Shares in NSW coal miner, Whitehaven Coal were punished yesterday after it cut its coal production outlook for 2019-20 and raised its cost forecasts.
The company blamed the cost rises on difficulties in getting enough workers for its Maules Creek mining operations and deepening drought conditions in NSW.
Whitehaven cut its managed run of mine coal production expectations for the full year to a range of 20 to 22 metric tonnes from a range of 22 to 23.5 metric tonnes.
Whitehaven also raised unit cost forecast – excluding royalties – for the period to between $US73 and $75 per tonne from $US70 per tonne estimated previously.
With global prices for thermal coal under pressure and not looking buoyant, Whitehaven could be looking at a sharp fall in earnings this financial year.
The December thermal coal futures price was $US66.82 on the ICE on Wednesday. That’s equal to around $A97 a tonne and doesn’t leave very much in the way of a profit margin for Whitehaven (or other coal producers for that matter.
Investors realised the pressure on profits very quickly and down went Whitehaven shares at the start of the session yesterday and for the rest of the day.
The shares slid more than 10% to a new 28-month low of $2.68 by the close.
The company told the ASX that challenges in sourcing skilled operators for Maules Creek, its largest operation, contributed to unanticipated productivity losses.
The shortfall in experienced personnel has contributed to unanticipated productivity losses detailed in the revised guidance provided below. Whitehaven expects it could take the balance of the financial year to source, select, onboard and train the necessary workers at Maules Creek in order to achieve a return to full utilisation of equipment and increase related operating productivity.
“Production at Maules Creek has been affected by numerous unscheduled production stoppages during November and December from smoke, dust and haze events which are a function of ongoing severe drought conditions,” the company also told the ASX.
A small measure of comfort was Whitehaven telling the market that the Mauls creek mine was the only one of its mines facing staffing problems.
It also warned of the potential for further production disruption from potential water shortages due to ongoing drought conditions.
Its outlook also incorporates “expectation of further disruptions at the project during the summer months”, the company said in its statement.
“Currently no interruption is expected for FY20 operations on account of water supply issues but the company will update the market in the event regulatory delays around further water supply augmentation measures already in train impact this revised guidance,” it said.