Shares in Whitehaven Coal slumped more than 14% on Thursday after it revealed another downgrade to its sales estimates for the year to June 30.
Whitehaven shares closed the day at $1.56 down $0.29 (15.4%) after investors sorted through the company’s March quarterly report and focused on the bad news rather than the bits of good
The good news was Whitehaven’s managed run-of-mine (ROM) coal production rose 12% compared to the prior corresponding period in the March quarter to 5.5 million tonnes. That saw the company’s managed saleable production increase 6% to 4.3 million tonnes compared to the same time last year.
Coal sales also increased 7% to 4.8 million tonnes as coal prices rose over the quarter (which was an easy comparison seeing they fell sharply a year earlier) due to increased economic activity and supply constraints.
But now for the bad news ends. Whitehaven has been impacted by poor weather conditions In and around the Hunter Valley because of flooding) and geological challenges at its Narrabri underground mine where the longwall miner was not able to operate for two weeks because of those geological issues.
The longwall’s key components will also require a further two weeks of downtime for overhauling.
Narrabri’s problems (basically a month’s lost production at least from the Narrabri underground mine, has resulted in Whitehaven revising down its June 30 financial year managed run of mine production estimate.
Total June 30 2021 financial year run-of-mine production across Whitehaven’s Narrabri, Gunnedah and Maules Creek operations in NSW has been lowered to 20.6 to 21.4 million tonnes, down from 21.4 to 20 million tonnes.
Last month saw the previous downgrade due to problems with one of the coal loaders in the port of Newcastle where coal loading operations slowed sharply in March by faults in a ship loader.
This resulted in the company suspending ship loading while maintenance was carried out on the equipment.
Shipments were further complicated by the weather-related restrictions on the Hunter Valley rail system for a number of days while flooding in the Hunter River saw coal loading suspended with consequent delays to exports – at one time a large queue of 40 ships were at sea off Newcastle waiting to load.
Due to these issues, Whitehaven cut its June 30 managed coal sales guidance to 18.5 million to 19 million tonnes. That was an effective trim of around 1 million tonnes.
On Thursday Whitehaven said it now expects 17.8 million to 18.3 million tonnes as a result of Narrabi’s extended downtime which have added to the cuts in March.
The company reckons it won’t be until later this year that lost sales will be recovered (that is, in early 2021-22).
“Pleasingly we are seeing much improved and more consistent performance from our largest operation at Maules Creek, notwithstanding adverse weather in recent weeks,” managing director Paul Flynn said in Thursday’s statement.
“Offsetting this progress to some extent has been the geological challenges encountered at the Narrabri Underground which has impacted production.
Mr Flynn said that coal prices continued to improve over the quarter, responding to increased economic activity as well as supply constraints.
But the production and logistics problems have meant that Whitehaven has been unable to take full advantage of the price recovery, hence the weakness in the share price yesterday.
Sales tonnage forgone is revenue forgone because the price would very well be lower later in the year (and it could also be higher). But it is very hard to recover.