Whitehaven Coal Ltd [ASX:WHC] share price is down today after releasing their December 2021 quarterly report and FY22 guidance.
Whitehaven said it achieved an average coal price of $211 per tonne during the quarter — a 144% jump from the $86 a tonne they were getting this time last year.
The company expects coal prices to remain high in the near future, mainly because of strong demand and supply chain disruptions.
Thermal coal supply also took a hit after Indonesia, the largest thermal coal exporter in the world, imposed an export ban from 31 December 2020. Whitehaven said some producers have restarted exports. As they noted:
‘Thermal coal customers came to the market across the December quarter to procure supplies through to the March quarter, in many cases having to accept inferior quality to what they were seeking. More recently, some tenders have attracted zero bidders, a strong indication that supply is very tight, and incremental supply is almost non-existent. Physical prices for 6000 CV quality coal for near term delivery are at substantial premia to the paper market.’
Higher coal prices but lower production
Yet, while thermal coal demand and prices remain high, a couple of factors have impacted Whitehaven’s operations.
For one, there was La Nina. Heavy rain flooded road accesses in the Gunnedah Basin and the Hunter Valley. The company estimates that because of flooding they’ve had to delay around 600–700kt of run of mine (ROM) production at Maules Creek.
And then, worker shortages along with workers having to isolate due to COVID have impacted production.
It’s all meant that Whitehaven’s managed ROM coal production for the December quarter was 3.2Mt, much lower than the 5.1Mt they produced in the same period last year.
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What happens next to the WHC Share Price?
With bad weather, COVID, and worker shortages impacting production, the company has had to downgrade their FY22 guidance by around 5%. They now expect production to come in between 19–20.5 Mt, lower than the previous guidance of between 20–21.5 Mt.
Shares dropped after the announcement and were trading at $2.72, an almost 8% drop from yesterday’s close.
Whitehaven hasn’t paid shareholders a dividend since 2020, but there are plenty of other companies that do. Check out Greg Canavan’s top five dividend stocks on the ASX here.
Best,
Selva Freigedo,
For The Daily Reckoning Australia
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