Australian (ASX) Stock Market Forum

WHC - Whitehaven Coal

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qldfrog said:
www.afr.com

Japan’s ‘urgent’ $1.6b coal deal driven by Qld royalty storm

The Japanese steel mill that bought 20 per cent of Whitehaven’s Blackwater coal mine says it was motivated by a fear higher royalties would curb supply.
www.afr.com www.afr.com
Our suicidal ideological push is potentially pushing whole other countries into the abyss
All that on a fake co2 is the culprit scheme
Click to expand...
not an international tax-gouging scheme , go back in time and see where 'carbon credits' started

that should tell you everything ( just another commodities derivatives scam )
 
Very much accords with Greg Canavan's of fat tail investment advisory viewpoint.
Market Matters today:

The Coal Sectors hotting up, MM‘s view
Yesterday, Whitehaven Coal (WHC) announced that Nippon Steel and JFE Steel had bought 30% of their recently acquired Blackwater Met Coal Mine for $US1.1bn, a very useful and well-received cash injection. Interestingly, Japanese giant Nippon Steel said the Queensland government’s coal royalties grab influenced its decision to spend over $US1 billion buying the stake amid rising concerns over supply security, although such concerns haven’t yet been reflected in the coal price, which is trading at 2-year lows. They are understandably concerned that the QLD government’s royalty hike and increasing headwinds around funding will discourage future investments. Politicians and financers are playing an important role in the future evolution of our coal industry, not necessarily a healthy mix:
  • The QLD government has gone on a cash grab while it can in an industry with an uncertain future. The coal industry is also unpopular due to its carbon footprint, making the move easy for voters to digest.
  • Moving forward, new Australian coal projects will be extremely difficult to finance and obtain financially viable government/native title approval.
At MM, we believe the transition to carbon neutrality will become a more challenging and longer journey than many think. This will lead to an eventual supply imbalance and, subsequently, higher prices, which will be good news for established miners already in production. Our on-the-back-of-an-envelope numbers suggest WHC has profited from the deal, having sold the Blackwater stake to the Japanese steel makers at a higher price than Whitehaven had paid for the mines from BHP last year.
  • The purchase reinforces MM’s view that quality metallurgical coal assets will remain in demand for many years to come, and the price paid by Nipon Steel implies the coal price will move higher.
  • We must remember that global electrification will require copious amounts of steel, plus the AI revolution needs huge amounts of energy, both adding tailwinds for coal.

Whitehaven Coal (WHC) $7.65
Whitehaven’s result (covered yesterday here), accompanied by the announcement of Nippon Steel’s purchase, was well received by the market, with the stock closing up +6.25% on Thursday. Whitehaven agreed to pay up to $US4.1 billion last year to acquire Blackwater and a second BHP mine called Daunia. Thursday’s sale of a stake in Blackwater resolves the question of how Whitehaven will fund next April’s $US500mn instalment, with a capital raise now unlikely. Whitehaven had $1.3 billion of net debt on June 30 before announcing Thursday’s $1.6 billion deal.
We were advocates of WHC’s acquisition of Daunia and Blackwater last year, which transformed Whitehaven from a NSW thermal coal producer into a business that will generate most of its revenue by selling Queensland coking/met coal to steel makers. However, the purchase curtailed WHC’s tremendous dividend stream of previous years, at least for now. For example, WHC will pay a total 20c fully franked final dividend in 2024, compared to 74c in 2023 and 48c in 2023, although the coal price also plays a major role here.
  • MM believes that WHC’s glory dividend days will return over the coming years, but investors need to be patient.
Following last year’s $US3.2bn purchase of BHP’s Blackwater and Daunia coal mines, WHC strategically pivoted primarily to a met coal producer, used in steel making, which now delivers ~70% of its revenue across NSW and QLD. Given supply constraints and a strong demand outlook driven by India, which Nippon Steel endorsed, we are increasingly bullish on the met coal outlook.
WHC​
MM is long and bullish WHC medium-term
WHC-2.png
 
Picked up 500 more WHC @ 6.80 in the closing market.
No current conviction in the chart, so really just 'Not Zero' (sic) buying at below my average price. Hope I'm right.
'Not Zero' is Greg Canavan's title of an essay debunking 'Net Zero' of carbon fuels.

Held
Holding
 
WHC made a low of 6.58 today. I will be holding off buying more until the chart gives some assurance.
Looking at the all data monthly chart below emphasises the anaemic rally over the last year and I'm starting to think it will likely break to the downside - basically a bearish flag?

My attitude as a holder is that I need now to take a patient strategic view and tolerate 'short term' share price loss. Maybe as much as a year to play out? Not going to suit traders. I'm taking my fundamental cues from Greg Canavan (fat tail investment advisory). He posted to subscribers yesterday and reaffirms his BUY rec. He says the market is recoiling from higher cost guidance for FY25 but still sees overlooked value, higher prices beyond FY25 and keen, not to say desperate, interest in met coal supply assurance from Japanese steelmakers. This evidenced in the 30% purchase of Blackwater. So while I am not buying more until the sentiment and chart resolves I am sitting on the advice and dividends. Excerpt of Greg's remarks below.

MONTHLY All Data - not showing todays down move to 6.58
big (54).gif


Why Japan wants our coal​

As part of the results announcement, WHC also revealed it had agreed to sell 30% of its long-life Blackwater mine to two Japanese steel makers for US$1.08 billion (AU$1.6 billion). The deal will close in early 2025.

Nippon Steel (who purchased 20%) made a statement to its own exchange about the deal. This is really interesting (my emphasis added):

‘Currently, there are growing concerns that capital investment in coal assets will shrink due to the implementation of policies to raise coal royalty rates in Australia’s states, which hold significant influence over the supply of steelmaking coal to the seaborne market.
‘This will certainly contribute to a decrease in the supply of steelmaking coal in the long-term.
‘Given the strong sense of urgency in respect to this decrease in the supply of steelmaking coal, Nippon Steel has determined that, as an end-user of steelmaking coal, it is necessary to invest in the BW Coal Mine to secure a long-term stable supply of coking coal required for Nippon Steel’s technologically advanced coke production.’
Click to expand...
And this…

‘…the current situation where raw material and fuel prices remain persistently high regardless of fluctuations in the steel market due to the structural decline in investment in resource development and other factors presents a significant challenge to the sustainability of Nippon Steel steelmaking business.’
Click to expand...
If that’s not a clear sign of concern about long-term supply, I don’t know what is. Nippon wants access to coal and wants to profit from its scarcity value in the years and decades ahead.

Please keep this in mind when looking at the day-to-day share price moves.

In my view, this is a multi-year investment. There is strategic value in WHC that the market isn’t currently recognising. But Nippon Steel is.
 
Further from Greg Canavan yesterday, my bold. It's going to be a nail biter for a while.

"WHC has a short and long-term story.

The short-term story is costs. That is weighing on the price right now. The long-term story is the investment in Blackwater by Japanese steel makers. That is very bullish.

First, costs…

Unit costs increased 16.5% to $120/t from FY23 to FY24.

Guidance for FY25 is for costs to increase again to $140-$155/t. That’s another 20% plus increase. There are a few one-offs in that increase, so you should expect unit costs to decline in FY26.

However, these numbers don’t include royalties, which are becoming an increasing expense thanks to state government short-sightedness. Keep that in mind for later…

WHC revealed these higher-than-expected costs at a time when metallurgical coal prices are under pressure. Obviously, higher costs and falling prices translate into weaker margins and cash flows.

This is especially relevant for WHC, which needs to make deferred payments in relation to the acquisition of the Daunia and Blackwater mines.

WHC must make these payments on the acquisition anniversary (2 April) for the next three years. Next April’s payment will be around $760 million.

That seems large. But think of it in the context of WHC’s potential cash flows. In FY24, it generated EBITDA margins of $84/t. (EBITDA is a proxy for cash flow).

At 27 million tonnes of coal production (guidance for FY25), that equates to $2.27 billion. Less $500 million in capital expenditure, $250 million in net interest expense, and the $760 million payment, leaves $760 million to pay tax and dividends etc.

At those margins, WHC is comfortable.

But costs are higher this year by around $20/t. A $20/t fall in prices across the board would result in EBITDA margins of $44/t and much lower cashflow.

This is what the market is worried about. And that’s a fair short-term consideration. But costs are likely to fall in FY26, which will help rebuild margins. And then there is the positive longer-term outlook for coal prices… "
 
i saw what 'activists ' could do to the share price here in 2013 and 2020 ( and bought during both events ) and locked out any chance of a capital loss here ( until i buy another parcel )

seems to attract aggressive activist activity , have your research up to date early ( so you can make quick informed decisions )

bold gambles can pay off here , but do NOT become a forced seller ( keep your potential losses affordable )
 
I am thinking they can sell down more of Blackwater or some of Daunia if they get into liquidity trouble over staged payments to BHP, interest payments and capital investment. In that contingency they'd also suspend the dividend. Or the option of an equity raise of course.
 
divs4ever said:
i saw what 'activists ' could do to the share price here in 2013 and 2020 ( and bought during both events ) and locked out any chance of a capital loss here ( until i buy another parcel )

seems to attract aggressive activist activity , have your research up to date early ( so you can make quick informed decisions )

bold gambles can pay off here , but do NOT become a forced seller ( keep your potential losses affordable )
Click to expand...
This has been my strategy with coal companies, although I wished I had bigger balls and bought more aggressively. I knew it was a screaming by down at those lows... Classic commodity play at minimum price. To my eternal shame I did get a little bit psyched out by the end of coal rhetoric, even though I knew it was BS.

Holding this and others.
 
wayneL said:
This has been my strategy with coal companies, although I wished I had bigger balls and bought more aggressively. I knew it was a screaming by down at those lows... Classic commodity play at minimum price. To my eternal shame I did get a little bit psyched out by the end of coal rhetoric, even though I knew it was BS.

Holding this and others.
Click to expand...
not me , i took small comfortable parcels and waited longer than most before reducing
doing alright on NHC after 'averaging down ' , TER has been a bit of a patience tester

and haven't got an attractive entry for YAL
 
WHC down another 3% yesterday and down 5% now.

Market Matters yesterday got it from the horse's mouth that the dividend payout won't be revisited until FY25 results. So at least a low interim div to come and suggestive of a low final div as well. Not that that's a surprise I guess. Doesn't mean a strong HY production update, better coal prices or some guidance couldn't boost the share price. Grasping at straws? Market Matters holds WHC in their growth portfolio but I don't think they're currently accumulating, not sure. But they're not selling and nor am I, nor Greg Canavan.
  • Whitehaven Coal (WHC) –2.8% was lower, we had the CEO Paul Flynn in this morning running through specifics post-result. Lots of work to do, and a lot on their plate with recent acquisitions and subsequent partial sell-down. They don’t expect to revisit the size of dividend until FY25 results.
Edit: Oh, just saw that WHC ex dividend today, but div is only 13c and share price down 33c intraday
 
Interesting chart link guys that I pinched off a more populated forum. Can follow the course of the near futures contract specifically for Australian coking coal! Nothing in that chart to hearten us WHC holders yet.

I keep thinking that the medium term weekly chart of WHC is suggesting a break of a bearish flag. That idea more than anything has wrested my hand from the buy button. It's a daily psychlogical struggle, it really is, my shopping urge is strong.
www.barchart.com

SGX Aus Coking Coal Sep '24 Futures Price - Barchart.com

SGX Aus Coking Coal futures price quote with latest real-time prices, charts, financials, latest news, technical analysis and opinions.
www.barchart.com www.barchart.com

Screenshot_20240906_130545_Chrome.jpg
 
Copy to New Hope Coal (NHC) and others.

Rise in power-hungry data centres pushing Malaysia’s consumption of coal, as regional demands set to outpace China
"NUSA DUA (Indonesia), Sept 20 — Southeast Asian countries such as Vietnam and Philippines are expected to boost coal trade and consumption this decade, industry officials say, even as demand from top consumer China approaches its peak.... "
More ..
www.malaymail.com

Rise in power-hungry data centres pushing Malaysia’s consumption of coal, as regional demands set to outpace China

NUSA DUA (Indonesia), Sept 20 — Southeast Asian countries such as Vietnam and Philippines are expected to boost coal trade and consumption this decade, industry officials say,...
www.malaymail.com www.malaymail.com

Held
Holding
 

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