Whitehaven pushes Australian coal growth

Australian producer Whitehaven Coal plans to invest heavily in thermal and coking coal growth and production out to 2044.

Whitehaven will double its capital expenditure (capex) in the 2023-24 fiscal year to 30 June, as well as make a final investment decision on a longwall at its 11mn t/yr Narrabri mine that will allow thermal coal production to continue until 2044. The expansion includes extending its Narrabri and Vickery mines, as well as building the 17mn t/yr Winchester South mine, despite an increasingly difficult financial, regulatory and social environment for investing in new coal capacity.

It is also one of the parties looking to buy Australian-Japanese joint venture BHP Mitsubishi Alliance's Blackwater and Daunia mines, which have been up for sale since February.

Whitehaven has set itself a target of 16mn-17.5mn t of managed coal sales excluding purchased coal for 2023-24, having achieved 16mn t in 2022-23. This 2023-24 guidance is below its original target of 16.5mn-18mn t for 2022-23, partly because of the planned closure of the Werris Creek mine. But the firm will roughly double its capex to A$450mn-570mn ($290mn-370mn) in 2023-24 from A$241mn in 2022-23 as it looks for longer term growth.

The firm remains committed to thermal and coking coal output growth, despite rising royalties and other costs, an increasingly complex environmental regulation framework and many financial institutions pulling out of investing in at least thermal coal.

The firm made a profit of A$2.67bn in 2022-23, up from A$1.95bn in 2021-22, and had a net cash position of A$2.65bn at 30 June compared with debts of A$809mn two years earlier. It expects that the lack of new supplies, coupled with continuing firm demand for its higher quality thermal coal, will maintain above average coal prices during 2023-24 and allowing it to continue to generate cash for growth opportunities.

Whitehaven chief executive Paul Flynn expects thermal coal prices to rise for the rest of this year, particularly for high-grade thermal coal, as the northern hemisphere heads into winter. He is less clear on the short-term outlook for coking coal, citing the more variables involved.

Whitehaven's optimism about coal demand and prices came as the Australian federal government forecast that Australian thermal coal exports will fall to 80mn t/yr by 2030 if global warming is to remain less than 1.5°C above pre-industrial levels. The Australian treasury modelling shows that Australian thermal coal exports will fall to around 120mn t/yr under a 2°C maximum warming scenario. Australian thermal coal exports fell to 178.27mn t in 2022 from 198.79mn t in 2021 and a peak of 212.08mn t in 2019, largely because of flooding in key coal mining regions.

By Jo Clarke

Australian coal price comparisons ($/t)