Whitehaven coal
Whitehaven Coal hasn’t just weathered the multi-year commodity storm – it has emerged stronger than ever.
“the past decade has seen us grow from a relatively small mining company to a major coal player in the australian and international markets.”
FROM excellent FY17 results for Australian coal producers Whitehaven was a clear standout – posting an enormous jump in net profit from $20.5 million to $405.4m year-on-year.
There was encouraging news across the board for Whitehaven, together with record production year of 23 million tonnes per annum (mtpa) of ROM coal.
The record breaking run continued in Q3, as ROM production increased 5 per cent to 5.7mt, and best-ever coal sales of 6.1mt was 21 per cent higher than the previous corresponding period.
Whitehaven Coal chief executive Paul Flynn said the company had delivered on its promises to ramp up Maules Creek, meet production guidance and continue to repay debt.
“Our investment in the development of Maules Creek at the bottom of the coal price cycle, the ramp up of Narrabri underground and the productivity improvements exhibited at the Gunnedah open cuts meant we were confident it would be a strong year,” Mr Flynn said.
“It has also provided a solid platform for the business and ensured that the group has been and continues to be well positioned to capitalise on an improved environment for thermal and metallurgical coal.”
Mr Flynn said improved coal prices were a catalyst for the company to improve debt levels.
“The past year provided a great opportunity to fulfil this imperative and focus on reducing debt levels.
“Overall, we reduced our net debt reduced to $311.1m at 30 June 2017 with gearing at 9 per cent.”
FY17 marked Whitehaven’s 10 year anniversary since listing to the ASX and capped off an outstanding decade of progress.
“The past decade has seen us grow from a relatively small mining company to a major coal player in the Australian and international markets,” Mr Flynn said.
“This is something I am extremely proud of and it just would not be possible without the support of the local communities in which we operate.
“More than 75 per cent of our workforce live in the areas of our operations.
“Our commitment has always been to ensure to the towns of Narrabri, Gunnedah and Boggabri feel the benefits of our presence.”
Maules Creek
Maules Creek (Whitehaven 75 per cent) continued to break ROM and saleable production records in Q3.
ROM production for the quarter was 2.6mt; a 37 per cent jump on the previous corresponding period.
The company said that the next step up in production would occur in early FY19, when additional mining equipment was added to the fleet.
At Narrabri, mining in panel LW107 “progressed successfully” through the fault zone with production exceeding expectations.
ROM coal production for the quarter was 2.237mt, within 5 per cent of the previous corresponding period.
Roadway development for the September quarter was 5458m, and construction of the new ventilation shaft construction was progressing with the pilot hole for the shaft completed during the Q3.
The three Gunnedah open cuts – Tarrawonga, Rocglen and Werris Creek – produced 0.899mt for Q3, lower than the previous corresponding period as shift rosters returned to normal following the strong finish to the previous financial year, the company said.
Saleable coal production was 1.312mt, up 12 per cent, and sales were 1.374mt, up 20 per cent on the previous corresponding period.
Mining also restarted at the Sunnyside open cut, which had been on care and maintenance for an extended period.
Whitehaven plans to mine 0.8mt over the next two years as part of rehabilitating the site. Blasting at the mine commenced in late September and coal production will recommence during the December quarter.
Vickery Extension Project
At Vickery, work on the Environmental Impact Statement (EIS), required for Government approval of an expanded Vickery mine to 10mtpa, was “substantially complete” by the end of Q3.
“The EIS document and supporting documents are due to be lodged upon completion of some final optimisation work,” Whitehaven stated in its Q3 report.
“It is anticipated that the EIS will be lodged shortly.
“Discussions with numerous parties who have expressed interest in becoming joint venture partners will commence following the lodgement of the EIS.”
Timing for start-up of the Vickery project remains market dependent, but would likely occur once Maules Creek had been fully ramped up to its 13mtpa capacity.
Mr Flynn said the Vickery extension was one of the most significant investments currently underway in North West NSW.
“The project, if approved, will cement our standing as the single largest private sector employer in the area,” Mr Flynn said.
“It will generate around 500 jobs during the construction phase and roughly 450 jobs during operations, the majority of which will come from the local communities of Gunnedah, Narrabri, Boggabri and surrounding areas.
“It will also create fresh opportunities for Whitehaven to support local businesses and contractors, and generate more than $700m in royalties for the people of NSW to help provide important services like education, health and transport infrastructure.”
Paid $171.9m to the NSW Government in mining royalties
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Spent $237m in the Gunnedah, Narrabri, Tamworth, Liverpool Plains regions
• Made 90 donations to local community groups
At the end of FY17, Whitehaven’s FY18 production guidance was in the range of 22mt to 23mt.
Costs for the year were likely to increase slightly as production of metallurgical coal increased and the strip ratio at Maules Creek moves towards the life of mine ratio.
The outlook is positive, as the higher quality end of the thermal coal market experienced stronger demand from end users changing their quality requirements due to a greater focus on environmental and generation efficiency.
“The outlook for the high quality coal we produce is positive, as more HELE technology coal-fired power plants are being deployed into the Asian region,” Mr Flynn said.
“Our high-quality, clean coals continue to attract strong demand from a growing customer base in over ten countries.
“Whitehaven has attracted a number of new customers during FY17 in countries such as China, Taiwan and Vietnam for semi soft coking coal sales and Malaysia for thermal coal sales.”
In China, the coal burn for electricity generation was up 8 per cent year-on-year, due to hydro electricity supply constraints and strength of underlying electricity demand, Whitehaven stated in its Q3 report.
These factors have led to a larger than expected draw on the seaborne market.
The Future is HELE
“Over the past decade, the public policy process has failed to produce outcomes that create certainty for investors or security for energy consumers,” Mr Flynn told the Brisbane Mining Club in June this year.
“We are now arguably experiencing a boiling frog moment. The dire warnings of the past 10 years are coming to pass, and once again, we look to the Federal Government for leadership, for solutions.
“And while Whitehaven is not looking to develop or fuel an ultra-super critical coal-fired plant in Australia any time soon, the atmospherics around that discussion, and whether this nation could – or should – emulate the pragmatic position adopted by most of the countries Whitehaven exports to, is of real interest to us.”
Mr Flynn said countries around the world were relying on HELE coal generation to meet their Paris targets while ensuring low cost, reliable energy – there were more than 1100 HELE plants under construction, or planned, in East Asia alone.
The current 33 per cent global efficiency rate of coal fired power plants could be improved to 40 per cent by deploying more advanced “off-the-shelf technology”, cutting two gigatonnes of C02 emissions now, while allowing affordable energy for economic and social development, he said.
“Which raises the question: if countries around the world are investing so heavily in new coal technology to provide reliable and affordable electricity while making material carbon emissions reductions, why should Australia discourage this investment, or indeed rule it out?
“Unfortunately, HELE has become tied up in the broader energy and resources policy debate that has lumped this new technology into the imaginary binary decision between meeting our climate change commitments and delivering affordable and reliable energy solutions.
“The reality is, Australian businesses require long term investment certainty, without it, investment will not occur.
“What Australian governments need to focus on is coming together and providing the policy level playing field for all technologies to compete.
“There are a multitude of solutions to our current energy issues, and HELE is one we should properly examine.”
In Australia, the push to build HELE coal-fired power plants is gathering some momentum.
Proponents from Japan, Thailand and China have purportedly approached the QLD State Opposition after it pledged to fast-track approvals for a HELE plant in the North within 100 days, if elected to Government.
The project, which would take three to five years to build, would create up to 750 jobs during construction and maintain 150 full-time positions.
In NSW, recent research suggested that a strong majority of people in the Upper Hunter would support the construction of a HELE coal-fired power station in the region.
A survey of 2000 people across the state electorates of Cessnock, Maitland and Upper Hunter and found 67 per cent support for the construction of a new coal-fired power plant if it could produce lower emissions than existing power plants.