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Whitehaven Coal (ASX:WHC) highlights production dip amid bad weather and COVID impacts

ASX News, Energy
ASX:WHC      MCAP $6.650B
21 January 2022 11:56 (AEST)
Whitehaven Coal (ASX:WHC) - MD and CEO, Paul Flynn

Source: Whitehaven Coal

Shares in Whitehaven Coal (WHC) have fallen this morning after the company flagged soft production for the December quarter and downgraded its 2022 financial year guidance.

This comes despite an increase in the average price of sold coal to $211 per tonne for the three months to the end of December 2021. Over the full 2021 financial year, coal prices averaged $94 per tonne.

Whitehaven said unusually heavy rainfall during the quarter meant road access to some of its mines was cut off for up to two weeks.

The company estimates local flooding caused between 700,000 and 900,000 tonnes of production to be deferred at its Maules Creek and Gunnedah open cuts in New South Wales, with COVID-19 also impacting operations during the quarter.

All up, managed run-of-mine (ROM) coal production fell to 3.2 million tonnes, down by 37 per cent compared to the $5.1 million tonnes produced over the December quarter over the same time period the year before.

Coal sales dipped 11 per cent to 3.97 million tonnes compared to 4.46 million tonnes compared to the previous corresponding period.

As such, despite rising coal prices, Whitehaven has revised its 2022 financial year guidance by around 5 per cent, now expecting to produce between 19 million tonnes and 20.5 million tonnes of coal over the year. For reference, the company previously forecast production of between 20 million tonnes and 21.5 million tonnes.

As far as coal sales are concerned, White Haven now expects to sell between 17.2 million tonnes and 17.8 million tonnes of coal compared to the previous guidance of between 18 million tonnes and 18.6 million tonnes.

The company has also amended its forecast cost of coal to between $79 and $84 per tonne compared to its last forecast of between $72 and $76 per tonne.

Whitehaven Managing Director and CEO Paul Flynn said coal prices continued to rise and cash generation remained strong over the December quarter in the face of supply-side disruptions.

“Whitehaven has unfortunately not been immune to recent heavy rains that impacted large parts of regional NSW and QLD as La Niña made its presence felt for the second Australian summer in a row,” Mr Flynn said.

“While we remain very confident about ongoing favourable supply and demand dynamics, there is elevated uncertainty associated with COVID’s impact on workforce availability and resourcing through our supply chains.

“The strong balance sheet and robust market environment is an appropriate backdrop to provide an update on our capital management strategy with our half-year results.”

Shares in Whitehaven Coal were down 6.27 per cent to $2.77 at 10:55 am AEDT. The company has a $2.86 billion market cap.

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