Transcription of Finance News Network Interview with Whitehaven Coal Limited (ASX:WHC) Managing Director, Paul FlynnLelde Smits: Whitehaven Coal Limited
(ASX:WHC) is a coal producer in New South Wales Gunnedah Basin and holds a number of exploration assets across the State, and also in Queensland. The miner’s operations are underpinned by its large Narrabri underground operation and three open cut mines. Whitehaven is well advanced with the construction of its Maules Creek project with coal railings commencing three months ahead of schedule. The recently approved Vickery project provides another growth opportunity for the future. I’m Lelde Smits and joining me at ASX Investor Series in Sydney is the Company’s Managing Director, Paul Flynn. Paul welcome to FNN.
Paul Flynn: Thank you Lelde, pleasure to be here.
Lelde Smits: Whitehaven Coal has been battling soft coal prices by improving your efficiencies and costs. What are your financial and production highlights?
Paul Flynn: Our production highlights Lelde for the first couple of years I would have to say, has been really a doubling of our output with our Narrabri mine coming on stream. So we’ve been growing very, very quickly. From a financial perspective, our cost base has come down dramatically over the last two years. We’ve brought our cost base down 20 per cent and that brings us down into the lowest cost quarter of the whole of the industry. But I think the third dimension, which I think is worthy of mentioning is the community and social aspects of what we’re doing.
We are a local based company out in the Gunnedah Basin, 75 per cent of our employees come from the region. We don’t support a long term fly in/fly out proposition. And wonderfully for our Maules Creek project, we set ourselves a target of 10 per cent indigenous employment with Maules Creek, because it’s a greenfields site. And at this point, we’re running at about 15 per cent. So community engagement and the benefits to the community in which we’re operating within, has been very strong.
Lelde Smits: The Company’s Maules Creek mine has recently struck a number of milestones. What is the project’s size, mine life and annual production?
Paul Flynn: Having firstly railed coal three months ahead of schedule, that’s a terrific milestone for us. The whole mine is 13 million tonnes per annum but running at its full run rate. Now the life of the project will be about 30 to 35 years in length and once fully ramped, we’ll have about 12 million tonnes of product leaving the sitein any one given year.
Lelde Smits: What will be occurring next at the Maules Creek project?
Paul Flynn: Well the next steps for us are continuing to ramp up the production from the beginnings that we’ve had, with the first coal leaving the site during December of 2014. So shipping raw coal at the moment as our thermal product. And the next major milestone for us is commissioning our preparation plant, where we’ll be able to produce a semi-soft coking coal product and a PCI (pulverised coal injection) coal as well.
Lelde Smits: Whitehaven has also been working to refinance your debt. What progress have you made?
Paul Flynn: Lelde we’ve been looking at this for some time now. And I think the balance of markets in terms of where we look to tap the markets for our refinancing has changed. Late last year we were looking offshore in terms of the US debt markets. But the Australian market, the Australian bank market has improved substantially this New Year. And I would expect actually our solution as far as refinancingthat will come from the domestic market in Australia, I would suspect and in our expectations that will be done relatively soon. So by the end of March I would say, we will have that sorted.
Lelde Smits: The Company has described the current coal market conditions as lacklustre and weak. How do you expect prices to trend over the year ahead?
Paul Flynn: Well we think this year in particular is probably a little flat. We are seeing quite good prices at the moment which is we believe, a short term supply demand deficit for quality coal which is what we sell, which is great. But over the year we expect it to be relatively flat, picking up in 2016.
Lelde Smits: Where do you see coal prices moving over the longer term?
Paul Flynn: The longer term perspective, we see the supply demand dynamic in thermal coal certainly strengthening in 2016 and beyond. Met coal we actually see as improving before then. So we would see the outlook for met coal being more positive than thermal, in the shorter term. But over time, we see the thermal also picking up in 2016 and 2017.
Lelde Smits: Finally Paul. What will be Whitehaven Coal’s main priorities over the year ahead?
Paul Flynn: Well for this year certainly ramping up Maules Creek is a priority for us. We’ve just started as I said, in December and so we’ll ramp up past thesix million tonne run rate for this first 12 months. At the same time we’ve got our other mines which are running very well. Narrabri is continuing to exceed expectations. I think it’s now probably in the top three underground mines in the country, and we’re looking for seven million tonnes out of that this year. And our other smaller mines again, driving cost down but increasing their output as well, which is positive.
Lelde Smits: Paul Flynn, thank you for the update from Whitehaven Coal.
Paul Flynn: Thank you very much.
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