Coal space rolling on, rolling in it

Company News

by Glenn Dyer

No wonder Whitehaven Coal (ASX:WHC) shares touched record levels this week after it revealed another cornucopia of rewards from the coal price boom for shareholders to enjoy.

Hours before Russia sent the price of key energy commodities surging again with news of a partial mobilisation to try and offset losses in Ukraine, Whitehaven Coal shares leapt to a new all-time high of $9.165 after the NSW thermal coal exporter revealed plans to boost the size of its current buyback by up to $2 billion.

Russia’s announcement saw oil prices rise more than 2%, sent LNG prices higher and thermal coal prices as well with the price of NSW coal up more than 3% to $US431.50 and the price of spot coal to more than $US441 a tonne and only a couple of dollars away from the all-time high.

But Thursday and early Friday the Newcastle price reversed, tumbling more than 6% with the front month price falling to $US415 a tonne – still very high historically.

Whitehaven told the ASX that it seeking shareholder approval at its annual general meeting on October 26 to extend its current buyback program.

Whitehaven needs a minimum of 50% approval from shareholders to extend and increase the size its on-market buyback for another 12 months

The current on-market buyback started in early March this year, through which Whitehaven set out to acquire up to 10% of shares over 12 months.

The company said it had bought a total of 93.5 million shares or roughly 9% at an average price of $5.40 a share as of last Tuesday, September 20.

That took the total cost to Whitehaven to $504.3 million for the current buyback which it expects to complete before the AGM on October 26

The company says it is now looking to get 50% shareholder approval for an on-market buyback, or 75% for an off-market tender buyback.

If the resolutions are passed, this will allow the board to acquire up to 240 million shares (25% of issued shares) under any on-market or off-market tender buyback for a 12-month period to October 26, 2023.

Whitehaven shares hit an all-time high of $9.1565 on Wednesday (in a losing market) and a buyback around the $9 mark would cost the company more than $2.1 billion.

Whitehaven reported a net profit of $2 billion for the year to June 30 and paid dividends totalling 48 cents a share for the 2021-22 year.

Whitehaven’s buyback came a day after rival, New Hope revealed a near 1,200% surge in earnings to more than $980 million and higher dividends to shareholders.

New Hope also promised that it would look closely at all ways of returning cash to shareholders (which would benefit its 61% shareholder, Washington H Soul Pattinson). New Hope boosted dividends 700% for 2021-22 to 86 cents.

Another listed NSW thermal coal exporter, the Chinese-controlled Yancoal Australia also reported record profits for the half year to June of more than $1.74 billion and has paid off all its debt (New Hope cut its debt as well, as has Whitehaven).

Yancoal paid a 52.71 cents per share interim after paying a 70.4 cents per year for 2021.

BHP saw a surge in earnings from its Queensland coking coal mines (50% owned) with the added boost from its thermal coal exports from the Hunter Valley (to more than $US9 billion) after deciding not to sell its NSW energy coal mine (it couldn’t get an attractive offer) and looking to renew the licence past its 2026 expiry and then close the mine by 2030.

Glencore, the biggest thermal coal exporter would have done well – it doesn’t provide a breakdown about its Australian operations.

But its global coal business benefited from the thermal coal price surge in the June quarter and half year and the global giant did reveal that its adjusted EBITDA more than doubled to $US18.9 billion for the six months to June.

The company said it would pay out an additional $US4.5 billion, including a $US1.45 billion special dividend and a $US3 billion share buyback taking 2022 payouts to $US8.5 billion in total.

The company had in February announced a $US4 billion payout including a dividend and a $US550 million share buyback.

And US group Peabody Energy reported a sharp 83% rise in June quarter revenue to $US1.322 billion, against $US723.4 million in the June 2021 quarter.

Peabody, which has metallurgical and thermal coal mines and exports both types of coal from NSW and Queensland, reported adjusted EBITDA of $US578 million, the highest quarterly result in more than a decade.

Net profit was $US409.5 million for the three months compared with a net loss of $US28.6 million in the June, 2021 quarter.

Despite the improvement there was no dividend for shareholders, as the company continues to work away at covering the still rising cost of collateral put up for an old sales contract covering coal from the Wambo mine in the Hunter Valley. That contract almost caused Peabody to collapse earlier this year as thermal coal prices started running higher after the Russian invasion.

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