The Whitehaven Coal Ltd (ASX: WHC) share price is up 4% after the ASX coal share‘s December 2023 update.
December 2023 update
Whitehaven reported that its managed run-of-mine production of 5mt was down 6% compared to the September 2023 quarter. But, the ASX coal share said its December quarter managed sales of produced coal was 4.6mt, an increase of 20% on the September quarter.
A few months ago, the coal miner announced an agreement it was buying the Daunia and Blackwater coal mines, which it called a “highly attractive and transformative acquisition”.
The company agreed terms with a range of financiers of a 5-year credit facility of US$1.1 billion, refinancing its bridge facility ahead of the expected completion of the acquisition in early April 2024. Long-form documentation is expected to be completed in early 2024.
Whitehaven said it finished December 2023 with a net cash position of $1.5 billion as at 31 December 2023, after paying a $833 million tax payment which relates to FY23 and a US$100 million cash deposit for the acquisition of the Daunia and Blackwater mines.
Comments on the coal price
The coal price is normally integral for the Whitehaven share price.
Whitehaven said the underlying demand for quality (high CV) thermal (energy) coal in its markets in Asia, “including to supply high-efficiency, low emissions electricity generation” is important for “customer countries as part of their long-term energy transition and decarbonisation plans.”
The ASX coal share said the “structural supply shortfall in the seaborne market for high CV thermal coal is continuing to grow as a result of underinvestment in new supply and depletion of existing mines. This growing supply is supporting strong long-term high CV thermal coal prices.”
Whitehaven then said short-term supply disruptions, such as weather-related impacts in Queensland and a derailment on the Hunter Valley’s Ulan line that occurred in December, as well as Russian coal sanctions also continue to contribute to tightness in supply.
HCC metallurgical coal prices have strengthened to around US$300 to US$350 per tonne, which will “deliver benefits for Whitehaven post completion” of the acquisition.
Final thoughts on the Whitehaven share price
The ASX coal share has fallen 25% since October 2022, but it has been on the way up over the last few months.
It trades on a very low earnings multiple, but I’m not sure it is a good buy today because the coal price is fairly high, and it’s normally a good idea to buy a commodity price when the price is low. It’s an interesting investment proposition though – if coal prices stay high for longer, that could mean attractive dividends.
