Whitehaven Coal Receives Clean-Up Notice
Most Australian miners have enjoyed an unexpected rise in prices for their products since the outbreak of coronavirus, defying consensus that mass disruption in China would result in a widespread decline in commodity prices. Specifically, coal prices have been hit by the virus’ impact on Chinese coal mines. As Australia’s leading coal producer, Whitehaven Coal does not regularly export to China. However, the price it receives from its Japanese, Korean and South-East Asian customers is partially influenced by Chinese consumption of thermal coal.
More recently, Whitehaven Coal has been issued with a clean-up notice by the Environment Protection Authority (EPA) after it identified a pollution incident at the Maules Creek Coal Mine. The EPA issued the warning after a local farmer discovered thousands of small expandable polystyrene balls (EPB) in Back Creek, near Boggabri. On 10 February, officers identified that the EPBs had been discharged from the mine into the creek, while more of such balls were found on a facility seven kilometres downstream of the mine.More notably, this isn’t the first time Whitehaven Coal has encountered such a situation.
The EPA had previously inspected the mine in August 2019 and found that the residues were not being contained in its respective depot. The firm has been instructed to carry out a series of steps to correct the situation, including a full cleanout of one of its dams. Regarding its performance, Whitehaven Coal has continued to issue a small dividend despite rising net debt and its weakest half year profit since 2016. The firm posted $27.4 million half-year net profit, 91 per cent lower than the $305.8 million generated in the same period last year.
Whitehaven distributes both semi-soft coking coal and thermal coal, and its average receive price in the half-year ending 31 December came in 31 per cent lower than that of last year. The firm asserted that the firm had been struggling to perform due to factors both within and beyond their control. Specifically, coal production was adversely affected in the past six months due to bushfire smoke and dust from drought hindered mining activities. Additionally, manpower issues also hurt productivity at Whitehaven’s flagship Maules Creek mine, contributing to rising unit costs.
However, there was some positivity for investors amid the poor results, with Whitehaven issuing an unfranked 1.5 cents interim dividend. Although that was significantly lower than the 20 cents interim dividend last year, it certainly surpassed analysts’ expectations of the firm doing away with an interim dividend. Thus, the continued payment of dividends reveals Whitehaven’s confidence of successfully sourcing funds for its Vickery and Winchester South growth projects.
This is despite the regular announcements from financial institutions about toughening up lending conditions to coal miners. Meanwhile, Whitehaven Coal has also partnered with businesses in north-west New South Wales on a $126 million upgrade at the Tarrawonga open-cut coal mine, with the project to be managed entirely by local businesses.
By Caroline Wong
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