Stocks in the energy sector have lost their mojo with the Santos Ltd (ASX: STO) share price and Origin Energy Ltd (ASX: ORG) share price giving up morning gains to lead the sector lower.
But there's one exception that is bucking the downtrend and it's the Whitehaven Coal Ltd (ASX: WHC) share price which hit a two month high during lunch time trade after it reported record production in the December quarter.
The Whitehaven share price surged 4.1% to $4.72 at the time of writing while the S&P/ASX 200 (Index:^AXJO) (ASX:XJO) index is trading just above breakeven at 5,893.
The WHC share price is the best performer on the ASX 200 index followed by the South32 Ltd (ASX: S32) share price.
Record quarter
Whitehaven announced that run-of-mine (ROM) coal production hit 7.4 million tonnes (Mt) in the three months to end December 2018, which is 36% higher than the same period in the previous year.
This brings first half production to 11Mt in the first half of the financial year and management is reaffirming its full year production guidance of 22Mt to 23Mt of saleable coal.
It's flagship Maules Creek mine contributed to the record production result and the miner said that Tarrawonga ROM production is expected to increase by 3Mt during the first half of FY20.
Whitehaven appears to have also won public support for its Vickery Extension Project with 63% of public submissions supportive of the project proceeding.
Global warming protesters won't be pleased but Whitehaven shareholders are clearly excited about the future of the miner even though management warned that production costs are creeping higher.
Rising costs
There are two reasons for cost inflation. The premium price offered for higher quality coal has reached a point where it makes sense for Whitehaven wash more coal and produce the higher quality commodity.
Meanwhile, lower production at Narrabri and Maules Creek mines in the September quarter along with demurrage underutilisation logistics costs meant that costs for FY19 is likely to average $67 a tonne – or $3 a tonne more than its previous guidance.
"While ongoing Asian demand for high quality thermal coal in the lead up to the northern hemisphere winter was strong, the global Coal Newc Index (gC Newc) thermal coal price succumbed to usual seasonal factors and declined to an average US$104.40/t for the quarter, approximately11% lower than the September quarter average," said the company in a statement released to the ASX.
"Maules Creek achieved an average price 9% higher than the gC Newc index price for its sales of thermal coal during the quarter."
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