Whitehaven (ASX:WHC) share price plunges 8% following ‘La Nina and COVID impacts’

Bad weather and COVID-19 are creating uncertainties for Whitehaven.

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A man sits in front of his laptop computer with his head on his hand and a sad, dejected look on his face after seeing how far Whitehaven shares have fallen today

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Key points

  • Whitehaven released its quarterly update today
  • The miner says bad weather and COVID-19 played havoc on operations
  • Production and sales were lower, alongside 12-month rolling yield
  • Management has downgraded guidance in response to ongoing uncertainties
  • The Whitehaven share price is trading down in the trenches on Friday

Shares in Whitehaven Coal Ltd (ASX: WHC) are drilling lower today and are trading 8% down at $2.71 apiece.

The Whitehaven share price is on its way down after the mining giant released its quarterly update for the period ending 31 December 2021.

The coal giant collapsed out of the gate and sunk to an early low of $2.65 this morning before recovering somewhat to its current level.

Whitehaven share price slides due to lowered production

The company gave a broad overview of its progress and challenges this quarter, including:

  • Whitehaven managed total ROM coal production of 3,235 thousand tonnes (kt), down from 5,138kt year-on-year (YoY)
  • 12-Month rolling yield 82% down from 88% in the prior year
  • Total coal sales 3,971kt for the quarter, down from 4,646kt last quarter and down 11% YoY
  • Average coal price on own sales $211/tonne, a 145% YoY gain
  • December quarter realised average thermal coal price of US$155/tonne
  • Heavy rain and COVID-19 had material impacts to coal production and income during the quarter
  • La Nina and COVID-19 are creating uncertainty on expected ROM production and earnings outlook

What else happened last quarter?

The company says that “unusually heavy rain” throughout the quarter saw road access to the mines and Gunnedah CHPP cut off for up to 2 weeks.

Flooding from the rain is estimated to have deferred 600 kt to 700kt of production at Maules Creek and 100kt to 200kt of production at Gunnedah.

Not only that, but COVID-19 had an impact on labour shortages across all sites “with associated production impacts of 200kt in the December quarter”.

As such, production at Maules Creek was 39% behind the previous year at approximately 2,000kt, Whitehaven says.

The company also realised an average thermal coal price of US$155/tonne throughout the quarter.

Whitehaven says this is because around 50% of Whitehaven’s thermal coal book in the December quarter was priced in prior periods, and “approximately 27% of thermal coal sales were priced with reference to sub gC NEWC 6000 CV pricing structures”.

Equity coal sales came in at 3.3Mt, including purchased coal, 11% down on the same time last year. Due to coal price strength, Whitehaven achieved an average price of $211/tonne for sales of its own coal. This was 144% higher than the prior corresponding period.

With this momentum compounding late in 2021, the Whitehaven share price hit a 52-week high of $3.64 in October.

Management commentary

Speaking on the announcement, Whitehaven CEO Paul Flynn said:

Coal prices continued at attractive levels through the December quarter and remain well supported for the near future given strong underlying demand and persistent supply-side disruptions. Cash generation has been strong, with the business expected to be net cash in the March quarter. Whitehaven has unfortunately not been immune
to recent heavy rains that impacted large parts of regional NSW and QLD as La Niña made its presence felt for the second Australian summer in a row.

What’s next for Whitehaven?

The company notes that as of January 2022, the impact of La Nina and COVID has caused an approximate 5% decrease in expected ROM production, which management has reflected in its guidance.

Management now forecasts managed ROM coal production of 19Mt to 20.5Mt, down from 20Mt to 21.5Mt on the previous forecast.

It also sees a higher cost of coal in FY22, estimating $79/tonne to $84/tonne, whereas it had previously forecasted $72/tonne to $76/tonne.

Whitehaven also expects to complete 17.2Mt to 17.8Mt in managed coal sales, a substantial down-step from previous modelling showing 18Mt to 18.6Mt.

Updated unit cost guidance per tonne includes many variables such as increasing diesel prices, increased demurrage costs, volumetric impacts of flooding and “COVID related absenteeism”.

Management notes the “bottom end of guidance reflects the continuation for the remainder of FY22 of recent COVID labour related impacts” whereas the “top end of guidance reflects a return to more usual activity within Q3 FY22”.

Whitehaven share price summary

After a strong performance in 2021, the Whitehaven share price is up 64% over the past 12 months. It broke away from the benchmark index back in May of last year in line with coal pricing.

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