How the Yancoal share price soared 36% in a year and what to expect next

Atop the soaring share price, Yancoal paid out market-beating dividends over the year.

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Although sliding today alongside the wider market, the Yancoal Australia Ltd (ASX: YAL) share price has been a stellar performer over the past year.

12 months ago you could have snapped up shares in the All Ordinaries Index (ASX: XAO) coal stock for $4.76 apiece. At the time of writing those same shares are swapping hands for $6.48, up 36.1%.

And that doesn't include the 69.5 cents a share in fully franked dividends the coal miner has paid out over the year.

If we add those back in, then the Yancoal share price has gained an accumulated 50.7% in 12 months, with some potential tax benefits from those franking credits.

Here's what's been driving the coal miner's success.

What's been lifting the Yancoal share price?

The Yancoal share price has smashed the benchmark returns over the past year despite significantly lower thermal and metallurgical coal prices than it received in 2022 and the first half of 2023.

Speaking at today's annual general meeting (AGM), Yancoal CEO David Moult noted coal prices were impacted by a slowing global economy and mild winter in the northern hemisphere. The lower demand came amid an uptick in supplies, with Aussie coal exports increasing 22% in 2023 and Indonesia's exports rising 12%.

Yancoal itself spent 2023 focusing on its mine recovery plans. The ASX coal stock still managed to increase output in each quarter, with fourth-quarter production marking the highest rate in three years.

As for why investors have been bidding up the Yancoal share price, Moult said:

For 2023, we were pleased to report $7.8 billion in revenue, $3.5 billion of operating earnings before interest, taxes, depreciation and amortisation (EBITDA), and $1.8 billion in after tax profit.

Atop those strong metrics, Yancoal held a whopping $1.4 billion of cash as at 31 December and has increased its cash holdings since then.

And this came after the coal miner repaid its final costly loans.

"The board elected to prepay the last of our interest-bearing loans during the first half of 2023," Moult said. "In total, we repaid more than US$3.0 billion of loans since late 2021. The loan prepayments saved us almost AU$300 million dollars in finance costs last year."

But the Yancoal share price isn't immune to the rising costs impacting most industries and households across Australia, reporting cash operating costs of $96 per tonne.

According to Moult:

While we are focused on minimising our cash operating costs, inflation factors including labour, explosives, electricity and spare parts, incurred over recent years, may only partially unwind, if at all.

That said, we have re-established our position at the low end of the operating cost curve, where we see our natural competitive advantage. Our implied operating cash margin for the year was $115 per tonne.

Now what?

With the Yancoal share price up 36% over the past 12 months (50% including dividends), what can investors expect next?

Shedding some light on that, Moult said, "This year, we aim to produce at a level similar to the second half of 2023."

Yancoal's 2024 guidance is for 35 million to 39 million tonnes of attributable saleable production, with a second-half weighting to the production profile.

As for the future costs that could impact the performance of the Yancoal share price, Moult said:

We aim to bring the cash operating costs per tonne down from the full-year 2023 level and are focused on output given the direct relationship between the volumes we produce and the per tonne cash operating costs we report.

The miner's cash operating costs guidance for 2024 is $89 to $97 per tonne.

Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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