WHITEHAVEN COAL

Australian Black Gold

Exchange: ASX

Share Price: $6.30

Dividend Yield: 11.4%

Whitehaven Coal Australia is a mining company based in Australia that specializes in the exploration, development, and production of coal. The company was founded in 1999 and is headquartered in Sydney, Australia. Whitehaven operates several coal mines across the states of New South Wales and Queensland, producing both metallurgical coal (used in the steelmaking process) and thermal coal (used in power generation).

Whitehaven has faced criticism and controversy for its environmental and social impact, particularly in relation to its coal mining operations in sensitive areas and its contribution to greenhouse gas emissions. The company has also been the subject of protests and legal action by environmental activists and local communities concerned about the impact of its mining activities.

The Australian government's stance on coal production versus renewable energy has been a topic of debate and has evolved over time. The government has historically been supportive of the coal industry due to the significant economic contribution it makes to the country. Australia is one of the world's largest coal exporters and has substantial coal reserves.

In recent years, there has been an increasing recognition of the need to transition to cleaner energy sources to address climate change and reduce greenhouse gas emissions. The Australian government has set renewable energy targets and has implemented policies to encourage the development of renewable energy projects, but it's important to note that coal will likely continue to play a role in the global energy mix for some time.

CUSTOMERS

Whitehaven's main customers for its coal products are typically energy companies and steelmakers located both domestically and internationally.

In terms of thermal coal, which is primarily used for power generation, some of Whitehaven Coal Australia's key customers are power utilities in Australia, Japan, and South Korea. The company also exports thermal coal to markets in Asia and Europe, including India and Germany.

As for metallurgical coal, which is used in the steelmaking process, Whitehaven Coal Australia's customers include steel mills in Asia, particularly in China, Japan, and South Korea, as well as in Europe and North America.

COMPETITORS

BHP has operations in Australia and around the world. Its Australian coal assets include the Mt Arthur Coal mine in New South Wales.

Glencore is a global mining and commodities company with significant coal operations in Australia. Its Australian coal assets include the Newlands, Collinsville, and Oaky Creek mines in Queensland.

Anglo American has a diversified portfolio of assets, including coal mines in Australia. Its Australian coal assets include the Capcoal and Dawson mines in Queensland.

Peabody Energy is a US-based mining company with significant coal operations in Australia. Its Australian coal assets include the North Goonyella, Moorvale, and Millennium mines in Queensland.

Yancoal Australia is an Australian mining company with coal assets in New South Wales and Queensland.

MANAGEMENT

Whitehaven has a strong senior leadership team led by Paul Flynn. Paul has extensive experience in the mining, infrastructure, construction, and energy sectors gained through 20 years as a professional advisor at Ernst & Young. As a partner at EY for over eight years, Paul managed many of the firms largest mining and energy clients across Australia, Asia, South and North America. Paul has also fulfilled various leadership roles with large corporations on secondment including as the CFO of a top 50 listed company. 

The CFO, Kevin Ball also has over 25 years experience working in the mineral and energy industry across coal, oil and gas.

FINANCIALS

Like all other mining companies, Whitehaven had a bad 2020 and 2021 which saw the entity make a loss in 2021. FY2022 was an exceptional year of profits for the company with earnings of close to $2.8 billion.

The balance sheet as at 31 December 2022 indicates that Whitehaven has $2.6 billion in cash and $32 million in debt, resulting in a strong net cash position.

CONCLUSION

It is very important to understand that like most mining industries, coal is cyclical. It is imperative that you buy at a fair price and keep checking on your investment.

Disclaimer: Nothing in this article should be seen as financial advice. Everything stated is for educational purposes only. Always do your own due diligence.