Ground Breakers: Whitehaven approves rare new coal development, Forrest hits majority control at Mincor, Lynas prices drop as China floods rare earths market

Whitehaven approves early development of Vickery project in a rare new development in the coal industry
Wyloo hurdles 50% mark in Mincor takeover as nickel miner reports March quarter production
Lynas prices fall but NdPr production lifts as Malaysian plant suspension looms

The board of Whitehaven Coal (ASX:WHC) has approved a $150 million investment in a small scale start-up of the new Vickery mine, in a rare investment in new coal supply.

The New South Wales coal mine was operated by Rio Tinto (ASX:RIO) from 1991 to 1998 and will be, managing director Paul Flynn says, the highest quality thermal coal product traded on the seaborne market at a caloric value of over 6400kcal.

The mine, which has a larger 10Mtpa full-scale development in the works which WHC wants to make “shovel ready” by next year, will deliver first coal in mid-2024 and ramp up across FY25 to ROM production of 1.2-1.3Mtpa and sales of 900,000-1Mt.

In the near term it will replace the high ash, lower CV Werris Creek mine, where Whitehaven plans to begin a phased wind down next financial year.

Vickery was approved by the NSW Independent Planning Commission in 2020.

WHC delivered managed sales of 4.1Mt in the March quarter, equity sales of 3.4Mt and ROM production of 4.3Mt — down 12% on the December quarter on the back of labour shortages, congestions from the management of autonomous fleet at Maules Creek and weather issues.

Whitehaven already reduced guidance earlier this month.

Prices were also down from $527/t in December to $400/t in March as global thermal coal prices softened due to a mild northern winter.

A world Paul Flynn can’t imagine: Coal under US$100/t

But the company, which has ridden a record coal price run to hold a net cash position of $2.7b including a $1.2b cash build in the March quarter, continues to be bullish on the long term outlook for coal.

Whitehaven boss Paul Flynn told analysts on a conference call he’d seen long-term forecasts from credible commentators moving to the US$130-150/t range, with conversations with customers highlighting their concerns around securing long term supplies.

He said underinvestment in coal, gas and oil meant price curves would need to be reassessed.

“Our friends in Japan, of course, are now living in a world where they don’t have access to Russian coal, they stopped taking it at the end of March,” Flynn said.

“And so whilst they do have the comfort of having some stock on the ground at the moment, their focus is turning to how do I resupply and … bigger customers are starting to look for greater duration in their contracts with us.

“So we are working through that with them and we are interested in signing up longer term deals with them.

“I know in the past we’ve talked a little bit about from 1-2 to 3-year type duration deals that that we’ve done. But we now have the prospect of some customers asking us for longer, so even 7-10 years in duration.

“So that’s telling us that there’s a high degree of anxiety in the market of being able to resupply.”

In a sign of the redrawn lines of the coal industry since the pandemic, WHC has used a Coal Newcastle thermal three-year average price of US$156/t to underpin its investment case for Vickery.

That would have been near record highs only two years ago, but is conservative in the context of prices in excess of US$400 and US$450/t seen at some points last year following Russia’s invasion of Ukraine.

While some forecasters still see thermal coal prices resettling to below US$100/t in the medium to long term, Flynn says he can’t see it happening.

“I can’t imagine a world where it sinks to US$100 long term, given that there’s no supply and the demand is very good,” he said on the conference call.

“With new power stations coming on in very mature jurisdictions, let alone emerging, the issue is the supply constraints, not the demand.”

Whitehaven Coal (ASX:WHC) share price today:

Forrest taking the reins at Mincor

Mincor Resources (ASX:MCR) has had a tumultuous month or so.

But its M & A dance with billionaire Andrew Forrest’s mining brand Wyloo Metals looks to dragging to a conclusion, with a note to the ASX showing it had crossed the 50% ownership threshold of the junior nickel miner in its on-market $1.40 per share bid to take control of Kambalda’s key nickel assets.

The bid has been recommended by the target’s board after an issue with arsenic levels in some nickel delivered to BHP’s Kambalda concentrator saw it withdraw its FY23 guidance and chill enthusiasm for a higher or competing bid against Wyloo’s cash offer.

Mincor revealed today it had increased mined ore production 129% quarter on quarter in March from 45,029t to 103,309t, with nickel in concentrate production of 1380t (3323t YTD).

“During the quarter, we opened up additional mining fronts and multiple levels, resulting in a significant uplift in stoping tonnes. The breakthrough in the incline/decline at the Northern Operations, which now joins the Otter Juan and Long mines together, has also delivered a step-change in our ore movement,” Mincor MD Gabrielle Iwanow said.

“As announced on 30 March 2023, due to the lack of certainty regarding future acceptance of off-specification ore by BHP and the incomplete status of potential solutions, we withdrew FY23 guidance. We have stockpiled some material for blending as and when other material becomes available from the continued ramp-up in our mining operations.

“Work is continuing to improve ore body knowledge to enable optimisation of our forward mine plan to enable us to consistently deliver on-specification product. Our drilling programs continued at both Northern Operations and Southern Operations during the quarter, with assays pending.

“We are excited about the significant geological re-interpretation of the Kambalda Dome which we shared on 4 April 2023 in our Target’s Statement.

“This work has been used to identify multiple, predominantly untested, high-quality nickel sulphide targets within the Kambalda Province and we will continue to pursue these exciting targets to unlock the full potential of our dominant landholding in the Kambalda District.”

Mincor says it delivered 87,248t of nickel ore at an average grade of 1.88% to BHP in the March quarter, with 23,358t containing 550t at a grade of 2.4% in stockpiles, including off-spec ore delivered to BHP, ore awaiting assay and off-spec ore BHP won’t accept without blending to reduce impurities.

“Mincor is working closely with BHP to manage the specification of ore parcels delivered, and if parcels are not blended during the month, then the parcel is stockpiled for future blending opportunities. For context, some 6,000 tonnes of the stockpiled ore have already been blended, delivered, and accepted by BHP in April month to date,” the company reported.

BHP’s Nickel West division lowered production guidance by 5000t today to 75,000-85,000t for FY23, in part because of the spec issues at Mincor.

Mincor Resources (ASX:MCR) share price today:

Lower rare earths prices for Lynas as China revs up production machine

Higher sales volumes helped rare earths giant Lynas (ASX:LYC) avoid a fall in revenue as rare earths prices fell to their lowest levels of the financial year in March on the back of a big ramp up in Chinese production.

While demand for its products remained very strong outside China, Lynas said it delivered 4914t of total rare earth oxides at prices of $48.3/kg.

That underpinned revenue and receipts of $237.1m and $229.2m respectively, up from $217.5m and $168.4m in the December quarter, when it delivered 3725t at an average price of $58.4/kg.

Prices hit their peak for Lynas in the fourth quarter of FY22 at $79.2/kg, when the company sold just 3719t of rare earths oxides but raked in a massive $351m in sales receipts.

Prices of its highest value product, neodymium-praseodymium, have tracked lower from an average of US$139.3/kg in the third quarter of FY22 to US$88.1/kg in the March quarter this year and US$75.8/kg in the month of March.

Lynas says there has been a “temporary oversupply” of rare earth products with subdued demand in the Chinese domestic market, with production quotas in the world’s largest rare earths market increasing 19% YoY in the first half of 2023.

“Future pricing trends will depend mainly on the economic recovery in China and anticipation of Chinese production quotas for 2H 2023,” Lynas told shareholders in its quarterly report today.

Lynas’ Malaysian plant delivered its best ever quarter for NdPr production of 1725t, around 40% of the 4348t of total rare earth oxides produced at the Kuantan facility.

However, April 28 looms as a key date for the miner, when it will appeal licence conditions preventing it from importing and processing lanthanide concentrate in the South East Asian country.

While it has been building a plant in Kalgoorlie in WA to undertake the cracking and leaching processing step, which produces low level radioactive waste as a by-product, the first mixed rare earth concentrate from the Kal factory is only expected to reach Kuantan in August and the uncertainties of the ramp up mean a shutdown or slowdown of the Malaysian plant for at least three months is likely.

Lynas finished the quarter with $1.1129b in cash and short term deposits, having spent $155.3m on CAPEX, exploration and development.

Alongside the $575m Kalgoorlie plant build it is also progressing a half-billion dollar expansion of its Mt Weld mine near Laverton and plants to process heavy and light rare earths in the US with the support of the Department of Defense.