Ground Breakers: Whitehaven drops after guidance trim, mid-tier gold miners show signs of life
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Whitehaven Coal (ASX:WHC) is down on a guidance hit, but you can’t feel too sorry for the fossil fuel peddler, which raked a ridiculous $1.2 billion off the craps table and into its bank account in the March quarter.
After pulling in prices of $400/t in the three months to March 31, the New South Wales based thermal coal producer bolstered its growing cash pile to $2.7 billion.
That was the good news for Whitehaven investors. The bad news was the company has slashed ROM coal production guidance by 1-1.2Mt from 19-20.4Mt to 18-19.2Mt for FY23 on the back of production issues at its Maules Creek mine.
“Labour shortages are being felt across the business, but the impact of several additional operational constraints at Maules Creek meant its production increased by only 9% relative to the December quarter,” WHC said in a statement today.
“This lower than planned increase reflects labour constraints, congestion arising from limited dumping locations while keeping manned and unmanned fleets separate, and intermittent weather interruptions in the month of March.”
That will see managed coal sales fall from 16.5-18Mt to 15.3-16Mt, with equity coal sales to drop from 13.1-14.4Mt to 12.3-12.9Mt, and costs excluding royalties rising from $95-102/t to $100-107/t.
The production issues came amid complaints from the coal industry over the extension of a domestic reservation policy by the New South Wales Government, though that rule to confiscate 5% of local production for local power plants at a maximum price of $125/t was not due to come into effect until this month.
Thermal coal prices have roughly halved from levels of around US$400/t at the end of last year on the spot market, though most sales have been locked up in contracts with long-term customers owing to the tightness of seaborne coal supplies.
Some sales will be pushed into FY24.
Hammered by cost pressures, inflation and Covid last year, are we seeing early signs mid-tier gold stocks could finally deliver this year?
The whole market is on a high thanks to gold prices crashing through US$2000/oz and $3000/oz Aussie last week, as well as Newmont’s decision to amp up its chase with a higher bid yesterday for Aussie gold giant Newcrest (ASX:NCM).
But other producers are starting to build cash after a couple of rough quarters for the sector.
Westgold Resources (ASX:WGX) was the latest gold miner to deliver its March quarter production today, producing 60,512oz for Q3 of the financial year.
Down from 62,180oz in Q2, WGX says its year to date production of 188,740oz from the company’s Murchison gold mines puts the company on track to hit guidance of 240,000-260,000oz for FY23, despite temporary restrictions from a major rainfall event.
Importantly the company saw its cash, bullion and liquid assets grow $9m to $168m, after a $31m drain in the September quarter and flat December quarter.
“Westgold’s Q3 results show changes made around operating discipline, mining efficiency and cost management are beginning to deliver the financial results we expect from our mines,” MD Wayne Bramwell said.
“The turnaround this quarter is encouraging considering the investment in resource drilling, earthworks associated with our hybrid power stations and solar farms and a major rainfall event across the Murchison late in the quarter that impacted our Meekatharra and Fortnum operations.
“Our team continues to find ways to simplify our business and drive efficiencies. Profitability and building our cash position is the objective this year and at the end of Q3, FY23, we remain on track to deliver our FY23 guidance.”
Speaking of rain, Cyclone Ilsa is about to hit the northwest coast of Australia, drawing expectations the major iron ore miners will see hits to exports out of Port Hedland and Dampier this month.
That sent iron ore prices 1% higher overnight to around US$119/t.
“Iron ore prices advanced to USD120/t amid concerns of cyclone disrupting Australian shipments from Port Hedland … while exports of iron ore from Brazil started recovering,” ANZ’s Kishti Sen said in a note this morning.
“China’s recent plans to spend USD1.8 trillion in infrastructure has boosted demand prospects for steel.”