Monsters of Rock: Coal miner’s delight as Whitehaven says higher prices will translate to cash flow
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Mining stocks continued to outpace the market this week, with gold, iron ore and coal stocks all among the big winners.
With a 1.36% gain Materials was the best performing sector on the Australian bourse as the ASX200 posted a 0.26% loss.
Whitehaven Coal (ASX: WHC) delivered a positive signal for coal stocks by talking up stronger prices for thermal coal.
St Barbara owns the Gwalia gold mine in Leonora, a historic operation run by US President Herbert Hoover back when it opened in 1897 and now the deepest trucking mine in the world.
That has logically brought its issues and as miners have gone closer to the Earth’s core costs have gone up with the need to spend heavily on infrastructure and ventilation to support safe operations at depths of 2km underground.
St Barbara was a standout today on no news, up around 6%, although it did emerge yesterday with an almost 20% stake in nearby explorer Kin Mining (ASX: KIN) which controls around a million or so ounces of gold around Leonora in WA’s northern Goldfields.
That is interesting given St Barbs outlined plans last month to scale up and maintain its Gwalia operations by turning it into a provincial play by open pit mining, processing satellite resources and toll milling gold from other miners through the Gwalia mill.
Whitehaven Coal released its quarterly report for June, rising on positive sentiment after pledging to investors that 10-year-highs in thermal coal prices were about to bring stronger cash flow.
“Coal prices staged a remarkable recovery over the quarter, responding to increased economic activity as well as continuing supply-side constraints,” Whitehaven MD and CEO Paul Flynn said.
“Prices for high-CV thermal are at 10-year highs, and we will begin to see this materialise into strong free cash flow over the coming months.”
Whitehaven produced 4.43Mt of coal at its Gunnedah Basin mines in New South Wales in the June Quarter, and around 16.5Mt in FY21.
China’s coal imports rose 35% in June to their highest level in 2021, 12.3% higher than the same period in pandemic affected 2020.
The industry has been urged to build up coal supplies for the summer months, with China announcing a 10 million tonnes release from State reserves today.
Yancoal, owns and manages a suite of mines across Australia, primarily in New South Wales and Queensland, was also up today.
Rio is expected to produce a record half-year result after record iron ore prices in the June Quarter, despite its issues getting all the product it planned out of Pilbara ports in recent weeks.
With a 2% gain it is now trading upwards of $130, with a market cap of $193 billion.