Whitehaven Coal Shares Drops 14% after Updating Guidance (ASX:WHC)

Whitehaven Coal Ltd [ASX:WHC] shares are down 14.4% at the time of writing after the company released their quarterly report and revised guidance.

Storms, floods and restrictions

Total managed coal sales for the March quarter were 4.8 million tonnes, up 7% when compared to the same period last year.

For the quarter, Whitehaven achieved an average realised price of US$76/t for thermal coal, higher than the US$62/t they got in the December quarter but 15% lower than the Newcastle Index average of US$88.70/t.

Whitehaven Coal said prices for coal have been increasing from higher demand for high-quality coal and supply issues.

The company was rooting for a good year in FY21 but it’s been hit by a bunch of things that have gone wrong in the last few months.

There’s been coal import restrictions from China, an issue that was still ongoing throughout the quarter. But Whitehaven said higher demand for thermal coal from Japan and Taiwan have helped push prices higher.

Then in November last year, a storm damaged one of the shiploaders Whitehaven uses to export coal from Port of Newcastle. The company has been operating at reduced capacity since, but they expect the shiploader will be up and running by the fourth quarter.

In March, Whitehaven Coal also run into shipping problems after floods and severe weather impacted rail and port infrastructure. They revised managed coal sales guidance down from 19–20 million tonnes to 18.5–19 million tonnes.

Whitehaven Coal said it’s also been hit with geological problems in the Narrabri underground mine in NSW, which have affected performance.

Narrabri issues force Whitehaven Coal to update guidance

Managing Director and CEO Paul Flynn said:

Disappointingly, we have had to revise down our FY21 production, sales and unit cost guidance due to the ongoing geological challenges at our underground mine, Narrabri.

Today the company has revised guidance down once again to 17.8–18.3Mt.

Shares for Whitehaven Coal were trading at $1.58 at the time of writing, down from yesterday’s close at $1.85. Shares had collapsed down to 83 cents in September but have somewhat recovered since.

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 Selva Freigedo

Selva Freigedo is a research analyst for The Rum Rebellion.

Born in Argentina, her passion for economic analysis started at a young age. Her father was an economist for the Argentinean governments and the family used to discuss politics and economics at the dinner table.

Argentina is a country with an unusual economic history. Growing up there gave Selva first-hand experience on different economic phenomena such as hyperinflation, devaluation and debt default.

Selva has also lived in Brazil, Spain and the USA.

Back in 2000 she was living in the US as the dot com bubble popped…
And in 2008 she was in Spain as the property market exploded and then collapsed…

She has seen first-hand what happens when bubbles burst.

Selva joined Fat Tail Investment Research’s team in 2016, as an analyst. She now writes from her vantage point in Australia, where she settled in 2015.

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