Company Overview
The Australian coal miners are under pressure from multiple angles in the current environment with Chinese imports of coal slowing as a direct result of the displeasure by China and coal demand in the mature markets has seen a marketable shift away from coal towards natural gas in the US.
Whitehaven is one of the larger coal miners listed on the ASX. Comparing WHC against the ASX 200 index chart shows the risks in investing in miners in a sector that is undergoing fundamental changes.
Our view is that while the overall market for coal demand is shrinking (replaced with LNG and natural gas taking the lion of market share). Coal will continue to play a critical piece in the energy mix especially in the developing markets. This driven by coal’s cost competitiveness even with inclusion of any potential carbon tax.
The soft stoppage of coal imports into China is seeing unforeseen consequences which is not sustainable in the long run. The downside is that is can last beyond the period most investors are expecting.
If you are investing in a coal miner, then it is important to focus on the producers that are at the lowest quartile of the cost curve with a long mine life.
We have been following Whitehaven for a number of years. Coal used to be an important part of BHP and RIO asset portfolio but has been gradually divested.
ESG issues aside, there are still a number of pure coal miners listed on the ASX and WHC is one of the best pure play on the coal sector not only on the ASX 300 but globally.
Whitehaven commissioned its largest asset, Maules Creek which as 30 year mine life in the last 5 years. It ramped up production from initial 13 mtpa to 19 mtpa.
WHC Dividends
WHC restarted the dividend payments in 2017 following the recovery from the last cycle. Since then shareholders have been rewarded with dividend growth as the Maules creek’s production ramped up and throwing out cashflow. Due to the historical losses the dividends are paid excluding any franking credit.
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WHC dividends are paid in September and March.