Whitehaven and Yancoal riding higher as Newcastle coal prices increase

STRONG DEMAND: Yancoal is bedding down its purchase of the Hunter Valley Operations and Mount Thorley-Warkworth mines while looking after the other operations it runs after listing on the stock exchange in 2012.WHITEHAVEN Coal –operator of the Maules Creek mine near Gunnedah –has seen its share price rise from 37 cents two years ago to $4.76 this week, an increase of almost 1300 per cent.

It’s a stellar rise for the company, and for the mine that fallen magnate Nathan Tinkler wrestled into operation before losing control of his empire after a failed attempt to privatiseWhitehaven in 2012.

As a measure of how much the industry’s stocks have risen sinceprices hit rock bottom in January 2016,Whitehaven is now valued at $4.8 billion, within sight of the $5.3 billion valuation at the heart of the Tinkler bid.

While Whitehaven has enjoyed almost continual share price rises since early 2016, things may also be looking up for another listed miner, the Chinese-backed Yancoal, now the third biggest coal producer in behind BHP and Glencore, and the second biggest in the Hunter, behind only Glencore.

Yancoal took a spectacular bet last year on the long-term future of coal when it paid almost $US2.7 billion ($3.4 billion) for the Hunter Valley Operations and Mount Thorley-Warkworth mines previously run by Rio Tinto.

That transaction also gave it a 30 per cent stake in Port Waratah Coal Services –it now runs the company’s two loaders –as well as the 27 per cent stake it already held in Newcastle’s third coal loader, owned by Newcastle Coal Infrastructure Group.

The heavily debt-laden company had lost money for the pastfive years but at its annual general meeting last month, chief executiveReinhold Schmidt foreshadowed a return to profitability by raising the potential for shareholders’ dividends.

“We are now ’s largest pure-play coal provider and remain well-positioned to improve our bottom line and drive future profitability, while reducing operating costs and our existing levels of debt,” Mr Schmidt, a former Glencore Xstrata executive, said.

The fortunes of both companies rise and fall with the price of coal, and at this point, thermal coal exported from Newcastle is bringing about $US105 ($132) a tonne, compared with the most recent bottom of the market in January 2016, when the spot price for one-off cargoes fell to $US49 (about $69 at the 71-cent exchange rate prevailing at the time).

In its annual report, Whitehaven revealed that about 80 per cent of its sales were thermal coal, with the remainder going to the higher-priced metallurgical coal markets for steelmaking.

Yancoal had shipped 17.2 million tonnes of coal to the end of September, two-thirds of it thermal, the remainder coking. Overall production was up by more than 30 per cent on the same period in 2016.