Whitehaven Coal Sells 30% of Blackwater Mine in $1.08B Deal

About Whitehaven Coal Limited

Whitehaven Coal Limited (ASX: WHC) is a leading Australian coal producer, operating six mines in the Gunnedah Basin of New South Wales (NSW) and the Bowen Basin of Queensland (QLD). Major projects include the Blackwater Mine, which produces low-ash, low-sulphur metallurgical coal and high-energy thermal coal, and the Daunia Mine, both acquired from BHP and Mitsubishi Development.

Other significant assets in Whitehaven’s portfolio include the Maules Creek Mine, Narrabri Mine, Tarrawonga Mine, and Werris Creek Mine, all located in NSW. The company is also developing the Vickery Extension Project and the Winchester South Project to expand its production capacity.

Supporting these operations are the Gunnedah Coal Handling and Preparation Plant (CHPP) and several mines undergoing rehabilitation, such as Canyon, Rocglen, and Sunnyside. Whitehaven continues to invest in its assets and projects, ensuring sustainable growth and a reliable supply of high-quality coal to meet global demand.

Sell Down & Joint Venture

Whitehaven Coal Limited has successfully completed the sell down of 30% of its Blackwater mine, forming a joint venture with Nippon Steel Corporation and JFE Steel Corporation. The transactions involved selling 20% of the mine to Nippon Steel and 10% to JFE Steel, resulting in an aggregate cash consideration of US$1.08 Bn.

The ownership of the joint venture will effectively commence 1st of April 2025. Whitehaven’s CEO & Managing Director, Paul Flynn, expressed excitement about partnering with these longstanding customers, recognising the value and long-term importance of the metallurgical coal produced at Blackwater.

Blackwater Mine

In April 2024, Whitehaven acquired the Blackwater and Daunia mines from BHP and Mitsubishi Development. Whitehaven paid BMA a cash consideration of $3.03 Bn on completion.

With a strike length of 80km, the Blackwater mine is a significant asset in Whitehaven’s portfolio and a cornerstone of the company’s operations with around 2,000 workforce personnel. The Blackwater mine produces predominantly low-ash, low-sulphur metallurgical coal products, as well as high energy thermal coal and its coal products are exported across Asia.

The mine reports output of 14 million tonnes of coal annually with JORC resources of 1,837Mt. Over the course of 50 years the mine has produced around 450 million tonnes of coal.

Nippon Steel

Nippon Steel Corporation, one of the largest steel producers in the world, has a rich history dating back to its founding in 1950. The company has seen consistent revenue growth over the last three years up to FY23, increasing from ¥6.81 Tion in FY21 to ¥8.87 Tion in FY23.

Their total liabilities stand at ¥5.36 Tion in FY23, and total equity at ¥5.36 Tion indicating an equal reliance on debt and equity for financing and a balanced debt-to-equity composition.

The company’s major assets include steel plants and production facilities such as the Muroran Area in Hokkaido, the Kashima Area in Ibaraki, the Kimitsu Area in Chiba, the Nagoya Works in Aichi, and the Oita Area in Oita, as well as international facilities in countries like Brazil and India.

Nippon Steel’s investment in the Blackwater mine aligns with its strategy to secure high-quality raw materials for its steel production.

JFE Steel

JFE Steel Corporation, another major player in the steel industry, was established in 2003 through the merger of NKK Corporation and Kawasaki Steel Corporation. JFE Steel has demonstrated solid financial performance, with consistent revenue growth. Over the last five years their revenue has increased annually and increased from 5.52 T to 5.75 T between FY23 and FY24. Their capital structure consists of 3.22 T in liabilities and 2.54 T in equity indicating a stronger reliance on debt for financing.

JFE Steel’s major assets include state-of-the-art steel manufacturing facilities and research centres, which drive its innovation and production capabilities. Their production facilities include West Japan, East Japan, Chita and Sendai and they also have a steel research and development centre. Their main product includes sheets, plates, shapes and spiral pipes, pipes, electrical steel, stainless steel, bars, wire rods, welding materials, iron powders, titanium and slag.

The company also undertakes many research and product development activities such as the variety of sheet products for cars, forming technology, coated products, can & laminated materials, plate & shapes, corrosion protection tubular products & casting and iron powder and magnetic materials.

The partnership with Whitehaven in the Blackwater mine is part of JFE Steel’s efforts to ensure a stable supply of high-quality metallurgical coal.

Whitehaven Financial Performance

Whitehaven Coal has shown growth in revenue, EBITDA and EBIT in the three years leading up to FY23, however they have experienced a significant downturn in FY24. Revenue from FY22 to FY23 increased from $4.92 Bn to $6.06 Bn, then down to$3.82 Bn in FY24. EBITDA moved from $3.06 Bn to $4 Bn and down 65.08% to $1.40B. EBIT increased from $2.80 Bn to $3.72 Bn and dropped 72.89% in FY24 to $1.01 Bn.

Whitehaven’s capital structure has evolved, with total liabilities increasing from $2.35 Bn in FY23 to $8.04 Bn in FY24, and equity slightly rising from $5.26 Bn in FY23 to $5.27 Bn in FY24. Their capital structure moved from being equity reliant to debt reliant for financing between FY23 and FY24.

Over the last year the company’s stock price has fallen 22.96%, and -11.77% YTD, they have struggled against the ASX200 over 1 year down -22.28%.

Overall Whitehaven’s performance is struggling with growth and stability over the last year although the company reports $13.31 Bn in assets in FY24 which has been growing significantly over the last three years from $6.24 Bn in FY22. Their assets increased 74.93% since FY23 indicating that the increase in total liabilities in this period (+242.47%) may be attributable to significant acquisition of assets, especially considering that current assets declined from $3.23 Bn to $1.53 Bn, and non-current assets increased from $4.37 Bn to $11.77 Bn. In particular, long-term investments increased from $23.39 M to $77 M and property, plant and equipment increased from $3.80 Bn to $10.74 Bn.

Energy Sector and Coal Commodity Performance

The energy sector has fallen 26.31% over 1 year and has been declining from a four-year peak in September 2023. Coal prices have fallen to the lowest in nearly four years as global supply continued to increase with top produces such as Chine set to increase output to 4.82 Bn tonnes in 2025.

Lower coal prices have squeezed Australian coal producers and creates a difficult economic setting for Whitehaven to operate in and applies pressure on the company’s newly acquired assets to deliver strong financial performance and growth.