Whitehaven Coal shareholders are set to benefit from purchase of US$3.2B of metallurgical coal assets from BHP

About Whitehaven Coal Limited

Whitehaven Coal Limited (Whitehaven, the Group, ASX: WHC) is Australia’s leading producer of metallurgical coal which is exported to premium markets in India and Asia. Whitehaven has been an active coal producer for more than 20 years including 15 years as an ASX-listed entity.

Metallurgical coal now accounts for 70 percent of revenue

Following the purchase of 100 percent of the Daunia and Blackwater metallurgical coal mines in April 2024, Whitehaven’s annual revenue beyond FY25 is expected to be 70 percent from metallurgical coal and 30 percent from thermal coal. Currently metallurgical coal accounts for 59 percent of total revenue. The metallurgical coal assets were acquired from BHP and Mitsubishi for US$3.2 billion in April 2024. The recent acquisition consolidates Whitehaven’s position as Australia’s leading ASX-listed metallurgical coal producer.

Metallurgical coal is necessary for steelmaking, while thermal coal (or steaming coal) is burned to create steam to drive turbines that generate electricity. This means that the markets for metallurgical coal and thermal coal are vastly different, and this is the basis of Whitehaven’s strategic decision to invest in metallurgical coal producing assets.

Environmental impact of metallurgical coal is far less than thermal coal 

A key benefit of metallurgical coal over thermal coal is the environmental impact of metallurgical coal in steelmaking is far less than that of thermal coal in generating electricity. While steelmaking is relatively carbon intensive across the supply chain, metallurgical coal producers like Whitehaven highlight that their commodity is not as replaceable as thermal coal. There are several renewable energy alternatives to using thermal coal for electricity generation, including solar, wind, natural gas or nuclear power. However, Whitehaven’s high-quality metallurgical coal is currently irreplaceable in the steel production process.

Whitehaven pitch these facts to the investment community as investors apply their investment screening process to address Environmental, Social and Governance (ESG) concerns regarding the impact of human behaviour on sustainability and climate change.

It is significant that when global asset managing giant BlackRock Inc. announced its investment policy would exclude coal from its active funds, it specifically targeted thermal coal. Other asset managers and active investors make the same distinction between their exposure to thermal and metallurgical coal market dynamics. This suggests it is easier for the pure-play metallurgical coal producers like Whitehaven to pitch to ESG investors, banks, insurance companies and governments than their thermal coal counterparts.

Indian economy driving long-term demand for metallurgical coal 

A core pillar of Whitehaven’s strategy for many years has been to significantly boost the Group’s exposure to metallurgical coal to service the growing demand for steelmaking in India and across Southeast Asia. Demand growth is expected at least through to 2050, driven by population growth and economic development in these expanding economies, as well as the structural supply shortfall of metallurgical coal underpinned by these high growth market segments.

The long-term outlook for metallurgical coal appears favourable and Whitehaven’s increased exposure to the commodity should ensure positive shareholder returns at least in the medium-term.