Meh. Met coal is sitting at $285/tonne AUD as I type. Last quarter WHC realised price was $230 and their slide deck talks about 80% relative to index which lines up mostly. Somewhat cushioned by falling AUD.
Most met coal for most mines is contracted with offtake and JV partners as each furnace is somewhat tuned for the specifics of that coal type, although yes, some will also be sold spot. Their cost of production is $140 FOB and a bit under $30 a tonne royalty, about a $60/tonne margin. WHC has a very robust balance sheet, with the sale of 30% blackwater they have the payments to BHP locked in risk free.
People are acting like the Coal price is going to halve from current levels, we are seeing some smaller leveraged players losing money at these prices due to their high cost and poor product and the long trends of urbanisation and development is not some 'AI or bubble' prone to a crash. Its a long duration steady trend driven by demographics, income and the desire for a better life. I'm not expecting fireworks for the coal price in the next 12 months, but at current prices we don't need it.
Within 12 months we will be essentially debt free, spitting off an EPS of circa $1.20 a share for a PE of less than 4. It is taking me a lot of restraint today to not buy more just yet.
We don't need the coal price to go back to record highs of $600USD a tonne. Every $50 AUD increase in the coal price improves bottom line revenue by $1.1B, and doubling income. Which is just insane.
WHC Price at posting:
$4.62 Sentiment: Buy Disclosure: Held
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