Target $18.72, page-10215

sto..ck...head.com J. Chiat 22.8.24 said

"Whitehaven Coal (ASX:WHC)will pocket more than US$1 billion from the partial sale of its Blackwater coal mine, in a deal that makes its US$4.1bn purchase from BHP of that and the Daunia mine as well as the Blackwater South development asset look cheap (my emphasis) by comparison...

Japanese canary in the coal market

Whitehaven Coal will be able to cover any future payments due to BHP by banking US$1.08bn from Japans Nippon Steel and JFE Steel for 30% of the Blackwater coal mine in Queensland. It highlights the continued importance of met coal to global steelmakers, indicating the long-term outlook for the commodity as green steel technologies take longer to emerge than many observers had hoped.

Nippon, which will take a 20% stake worth US$720m, said higher royalty rates in Queensland had made it concerned new supply will not be brought online, placing a premium on existing operations.

“Currently, there are growing concerns that capital investment in coal assets will shrink due to the implementation of policies to raise coal royalty rates in Australia’s states, which hold significant influence over the supply of steelmaking coal to the seaborne market,” Nippon said in a statement.

“This will certainly contribute to a decrease in the supply of steelmaking coal in the long term. Given the strong sense of urgency in respect to this decrease in the supply of steelmaking coal, Nippon Steel has determined that, as an end-user of steelmaking coal, it is necessary to invest in the BW Coal Mine to secure a long-term stable supply of coking coal required for Nippon Steel’s technologically advanced coke production.”

Given WHC paid BHP US$3.2bn last year for both Blackwater and Daunia with US$900m in payments deferred contingent on prices and milestones, it shows how concerned customers are on the future of coking coal supply...

Front month premium hard coking coal futures are trading at US$198/t, but WHC boss Paul Flynn is hopeful of seeing higher prices as Indian purchasers return to the market after a traditionally down season (northern summer. My words in brackets; & all emphases, mine) for steelmakers. He said while WHC would like to see prices above the US$200-205/t range seen recently, the purchase of Blackwater and Daunia was a long-term strategy.

Flynn views the Japanese steelmakers’ purchase of the Blackwater stake as a sign of what customers see in coal’s long-term future as well.

“The key point here is these are both important and material consumers of both products, the semi-hard and the semi-soft out of Blackwater and it’s obviously important enough to put their money to work here to ensure they have consistency of supply over time,” WHC boss Paul Flynn said".

Monsters of Rock: Dividends, mine sales and studies, it's all kicking off today - Stockhead

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