WHC Share Price History
06 Aug, 2020
(Bloomberg Opinion) -- Ivan Glasenberg has built up a formidable commodities giant. The Glencore chief executive officer’s resolute belief in the counter-cyclical value of a trading business paid off in the first half of 2020, with an oil bonanza that helped ease blows dealt by the coronavirus. Impairments still dragged it to a $2.6 billion net loss. The past two years haven’t been kind: The group is still under investigation over possible corrupt practices, coal has crumbled and the stock has underperformed traditional mining heavyweights. Glencore could do worse than to take the pandemic hint and revamp its investment proposition, with less of the black stuff and greener assets to get ahead of peers in a sector that hasn’t been a leader in environmental, social and governance terms. That might include completing a long-signposted change at the top. All but one of the old guard of divisional heads who became billionaires alongside Glasenberg when the miner and trader listed in 2011 have now left. With a shift away from past fiefdoms and a new generation in place, the company can at last outline an exit date, a new boss and its next act.Not all of the group’s troubles are within its control, or indeed avoidable. It can’t speed up investigations, and is already cooperating. Meanwhile, an unexpected, gravity-defying surge in iron ore, which Glencore doesn’t mine, has masked plenty of problems at rival diggers. The Covid-19 pandemic also took its toll: Earnings before interest, tax, depreciation and amortization for the first six months came in at a forecast-beating $4.8 billion, but still fell 13%. It wrote $3.2 billion off the value of Colombian coal, Chadian oil, African copper and Peruvian zinc. Even its oil trading win pushed up a debt burden already higher than most peers, and forced the company to scrap dividends for the year.It can, though, tell a better story, at a time when even oil majors are going green.That involves, first and foremost, tackling coal. It still helps fund Glencore’s more eco-friendly activities like battery ingredients copper, cobalt and nickel, but coal margins have shrunk to 23%, half where they were in 2018, and that’s not just a temporary coronavirus hit. The world’s largest thermal coal exporter capped production last year, and said last week it would cut back in light of oversupply. Glencore has resisted more dramatic strategic moves, arguing the material can recover, given limited new supply and Asian demand, and remain profitable, and that it doesn’t make up enough of its earnings to scare investors. With demand in places like Vietnam looking less bright, and ESG pressures only increasing, that’s a challenging argument to defend. Options include spinning off coal assets (thermal and less significant coking coal), following the path set by BHP Group with South32 Ltd. Fund manager distaste for an all-coal business, though, may push it toward a private solution, if enough backers can be found to build a coal powerhouse to feed Asian buyers. That’s looking cheaper than a year or so ago: Assuming annual Ebitda of roughly $1.3 billion for 2020 at current prices, and the multiples on which coal rivals like Whitehaven Coal Ltd. trade, a specialized entity could be worth roughly $9 billion. Neither of these alternatives is yet on the table. Keeping it isn’t impossible, of course, but as with BP Plc and oil, Glencore may require more evidence of a change of focus, perhaps even the retirement of its former coal trader boss. Parting company will be a challenge. Glasenberg’s pugnacious charisma has been key to Glencore’s lure. When it listed in 2011, as the rest of the mining industry was cleaning up after wasteful deals and over-priced projects, he was among the first to press for a focus on returns. He wasn’t only a leader, but a major shareholder with skin in the game, as he liked to remind investors. That glow hasn’t faded entirely and he is still the second-largest owner, but Glencore shares are worth less than half what they were less than a decade ago. Including reinvested dividends, the stock has generated a negative 51% total return for investors since 2011. Not all African operations have lived up to expectations, and even trading hasn’t been consistent.After his departure, Glasenberg will remain a strong voice, with 9% of the stock, a holding he has said he won’t sell under his replacement. It might be a good time to give a well-established board a few new faces.Yet Glencore’s traders have always been famed for their impeccable timing. With ESG the company is falling worryingly behind, and not just with coal. It has shifted investment plans to green metals and has a credible 2035 target for closely watched Scope 3 emissions, the greenhouse gases released by clients, but it’s one that relies largely on the inaction of allowing assets to deplete. The company recorded six fatalities in the first half, and embarrassingly few women at the top. Glencore can clean up faster.This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Clara Ferreira Marques is a Bloomberg Opinion columnist covering commodities and environmental, social and governance issues. Previously, she was an associate editor for Reuters Breakingviews, and editor and correspondent for Reuters in Singapore, India, the U.K., Italy and Russia.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
04 Aug, 2020
Today we will run through one way of estimating the intrinsic value of Whitehaven Coal Limited (ASX:WHC) by taking the...
29 May, 2020
(Bloomberg Opinion) -- It’s not unusual for large new mines to attract opposition and controversy. But rarely has so much energy, political and financial capital been spent on a project with as little prospect of making money as Australia’s Carmichael mine.As we’ve written, the sums used to justify the pit being developed by an affiliate of billionaire Gautam Adani’s ports-to-power Adani Group don’t really make sense. At reasonable costs for production, transport, finance and infrastructure, its low-grade coal would be far more expensive than comparable product available elsewhere. Adani’s Indian-based power unit already loses money on every kilowatt-hour of electricity it sells and runs well below capacity. Fueling its power stations at the cost needed to make Carmichael stand up would make matters even worse.Adani has always said that the economics of the project “remain strong,” but its published accounts for the year ended in March suggest the company is finding it harder to make that assessment. “It is not likely that taxable income will be earned in the foreseeable future,” they state for the first time this year, in reference to a A$1.29 billion ($857 million) tax loss that’s been run up so far.That doesn’t exactly mean the project will never spit out cash of any sort. Such remarks can just be boilerplate to define where the potential A$386 million tax benefit belongs on the balance sheet. Still, looking at the way the company values its own project shows just how generous your assumptions must be to believe this mine can actually make money. The company uses “industry-standard techniques” in valuing the project, a spokesperson said by email.(3)Take Carmichael’s base valuation of A$1.07 billion as of March 31. A discount rate of 13.5% leaves the project extremely sensitive to the price of coal in its first four or five years of operation, a period that would account for about half of its lifetime cashflow.Should the coal price fall by just 10%, that valuation would decline by A$882 million, according to the accounts — more than 80% of its balance sheet value. That would push accumulated losses, which already amount to A$795 million, uncomfortably close to A$2 billion.A 10% fall in a commodity price is not a particularly dramatic event. Futures based on the main Asian coal pricing benchmark — 6,000 kilocalorie product from Australia’s Newcastle port — have slid by 9% or more in about three out of every 10 quarters over the past decade. After a price surge between 2016 and 2018 they slumped 34% last year, and have dropped a further 16% so far this year. Since Adani’s valuation date at the end of March, the average futures price over the 12 months through May 2021 has slumped 14%. Viktor Tanevski, principal analyst for coal research at Wood Mackenzie, estimates that Carmichael's product would currently price at around $40 a metric ton based on discounts to benchmark spot prices, although that figure would change over the life of a project. The mine won’t be economically viable on a net-present-value basis unless prices for high-ash coal rise from their current levels, he wrote by e-mail, adding that he expects prices will climb and put the project in the black in the medium term. Even at current prices the mine would be able to operate at positive margins, Tanevski said. His estimate doesn’t factor in the costs of interest payments, depreciation or tax.Carmichael’s discount rate is also worth examining, since it was reduced over the past year to 13.5% from 14%. That enhances the assessed value of the project — indeed, a 1 percentage point increase would reduce its value by A$345 million, according to the accounts. Some rate reduction isn’t entirely unreasonable: The project is closer to operation than it was a year ago, so it should be less risky while interest rates generally have fallen. Still, it looks generous compared to other Australian coal mines. Whitehaven Coal Ltd. applied a discount rate of 11% to its operations at the time of its 2017 annual report(2), and Yancoal Australia Ltd. currently uses a rate of 10.5%. Their mines have been in operation for years, often decades, and their few development projects won’t add significantly to their near-term revenue. Carmichael, on the other hand, is a single greenfield project in the early stages of construction, and major lenders in Australia have already made clear they won’t finance it. Such a thin risk premium could be very useful in producing a positive valuation in the accounts.Why should this matter? The controversy attached to Carmichael seems out of all proportion to its significance. While the world’s climate needs fewer, not more thermal coal mines, comparable projects like MACH Energy Australia Pty.’s Mount Pleasant and Whitehaven Coal’s Vickery have quietly advanced without the opposition and demands for government support that Carmichael has attracted.Adani’s motivation in pursuing such a questionable project is hard to fathom, as is the persistence with which both sides of Australian politics pretend this emperor still has clothes. And all of it is predicated on the notion that this is an economically viable project with a positive net present value.If Carmichael is going to earn money, pay taxes and employ workers for years, it might be justified in chewing up so much political time and money. If it’s unable to stand on its own feet, then Australia’s fossil fuel-friendly politicians are likely to end up with a white elephant reliant on state support for as long as it’s able to keep going. Coal’s days are numbered. The sooner Adani and Canberra recognize that, the better.(Corrects the price estimate for Carmichael’s product in the eighth paragraph, and clarifies Wood Mackenzie’s definition of economic viability.)(1) “We apply industry standard techniques for the purpose of calculating fair value of our Carmichael asset, inclusive of engaging independent external third parties to undertake such valuation work," a spokesperson for Adani wrote by e-mail. "We also utilise independent third parties for the provision of long term commodity price forecasts and FX forecasts for incorporation into the valuation of the asset. Given that Carmichael construction is now well progressed the project is significantly de-risked from an execution perspective which of course translates into a lower discount factor.”(2) It hasn't reported the number since.This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.David Fickling is a Bloomberg Opinion columnist covering commodities, as well as industrial and consumer companies. He has been a reporter for Bloomberg News, Dow Jones, the Wall Street Journal, the Financial Times and the Guardian.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
22 May, 2020
Paul Flynn became the CEO of Whitehaven Coal Limited (ASX:WHC) in 2013. This analysis aims first to contrast CEO...
16 Apr, 2020
Whitehaven Coal (ASX:WHC) shareholders are no doubt pleased to see that the share price has bounced 45% in the last...
27 Mar, 2020
Today we'll evaluate Whitehaven Coal Limited (ASX:WHC) to determine whether it could have potential as an investment...
18 Mar, 2020
Half Year 2020 Whitehaven Coal Ltd Earnings Call
28 Jan, 2020
The goal of this article is to teach you how to use price to earnings ratios (P/E ratios). We'll apply a basic P/E...
20 Jan, 2020
(Bloomberg Opinion) -- BlackRock Inc., the world’s largest asset manager, says it will cut exposure to companies linked to thermal coal, among other climate-friendly measures. It’s a powerful signal. Unfortunately, it only scratches the surface. If BlackRock CEO Larry Fink is serious about helping to eliminate coal while reshaping finance, his outfit can use its holdings of sovereign debt to tackle governments, too.Coal power generation has fallen steeply in Europe and the U.S. in the past year or so, thanks to cheap natural gas, higher carbon prices and green pressure. Yet in Asia, once you iron out some local peculiarities, demand for the black stuff remains remarkably resilient. That suggests that even if global appetite peaks soon, as most analysts estimate, it could well remain at high levels for years to come. Analysts at UBS Group AG estimated last July that on current trends the last coal-fired power station may close only in 2079. To blame are the likes of China, India and Vietnam. Their fleet is young, still growing and often state-backed; Western money managers selling out of public securities won’t change that. There is good news. BlackRock is an investment giant, with $7.4 trillion of assets under management, so Fink’s call to arms last week marks a significant move. Cutting off funds for coal producers and driving up their cost of capital is key to suffocating a sector that is the single largest cause of increased global temperatures.BlackRock’s strategic shift is also driven by self-interest. That’s encouraging, as such initiatives tend to outlast moral outrage. Heat from activists, like the BlackRock’s Big Problem campaign, helped, but Fink argues he is making sustainability the new standard because it makes financial sense. The surge of inflows into the firm’s environmentally friendly funds last week will encourage that view.The devil, as ever, is in the detail. BlackRock’s aim to divest thermal coal equity and debt will apply to its actively managed funds. Yet those amount to only under a third of the money it manages. As worrying is the threshold to be used to determine what has to go: The fund manager will sell out of any company where 25% of revenue or more is derived from thermal coal. That gets at narrowly focused producers like Australia’s Whitehaven Coal Ltd., but leaves untouched stakes in diversified heavyweights, like BlackRock’s 6% holding in Glencore Plc, the world’s top producer of seaborne thermal coal, or other sprawling conglomerates. It also tackles primarily miners, not utilities that consume the fuel.It’s possible to aim higher: Axa SA last year vowed to reduce its exposure to the thermal coal industry to zero by 2040.The bigger problem is that while such moves are necessary, they aren’t sufficient. That’s firstly because of the haven offered by private markets. If a large investment fund divests a stock or bond, or pressures companies into selling out of coal projects, what next? BlackRock investors may feel better, but will global production reduce overall? Quite possibly not. Will the world be greener? Also, possibly not, if the pit is sold to owners out of the public eye. Arguably, it may become harder to monitor. That suggests a more effective pressure point is demand, and that means tackling governments and state-backed firms still funding and supporting the fuel. Indeed, real impact will require a change in policy in Asian markets like Vietnam where coal is still a major employer and seen as a driver of economic growth. As a major investor in sovereign debt, even if much of it is in passive funds, BlackRock has enough leverage for meaningful dialogue at least.The challenge is significant. Consider China, which wants to reduce its reliance on coal. At least 200 million tons of coal capacity were ready to start production in 2019, while another 409 million tons of government-approved capacity are under construction, according to Bloomberg Intelligence numbers published last September. Together, that’s almost a quarter of China's up-and-running thermal coal capacity. In Indonesia, coal consumption may grow at the world’s fastest pace. Earlier this month, Jakarta ordered coal miners to slash production after record output last year. Prices immediately turned higher.Policy, then, is the lever to significantly reduce coal use in the region where it’s still growing: Asia. Go back to the UBS numbers. On current trends, the last coal-fired power station closes in six decades. But a red alert scenario where leaders accelerate closures would shutter the last plant in 2058, according to the bank, closer to the 2050 target set by the Intergovernmental Panel on Climate Change.Indonesia’s tussle with JPMorgan Chase & Co. in 2017 — when Jakarta temporarily severed business ties over a negative research report — is a reminder of just how much emerging market governments care about perception. BlackRock can make that count. To contact the author of this story: Clara Ferreira Marques at email@example.comTo contact the editor responsible for this story: Matthew Brooker at firstname.lastname@example.orgThis column does not necessarily reflect the opinion of Bloomberg LP and its owners.Clara Ferreira Marques is a Bloomberg Opinion columnist covering commodities and environmental, social and governance issues. Previously, she was an associate editor for Reuters Breakingviews, and editor and correspondent for Reuters in Singapore, India, the U.K., Italy and Russia.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
09 Dec, 2019
In 2013 Paul Flynn was appointed CEO of Whitehaven Coal Limited (ASX:WHC). This report will, first, examine the CEO...
04 Nov, 2019
When you buy shares in a company, it's worth keeping in mind the possibility that it could fail, and you could lose...
13 Oct, 2019
Building up an investment case requires looking at a stock holistically. Today I've chosen to put the spotlight on...
17 Sep, 2019
Full Year 2019 Whitehaven Coal Ltd Earnings Call
06 Sep, 2019
Today we'll evaluate Whitehaven Coal Limited (ASX:WHC) to determine whether it could have potential as an investment...
20 Aug, 2019
This article is for investors who would like to improve their understanding of price to earnings ratios (P/E ratios...