Published October 24, 2012
MELBOURNE – Whitehaven Coal has won state approval to develop its most valuable project, the A$651 million ($673 million) Maules Creek mine, and now just needs federal clearance, Australia's largest independent coal miner said on Thursday.
Whitehaven aims to start operations at the mine in mid-2013, ramping up to produce more than 10 million metric tons (11 million tons) a year of mostly high quality semi-soft coking coal, used to make steel, from fiscal 2016.
The approval relieves some pressure on Whitehaven, whose shares have plunged 43 percent from a high of A$5.62 this year due to a coal price slump, worries about delays at Maules Creek and fears its top shareholder may be forced to dump his stake.
"Notwithstanding the stringent environmental conditions which have been placed on the project and the difficult coal market at present, this is a world-class project and Whitehaven will be seeking to bring it into production as soon as possible," Managing Director Tony Haggarty said in a statement.
His comments came the same day that a newspaper reported that he wants to leave the company.
Whitehaven declined to comment on the report in the Australian Financial Review that said Haggarty had told the board of his intentions earlier this year and the board had started its search two months ago.
The approval also comes on the same day that Whitehaven announced that it plans to suspend operations at its Sunnyside mine indefinitely due to continuing declines in global coal prices, joining other producers who have made production cuts and delayed projects, including BHP Billiton , Rio Tinto and Xstrata .
Whitehaven will offset the lost production from Sunnyside by ramping up operations at its Werris Creek mine from 2 to 2.5 million metric tons per year. The company will also offer Sunnyside mine employees posts at other Whitehaven operations, it said.
The company has been distracted over the past two years, first by a failed effort to sell itself and more recently as its top shareholder, mining magnate Nathan Tinkler, made a $5.5 billion bid to take the company private then scrapped it because he was unable to raise funding.
Tinkler this week threatened to use his 19.4 percent stake in the company, the main source of his wealth, to vote out most of the board if it failed to give a detailed earnings and project update ahead of its annual meeting on November 1.
Whitehaven put its shares on a trading halt on Wednesday and said it would give an update with its quarterly production report on Friday, as previously scheduled.
The trading halt made some analysts nervous that Whitehaven's outlook for earnings before interest, depreciation and amortization was going to be well below the market consensus of A$188 million.
But others said Whitehaven was just being cautious in the wake of recent guidance from Australia's securities regulators urging companies to seek trading halts where there is speculation that could move share prices.
"I'm not seeing anything onerous in them being in a trading halt," said Jason Beddow, managing director of Argo Investments, which owns a small stake in Whitehaven.
Tinkler has borrowed heavily against his Whitehaven stake, which has plunged in value to A$629 million as coal prices have slumped. That has sparked speculation he may have to sell the stake to pay his creditors.
Tinkler became Whitehaven's biggest shareholder earlier this year when the company took over two companies he controlled, Aston Resources and coal explorer Boardwalk Resources, in a $2.5 billion deal.
Whitehaven targeted Aston for the Maules Creek project, which is 15 percent owned by Japan's Itochu Corp <8001.T> and 10 percent owned by Electric Power Development Co (J-Power) <9513.T>. ($1 = 0.9676 Australian dollars)
(Additional reporting by Rebekah Kebede in PERTH; Editing by Bob Burgdorfer, Eric Meijer and Ed Davies)