Whitehaven cuts FY23 production and raises cost guidance on NSW floods: shares tumble

Whitehaven Coal (ASX: WHC) shares appear increasingly top heavy in the short-term as coal prices ease and adverse weather conditions weigh on production. The company's stock tumbled -4.9% to $8.80 as the market opened.

"Regional and localised flooding impacts arising from the continuing La Niña phenomenon have hampered production at its open cut mine operations," the company said in a statement.

"Wet weather has persisted into November with soil moisture profiles, dams and river systems at capacity in the Gunnedah Basin."

Most other coal names including Stanmore (ASX: SMR), New Hope (ASX: NHC) and Terracom (ASX: TER) are also getting sold off, down between -5-7%.

FY23 guidance: Lower production, higher costs

Whitehaven expects adverse weather conditions to impact its Maules Creek and Tarrawonga open cut mines and downgraded the FY23 production profiles for the two projects.

The company's cost outlook was also revised upwards to reflect the possible impacts of weather and ongoing labour constraints. Whitehaven said it has been transporting people to sites via helicopter to overcome flood-related access issues.

To add some perspective, Maules Creek produced 56% of Group coal production in FY22 while open cut mines contributed 20%. The remaining 24% was from the Narrabri Project in NSW.

Updated FY23 guidance:

Source: Whitehaven Coal | Table: Market Index

Coal prices slump

Newcastle coal futures have tumbled -25% from September all-time highs of US$457 a tonne to now US$345.

A recent spike in covid cases in China, especially across manufacturing hubs like Guangzhou is adding further insult to injury to the energy material.

"The Russia-Ukraine war, broader energy market volatility and continued supply disruptions have combined with broader macro demand concerns to cloud the short-term met coal price outlook," UBS analysts said in a note on Tuesday.

UBS upgraded its near-term thermal coal price outlook for 2022-24 by 11%, 5% and 17% respectively to US$367 in 2022, US$275 in 2023 and US$175.

Newcastle coal futures (Source: TradingView)