LA Private

Yancoal survives coal price drop

The Chinese-controlled Yancoal Australia (ASX:YAL) has weathered a near-halving in the price of its main product, thermal coal, in the three months to March and still augmented its substantial cash pile.

Despite sharp falls in global coal prices in the quarter, the company still generated a significant amount of cash, boosting its cash balance at March 31 by $260 million to $1.66 billion.

Yancoal said its average selling price for thermal and coking (metallurgical coal) was $A180 a tonne for the March quarter, down 48% from $A347 a tonne a year earlier.

The company stated that its average thermal coal selling price in the quarter was $A159 a tonne, down 53% from $A338 a tonne a year earlier. The average selling price for its coking coal sales fell 13% to $A334 a tonne.

“Saleable production volumes in the period were down 12% from the elevated level recorded in the final quarter of 2023,” the company said in its quarterly report filed with the ASX on Thursday evening.

“This was expected given the favorable operating conditions in 4Q 2023 and the natural variation in mine plans from quarter to quarter. The 47% uplift in saleable production from 1Q 2023 is a reflection of the strong recovery achieved over the past 12 months.”

Yancoal said that its solid first-quarter performance meant it was leaving its 2024 guidance unchanged at 35-39 million tonnes of attributable saleable production; $A89-$A97/tonne cash operating costs, and between $650-800 million attributable capital expenditure.

CEO David Moult was relaxed about the company’s operating position even with the significant price drop. “Yancoal continues to generate robust cash inflows. The A$180/tonne price realized was roughly double the cash operating cost we are targeting this year,” he said in the statement.

“The production rate in the first quarter sees us tracking at the low end of the guidance range, in line with our previous advice that production was expected to be weighted towards the second half of the year. We anticipate higher output in future periods.

“The company retains a strong financial position. We held $1.66 billion in cash at the end of March. Of this sum, $429 million goes to paying the fully franked 2023 Final dividend (32.5 c a share) on 30th April.”

“Thermal coal markets faced a combination of weak demand due to a warm northern hemisphere winter and a soft global economy – and strong supply due to recoveries in exports from Australia, Indonesia, and other regions.

“The fact coal indices have not sharply declined under these adverse conditions suggests thermal coal markets remain relatively balanced.

“We see Yancoal’s large-scale, low-cost coal production profile as well-suited to the current coal market conditions. Having no interest-bearing loans, a large net cash position, and robust operating margins provide us with the capacity to act should suitable growth opportunities arise,” Moult added.