While the investment bank has kept a neutral rating on Whitehaven, primarily due to its concerns that the ultimately unsustainable combination of low thermal coal prices and the high Australian dollar could still linger for some time yet, Goldman lifted its 12-month price target from $1.40 to $1.70.
“The change is driven by our increased confidence that the company is going to be able to deliver on its projected production schedule now that Maules Creek is in development and Narrabri teething issues are largely resolved,” Goldman said on Wednesday.
While its $1.70 target price was made when Whitehaven shares had closed up 12% higher at $1.90, Goldman flagged the prospect of more re-ratings ahead especially as the vast Maules Creek open cut coal project advanced.
“The value in Whitehaven rests largely on the successful development of its two newest assets: Narrabri and Maules Creek,” the bank said.
“Both assets are considered top-tier, producing quality coal at low cash costs over a long mine life. We believe the execution risk in Whitehaven has narrowed and will continue to narrow over the coming 12 months.
“While teething issues at Narrabri continue (ie horizon issue during Q4), these are being resolved efficiently with limited disruption to overall output. With the major regulatory hurdles behind them, the development of Maules Creek is well underway and slightly ahead of schedule.
“As this project moves closer and closer to commissioning, we believe the stock will continue to re-rate as the execution risks narrows.”
Maules Creek is targeting 6 million tonnes per annum of coal production over the first 12 months and has approval to ramp up to 13Mtpa ROM, while Whitehaven is also expecting the site to deliver about 2.1Mt of pre-commercial ROM and coal sales of 1.8Mt for FY15.
First coal from the future mine is expected to be railed in March.
Meanwhile, the Narrabri longwall mine could become a star performer this year as it set a weekly production record of 257,000t in late June.
This rate equates to more than 13Mt when annualised – far beyond the mine’s nameplate capacity of 6Mtpa.
