How Is New Hope Managing Coal Production Amid Falling Prices and Rail Limits?
New Hope Corporation reports steady coal production but a 27% drop in EBITDA amid falling prices and rail constraints, prompting revised FY25 guidance.
- Underlying EBITDA down 27% due to lower realised coal prices
- Stable group saleable coal production at 2.8 million tonnes
- Bengalla Mine reduces cash costs and maintains production guidance
- New Acland Mine faces rail capacity issues, revises FY25 volume guidance
- Safety metrics improve with lower injury frequency rates
Steady Production Amid Market Pressures
New Hope Corporation’s latest quarterly report for the period ending April 30, 2025, reveals a company holding its ground in a challenging coal market. Group saleable coal production remained steady at 2.8 million tonnes, consistent with the previous quarter. However, the company’s underlying EBITDA took a notable hit, falling 27% to $155.2 million, primarily driven by lower realised coal prices, which dropped from $159.1 per tonne in January to $147.5 per tonne this quarter.
Operational Highlights: Bengalla and New Acland
The Bengalla Mine in New South Wales demonstrated operational resilience, moving 11.9 million bank cubic metres of prime waste, an 11.4% increase, and achieving a 1.7% reduction in FOB cash costs to $75.3 per sales tonne. Despite a 15.8% dip in run-of-mine coal production due to mining higher strip ratios, saleable coal production edged up 2.9%, supported by improved plant availability and yields. Bengalla remains on track to meet the midpoint of its FY25 production guidance.
Conversely, New Acland Mine in Queensland encountered significant rail capacity constraints that capped saleable coal production at 0.7 million tonnes, a 3.7% decline quarter-on-quarter, despite a 12.9% increase in run-of-mine coal. These logistical bottlenecks have forced New Hope to revise down its FY25 guidance for New Acland’s physical volumes, reflecting the critical impact of rail availability on production and sales.
Safety and Strategic Investments
On the safety front, New Hope reported improvements with its twelve-month moving average Total Recordable Injury Frequency Rate (TRIFR) dropping to 3.65 from 4.08 last quarter, and the All-Injury Frequency Rate (AIFR) also declining. These metrics underscore the company’s ongoing commitment to workplace safety despite operational pressures.
Strategically, New Hope’s 22.97% stake in Malabar Resources continues to bear fruit, with the Maxwell Underground Mine ramping up production and development. The mine’s premium-quality coal fetched a 12% price premium in the Japanese market, highlighting the value of high-grade product in a softening market.
Capital Management and Market Outlook
New Hope’s capital management remains robust, with a fully franked interim dividend of 19 cents per share paid in April and an ongoing on-market share buy-back program, which has repurchased 1.4 million shares at an average price slightly below the recent trading average. The company’s cash position remains strong at $659.3 million, including liquid fixed income investments.
Looking ahead, New Hope anticipates a more balanced thermal coal market with increased demand expected in the Northern Hemisphere summer. However, rail infrastructure challenges, particularly related to the Cross River Rail project outages, pose near-term risks to logistics and production continuity.
Bottom Line?
New Hope’s ability to manage operational challenges and market headwinds will be critical as it navigates rail constraints and pricing pressures in the months ahead.
Questions in the middle?
- How will New Hope secure additional rail capacity to support New Acland’s production ramp-up?
- What impact will ongoing coal price volatility have on New Hope’s earnings for the remainder of FY25?
- Can the company sustain its safety improvements while increasing production and managing logistics?
