Why the Whitehaven Coal (ASX:WHC) share price is plunging 14%

The Whitehaven Coal Ltd (ASX: WHC) share price is sinking today after the coal mining company provided its quarterly production report and revised FY21 guidance.

It seems the market has homed in on the negatives from a mixed bag of information. At the time of writing, the Whitehaven Coal share price has fallen steeply by 14.3% to $1.58 a share.

Taking the good with the bad

The good news first. Whitehaven’s managed run-of-mine (ROM) coal production increased 12% compared to the prior corresponding period in the March quarter. The increase put its ROM production at 5.5 million tonnes (Mt). Additionally, the company’s managed saleable production increased 6% to 4.3Mt compared to the same time last year.

Coal sales also increased 7% to 4.8Mt compared to the prior period, leaving Whitehaven with 2.8Mt of coal stocks by the end of March. Improved coal prices also bolstered sales over the quarter due to increased economic activity and supply constraints.

However, the good news ends there. While coal prices are attractive, Whitehaven has been impacted by poor weather conditions and geological challenges. The Narrabri underground longwall mine lost two weeks of production due to geological issues. On top of that, the longwall’s key components will require a further two weeks of downtime for overhauling.

Narrabri’s additional downtime has resulted in Whitehaven revising its FY21 managed ROM production. Rather than the previous 5.3Mt to 5.5Mt forecasted, the company now expects 4.5Mt to 4.9Mt from the Narrabri mine.

Logistics take it from bad to worse

Whitehaven also provided an update on the logistics issues previously reported. Operations were dampened in March by faults in a ship loader at the Port of Newcastle. This resulted in the company suspending ship loading while maintenance was carried out on the equipment.

Logistics were further complicated by the weather-related restrictions on the port at the time, resulting in a large queue of 40 ships awaiting entry at the port.

Due to these issues, Whitehaven on 23 March revised its FY21 managed coal sales guidance down to 18.5Mt to 19Mt.

Today, the Whitehaven Coal share price is being hit by the further decrease of its sales guidance. The company now expects 17.8Mt to 18.3Mt as a result of Narrabi’s extended downtime.

For consolation, sales volume slippage caused by the logistics issues is anticipated to be recovered early in FY22.

Whitehaven share price recap

It’s been a few difficult years for the coal producer. Since July 2018, the Whitehaven Coal share price has been on a downtrend, erasing 72% off its market capitalisation.

Even as the economy recovers, shareholders haven’t experienced any of the resurgence. The Whitehaven Coal share price has actually lost a further 22% over the past year. Meanwhile, investors of the S&P/ASX 200 Index (ASX: XJO) have basked in a 28% gain.

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Motley Fool contributor Mitchell Lawler has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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