Whitehaven eyes upside for Blackwater, Daunia

Whitehaven Coal already has an eye to measures to boost performance at Blackwater and Daunia after securing the BHP Mitsubishi Alliance metallurgical coal sites in a $6.4 billion deal. The change of ownership also brings the associated Blackwater South project back into play after BHP backed away from investing in new coal developments in Queensland following the State Government's coal royalties hike. A Whitehaven presentation this week highlighted the significant value upside and strategic growth options that company sees in the Blackwater and Daunia assets. Chief executive officer and managing director Paul Flynn pointed to the opportunity to ramp up the volumes of coal mined at Blackwater by harnessing latent dragline capacity. There are eight separate pits within Blackwater’s current operation and it boasts the largest dragline fleet in the southern hemisphere, with seven of the machines. "There is latent capacity in the dragline fleet there, so we think there's further opportunity to add more prestrip in there and use that latent capacity in the dragline mining part of the business and advance the strip and then advance the coal and ramp up the volumes of product out of this business," Mr Flynn said. "So I think that is quite a significant change. "There is the option obviously to increase the processing capacity with that - up to 18 million tonnes ROM feed and also an opportunity to blend the products to become a 100 per cent met coal given that there has been a thermal fraction in the past. "And then the integration of Blackwater South, which is another enormous area at the bottom of this chart, which is outside again of the value proposition we've paid for, but there's probably 20 to 30 per cent of the resources of the total 1.8 billion pool of tonnes there that sits in that area, which is upside for us." Related: Union welcomes job security in BMA sites’ sale The Daunia mine has been the beneficiary of more than $3.6 billion (US$2.3 billion) investment, including a recent injection of about $160 million (US$100 million) to convert a fleet of 34 trucks to automated haulage and acquire operating expertise. Mr Flynn said Whitehaven would be looking to achieve a target of about 6600 annualised production hours per truck by FY26 as automated haulage ramped up at that site. This is in line with performance at other BHP mines where automated haulage has been rolled out. Unlocking synergies between Daunia and Whitehaven's Winchester South project was another major theme. "Of course, Daunia is located adjacent to Winchester South, so there's a whole range of synergies there, which we've looked at but not priced into this deal," Mr Flynn said. "Product blending, labour sharing, technical expertise, the autonomous haulage itself and obviously the shared infrastructure would be areas that we'd be looking to drive further value, but this does transform Whitehaven into a met coal producer." In fact, he said the acquisition of Daunia and Blackwater would reposition Whitehaven as Australia's leading ASX-listed seaborne metallurgical coal company. Long-life assets and benefits of scale It brought a big jump in the company's coal resources and reserves, with potential to convert more of the enormous resource base at Blackwater into reserves through drilling, he said. "So that will be a focus for us. Blackwater ... has got a 50 year life we believe at least, Daunia has another 17 years out to FY40, but with Winchester South sitting adjacent to it, I think that 17 years is probably not the right way to look at it given that we've got a very good reserve sitting next door. "So increases in both our footprints here and lots of long-life potential with these assets coming into our group." Mr Flynn said the new assets would double Whitehaven's managed ROM production to about 40Mtpa and take its workforce from about 2750 up to about 5300 people. "There will be significant procurement benefits available to us off a bigger base and, of course, the autonomous haulage opportunity is there not just for adjacent, next door but across the balance of our business potentially as well," he said. The transaction for Daunia and Blackwater will see Whitehaven pay BMA an aggregate cash consideration of US$3.2 billion ($AU5 billion), in addition to contingent payments of up to US$900 million ($AU1.4 billion) dependent on realised pricing exceeding agreed thresholds. Completion is expected to occur in the June 2024 quarter, when the new owners will assume economic and operating control of the mines. Below: A snapshot of Whitehaven's improvement plans for Blackwater and Daunia mines.

Whitehaven eyes upside for Blackwater, Daunia

Industry Queensland

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