Monsters of Rock: Whitehaven nabs a Win in plan to up Queensland coal production

Whitehaven Coal has received approval from Queensland’s environment department for the Winchester South development
The $1bn project could be developed to complement its soon-to-be-acquired Daunia mine in Central Queensland’s Bowen Basin
Market treads water as iron ore prices, battery metals revival fail to lead materials into the green

Facing opposition from green groups, Whitehaven Coal (ASX:WHC) has taken a significant step to bringing a new metallurgical coal mine in Central Queensland into production, with Queensland’s enviro department approving the Draft Environmental Authority for its proposed Winchester South mine.

The significance of the Bowen Basin asset, acquired from a wantaway Rio Tinto (ASX:RIO) and Scentre Group in 2018 for US$250 million, has been ramped up since Whitehaven announced the acquisition of the nearby Daunia mine from BHP (ASX:BHP) last year.

The mine is expected to produce 17 million tonnes of coal per annum once operating, around 60% of that for steel markets and the balance to be sold as thermal coal in the Asian energy market.

While Whitehaven has revealed it is planning sell down a stake in the other asset acquired from BHP – Blackwater – a decision on whether to bring external backers (probably steel companies from Japan or India) into Daunia will only come once there is clarity on the role Winchester South will play in its future.

“This is another important milestone for Whitehaven, for the people of Queensland and for our trading partners who rely on Australia’s high-quality metallurgical coal, which is essential for steel production,” Whitehaven said.

“Winchester South is located approximately 30km southwest of Moranbah within the Bowen Basin in Central Queensland and is 100% owned by Whitehaven Coal.

“Acquired from Rio Tinto in 2018, Winchester South is adjacent to the Daunia metallurgical coal mine, which Whitehaven is acquiring as announced on 18 October 2023. This will provide opportunities for future synergies including potential integration of the operations.”

A $1bn development, Winchester South has a ~28 year mine life. It and Daunia are also located near South32’s (ASX:S32) undeveloped Eagle Downs project, which was reportedly put up for sale in October last year through Macquarie after years sitting idle in the diversified miner’s portfolio.

The approval of Winchester South’s Draft EA from Queensland’s Department of Environment, Science and Innovation came after it was recommended by the State’s Coordinator General in November.

Green groups oppose coal expansion

But the project would result in 14.96Mt of new CO2 equivalent emissions on a Scope 1 basis related to diesel use, fugitive methane and electricity usage. Once land clearing emissions are taken into account WHC’s environment impact statement predicted that would rise to 15.94Mt, with Scope 2 emissions adding 1.4Mt over the life of mine.

Its Scope 1 emissions would amount to 490,000tpa (530,000tpa including land clearing), around 0.12% of Australian greenhouse gas emissions against a 2019 baseline.

But that largest impact would come when the coal is used in the steelmaking process or burnt for energy, with Scope 3 emissions clocking in at 567Mt CO2-e or 18.9Mtpa, around 0.04% of the global total.

Anti-coal activists Move Beyond Coal, who have a stated aim of stopping coal expansion and phasing out coal by 2030 (a tough ask given steelmakers are likely decades from the broad commercialisation of green steel and coal use remained at a peak last year), said on Wednesday the mine would still require Federal approval, calling on Labor’s Environment Minister Tanya Plibersek to knock it back on grounds it would drain ground water and endanger wildlife habitat.

“Winchester South would leave three giant craters that would drain ground water forever, clear the habitat of endangered koalas and greater gliders, and fuel devastating climate impacts like worse bushfires, floods, droughts, storms and heatwaves already ravaging communities around Queensland and the whole of Australia,” Mackay Conservation Group climate campaigner Imogen Lindenberg said.

“The Queensland government’s greenlight for this proposed mega mine in the middle of the climate crisis is reckless in the extreme and flies in the face of the Queensland government’s recently beefed up emissions reduction targets.

“The Queensland government is undermining its own climate policies by approving massive new polluting coal mines. To reduce emissions we need to urgently phase out fossil fuels, not open new coal mines that will pollute for decades to come.”

And on the markets

Whitehaven shares fell 1.2% despite the news, in line with other ASX coal stocks.

Iron ore producers were mooted despite a 1.73% lift in Singapore 62% Fe prices, which came off the back of news the Chinese government was asking banks to ramp up funding for ailing property developers.

“This comes after data showed the growth rate of loans to the sector rose only 1.5% in Q4 2023, the slowest pace in more than a year,” ANZ senior economist Adelaide Timbrell said in a note.

“A drop in iron ore inventories at major Chinese steel mills to the lowest in more than two years also stocked optimism that a restocking phase could boost prices once the weeklong Lunar New Year holiday is over.”

But the materials sector fell marginally as battery metals stocks surged into the green. Liontown Resources (ASX:LTR) rose over 6% to take its shares back above $1, with a deadline preventing Gina Rinehart’s Hancock Prospecting from making a takeover bid below the $3 it paid for shares four months ago expiring over the weekend.

There were even larger moves for graphite play Syrah Resources (ASX:SYR), which climbed 20%, as well as Piedmont Lithium (ASX:PLL), which rose 14.63% a day after it said it would make $10 million in spending savings this year as it tightens the belt ahead of a final investment decision on the Ewoyaa JV with Atlantic Lithium (ASX:A11) in 2025.

Both are looking to establish downstream processing facilities in the United States in graphite anode materials and lithium chemicals respectively.