Why the Whitehaven Coal Share Price Has Nearly Tripled This Year

What happened to the Whitehaven Coal share price?

From a high of $7.35 back in early 2011, shareholders of Whitehaven Coal [ASX:WHC] could only watch in horror as it ground its way down to a low of just 35 cents, hitting that in February this year. That’s a 95% fall over a five year period.

Since hitting that low, though, the share price has almost tripled over the last three months, hitting a recent high of 95 cents.

Why did Whitehaven Coal shares do this?

Quite often you’ll see coal described as a ‘sunset’ industry — meaning that it has a limited lifetime, as industry transfers over to lower emitting, renewable energy. Many of the big coal players have been caught as the coal price has been hammered, making their coal mines almost worthless.

However, after some painful restructuring and write-downs, and some handy gains in the coal price, Whitehaven snuck back into profit. Albeit it did so modestly. The release of its interim results in February saw revenues jump 54%, to $574 million, allowing them to make a NPAT of around just $8 million.

It’s also a question of supply and demand. As the price of coal has become cheap, energy companies in emerging countries see coal once again as a cheap alternative. And as an energy source that has little chance of running out of supply.

What now for Whitehaven Coal?

While the long term picture might look bleak, some forget that new coal-fired energy plants are still being built. Demand is expected to run well into the next two to three decades.

However, it’s the coal price that will govern the Whitehaven share price from here. Any drop in the coal price could see the share prices once again take a tumble.

Matt Hibbard,
Money Morning

Money Morning Australia