We are initiating coverage on Whitehaven Coal (WHC) with a BUY recommendation and a A$9.50 price target. The acquisition of Blackwater and Daunia has transformed WHC’s portfolio, doubling the production profile and shifting towards being a predominantly coking coal producer. We expect operating costs to have peaked and forecast WHC to comfortably achieve both production and cost guidance for FY25. Cash flow from both the coking and thermal coal assets, and the recent sell down of 30% of Blackwater, should see WHC return to a net cash position within 18 months. We are bullish on the medium-term price outlook for coking coal and note that WHC has significant leverage to coal prices
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