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New Hope puts faith in high coal price

AAP logoAAP 20/09/2016 Petrina Berry

Miner New Hope Group expects a recent lift in coal prices will be sustained and boost its earnings in the current financial year.

Weak global oil and gas prices contributed to a $53.7 million loss for 2015/16 for the Queensland-based company, more than double the $21.8 million loss in the prior year, although costs from a new mine acquisition were also a big driver.

New Hope lost $22.6 million to sliding coal and oil prices and in foreign exchange impacts during the 12 months to July 31, but managing director Shane Stephan says better times are ahead after the Chinese government restricted thermal coal supplies - a move that has driven prices up 40 per cent since the start of July.

"Last year, around 50 per cent of the Australian thermal coal industry was not making cash," Mr Stephan told AAP.

"Most importantly, over 90 per cent of the Chinese domestic thermal coal industry was not making cash. That is simply not sustainable."

He said he expected the better coal prices to hold steady.

"We can't see the Chinese government going backwards from the action they have taken in order to constrain supply," he said.

Japan Taiwan and South Korea were also driving demand for thermal coal, he said, with future opportunities expected in the Philippines, Thailand and Vietnam.

New Hope recorded earnings before interest, tax, depreciation and amortisation (EBITDA) of $81.3 million in 2015/16, down from $132.8 million a year earlier.

In the 12 months to July 31, New Hope's profit before extraordinary items was $5.03 million, down from $51.7 million in 2014/15.

Revenue was up 5.1 per cent at $531.5 million but New Hope's bottom line was hit by $52.1 million in acquisition costs, including costs related to its purchase of a 40 per cent stake in the Bengallla coal mine in NSW.

Mr Stephan said the company was benefiting from firmer prices in the current financial year and from its "well-timed" Bengalla acquisition.

The benchmark Newcastle spot price for coal was $US51 a tonne in March when the Bengalla transaction was completed, he said, and was now $US70 a tonne.

During the five months of New Hope's ownership, Bengalla production contributed 1.5 million tonnes to coal sales and earnings of $21.3 million.

Fat Prophets analyst David Lennox said the group's operational result was solid.

"The balance sheet is reasonable with an operating cash surplus of $61 million which is a good result given the sector has been under considerable price pressure," he said.

Shares in New Hope ended Tuesday down six cents, or 3.85 per cent, at $1.50.

NEW HOPE LOSS WIDENS:

* $53.7m full-year loss, compared to $21.8m loss in prior year

* Revenue up 5.1 pct to $531.5m

* Final fully franked dividend of 2.0 cents, down from 2.5 cents

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