* Weak coal price, mine delay and debt burden hit Whitehaven
* Court ruling on Maules Creek project due in December
* Hedge fund manager Ray Zage takes up board seat
By Sonali Paul
MELBOURNE, Nov 4 Delays on a major growth
project and weak coal prices have pummelled shares of Whitehaven
Coal to 4-1/2-year lows and could pressure the
Australian firm to raise equity in 2014, putting its top
shareholder in a tricky position.
U.S. hedge fund Farallon Capital Management, with a near 17
percent stake, and its Asian chief Ray Zage will be in the
spotlight at Whitehaven's annual shareholders' meeting on Monday
where investors will want to hear how Australia's second-largest
independent coal miner plans to face several challenges.
Whitehaven's long-delayed Maules Creek mine project is now
being held up by objections from green groups, coal prices are
near four-year lows and it is saddled with A$1.2 billion ($1.14
billion) in debt that may be tough to manage.
Those factors have combined to slice nearly a fifth of its
market value in October alone to A$1.65 billion, leaving
Farallon's investment in the red.
Whitehaven is likely to put on the best face possible at its
first shareholder meeting since coal tycoon Nathan Tinkler was
forced to give up his one-fifth stake in the company to settle
most of a $634 million debt.
Tinkler's exit in June was a relief for management and
investors who had feared he might dump his stake to pay off the
debt at a time when he was selling off everything, including his
prized race horses, to stave off creditors.
All eyes will be on Zage, who made bullish bets on coal
backing Tinkler and Indonesia's Bakrie family when coal prices
were on the rise. He was appointed to the Whitehaven board in
August and is up for election at the annual meeting.
He has been supportive of Whitehaven, according to Managing
Director Paul Flynn, but investors are eager to know how patient
Zage will be.
"People are focusing on this stock overhang and the debt,"
said Matthew Trivett, an analyst at Patersons Securities.
"That's a concern in the back of everyone's mind."
Zage could not be contacted immediately by Reuters.
BACK OR BLOCK SHARE SALE?
The main worry is how Whitehaven manages its debt while
building the A$767 million Maules Creek mine, now expected to
start exporting coal only in the first quarter of 2015.
"That (timing) is looking increasingly ambitious as time
ticks over and significant development at Maules Creek hasn't
commenced," said Michael Evans, an analyst at CIMB.
"The balance sheet could be a little bit stretched in 12 to
18 months' time, depending on the coal price."
Whitehaven is confident the Federal Court in New South Wales
will knock down a challenge by an environmental group that wants
the federal government to review its approval of the Maules
Creek project, but has to wait until December for a decision.
If the decision doesn't go its way, the federal government
will have to look at the Maules Creek approval again, which
Flynn has said should be a quick process.
The environmental challenge is over concerns Maules Creek,
an open-pit mine, could destroy forests, deplete groundwater and
spread coal dust on farms.
Like other Australian coal miners, under pressure from
sliding prices, rising costs and the strong local dollar,
Whitehaven posted a loss of A$82 million for the 2013 financial
year. Analysts are expecting a much smaller loss of A$3 million
for the year to June 2014, helped by higher production from
Whitehaven's Narrabri mine and cost cuts.
If Whitehaven's balance sheet becomes stretched, analysts
say the company may have to raise funds through a sale of new
shares, another worry weighing on the stock.
The key question is whether Zage would be willing to pour
more money into Whitehaven in an equity raising or whether he
would stand in the way of a share sale that would dilute
The problem for Zage is that Whitehaven's shares have
already lost a quarter of their value since the debt-for-equity
swap with Tinkler, sliding to A$1.605. The stock would need to
trade above A$3 for Farallon to recoup its loan to Tinkler.
Farallon suggested in June it would hold out for a recovery
in Whitehaven's shares. "Farallon looks forward to growth in
shareholder value over time," the hedge fund had said then.
Shareholders at the annual meeting will be looking for
($1 = 1.0560 Australian dollars)
(Editing by Muralikumar Anantharaman)