Coal producer New Hope Group has “A very strong fundamental base”

Coal is rarely a neutral investment conversation. In a world increasingly shaped by ESG mandates and decarbonisation targets, thermal coal producers often sit in the crosshairs of institutional capital flows.

Yet global energy demand remains robust, Asian power markets continue to rely heavily on coal-fired generation, and the economics of well-run, low-cost producers can still generate significant dividends for shareholders.

New Hope Group (ASX: NHC) sits squarely at the centre of this tension. The Queensland and New South Wales-based coal producer released its latest quarterly update this week, reporting improved production, firmer realised pricing, disciplined cost control and a healthy cash balance.

To unpack the result, I spoke with Emanuel Datt, Managing Director of Datt Capital — a long-time resources investor known for his bottom-up, valuation-driven approach and willingness to invest where fundamentals are strong, even if sentiment is divided. New Hope Group has a “very strong fundamental base”, says Datt, who is a current buyer of the stock.

Key Numbers – Quarter Ended 31 January 2026

Production & Sales

• ROM coal production: 4.1Mt (+4.8% quarter-on-quarter)
• Coal sales: 2.9Mt (+8.2%)

Pricing & Costs

• Average realised sales price (Group): A$139.0 per tonne (+1.7%)
• Bengalla FOB cash cost (excluding royalties): A$84.4 per tonne vs FY26 cost guidance: A$81–89 per tonne
• FY26 sustaining capex (Bengalla): revised to $100–130 million (previously $130–160 million)

Earnings & Balance Sheet

• Underlying EBITDA (1H FY26): $214.8 million
• Available cash balance: $616.8 million

What was the key takeaway from this result?

The key takeaway from the result was the observation of green shoots and improvement across a number of metrics, suggesting the business is performing well for shareholders.

Noteworthy improvements included a small increase in production rates, a couple of percent increase in realised pricing despite a stronger AUD, EBITDA holding up well, and a closing cash balance of over $600 million.

Were there any surprises investors should be aware of?

One thing that stood out was the reduction in capital expenditure guidance from the previous $130 million to $160 million range, down to $100 million to $130 million.

To me, that really demonstrates the discipline being shown by the management team. We're in a fairly soft market environment for thermal coal at the moment, so it’s pleasing to see the team taking a disciplined approach to capital allocation.

New Hope is primarily a thermal coal producer. Thermal coal prices have risen modestly recently, and we’re generally positive about pricing over the next 12 months, but there is typically a lag between today’s prices and what they actually receive.

We see improving production rates as New Acland Stage 3 continues to ramp up towards its target range. Costs are also moving in the right direction, with management getting them to the lower end of guidance at about $83 per tonne, which is close to the bottom end of their guidance range of $81 to $89 per tonne.

When you combine any improvement in pricing with organic production growth, cost control and lower capex, it all looks quite favourable.

Buy, hold or sell New Hope Group?

Rating: BUY

I would have a buy on New Hope because I think the business is fundamentally sound. It has strong organic growth potential due to the fact it is in a ramp-up phase.

It’s also worth mentioning its minority stake in Malabar Resources, which owns the Maxwell Underground Mine in the Hunter Valley — another source of production growth. This project also adds diversification in product mix, as it produces primarily semi-soft coal, a higher quality product that commands a premium in the market.

We also like the strong management team, which has shown substantial discipline through what has been a tough time for many coal producers. That gives us confidence in positive performance over the next 12 months.

I think the business has a very strong fundamental base, and that will be realised in time.

What are the key risks?

They did report that the All-Injury Frequency Rate (AIFR) rose for the quarter, up to 35.2 from 28.5. This highlights the operational risks inherent in the business.

Ideally, this metric would be at zero, but coal mining is inherently exposed to operational risk. It’s part of the nature of the business, and management aims to reduce it as much as possible. It’s simply a factor investors should be aware of.

How much value are you seeing on the ASX today?

Rating: 3 (Neutral)

There are sectors that are really beaten up, like information technology, where we’re finding opportunities. Commodities are starting to look expensive — we’re trimming some exposure there and reallocating to sectors we feel have been indiscriminately punished.

We are focused on companies we believe have solid and sustainable growth over time, and we’re finding those opportunities in tech right now. Diversification across sectors is important, and these environments can prove favourable for disciplined investors.