Peabody Energy Corporation Q1 2023 Earnings Call
Good day and welcome the Peabody's first quarter earnings Conference call.
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I would now like to turn the conference over to Karla Kimrey, Vice President of Investor Relations. Please go ahead.
Good morning, and thank you for joining Peabody's earnings call for the first quarter of 2023 with me today are president and CEO , Jim Grech and CFO Mark Sperbeck within the earnings release, you'll find our statement on forward looking information as well as the reconciliation of non-GAAP .
Measures, we encourage you to consider the risk factors referenced there along with our public filings with the SEC now I will turn the call over to Jim.
Thanks, Carlo and good morning, everyone.
In the first quarter of 2023 peabody's diverse portfolio produced another strong quarter of financial results.
For the past 18 months, we have aggressively been deleveraging our balance sheet.
And we remain committed to a disciplined approach for capital allocation.
In April we announced a shareholder return program that will consist of a fixed dividend component share repurchases and variable dividend.
We are starting a program with a heavier weighting toward share repurchases and expect to transition to a plan, including share repurchases variable dividends and fixed dividend.
Before I expand on the markets and operations.
To thank our global employees for their continued focus on working safely and efficiently.
Without the dedication of our talented workforce, we would not be in a strong financial position we are in today.
Now turning to global coal markets.
Global thermal coal prices stabilized in March and recently showed improvement a bit supply disruptions in Colombia.
South Africa, and ongoing strong demand from India, China, and ASEAN countries, although shoulder season conditions in healthy fuel stocks are influencing demand elsewhere.
China has entered its unofficial ban of Australian coal imports, providing additional demand for Australian thermal coal, which has resulted in Australia import rates of over 4 million tonnes per month.
Domestic coal production and renewable generation has been strong to start the year.
However, import demand has been higher year over year as overall coal demand has been strong.
While it is early in the year. The first quarter of 2023 run rate of imports is close to an all time high of approximately 400 million tons.
India two has shown signs of improved economic activity early in 2023.
<unk> and increased power demand and elevated coal imports despite elevated domestic production.
Overall demand for seaborne thermal coal is robust and supply remains constrained across the globe.
However, we acknowledge that lower LNG prices and how high coal inventory levels in Europe are short term headwinds.
In terms of pricing across the globe.
Within the seaborne metallurgical coal market the quarter was characterized by ongoing volatility as global accurate macroeconomic turbulence contracted improving demand and further weather induced supply disruptions in Australia.
Met coal price volatility continued in early March increases eroded in the second half of the month amid macroeconomic sediment.
The lowest level since mid January .
Albeit remaining healthy at around $250 per metric ton for headline hard coking coal.
And you know I state this quarter natural gas prices have weakened further due to near record gas production levels.
U S natural gas prompt prices are approximately $2 25 per M. N V to you.
Yeah. He is currently forecasting Henry hub natural gas spot prices to increase above $3 per M. B to you during the second half of 2023.
In response to higher feed and volumes to LNG exports while.
While natural gas production rates remained flat.
Overall near term demand for U S. Thermal coal is expected to be muted as a result of low gas prices and stronger renewable generation.
However, as summer weather brings stronger total low demand and increased LNG export pressure gas prices.
Coal demand has the potential to increase in the second half of 2023.
Now moving on to our operating segments.
Our seaborne thermal segment first quarter exports were stronger than anticipated due to better than expected production out of open jaw.
As a result of more efficient mine sequencing.
And while the open cut as a result of improved productivity.
Cash cost per tonnes were lower than anticipated due to the increased coal production as well as lower overall spend.
Our seaborne met production was down from the fourth quarter due to lower volumes at Shoal Creek and rail and transport congestion in Australia due to heavy rains earlier in the year.
On March 29, 2023, the Shoal Creek mine experienced and the J two longwall panel.
A fire involving void fill material utilized to stabilize the restructure of the mine.
All mine personnel were safely evacuated from the mine.
I'm sure. It has allowed mine rescue equipped personnel into the mine at various times to assess the situation and perform work in preparation for installing temporary seals.
On April 26.
<unk> approved a temporary sealing program limited to only the affected underground area.
Which consists of the J two panel and previously mined J one panel.
And north can yellow, we continue to advance redevelopment effort and expect to spend approximately $120 million as planned in 2023.
As a reminder, north can yellow is a premium grade hard coking coal longwall operation in Queensland, Australia with over 70 million tons of reserves.
This operation is greater of coking coal was considered to be the cornerstone of coking coal feedstocks globally.
North Daniela is expected to meaningfully increase peabody's metallurgical coal production.
And generate approximately 25% returns at historical long term prices and this initial phase.
In the U S. <unk> sales volumes recovered due to higher customer their customer nominations and better rail performance.
We're able to pull forward some maintenance into the first quarter to improve truck availability and lower cost for the remainder of 2023.
Our other U S thermal mines continued to perform well as expected.
We are still essentially fully committed at our U S. Domestic operations for 2023, and the railroad are showing improvement in their service levels.
While we are sold out we are working with our customers to be responsive to their needs, while retaining the value of our contracts.
Our guidance reflects our current assessment of sales going forward.
Taking into account the current U S market conditions.
I'll now turn it over to Mark to cover the financial details.
Thanks, Jim in the first quarter, we recorded net income attributable to common stockholders of 269 million or $1 68 per diluted share and adjusted EBITDA of $391 million or nearly 20% increase from the prior year quarter.
We reported operating cash flow of $386 million and had $892 million of cash at March 31. After completing the pre funding of all long term mine closure and reclamation and adjusting cash collateral for other performance obligations.
More importantly, we delivered on our commitments to amend the surety agreement and eliminate the bank letter of credit facility.
With our balance sheet initiatives complete we were pleased to announce a comprehensive shareholder return program.
The board has authorized a $1 billion share buyback program and implemented a regular quarterly cash dividend of $7.05 per share for a current yield of approximately 1.25%.
Under the program first quarter performance will result in a $170 2 million being returned to shareholders, including nearly 160 million for share buybacks or about $6 6 million shares at the current price better than 4.5% of outstanding common shares.
Turning now to the first quarter segment results.
Seaborne thermal recorded $164 million of adjusted EBITDA as expected export shipments were lower than the prior quarter due to a longwall move at womble, but exceeded expectations by 300000 tonnes due to higher than anticipated production from both Wilson young and the Mambo open cut joint venture.
Higher production rates helped drive cost to a lower than expected $51 per ton.
With the winding down of the legacy hedge program, we realized an average export price nearly the same as the fourth quarter. Despite a 33% decline in the average Newcastle benchmark.
Overall, the segment reported a 47% adjusted EBITDA margin.
The seaborne metallurgical segment generated $90 8 million of adjusted EBITDA as expected volumes were lower than the prior quarter due to heavy rains in Queensland and the challenging conditions at Shoal Creek.
The average realized price was flat quarter over quarter, while costs increased to $151 per ton due to lower production, resulting in adjusted EBITDA margins of 31%.
The U S thermal mines delivered $100 million of adjusted EBITDA, 21% better than the prior quarter, despite challenging market conditions.
The PIV mines generated $35 8 million of adjusted EBITDA revenue per ton was a record $13 89 and.
As we continue to benefit from the roll off of lower priced contracts.
22 million tonnes were shipped on forecast while cost of $12 26 per ton were above expectations as we opportunistically pulled certain equipment repair costs forward into the first quarter.
The other U S thermal mines delivered $64 2 million of adjusted EBITDA.
Production and costs were both inline with expectations, resulting in adjusted EBITDA margins of 26%.
Now turning to the balance sheet.
At March 31, we had $892 million of cash during the quarter in connection with the surety Amendment and elimination of the bank letter of credit facility, we increased restricted cash and collateral to $937 million, including $760 million for reclamation and mine closure and 177 million for other performance.
<unk>, such as long term port and rail commitments black lung workers' compensation and legacy pension requirements.
Importantly, the revised surety agreement eliminates a substantial liquidity risk by establishing a collateral cap of 56% of the bonded amount and guarantees peabody's access to third party bonding through December 31 2026.
Combined we believe we are positioned Peabody with the best balance sheet in the industry free from uncertain credit markets and built to withstand market cycles.
Looking forward, we will remain maintain rigorous discipline to capital allocation expecting to return at least 65% of available free cash flow to shareholders, we'll never risking the company's financial resiliency.
Lastly, let's turn to our outlook.
Our full year guidance remains unchanged with updates limited only to priced positions.
As a reminder, shoal Creek was transitioning in 2023 until production ramped up later in the year with better conditions currently higher than anticipated production from Metropolitan is partially offsetting loss of production from Shoal Creek.
For the second quarter, we are expecting improvements in our seaborne segments performance and another consistent reliable quarter from the U S thermal segments.
Seaborne thermal export volumes are expected to be 500000 tons higher as womble underground completed a longwall move in the first quarter and Wilson Young continues to produce at first quarter's heightened levels.
<unk> 1 million tons are priced on average at 243, and $1 2 million tons of high ASP product and 400000 tons of Newcastle product or unpriced.
Costs are expected to remain at $50 to $55 per ton.
Seaborne metallurgical volumes are projected to be 400000 tons higher as cm JV shipments recover from the impact of heavy rains that impacted logistics in Queensland during the first quarter.
Above 500000 tons are priced on average at 244 and remaining tons are expected to achieve 75% to 80% of prevailing hard coking coal prices.
Costs are expected to decline to 135 to $145 per ton.
In the <unk>, we are projecting.
<unk> shipments of 21 million tons priced on average at $13 70.
And costs are expected to be $12 per ton.
Full year price volumes of 91 million tons are now 1 million tons less than previous expectations, better reflecting contract minimums given market conditions.
Other U S. Thermal volumes are expected to be $4 3 million tons at an average price of $52 50 and cost of $41 per ton.
Full year price volumes of 18 million tonnes are also now 600000 tons less.
We previously anticipated annual cash interest payments of $60 million inclusive of surety bond fees with a substantial increase in restricted cash and collateral generating a conservative U S. Treasury yield we no longer anticipate significant net cash interest for the year.
In summary, the company continued to generate substantial free cash flow.
We amended and extended the surety agreement.
We positioned P body with the most resilient balance sheet in the industry.
We initiated a robust shareholder return program and continue to invest in long term growth at north Daniela.
I'd now like to turn the call over for questions operator.
We will now begin the question and answer session.
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At this time, we will pause momentarily to assemble our roster.
Okay.
The first question today comes from Lucas pipes with B Riley. Please go ahead.
Thank you very much operator.
Good morning, everyone and congratulations on the commencement of the capital return program Thats.
Job well done.
My My My first question is in regards to the cadence of met coal shipments over the course of this year and then also.
The cadence of your medical costs, so when I kind of back into the full year guidance.
What you've done in Q1 and what your outlook is for Q2.
We're looking at a pretty meaningful ramp up in volume and a concurrent decline in costs and I just wondered if you could provide a little bit more color as to the key drivers there were where you would expect volumes to ramp up within your portfolio. Thank you very much for your color on that.
Good morning, Lucas Thanks for the comments on the shareholder return program. We are excited to finally kicked that off.
Youre right as we announced at the beginning of the year. The first quarter was going to be less than ratable in our lowest production quarter for the year, we do expect that to consistently improve largely given our improved performance at the CMV.
As well as the Rahmbo underground was.
Undergoing a longwall move in the first quarter, so that really drove first quarter volumes lower we're still.
We're still on target in our range for our seaborne met.
Clearly with with some uncertainty around Shoal Creek.
There is there is a potential to be at the lower end of that range, but well.
See how that plays out through the remainder of the year.
Okay. Thank you for that and on onshore Creek.
Temporarily sealed section of stat.
Surrounding the existing operating longwall at Shoal Creek or would that be adjacent to it I'm just trying to get a better sense for.
Where are the affected areas are and.
Hmm.
What what it could mean for production over the course of this year I know you have a second longwall on schedule for later this year.
Any comments regarding that.
Start with that one thank you very much for your color on it.
Yeah, Hi, Lucas good to hear from you again.
And I'll talk about the ceiling and then the other longwall, but I just want to start out by saying that safety dictates every step that we take forward at Shoal Creek and we're working very closely with <unk> in this regard because thats our top priority. The path forward that I'll talk about here can have a lot of variability as we react to conditions.
<unk> in the mine and if needed we will reset our path to the safest way to proceed but I will say that the conditions at the mine have been relatively stable, which has been great. So with that in mind and the potential for variability, though our current path forward right. Now is as you said, we're going to put in temporary seals.
Which they can be put in very quickly and there is not as extensive extensive a construction process.
As a more substantial set of sealed and because of that putting them quickly. We can also pick out a localized area of the mine to do that with.
Which as you said Lucas Thats just in the J two panel in the field will cut off the J two panel and you already mined J, one panel area and so.
We were in the mine actively doing that right now I will say that <unk> under mine rescue apparatus and attended by mine rescue personnel. We have been in the mine numerous times since the incident has occurred so again I'm going to get back to the relatively stable conditions in the mine. So we're putting the seals and and this local.
Liberia.
If all continues to go well, we expect those temporary feels to be put in today are final.
Final lives today, and then the plan after that to going forward is to then flood the.
Area with nitrogen with.
With the goal of eliminating any existing sources of potential ignition.
So this whole process could take a few weeks to getting the seals in putting the nitrogen in and getting <unk>.
Thus, both getting comfortable with the conditions in the mine.
After that.
We're going to work with them to assess the situation with <unk> guidance, how best to safely preceded the mine, but the key to the new longwall.
Coming into the mind of Lucas as Ive noted is the steels that we have the temporary seals are just in the J two NGA one area.
This planned isolate this part of the mine, but if all goes well again working with <unk>, we still should have access hopefully to the rest of the mine, which is most importantly, the L panel area.
So the El panel area, we've already the development is complete.
We're ready for the new longwall and we are on schedule.
As we have been the same scheduled to arrive sometime in Q3.
And get into much better mining conditions in the J panel so.
Again, a lot of variability, but the plan is contained isolated to the J J, one and Jay to still have access to the rest of the mind. Most importantly, the el panels, where development is done and then the new longwall will come in the third quarter.
So that's the outlook as it stands at the moment Lucas of course subject to change, but that's where we're at right now.
That is a lot of color.
I appreciate that I'll turn it over for now thank you very much.
Next question please.
Our next question comes from Nathan Martin with Benchmark Company. Please go ahead.
Hey, good morning, everyone and I'll Echo Lucas' comments, congrats on getting the shirting agreements completed and then pivoting to shareholder returns.
Thanks Nathan.
Maybe mark for you in regards to the available free cash flow calculation you guys laid out. This morning, how shall we think about modeling that noncontrolling interest in restricted cash line item going forward is the expectation that they might be fairly consistent or could there be lumping lumpy excuse me any.
Any guidance there would be very helpful. Thanks.
Sure two things first on the distributions to Noncontrolling interests.
That's a minority interest in the Huambo complex.
5%, so that'll be variable based on the results from the <unk> mine.
And then on the restricted cash and collateral with the with the progress we've made in the first quarter.
We're fairly comfortable with that number there is some variability it's we will certainly manage it.
But we don't expect significant changes right now outside of a change in law.
Bonding requirements are also a possibility that would increase that but.
We don't expect significant changes in their restricted cash in collateral here in the immediate future.
Got it so that $40 million run rate plus or minus is a good way to think about that.
Yeah, no just to be clear Nathan the mountain we have on the balance sheet now is good and I am not expecting an increase here over the next couple of quarters, and we will look to continue to manage that throughout.
Throughout the year.
But the biggest risk is as changes to laws and regulations.
Okay got it so it's a mark to be clear that $43 million.
And your your calculation of available.
Cash free cash flow, probably goes closer to zero because you don't.
We expect the change in the overall number.
That's right I don't expect a significant change over the next couple of quarters.
Got it that makes sense I appreciate that clarification and also what have you can can we touch again on the other operating cost line item I know I've asked about last couple of quarters. It had been running at $30 million a quarter into the back half of last year. You had mentioned you expect another decent quarter again, it was actually up 26 million quarter over quarter it looks like.
Maybe maybe driven by some sales of logistics capacity, you guys called out, but it'd be great to get your thoughts on how that line could look over the next few quarters.
Sure.
Youre right the sale or assignment of excess port and rail capacity that was a onetime gain of $19 million in the first quarter.
Wouldn't expect that to repeat.
And then the other big item was about $34 million in trading operations you referenced the previous two quarters that that was basically realizing higher prices in some of the on a hedged tons and the delay in the delivery of the physical tons and.
And with an improving price environment, we actually had gains there those were real and.
And consistent with our operations in the first quarter of this year that $34 million gain is largely based on on some.
Coal purchases.
Trade made as part of our blending operations they were able to sell that at prices realized prices higher than than what they purchase those coals that.
That's a timing thing and with with a declining price environment. We've experienced here in the first quarter, we expect that to reverse here in the second quarter. So that's kind of a one time thing that will reverse out in the next quarter or two.
So to wrap that up maybe that that 50 plus million this quarter kind of gets closer to zero to $5 billion, just any any invitation on an absolute value.
Yes, that's right.
Normalize those two items that's right. We include like some of our past mining obligations. In there. There is there is some corporate and other stuff in there, but pretty modest in the cold trading from our blending operations I think that 5 million number is something that we've targeted before.
Great I appreciate that that color and then.
Maybe you guys. Finally can we get some additional thoughts on the domestic thermal coal market here I think there were some comments in your prepared remarks, but specifically how are you seeing your customers stockpiles are you having any deferral discussions at this point.
As we look into 'twenty four you gave us some numbers previously around pure being other thermal commitments could we get an update there and maybe any thoughts on pricing I appreciate it.
Yeah, Hi, Nate good morning, so.
The current guidance that we that we've put out reflects the.
I would say the current market dynamics and results of the discussions with our customers right now.
So.
As you probably know our position for 2023 is sold out.
So as our customers have different demands of different needs, we work with them to be responsive to that while we still retain the full value of our contracts, but again with all that said.
And any expected changes that's all reflected in in our current guidance.
As far as 2024 and <unk>.
85% sold position and about 70% sold in our in our other position. So we've got a very strong sales book for for next year already in place and we don't we haven't given up price guidance, yet on India positions.
Got it and then how would you describe maybe Jim the rail service Youre seeing in the U S. Right now is that driving any of your expected quarter over quarter decline in U S thermal shipments or is that more market driven or any thoughts there.
Nate so far.
I would say for this year January and February .
We're.
Tough.
Operations for the railroads the service challenges they had along with some really challenging weather made for some pretty pretty rough numbers for us, but March was a significant improvement and we've seen that same level of service so far in April so.
We feel a lot better about the rail service out west and their ability to meet the customer demands going forward. So big improvement. There. So now my view on it is going forward is going to be more of a fluctuation of market demand and the customer pool.
Dictating the flow of the coal versus rail performance.
Great I appreciate your comments and thoughts, Jim and Mark as well I'll leave it there best of luck in the remainder of the year.
Thank you.
Next question next question.
The next question comes from Kenya, Xanthic with BMO. Please go ahead.
Hi, Thank you for taking my question, maybe going back to the capital return framework you.
Nearly $900 million of cash, which I assume is on restriction on balance sheet could any of that would be used potentially for the maybe buybacks or special dividend later in the year.
I Gotcha and congratulations to you with regard to the cash in the balance sheet. As we mentioned previously we're going to maintain substantial liquidity on the balance sheet to weather the volatile pricing cycles and a credit challenged industry.
Yeah.
The way I look at this this represents the opportunity cost of the call option premium for the free cash flow yield that Peabody generates in the current price cycle.
We have always mentioned that the.
Sure on the returns.
Be a minimum of 65% of available free cash flow, but it is on a forward looking basis, we're real comfortable given the current market conditions, where we're at from a liquidity standpoint in that $800 billion to $1 billion range.
Okay, and maybe just on the second half of the year when you're planning to have a more balanced.
Capital return framework can you talk about is this going to be 50% variable dividend, 50% share buybacks or how should we think about that.
Yes, I think certainly is at the board's discretion, we're starting with a very heavy focus on share buybacks given the current free cash flow yield.
But we do look to probably transitioned to a more balanced approach between dividends and buybacks.
Going forward.
It's maybe at the board's discretion, but a 50 50 split is something that we may achieve at some point.
Okay. Thank you very much.
Thank you.
Next question.
The next question comes from Michael Dudas with vertical Research partners. Please go ahead.
Hi, good morning, everyone.
Good morning.
Jim.
I'm wondering if you could share your views new spin.
We have a little bit of consolidation activity in the global mining space, especially in the coal sector.
In Australia and elsewhere. So I just wanted to share your views on how youre seeing that play out with your thoughts about it.
As you've recapitalized and a terrific job on getting the company's balance sheet is where it is.
Maybe reiterate your thoughts on how <unk> may or may not fit into those types of opportunities going forward.
Yeah, Michael well first off thanks for getting on the call. It's great to hear from you again.
<unk>.
<unk>.
As far as Peabody and what we look at as far as potential M&A, We stated before and it's still the case that you know are our focuses on seaborne.
Seaborne markets and assets that serve the seaborne market more heavily focused on metallurgical, but if theres a good thermal play out there we'd take a look at it but our main focus is seaborne metallurgical.
As we were looking at.
Seem to be some some uptick in M&A activity out there.
A lot of discussions going on.
To me it Hasnt, what Hasnt changed though Michael is the availability of financing to do deals right.
It seems to me that you are looking at scenarios where.
People have to use equity or cash on hand, or casualty generate because of the financing where attractive financing isn't really there. So while there is an uptick in activity I still think the challenge that people are going to have is again how to do the financing for some of these assets.
Yes.
Michael did I answer all the questions.
No that's great that's very helpful.
Quite a bit of sense, because there are those dynamics on capital, which of course is probably going to lead to a much tighter market for global thermal and met coals in the future. So my second part of my question would be maybe Jim as you assess how your customers are reacting looking at things.
Obviously, it's very volatile market, but as you look forward into later this year maybe into next are you more encouraged are cautious about the direction of.
Demand and maybe pricing in the markets for quality thermal and met that you guys are shifting to the market.
Yeah, I'd say on a global scale were.
More encouraged.
Not just later this year next year, but I'll just say go on through the rest of the decade, that's being Michael I'd just to oversimplify it.
In fact, the supply and demand, we see demand growing both instilling rimmel and metallurgical Ani.
Seaborne markets and the constraints to supply growth that have been there are still there.
Access to new capital permitting.
G pressures lack of.
Hiring employees.
While the volatility is going to be there in the pricing as you see right now there's some you know maybe downtick in demand because of weather or some excess gas on the market the underlying fundamentals.
This year and next year through the decade are still really strong and the fact that we think demand is going to be growing and supply is going to have a hard time responding to it.
Thanks, Jim Thanks for your thoughts.
Thanks again, Michael for getting on the call.
Next question.
<unk>.
As a reminder, if you have a question. Please press Star then one to enter the question queue.
The next question is a follow up from Lucas pipes with B Riley. Please go ahead.
Thank you very much operator, thank you very much for taking my follow up questions.
And Jim the first one I wanted to touch on is just kind of state acute state of the medical market today.
Austin debate.
This is still strong by historical standards, but I wondered if you could shed a little bit of light on what youre seeing from your customers in the various geographies.
And what do you think is causing this.
More recent pullback thank you very much.
Yeah.
Take that into into two parts of the answer is sort of shorter term and longer term in.
In the shorter term what we saw was.
China the exports of steel out of that really flooding the market here in the first few months of the year and we've seen that pull back significantly now as youre getting into there's a lot of domestic growth going on in China and the demand for steel is we're already seeing less exports of steel from China and more used for internal consumption of it.
So that goes with a need for more more coal imports into China and being less steel out on the market from China opens a way for other countries that would be pushing their product out there. So.
We've seen the dip in the price is still at a very healthy price at around the $250.
But we think the conditions are there now with what we see with China and its steel production.
For production to other countries to fill that void on the international market. So there is this potential there for strength.
With that and then again.
Longer term.
I'll just go back to the same supply demand dynamic that I had mentioned with the with Michael and that seeing again.
Not very quick response from the supply side, if at all and as demand increases.
Now having that.
Out of balance equilibrium in the supply and demand side on the international markets.
Okay.
I appreciate that thank you and then.
Yeah.
Switching topics.
Little bit of a complicated question, but as much details you could provide.
I would appreciate.
When I think about your.
The restricted cash.
Seizing the reclamation liability effectively but then also the <unk>.
<unk> bonding requirement.
Minimum liquidity requirement that comes with that.
So overtime I would expect kind of.
Both the NPV into bonding requirement to come down and this should this should unlock.
It's a fair bit of capital but.
First can you comment on kind of the expected pace of off those declines and then what sort of reclamation costs would be associated on the other side of it.
As you as you reclaimed land and return mined areas to their original state. So so so again.
Trying to get a sense for.
The NPV of that liability how it may change and also the bonding requirement Tao how capital might be unlocked there. Thank you very much for your for your color on this.
Certainly lukas.
I guess I'll start with the <unk>.
The first question.
The the <unk>.
Collateral cap on the surety program as a percentage of what is currently bonded it's a little bit different bye bye.
By individual marketed by a characteristics of the bonds, they've written but it's 56%.
You are correct.
Bonds are released.
After work is completed that would naturally come down.
It will be completely dependent upon.
New bonding requirements and new operations. So we have not seen a significant change in that amount.
From a GAAP liability perspective over the last several years and I don't expect to see one going forward for the next several years either the total bonding has come down.
Recently, but.
I expect it to be pretty stable.
Going forward.
And then as far as the expense that goes on and we have guided to $60 million to $70 million of kind of <unk> cash spend that's been pretty consistent over the last several years and I would expect that to continue.
Got it so so over the next few years in a nutshell, we shouldnt expect mean.
Meaningful changes either on the bonding requirement or the present value of that cash collateralized stuff that amount.
Right.
That's correct Lucas again that 900, plus number we have on the balance sheet for total restricted cash and collateral.
Not expecting to see significant changes.
Going forward, if theres changes in laws or some additional new bonding requirements, then that could that could go up but we will do our best to offset that by completing reclamation work in continuing to I'll get bond releases.
Got it that's that's very helpful. I appreciate that Marc Thank you for the color and then.
Just to go back to Shoal Creek, one more time.
With the temporary seal.
Program being initiated.
Is that due to an abundance of caution or have there been.
Signs of of lingering.
Yeah.
Hotspots for example underground at cost this measure to be necessary. Thank you very much.
Yes, hi.
The the readings, while they have been very stable at the mine have not been zero when it comes to like levels of hydrogen or.
Or C O. So.
Uh huh.
This is <unk>.
And so we're putting the temporary seals and again with <unk> to make sure that.
Sure.
It is a safe environment for us to get into to access the rest of the mine and hopefully back to this area here. So I don't know if I call. It an abundance of caution.
Lucas it's.
We're comfortable with this approach and working with them on it so.
The temporary feels like a very good indication that we get to get in there.
Get in there quickly.
And localize the area.
Sure.
Where it's at so.
I guess I'd leave it at that.
Okay No no. That's that's that's helpful. Thanks again for all the color and best of luck.
Thank you Lucas.
We have any more questions.
There are no further questions at this time, so I would like to turn the conference back over to Mr. Jim Greg for any additional or closing remarks.
Well I'd like to thank you all for joining us today, and I'd, especially like to thank our employees for remaining focused on safety and for continuing to execute on our various initiatives.
I'd also like to thank our customers investors insurance providers and vendors for your continued support.
Operator that concludes our call.
Thank you.
That does conclude today's teleconference, and we do appreciate your participation you may now disconnect.
[music].
Yes.