Q3 2023 Peabody Energy Corp Earnings Call
Good day and welcome to the Peabody's earnings call for the third quarter of 2023, all participants will be in a listen only mode should you need assistance. Please signal a conference specialist by pressing the star key followed by zero.
After todays presentation, there will be an opportunity to ask questions to ask a question you May Press Star then one on a touchtone phone to withdraw your question. Please press Star then two please note. This event is being recorded I would now like to turn the conference over to Karla Kimrey. Please go ahead.
Good morning, and thanks for joining peabody's earnings call for the third quarter of 2023.
With me today are president and Chief Executive Officer, Jim Grech.
Chief Financial Officer, Mark Sperbeck, and our Chief Marketing Officer, Malcolm Roberts within the earnings release, you'll find our statement on forward looking information as well as a reconciliation of non-GAAP financial measures.
We encourage you to consider the risk factors referenced there along with our public filings with the Securities and Exchange Commission I'll now turn the call over to Jim.
Thanks, Carlo and good morning, everyone.
In the third quarter of 2023, we delivered strong operational results with better than expected production and effective cost management.
We also advanced initiatives at Shoal Creek in North Green yellow Red.
Straight our ongoing commitment to continue investing in our seaborne metallurgical portfolio.
During the quarter, our board approved full funding at North can you walk through the completion of initial development to the commencement of longwall operations in 2026.
We are also excited to announce that we have reached an agreement to acquire a large portion of the awards won't cold deposit adjacent to our existing nordson yellow mine.
This is a tremendous opportunity to extend our world class cold deposit and leverage our existing infrastructure and equipment.
Before I expand on the quarter.
Want to thank our global employees for their continued focus and commitment to working safely and efficiently.
Now turning to the global coal markets.
Seaborne thermal coal markets remain volatile during the quarter with modest pricing improvements.
Robust, but moderating colon natural gas inventories in the northern hemisphere have continued to weigh on demand for high energy thermal coal.
Coupled with better supply prospects due to drier weather on Australia's east coast.
<unk> and Newcastle coal trading within a range of $130 to $160 a ton.
China's imports of lower grade thermal coals continued to significantly surpass the prior year.
With an increase in the annual thermal coal input run rate of approximately 93% over 2022 levels.
India has also increased seaborne market participation as a power demand continues to grow.
Recent important trends I've led the I 80 reported elevated global demand for thermal coal imports. So far during 2023 are pointing to 6% year on year growth in overall seaborne coal trade versus 2022.
Within the seaborne metallurgical market global crude steel output during the quarter continued to be variable with production rates in Europe and South America.
Offset by notable year on year crude steel protect production growth and some Asian markets.
Metallurgical coal supply has remained constrained with the rate of exports from Cleveland remaining below historical rates and premium hard coking coal remaining highly sought after.
Premium hard coking coal indices finished the quarter around $330 a ton.
Courting a 42% increase during the quarter.
The outlook for metallurgical coal remains positive with seaborne supply remains below historical levels, combining with strong purchase interest out of India.
A new important demand for steelmaking coal's within the Southeast Asian region.
The United States electricity generation from thermal coal has declined year on year due to low gas prices and growing renewable generation, although quarter on quarter improvement and Colbert was recorded through.
A warm end to the summer.
Natural gas prices continue to recover during a quarter with U S natural gas pricing.
Pricing currently at around $3 per M B to you.
Near term demand for U S. Thermal coal is anticipated to be supported by higher gas prices.
I'll also challenged by comparatively high generator inventories.
Now moving on to our operating segments.
As expected our seaborne thermal third quarter coal exports came in at $2 7 million tonnes.
Segment cost per tonnes were lower than the second quarter due to stronger production and lower sales price sensitive costs.
Our seaborne met segment shipments were one 5 million tons.
Segment costs per ton were 20% lower than the second quarter due to strong production and lower sales price sensitive costs offset by timing of sales.
And Shoal Creek.
We continue to make significant progress towards resuming targeted longwall production early in the first quarter of 2024.
What's the potential that this could be pulled forward into Q4 2023.
Now our coal production is ahead of target due to favorable geological conditions in the L panel area and installation of the new fit for purpose longwall is well underway.
And the <unk> shipments of $22 7 million tonnes were better than anticipated.
Goodbye or produced $4 2 million tonnes, the most in a quarter since 2012.
And arm complex produced almost 16 million tons similar to the third quarter last year and the mine has recovered nicely after a tornado damaged facilities in June.
Higher production and lower maintenance costs allowed us to reduce costs by nearly 8% from the previous quarter, while expanding margins by more than 70%.
Now the U S thermal shipments were $4 2 million tonnes as expected and above the $3 8 million tons from the previous quarter due to increased customer demand.
Our customers did to their inventories come down in July and August but.
At September likely saw inventories increase again.
Looking to 'twenty 'twenty four.
We sit comfortably with about 80 million tons priced at $13 77 per ton in the PRP and.
And nearly 15 million tons priced at $51 18 per ton and other U S thermal.
In addition to our active operations, we continue to advance redevelopment efforts at North Daniela.
Key organic growth metallurgical opportunity within the portfolio.
As anticipated we achieved a significant milestone when we received the required approvals to reenter zone B.
Reentry has occurred ventilation has been established and we are operating under normal mining processes.
The conditions in zone, b or better than expected with no impediments to the installation of conveyors and access to our southern longwall blocks.
Next steps in don't be include installation of new ground support.
The removal of the old conveyer system and installation of a new conveyor system to support commencement of development operations.
This new conveyor system, which runs from the surface to the coal phase.
Will result in improved reliability and capacity.
New continuous miners and development equipment. They were ordered in late 2022 are scheduled for delivery in Q1, 'twenty 'twenty four for the commencement of development coal.
Since commencing redevelopment in north can yell in late 2022, the company has invested $75 million of the initial.
Redevelopment capital expenditures.
Which includes further ventilation equipment conveyors and infrastructure updates.
Overall, our operations had an outstanding quarter, enabling us to deliver consistent and predictable results and highlighting the benefits of our unique diversified portfolio.
I'll now turn it over to Mark to cover the financial details.
Thank you Jim.
In the third quarter, we recorded net income attributable to common stockholders of $120 million or <unk> 82 cents per diluted share and adjusted EBITDA of $270 million.
Operator: Good day and welcome to the Peabody's earnings call for the 3rd quarter of 2023. All participants will be in a listening mode. Should you meet assistance please signal a conference specialist by pressing the star key followed by zero.
The company generated 87, and a half million of operating cash flow from continuing operations, which included an increase in working capital of $81 million.
Operator: After today's presentation there will be an opportunity to ask questions. To ask a question you may press star then one on a touch tone phone. To withdraw your question please press star then two.
Actually reversing the second quarter working capital benefit as expected.
We also reached a 72 million cash settlement with the department of labor for Black lung liabilities related to discontinued operations.
Operator: Please note this event is being recorded.
Karla Kimrey: I would now like to down the conference over to Karla Kimrey. Please go ahead.
The settlement discharged of $76 million legacy liability from the Companys balance sheet and eliminated almost certain risk I mean, much larger collateral requirement proposed in the new Dol rules.
Karla Kimrey: Good morning and thanks for joining Peabody's earnings call for the 3rd quarter of 2023. With me today our president and chief executive officer Jim Grech, chief financial officer Mark Spurbeck and our chief marketing officer Malcolm Roberts. Within the earnings release you'll find our statement on forward looking information as well as a reconciliation of non-GAP financial measures.
Through October 20th we have returned $307 million to shareholders.
Our share count by nine 3% and have $713 million of remaining authorization under our share repurchase program.
We remain steadfast in our commitment to return at least 65% of annual available free cash flow to shareholders.
After their recently declared third quarter cash dividend of $7.05 per share based on year to date results of $103 million is currently available for additional share repurchases.
Karla Kimrey: We encourage you to consider the risk factors reference there along with our public filings with the Securities and Exchange Commission.
Jim Grech: I'll now turn the call over to Jim. Thanks Karla and good morning everyone. In the[inaudible] Metalogical Coal Supply has remained constrained, with the rate of exports from Queensland remaining below historical rates and premium hard-coking coal remaining highly sought after. Premium hard-coking coal indices finished a quarter around $330 a ton, recording a 42% increase during a quarter.
Turning now to third quarter segment results.
Born thermal recorded $116 million of adjusted EBITDA.
Higher production and whooping young and a lower mix of Mambo underground production reduce costs to $43 68 per ton below the low end of our guidance.
Despite lower price realizations from additional high Ash Wilson you on production adjusted EBIT margins were approximately 40%.
Seaborne metallurgical segment generated 79 million of adjusted EBITDA.
Cost per ton were below the low end of guidance, mostly due to lower sales price sensitive costs.
Lower than anticipated price realizations resulted from the widening price gaps between premium hard coking coal and PCI coal.
PCI achieved only 64% of the benchmark price in the third quarter compared to 86% in the previous quarter.
Despite the relative weakness in PCI coal prices the segment reported 32% adjusted EBIT margins.
The U S thermal mines produced $103 million of adjusted EBITDA, an increase of 32% over the prior quarter benefiting from much stronger demand for <unk>.
The <unk> mines generated 54 million of adjusted EBITDA and shipped $22 7 million tonnes exceeding guidance by more than 8%.
<unk> margins improved substantially to $2 38 per ton.
Up from $1 38 last quarter due to higher shipments and lower maintenance costs.
The other U S thermal mines delivered 49 million of adjusted EBITDA shipments of $4 2 million tons were in line with expectations, while costs were a bit higher due to timing of repairs contracted services and higher fuel costs.
Taking a peek at our outlook full year guidance has improved and a couple of areas.
We are lowering seaborne thermal cost guidance $5 per ton to 45 to $50 as we expect full year volumes to be at the higher end of the 15 to 16 million ton range.
Our reclamation efforts continue to be efficient and we are reducing the expected cash required for final reclamation by $5 million to a range of $60 million to $70 million.
Specifically for the fourth quarter.
Seaborne thermal export volumes are expected to increase to $2 8 million tonnes 500000 tons are priced on average at 161 per ton and one and a half million tons of high ash product and 800000 tons of Newcastle product our unpriced.
Jim Grech: The outlook for medical coal remains positive, with fee-borne supply remaining below historical levels combining with strong purchase interest out of India and new import demand for still making coals within the Southeast Asian region. The United States Electricity Generation from Thermal Coal is declined here and here due to low gas prices and growing renewable generation, although quarter on quarter improvement in coal verd was recorded through a warm end to the summer. Natural gas prices continued to recover during a quarter, with U.S, natural gas pricing currently at around $3 per minute BTU. Your term demand for U.S, thermal coal is anticipated to be supported by higher gas prices, while also challenged by comparatively high-generator inventories.
Costs are expected to be 45 to $50 per ton.
Seaborne metallurgical volumes are projected to be 45% higher at $2 2 million tons due to the absence of a longwall move continued development coal coming out of Shoal Creek and a reversal of the mine sequencing and sales timing that impacted the third quarter two.
200000 tons are priced at 164 per ton in the remaining unpriced volumes are expected to achieve 65% to 70% of the premium hard coking coal price.
Costs are expected to be 110 to $120 per ton.
And the P. R. B, we are anticipating shipments of 21 million tons, resulting in full year volumes at the high end of our guidance range in the fourth quarter. We expect average realized prices of $13 30 per ton and cost of $11 55 per ton.
Jim Grech: Now, moving on to our operating segments. As expected, our sea-borne thermal third quarter coal exports came in at 2.7 million tons. Segment cost per tons were lower than the second quarter due to stronger production and lower sales price sensitive costs. Our sea-borne met segment shipments were 1.5 million tons. Total segment cost per ton were 20% lower than the second quarter due to strong production and lower sales price sensitive costs offset by timing of sales.
Other U S thermal shipments are expected to be $4 1 million tonnes in line with the third quarter, resulting in full year volumes at the low end of our guidance range.
In the fourth quarter, we anticipate an average price of $51 40, and cost of approximately 43 to $44 per ton.
In summary, we delivered another quarter of solid operating results and we expect to do the same in the fourth quarter.
We eliminated our legacy liability and removed a potentially large liquidity requirement.
Jim Grech: At Show Creek, we continue to make significant progress towards resuming targeted lawn wall production early in the first quarter of 2024, with at potential that this could be pulled forward into Q4 2020-23, as developmental coal production is ahead of target due to favorable geological conditions in the L-panel area and installation of the new fit for purpose lawn wall as well underway. In the PRB shipments of 22.7 million tons were better than anticipated.
We are excited about our organic growth opportunities in the seaborne metallurgical segment and will maintain rigorous attention to operating costs and capital allocation discipline.
Operator, I'd now like to turn the call over for questions.
Thank you we will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone.
Jim Grech: Caballo produced 4.2 million tons, the most in a quarter since 2012. The NARM complex produced almost 16 million tons, similar to the third quarter last year and the mine has recovered nicely after tornado damage facilities in June. Higher production and lower maintenance costs a lot of reduced costs by nearly 8% from the previous quarter, while expanding margins by more than 70%. Another US thermal shipments were 4.2 million tons, as expected, and about 3.8 million tons from the previous quarter due to increased customer demand.
If you are using a speakerphone please pick up your handset before pressing the keys.
In fact anytime Youre question has seen that truth and you would like to withdraw your question. Please press Star then two.
At this time, we will pause momentarily to assemble our roster.
Our first question comes from the leukocytes with B Riley Securities. Please go ahead.
Thank you so much operator, good morning, everyone.
Good morning Lukas.
Hey.
Jim Grech: Our customers did to their inventories come down in July and August, but September likely saw inventories increase again. Looking to 2024, we sit comfortably with about 80 million tons priced at $13.77 a ton in the PRB and nearly 15 million tons priced at $51.18 per ton in other US thermal.
First question is on works, well and and I want to make sure I understand that the structure of that deal right. So 136 million cash and debt of loyalty contingent royalty of 200 million.
$136 million of cash kind of it does.
That got paid on on closing and then the $200 million.
Exactly what is that contingent upon I think it says recovery of cap of what capital does that refer to which is really appreciate some additional color around the timing.
Jim Grech: In addition to our active operations, we continue to advance redevelopment efforts at North Canola, the key organic growth and metallurgical opportunity within the portfolio. As anticipated, we achieved a significant milestone when we received the required approvals to re-enter zone B. Reentry has occurred, ventilation has been established, and we're operating on the normal mining processes. The conditions in zone B are better than expected with no entitlements to the installation of conveyors and access to our southern, long-walled blocks.
Initial and later cash flows and then I have a.
Jim Grech: Next steps in zone B include the installation of new ground support, removal of the old conveyor system and installation of a new conveyor system to support commencement of development operations. This new conveyor system, which runs from the surface to the coal phase, will result in improved reliability and capacity. New continuous miners and development equipment that were ordered in late 2022 are scheduled for delivering Q1 2024 for the commencement of development and coal. With commencing redevelopment in North Danielle on late 2022, the company has invested $75 million of the initial approved redevelopment capital expenditures, which includes further ventilation, equipment, conveyors, and infrastructure updates.
Second question on board as well and that is what when would you expect to to mind that adjacent deposit that thank you very much for the color on that.
Yeah, Hi, Lucas, Jim Greg here and first off congratulations on that our beautiful daughter, you had just a few days ago. So that's the most important thing.
Yeah.
So the $136 million is a let me see if I can remember all your questions here that'll be paid on closing we expect that to go out sometime in the first quarter of next year and the the $200 million of royalty.
Again, that's recovered we start paying that out after recovery in full project investment with.
The projects, so that's going to be some years into the into the future are probably not and if it is at the end of this decade, if not into early into the 2030 timeframe.
<unk> timeframe.
So we would expect that that royalty to start being paid.
And I'm sorry, you had a couple of other questions. If I Didnt hear did you repeat them.
Yeah, no that covered the first part.
Jim Grech: Overall, our operations had an outstanding quarter enabling us to deliver consistent and predictable results and highlighting the benefits of our unique diversified portfolio.
The second part was.
That when you would expect to mine those reserve.
Yeah. Thank you yeah, yeah. So.
Mark Spurbeck: I'll now turn it over to Mark to cover the financial details. Thank you, Jim. In the third quarter, we recorded net income, attributable to common stockholders of 120 million, or 82 cents per diluted share, and adjusted even up to 270 million. The company generated 87.5 million of operating cash flows from continuing operations, which included an increase in working capital of 81 million. Largely reversing the second quarter working capital benefit as expected.
We have Lucas we literally close on this deal just a few hours ago. So we're happy we could do that and get it into the release here and what.
What we're looking at is optimizing the mining plan right now the way. It's laid out is we would still mine in northern yellow reserves first and what we're looking at is the timing of when we would then jump into the awards well reserves are contiguous they're right up against our property and so some of the different scenarios, we're running as mine just a few panels.
Mark Spurbeck: We also reached a 72 million cash settlement with the Department of Labor for Black Long liabilities related to discontinued operations. The settlement discharged a $76 million legacy liability from the company's balance sheet and eliminated the almost certain risk of a much larger collateral requirement proposed in the new DOL rules. To October 20th, we have returned 307 million to shareholders, reduced our share count by 9.3% and have 713 million of remaining authorization under our share repurchase program.
Northern yellow, then jump right up towards well or maybe might even a few more panels in north in yellow, which would take us out towards the end of the decade, and then jump up towards well.
So we're looking at what gives us the best cost structure.
With a different different mine plans. So it could be a few years out to maybe four or five years out depending on how we go after we start longwall production right. So it depends on.
And what gives us the best cost structure.
It is very good about those reserves, though Lucas is us having that optionality is because it's the same coal seam.
Mark Spurbeck: We remain steadfast in our commitment to return at least 65% of annual available free cash flow to shareholders. After they're recently declared third quarter cash dividend of 7.5 cents per share based on year-to-date results, 103 million is currently available for additional share repurchases.
Using the same conveyor systems the same longwall the same development units.
And it's just which direction we take the mine whether you go to the north or the south faster.
Going down to a different theme down at a different elevation and we have lots of optionality as far as as the mine plan now so getting.
Again, we're still looking at that but you know a few years out after a longwall starts would probably be the earliest we'd hit those reserves.
Mark Spurbeck: Turning now to third quarter segment results. Seaborne Thermal recorded 116 million of adjusted EBITDA. Higher production at Wilpinion and a lower mix of Lambo underground production reduced cost to $43.68 per ton, below the low end of our guidance. Despite lower price realizations from additional high-ash Wilpinion production, adjusted EBITDA margins were approximately 40%. The seaborne metallurgical segment generated 79 million of adjusted EBITDA.
And.
Again, we're still we've just signed the deal and you know and you asked about the payment again that would come in.
Closure, which again, we expect that to be in the first quarter.
Okay.
Very helpful. Thanks.
Thank you for that color Jim.
My second question.
States with Northland Yeller.
The Capex guidance this morning.
We've seen obviously across the industry pretty materially increases in capital costs.
Mark Spurbeck: Dada. Costs per ton were below the low end of guidance, mostly due to lower sales price sensitive costs. Lower than anticipated price realizations resulted from the widening price gap between premium hard-coking coal and PCI coal. PCI achieved only 64% of the benchmark price in the third quarter, compared to 86% in the previous quarter.
And at this stage, how how far down the rabbit hole are you.
In terms of Derisking the capital for for North Daniela.
Would appreciate a sense for your confidence level.
And.
Mark Spurbeck: Despite the relative emergence. The U.S, thermal mines produced 103 million of adjusted EBITDA, an increase of 32% over the prior quarter, benefiting from much stronger demand for PRB coal. The PRB mines generated 54 million of adjusted EBITDA, and shipped 22.7 million tons, exceeding guidance by more than 8%. PRB margins improved substantially to $2.38 per ton, up from $1.38 last quarter, due to higher shipments and lower maintenance costs. The other U.S, thermal mines delivered 49 million of adjusted EBITDA. Shipments of 4.2 million tons were in line with expectations while costs were a bit higher due to timing of repairs, contracted services and higher fuel costs.
Maybe some risks linger.
And this broadly inflationary environment. Thank you.
Yeah, Lucas as you said, we're not immune to cost increases just like the rest of the industry, but given the relatively short timeframe.
The development of <unk>.
Mining here in the first quarter. We've got the miners are on order will be delivered here in the first quarter. The conveyor structure Thats all in place there's still some more capital to be spent but a lot of it has been ordered or on order or have been spent already.
You know a big part of the increase we have has been in labor cost, which at this point is also capitalized and so those have increased and we think we've captured that in our forecast that that's a big part of the of the change in the capitalization is on the labor expense. So.
Given the short timeframe and the.
The amount that's already been ordered or spent.
Mark Spurbeck: Taking a peek at our outlook, full-year guidance has improved in a couple of areas. We are lowering Seaborn Thermal Cost Guidance $5 per ton to $45 to $50, as we expect full-year volumes to be at the higher end of the 15 to 16 million ton range. Our Reclamation efforts continue to be efficient, and we are reducing the expected cash required for final Reclamation by $5 million to a range of 60 to 70 million.
We feel pretty good about those numbers.
And then being being accurate.
Based on all of those reasons, you know labor is still a bit of a wildcard, but we think we've captured everything with the labor costs that we could see going forward.
Okay.
Thank you Jim very helpful. I'll squeeze one last one in.
On the on the met coal side for 2020 for few moving pieces I know it's.
Little early to ask for guidance, but just.
Mark Spurbeck: Specifically for the fourth quarter, Seaborn Thermal Export volumes are expected to increase to 2.8 million tons. 500,000 tons are priced on average at 161 per ton, and 1.5 million tons of high-ash product and 800,000 tons of Newcastle product are unpriced. Fosses are expected to be $45 to $50 per ton. Seaborn metallurgical volumes are projected to be 45% higher at 2.2 million tons due to the absence of a long-won move, continued development goal coming out of Shoal Creek, and a reversal of a mine sequencing and sales timing that impacted the third quarter.
Between development coal.
The good update on Shoal Creek, what is a reasonable range for your coking coal volumes in this transition period before Northland yellow is fully ramped.
Yes, Lucas Mark.
We're not giving guidance for 'twenty for you.
Obviously shoal Creek has done a really good job.
With the with some of the continuous miner development colver getting now and we expect that to be ramped back up beginning Q1 of next year.
That did about 800000 tons last year, it's probably high point was 2 million tons, which are probably somewhere in the middle there for next year, that's the big change.
Mark Spurbeck: 200,000 tons are priced at 164 per ton, and the remaining unpriced volumes are expected to achieve 65 to 70% of the premium heart-coking gold price. Fosses are expected to be $110 to $120 per ton. In the PRB, we are anticipating shipments of 21 million tons, resulting in full-year volumes at the high end of our guidance range. In the fourth quarter, we expect average realized prices of $13.30 per ton, and costs of $11.55 per ton.
And all the other operations no major changes that you would expect there.
That's right.
Alright, Thank you very much I'll turn it over best of luck.
Thanks, Lucas Thanks Lucas.
Okay.
Please.
Please.
Then we wanted to be joined into the queue.
The next question comes from Nathan Martin with Benchmark Company. Please go ahead.
Hey, good morning, everyone. Thanks for taking my questions.
And then just one last one on northern yellow.
Mark Spurbeck: Other US thermalship that are expected to be $4.1 million in line with the third quarter, resulting in full-year volumes at the low end of our guidance range. In the fourth quarter, we anticipate an average price of $51.40 and cost of approximately $43 to $44 per ton. In summary, we delivered another quarter of solid operating results, and we expect to do the same in the fourth quarter. We eliminated a legacy liability and removed a potentially large liquidity requirement.
And now the project is fully approved we've got the Capex update.
Guys give us any idea on the cadence of that spend it looks like roughly 400 million or so left between now and 2026 and also you mentioned something in the release about our regulatory costs that increase there I know you previously said the reentry with the major approval needed, but is there anything else from a regulatory perspective that we need.
To be mindful of.
Yeah, Nathan I'll answer the regulatory side of that and then Mark can.
Mark Spurbeck: We are excited about our organic growth opportunities in the seaboard and middle-urgical segment and will maintain rigorous attention to operating costs and capital allocation discipline.
Address the <unk> question that you had.
In Australia, where this safeguard act was passed.
Passed legislation I think it was end of July which affected many industries in Australia, but us US included and so we just got the you know the.
Operator: Operator, I now like to turn the call over for questions. Thank you.
The detail of what that involves and the compliance costs that go along with it.
Operator: We will now begin the question and answer session to ask a question you may press start then one on your touch-tone phone. If you are using the telephone, please pick up your handset before pressing the keys. If at any time your question has been at risk and you would like to withdraw your question, please press start then two.
So those regulatory impacts were something that we had to work into our into our forecast for the mine. That's the main one there's been some other changes legislatively potentially that we see with the work rules and so on that we've accounted for but the main regulatory impact that we're talking about is that safeguard act.
Operator: At the time we will pause momentarily to assemble a roster.
That came into effect there late in the summer.
Yeah, Nate we've got about 75 million spent a life to date, then that redevelopment at north Gila I look at the Capex of about $150 million to $160 million for 'twenty four 'twenty five and the rest of that capital would come in after a while more production begins at the beginning of 'twenty six.
Lucas Pipes: Our first question comes from Lucas Pipes with the early securities, please go ahead. Thank you so much, Operator. Good morning, everyone. Morning, Lucas. My first question is on words well and I want to make sure I understand the structure of that deal. It's 136 million cash and then a royalty contingent royalty of 200 million. Does the 136 million of cash kind of, does that get paid on closing and then the 200 million?
Lucas Pipes: Exactly what is that contingent upon? I think it says recovery of capital. What capital does that refer to? Which is really appreciate some additional color around the timing of initial and later cash flows. Then I have a second question on words well and that is when would you expect to mind that adjacent deposit? Thank you very much for your color on that. Hi, Lucas. Jim Greg here and first off, congratulations on that beautiful daughter you had just a few days ago.
Great color there guys I'd appreciate that and then.
And then shifting over to the seaborne thermal segment great job on the cost there obviously for your cost per ton guidance down by about five bucks.
Yes. The question is you know, what's what's driving that improvement and is this kind of a new base. We should think about going forward in 'twenty four or are there some other factors to consider.
A couple of things Nate one.
Certainly certainly hitting volumes I'm costs have been very helpful. In seaborne thermal the Aussie dollar as historically weak dead. So that's also helping us on the costs, we saw costs come down quarter over quarter. Some of that was in a lower sales price sensitive costs and higher production.
We're not providing guidance for 'twenty forward, just yet we'll do that next quarter.
Lucas Pipes: Thank you. That's the most important thing on that. The 136 million dollars, let me see if I can remember any questions here that will be paid on closing. We expect that to go out sometime in the first quarter of next year and the 200 million dollars of royalty, again, that's recovered. We start paying that out after we cover a full project investment in the private project. So that's going to be some years into the future, probably not in if it is at the end of this decade, if not into early, into the 2030 timeframe that we would expect that royalty to start being paid.
Okay.
Thanks for that Mark.
And then maybe.
Maybe at the U S thermal business side of the house, Jim I. Appreciate your update on 24 channel fills in price there.
Should we kind of assume you guys are close to sold out at those levels. I think you said in your pier B 80 million tonnes at $13 77, and other thermal at $15 million at 50 118.
I think if you look at the the guidance ranges, we are providing this year for the different markets.
That can give you a pretty good range of what we think about for the tons for next year.
At this time and where we sit with these sales within those guidance ranges.
Lucas Pipes: I'm sorry, you had a couple other questions. I didn't answer. Did you repeat them for me? Yeah, no, that covered the first part. But the second part was about that when you would expect to mine those reserves. Both. Yeah, thank you. Yeah. So, what we have, Lucas, we literally closed on the field just a few hours ago, so we're happy we could do that and get it into the release here. And what we're looking at is optimizing the mining plan right now, the way it's laid out is we would still mine in North Canyella reserves first.
Okay, just just to be sure. So you are saying you know maybe somewhere within this year's guidance ranges for 'twenty four is not a bad place to start.
Yeah and.
Maybe towards the higher end of the guidance ranges.
Okay got.
Very helpful. I'll leave it there I appreciate the time best of luck in the fourth quarter.
Thanks Nate.
Lucas Pipes: And what we're looking at is the timing of when we would then jump into the woods well reserves or continue us right up against our property. And so some of the different scenarios we're running is mine just a few panels in North Canyella, then jump right up towards well, or maybe mine even a few more panels in North Canyella, which would take us out towards the end of the decade and then jump up towards well.
With no further questions. This concludes our question and answer session I would like to turn the conference back over to Jim Greg for any closing remarks.
Thank you all for joining us today.
I'd 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 their continued support.
Operator that concludes our call.
Thank you. The conference has now concluded. Thank you for attending today's presentation you may all now disconnect.
Lucas Pipes: So, we're looking at what gives us the best cost structure with a different, different mine plan. So, it could be a few years out to maybe four or five years out, depending on how we, after we start long wall production, right? So, it depends on what gives us the best cost structure, which, which is very good about those reserves though, because it's us having an optionality is because it's the same pulsing.
Lucas Pipes: We're using the same conveyor systems, the same long wall, the same development units, you know, and it's just which direction we take the mine, whether we go to the North or the South faster, we're not going down to a different scene, down at a different elevation. And we have lots of optionality as far as the mine plan now. So, again, we're still looking at that, but you know, a few years out after long wall starts would probably be the earliest we'd hit those reserves, and again, we're still, you know, we've defined a deal and you know, you've been asked about the payment, again, that would come at close year, which again we expect that to be in the first quarter.
Lucas Pipes: Very helpful. Thank you for that, that color, Jim. My second question stays with North Gunyela. You raised the capex guidance this morning. We've seen, obviously, across the industry, pretty material increases in capital costs. And at this stage, how far down the rabbit hole are you in terms of the risking the capital for North Gunyela would appreciate the sense for your confidence level and maybe some risks linger in this broadly inflationary environment.
Lucas Pipes: Thank you. Yeah, Lucas, as you said, we're not immune to cost increases just like the rest of the industry, but given the relatively short time frame, you know, we start development mining here in the first quarter. We've got the miners on order be delivered here in the first quarter, the conveyor structure that's all in place. You know, there's still some more capital to be spent, but a lot of it has been ordered or on order or been spent already.
Lucas Pipes: You know, a big part of the increase we have has been in labor cost, which at this point is also capitalized. And to those have increased, and we think we've captured that in our forecast. That's a big part of the change in the capitalization is on the labor expense. So given the short time frame and the amount that's already been ordered or spent, we feel pretty good about those numbers and being accurate based on all those reasons.
Lucas Pipes: You know, labor is still a bit of a wild card, but we think we've captured everything with the labor cost that we could see going forward. Thank you, Jim. I'm very helpful. I'll squeeze one last one in on the on the medical side for 2024 few moving pieces. And I know it's a little early for to ask for guidance, but just between development, coal. That the good update on on show Creek, what is the reasonable range for your cooking volumes in this transition period before north gondola is fully ramped?
Lucas Pipes: Thank you. Yeah, Lucas, Mark, we're not given guidance for 24 yet. Obviously, show Creek is done a really good job with some of the newest minor development. We're getting now and we expect that to be ramped back up, beginning Q1 of next year. You know, that did about 800,000 tons last year. It's probably high point with 2 million tons. There are probably somewhere in the middle there for next year. That's the big change.
Lucas Pipes: And all the other operations, no major changes that you would expect there. That's right. All right. Thank you very much. I'll turn it over. Best of luck. Thanks Lucas. Again, if you have a reminder, please, please, please press star, then want to be joined into the queue.
Nathan Martin: The next question comes from Nathan Martin with Ben.
Jim Grech: Mark Company, please go ahead. Hey, good morning, everyone. Thanks for taking my questions. Maybe just one last on North Green Yellow. Now the project is fully approved. We've got the CapEx update. You guys give us any idea on the cadence of that spend. It looks like roughly 400 million or so left between now and in 2026. And also you mentioned something in the release about regulatory costs that increase there. I know you previously said the reentry was the major approval needed, but is there anything else from a regulatory perspective that we need to be mindful of?
Jim Grech: Thanks. Again, Nate, I'll answer the regulatory side of that. And then Mark can address the cadence question that you had. In Australia, the Safe Guard Act was passed the legislation and it was end of July, which affected many industries in Australia, but us included. And so we just got the, you know, the detail of what that involves and the compliance costs to go along with it. So those regulatory impacts was something that we had to work into, into our forecast for the mine.
Jim Grech: That's the main one. There's been some other changes legislatively, potentially that we see, you know, with work rules and so on that we've accounted for, but the main regulatory impact that we're talking about is that Safe Guard Act that came into effect there, you know, late in the summer. Yeah, Nate, we've got about 75 million spent left to date than the redevelopment in North Canola. I'd look at the cap backs of about 150 to 160 million for 24 from 25. The rest of that capital would come in after a long, long production begins in the beginning of 26.
Mark Spurbeck: Great color there. Guys, appreciate that.
Mark Spurbeck: And then maybe shifting over to the Seaborn Thermal Segment. Great job on the cost there. Obviously, for your cost, the ton guidance down by about five bucks. I guess the question is, you know, what's what's driving that improvement and is this kind of a new base? We should think about going forward in 24 or there's some other factors to consider. A couple of things, Nate. One, you know, certainly, certainly hitting volumes on cost have been very helpful in Seaborn Thermal the Aussie dollar.
Mark Spurbeck: It's historically weak. That's also helping us on the costs. We saw a cost come down quarter of a quarter. Some of that was, you know, lower sales price sensitive costs and the higher production. You know, we're not providing guides for 24 just yet. We'll do that next quarter. Okay, thanks for that, Mark.
Mark Spurbeck: And then maybe maybe at the US Thermal Business side of the house, GMI appreciate your update on 24 thermal sales and price there. Should we kind of assume you guys are close to stalled out at those levels? I think you said your PRB 80 million tons at 1377 and all their thermal at 15 million at 5118. I think if you look at the guidance ranges, we're providing this year for the different markets.
Mark Spurbeck: That can give you a pretty good range of what we think about for the tons for next year at this time and where we sit with these sales within those guidance ranges. Okay, just to be sure, so you're saying maybe somewhere within this year's guidance range is for 24 hours on a bad place to start. Yeah, and maybe towards the higher end of the guidance range is. Okay, very helpful.
Nathan Martin: I'll leave it there. Appreciate the time. That's a luck in the fourth quarter. Thanks. Nate.
Operator: No further questions, just conclude the question and answer session.
Jim Grech: I would like to tell the conference back over to Jim Grech for any closing remarks. Thank you all for joining us today. 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: Operators that concludes our call. Thank you.
Operator: The conference has now concluded.
Thank you for attending today's presentation.