Speaker #1: I'm joined here by our CFO, Kevin Ball, and our COO, Ian Humphris. So the three of us will try and make sure we get through this, and answer all your questions at the end.
Speaker #1: But to kick off, let me just go through the highlights. Been very good quarter for us, very nice platform from which to start the year.
Speaker #1: Our triple rate at 7.4 across employees and contractors for the quarter. A little higher than previously, but a little work to be done there.
Speaker #1: Our managed ROM production outcomes for this quarter: very strong at 11 million tons per annum. So whilst only Omega 3% up on June, it was significantly up period on period.
Speaker #1: September quarter equity sales have produced coal at 6 million tons, 5% down on the quarter from a June quarter comparison basis. But we'll talk to that because we've had some disruptions at both RG Tanner and PWCS, which I know many of you have already seen with other people reporting similar sort of issues.
Speaker #1: Our unit cost performance has been very good. So we're at the lower end of our guidance of the range of 132 to 147. We can talk about that a little bit further detail later.
Speaker #1: Our achieved prices across the portfolio at an average of Aussie dollar 226 per ton, 2% up on June. Our net debt for the period, slightly up at 1.4 billion Aussie for the September quarter, and mostly as a result of some lumpy items in terms of dividend returns and so on, buybacks, and then, of course, slippage in relation to sales as a result of the port, which I'll expand on a little bit further.
Speaker #1: But temporary factors. Moving to the quarter, sorry, the state-to-state split for the quarter. Both states doing well and sharing the low very evenly. In fact, so Queensland's managed ROM at 5.5 million tons for the quarter, very good.
Speaker #1: New South Wales did the same number, but one slightly less than the June quarter, and New South Wales is up actually quite materially for the quarter.
Speaker #1: Queensland's equity sales produced coal at 2.8 million tons for the quarter, down 12%, and we'll get to the issues there, but that's RG Tanner causing some disruptions for our sales flow during this quarter period.
Speaker #1: New South Wales equity sales at 3.2, also had some disruptions, but nowhere near to the same extent given that we've got obviously two port facilities to move.
Speaker #1: Move coal through for New South Wales, whereas in the case of Blackwater, its dependency on RG and Tanner is 100%. The September quarter average price for Queensland was $8.257 per ton, and with the 12-month rolling average realization of 74% relative to the PLV hardcode index.
Speaker #1: New South Wales has done well. Aussie dollar 198 realized per ton, giving us 103% of the GC nuke average for the quarter. Going over to the table across, you can see the numbers look pretty good across for a very good start to this year.
Speaker #1: So 11 million tons, as I mentioned, at a group basis, the saleable production at 8.5 million tons, the managed sales and produced coal at 7.5 million tons, and a stock build, which goes along with the various issues associated with the port that I'll get to.
Speaker #1: The Queensland splits, you can see there, and New South Wales evenly spread, good managed saleable production relative to sales, both quite consistent, but again, I'll get to the operational matters that are causing us a little bit of timing-related issues, with shipping of sales.
Speaker #1: So over to Queensland, like I said, 5.5 million tons, very good start to the year, very pleased with the start that we've laid out there.
Speaker #1: Managed sales are 3.5 million tons, weren't, is not really where we wanted to be, 12% down on the June quarter. And our primary concern there has been the performance of RG Tanner, as a result of both some planned and unplanned loading outages which we've given you an estimate of that at 12 days during the quarter.
Speaker #1: Now, that is an equivalent day basis, if I can say that. The disruptions actually went across, a lot more than 12 days, and sometimes there was one ship loader versus others, like some planned, a lot unplanned.
Speaker #1: But we've tried to give it the expressive in an equivalent days basis for you, at least just to give you a scale of the total disruption across the quarter.
Speaker #1: And that's the 12-day number that we've given you. Now, as a result, obviously, we've got a bit of stock build, and that's natural, and that should unwind during the December quarter.
Speaker #1: It may spill into the following quarter a little bit as well, but we've got good stocks at 3.1 million tons. So look, we are seeing an improvement in RG Tanner's performance, but certainly it was disruptive during this past quarter.
Speaker #1: Blackwater's ROM production at 4.1 was in line with the June quarter, but June quarter was actually a big quarter itself. So it's actually a very good performance to see quarter on quarter.
Speaker #1: Total sales of Blackwater, as a result of all of what I just said before, lower than where we would expect it to be at 2.3 million tons, reflecting just the timing-related matters.
Speaker #1: But we do think this does unwind, and so it is a timing-related matter in terms of how you position that in your thinking about the performance.
Speaker #1: Dorney has done what it should have done, so 1.4 million tons is bang on our plan. Less, of course, than the big June quarter, but June is always a big quarter, so it was completely in line with the plan we had for Dorney.
Speaker #1: And total sales of Dorney for the quarter, 1.2 million tons, down as well, but also consistent with our plan. New South Wales operations at 5.5 million tons of ROM production.
Speaker #1: It was a 10% improvement on the June quarter, with now a variety delivering a strong uplift for the quarter, which is very welcome. The managed sales of produced coal, 4 million tons, 5% higher for the quarter.
Speaker #1: Despite the fact that we do actually have a few planned and unplanned outages at PWCS in particular. So despite the disruptions of that, we've been able to make sure, because of the exposure to both port facilities, we could continue to sell coal now.
Speaker #1: The loader impacts the unplanned components of that have been dealt with, but there is still a planned outage which sees one ship loader at PWCS out, and we're coming back for completion during the month of November.
Speaker #1: So as I say, with NCIG and our exposure there, plus one ship loader backup and running from those unplanned outages, the vessel queue should moderate and so deliver a good sale performance in the second quarter.
Speaker #1: Closing stocks at 2.2 million tons, so they are higher as a result. Malls has done well at 2.7 million tons. Of course, less than the June quarter, which is always a bit chunky, but certainly in line with our plan, very pleased, and sales at 2.1 million tons as well.
Speaker #1: Now, obviously being the standout for the quarter in terms of underpinning a very strong result for New South Wales, 1.9 million tons, done very well.
Speaker #1: So the next Long Wall move for us, as we've been saying before, is about March of 2027, and it is scheduled for nine weeks, as we've mentioned previously to you.
Speaker #1: But good result, sales 1.4 million tons for the quarter, so positive, good stocks held, so we'll see a strong second quarter from a sales perspective as well.
Speaker #1: The Canada Open Cuts have done what they should have done, so that's very positive to see that 900,000 tons of production for the June quarter, victory obviously 600,000 tons of tar at 300,000 tons.
Speaker #1: As well, so and I should just we've added a further point in there just to highlight to everyone that our Road Haulage Limit has been approved to now go to 4.1 million tons for the Canada Open Cuts, which was previously 3.5 million tons that Road Haulage Limit.
Speaker #1: So we will be ramping up to that limit over the balance of this financial year. I'll just flick over the page and talk quickly about the coal sales and our realized pricing.
Speaker #1: Say equity coal sales of our produced coal at 6 million tons, split between New South Wales at 2.2 and Queensland at 2.8. The sales mix in terms of revenue was 5743 from a met to thermal perspective.
Speaker #1: For the Queensland operations, we would choose an average of 257 Aussie for the quarter. Which was up, obviously on the June quarter, and significantly up on a period-on-period basis.
Speaker #1: The PLV hardcoke index averaged 248 for the quarter, and varied quite significantly, as you see the range we provided there from 229 to 278.
Speaker #1: So quite a spread across the period. Our realized prices in US dollar terms 184, and that's 74% of the index for that period. And then we've also provided you some splits there in terms of the sales mix, in terms of 58% for the primary products of the hardcoke and semi-hard, which as a group achieved 78% of the PLV hardcoke index, and 39% for PCI and semi-soft coke and coal, which on average achieved a realization of 68%.
Speaker #1: For relative to the PLV index, and there's obviously a small balance of thermal product that comes out during the period. New South Wales has not had the same spread in terms of range, up and down, but 198 Aussie terms has been a good result for us overall.
Speaker #1: We achieved 140 US dollars terms 103% of the GC nuke average for the period, but the range hasn't been as volatile. If I could say, ranging from 130 US to 145 US across the quarter.
Speaker #1: The market dynamics, there's a bit going on in market dynamics for sure. So the PLV side of things, let's just deal with the met coal side of things.
Speaker #1: I mean, Chinese demand, of course, because of the various things that we've seen there, safety reviews and production shortfalls and then transportation issues or diesel availability issues in China or Mongolia as it plays out, certainly has seen Chinese steel meals active in the market.
Speaker #1: And so we've been able to take advantage of that. It's not a market we chase historically, I have to say, but when the price is right, there's no harm in dealing with it.
Speaker #1: And then, but we're seeing strong underlying demand from Japan, a little bit of Europe in fact, Korea, as well. Indian steelmaking capacities, obviously increasing, but with the monsoon impacts, we there is evidence of perhaps the Indians are a little bit hesitant to buy back into the market at these elevated prices.
Speaker #1: And we think they may be waiting a little bit until they see further price changes. On the thermal side of our business, energy security concerns obviously continue to support the coal price.
Speaker #1: So whilst the Middle East conflict continues, we feel like there's going to continue to be affirming of the thermal coal price in our markets.
Speaker #1: And all our customers are expressing demand for all their option tons we have seen increased activity in the thermal market from a Korean perspective, where they have been winding previous to the conflict, been winding down some of their thermal electricity production that has gone the other way now.
Speaker #1: Of course, the underlying uncertainty about the export volumes out of Indonesia remains present in the market, and we do see that constraint. And year-on-year reduction of export tons supportive of indirectly of the GC index pricing itself.
Speaker #1: Longer term, our views of both these markets are structurally short, has not changed in any way. In terms of our production cost performance, we've done very well.
Speaker #1: We're at the bottom end of our guidance in this quarter, which is a very good outcome considering we are dealing with elevated diesel prices.
Speaker #1: Now, we've given you some numbers here to work with just in terms of how we performed in that first quarter, what we've been exposed to from a diesel perspective.
Speaker #1: Just to remind everybody, we've said that a dollar 16 per liter is the average across the full year that we've assumed would deliver a midpoint of cost guidance outcome.
Speaker #1: Now, we've assumed, as we mentioned before, that there was a resolution of conflict over the course of the year. So in terms of our budget estimates, we've started high and will taper off towards a more normalized position at the back end of the year.
Speaker #1: Thus far, for the quarter we've seen, we've had an average of a dollar 38 per liter is the outcome. That's actually a little less than what we assumed for the first quarter.
Speaker #1: But we're not going to get ahead of ourselves there because I think the second quarter will probably be a little bit higher than what we've assumed.
Speaker #1: So then there are those maybe we may be okay. But that just gives you the relatives of what we've exposed to and what our assumption is to remind you what our assumption is for the midpoint of our guidance for the full year.
Speaker #1: The balance sheet itself, as I mentioned earlier, 1.4 billion net debt, slightly up over the previous period, but really just a function of payment of dividends and our buyback program as well, of course.
Speaker #1: We paid the 84 million dollars, which was the Aussie dollar equivalent payment for the contingent payment to BMA at the conclusion of year two.
Speaker #1: And so a couple of anomalies there. The cash inflows obviously have been a little bit less than we would expected because of the port issues that I mentioned earlier.
Speaker #1: So our size is a little bit lower, but our stocks are good. And so you'll see the second quarter being a pretty healthy cash inflow period for us, which will be nice.
Speaker #1: And we've got the stocks and sales ready to go, so that's should not be a concern in any way. Onto the contingent payment structure, as you all know, we're in our last year.
Speaker #1: In fact, now we're in our last six months of it. And so if we look at it year to date, having passed two quarters under this arrangement, we estimate that we're going to be paying to BMA in the order of about 109 million dollars US thus far.
Speaker #1: So that's just based on the price we've realized so far. That'll be subject to verification, of course. And if these prices continue at the levels they are, then you can perhaps double that and get an estimate of where we'll be.
Speaker #1: But this is obviously a self-funding arrangement. And looks like year three will actually yield something materially for the vendors. Which is what this arrangement was intended to do.
Speaker #1: And of course, the final payment under the deferred structure is due in April, of course, being 100 million dollars US. Buyback program continues to move along.
Speaker #1: We took 1.8 million shares out of the market at a cost of 14 million dollars. Moving over, just for the record, is the expenditure on our development project, nothing too much to draw to your attention in that regard.
Speaker #1: And that leaves us with our guidance for the full year unchanged. And as you can see from the very solid start to the year, we've laid a pretty strong platform to project ourselves healthily towards the better end of our guidance.
Speaker #1: And in the cost side of things in particular, we are at the bottom. So that is, of course, aided by very good performance out of Nairobi.
Speaker #1: A little bit of a mixed benefit by a little bit more New South Wales in the period than budget because of that outperformance from Nairobi.
Speaker #1: So that's very good. But nice to see the volumes driving the costs down and the cost out programs that we had concluded as a result of last year's cost out programs that run rate in terms of cost reduction has continued into this new year, which is been very positive.
Speaker #1: And despite the fact that we haven't given you a separate target for cost reduction this year, we are very focused on making sure that we continue that momentum and they are various cost out programs across the business to continue that really good work.
Speaker #1: So with that, I might just finish up, as I say, very good strong quarter sets us up well for a very good year. And I'll hand back to the operator to get the Q&A started.
Speaker #1: Thank you.
Speaker #2: Thank you. Thank you, sell side analysts. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced.
Speaker #2: If you wish to cancel your request, please press star two. If you're on a speakerphone, please pick up the handset to ask your question.
Speaker #2: Your first question comes from rural and ant with Morgan Stanley. Please go ahead.
Speaker #3: Hi, Paul and team. Thanks for the call. Two questions. One may be on the NSW side and then perhaps one on Queensland. So on the NSW side, I take it your Nairobi is a bit variable and a very good result there.
Speaker #3: So I'm going to focus on molds. Pretty strong start to the year. I mean, typically the first quarter last two years has been about half a million times lower.
Speaker #3: And obviously, in the past years, that's meant that the second half has been a big, big lift for the asset. Now, I just wanted to understand, does this first quarter mean you can still do a big lift in the second quarter?
Speaker #3: And beyond into the second half? Or should we think about this year as a bit more balanced across quarters? I'm just trying to think about where the asset ends up as we get towards the later part of the year.
Speaker #3: That's the first one. Thanks.
Speaker #4: Yeah. Thanks, Raul. It's a good question. I didn't focus on it because it's just been the steady performance and the orientation of your perspective is the right one to observe.
Speaker #4: I mean, we are trying to iron out the quarter on quarter variation for sure. And so the team, if you look back over the last few quarters, have actually done really well.
Speaker #4: Productivity there is doing nice nicely, very nicely. And so we're seeing constant improvements there. And we don't want to have the heavy emphasis on the back end of the year because there are natural consequences or there are natural impacts that will occur anyway, which cause you to have a little bit more second half orientation because the weather's safe, for instance, can play up during the course of the year and everyone's trying to compensate for that in what time remains in the financial year.
Speaker #4: And so that lent itself to more Q4 orientation than we would like. The key objective for the team is, it's been very clear, smooth it out over the year.
Speaker #4: And that works well from every dimension in our business, blending, take or pay, absorption, utilization, it's every perspective of our business is better when we've got a seamless delivery.
Speaker #4: So it's nice to see them doing exactly that. I wouldn't, if I were you, ramp up your expectations on Q2. We want orderly progress throughout the year to deliver our results.
Speaker #3: Got it. No, that's clear. Thanks, Paul. And then the second one's on Blackwater. Obviously, that's the second asset, which has done really well this period.
Speaker #3: Just wanted to touch on that a bit. You talked about productivity driving the wrong result. I mean, is there a bit more detail you can provide there?
Speaker #3: Just around sort of how much improvements coming from the drag line, is it rebuilding the overburden in advance? And I guess what I'm trying to solve for is really how do I think about the further upside that's possible in this asset going forward?
Speaker #3: Thanks.
Speaker #4: Yeah. Yeah. And at the risk of talking down the business, I just don't want you to run away thinking that it's four times 4.1 gives you the answer.
Speaker #4: Because we obviously got Q3 and weather and so on. And even though we have been the beneficiary across New South Wales and Queensland of dry weather.
Speaker #4: And so that has underpinned the operational performance that we've experienced. And very positive. You're right that Q4 and Q1 look very good. Look very good.
Speaker #4: So we're pleased with that. But as you know, you know the drag line operations can actually have lumpy cold delivery. And that is part of the feature of drag line mining that in the case of such a big mine like Blackwater, you can all of a sudden have a pit release up to a million tons of coal.
Speaker #4: Pretty quickly. And so you do get a flurry. You get a flurry there, which made it a little bit all the more annoying that we were suffering G10 or the way we have been not being able to conduct a seamless sales program based on that release of very, very strong coal production during the course of the quarter.
Speaker #4: So we have got those healthy stocks on the ground and also at the port ready to go. And very keen to get that shipping queued down during the course of this next quarter.
Speaker #4: So the team's been on the ground there. They've been up visiting the port, trying to work out what's going on. And working with the port to make sure that that queue does come down and we're unimpeded from our sales targets in Q2 in particular.
Speaker #4: Very front of mind for us.
Speaker #3: Got it. Perfect. That's my too. I'll pass it on. Thank you.
Speaker #2: Thank you. Your next question comes from Dan Rodin with Jefferies. Please go ahead.
Speaker #5: Hey, Paul, Kevin and Dan. Thanks for taking the question. I just wanted to start with, I guess, the inventory building in Q1 and yeah, basically I just want to add a 1 million time and equity stock bill to get a bit of color around where that sits inside of the, I guess, inside of the supply chain.
Speaker #5: Is that sitting at port stocks and probably a quick follow-up on that is usually when you see building an inventory that has like a dollar per ton benefit net backlog to the unit cost.
Speaker #5: So I guess how should we think about, I guess, the benefit from that inventory move in Q1 and depending on the sale quantum into Q2, should you expect that to net back off in Q2?
Speaker #5: Thanks.
Speaker #4: Yeah, thanks, Dan. Look, the stocks in Queensland in particular, so no issue at Dorney, no channels there. Stocks at RG10 are very, very healthy.
Speaker #4: So that's definitely well railed. And waiting, of course, to make sure that we can push the ships through as quickly as we can, which, as I said before, has improved.
Speaker #4: So that's positive, but there is a queue there, which we want to bring down. I think it was about 40-odd ships. I think I saw yesterday.
Speaker #4: So we want to bring that down quickly. But everybody going through that port is suffering the same as us. So it's not peculiar to Whitehaven.
Speaker #4: The stock build, and given that we had such a strong production period for this quarter, as I say, aided by good weather, generally what that means is actually we've got on the stockpile a bunch of coal, which is come at low cost rates.
Speaker #4: Because if you've run well, then the cost per ton is obviously benefited from that. So the benefit of that actually sits on the balance sheet and will emerge in the next quarter.
Speaker #4: To the extent the sales have been held up a little bit. So the next quarter actually cost-wise, we'll get the benefit. As you draw down those stocks at those lower rates, because that occurred at a time when you were highly productive, and the per ton rate sits there encapsulating the balance sheet waiting to be released for the sales when they occur.
Speaker #4: So that's the impact that you will see in Q2.
Speaker #5: Yep. Yeah, okay. Yeah, I was talking about, I guess, the unit cost. Maybe just moving to, I guess, diesel costs. So I was thinking, I think pretty decent outcome.
Speaker #5: Definitely relative to some of the other peers that have reported. Like what realized diesel costs they were at in the quarter. How are you seeing the exit rate there?
Speaker #5: In terms of what are you, I guess, what price are you paying for diesel? I guess today, and yeah, like are you doing any hedging or are you trying to secure?
Speaker #5: Like are you seeing any shortages in the market? Are you concerned about that?
Speaker #4: Yeah, look, Dan, good questions. I think the diesel supply, we've got pretty good visibility on volumes coming our way. Two tier one suppliers who are doing a great job.
Speaker #4: And we have a regular routine conversation with those guys two or three times a week around what expectations are over the next two or three months.
Speaker #4: So from a volume perspective, we think we're in pretty good shape. From a price perspective, as Paul said, we started the year with a diesel price a little bit lower than what we thought that diesel price would be.
Speaker #4: But as we go into the second quarter, that diesel price is holding up. Crack spreads are still being held up. Brent crude today, 113.
Speaker #4: Aussie at 70 cents. It tells us that diesel price is going to be higher in the second quarter. I'm leading into the third if it doesn't start to soften.
Speaker #4: So our expectation is that diesel prices will be higher in the second quarter. Leading into the third than they had been in the first.
Speaker #4: We're currently, and I want to say like the 150s, 160 sort of range, that sort of price for diesel. I might get a little higher if crack spreads stay where they are and Brent continues to rally.
Speaker #4: But again, across the business, I'm seeing EBITDA margin expand in the business as a result of being long energy. So I'm looking for an uplift in EBITDA in the second quarter as Paul says because of the drop in the benefit of having the low cost stocks sitting in stocks and the release from that.
Speaker #4: And I think performance is continuing quite well. So yeah.
Speaker #5: Yeah, no, absolutely. You guys have set yourselves up pretty well into maybe just one more problem.
Speaker #4: I was going to say one thing. Hedging we don't do. We haven't done. We haven't done hedging probably, I'd say, for the best part of more than a decade.
Speaker #4: Generally, you ended up in the wrong side of that conversation. So we're an at the money call stock. We're an at the money with inputs and we're not trying to guess that.
Speaker #5: Yep, no, perfect. And yeah, one more quick one just before I hand over. What comfortable level of inventory do you want to enter wet season with?
Speaker #5: And I guess you've kind of talked around it, but what are you comfortable holding? I guess stocks that are at port going into wet season?
Speaker #4: Yeah, look, I think that our stocks last quarter, we finished the year pretty happy with that. In fact, that was on path to make sure that we're in a good position to be able to deal with the ebb and flow of sales and weather and so on and even a changeout.
Speaker #4: In Niagara's instance, obviously, we've been doing very well. And that continues to go well. So we want to make sure that we continue to sell during what is this year or this next changeout going to be an extended changeout.
Speaker #4: So nine weeks is obviously a good three weeks longer than what we normally have. During a six-week period, we would normally zero out the stock during that time.
Speaker #4: And then you'd start with in the new wall with a fresh stock base and with no remnants from the last production in the previous panel.
Speaker #4: So we are going to build some more stocks at Niagara, but the market is hungry for the coal and the pricing that we're receiving for Niagara discrete cargoes is pretty solid.
Speaker #4: So we're just going to balance that. But yeah, we're a little higher than what we need to be, but that will unwind quite naturally with this sales program we've got.
Speaker #4: In Q2.
Speaker #5: Yeah, awesome. Thanks for the call. Appreciate it. Thanks, guys.
Speaker #1: Thank you. Your next question comes from Chris Creech with Morgan's. Please go ahead.
Speaker #5: Good morning, team. Thanks for your time. This morning and a really good result. Just a quick one on, I've got two ones. I've got one on Dornea.
Speaker #5: Obviously, now that you're jumping into Pandora, is the autonomous haulage production as much as you're expecting now that you're in a, I guess, a bit of an easier pit to deal with, Paul, without I guess all the faults and everything and the steep declines in the call centers?
Speaker #4: Yeah, look, Chris, we were I'm just going to assist you with the nomenclature just there for that southern area of Dornea. We're calling that Atlas South.
Speaker #4: And just for fear of benefit, we don't Pandora just has some negative connotations with it. So call me sensitive, but I just think we should change the name.
Speaker #4: So Atlas South it is. And look, it's going well. And so that's very positive. Obviously, we've got to dig it down there, opening up the box cut, going nicely.
Speaker #4: The production obviously is coming from still the northern end of the pit. So doing well. Structure is not such a big concern down there.
Speaker #4: I mean, the primary concern there, as you would imagine, is because it's a little bit further south. The hauls in time the cost do increase a little bit because the hauls are longer.
Speaker #4: And so that's the key thing that's a feature of being down in Atlas South. But yeah, so far progress is going very well. And coal production is being good in the quarter, certainly in line with our plan.
Speaker #4: So the team are doing a good job to balance production in the main area of the pit, but also managing very well the box cut expansion.
Speaker #4: And again, you want to throw in that?
Speaker #5: I think one of your questions was alluding to a unit effectively working down there. Unimpacted, I guess, by other units. And that is what we saw down there.
Speaker #5: We had a 600-ton excavator in the initial dumps were fairly close. Good dry weather, as Paul's indicated. And the production rates we got out of that were tier one.
Speaker #5: So when it was operating by itself down there. No, perfect. Thanks very much for that. And then just quickly, one on Morse Creek's extension.
Speaker #5: I know you guys are still working through the approvals process for that one. With the high courts decision recently with Mack Energy, does that give you guys any pause in terms of the Morse Creek?
Speaker #5: I know that you're still going to be progressing it, but does that change anything in terms of what you then factor in for your application for your extension?
Speaker #4: Yeah, that's an interesting question, Chris. No, the answer to the question is no. We're not concerned by it. That obviously was not a new issue.
Speaker #4: That's been bubbling along there for some time. The outcome's pretty annoying. For them, not for us so much. And you're seeing the government obviously take a very pragmatic and supportive approach to dealing with that issue.
Speaker #4: And so they will fix that. In our instance, though, we're not concerned. You saw the HVO process come to conclusion. And we now have draft conditions for the continuation project.
Speaker #4: And those conditions are consistent with the HVO ones. So we're comfortable with that. Feel that that's the right answer. And this process is actually a little ahead of schedule, which is nice.
Speaker #4: So we're likely to have an IPC hearing this side of Christmas and have that over and done with by the time we get to the end of the calendar year.
Speaker #4: Which again, is advance of the schedule we've allowed for. So yeah, we're just pushing forward. We know all the noise, but the noise actually in a way, it's actually dealing with wrinkles in the system that we would like to have dealt with before we get to that point of the approval process.
Speaker #4: So it's useful in that sense.
Speaker #5: Yeah, it makes complete sense. I'll pass that on from there, but thank you very much for your time, guys.
Speaker #1: Thank you. Your next question is from John Sharp with JP Morgan. Please go ahead.
Speaker #2: Yeah, morning, Paul and team. Congrats on the result. Paul, just first question. You said just previously that you'd be or your team would be working with the port to try and get the queue down.
Speaker #2: I think you said the queue or maybe just it's more about getting more coal out. Just interested in what you can do to help clear sales there.
Speaker #2: What are you actually doing practically?
Speaker #4: Yeah, look, we've set up quite a well, I would say a useful dialogue now between them and ourselves. Obviously, we're a big user, the biggest user there.
Speaker #4: And we're very familiar with what a good operation, which is comparable, such as NCIG, looks like in terms of how it functions. And chief of our concerns here is the marriage-related issues, not just cash flow, but then the marriage-related concerns that stem from this less than seamless delivery of our sales.
Speaker #4: And so whereas NCIG efficiently run as it is, and your facility, of course, and higher capacity, often runs its dispatch. So our expectations are for it to run like that, not like how it's currently performing.
Speaker #4: So marketing and so Ian and Jason both been up there talking to the team up there, done tools, had a look at the ins and outs of the operations and can see various differences between NCIG and RG Tanner.
Speaker #4: And so we're trying to assist them with the observations we have from NCIG in terms of ways in which they might look at optimizing the performance there.
Speaker #4: I mean, it's an older facility and it's not as rated as highly in terms of throughput. So that's those are two points which are worthwhile noting up front.
Speaker #4: So the comparison from NCIG to RG Tanner is not like for like in that sense. But the style and mode of operation is. And we think there's opportunities to do to run this a little better.
Speaker #4: So we're going to continue to invest in that dialogue, make sure that we get our other user group friends in the discussion as well.
Speaker #4: Just so we can demand a little bit more of this government-owned facility.
Speaker #2: Okay, great. Thanks for that. And then second question, just more of a market question. It's still a lot happening around the world. I'm sure customers focus on energy security, just interest in what you're seeing.
Speaker #2: With customers, are they interested in more long-term contracts with higher CV thermal? And also, can you just quickly remind us? I know you've probably told us many times, just what the lag in what you get in terms of the spot, what lag is it?
Speaker #2: Is it two months?
Speaker #5: Yeah.
Speaker #4: Yeah, yeah, thanks. Look, customers are feeling concerned about they're not concerned from us. We're a very reliable supplier. So I was in Japan 10 days ago and me encouragement was keep doing what you're doing because we're relying on you.
Speaker #4: And interesting stat, and I think I've told you before that you've seen our presentations, that Australia is a big piece of the energy puzzle in Japan and Whitehaven 48 minutes of any day in Japan.
Speaker #4: Australia is actually eight hours of every day of Japan, which is quite extraordinary. And so their dependence on us is critical. And so they're encouragement was to continue to push forward and think about ways in which you can assist us.
Speaker #4: So we do meet with the government when we go there at each trip. And just an indication of how concerned they are about the continuity of supply of energy both LNG and coal.
Speaker #4: They had set up they told us they had set up an arrangement for emergency procurement for LNG out of Asia. So after Einstein to work out where the focus that would be, that's Malaysia.
Speaker #4: In terms of getting emergency access to more LNG. And then they said that they are looking to set up a similar arrangement for coal and the conversation turned to how could you assist us with essentially emergency stockpiling of coal.
Speaker #4: In the event that things take a turn for the worst and it's pretty bad anyway, but it gets worse. Or that there are disruptions in flows and so on.
Speaker #4: So we've opened that discussion up with them in terms of the way in which we could assist them. They understand the logistics chain the fact that it's relatively slow moving and to be able to build stock quickly and hold it in the event of emergency obviously would need some real planning.
Speaker #4: But you can the reason for telling you this is just to heighten the level of concern they have about the continuity of the supply arrangements both on LNG and coal as well.
Speaker #4: So yeah, look, all our customers are very concerned our sales are healthy. As I said, we've taken all our upside tons and to the extent that we can bring tons forward, we are doing that.
Speaker #4: But we are seeing that behavior also from Taiwan and Malaysia. So I shouldn't be remiss in me not to also highlight that because it's not just Japan.
Speaker #4: That's exhibiting those concerns as well.
Speaker #2: Okay, great. And just quickly, remind me what the lag is with pricing.
Speaker #4: Oh, sorry. A month generally, it's a month of scheduled shipment, but we have a few other contracts which average two months, but they're not the majority of contracts.
Speaker #4: So if you're just using a month, you'll be there in thereabouts. The average of the months of scheduled shipments. So don't take the spot, take the average for the month.
Speaker #2: Great. Thanks, Paul. And interesting information and stat there from Japan. Appreciate it first of all.
Speaker #1: Thank you. Your next question comes from Glenn Lockhart with Baron Joey. Please go ahead.
Speaker #5: Morning, Paul. Good to see Vickery. I'm sorry, good to see Nairobi have its best quarter in I think what, four years? If you start annualizing that, is there anything especially call out in the quarter?
Speaker #5: Just everything went extremely well. And can you sort of and how is it going this quarter? Can you sort of think about it continuing at that sort of rate?
Speaker #4: Yeah, morning, Glenn. Yeah, it's very positive to see the quarter doing very well. And that should continue on, which is nice. Now, Ian's been waiting patiently for a question and there'll be probably a remiss of me if I start taking any credit for that.
Speaker #4: So I'll let him answer. What's going well?
Speaker #5: Yeah, look, I think Glenn, we mapped out, got the processes in place at the mine. How to deal with the various structures, etc. I think your question about how we're traveling now, good.
Speaker #5: We're nearly through the map sort of heavy structure that the remaining heavy structure we see in this block. A lot of work going. I mean, on the annualized question, obviously we've got the move coming up.
Speaker #5: So a lot of work going into the planning of that, equipment, all the workshops we were to get this stuff to. And all the parts.
Speaker #5: But no, tracking along well. Okay. And then Paul, just the increase from for Canada open cuts. I know it's only just over half a million tons, but do they come from Vickery or Tarawonga or a combination?
Speaker #5: Like is Vickery maxed out at the moment? So it has to come from Tara?
Speaker #4: No, no, that's a good question. No, we can take it from either. If you're looking at the cost base of Vickery is lower. So that says do more there.
Speaker #4: So the 4.1 million tons is a useful addition because the 3.5, there's two things which are good there. The 3.5 was the limit historical limit.
Speaker #4: And they said if you want to go higher than that, you've got to build an overpass across the highway in order to do more.
Speaker #4: So they've released us from that obligation and also given us the 4.1 at the same time, which is two ticks, which is excellent. So we can take it from whatever pit is able to supply it.
Speaker #4: There are some blending opportunities between the two of them depending on which team is popping up for production at that particular time. So we will be ramping up between now and the end of the year to make sure we can get there.
Speaker #4: We think we've got pretty much the equipment necessary and people to do that. So yeah, that's a positive outcome for us. And that approval is now entrenched.
Speaker #4: So that is a permanent piece of the Canada Ops business. It's important to us, even though it sounds like only a small thing in half a million tons, but as you know, the cost base of that part of our business would benefit from more volume.
Speaker #4: And so that's an important step in the absence of a broader and bigger Vickery solution.
Speaker #5: And it'll take all the way through the next nine months to get that extra 600,000 tons. It sounds like or can you do it quicker?
Speaker #4: Oh, we're ramping up already. So it's just a matter of hitting our run rates. You've got to open up the pit a little bit more.
Speaker #4: And but we don't want to put more equipment in there. We just want to drive utility of the equipment we've got. And so that's the focus of it.
Speaker #5: Yeah. I'm going to just squeeze in one on Vickery. I mean, I just listened to you talk about the thermal markets and obviously there's a heightened degree of uncertainty with all your customers and they're scrambling a little bit some of them.
Speaker #5: And then you also said you believe in structurally short markets, medium to long term. So what are you waiting for for Vickery then? What more do you need to see?
Speaker #5: It doesn't sound like you've got more work to do. So what's the sort of timeline you're thinking?
Speaker #4: So you're in favor of us stepping forward with Vickery, Glenn?
Speaker #5: Well, if you believe in the structurally short market, it's and you believe in the price. I'm just curious what do you as a company it sounds like you've got everything in place.
Speaker #5: To push ahead, you're comfortable in the markets and the outlook. So is it a you're worried about the construction and you can't get the people to build it and it's going to cost too much right now?
Speaker #5: Just what's what are you weighing up as a board and a management team, I guess. I'm just trying to understand.
Speaker #4: I'll take that as a yes from you. So there's not too much there's not too much that's not obvious to everybody already. I mean, we've obviously just done Queensland and so that's been better down nicely.
Speaker #4: Pointing in the right direction, we feel good about that. So that's nice. And obviously the big victory was delayed because of the Queensland opportunity jumped in front of it.
Speaker #4: And so scroll forward two years, we feel like we're comfortable as I say on top of Queensland. More work to do there. Don't get me wrong, we're still working hard there for an optimization perspective.
Speaker #4: But it is the right time to go back and just reconnect with the bigger Vickery alternative. Make sure you understand the capex. Make sure you understand the opex and there's inflationary impacted environment.
Speaker #4: And then the obvious part of it all is the coal price looks really good, but what happens if we piece breaks out? That'll be great.
Speaker #4: For most things, maybe not so much the thermal price in the short term anyway. The market demand is good. So we're positive of that.
Speaker #4: So it's really just about making sure that all those underlying assumptions are still consistent and that there's a price pathway that you could see past and beyond this conflict that would be sensible to use as your assumption if you were to consider the balance of capital required to go to the 10 million tons scenario.
Speaker #4: So you're absolutely right. All these things look like they're well positioned. We feel the same. But we've just got to do that work first to revalidate all the important variables in this puzzle.
Speaker #4: Not the least of which is the funding. Now we've got lots of good expressions of support from customers on this. We are obviously wanting them to share the risk with us.
Speaker #4: And so you'll see us and we can talk about this over the next coming quarters. We are going to explore each of those expressions and try and pull them into something that's more actionable over the next six months.
Speaker #5: No worries. For the record, Paul, I do agree with your view of the coal price is probably going to be stronger for longer. But no worries.
Speaker #5: Thanks for that. Appreciate it.
Speaker #4: Thanks, Glenn.
Speaker #2: Thank you. Your next question comes from Lachlan Shaw with UBS. Please go ahead.
Speaker #5: Morning, Paul, Kevin, and Tom. Thanks for the call. So two for me. Just firstly on the port terminals obviously planned maintenance. You can get organized around, but the unplanned issues, how should we think about this?
Speaker #5: And I guess key question here, are you confident that there are remediations in place and that there would be, on a go-forward basis, hopefully better performance at the ports?
Speaker #5: I'll come back with my second.
Speaker #4: Yeah. I like Lily and Ian was actually on the ground over this last week having a look at what's going on there. So he's got fresh eyes in terms of what he observed there.
Speaker #5: Yeah, thanks, Paul. So I mean, Paul touched on it earlier. Obviously, the Gladstone Port is not a new port compared to the other ones that we see around.
Speaker #5: So the team there are doing a lot of work understanding, I guess, the age, the maintenance of that. Some of that stuff you can't buy spares for off the shelf, for example.
Speaker #5: So carrying that. So there's I was encouraged by the body of work that's going on there to get on top of that and ensure that it's in place.
Speaker #5: And then over a period of time, there's obviously what money needs to be spent at that port to, I guess, modernize, if you take electrics, for example, some of that type of thing.
Speaker #5: Gets to a life where you've got to put the next generation in there. And so the team are working through all of that as we speak.
Speaker #4: But currently the backup and running capacity. Now, we just want to make sure there's an active program that everyone feels confident in in terms of maintenance and renewal refurbishment of parts that need to be dealt with.
Speaker #4: So that we're not such that we're not encountering such clunky service delivery when that's the sole port that obviously Blackwater uses. Now, that's not to say we can't move ourselves around here and manage our risk by accessing other port arrangements.
Speaker #4: And we are actively exploring that just to make sure we can balance our risk exposure here. So those conversations are constructive. And obviously, we don't want to be paying anymore because we've already got port access with Tegelpay arrangements.
Speaker #4: So we don't want to be paying anymore than what we're currently paying. But if we're not getting what we want, then we're going to have to make sure that we have alternatives here in the event of any further unplanned issues.
Speaker #4: And we want to continue to grow so we don't want to be hampered by any clunky service delivery in that regard.
Speaker #5: That's really helpful. Just to clarify, so let's say maintenance capital has to step up for a period. Is that to be borne by the port operator and not the port users?
Speaker #5: Is that the situation?
Speaker #4: Yeah, that's not our focus, no. No, we are paying for a service. Now, if you've they haven't lowered the charges to us off the back of not doing maintenance, so why should we be paying more for that backlog of maintenance being rectified?
Speaker #4: So that's how we feel about it. And I'm sure the other users feel the same way. Like I say, at the meantime, we'll also make sure we manage our risk by providing potential for access through other infrastructure just to balance that risk exposure.
Speaker #5: Got it. That's really helpful. Thanks. And then just my second question was really on thermal coal and I suppose market question. Sort of picking up a little on Glenn's point.
Speaker #5: So JK, MLNG, has picked up. We're sort of just about to start Northern Hemisphere winter restocking has commenced the European buyer is competing with the Asian buyer for scarce cargoes.
Speaker #5: But GC Nuke, is up. But still arguably, not reflective of a look-through basis. What's the sense? What are your customers telling you as the phone sort of ringing off the hook?
Speaker #5: Do you think price has got more upside, more legs in the next three, six months?
Speaker #4: The last part of the question, yes, I do. I think this can it doesn't go dramatically because there's no risk around our supply. We're supplying to them.
Speaker #4: So I just think it tightens continues to tighten over time. So and that it's not going to be dramatic like the Russian invasion of Ukraine.
Speaker #4: There's no supply issues with us. And there's no other supply issues of coal related at our customer destination. But this just continues to tighten over time.
Speaker #4: The dynamic you're referring to, of course, on an energy equivalent basis, it's already staring them in the face that LNG, if you are buying on spot now, many of our customer jurisdictions aren't heavily spot exposed.
Speaker #4: They're long-term contracted players. And I was trying to get a bit of detail from them. And a lot of them were basically saying very politely about 20% is their spot exposure.
Speaker #4: So that's not insignificant. But on an energy equivalent basis, LNG spot is four times the price of Newcastle benchmark coal. So that's staring them in the face.
Speaker #4: But they do have the protection of the other 80%, which is all price-linked long-term contracts. And they all price hasn't gone up four times.
Speaker #4: And so they're not as heavily exposed as you might think there. But it is still nasty. And so yeah, that is a very constructive backdrop for anybody who has the capacity to deliver a few more tons into the market because they're definitely there's obvious anxiety there.
Speaker #5: That's clear. Thank you.
Speaker #2: Thank you. Your next question comes from Stefan Hansen with Macquarie. Please go ahead.
Speaker #5: Morning, everyone. Just a quick one from me, just on RG Tanner again. There's a few quite a few decent-sized coal mines along the lines that feed into that terminal who I assume have had a similar constraint as Whitehaven last quarter.
Speaker #5: Just wondering if there's a minimum capacity you guys would be able to access this quarter to start clearing the inventory. I imagine the others are wanting to try and access a pretty strong coal prices as well.
Speaker #5: So just wondering if you guys are assured of some volumes that you can get out.
Speaker #4: Yeah, we definitely everyone has the same experience. So that's not it certainly, as I said before, not a Whitehaven issue. I'm sure everybody wants to get their tons through.
Speaker #4: And so they do have capacity to on a ramp basis do more than what their they had been doing. I think they're doing 55 to 60 million tons, I think, maybe in that order when they're operating properly.
Speaker #4: Now, that's still probably 10 or 15 million tons, maybe a bit more, less than the theoretical capacity of the facility. So there is some sprint capacity available to be able to draw down this queue.
Speaker #4: And so yeah, we're pushing them obviously because we want to get our hands on that. And as I say, I think we are the biggest shipper through RG Tanner.
Speaker #4: We want to make sure we get our fair share. We've got plenty of stock on the ground there, so it's ready to go. So we just need the shipping queue to cycle through as quickly as possible.
Speaker #5: All right. Good stuff. That's it for me. Thanks, guys.
Speaker #2: Thank you. Your next question is from Chen Jiang with Bank of America. Please go ahead.
Speaker #3: Morning. Paul and Kevin, thanks for taking my question. Firstly, congrats on a strong result. So just to follow up on the thermal coal market, given the currently like you mentioned, checking the cost of using gas versus the cost of using coal, we've been talking about coal to gas switching in the past because of the push for decarb.
Speaker #3: But I'm just wondering have you seen I mean, from your customers, from the JKT market, given current, especially this year, elevated gas prices, have you seen any gas to thermal coal, especially the high CV thermal coal like you guys produce kind of thing happening?
Speaker #3: I have another one after this. Thank you.
Speaker #4: Yeah, thanks, Chen. Yeah, look, when we're in Japan just recently, we're asking a lot about this because and the general response from the market was the coal's running hard and there's not a lot of switching capacity.
Speaker #4: So that's a challenge. For them, because they're already working pretty diligently to make sure that they maximize their coal-fired fleet. And like a lot of countries, Japan's actually going through quite a reset of expectations internally because all their macroeconomic assumptions had been on the basis of declining population equals declining energy consumption.
Speaker #4: And that has now changed in Japan. And so when we're talking to the government in particular, you can see they're busily trying to reorient the assumptions around that because per capita energy consumption is now going up.
Speaker #4: Now, the other so the capacity to actually switch a hell of a lot more into coal is relatively limited. So that's positive from a price perspective for thermal coal.
Speaker #4: The other thing that's positive for the thermal coal price is the change in direction from Korea in terms of the utilization of their coal-fired plants because they're obviously they were number two, maybe even the biggest importer of LNG in the world now.
Speaker #4: Obviously, that's hurting price-wise. And their coal-fired fleet was winding down. So they've arrested that now and ramping that back up. So we're seeing a lot of interest in supply into Korea.
Speaker #4: So that's going to further put pressure positive pressure into the market for thermal coal.
Speaker #3: Great. Thanks for the color. Good to hear. It seems like so for the coal plants, whoever wants to shut down, it probably will take longer for them to do that given the gas price.
Speaker #3: Thanks. And then another question, just on the donor and a follow-up question on donor and blackwater. So just on the blackwater run coal, if I annualize, I'm wondering are you being able to do the current run rate, like by looking at the blackwater it would be more than 16 million tons.
Speaker #3: How should we think about your long term because you can do 4.1 and by looking at the past few quarters, I think you've done that as well.
Speaker #3: And secondly, on donor, remind us the box cut in the southern domain. Is that for the full FY27? Because if I annualize 1.4 million tons, that's like 5.6 million tons.
Speaker #3: So yeah. Thank you, Paul.
Speaker #4: Yeah, thanks, Chen. Yeah, look, again, I'll just cautious anybody using four times 4.1 because we have the wet season coming. So the 4.1 is really positive.
Speaker #4: So that is a demonstration of the capability of the mine. So tick on that box. But running that run rate right across the full year, I think we should be cautious on that with the Q3 weather season yet to unfold.
Speaker #4: Despite the fact that the weather has been very dry, and good for mining, but it's raining up there over the last few days in particular.
Speaker #4: And so that was that's just a constant reminder that we just need to temper our enthusiasm for the simple annualization of one quarter's good numbers as encouraging as they are.
Speaker #4: So I understand the motivation, but it's we're cautious on just multiplying that by four. Donor, it's had a good period, but it's everything's going well there.
Speaker #4: So I we don't give separate guidance on donor obviously across the course of the year, but I think that's a reasonable position, if not a little bit conservative, just in terms of where we might go with that.
Speaker #4: But that's all I'll say given that we don't want to split out numbers and undo our guidance that we've currently set.
Speaker #3: Sure. Understand. So thanks for that, Paul. So the box cut in the southern domain is through the whole FY27.
Speaker #4: Yeah, and through into FY28 as well. Yeah, it's not a simple thing. There's a large mine. Yeah.
Speaker #3: Yeah, sure. Got it. Thank you so much, Paul. I'll pass it on.
Speaker #4: Thank you.
Speaker #2: Thank you. That concludes our question and answer session. I'll now hand back to Mr. Flynn for closing remarks.
Speaker #4: Thanks all for your time this morning. Thanks also for making the adjustment in timing given there were a little bit earlier. I know everyone's got a lot on today.
