Coronado Global Resources Inc.

Thank you for standing by, and welcome to the Coronado Global Resources Third Quarter Investor Call. All participants are in a listen-only mode. There will be a discussion of results from the CEO and CFO, followed by a question and answer session. If you wish to ask a question, you will need to press the star key, followed by the number one on your telephone keypad. I would now like to hand the conference over to Andrew Mooney, Vice President, Investor Relations and Communications. Please go ahead.

Thank you, Operator, and thank you everyone for joining Coronado's third quarter investor call. Today we released our quarterly report to the ASX and SEC in which we outline our production and sales volumes, as well as other key information related to our safety results, development projects, coal markets and financial performance. A more detailed outline of our financial position and results will be released to the market on the 9th of November with our Form 10Q earnings release. Today, I am joined by our Managing Director and CEO, Douglas Thompson, and our Group CFO, Gerhard Ziens. Within our report, you will see our notice regarding forward-looking statements and reconciliations of certain US GAAP financial measures. We encourage you to review these statements in conjunction with our other filings with the ASX and SEC. I also remind everyone that Coronado quotes all numbers in US dollars and metric tons unless otherwise stated. With that, I'll hand over to Douglas.

Thanks, Andrew, and welcome to everybody who's made the time to join us today. As we embark on the fourth quarter, I'm pleased to report that the operational headwinds experienced during the third quarter relating to the adverse geological mining conditions at Buchanan are now safely behind us and more normal mining operations have been restored. Additionally, the repairs to the mechanical failure on the propelled unit of one of our four drag lines at Currah is nearing completion. It's a testament to our teams who have managed to pivot our mine plans and our maintenance resources to manage these unforeseen events and limit the impact, but also generate options to recover these deferred coal volumes in subsequent quarters. The business is focused on executing our revised market guidance plans and ensuring that our production levels remain above prior years. Despite these operational headwinds, the business achieved several milestones during the quarter, including the global business set new benchmark performance in safety and set regional safety records. As the Australian business segment nears completion of the improvement plans under the one current plan, record waste movement The record waste movement set in the June quarter has been surpassed. A new waste record has been set in the September quarter, and this has been achieved, albeit the failure of the drag line in mid-September. This reflects a return on investment from the One Carrier Plan, and the business will realise the returns of these investments in the 2024 business plan and beyond. We continue the development of our organic growth plans. both in the US and Australia, and these are showing good progress and performance against set timelines for these projects. Our business took another tangible step forward in our emissions reductions during the quarter. We commenced the installation works on a second ventilation air methane unit at Buchanan as part of our strategic plans to lower emissions, and thereby we accelerate our plans to reduce emissions by 30% by 2030. We also appointed two new independent non-executive directors to the board. We welcomed Amy Allen and Ann Wilson to the board meeting in September. Year to date, Coronado has generated more than $2 billion in revenue, with 92% of those revenues being generated from our metallurgical coal products. These products are mined and produced at 100% owned MEDCOL mines. That being the Currah Complex of Mines, Buchanan, and the Logan Complex of Mines. Independent industry experts and our own modelling is predicting tight future supply markets, thus anticipating higher for longer pricing. For this reason, Coronado continues to invest in itself. Investing in organic growth to increase our sales volumes of our highly sought-after, high-quality Metco products from our already-owned assets will drive enhanced and sustained return to our shareholders. Now, before I elaborate further on our results, I'll turn and provide a short summary on our safety performance. I'm always hesitant to talk about our safety results, as safety is integral to our daily activities and our holistic results. we are relentlessly focused on ensuring that what we do, we do safely. So my concern is if we pause and acknowledge great performance in this area, we may take our eye off the true reward, and that being our people and their daily wellbeing and operations. I'm again pleased to advise that both Australia and the US reflected improvements quarter on quarter, and we continue to remain well below relevant industry averages. In Australia, The 12-month rolling average total reportable injury rate as of September was 2.43. This is a 41% improvement on the same time last year. And in the United States, our 12-month rolling average total reportable incident rate was 1.6. This is a 25% improvement. Notably in a quarter, the Logan complex continued their strong safety performance, achieving 1.5 million hours or more than one year LTI-free. And at a group level, the TRIR rate was 0.91 compared to 1.33 this time last year, a 32% improvement. Putting this another way, these results reflect a record low for the United States business unit and the lowest incident rate in Australia and for the group since early 2018. This comes from our people living our values and their resentless focus on safety. I'd like to take the opportunity to thank and congratulate our people for their strong performance and encourage them to hold their gaze on the true reward, that being our people. In addition, during the quarter, our CARA team continued their work on the Dreadline Proximity Awareness Project. This world-first solution protects people and equipment working in proximity to dreadlines. Solution has generated significant interest and several of our industry peers have visited Currah to better understand our technologically engineered solution and we encourage them to adopt this in their operations and invite others to continue to visit us. Turning to our operations. We completed the third quarter showing improved performance year-on-year across waste movements, run-of-mine coal mining, saleable production, and this all came despite the unforeseen challenges in quarter three. Year-to-date group run-of-mine coal production was 19.3 million tons. This is 4% higher than the prior year. And saleable production was 11.9, also up on the prior year. In the third quarter itself, Group run of mine, coal mine, production was 5.9 million tonnes and salable production was 3.7. While production rates are higher on a year-to-date basis, coal production was lower during the quarter from the Curragh complex of mines. This is due to our mine plans focused on pre-strip activities under the One Curragh Plan and then also the impact of the dragline not being able to expose coal in the failure in late September. Additional to note in the quarter is we completed planned annual maintenance shutdowns on both our preparation plants through the quarter. Having two preparation plants, we continued production, albeit at reduced rates. We continued to run one plant while the other was shut down. This is a benefit offered by a mine that has long life and excellent infrastructure. During the quarter, Curra set new records on overburden movement. Eclipsing the record set last quarter, the team moved nearly 52 million BCMs in the quarter, bringing total waste movement year-to-date to 144 million BCMs. This is a 7% increase on prior year. I'll once again note that this record was set in a quarter where we did have an impact of having a drag line experiencing mechanical failure from mid-September. The repairs to the drag line continue. and expect it to be completed in the next two weeks. To ensure we take opportunity and adversity, while we're repairing the propelled unit on this drag line, we also took the opportunity to undertake maintenance that was planned to occur in 2024. The benefit from this will be reaped in the quarters to come. While I'm talking about taking opportunity and adversity, the coal deferred into later quarters the drag line failure will likely be sold at higher realised prices. For the remainder of 2023, the current team are focused on delivering the production plan and the costs as advised by guidance. The budget process for 2024 is currently underway and the demonstrated systemic improvements realised in 2023 will be implemented in our plans in 2024. This will include fleet rationalization and cost reductions. As we come to the end of the overburden advance and pit geometry improvement programs identified under our one current plan. At our US business segment, the Logan complex of mines continue to perform well in the quarter. And as previously noted, production was impacted by the geological conditions in the coal seams at Buchanan. And this slowed our production rates and impacted yield. This type of rock intrusion is not uncommon in underground mines and our team at Buchanan once again proved themselves in managing this very successfully and limited the impact of the event and also knock on impacts of the event. While the geological conditions are now back to normal we are focused on the remainder of 23 and early 24 to make every effort to recover the deferred tons and once again potentially at higher prices. Turning to sales volumes for the group in September quarter, we sold 4.1 million tonnes. This is 3% higher than the June quarter. And sales volume from Australia and the United States operations in Australia was 2.6 million tonnes. This is 5% higher and respectively 1.5 out of the US. The sales profile from Currah is higher in the quarter due to the higher inventory stockpiles held at the end of June. These we've been partially unwinding during the quarter. The sales profile from Curragh could have actually been higher, but for three shipments that were delayed into the December quarter due to logistic chain delays at port, this is about 130,000 tonnes. I'll now hand over to Gil to talk us through the financial position and market outlook.

Thanks, Douglas, and hello, everybody. As Douglas stated in his remarks earlier, Coronado has generated $2.2 billion in revenue year-to-date, with 92% of those sales being Metco sales. Our year-to-date revenues are lower than this time last year due to a 28% decrease in the benchmark index, but still remain our second highest September year-to-date revenue result for the group since the company's inception. June quarter revenues were 780 million U.S. dollars, broadly on par with the prior June quarter. And the group realized MEDCOR price year-to-date was 222 U.S. dollars per ton, which is a blend of FOB, FOR, domestic pricing contracts, U.S. domestic pricing contracts. And it trades to a 78% realization on the average Australian hard-corking coal index price for the nine months to September. So this reflects an improvement over the same period in 2022, where realizations were at 71%. Notably, CARA's Metco price realization year-to-date represents 84% of the Australian PLV benchmark price. And as of 30 September, the company's net cash position was 95 million U.S. dollars, and we maintained available liquidity of 487 million U.S. dollars. Our net cash position consisted of a closing cash balance of US$337 million cash balance and outstanding bonds totaling US$242 million. The decrease in the closing cash balance is primarily due to timing factors and the payment of some irregular payments in the quarter. The biggest one is really a change in the Queensland government royalty payment frequency from quarterly to monthly. resulting in a payment of five months royalties in the quarter. This saw an incremental 50 million US dollars cash outflow in the quarter. So it's a one-off, it won't happen again. The Queensland government switched in this quarter. The second one was an elevated quarterly capital expenditure of 20 million related to the investment in growth at Buchanan in the quarter. And during the quarter, Cornell spent 62 million on CapEx. The dividend payment of $8 million and the payment of our annual insurance premiums of $20 million that in prior years have been financed, but this year we paid them full as a prepayment in order to prudently reduce our interest costs. And then lastly, payments to our Queensland rail provider related to the June fiscal year annual takeover pay two up of $9 million. So year-to-date, average mining cost per ton sold for the group $105.5 per tonne. Higher mining costs per ton are basically due to inflationary pressures and the impact from lower sales in the March quarter from the significant above-average wet weather and train derailment on the Blackwater line and the issues navigated in the recent quarter. Now that the rock intrusions issues at Buchanan are behind us and the repairs at the covered rag lines, On near completion, the company expects fourth quarter production and sales volume to be higher, with sales volumes being realized at higher price points as we look back three months or a quarter, and the fourth quarter average mining cost per ton to be lower. And as a side note, the benchmark index in quarter two was $243 per ton, and in quarter three, it was $264 per ton. So we have benefited from the higher prices that we have seen in quarter three in the present quarter four. Today, Coronado reaffirms our revised FY23 production cost and capex guidance. Today, we also advise the market of the completion of our North American annual contract negotiations for the financial year 2024. In 2024, Coronado anticipates a volume-weighted average price across all grades of MEDCOL of approximately $161 per metric ton FOR price, reflecting a price aligned with the high world A and high world B FOB U.S. East Coast average index price that we have seen in June to August in forward curve pricing estimates at the time. These fixed price tonnage contracts cover approximately 38%. of our anticipated U.S. production and cover approximately 60% of our anticipated U.S. mine cash cost in FY24. Returning to coal markets, the benchmark Australian premium low oil index price for the September quarter was $264 per ton, up 9% compared to the June quarter benchmark price of $243 per ton. We have seen prices steadily increase since mid-September, with the current Australian benchmark sitting at $350 per tonne today. The increase in pricing is primarily due to a combination of tight supply from Australia, which was impacted negatively by continued rail constraints and planned maintenance disruptions to operations at Queensland ports, and heightened demand from Indian steel mills who are restocking as the monsoon season comes to an end. And recent price increases are despite a generally weak global economic environment and weak steel demand outlook, with the exception from India. Indian steel demand is very strong, with a resumption of construction activity expected to provide higher demand for metcoils during the December quarter and into 2024. The SGX forward curve is projecting pricing to be greater than 330 US dollars per ton for the remainder of 2023. and for the pricing in 2024 to average approximately $294 per ton, so by and large, around $300 per ton. These price projections indicate a higher pricing environment for longer and a pricing environment well above the long-term average of $194 per ton. And we anticipate the current higher and projected prices will reside in higher price realizations from the sales volumes in the December quarter. As we look more longer-term, You see the AME forecast in the pack estimates global met coal demand to more than double to nearly 700 million tons by 2050, led primarily by blast furnace steel production in India. India is expected to lead all countries in import demand growth due to its significant industrialization plans over the next two decades. India export met coal demand is forecast to increase by Well, it's almost quadrupled by 281% by 2050, the majority of which will need to be filled by supply growth out of Australia. In our view, it will be difficult to see how the supply growth will materialize to match demand given the limited approvals and incentives for new mines in the high-quality MEDCOR regions of Australia and North America. In order to meet the projected 2050 demand levels, AME forecasts that Magpul production from Australia will need to increase by 140% from existing levels over that time. Structurally, a lack of supply should ensure higher prices for longer, which places more emphasis on companies like us to continue operating and developing our long-term, long-lived, 20-plus years assets. Our MEDPOL remains in high demand. Our high-quality products and unique geographical diversification see us continue to support customers on all five continents. I now hand back over to Douglas to discuss the progress of our growth and emission production projects. Douglas?

Thanks very much, Mike. Turning to growth first, I'm pleased to report that the CARA underground MEDPOL project remains on target. During the September quarter, The project's environmental approval schedule achieved all the required milestones. Exploration drilling programs for geological and gas information for the phase one of the project is complete and a broader coal seam permeability testing program has also been conducted. More than 40 holes were drilled and grouted and just over 7,000 meters of drilling has been conducted in the quarter. The development of this project underpins Coronado strategy to deliver salable production of 13.5 million tonnes from Currah complex and mines by 2025. Growth plans at our US operations to produce 7 million tonnes by 2025 are also pleasingly performing on target. At Buchanan, the capital investment into works to construct our new surface raw stockpile area is on plan and progressing well, and also the second set of skips to increase our hoisting capacity is on plan and target. So now turning to our emissions reduction. In July 2022 at Buchanan, we commenced our first ventilation air methane abatement project at Ventshal 16. Since commissioning, the VAM unit has destroyed more than 220,000 tonnes of carbon equivalent. at a 94% efficiency. And this project alone had the group well on target to deliver a 30% reduction in emissions by 2030. Given the proven success of the original VAM unit, we commenced the installation of a second one at Ventshaft 18. Construction works are now underway, and it's expected to be completed mid 2024. The establishment of a second VAM unit is expected to substantially reduce Coronado's emissions even further. And this also establishes our company as an industry leader in the implementation and safe operation of this emission reduction technology. At Currah, we continue to make progress on our gas pilot project during the quarter. The project is intended to capture and beneficially use open-cut waste mine gas. Our primary downstream use cases for this gas is power generation and the use as diesel substitution. Drilling works on this pilot program were completed in early July and subsequently the surface and production infrastructure has been procured and we're in final stages of installation. Also in the quarter we ran a truck trial to measure the performance of the dual fuels. The results from this has been satisfactory and it lays the firm steps for the conversion of five to six trucks during 2024 for the use of this gas. Now, before we move to Q&A, I wanted to address the announcement in late September regarding seven global investments purchase agreement to acquire EMG's 51% major stake in Coronado Global LLC. As per the media releases, 7GI and EMG. We understand that the transaction is subject to customary closing conditions, including regulatory approvals in the US and in Australia. We remain committed to provide the market with information as it becomes available to the company in accordance with ASX continuous disclosure requirements. So with this, I'll now hand over to the operator and we'll be guided through the Q&A process.

Thank you. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. 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. Your first question comes from Paul Young with Goldman Sachs. Please go ahead.

Yeah, thanks. Morning, Doug. Morning, Gideon and Andrew. Oh, sorry, Gerhard. The first question's on Currah. and with respect to production in the quarter, Doug, I know the drag line was down for maintenance, and also, just broadly speaking across the industry, all companies are playing catch-up on waste stripping, but I'm just curious around the fact the drag line went down for maintenance in September, which I would have thought wouldn't have had too much of an impact on coal production, so it was more a function of the truck and shovel fleets not being able to uncover the coal inventory, or just a function of actually just being behind on waste stripping, which again is a broader industry issue?

Paul, as you communicated, the one current plan that we've been running has had the intent to address those pre-stripping deficiencies caused by the weather and other matters. So that program has been ongoing. In the quarter, we did have a focus on pre-strip, and that's why you saw the record out of our changes that we've been making in the mine plans over the last year or so. The results of that have been coming in great results in waste movement and stripping. Losing the drag line when we did is exactly, as you said, it's timing. The drag line is intended to expose coal to the back end of the month that we would have mined. Unfortunately, we couldn't benefit from that, so that's why there's this deferral. In addition, in the quarter, we had the two planned shutdowns for both of our prep plants. They were the annual shutdowns. As I said, we try and use what we have to the best we can. So while one's down, we keep the other one running so we can keep product coming. But that also had an impact to the profile in the quarter. And that was planned likewise of the pre-strip. What wasn't planned was the impact by the drag line in exposing coal. And then obviously in the quarter, mentioning the impact of our intrusion in the United States also impacted the group ability to produce coal in the quarter from a timeline perspective, but also deferred.

Okay. Thanks, Doug. And then maybe just on waste stripping and profiles, I mean, great to see you hitting record numbers on waste movements. As far as catch-up is concerned on the waste stripping on the mine plant at Curra, and great to see you'll be selling coal at the high prices in the following quarters, but how far through the catch-up actually are you? Or another way to put it, how much longer will it be before you get on top of the waste stripping at Curra?

I'm pleased to report that the impact in the first quarter that set the plan back we're now coming to the back end of it. So the one current plan, it's intent to straighten up geometry. I think you remember from previous quarters we spoke about the capital investment into extra box cuts so we could straighten up the mine and give our drag lines additional strike length. That work is very well advanced and we're getting far better performance out of our drag lines as a consequence. And then the pre-strip and advanced work is coming to an end. And that's looking ahead, the rationalisation and cost reductions that we'll see in plans into the future. As we finish that work, we'll rationalise our fleets that have been brought in as additional capacity.

Okay, thanks, Doug. And just the last one on the US Metco contracts, maybe one for Gerhard, around the reduction in the price Is that a function of just the fact that, and noting that a lot of the US companies are downgrading guidance, right? So from a production standpoint, the US industry seems to be struggling a little bit. But the drop in price, is that a function of just the fact that the demand from European steel mills is a little lower and just demand from US steel mills is expected to be a little lower?

Yeah, that's basically correct. I mean, if you see the disconnect between the so-called benchmark, the Australian FOB, and then the U.S. East Coast Index, it's sitting at about 74%. Historically, it's closer to 90%. The Atlantic market, in which usually the U.S. shifts into, is very weak. The reason the benchmark, the Australian benchmark, is so high is purely India. And we are lucky that India is our biggest export destination. But that's basically it, Paul.

Yeah, okay. Thanks. I'll pass it on.

Once again, if you wish to ask a question, please press star 1 on your telephone and wait for your name to be announced. Your next question comes from Chris Drew with Jefferies. Please go ahead.

Morning, guys. Thanks for the call. Just on the unit costs and the guidance, look, probably got to do a little bit more work on the numbers, but it looks to me like you've probably got to need a fairly substantial turnaround in the December quarter to deliver to that cost guidance. Can you perhaps talk a little bit to how you see the unit costs playing out in December? And maybe it goes a little bit to what you've just said around the strip ratios and things. Thanks.

Yeah. yeah chris it's a good question you know as you know that the unit cost right now is 105.5 and our guidance is closer to the 101 so it has to come down but i think one important aspect is we should have sold more in the in the quarter uh we missed the three shipments as douglas highlighted so in the denominator is hail stunts so that should help in the fourth quarter and we're trying to pull in more shipments into the fourth quarter, bring ships forward from December into earlier months if we can. And then we need to cut costs out as well, and we are on a good path to do it. So as Douglas said, we had fleets in there that helped us achieving record waste movements, but we started looking at rationalization of these fleets.

Great. And then perhaps

slightly right the second question is on the inventory position obviously we saw that build into June 30 that looks like it's at least partially unwound how far through that are we now is there more to come in the December quarter on the inventory I'm wondering is that largely done now yeah not really to be quite honest and that's in a way pleasing although that's also working capital but we still have very large warm stock inventories and of course we have product inventories and you will see that in when we release the 10Q the product inventories of Of course, also driven because we couldn't sell the 130,000 tons. But pleasingly, we had large ROM stock as well, and that will be converted into sales tons in quarter four.

Okay, great. Thanks very much.

Your next question comes from Paul Young with Goldman Sachs. Please go ahead.

Yeah, thanks again. Question on 7Grip. I know, Doug, you mentioned it's still working through in a sort of regulatory, et cetera, situation. Can maybe just talk around about this company, I know they own Blackhawk in the US or that complex of mines. Has there been any discussion with Seven Group so far and any thoughts around potentially the synergy between the Blackhawk complex and Logan and Buchanan?

Paul, I think the first thing to note and probably the most useful is this is a shareholder transaction. between EMG and 7GI, so not management, so it's a matter between them. Myself and Jerry have had meetings with 7, but by intent and by design, these have been introductory meetings, and nothing more than that, because the transaction needs to stay where it is, is between those two shareholders. Your comments about Blackwater, Blackwater, apologies, Blackhawk, They clearly are a very capable operator of mines and assets already, if you look at their portfolio.

Okay, thanks, Doug. Back onto the cash flow and in the quarter, your comments around the Queensland royalty payments, just to clarify that, that five-month payment, was that a pre-payment for next quarter or was that just a lag payment for the last five months?

So we paid, and don't hold me to account, I think we paid $130 million U.S. dollar royalties in the quarter, of which $80 million was just the usual payment in July for the for the prior quarter payments. So that was based on the old rhythm, the payment we always made in July. But then we also made payments for July and August in that quarter as well. And that was the $50 million that we normally wouldn't have seen. From here on, it's just every month, the royalty payment. So it's a one-off. in that quarter, and from here on, we just pay every month the normal royalty.

Okay, understood. Thank you. And then maybe back to Doug, on Buchanan, I know it's been such a consistent mine over the decades, and especially around the geology, so the unknown rock intrusion, it sounded like it came as a bit of a surprise. I know you're through that now, but any colour you can provide on any sort of mapping, seismic, anything you've done to sort of identify other intrusions, was this truly, in your view, you're confident it's a one-off?

I don't think you could ever call an intrusion a one-off, but the team have got the mine very well mapped through a number of areas. It's a mine that's well understood, it's well drilled, so we've got very good geological information. When you're doing your primary development in setting up the long walls, you generally have an opportunity to shore up the geology that you pick up through your drilling. And then thirdly, when we do drilling for gas, that provides a whole lot of geological information as well. Unfortunately, when you have these kind of events where you don't pick it up in your head gate or your tail gate or in your gas drilling and it's a ceiling type event where it dips down out of the hanging wall into your coal seam and narrows the seam that you're mining through, it is unforeseen. That's the style of event that occurred, yeah. I strongly say that what we have in place is best practice and has served us very well in the past. Where we've picked up geological features, we've been able to plan them well. We've set up jump faces and we've gone around them and moved around them very productively with limited impact. So this really was an unforeseen, but the team managed it well. You normally have not only delays or slowdown in your progress rate and yield impact, you can quite often have an impact to your material handling system out of the mine. The team ensured that knock-on effects were minimized, and once we got through, we could get back to normal production rates and then some really good production rates since then as well.

Okay, thanks, Doug. And just last one, just moving on to the other underground, which is soon to be developed at Currah. I know you just said you've received environmental approval. Do you still need any other approvals from the Queensland government? Just remind me, the first continuous mine, it's set to go into the end of next year, correct?

Yeah, sorry, you may have misheard. No, we haven't received approval yet. Our milestones in achieving approval... I have progressed really well within the quarter. We've achieved all our set milestones in gaining that approval, but we haven't gained approval as yet. That'll come next year, and that is on our critical path. The procurement strategy is well worked. We've got it defined. The intent is that we put the first miner into it at the back end of next year, and then once we've done the development phase production into 2025.

Okay, understood. Thanks, Doug. Pleasure.

The next question comes from Chen Jiang with Bank of America. Please go ahead.

Good morning, Tom. Thank you for hosting the call. Just a few questions from me, please. For that 7GI transaction, it's going to be your largest and major shareholder now. I mean, after the transaction, the 7GI seems like more supportive of their invested companies' long-term growth strategy versus EMG. I'm wondering how should we think of your inorganic growth opportunities from here? Thank you.

Look, Commentary on that probably is speculation. This is a transaction between the two major shareholders. What I will pause to say is none of us would probably be around this phone if it wasn't for EMG. They backed Jerry and Jim in the beginning to start this business, and they've been a fantastic major shareholder to date on a whole host of fronts. The transaction between them and then forward-looking decision-making will be decisions that will be made into the future, and I do speculate, so I'd rather reserve comment on that.

Right. Thank you. Thanks. I appreciate it. Maybe second question just to follow up on your cash cost. I understand we had these conversations multiple times in every quarterly call. So quarterly cash cost has been climbing higher quarter over quarter and then tracking above the guidance. Do you think your cash cost has peaked in the September quarter?

Yeah. So, no, it has peaked. As I said before, you know, there's an impact from the sales tons, the denominator. And as we will rationalize fleets, we will take the dollars out as well. So, it has peaked. And, yes, you're correct. The costs are very high.

Thanks, Tom. And how should we think of the pace of decline in the next few quarters of Operation Arcata? Thank you.

I think that comes with the next guidance we will issue in due course, but you can expect some profound improvement.

Okay. All right. Thanks. That's all from me.

Thank you. Your next question comes from Lachlan Shaw with UBS. Please go ahead.

Morning, Doug and Gerhard. Thanks for the update. Just a quick one on clarification. So just on your realization of your Aussie Metco sales versus the index, flip back a little bit in the quarter. Is that just a timing related to the timing of contracts?

Yeah. So you refer to the realization, right? Yeah, yeah. So if you look at the quarter, so fundamentally, as we always say, we basically are selling our products on prior quarter, rule of thumb. It's not always correct, but rule of thumb, we achieve the prices of prior quarter. So quarter one, this year, the prices we achieved in quarter two the quarter one price was $344, and the price in quarter two dropped to $243, so nearly $100 less. So therefore, the price realization in quarter two was very high, achieving the quarter one, very high quarter one prices. Now, the reverse happens when prices go up. So we have seen now in quarter three prices going up compared to quarter two. Therefore, you see a lower price realization. That's the main reason for that.

Okay, understood. And then maybe just one more if I can. So just to come back to the waste overburden removal in the quarter, you know, great job, record volumes, hopefully really sort of opening up more coal on a go-forward basis. And then to link that into the rationalisation of fleet. So it's the interpretation here that that sort of stabilization and positioning of the other burden and dragline strip is now done in terms of what you need to do to get sort of to the one-currah plan and to sustainably hit those production run rates you've been targeting?

You've described it spot on. The intention of the one-currah plan was to take the geology as it is and set the mine up by investing in box cuts, but to have a long-term sustainable stripping ratio So that as you mine it in a methodical manner, you have more consistent flow of coal out of the geology as predicted and modelled. That work in the capital box work has done what we've been doing, which is OPEX cost, is the pre-strip work of setting up the geometry of the pits again, getting ahead of the impact of the wet weather that's been occurred and probably decision making before that. So we've So we've, in large part, done that. In the original plan, we should have been done a couple of months ago. We're getting to the completion. The weather impacts delayed the plan. And we're getting to the back end of that additional installed capacity to make these changes and set ourselves up for the future. The fleets will be addressed in a rational manner as we go through the plan into next year. And we'll talk about that in next year's guidances.

Okay, great. Thank you. I'll pass it on.

The next question comes from Jim Sue with Baron Joey. Please go ahead.

Hi, it's Doug Gohard. Thanks for the opportunity to ask a couple of questions. I just wanted to confirm. You said that you expect price realisation for the group to increase in the December quarter. I just wanted to confirm, is that your realised price or the percentage of the price that you expect to realise? And should we expect that most of the improvement should come from the US or is it Australia... Thoughts on that?

I guess we have to see how that plays out. When I look at it, in the quarter to date, which is probably more months to date, prices are very high, $354 per ton. Let's just see how that plays back. What we will see is we will benefit from the higher prices we have seen in quarter three compared to the lower prices in quarter two. So in quarter three, we have seen an average price of $264 per ton as opposed to $243 per ton in quarter two. So bottom line is we will see a better cash flow in quarter four coming from higher volume, sales volume, and then also higher prices.

Okay, awesome. Thank you. And I know you touched on this earlier, but I just wanted to confirm, do you expect the September quarter to have been the peak in waste volume movements? And what kind of reduction should we expect going ahead in total material moves?

Yeah, in our planning, September was intended to be in pre-strip mining, so that's why we're calling it out. The reductions at this stage until we've finished our mine planning and that because obviously our mine plans pivoted with very short notice to focus on this year cash preservation and delivering the results the best we can. We're busy working on the plans and the impacts to next year. So I'd like to reserve that the teams can do the work and then we'll come back and talk about what it does to the plan next year with reductions.

Okay, thank you very much.

Your next question comes from Chen Jiang with Bank of America. Please go ahead.

Hey, Doug. Just a follow-up on the price realisation and on the coal market. Thanks for providing the colour in the coal market, price, etc. A lot of your coal are PCI. And then by looking at the PCI price index versus the premium hard-cooking code, actually the PCI price declined by 31% yesterday versus the Australian premium hard-cooking code increased by 44%. I'm just wondering if you can give any color on the PCI market and how should we think about your PCI code realization? Thank you.

Yeah, let me take that. It's a good question. It goes into the details, and then it goes also into our price realization. It's very detailed, though. So, yeah, you're correct. I mean, the PCI, the long-term PCI relativity to the benchmark sits at about 73%, 75%. Today and over the last few weeks and months, we have seen it at 56%. So why do we see such a low percentage? relativity of the PCI. Well, fundamentally, there is a disconnect between the benchmark and the rest of the market, including the US East Coast, as I mentioned before. The benchmark is mainly driven by the premium mid-wall products that Australia sells into India. And, you know, whenever the price goes up, you see there's a cargo of a premium mid-wall product sold to some Indian steel mills. at a higher price. And that's what we have seen over the last few months since August when we saw prices going back up again from what I call nowadays a $230 floor price. So today you see a benchmark price of $350 per tonne as opposed to PCI price of under $200 per tonne. The biggest PCI supplier in the global market is Russia. Russia owns about 30% of global PCI supply. Russia is selling that PCI into China, India, and South Korea at heavily discounted prices. Therefore, there's lack of demand for Australian PCI. For us, without giving away the secrets of our marketing team, it's actually not too bad. Some of our contracts are linked to the benchmark, although it's PCI prices, and I leave it there. I don't want to disclose more. It doesn't worry me too much. But what you see here between the benchmark and basically all other indices below the benchmark, it's really the disconnect between the booming benchmark Indian steel industry and then the, you know, essentially lack of demand from everywhere else, you know, be it North America, be it Europe, other parts of Asia, including Japan and Korea and Taiwan.

Right. Thanks for the call, Doug. So PCI Coal Price disconnected with Australia Premier Hard Cooking Coal. I guess a lot of your coal price realisation, if linked to PCI, then should have a lower price realisation in the next quarter then?

Yeah, and that's not unique to next quarter. That was already the case this quarter. I remind everybody, the historical relativity is about 75% last year after the Russian invasion of Ukraine. That actually shot up to 100%, 110%, you know, so it was complete opposite to what it is now.

Sure, I understand, Doug. Thank you. I appreciate your color. Thank you. I'll pass now. Yeah.

That concludes the question and answer section of today's call. I'll now hand back to Douglas for any closing remarks.

Thank you very much. I'd just like to take the opportunity to thank everybody for dialing in today. And if you've got any follow-on questions, as always, please don't hesitate to follow up through our investor relations team and by Andrew directly. Thanks for your time.

That does conclude our conference for today. Thank you for participating. You may now disconnect.