Coronado Global Resources Inc.

Thank you for standing by and welcome to the Coronado Global Resources second 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 second quarter investor call for 2024. Today, we released our quarterly report to the ASX and SEC, in which we outlined our production and sales statistics, as well as other key information related to safety, full markets, and financial performance. A more detailed outline of our financial position and results will be released to the market on the 6th of August, with our Form 10Q and half-year earnings release. Today, I'm joined by our Managing Director and CEO, Douglas Thompson, and Group CFO, Gerhard Ziems. Within our report, you will see our notice regarding forward-looking statements and reconciliations of non-US GAAP financial measures. We encourage all listeners to review these statements in conjunction with our other filings for the ASX and SEC. We also remind all participants that Coronado quotes all numbers in US dollars and metric tonnes unless otherwise stated. With that, over to Douglas.

Okay, thanks, Andrew. Let's get into this. For the June quarter, the Coronado team remained focused on our plan and achieved outcomes and milestones as set by our plan, delivering materially improved production, sales, cost, and revenue results. It is pleasing to report our business delivered higher group ROM coal production at 7.4 million tonnes, up 24% on the March quarter. higher salable production of 4.1 million tonnes up 22%, higher sales volumes at 4.1 million tonnes up 8%, and materially lower group mining costs at $91 a tonne down 27%, and higher total revenues of 674 million up 1%, along with several other underlying and enabling milestones within our plan. These results reflect 18 months of hard work from everyone in the business to drive the business forward and produce positive results. But the job is not finished. Our plan has more to offer. We will continue to press for further operational and cost gains in the coming quarters via the safe implementation of additional productivity improvements and the development of our organic growth pipeline. And I'm excited for the benefits ahead of our shareholders. as we progress our mammoth underground project and expansion works at Buchanan, both of which have extremely positive prospects and continue to be developed from the operational cash flows of our business without the need to raise additional debt or equity from the market. But before I elaborate on our operations, I will start by focusing on an overview of our safety performance. As reported in a prior public announcement on the 31st of May, the company temporarily suspended operations that became in mind following the fatality of one of our team members, Brock Jackson. The incident occurred at the commencement of the evening shift. We are deeply saddened by this event. I'll take this opportunity to once again extend our sympathies and condolences to the family, friends, and colleagues of Brock An investigation into the incident is underway and until the investigation is concluded, we cannot provide further comments other than to note our continued support for his family and co-workers. Anne Buchanan mine resumed operations on the 3rd of June and there are no directives or restrictions on the mine. This tragic incident is a reminder to all of us that there is no more important outcome from our day at work than returning home to our family and friends safely. Now turning to our safety statistics as of the 30th of June. At the group level, our total recordable injury rate was 1.01 compared to 1.18 at the same time this year. And if we split by segment, our Australian 12-month rolling average Total recordable incident frequency rate as of the 30th of June was 1.29 compared to 2.52 in the prior year. And our US 12-month rolling total recordable injury rate was 2.26 compared to 2.56 the prior year. Both rates are lower than prior year and below industry averages. Turning to our operational performance. Both our Australian and U.S. segments realized improved production rates, sales volumes, and lower costs compared to the March quarter. In Australia, our Currah Complex delivered ROM coal production of 3.8 million tons and salable production of 2.7 million tons, reflecting increases over the March quarter of 37% and 23% respectively. These significantly improved results are multifaceted and outcomes from our plan, but are principally due to the completion of the historic pre-strip waste deficits and the subsequent removal of four fleets in late March, combined with improved productivity from our dragline fleet, as we take advantage of improved pit geometry gained by our engineering changes made over the last 18 months. The dragline fleet continue to meet our improvement targets, with the ratio of waste movable by drag lines compared to truck and excavator at 44%, up from 37%. And total waste movements in the June quarter and year to date are our plan. During the June quarter, Currah also experienced less interruptions to production with lower rainfall reported quarter on quarter. However, heavy rain late in June did see about 100,000 tonnes of ROM production deferred to July. And Currah's railings to port were also temporarily impacted by a traffic accident on the Blackwater line in late June that resulted in a rail outage for approximately five days. The cost structure at Curragh has materially improved quarter on quarter, following the fleet removals, productivity improvements and contractor rationalisation. The Australian segment average mining cost per tonne sold for the June quarter was $81.70 per tonne, reflecting a 36% improvement quarter on quarter due to the operational improvements previously mentioned and combined with higher production. This cost per ton improvement equates to approximately 100 million tons of gross mining cost improvement in the quarter and is the lowest cost per ton rate for Currah since the March quarter of 2022. At Currah, we are targeting further productivity and cost improvements in the September quarter with a planned removal of an additional contractor fleet. This is about 13 pieces of equipment that are removed from operations. The removal of this additional fleet is not expected to impact current or future production plans at Currah. Upon full demobilisation, this will take the number of contractor fleets removed from Currah to five, and plus the introduction of the new Coronado Komatsu PC7000 excavator, which is contributing to our overall productivity and gains at site and coal exposures. Operation limits Currah finished the June quarter in a strong position with elevated stockpiles, and the positive momentum achieved in the quarter has flowed into July as we strive to continue to deliver according to our plan. Our U.S. operations also performed well in the June quarter, delivering improved production, sales volumes, and lower costs per tonne. The U.S. operations delivered ROM coal production of 3.6 million tonnes and saleable production of 1.4 million tonnes, reflecting increases over the March quarter of 11% and 18% respectively. The June quarter ROM and sales production were higher at Buchanan as we continued to mine in our newly developed southern panels. During the quarter, the mining conditions improved, and as forecasted, yield improvements started to materialize. Subsequently, Buchanan's ROM production was up 11%, and salable production was up 21% quarter on quarter. The mine continued to experience improved skip efficiencies following the maintenance work undertaken earlier in the year, and our conveyor belt systems continued to perform well, resulting in skip counts continuing to operate at their best rates in the last two years. In the September quarter, our plan currently has development of the next panel in the northern district ready for mining. And for a portion of time, we may have the ability to run both longwall sections at the same time. This is forecast to further increase the product yields from Buchanan, given the northern district has a high yielding section. At Logan, ROM and salewall production in the June quarter were up 11% and 14%, respectively, compared to the March quarter. These production improvements are due to the re-establishment of mining in the Pelton mine, and incremental tonnes gained from high-wall mining at our surface operations. The US operations noted a significant improvement in cost per tonne in the June quarter, principally due to higher production rates achieved. The US segment average mining cost per tonne for the June quarter was $110 a tonne, reflecting a 10% improvement quarter on quarter. As a result of these strong June results, and our forward plans, we today reaffirm our previously announced 2024 guidance metrics. I'll now hand over to Gerhard who will take us through our financial position and give us a bit of a market update.

Thanks, Douglas, and hello, everybody. I'll keep this short today. Our June quarter revenue was $674 million, up 1% compared to the prior March quarter, mainly because of higher sales volumes despite a fall in prices. Our year-to-date revenue was $1.3 billion, down 10% on this time last year, mainly because of lower met coal index pricing. Coronado's proportion of met coal sales revenue as a percentage of total coal revenues year-to-date was close to 96%. The percentage of met coal sales was higher than prior year, which was about 90%, because of the delivery in prior year of certain US thermal coal contracts that we negotiated when thermal coal pricing was way higher than met coal prices at the time. And that was kind of a pattern across the industry. So we went from 90% up to 96%. The group realized met coal price for the quarter was 195 US dollars per ton, which is a blend of FOB, FOR, and U.S. domestic pricing contracts, reflecting an 80% average realized price versus the Australian premium lower index. As of 30 June, the company had a net debt position of $5 million, which is comprised of a closing cash balance of $264 million. We had $242 million in senior secured notes outstanding, and then 27 million in interest bearing liabilities associated with the completion of the current housing arrangement. As discussed last quarter, the business was negatively impacted in the first half by the additional payment in March to the Queensland Revenue Office of 79 million Australian dollars inclusive of interest relating to Coronado's acquisition of the Carro mine in March 2018. Coronado had available liquidity of $414 million as of 30 June, comprising of cash, short-term deposits, and unborn available borrowings under the ABL facility. Year-to-date, capital expenditure closed at $137 million, with the majority of spend related to our organic growth works at Buchanan and Carro. In terms of coal markets, met coal markets, both the Australian and U.S. met coal index prices decreased in the second quarter. The benchmark Australian premium low boil average index price was 242 U.S. dollars per ton, down 21% compared to March quarter where it was $308 per ton. The benchmark index, average index was... US East Coast index was $218 per tonne, down 15% compared to March quarter, where the average price was $256. So down from $256 in March quarter to $218. Prices fell during the quarter because of an increase in seaborne supply from Australia, given the dry operating conditions. But we have seen an increase in price from late June, following operational issues from some of our peers in the Bone Basin and in the US, which has impacted supply. Subsequently, of course, now in July, prices have come down again. Different subject. Coronado expects that in the September quarter, prices will remain elevated on the back of Indian restocking appetite after the monsoon season, which probably starts in at around early September. In the same period, medical supplies expected to be restricted with the mine production issues from our peers and railway maintenance occurring particularly in July, August across the Queensland network. The SGX forward curve, just as a data point, as of 12 July, is projecting an index price of $255 per ton for the remainder of this year. These pricing projections continue to suggest a higher pricing environment for longer and a forward pricing environment well above the long-term average price of $199 per tonne. I hand back to Douglas now. Douglas?

Thanks, Georg. So in the second quarter, our business continued to invest in organic growth projects at Mammoth Underground and Buchanan, using cash flows generated within our business to fund this growth. Coronado has more than 800 million tonnes of met coal reserves and 2 billion tonnes of resource to draw upon. So beyond the growth projects presently afoot, we've identified additionally potential other organic growth projects within this reserve base, which potentially have more attractive metrics for our shareholders over the long term than what's available in the market. And our present organic growth investments remain within budget and on schedule, and continue to be assessed at multiple substantially lower than recent market opportunities, which we expect will create significant value for our shareholders over time. So turning to Mammoth Underground project, it remains on schedule, but subject to regulatory approval. During the June quarter, we submitted the required statutory approvals for this project. All our procurement activities are progressing to plan with equipment orders placed and delivery schedules agreed with the providers. And these delivery dates are before our planned commencement dates for the project. Mammoth has a full leadership team in place at the moment, which is supporting the construction of the project. And the response to our expression of interest for staff and workforce has been extremely pleasing. In June, we completed all necessary earthworks in Espeth, and high wall stabilization work has commenced in preparation for portal development. Our engagements with the regulators and the communities continue to be positive. As a reminder, Mammoth has a substantial high-quality meat coal reserve of 41 million tonnes of ROM coal, with coal qualities expected to mirror the existing Curra North open cut. Once fully operational, the project is on target to deliver an incremental increase of 1.5 to 2 million tonnes per annum of saleable production in its first phase. Subject to receipt of the regulatory approvals, first coal from Mammoth is expected in December of 2024. Organic growth plans in our US operations also remain on target, with Capital Works at Buchanan continuing during the quarter to invest in the construction of a new surface raw coal storage area to increase the mine storage capacity, ultimately reducing the risk of bottlenecks and allowing our longwall equipment to run at higher capacities. In the June quarter, excavation works continued with the completion of the access roads and bridge extensions. And the scheduled date for the new ore stockpile facility to be complete remains on plan of April 2025. In the quarter, we also progressed the construction of our second set of skips to increase the mine's hoisting capacity to surface. As at the 30th of June, shaft excavation work and concrete line works are complete all the way to shaft bottom. And the next stage of work, which is shaft equipping, is progressing to plan. Full completion of this project is expected in quarter two 2025. And now turning to emissions reduction. We continue to progress our gas pilot project at Curragh during the quarter. This project is targeting to capture and beneficially use open cut waste mined coal gas, with downstream use cases being explored, including power generation and the use as a diesel substitute in our mine fleet. Gas production from Europa 1 and Europa 2 wells commenced in January of this year, and we've continued to monitor gas flow from the wells to build our data record and to understand the reservoir's performance. During the June quarter, Coronado and its partners commenced a second gas-converted truck trial, to assess the performance of a 793F truck engine with upgraded conversions. Early results are positive and in line with what our expectations were for the trial. This trial will run over the next eight weeks. Given the positive success of our ventilation N-ethane van unit at vent shaft 16 to reduce emissions, we committed to undertake a commitment to install a second van unit at Ventshaft 18. The construction of the second van unit was complete in April and testing was conducted in May and June. And I'm pleased to announce today that the new van unit at Ventshaft 18 was approved for operation by the Virginia Energy Coal and Gas Board on the 18th of June and is now fully operational and actively reducing emissions at Abercannon Mines. The establishment of a second VAM unit is expected to further reduce Coronado's emissions, and this is all part of our strategic path to a 30% emissions reduction by 2030. Coronado considers itself an industry leader in the implementation of these emissions technologies. And with that, I'll now hand over to the operator to take your questions. Thanks, Darcy.

Thank you. If you wish to ask a question, please press star 1 on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star 2. If you're on a speakerphone, please pick up the handset to ask your question. Your first question comes from George Eadie from UBS. Please go ahead.

Yeah, g'day Douglas and Gerhard. First question is on guidance for this year. When you released guidance, was the two weeks rail downtime on the Blackwater line known?

Yes, so obviously the motor vehicle accident that occurred that cost about five days at the back end of June wasn't known and we're working to mitigate that. I must say that the rail providers above and below rail have been very good in working with the industry to mitigate it. And then the maintenance work that was planned for the month of July has been known for a while and we've been working to mitigate that. So that is considered. Okay, awesome. It's not helpful for us, but it's common to everybody in the industry that use that rail corridor.

Yep, just making sure it wasn't one way moving to two. Awesome. And then maybe just on Curra as well. So now you've taken five fleets offline. You've put more dirt in the dragline system. Both of these are absolutely great for cost, and we've seen that, which is great. But in terms of coal recovery, is there risks here? I guess... How many strips in advance of pre-strip have you now done? I'm more sort of coming at the angle, is there a risk in three to four years you'll need to bring back a contractor fleet for another large double strip, pre-strip campaign or something?

No, our intent in this plan that we've been executing is to set the mind up that it's got a long-term sustainable stripping ratio and that's geared towards dragline operations. So the last 18 months, we mobilised additional fleets into the site to catch up on the waste deficits that occurred, but also to set up the geometry of the different pits to have longer strike length and also better configuration for dragline productivities. And that's how we've gained, our plan is at 44%. We're hoping to get a little bit more over time out of it. But that's the ratio that we're running to dragline and truck and excavator, and that's sustainable at the stripping ratios that we have. The plan does have further tricks available to it, clearly bringing an underground mine into operation that's lower cost and brings us de-risk supply because it's not exposed to the wet weather, gives us options down the line which will further medicate the risk of having to bring additional contracted fleets onto site for what you described.

Yep. Okay. Thanks, Douglas. Maybe just a second on Buchanan. You said the next panel in the Northern District will be ready this quarter, September, and higher yields. Can we just quantify this a little maybe? Is it ready now? And how does overall yields lift from Buchanan? Are we talking sort of 60% or sort of mid-high 60s?

So no, it's not ready quite yet. The development for that panel has progressed really well. We're actually slightly ahead of our original plan. The team has done well. So we're busy setting it up. It'll be ready in this quarter to start mining, but not quite now. And the yield improvement between the south and the north is about a 6% improvement at the moment. It might get a little bit higher than that, but we're looking at mid-50s that the north will offer us.

Okay, thanks, guys. Thanks, George.

Thank you. Your next question comes from Daniel Roden from Jefferies. Please go ahead.

Good day, Douglas and Gerhard. Thanks for taking my question. I just wanted to, I guess, get a better sense on the mammoth underground approvals and where your head's at with that and maybe just update us on the timing of the closure of the public review and, you know, how much time after that is required for the regulatory approvals.

Daniel, the good thing that we have is working through DES's process is it's fairly well defined. So we can set timelines. And what we've done to our program schedule is set the outer limits of DES's design program. That gives us a delivery date of approval in late November. So that's what we're working to at the moment. There's obviously gate stops as you work through it. as you've called out, public consultation is one of those. I think what I'm comfortable in saying at this stage so that I don't work against any of DES's information that they'll want to manage more than me publicly is our requests for information have gone very well with them to date. We're actually a little ahead of our time schedule that we've planned for the project.

Yeah, okay, perfect. And are you still, I guess, with an expectation of a close in November, are you still comfortable with a December quarter first production? And I assume that's going to be very modest, but just kicking in.

Yes, that's right. It will be modest, but it's a milestone that we want to achieve. All other factors, our civil works are progressing really well and actually a little bit ahead of program. Our high-wall stabilisation is going well at this stage, so that will put us in a position that we'll be ready to work as soon as available, and our equipment delivery is all secure for that first stage at this stage. So we're in really good shape.

That's quite good to hear. And I just wanted to, I guess, you know, the balance sheet is looking... like it's going to be in a better position with the turnaround in costs and production. I'd be remiss if I didn't ask on M&A, so Anglo first tenders are due in the coming weeks. I guess do you want to refresh the expectations on how you're thinking about that M&A? There's lots of coal assets up for sale at the moment. Yeah.

You're right, there has been quite a bit of activity in the market to date and there's clearly more. These are good assets, but what's in front of me and the team and in our plan at the moment is far more attractive for our investors and shareholders. We've got projects in organic growth that we can manage the risk of. We clearly understand those projects and that multiple is much lower than any of the opportunities that are presenting themselves in the market at the moment. So that's where our focus is as a business, is on our organic growth opportunities. On the Anglo process, I'd rather not comment about their assets and their process at this stage. Our focus is on our organic growth.

No, no, that's very fair. And I think I might hand it over and watch you on the queue. Thanks, Daniel.

Thank you. 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 Chen Jiang from Bank of America. Please go ahead.

Good morning, Doug and Geha. Thank you for taking my questions and congrats on a strong quarter with much lower cost. Just to follow up on that, the The mining fleets and people, you know, 30 major pieces of equipment removed in March quarter and another 13 expected in September quarter. I guess for the people and the equipment operating at the CARA now, is this going to be the norm going forward? Are you happy with the mine plan? I guess, as you mentioned earlier, It's not a temporary removal and you will not bring them back at some stage in the future. I'm just trying to think if the improvement in your course is primarily driven by the removal of people and fleas.

Thanks. Principally, you're correct. There's obviously a host of underlying activities that drive the productivity to enable this Two lots. The first lot of work that was let's catch up the historic deficits, and that was additional fleet that we invested in over the last period of time. That cost increase has now come up because that works behind us, exactly as you described. Secondly to that is the productivity improvements that we've identified as potential in our plan and what we started to see being delivered. For example, the productivity gains that we're getting out of our dragline fleet. is enabling the liberation of this additional contracted fleet. And that'll come out. But to sustain our dragline profile going forward and our stripping ratios that we want to have as a long-term match to our long-term mine plan designs, the fleets that we have at site is pretty much stabilized now going forward. We will continue to hunt for productivity gains And if those productivity gains are materialised, particularly in our drag lines, that's where I'll be looking for, is can we get more volume moved by our drag lines and maybe in cost blast is another area that we're looking at a few projects on. That might liberate that we can free up more fleet, but we don't see that in the immediacy. Those are projects that we deliver over time and take advantage of either an incremental tonne gain or a removal of cost gain.

Sure, sure, thanks for that, Doug. Maybe a follow-up. You mentioned the strength ratio. So is CARA at the moment achieving the long-term, sorry, improved strength ratio or long-term strength ratio? Just to remind us the long-term strength ratio for CARA.

I have to, as a mining engineer and engineer, qualify my answer in saying you have to average it out because instantaneously, month to month, depending on the geometry of the pit or what you're doing in the pit, it will change and go up or below. But over time, you want to average that. And to answer your question with that caveat, yes, we are at our average long-term stripping ratio. There is potential to drive that down over time, but it will be short-term downs and ups.

Sure, sure. Thanks for the color. And then maybe last question to Geha about your price visualization and then what's happening in the medical market. So by looking at the cover, the June quarter price visualization, it's close to 90% of the POV, the premium low volatile high cooking costs. So I'm wondering, this 90% price visualization, is that mainly because of the timing of the shipments that is lagged for three months, or it's something else? And also, Gerhard, if you can provide your observation of the supply and demand for the PCI-Co or second-tier quality MECO in the Sabre market. That would be great. Especially, what are the drivers for the PCI discount? That is narrow to 20% in July from 32% discount averaged in the June quarter. Thank you very much.

Yeah, okay. So, good question. So, I think... In terms of price realization for us, that has improved simply because we came from a very high price environment in quarter one. So it's a time lag, $308 per ton, I think, in quarter one. And quarter two is $50 less. So we benefit here, as I always say, in a falling price environment, our price realization goes up. in an increased price environment, our price realization goes down. It's just a three-month time lag. At the same time, and that goes into your question as well, in recent weeks or months, we have seen the PCI relativity has dramatically improved. It's sitting at about 88% to the premium global index. So very small discount on PCI in the market right now. What is driving it? Predominantly the embargo on Russian coal businesses. Russian coal businesses were targeted by the US. Chinese banks stepped immediately back, stopped funding any deals with these Russian coal businesses that usually exports into China and India and South Korea and Brazil. So it's a little bit more difficult. I think it's temporary. I think it will take some time for the Russians to find alternative routes into the market for that type of coal, of which there is, of course, a lot available in Russia right now, stockpiled. And when Russia sells this type of coal, it's being sold at about $160, $170 a ton, so it's a big discount. to today's $200 per ton or $197 per ton. I think it will take a little bit of time, but they might find a way to circumvent these embargoes this year. I think the other element we see is, and look, by the way, that is, of course, very positive for us. A lot of our call sits on the secondary indices, and that's very positive for us, and we will benefit from that. in the third quarter and going forward. So on, on the main benchmark index, we have seen that of course, coming down now to 225. Um, what is the driver for that? Well, the main reason why that price was very high in, you know, anything above $200 is pretty high, but we have seen prices above 240 for a long time was predominantly India. India is a monsoon and, um, and won't come back before end of August or even September before they start really building momentum again in terms of appetite for metallurgical coal out of Australia. We do see a very, I would say, subdued demand for met coal in the market, which in a way is a positive. Given the depressed steel markets, the price of 225 is not a bad price. It's a very good price. But we do see China exports it. at record levels. We see Indonesia exporting Coke at high levels. So there is a lot of pressure on this index, on the benchmark index, and that was a reason why prices are now down to $2.25. There's probably a little bit more pressure on that price, you know, maybe $5 to $10 more downside before then the CFR arbitrage kicks in and then the Chinese starts buying.

Okay. I appreciate the color, especially on the Russia sanction. Just to summarize, so the 90% price visualization from CARA of the POV is due to the three-month lagging, and the PCI discount narrowed. That's mainly because of the sanction of Russia. And then just wondering for For those PCI coal from Russia, normally, do you see them as competition to Australia coal? Eventually, they will go to China or India. Do you see that price discount creates downward pressure to Australia coal? Thanks.

It's a global market. It's always competition. Australia is still the biggest PCI exporter, but closely followed by Russia. Russia owns about a third of the 60 odd million tons the seaboard market has on PCI. And yeah, it's in competition. I mean, Australia is a traditional seller into China and India and other areas, you know, South Korea. And that is putting pressure on the prices. But of course, if you embargo Russian coal, you know, you're taking it out of the supply chain, you know, so that's driving up the prices. It will, it will, that means also that will remain in place for another few weeks, you know, if not month, but eventually, eventually Russia will find, you know, these coal producers of Russia will find their way into the market again, you know, through other means. And then there's, you know, I think the relativities will normalize, you know, remember the relativity from PCI to benchmark is always like 70%, 73%, but the 88 we see today.

Yeah, sure, sure, understand, understand. Thank you so much, Geha and Doug, for your call. I'll pass it on. Thank you.

Thank you. Your next question comes from Nathan Martin from the Benchmark Company. Please go ahead. Pardon me, Nathan, your line is now live.

Sorry, I was on mute. Good morning, Gerhard, Douglas, Andrew. Just wanted to come back to the cost side of the equation, if we may. Congrats again on a pretty remarkable quarter-over-quarter decline. Cura specifically came down from $127 per ton in the first quarter to around $82, it looks like, here in the second quarter. Some commentary regarding targeting further productivity and cost improvement at Cura in the third quarter. I think a lot of that may be revolving around that plan removal of an additional fleet, but it would just be great to get your thoughts on how repeatable maybe that $82 cost per ton number is from the second quarter in the back half, or maybe is there even room to improve that for some of the productivity initiatives in the removal of that fleet?

The numbers driven by what you described in our plan, and I've been talking to it, and this is what's really dear to us as a team, is we have a plan and we're diligently executing to that plan. The removal of this fleet we always knew would be a step change in our cost, and that cost is now out. So we've got the cost out of the business, and it will stay out of the business. There is additional gains, as you mentioned, in this quarter. We will take some more cost out off the back of productivity gains of standing down another fleet. And then there's another element to it, which is always the denominator. And we've had a good quarter which has driven that number on it. So if we can sustain, which our plan does support, continued good production and sustained performance, then we will enjoy the numbers that we have in this quarter. And that's what we'll be focusing on. Second order to your question being, is there more opportunity? Yes, there is. And that's part of our plan. We're busy driving out costs and looking for opportunities where we can offset costs that have been imposed upon the business. For example, the royalty impost. And post-2026, when the standby royalty drops off, that's another $15 a US tonne that comes out of Currah's cost profile, which is another substantial step change in our costs. So in the near term, there's incremental cost differences, and then longer term, there's major step changes in our cost position of the asset and complexes.

Appreciate that caller, Douglas. And then maybe to your comment on the denominator, I think you guys mentioned that you had increased inventories a little bit during the quarter at Cura. When do you expect those inventories to ship and could that improve, you know, upon your 2.7 million tons sold at Cura in the second quarter as we look to the back half, increase that run rate?

Yeah, Nathan, you're correct. We did build stockpiles because we were hindered with our ability to get product to port through the The rain that occurred, firstly the rain hindered it, and then we had a run on coal right at the end of the month as a result of that, which ended up in stockpiles of warm coal. And then we also had product at port. That will be consumed over the course of this quarter.

Okay, great. I appreciate those comments.

No problem. Thank you.

Thank you. Your next question comes from Rob Stein from Macquarie. Please go ahead.

Thanks for the opportunity. You would have noted several mine outages in the sector, which has had an impact on both operations, but then also permitting and approval processes. Can you just potentially give us a view on the relative complexity of the Mammoth Underground to, say, a typical geologically complex and fractured mine? you know, underground system in Queensland. Like, where do you see the risks? How are you managing it? Noting the different mining method. And then similarly, can you talk to the US underground risk in that same context? And I'm really just looking for a relative view here, not skewing one way or the other.

So the mining method that we're going to deploy at Mammoth is board and pillar. The geology lends itself to board and pillar and also the level of cover. So our extraction ratios are going to be very favourable out of the project. The other fact that we're launching the mine straight off a high wall takes the civil costs out of the project. You know, SPIT has come to a limit at this stage, not an economic limit, and we've fully permitted to mine all of that coal from an open-cut perspective, but we've got an overland conveyor that would have to move. So it would have been coal that would have mined to the back end of the life, but this gives us the opportunity to pull forward in the life of the mine and mine through an underground mining method. Relativities to the US. Our US operations, I believe we've got one of the best teams in the world to manage high cover, because they're mining in the Appalachians, so there's high cover. and highly gaseous. Buchanan is a very gaseous mine, and we've had a team with a huge bank of experience that's got the capability to manage those complexities and done it very successfully over a long period of time. Buchanan is a two-long-wall mine, so totally different mining method to the board and pillar that we're deploying here. Gas at the project in the first phase is pretty low in the project, so breakout gas is low. But over time, it will increase and will bring that knowledge to bear. And this is the benefit of having the business of strong open-cut and underground skill set and knowledge that we've developed over time that we can leverage into the development of this mine. And as we've built the business over time, brought a skill set together, they can look at other opportunities that has got a proven track record of successfully integrating and getting more out of operations that have been there in the past. I think you touched on permitting relativities to others. This is an area of mine that's fully permitted. We can mine all of this coal. What we're seeking from DES is effectively a mining method change. We can mine it through open cut and what we're applying for is a change under our permits. So we want to mine it through a different method, be an underground mining. But it takes us through an approval process with DES. So a lot less complex than trying to build a new mine and get it fully permitted from the ground up.

And just as a follow-up, the implications of Grosvenor and the outage there, and I guess potentially an increased... Not, sorry, a decreased risk tolerance from the regulator up in Queensland, you don't think that's going to have an impact primarily owing to the mining method? Would that be fair to say? Yeah.

I think it's beholden to an old industry that we learn from each other and make sure whatever we can get from Anglo to learn, we take through the industry and distribute. So we're doing that, and Anglo's been fairly liberal with good information to industry to date that we'll learn. Different mining method, different gas, different circumstances. Our engagement with the regulator to date has been positive. We've made sure that we've I've spoken to them early and we've taken them through all of our technical information and our team has come away from those meetings fairly buoyant with the response from the regulator on the way in which we're approaching this project. We've got great people in country supporting us and we've got a very strong team and we're leveraging our skills within the team to ensure that we understand the risks and we've got engineered controls in our plan around all of them. So positive feedback. from the regulator that we've observed.

Thank you for that clarity. It's really helpful. I'll pass it on. Thanks Rod.

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

Firstly, thank you everybody for taking the time to join us today. I've said it a few times before on these calls that the team has developed a plan for the near term and the long term to set the assets that we have up. We're blessed with the resources we have and the team, and we've got a plan that we're diligently executing to take full advantage of this 800 million tons of resource ahead of us and making sure that we extract the best value we can for shareholders. And I look forward to updating you on progress to our plan and positive results into the future. Thank you.

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