Stanmore Resources Limited

I would now like to hand the conference over to Mr. Marcelo Matos, Executive Director and CEO. Please go ahead.

Hi, all, and thank you for joining us today as we discuss our performance for the first quarter of 2025 following the release of the activities report this morning. It is no secret that it has not been an easy quarter in the Bowen Basin with rainfall of more than 470 millimeters from January to March. which is almost 80% of the annual average for the previous five years. This has understandably impacted operations and the whole logistics chains, whilst also coinciding subdued demand in the metallurgical coal markets, which has driven down the headline coal prices to a level not seen since mid-2021. Nonetheless, we are proud of the efforts from our side teams in managing these headwinds, to deliver saleable coal production of 3.3 million tons, although below our guidance on an analyzed basis. This result is above market consensus, given the expected weather impacts and in line with the prior quarter. Moreover, we are pleased to have kept full-year saleable production guidance unchanged, owing to the recovery plans being underway and the underlying resilience of our assets. In recognition of the market conditions, we have also announced a reduction in the guidance range for both FOB cash costs and capital expenditure, further solidifying our cost-competitive position. On a deeper note, we have maintained our focus on project development pipeline and are pleased to have announced the maiden JORC-compliant reserve statement for the combined Isaac Downs Extension project. Opening with safety. We are glad to report that no serious accidents occurred during the quarter, reducing our serious accident frequency rate to 0.15. This is a great start to 2025, and we are also pleased to have observed a significant reduction in our total recordable injury frequency rate, giving credibility to our proactive safety culture and the commitment of our site teams in identifying and managing risk. especially given the difficult weather-driven mining conditions we face within the quarter. Moving on to the operational update and starting with South Walker Creek. Overall, romco mining volumes recovered compared to the fourth quarter of 2024, supporting steady saleable production and a lower strip ratio. This is an impressive result in light of the challenging conditions demonstrating the underlying strength of the asset and adaptability that comes with a long strike length and multiple active fits, as well as the benefits of the asset being well capitalized in recent years. The drag lines, which are less impacted by the wet weather, recorded another impressive quarter with total material movement of 8.8 million BCMs compared to 8.1 million BCMs in the prior quarter. This sets a good baseline to execute on the recovery plan for the remainder of the year, which, as highlighted in the report, is expected to be weighted towards the second half as operations manage the flow-on effects from restricted cold recovery during the second quarter. On the project's front, the newly upgraded wash plant reached its main plate capacity of 1,200 tons per hour during the first quarter, and even above this throughput rate at times when consistent feed was achieved. The MRHC Creek diversion reached substantial completion, enabling clearing works to begin at the new E North pit. A Poitrail produced a standout quarter with stable coal mining volumes quarter on quarter, and the almost 850,000 tons of opening ROM core inventories providing the feed stability to support the increase in saleable production. With the North Queensland export terminal and the associated rail network adversely impacted by the extreme weather and flooding conditions in late January and early February in North Queensland, sales volumes were lower compared to saleable production. This has led to a modest build in product inventories, partially offsetting the drawdown in ROM inventory and positioning the asset well as weather recovery plans are actioned through the second quarter. The excellent operational performance out of portrayal has ultimately led to a slight increase in the full-year production guidance range for saleable production, enabling us to keep portfolio-level guidance steady. The Isaac Flames complex suffered the biggest impact from wet weather, with limited flexibility to manage the conditions from fewer active pits at Isaac Downs and lower opening ventures compared to other operations. Rum flow was 216,000 tons lower quarter-on-quarter, whilst saleable production was 240,000 tons lower and sales 140,000 tons lower, resulting in unexpected impact to strip ratios, which should improve in the coming quarters with increased cold flows. Dragline performance was a positive, recording strong productivity despite the headwinds, and supporting recovery efforts in the second quarter and for the remainder of the year. Nonetheless, considering the impacts in the first quarter and the expected recovery trajectory, We have lowered the full-year saleable production guidance range by 200,000 tons, with a commensurate impact to sales volumes expected. As highlighted earlier, we are currently expecting that this impact can be mostly offset by the higher volumes from portrayal, enabling us to maintain the total group guidance for saleable products. On the project's front, We have been accelerating our pace of activity for the Isaac Downs Extension Project, focusing on those items on the critical path for development and seasonally dependent activities. We are pressing ahead with the required studies and the works for the environmental impact statement, targeting submission in early 2026. As mentioned earlier, we are pleased to have announced today the made and reserved statement for the project. With a total reserve of 52 million tons, this release reiterates the underlying strength of this project as we press ahead towards an investment decision. On Eagle Downs, whilst this remains a core project and we are advancing work packages as part of moving towards achieving readiness to support a final investment decision, with the market conditions where they are, we have prudently notched our gear or two as part of the overall focus on cash preservation, meaning that we would not expect final investment decision readiness to take place in the first half of 2026. I'll now hand over to Shane to summarize our corporate activities and updates to guidance.

Thanks, Marcelo. Stanmore's balance sheet remains in a solid position despite the current industry conditions. with closing cash of 169 million US dollars, or around 260 million Australian dollars at current exchange rates, and total liquidity of almost 400 million US dollars. This positions net debt at 146 million US dollars compared to 26 million US at the start of 2024, at the end of 2024, sorry. The major cash items that are driving this movement include the $60 million dividend paid to shareholders in March and $17 million in capital expenditure, primarily related to the wrapping up of our key growth improvement projects at MRA2C and the South Walker Creek CHPP expansion. Furthermore, there has been a notable working capital build contributing to the increase in net debt as at March 31st. with our customer receivables balance having increased from the end of 2024, primarily due to timing differences in sales and cash receipts. Collections of those receivables has already seen the cash balance improve to approximately 224 million US or 350 million Australian dollars by the middle of April. In terms of guidance, as mentioned by Marcelo, we're pleased to have reaffirmed our saleable production guidance despite the weather-related headwinds in the first quarter. Hopefully it is self-evident in our quarterly report, but we do expect that our consolidated production and sales profile will be lower in the first half of 2025 compared to the second half, if considered in light of our full-year guidance, as we deal with the associated flow-on effects of the weather impacts from Q1 and enact recovery plans throughout the course of the second quarter. With respect to other guidance items, FOB cash costs are currently tracking below our previously stated guidance range of 89 to 94 US dollars per tonne. This is primarily due to lower input costs, as well as benefiting from a lower Aussie dollar exchange rate during the first quarter and into April. This, together with cost improvement initiatives being implemented for the remainder of the year, has supported a 4% reduction in FOB cash cost guidance to between $85 to $90 per tonne for the full year. Furthermore, we have taken a deep dive into our capital expenditures for the remainder of 2025, seeking to defer non-essential sustaining and improvement capital works into 2026 for reassessment depending on market conditions at that time. This, together with favourable effects in the first quarter, has supported a significant reduction in capital expenditure guidance, reducing the range by more than 20% to between 80 to 90 million US dollars. These changes add to Stanmore's already strong cost position in the industry, giving all stakeholders further confidence that the business is well placed to withstand volatility that is currently being experienced in commodity markets. I'll now hand back to Marcelo to conclude the call with a brief overview of market conditions.

Thanks Shane. It has clearly not been an easy quarter for Metallurgical Coal Markets with headline coal prices, which opened at the highest level of 200 US dollars per ton, for quarter, reducing to a four-year low of 166 US dollars by mid to late March. The key driver has continued to be the elevated level of Chinese steel exports, further dampening steel market conditions ex-China, and has obviously been impacted by the overall uncertainty from the tariff announcements, particularly as it relates to metallurgical trade flows between US and China. We perceive that the smoke signals for the price move lower in March were certainly there, with no price response in late January and February, despite the supply disruptions across Queensland. Nonetheless, a recent rebound in prices, Back to 190 US dollars per ton has been well received, with supply risks becoming more prevalent following further incidents impacting expected supply from Queensland and New South Wales. On the demand side, buying interest from India has improved, which we expect to be a signal of the beginning of restocking activities ahead of monsoon season. and ahead of ongoing new co-governance commissioning from the third quarter in India. This is a positive sign for the market and remains key for price direction, together with the obvious uncertainties from the global geopolitical environment. With that, I will now hand over to the moderator so we can take your questions.

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 Brett McKay with Petra Capital. Please go ahead.

Good morning, gents, and rather good results given the circumstances. Well done. I just wanted to quickly talk about the CapEx and OpEx changes to guidance and how How much is sustainable in terms of cost out initiatives put into place that will remain that way versus any of the costs that have been taken out this year that might come back in next year? Just trying to get an understanding both from the cost and the capex side as to the magnitude of sustainability across both those buckets versus what might come back in next year.

Yeah, don't worry. Thanks, Brad. Shane here. Yeah, look, I mean, what we've sought to do there is to – there's various initiatives that are taking place to look forward to reducing costs and improving the effectiveness and productivity of operations. So looking at low-cost country sourcing and improvements with vendors on the supply chain side of things, obviously taking out some low-hanging fruit where we can in terms of cost-improvement initiatives as well as areas on the operations side where you're looking to improve yield or increase throughput through our wash plants. So at this stage, I think there are a lot of initiatives here that could well be sustainable well into the future as we look to make sure that we focus on productivities and cost improvements here. through the medium term. So there's nothing that's being done that's, you know, puts at risk, I think, future production. I think one of the things we're always conscious of, though, is particularly at Isaac Plains and the steeply dipping coal seam there with strip ratios will naturally increase over time. But beyond that, I don't think there's too much there that is really... more once-off in nature. I think these costs are sustainable into the future.

What about on the CapEx side? I mean, we were sort of expecting that roughly $100 million number from a sustaining CapEx point of view going forward, but it seems like that could be a little bit lower given the capital projects are now complete.

Rob, this is Marcelo up. As we explained in the release, most of the CAPEX reductions, they are actually deferrals. They are, in our view, low-risk deferrals, so we are not putting at risk the integrity, of course, of the assets, like postponing things like shutdowns or critical overhauls. Most of them are projects that we classify as more like potential improvement opportunities that obviously will generate a benefit, but in light of, you know, the focus on cash preservation, we just thought that some of those benefits can wait, okay? As an example, one of them is a project in Port Royal for pumping tailings, which will save us some cost of tailings haulage, which is a great project with quick payback, but could wait, and so we could well be in the plan for next year, for example, okay? So I don't think anything has changed against our previous message that we are back now to sustaining capital levels. These type of improvement projects are part of this sustaining capital book, okay? But in light of this year's market conditions, we decided that some of them can wait, and we, of course, are focusing on making sure that we are protecting margins and preserving cash.

Okay, that makes sense. Thanks, Masai. Maybe just a quick one for Shane, just on underlying free cash flow at current prices. Given that there was some working capital movements in the quarter that you've stated that cash has now come in and built the cash reserves quite substantially, just at current prices and with this lower cost structure in place, is the business cash flow positive?

Yeah. Absolutely. We're still generating cash flows and, you know, even if we look at some of the low points of coal prices as we experienced through Q1, where the business is being positioned, you know, we're still making margins even if those low points were to be revisited. So that's one of the things that we're looking to do is to really, you know, capitalise on what are already, you know, pretty... be competitive assets on the cost curve by just making sure that they survive all seasons through this volatility we're seeing at the moment.

Excellent. Thanks, Shane. And just the last one on Isaac Downs Extension. Can you give us a bit of granularity on the OPEX, CAPEX side of things? I know that they weren't included in another pre-season being complete. Is there any sort of guidance you can provide around those sorts of numbers that came out of the study?

Brad, if you put some of the contingent payments associated with the acquisition of the block of code that we've concluded with Anglo and Exaro last year, and if we just look at the, which are small payments at the end of the day, there's a first code payment, and there's a, let's say, a stream of royalties in the future. But if you just focus on the project development itself, we are looking really at around probably 150 million U.S. to develop the project. As I said before, it's a very similar project to the Isaac Towns project, comprising of a whole row, the pit development, which is box cut, the basic, flood protection infrastructure in the form of levees and associated, let's say, mine infrastructure. So it's a very simple project. We've done it before very successfully. And we are very comfortable with the challenge ahead of us. And I think it's going to be a capital light project for us. And whichever way we look at it as an extension, brownfield project, is going to be attractive for us with pretty quick payback.

Right, perfect. Thanks, Marcelo. I'll leave it there.

Your next question comes from Tim Elder with AUDS. Please go ahead.

Yeah, good morning, Marcelo and Shane. Thanks for taking my question. Just interested around the revised CAPEX guidance, and Shane, you pointed to some lower assumptions around FX. I'm just interested in if you can give us a split around how much of that is related to projects that you've deferred, those changed assumptions around FX.

Yeah, no worries, Tim. Yeah, I guess referring to FX, I was mainly referring to the impact on Q1 CapEx. So in the first quarter, we had about $17 million of CapEx in US dollar terms, which has benefited from lower exchange rates in that quarter. When we look forward to the rest of the year, we've actually used... We've actually used the same FX assumptions as we had done for the previous guidance. We're not seeing the improvements for the rest of the year being necessarily FX related, but more deferrals. We've been seeing up to that $20 million mark of deferrals of capex that we can move. That's $20 million Aussie, by the way, that we've been able to move out of the year without a detrimental impact to our operations or to operating costs. just looking for that sort of low-hanging fruit and ways and means that we can improve our cash position this year and to see where markets go over the course of this year and into next year.

No, thanks for clarifying that. And then in terms of the Isaac Plains extension, I'm just wondering if you can give us an update on the approval processes with Queensland Government and how you found working with the new government.

Look, the initial dealings with new government has been pretty positive so far, Tim. We are still on the, let's say, working hard on the work streams to support the submission of the EIS in early 26. And I think a lot of the work now is on all the, let's say, acquisition of of data around groundwater, all the ecology works that are required to support that submission. In parallel, of course, we are firming up the work packages for the project. We have time for that. So all going well. No issues so far. And a pretty good, you know, good early days with the new Queensland government as well around discussions around how we can fast track the approval. towards ensuring, as I said before, our target of good continuity from the moment we start to ramp up the extension project to when Isaac Downs starts to reach its economic limits, which I expect it to be around somewhere around 2028.

Yeah, thanks. That makes sense. And then just around the coal quality for that project, it seems like you're targeting more of a PCI coal than my understanding would be similar kind of a semi-soft product previously. I'm just wondering if you can talk through the rationale for that.

Look, Tim, the option is there. We can produce, I mean, the wash plant and the resource will allow us to produce both, okay? We can tweak the plant towards a slightly higher SPCI that could give us a better, let's say, price relativity compared to what we would get if we targeted a semisoft, because if we targeted a semisoft in that resource, we would have a larger portion of a secondary thermal core product. So that's where the trade-off is, is whether we tweak towards a high-ash PCI at times, or we change the semisoft depending on what the market is. We do that very often with portrayal. Sometimes we have a yield benefit as well. It's early days. It's not a decision we need to take now. Depending on PCI relativities, a slightly higher SPCI could actually generate a better revenue outcome combined with the overall yield, let's say, yield and margins outcome. As I said, like we do it for trail, this can change from time to time depending on market conditions. Thanks for that. I'll end it off.

The next question comes from Glenn Lawcock with Baron Joey. Please go ahead.

Morning, Marcella. I know it's a tough question and I don't want to ask it, but you pulled costs out, done a great job, but cold price goes down again once the weather abates. How much more do you think you can pull out of the business? I mean, good job today, but is there more and could we see another, you know, are you working to produce another cost guidance again in a quarter's time?

Glenn, there's a lot of work. going in that space. So far, we've banked a portion of the improvement initiatives that we've identified. We have a very clear pipeline of improvement initiatives. They go from operational improvements from loss and dilution, productivity, yield, as Shane said before, to the procurement book. And so, I mean, there's a range identified. Some of them need to be better. let's say, defined at a more granular level. We need to understand how much we are able to capture in 2025, or how much is also going to be like a more multi-year type of opportunity. So, that pipeline of opportunities are well mapped. So, I would say, yes, there's more to identify that we could, let's say, bank on. Some of them are no regrets, okay, to be frank. We might just go and implement anyway. So far, we have not pulled the trigger on initiatives that could actually have an impact, let's say, in 2026, almost like high-grading mine plans or chasing lowest preparation areas or, let's say, shorter haulage calls that could have an impact, let's say, in the life of mine plans in the future. So those options are also there. If we really need to, so far we haven't.

Probably just one thing to add to that too, Glenn, is that some of the, particularly on the supply chain initiatives, as we implement them, you'll see an improvement this year, but you won't get that full year run rate improvement until next year. And that's where you can start to see actually some actually more weighty improvements going forward, depending on how successful those initiatives are.

Okay, that's great. So hopefully we might get another cost guidance update with the June quarter results in July, if all goes well.

We can promise that at this stage, but a lot of work in this space going on.

Oh, well, you know, don't promise it, but drive for it. That's all we ask. Absolutely. Just on the market side, if maybe you could just shed a little bit more colour. I was a little bit confused. You were sort of saying in your release you know, when we emerged from the monsoon season, which is Q3. So that's actually quite a long way away from today. That's another four or five months. Yeah, so how much of the recent bounce in the price thing do you think is really just related to the weather and the outages like Moranbar North, which were apping out for a period? You know, do you feel that prices in the next quarter, the next three months probably go back down again with all the restarts, etc.? ?

I would say the market's quite balanced now as we speak. Yes, probably a bit of that is a result of some of the supply withdraw that we've seen. We are not seeing a lot of volumes sitting with traders needing to move volumes as we've seen earlier in the last quarter, okay, which is good. So we are not seeing a lot of new producer offering as well. So the market, it's balanced. A lot of this recent uptick were driven by very few number of cargoes offered in the sport market. They were driven by the Indian market. The Chinese CFR price is at a different level, as you're probably aware. We'll see what happens ahead of Monsoon. The Indians are still running very low inventories. This hasn't changed, so they have not come back to to buy big time yet to bring ventures back to a higher level, which means they have been taking risk in terms of running lower stocks because the market was reasonably well supplied. It's tighter now, so we could see some restocking ahead of monsoon. When you go through monsoon, things get a bit weaker. It's quite normal, right? It's a seasonal thing every year. But then we have a few things happening in the second half of this year, which are a few new coke plants that are commissioning in India. They're quite well known to the market. And from everything we've heard, there won't be delays in terms of firing up those new coke plants. So we would assume that they will need to go and, of course, buy up inventories to fire up those plants, which could have a positive impact in the second half. So it's all about now waiting to see what happens pre-Monsun, if the Indians will take a more conservative approach and restock ahead of Monsun, or whether they're going to keep eventually slow, protecting their margins, given the pressure they were suffering on Chinese steel imports into India. As you probably heard, there have been tariffs raised by the Indian government as well on steel imports. So there's a lot to watch in that space.

Yeah, no, I appreciate that. I mean, but obviously the lack of spot sales has probably more been driven by the weather and the outages than anything else in the last two weeks, you'd say?

Well, to a certain extent, yeah. I think it's what Blake Bateman has contributed to that.

Yeah. Yeah. All right. Thanks, Marcelo. I appreciate it. No worries, Lee.

Once again, if you wish to ask a question, please press star 1 on your telephone. Your next question comes from Peter Kerr with the Australian Financial Review. Please go ahead.

Good morning. Thanks for your time and apologies. I haven't heard all of the call, but in terms of the unit costs going down, obviously the Australian dollar would be helping there. Can you give us a steer on what's happening with labour, like wages going down, or have you reduced headcount at the mines?

Hi, Peter. This is Marcelo here. No, there's been no significant reduction in headcount. Actually, we've been on a So if you look back at the last 18 months, we've actually increased the number of fleets we were running in South Walker Creek, which is our largest operation. This hasn't changed. There is a portion of that additional capacity that was always planned to stop because that was part of the ramp up. That's going to happen during this year, but it's not the result of what's happening with the market, for example. It's more part of the normal process of ramping up capacity and stabilizing the operation. Labor costs have not decreased, okay? There are actually some of our enterprise bargaining agreements, the EBAs, I mean, they have already pre-established increases, and some of them were concluded in the last couple years, or the last two or three years. And, I mean, we have had, as you're probably aware, cost implications as a result of same job, same pay in one of our, especially in one of our operations portrayal, where we have quite a substantial increase in costs, given that we have, we do have, let's say, a larger number of labor hire, which was, let's say, was impacted out of that legislation.

Okay, great. Thank you. And I thought I heard correctly earlier that the cash balance of $169,000 at March 31 had improved to $224,000 since then, you know, the last month and a half, well, sorry, over the last month. So should we be thinking that if coal prices stay where they are today for the rest of this quarter, that your cash balance will be at least $2.24 at June 30?

Yeah, I think that's an unreasonable assumption. I mean, obviously, we need to see where the FX rate goes and... And hopefully there's no further weather interruptions, which was a big interrupter for Q1 for us. But at this stage, it's not an unreasonable assumption, again, depending on coal prices. And probably the only other thing to note is that we do have a debt repayment in June, a scheduled amortization amount of $35 million. Great. Thank you very much.

There are no further questions at this time, and I'll hand back to Mr. Matos for closing remarks.

Well, thanks, everyone, for your questions and joining today's call. While it's been a challenging quarter, we have ultimately delivered a relatively robust operational performance, and most importantly, done so safely. 2025 is shaping to be a tale of two halves, with a more challenging first half with recovery underway, and a stronger second half, but we remain confident on the ability and resilience of our operations to deliver on our guidance numbers. We'd like to once again commend our employees and contractors for driving this outcome, which I believe demonstrates the positive and unique culture we have at Stanmore. Thanks again to everyone who has joined today's call, including our shareholders. Goodbye.

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