Whitehaven Coal Limited

Good morning, everybody. Thanks very much for taking the time to dial in today to the half-year results for financial year 24. As usual, I'm joined by a couple of my colleagues here on the leadership team here, Kevin Ball, our CFO, and Ian Humphress, our EGM of operations. And I've also got here, of course, Kylie and Karen from our investor relations team. Kevin and I will go through the presentation as we normally do, and then we'll move over to Q&A for further questions. Flicking the pages, go to our disclaimer, of course. There are some forward-looking statements included in this pack, so I'll draw your attention to that important statement. Over to the half, I'll just go through the highlights as we usually do. There's been a solid result from us, as you saw, with the quarters that we've released over the last two quarters, first half of the year, and consistent performance from our open-cut operations, resilient thermal coal pricing, which has been very positive, The realised coal prices for the period, $220 Aussie, was a very good result. Rise to revenues of $1.6 million for the half. We have maintained, of course, a strong balance sheet in anticipation of the transformational acquisition of Dornier and Blackwater, which I'll talk about a little bit further. That clearly was the highlight for six months in terms of the news flow from Whitehaven with our October announcement. We are on track for the 2nd of April in terms of completion. In this packet, I'll obviously give you insight into the costs associated with the transition and transaction related costs. A total of $164 million. The tax effect of that is $1,155 million. Our underlying EBITDA for the period was $623 million for the half and our underlying NPAT at $372 million for the half. Safe performance has been very positive. Our TRIF are just dipping under the four now, which is very good to see. More effort required and zero enforceable actions from an environmental perspective during the course of the period. Our balance sheet is in good shape, $1.5 billion in cash at the 1st of December. Obviously, we can update you a little bit more on how that's tracking, $1.1 billion a facility was put in place, US dollars that is, during the course of this period, obviously to underpin the settlement of the transaction, as I say, expected on the 4th of April. From a return perspective during this quarter, we were 18 of the top 100, I think, which is a good place to be, 18.5% return from a TSR perspective over the period. And the board has declared a fully frank dividend of 7 cents per share in the half, obviously those Those numbers, the dividend number in particular is focused on the fact that we have obviously cash outgoings planned shortly with the settlement of this important strategic transaction. But it's nice to be able to deliver a fully franked dividend for the first half of the year. As I mentioned, obviously the highlight for the period was the announcement about the transaction that we are to acquire Dornier and Blackwater, and that is proceeding very well. I won't go through the rationale and recap on the transaction here because I know we've spoken to many of you about this, but there is on this slide a quick summary of the important rationale in terms of why we're moving in this direction. The feedback from our shareholders has been, during this time, overwhelmingly positive, which has been very good, not just about the strategic direction of it, but very positive in terms of price that we've paid and, of course, the structure of the transaction as well has been very, very well received by the shareholders since the announcement in October. I think that's been very, very positive and nice to see that sort of reaction. We believe we're on track for the 2nd of April to say. A number of already the irrigatory... hurdles required have been concluded already and so that gives us line of sight and good confidence that the 2nd of April is actually the right date to be figuring on the settlement of the transaction. The efforts going into the transition team and the efforts are enormous but we're in a good position from an IT perspective, from a business planning perspective, from an employment perspective. We did have to offer a role to all the people across these two sites. We've got 95% acceptance at the moment, which is a very, very good result. The IT build is going well and near completion in terms of the build phase and moving into the testing phase now. important contracts and so on have been successfully worked through and ovated over to Whitehaven and the operational readiness and business continuity plan potential for that transition are well in hand and we move forward over the next seven weeks to the anticipated settlement date. I'll just move over to Whitehaven's coal markets and a quick reflection on that in terms of our business as it stands today. You can see obviously half our business is in Japan, and that will remain an important feature of our business even after the transaction has concluded, given that we will be expanding relationships with existing customers with new products after the transaction. But in terms of our current business today, 52% is in Japan. As I've said before, South Korea and Taiwan always duking it out for either second or third place in the rankings there. But the mover and shaker in terms of our sales mix has obviously been Malaysia being a double over year on year. And so now at 11%, that's actually turned into a very good market for us, which is very positive to see. Split between met and thermal, 9% and thermal, 10% met from our existing business. A quick reminder here that Whitehaven does sell the very high quality thermal product that we've come to be known for and a quick comparison across other jurisdictions and Australia as a whole. From our perspective, the average energy content of our sales in H1 at $6,100 takeout, it points to a very strong quality that we have and the pricing that we receive as a result of that. The Vickery project, which I'll speak to a little bit later on, will come on and improve that as well because the product there at Vickery is better again, not just from the average of the country, but the average of Whitehaven's existing portfolio. And just again, another reminder into the central nature of the part that we play in the energy world. You can see our key markets there in terms of Japan, Taiwan and Korea, updated in terms of our contribution to their daily energy needs in each of these these jurisdictions there's a couple hundred million people involved in this equation and more now that malaysia has joined the tables here in terms of what our contribution is on a daily basis 17 minutes in malaysia i think is reflective of the fact that that volume into malaysia has doubled year on year and uh and the market's a very good one for us in terms of pricing as well it's it's it's a japan-like pricing environment that we're operating within there which is which is uh very pleasing for us to see that expansion and diversification into into other markets Flipping over, as we transform with the Dornier and Blackwater transaction, you'll see that we are going to spread our wings further, obviously, into metallurgical coal, and that is one of the overarching objectives of that transaction, to promote a better business. But our customer mix doesn't really change that much. There are a couple of call-outs that I will make just in terms of the difference in terms of the market jurisdictions. We've The Indian presence actually reverts pretty much to a particular proportion that we experienced in more recent years, but that has dwindled off as many as you know as the sanctions imposed of Russian coal move Russian coal out of certain markets. And for us, the Indian market was the key point of pressure in that regard, and Russian coal being offered into India and China at lower prices obviously meant that our sales into the Indian market had decreased. But that we expect that to jump up again as a result of the metallurgical coal that we would sell or that is already being sold from these two mines into India and that we will obviously take over once completion has occurred. And everybody knows that historically we've not been a player in the Chinese market. There will be a small presence in the Chinese market that does come as part of this. but it is a relatively small piece of the puzzle for us as an organisation. And so largely markets that we've been dealing with in the past. And based on the price spread between the PLV hard coke and the high CV market today, we anticipate the spread of revenue to be about 70% met coal, 30% thermal. The backdrop of that dynamic is important to note again, just in terms of supply-demand dynamics in the market. You can see here, based on the Commodity Insight numbers, I know it's gaining further momentum in the market in terms of their advisory work in this coal space. They are certainly projecting growth in the market, the thermal coal market over time, out to 2040, some 28%. But there's also at the same time a decline in the available supply. Just as we all know, it's difficult to bring new mines on and that mines that are already on foot and producing do dwindle and exhaust their reserves over time. So a 23% decline over that same period. This is the high CV market in particular that we're focused on here. And so that does point to a very solid backdrop from our perspective in terms of continued solid high CV thermal coal pricing in this outlook period. The same picture for slightly different dynamics, but the same picture presents itself also in terms of the metallurgical coal market. This is the metallurgical coal market as a whole, but you can see growth there over the outlook period as well. Some 74 million tonne shortfall created as a result of the inherent growth and the decline in some mines as they run off their lives. Key dynamics here is obviously China buying Australian hard coke again, but India emerging very strongly in the marketplace. We've seen India growing over time, but you can see it seems to hit its strats in a way that it's certainly drawing in available capacity out of the hardcote market, and we expect that to continue as they continue to try and fulfil their objectives here in increasing their steel production as their needs domestically continue to increase. So a very strong backdrop from our perspective, which will underpin good pricing over the outlook period. So there's a summary of those external market drivers here. Supply-demand dynamic, as I mentioned, the underlying supply-demand tightness is going to play out with decent pricing. In the last six months, we've seen a relatively subdued pricing or demand for the thermal side of our business. Having said that, the pricing, despite that shoulder period which you saw in December in particular, was actually very encouraging. That structural shortfall, I think, in thermal and metallurgical coal will continue to play out And as I say, the hard coke demand continues to impress, although the semi-soft market, particularly influenced by the Russian coal flowing around and being offered at cheap prices, is causing quite a large separation between the prime hard coke numbers and the semi-soft pricing and also the high vol PCI. So on the pricing side of things, we're seeing $141 as the average for the US dollar for GCNUC during the period. Metallurgical coal has been very good, $298, so nearly $300 average over the period as well. Realised pricing, as I mentioned earlier, for Whitehaven's thermal coal of $220. Aussie has been very positive for us. On the cost side, labour has moderated to some degree, although I'll put that availability rather than actually pricing. The pricing, I think, of labour is still yet to There's a little bit more time before we see a moderation in that. Electricity prices have gone up substantially during this time. Diesel costs stabilised, although that continues to move around, and the safeguard mechanism costs will be increasing over time. Now that we've covered off the external, let's go quickly just to the first half results. Safety, as I say, our TRIFA just under four now, a tremendous result from our team to continue to deliver real structural improvements here in our business that see our TRIFA rate declining, continuing to decline, so that's a 16% improvement. So very pleased to see that, and as mentioned earlier, the environmental side of our business also continuing to be well managed. So more effort required, of course, to try and continue to squeeze out further improvement here, particularly with the enlarged business after the settlement of the transaction. Our focus is to make sure that we take over those two mines in a safe way and that the safety improvement that we've seen in our business continues to wash over their business as well. Financial results, again, just a quick recap. 10.3 million tonnes for the six months we're on production. Aussie, $220 per tonne in terms of realised coal prices, revenue 1.6. And our unit cost at $111 per tonne for the first six months of the year. We have broken out some acquisition costs for you as well, so you can see here the underlying EBITDA, as I mentioned to you before, 623, the statutory MPAT at $258 million, and the tax effect of those transaction costs gets you back to that underlying MPAT number I mentioned earlier of 372. Just quickly over to the business, I won't labour this, given that we've seen the quarterly reports have gone out in any event, 10.3 million times four, For the first half of the year, for the business, it was actually a pretty solid result with obviously the open cuts doing well and Narrabri underperforming as it deals with some geological issues in Panel 203. A quick look at the sites. Malls has done well and we're very pleased with the run rate for the first half of the year. There are 6 million tonnes for it, so that's very positive. From our perspective, the news here, some people may have seen already, we have made the decision to conclude the trial of AHS at Malls Creek and so we will move back to a fully manned frame of operation there in Q3, so the March quarter, and expect productivity improvements to move now that we're predominantly focused on in-pit dumping and will be completely in-pit dumping very shortly. But that is tracking towards the top end of its range from a guidance perspective. So Malls Creek going well, but we have made that call just to move out of that trial phase of AHS and move on in a manned form. As I mentioned earlier, the Gunnedah Open Cut's doing well. Tarrawonga's done a solid job in the first half, and Warris as well. Warris will be finishing up, though, at the end of the quarter, and so that will be a point to mark just in terms of the transition of the business. But it is... tracking along well to that end date and remaining sales out of where we will see those in the Q4 period as we wrap up the financial year. The Vickery Early Mining Project is going well on time and budget, so that's very positive. First coal, you'll see that in Q4. You'll see some small amounts of coal coming out there as expected, so that's very positive to see, and we'll see the benefit of that obviously will spill into the new year FY25. Now as I mentioned and we talked about before in the quarter obviously there's some operational challenges there with geological conditions in panel 203 as we're in the panel that obviously borders the washout of the coal seam on that eastern flank and so that continues at a slow pace. We revised our guidance for Narrow Rice specifically although we held our guidance for the group as a whole when we revised this back in the quarter and in order to underpin that guidance range we've assumed a replica essentially of of the first half performance at Narrabri and we know we're heading into some better terrain there in terms of the balance of the Panel 203. So we feel that that's the right position for Narrabri's guidance, even though the overall guidance for the company remains the same from a raw production perspective. I'll skip over this slide because I think you've all seen that one plenty of times before. So with that, I'll hand over to Kevin and we can go through the financial results for the first half.

Kevin. Thanks, Paul. So what you see here is the five-year graphs, and I think first half underlying EBITDA are $623 million is a pretty strong result. What they do show in this graph is really how strong FY22 and 23 were, with realized prices well above where we currently are. Really great results. This is a more sustainable level of performance out of the Whitehaven Coal New South Wales business, if I can call it that. Delivered $1.6 billion in revenue, underlying EBITDA of $6.23, underlying NPAT of $3.72. The cash generated from operation in the first half was $5.23, and we finished the year with $1.6 billion in cash and $1.5 billion in net cash. We'll talk a little bit more about what cash we're holding at the current moment because as I said at the quarterly, the unwind of the receivables in the first half has delivered some more cash in the first quarter. EBITDA margin, a 46% EBITDA margin is something that I'm quite pleased with. Coal price better than GCNUC average for the period. Average cost of sales up and we'll talk about that in a minute which is really around the volumetric impact of Narrabri. And it's lower than last year, but I don't think anyone's terribly surprised by that, given the fact that coal prices have come off from the highs of the Ukraine. So if we look at the EBITDA movement, again, what you see here is we've made $2.6 billion in the first half of fiscal year 23. Compare that to the first half of fiscal year 24, and about $2 billion of that decrease comes out of price. $35 benefit from sales volume, so we sold a little bit more in the first half relative to FY23, and costs were up on this from, I think it's $96 to $111. So $623, a good result, and we'll go on to the cost in a little more detail. So if we turn the page to the next one, Paul, you can see from the chart the costs have moved from $96 a tonne in half, $123, There's a little bit of a blend mix here. There's a bit more tarawonga in this product. There's a little bit more mauls in the open cut. And Narrabri hasn't delivered the tonnes that we thought would have delivered in the current year. And because it's proportionally less, it helps to drive costs higher for the group. $4 in the open cuts reflects higher diesel prices mainly, together with increased labour costs. And again, you can see the safeguards mechanism there coming in at $1 a tonne to get us to $111. As we say, you can calculate this is the whole of company cost. This is not a mine cost, so a little bit different from smugglers in the market. But you can calculate this off the face of the P&L, and we've done that for the last 10 years. Let's go to cash, because I think cash is where people are going to focus here. At 30 June 23, we held about $2.6 billion. We generated $500 million in cash from operations. And again, we've had a bit of an unwind out of the receivables at 31 December. We settled the tax. There's no surprise in that conversation. We paid $927 million to the federal government, and they happily took it. And we spent about $360 million, including the US $100 million deposit to VMA for the acquisition of Dornier and Blackwater. Again, we paid out the dividend at the end of the year, and I think there's a slight top-up there in our roundings on a buyback. So all in all, we finished the period at 1.5%. in net cash. On top of that, we've got about $100 million in financing, finance leases and ECA facilities. So our gross cash at the end of that period was about $1.6 billion. And today we're holding circa $1.9 billion in cash because of that unwind and the cash generated in the first six weeks of the business. So hopefully that'll help... explain some other comments we'll make later in this about net cash and liquidity and how we plan on solving and settling. So with the balance sheet in rude strength, in repaying all that senior bank debt in FY22, we bid on those BMA assets and our view on how we settle that is we have a cash balance today, US cash today is about US $1.15 billion. We're holding a $1.1 billion facility with financiers that we announced in late December to the market. So we are really well positioned here to settle this transaction and have adequate liquidity to move through this process. So our expectation is we'll continue to generate cash through the back half of this year. And these assets are highly accretive in a transaction and they come with quite strong stock positions to start with. So we were really pleased with the support from the range of financiers. We were substantially oversubscribed on that. And we are taking the time and the opportunity to reposition and open discussions with a range of financiers along the way. Because I think this transaction does transform Whitehaven from being a predominantly thermal business to being a predominantly met coal business. And that does change the appetite for credit providers. On to the next stage, this one I don't propose to talk a lot about. This has been well canvassed in all of our presentations to people. We do run a business that's all about maintaining a balance sheet in Root Health, maintaining the business so the business can continue to operate and providing returns to shareholders. We've said through the acquisition of Dornier and Blackwater that the buyback will remain on hold, and that's our expectation through this. We also expect to see dividends continue to come from the existing business to shareholders. And once that vendor finance is retired, then I'm expecting to see quite strong cash flows flowing through to the shareholders of Whitehaven Coal. And as Paul said earlier, the beauty of this transaction is that this transaction doubles the size of the business without tapping equity holders. So FY24 guidance, Paul, I'm going to turn back to you.

Thanks, Kevin. Just a quick recap on the guidance, as everyone saw, unchanged from what our previous statements were. You saw back at the call that we refined the guidance on narrow rise statistically, just at a mine level, given the challenges that we're experiencing in this panel. Our overall guidance, from a ROM perspective, remains the same. We pointed to the fact that Malls Creek and the open catch generally are pointing to the top end of their guidance, which is very positive to say. But with Narrabri underrepresented in the overall weighted average mix, the cost is trending towards the top end of our range there. And you can see the 111 that we printed for the first half is towards the top end of that range. And as we've assumed Narrabri to duplicate the run rate of the first half into the second, that provides staying at around the upper end of that cost range for the full year guidance, but within our guidance overall. CapEx, look, CapEx, we're just, the business is so busy. Execution, I think just on that gap, you can see the 171, the first half versus the 400, 450 that we've given you as part of the Q2 revision. Look, I think it's going to struggle to get to the bottom end of that, even at this point in time, there's just a lot of work on. And with all that tightness in the market, tightness in suppliers, tightness in delivery of gear, I can see some of that slipping into the new year, quite frankly. But our guidance remains the same as we previously published and looking forward to executing this second half to make sure we deliver on the balance of our targets. Our focus for this year, no changes in terms of This, of course, the safe management of our business, the environmental compliance is a must. So we want to continue to drive our guidance, as I say, and deliver on the targets we've set here. Early mining for Vickery is going very well, so very pleased with that, and look forward to that making a bigger contribution next year, given that Warris is rolling off. And we'll continue to push through our approvals, and I know we didn't mention the Winchester South approval at the state level during the course of this presentation today, but obviously that's Very positive to see that. Another important step forward to see that piece of the puzzle come together, particularly given that Dornier is adjacent there. So the opportunity there is very exciting. The transition effort for the completion of the transaction, as Kevin's outlined, we feel very confident about our financial position to make sure that there's a seamless transition through completion. We are expecting that to be the 2nd of April. As I mentioned, the competition and regulatory requirements are all solving themselves, which is good. So our anticipation is that we'll be able to settle that on the 2nd, but for some other peculiarity of some bureaucracy somewhere, but otherwise they all look in hand. The safe transition into these operations is obviously front of mind for us and the operational readiness planning that we've got going on the business now and including business continuity plans is an important focus during this period. We have obviously mentioned that we are opening the door, have opened the door to a sell down of up to 20% of Blackwater the Blackwater asset, the inbound interest in that asset, given the long history, the well-established nature of that coal quality in the market, has brought a very strong inbound interest level into the company. So we are looking at that. So the process is ongoing now that that's been launched. That's very positive. As Kevin says, We've gone through the capital allocation side of things. We'll continue to remain prudent and strong balance sheeters, not just as we move through completion and then into the settlement of other costs and so on later in the year. The dividend declared today was a very good result. It is obviously, as people can back salt, that's basically 20% of the thermal business. As we said, we'll be funding dividends from that during the course of the next two years as the metallurgical coal business repays the vendor finance. So that's nice to be able to ensure that we continue the dividend paying to our shareholders. And from our perspective, I just want to round out our comments and just thanking all our employees and contractors and advisors and so on for all the effort that's gone into this last six months. I think our employees have put a huge effort in our board and the support we've been getting from that in order to drive this transformational period for the company is greatly appreciated. And we very much appreciate the continued support of our longstanding shareholders in supporting the company through this journey. So with that, I'll hand back to the operator. We'll get the Q&A started. Thank you.