Whitehaven Coal Limited

Good morning, everybody, and thanks very much for taking the time to join us today for White Hand Coal's full year results call and presentation for FY24. As usual, I'm joined by Kevin, our CFO, Ian, our COO, and our IR team with Kylie and Karen. Kevin and I will go through the presentation as usual, and then we'll move into the Q&A session as quickly as we can. Moving on, firstly, first and foremost, our safety guidelines. Our safety and environmental performance, just want to focus on that. These are very, very encouraging results from our perspective. And I say that because it's made them more pleasing because of the level of distractions that have been going on in the business from the non-routine activities that we have in a normal year. So to be able to land on safety and environmental performances that we have has been particularly pleasing. New South Wales business, of course, historically has been on a very good trend. It's nice to see that it continued that this year with our TRIFA down to 3.3 for the year, which is a great change and 30% improvement. Our new assets in Queensland have landed with a TRIFA of 6.6 for the quarter. And we are working very closely on integrating our business together to ensure that we've got wide-ranging safety management systems rolled across Queensland and we continue to drive the performance that we've been experiencing from a safety improvement perspective. For the second year running, we've had no environmental enforcement actions, which has been terrific. And certainly Queensland also emulated that type of performance with the quarter that we've got in our results here today. I'll go over to FY24's highlights. And of course, this has been a transformational year for us with the acquisition of the Queensland Metallurgical Coal Assets. We have successfully transitioned into ownership, obviously, to Whitehaven, and we've delivered successful and safe production outcomes for that first quarter, being Q4 of the FY24 year. Overall, the New South Wales business has performed well, and the highlights of that is the overcuts performing nicely, And certainly Narrabri has certainly turned the corner and performed better in Q4. Looking at the financial highlights, we delivered 3.8 billion of revenue and underlying EBITDA of 1.4 billion and an underlying NPAT of 740 million for the year. This includes Q4 revenue contribution from the Queensland assets of 869 million and 272 million of underlying EBITDA contributed. The statutory impact for the group at $355 million is after non-recurring items primarily related to the acquisition. Kevin will go through that shortly for you. These good results have underpinned the financial stability of the business and allowed us to declare a final dividend of $0.13 per share to be paid on the 17th of September, taking the total for the year to $0.20 for the year fully franked. From a TSR perspective, across the year, we delivered a 23% return across the 12 months, which is a pretty positive result, which ranks us about 30th in the ASX 100, hitting above our weight, given that we've been hovering between the 80 and the 70 range across the course of the year. From an operational perspective, we delivered 24.5 million tonnes of Brom. New South Wales realised a price of $217 Aussie for FY24, the Queensland for the quarter of June, $271 Aussie, good results both there. New South Wales unit costs ended just above the top of our guidance at $114 over, reflecting lower than planned volumes from our narrow road production. And then, of course, taking one quarter and integrating that into our results gave us an overall result of $120 Aussie per tonne for the group. The Queensland component of that being $147. But before we get on to the financial results too far, I did want to just pause for a moment and talk about the other important announcement that we put out this morning. And that is that obviously we've announced this morning that we've now signed binding agreements to sell to Nippon Steel and JFE a combined 30% equity stake in the Blackwater mine, which has been a fantastic end to a process which has been done not just cooperatively and with a fantastic spirit of goodwill, but a very competitive process and a very expeditious timeline, I have to say. We do feel like we have formed, you know, essentially the gold standard of joint ventures in metallurgical coal assets, I have to say. And this marks the completion of step two, a two-step process, which sets up Whitehaven for the future. When the transaction completes, Nibon Steel will have 20, JFE will have 10% of the joint venture, and we are to receive a consideration in aggregate of 1.08 billion US upon the completion of these transactions. It is a strategic initiative that we've been chasing here and it includes long-term offtake arrangements for both parties and validates Whitehaven's acquisition of these important assets and the ongoing importance of Blackwater Coal to the Met Coal asset, the Met Coal coal market. Whitehaven will manage the joint venture and our partners are supportive of the strategic direction we want to take Blackwater in and we're at our drive to continue to unlock value from this important asset over time. The return metrics for our retained position in Blackwater are enhanced by this joint venture arrangement and not just obviously selling it at a compelling price per percentage point of equity in the Blackwater mine, but we also keep the 100% of the free cash flow of course from the time that we bought the asset, the 2nd of April, right through to say an estimated closure period that we estimate at the back end of the year. So for the nine months that we hold the asset, we take all the cash flows. And in addition to that, we have a $2 US per tonne management fee as the operator of the mine, which will kick in, will be indexed, of course, but will kick in and cover all the sales tonnes for the operation. So very positive enhancements to our overall terms of the metric. And of course, taking the money off the table, de-risking the balance sheet has certainly enhanced the return metrics for our retained position. The cash proceeds obviously fortify the balance sheet very quickly and should take away any concerns about gyrations in coal prices from time to time and our ability to meet all the various commitments we have associated with the original purchase. The buyback remains on hold for two years, as we've said, and dividends will flow from the New South Wales business as you've seen is declared today But I think with, obviously, with the strengthened balance sheet and by the time the proceeds for this transaction materialise in the bank account, which is likely to be Q1 of calendar 25, the board will have the opportunity to review the payout ratio for the final dividend for FY25. Whitehaven remains the obliged or on the hook for the contingent and deferred payments, but obviously the price that we're we've negotiated with the two joint venture partners includes the upfront payment of their share of those payments as well. And so we'll keep that money aside and make sure that we've got all those obligations covered nice and tidy. And as I say, our balance sheet is certainly in very good shape. From our perspective, this is a tremendous conclusion to a two-year acquisition process and assuming the transformation of the company into a metallurgical coal producer and now on a very solid financial footing. Moving across to our business, our markets, obviously Whitehaven is transformed into metallurgical coal producer, but maintains a fantastic position in the high CV thermal coal market. Obviously that thermal coal market, Japan, Korea, Taiwan and Malaysia are now complemented by our metallurgical coal customers. And it's nice to see many of the most familiar customers to us, but it is a much expanded portfolio in that sense. So FY24 sales revenues, 50% of it came from Japan, Taiwan was next at 14, Malaysia at 10, South Korea at 7 for total revenues. India was at 6%, but that will increase, as we know, with the greater proportion of the Queensland production in this New Year's numbers. Beyond the top five countries, 13% of the revenue comes from Europe, Vietnam, Indonesia, Chile, New Caledonia, a range of good jurisdictions to be selling into. As we commented at the time of the quarter, the revenue split between MET to thermal at the quarter, Q4 was 69 to 41. We expect that to gravitate to the 70 to 30 over a full year, given, as we said, there was a lower proportion of sales out of Dornier and we spoke a little bit later in the presentation. I know these next slides, I'm over on page nine, you've seen these before, but it's worth highlighting that we are now strategically exposed to structural supply shortages on both sides of our business. to pick that well. Commodity Insights is the source of this data, and we can see that looking at their analysis here, the high CV end of the market, you can see demand is expected to grow by 20% between 2024 and 2040, but supply is expected to fall by 33%, so that's going to do good things for our prices. Metallurgical coal represents a similar sort of dynamic here, and you can see that metallurgical demand is expected to grow 22% over the same period, and suppliers expected to fall by 8% at the same period. So that's going to cause compression, which is going to underpin very good pricing for the future. It's not just commodity insights, obviously, forming these views. Woodmax views also consistent on the metallurgical coal market side of things. And as you can see here, this is obviously the market itself looks pretty consistent along the time, although growth occurs. But obviously the big driver here is India, with India's With India's demand expected to grow 110% out to 2050, Asia is going to grow about 29% through that same period. Dawn and Blackwater are obviously important resources playing in this market. And as you've seen with the formation of the joint venture, the validation of Blackwater's role in the military coal market, I think, is strongly endorsed by these important T1 joint ventures wanting to secure their supply of these valuable products. Looking to the external market quickly, you can see there's a range of factors which we caught out here playing into the external market dynamic. Demand for hard coke has been strong. India's demand grew, although in the current dynamics it is a little bit softer based on the weather playing out there at the moment. Thermal markets have remained resilient through the whole market and wood pricing has been a familiar backdrop for the year as a whole, which is very positive. Supply dynamics on both sides have been a little better in Australia, so good weather has allowed producers to do well in this period. And external pricing, we've seen the POV hard-coking price average for the year at $2.87, which is very positive. Flat semi-soft was about 60% of that number, which is lower than historical yields, but we've talked about that many times, so I understand that. GCNUGA across the year at $1.36 was a good number. Obviously, it's a little stronger at the moment with about $150 per tonne, which is very good. Now, of course, it's not all about just good pricing and so on. The cost side of things has been buffeted by significant inflation, as everybody understands. And we can talk about that a little bit more when we get to the cost side of our things. And whilst we've talked that labour is more accessible for us, the labour costs are still high. And then we're calling out here, of course, the obvious regulatory impost in terms of the inflationary impacts on our business. And I'll just name a couple. Clearly, the safeguard mechanism is part of it. Same job, same pay. New South Wales coal reservation policy, thankfully, finished at 30 June. And then higher royalties across Queensland and now New South Wales as of the 1st of July. All that places inflationary pressures on our business. So our task is to make sure that we can combat that through cost reductions and productivity across the business. The operational results, I'm not going to dwell on too much because you saw them in the quarter, so I'll skirt through these relatively quickly. RON production, 24.5, as I mentioned before, is 34% up, 26% being Queensland, of course, and 8% increase in New South Wales. Managed sales volumes increased by 22% year-on-year. I'll just move across and talk to the various segments of our business now separately. New South Wales, 19.7 year-on-year, did well. The open cuts have performed strongly. Narrabri in total was less than what we want, but there was very positive turnaround in the recovery in Q4. Warehouse Creek obviously finished up production and has transitioned into a rehabilitation site. And we saw the first tons come out late in the year on time budget for Vickery. So a small contribution in FY24, and you'll see that ramp up in the new year. And just quickly on the sites, malls exceeded its guidance, did well. We did turn off AHS there, obviously. It did exceed its guidance, which was very positive. Mining has finished in the southwest area now, so we are 100% in pit dumping there. Narrabri, as I mentioned before, a tough year, but certainly a good turnaround in Q4, and that continues into this year, which is very positive. Tarrawonga exceeded its wrong. Next year it is, or this year it is, moving into that hill section in Tarrawonga, so we are entering a higher strip ratio area, so that does affect the amount of tonnes that will come out of it in this particular year. Whereas, as I say, it exceeded its guidance, but has closed and now moved into rehabilitation. I'll just focus very quickly just on Hickory. As you can see, there's a real mine there in the picture in the slides there now. So that's been very positive. So a small contribution, i.e. 100,000 tonnes, obviously in Q4. But this year we're expecting to be a replacement essentially for Werris Creek tonnes in this year. The construction went very well on time, on budget and safely. So we're very pleased with that. And we have all all the approvals in place to continue on with this and the board's consideration can look at when is the right time to bring that on. But as we've said, that has been off the table for, will be two years from the time of the transaction. Focusing on Queensland, we've added in the historic numbers for you, which may help for context, and then called out obviously the period of our ownership here in the Boulder, that has been previous BMA numbers. But we had a safe and stable transition into our ownership, which is very pleasing. And the quarter, the first quarter under our control was fantastic, actually. So we had very good results from Dornier at 1.3 million tonnes and Blackwater at 3.6. Performance looks pretty good, trending into this new year as well. So we're very pleased with that. So the quarter did actually, from a Blackwater perspective, saw a couple of production records hit. And we saw actually quite a few productivity improvements at Dornier as well, which is very encouraging and lays a good foundation for this transition into the new year. focus. It does need a bolstered leadership framework to be able to manage this adequately. So we have made some changes, and I'll just call this out briefly. Ian's role has been restructured and changed, and he's taken on the role of our COO, which is very pleasing. And we put in place a regional general manager role, which Dan Iliff has taken on the responsibility for both Queensland sites and also the ROC, the remote operating centre in our Brisbane office. Reporting into Dan, you've got two general managers here now. Todd Matthews taking on Blackwater. Sean Milford taking on Dornier. Two very seasoned and experienced Bowen Basin operatives. So got plenty of experience across all forms of mining in Queensland. And we're looking forward to seeing the benefit of their leadership on the sites. And very well known to many of the people in the Queensland market, being experienced people. So I think that This team coming together will assist us in driving changes across the business. Obviously, there's significant opportunities for realignment of this business, and we are transitioning the Queensland operations to a simpler, more Whitehaven-style operating model. And you would have seen already last week or so, we've started that process with some changes to workforce with some 200 roles affected by that. But that job will continue and the team is very engaged in making sure that these sites are rebased in an appropriate way and at all times ensuring safe and reliable production. We are focusing on top another $100 million worth of initiatives which we're working independently of the guidance range that we're giving. We'll speak to that a little bit later, but that's across a whole range of initiatives which we think there's very good opportunities here in Queensland to make sure we rebase the business as quickly as we can. And with that, I'll hand over to Kim for the financial advice.

Yeah, thanks, Paul. FY24 is probably one of the more noisy sets of numbers that Whitehead & Coal has produced in the last decade, I'd say. So let's take a little bit of time to go through it. We reported $1.4 billion of underlying EBITDA. And you can see it in the top line there. Transaction, transition costs, and some other things related to Werris Creek, accounted for about $601 million of non-recurring costs. A large part of that was stamp duty, so that's about $360 million that we expect to pay in the first half of FY25. And there was $73 million of other transaction costs and about $125 million of transition costs, which included building an IT system to replicate BMAs so that we could pick these assets up and start them on the 2nd of April. And we had a Queensland... integration team that was involved in that as well. So outside of stamp duty, the transaction and transition costs totaled about $200 million on a pre-tax basis. In the remainder of the business, we had about $31 million of non-recurring costs in relation to an inventory valuation uplift. So what that means is accounting standards require us to bring the inventory in at fair value, and that means the normal margin that you would expect to see from those tons doesn't emerge in the P&L. That's why I that adjustment is made. And finally, when we closed Warris Creek, we had about $11 million in one-off closure costs around redundancies and putting the rehabilitation provision to the right place. After these significant items, EBITDA was 798. So that's the statutory number. The DD&A was about 319. And I think the brokers and the analysts of the world will want at some point further guidance on how DD&A and interest works. So Kyle has attached that in the back of this process, and we'll be happy to take people through that. It is one of the bigger differences between people, pretty easy to get to either da, but the NPAT becomes a little bit murky with all these transactions that are taking place in the next few years. We reported a statutory NPAT of 355, but if you add back the significant items, the underlying NPAT was 740. And as usual, the tax rate was about 30% on that. So you should continue to use that rate in your model. Come over the page, I think on financial history and it's, 2024 was a very good result of 1.4 billion, but 2022 and 2023 were excellent results. And they were the years that pushed this business into the position to be able to provide increased returns to shareholders and diversify. So very good two years. But if you go back 10 years, Whitehaven's three highest years of underlying earnings before the contribution Queensland had been, 22, 23, 24. FY18 and 19 were both very solid years, but they were about 1.04 billion. And the next strongest year in 19, the underlying impact was 565 compared with 740 and 24. So what am I trying to say about you two? I think structurally what we're telling you and what we see in the markets is that these coal prices that we've been seeing for a number of years between that US 120 and 150 for thermals, seem to be sticky. So, and if you look at FY24, you can see the potential of the contribution from Queensland. We are excited by those two mines and very happy to see them in the stable. Segment financial results. On a revenue basis, Queensland, as Paul said, contributed $869 million in Q4 to the total of $3.8 billion of revenue and an underlying EBITDA of $272 to the $1.4 billion total. It's a good start. There's plenty to do in Queensland and there's plenty to do with it. So we look forward to that. Come over the page to sales mix and realisations. New South Wales reported equity coal sales for the year of $13.2 million with an average price of $217 a tonne. Queensland reported 3.2 million tonnes of coal sales for the quarter, which, as you know, was below expectation due to the transition-related rail path issues of Dornier and it achieved an average realised price of $271. I think you're going to need to see a few quarters of this play out to see the traditional run rates of product qualities and product mix. So just bear with us on that. Nevertheless, in Q4, hard coking coal and semi-hard coking coal sales achieved a price relative to the prime road oil hard coking coal index of 81%. But the semi-soft and PCI volumes were lower because of the Russian influence in the market. On a group basis for Q4, revenues were 59% from met coal and 41% from thermal. And without the rail-related issues of Dornier, we would have expected to have seen higher met coal revenues. Come over the page on the margins. It's healthy margins. At a group level, we realise an average price of $2.28 and a unit cost, including Queensland, of about $1.20 before an average royalty of about $24 a tonne. So you can see the margins that are coming out of this business With the addition of Queensland Ops in the last quarter, that unit cost increased. But the Queensland unit cost of production in Q4 was about $147 a tonne. And the first quarter of our ownership, the royalty rate in Queensland was about 15%. While in New South Wales, the royalty rate was 8%, but has increased to about 10.6% from July. So the government's benefiting from the coal industry quite well. EBITDA margins, a little bit, you can see the FY23 margin, which was outstanding at 303, not to be repeated as coal prices softened, but a very healthy margin of $84 a tonne in FY24. And I'll be happy with margins that run around the 50% with a coal price on a normal basis, on a normalised basis. So let's go to the Iberdar Bridge. No surprises, almost $4 billion in Iberdar and FY23. And as the coal price came off its highs, that took about $2.7 billion off the Iberdar. And you can see the $138 million change in cost was really around $12.7 at about $10 or $11 a tonne. 12.7 million tonnes of sales at about $11 a tonne. Queensland contributed $272, and this is how we get to $1.4. I draw your attention to the fact that we pretty much are washing all of Maulstreet, Tarawonga and Vickery, and that is helping to support costs, but it's also driving the revenue outcome that you see, which is a GCNU plus outcome. Come over the page to cash flows. You'll recall we held about $2.7 billion of cash, but we knew we had to pay about $800 million to $900 million of tax. So really there was about one point $1.8 million there that was unaccounted for. We generated $1.3 billion in the period. And as I said, we paid the tax $880 from the previous year and about $140 for the current year. We spent $496 million on expenditures and other acquisitions. We returned almost $400 million to shareholders. And those were payments and others were just lease payments before we spent $3.3 billion buying Dornier and Blackwater. Now, clearly, As Paul said, we expect in the first quarter of calendar year 25 to be receiving US $1.080 billion, and that's about $1.6 billion Aussie. So we're expecting that that net investment there is going to be very attractive. So we finished the year with net debt at about 1.3, and as I said, we'll look forward to the collection of the proceeds, the sales proceeds from Nippon Steel and JFE. Net debt and liquidity, we've got plenty of liquidity. If you look at this, we have $556 million of liquidity at 30 June 24. We've established a couple of other facilities post that period to add to that liquidity, and we're generating cash flow from the business every month. So that strategic joint venture with Nippon Steel and JFE and the $1.08 billion there, US, that will be... that will effectively turn us into a net cash position before we settle the US 500, the first US 500 with a billion may on April next year. So I'd say balance sheet in excellent shape. Turn over the page. I think our capital allocation framework has delivered really solid outcomes to shareholders and to the business. You know, it's served us well. It's a disciplined process that says we keep the business going well, we put the balance sheet in great shape, and there's real tension between where do we deploy capital and provide returns to shareholders. For now, the buyback remains paused. Dividends are being determined based on the earnings from the New South Wales business. We've said in light of the acquisition that cash flows from the acquired business will be directed to retiring vendor finance first. and the decisions around major development expenditure will be on hold until the deferred payments are paid down. When we receive the $1.08 billion, the board will have the opportunity to review this capital allocation priorities and timing. And as Paul said, we'll look to the full year FY25 dividend to see where that goes. But overall, A final dividend of 13 cents fully franked takes the full year FY24 dividend to 20 cents, which is pretty easy to remember. And that's about 22% of group underlying impact. So we expect to continue a significant, we expect a significant step up in capital returns when the deferred payments are made and surplus capital emerges from these expanded assets. So I'll hand it back to Paul and go from there.

Thanks, Guy. Turning over to the full year guidance. In FY25, of course, everybody will understand that we're focused on continuing to integrate the Queensland assets and setting up a robust base against which we can deliver strong results and sustainable outcomes. We have deliberately taken a measured approach to guidance with these new assets, as you would imagine, being the first year of our ownership and having had them now for nearly five months. I think we all want to ensure that this year ends well. And to that end, you will understand that we've taken a level of conservatism and that has been prudently applied in the construct of our guidance for this year. We expect to produce 35 to 39.5 million tonnes of ROM production for the year and to deliver a range of 28 to 31.5 million tonnes of managed coal sales. We believe this is very achievable. Queensland ROM production reflects a focus on increasing the blasted at the inventories and pre-strip inventories to optimise operations and a set of base for improved performance of Blackwater and deliver ongoing AHS productivity at Dornier. New South Wales wrong production reflects the closure of Werris, of course, and the ramp up of Vickery. Mining it up, there is a higher strip ratio area. We're heading through the hill there at Tarrawonga, as many people have observed. And we have allocated an eight-week long wall move for now by informing our guidance for this year. That'll be in January 2022. January 25. The reason why it's eight weeks longer than normal is we do have some shocks that we want to bring to service. The maintenance can't be done downstairs, so we will bring them up onto the surface so that we can get up to some of that important work. We expect hot costs to be in the range on a group basis from 140 to 155 Aussie dollars per tonne. Certainly reflects the underlying labour cost increases as continuing as BBAs are rolled out across the business. The Queensland cost base obviously represents lots of opportunities to improve. You'll see us attack some of that already. You will see us continue to do that as we move through the course of this year. The capital guidance there at $450 million to $550 million, I think it's pretty judiciously configured. We have pulled out the microscope and had a good look at that across the business. And so I think given the scale and change of the business, that is a pretty responsible way to configure our first year of ownership of the broader business. Queensland, we're accounting for about 40% of that. New South Wales, 60% of the capex for FY25. And in closing, just coming to our focus for the year, predictably, as we described, we want this year, obviously, the first year of the expanded business to go well. So we're very much focused on sustainable operational performance year to year and improved cost management across the entire business. In New South Wales, our efforts will be directed to consistent and reliable operations at Narrabri, as well as our open cut operations and ramping up early mining at Vickery. In Queensland, We want to set a strong foundation in FY25. And we know we can deliver significant value, not just in this year, but in years to come. And it's all about setting that up for the future. So further alignment of Dornier and Blackwater will be the focus to Whitehaven's simplified operating model. And as I mentioned just briefly, rebuilding blasted inventories and pre-strip at Blackwater will certainly be a point of focus, as will be further productivity gains at Dornier with the AHS system. And of course, overall, as I mentioned earlier, there's a $100 million bucket of costs and issues that we're looking at in Queensland. And our target is to rebase the run rate of costs at the end of the year by that measure. So just to be clear, not delivered within the year in terms of those saves, but rebase the run rate of costs by the time we get to 30 June. And of course, we want to see the terrific trajectory of safety performance going across the entire business and also the environmental compliance that you've seen in more recent years. At a group level, we obviously will be focused on completing the sell-down, a very exciting transaction as that is, and as we've said, we expect that to complete. They are two separate transactions, so they can complete at different times. We hope that it's at and around the same time. But we think that will be in the first quarter of calendar 25 when the completion occurs and the cash will be in the bank. Terrific result as that is. And to that end, I'd like to thank all our people who've worked tirelessly during the last year or two, actually, to transform the business into what it is today and to our board for the steadfast support to be able to navigate our way through this transitional two-year period. It's very satisfying to see the business on a steady footing and de-risked as we chart out boards into the future. So I thank you all for your support, and I'll particularly thank our shareholders for their ongoing support during this period of change for us. So with that, I'll hand over to the operator, and we'll get the Q&A going. Thank you.