Yancoal Australia Ltd

and thank you for standing by. Welcome to Yankou Fourth Quarter 2025 Production Report. At this time, all participants on a listen-only mode. After this speaker's presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star 11 on your telephone or submit a written question via the webcast. You will then hear an automated message advising your hand is raised To withdraw your question, please press star 11 again for the audio. Please be advised today's conference is being recorded. I would now like to hand the conference over to our first speaker today, Brendan Fitzpatrick, Investor Relations Manager. Please go ahead.

Thank you, Maggie, and thank you to everyone on the call for joining this briefing on Jan Cole's fourth quarter production report for 2025. We have several members of Yancor's executive leadership team to recap the quarter and participate in the question and answer session. On the call, we have Sheriff Burra, Chief Executive Officer, Kevin Su, Chief Financial Officer, Laura Jung, Company Secretary, Chief Legal Compliance Corporate and Affairs Officer, Frank Fulham, Chief Sustainability, Technology, Innovation and Development Officer, David Bennett, EGM Operations, Mark Salem, EGM Marketing and Logistics, Mike Wells, EGM Finance, and Mark Jacobs, EGM Environment and External Affairs. The commentary provided today is based on the Coilink production report published to the Australian Securities Exchange and the Stock Exchange of Hong Kong platforms on the 19th of January. There is no presentation pack for this conference call. The Yarn Coal website holds past presentations for any participants who require additional information on the company. I'll hand over to our CEO, Sheriff Burra, to provide the fourth quarter highlights.

Thanks, Brendan. I also welcome everyone joining us on today's conference call. We had a great quarter. In fact, the 10.4 million tonnes of attributable saleable coal was a company record. The fourth quarter production carried us to the top of our annual production guidance range and the 38.6 million tonnes for 2025 was also a company record. This was a tremendous effort and I congratulate all of our people for their role in this achievement. All of our mines contributed to total ROM coal production, which increased 20% compared to the third quarter. As usual, we don't include cash operating costs per tonne in the quarterly report. At the half year, our cash operating costs were 93 Australian dollars per tonne, in the middle of our 89 to 97 Australian dollar per tonne guidance range. Consistent with our commentary in October, for the full year we expect to deliver unit costs around the middle of the guidance range. Previously, we disclosed our expectation for capital expenditure within the guidance range. We now anticipate it will be towards the bottom end of the $750 to $900 million guidance range. During the fourth quarter of 2025, international coal indices for both the thermal and metallurgical coal markets had mixed performances, yet our average realized prices improved by 6%, to $148 Australian dollars per tonne from the prior quarter. This realised price, combined with 10.8 million tonnes of attributable sales and our disciplined approach to costs, delivered a $307 million increase to our cash balance over the quarter. We now have over $2 billion on the balance sheet and no debt. This gives us scope to consider dividends and to contemplate potential value-adding growth opportunities. We look forward to carrying our positive operational momentum into 2026. We will provide our 2026 guidance on production, cash operating costs and capital expenditure in our 2025 financial results, which are scheduled to be released on 25 February. I'll now hand over to other members of our executive team to share further details from the fourth quarter, starting with David Bennett, our Executive General Manager of Operations.

Thanks, Sheriff. Our total recordable injury frequency rate reduced throughout 2025, and it was 6.14 at the end of the year. We achieved a downward trend in this statistic, and our rate is below the industry weighted average of 7.45. We remain committed to further improving our safety performance. During the quarter, we produced 18.9 million tonnes of ROM coal, 20% more than the third quarter. From our ROM coal, we produced 13.6 million tonnes of saleable coal, 11% more than the third quarter. It takes all our people across all our mines working cohesively to deliver this level of performance. There were some temporary challenges such as hard coal encountered by the Malarvan long wall, some wet weather delays and some equipment reliability issues. However, in each case, the issues were resolved or effective adaptions were applied. Our attributable share of the saleable coal was 10.4 million tonnes. As Sheriff mentioned, this was a record performance. In the report, we explain how the 10.4 million tonnes includes the additional 3.75% interest in the Malabon joint venture, which we secured on the 3rd of October. If this additional interest is excluded, the figure would have been 10.2 million tonnes, which still would have equaled our best ever historical quarter. I will now hand over to Brendan Fitzpatrick, Investor Relations Manager, to provide commentary on the coal markets.

Thanks, David. This is Brendan. We do have Mark Salem, our EGM, Marketing and Logistics, online for the Q&A. However, I'll present the initial comments on his behalf regarding the coal market. Our attributable sales volume of 10.8 million tonnes was similar to the third quarter and followed our strategy of optimising sales volumes and managing stock positions. The sales volume contained a typical mix of thermal and metallurgical coal products. During the quarter, conditions in the international coal markets, both thermal and metallurgical, remained somewhat challenging. There were mixed performances across the indices we sell against. The average price on the API 5 index was 12% higher than in the third quarter, while the average price on the GC Newcastle index was flat. That said, it was the G3 Newcastle Index that finished the quarter with positive momentum. There was a similar situation for our metallurgical coal products. The average price on the Platts Low Bowl PCI Index was down 2%, but the average price on the Platts Semisoft Index was up 10%. In the thermal coal market, Japan is still utilising coal as a fuel of choice for power generation, and its imports increased 16% in 2005. South Korea also increased its imports, but prioritised Indonesian and Colombian supply over Australian coal. Elsewhere, demand for thermal coal was less resilient. Despite a restock cycle in China during the fourth quarter, its annual imports fell 18% through the year due to a strong domestic production level in the first half. Taiwan utilised more gas and imported 12% less coal than last year, and India reduced demand for coal imports due to cooler weather through summer and increased hydro power generation. Supply from Australia was constrained at times during 2025, but as our performance shows, there are still good export rates being achieved. Indonesia's exports fell 10%. and Colombia's exports fell 18% in response to market conditions and due to some infrastructure challenges. But Russian exports continue to reach international markets, and improved rail and port operations in South Africa enabled its exports to increase by 5%. A demand uplift may be needed for thermal coal indices to break upward from the trading ranges observed over the past 6 to 12 months. Global demand for metallurgical coal declined as steel production decreased in many countries. The primary driver of this situation was Chinese steel exports displacing production from other steel production nations. In seaborne metallurgical coal markets, global exports were down 7% compared to 2024. A primary component of the global reduction was 9% lower exports from Australia. Due to a temporary mix, sorry, due to a mix of temporary and structural reductions, including mine suspensions and some rain delays. Exports from Canada were down 3% due to reduced coal handling capacity following a ship load of fire at an export terminal. Sheriff mentioned the 6% increase in our average realized price to $148 Australian dollars per tonne. This combines a 6% increase in our average thermal price to $138 Australian dollars per tonne. and a 4% increase in our average metallurgical coal price to $2.03 Australian dollars per tonne. Having made all these comments, gained in most coal price indices since the end of 2025 is stoking optimism amongst some industry participants. We continue to utilise our scale and blending capabilities to maximise the real-earth prices we can deliver. I will now hand over to Kevin Hsu, our CFO, to touch on the financial position.

Thanks, Brandon. The key observations are the same, but we might have lost oil. Yanko remains in a strong financial position. We ended the oil with over $2 billion in the bank, and it remains free of interest-bearing debts. When we last spoke, Lucy, we discussed the external and temporary cost pressures at the port of Newcastle. The ship queue at the port has now gone and within most of those temporary cost pressures. Shariff described how we are still on track to deliver operating costs around the middle of the guidance range. We would see this as a notable achievement in the current industry setting. It reinforces our position as a leading low-cost co-exporter. David and the operation teams deliver the production records, which allow the mark and the marketing team to maximize sales and planning opportunities. Adding over $300 million to our balance sheet in just three months speaks to the quality of our assets. Our strengthening financial position enables us to consider dividends and to contemplate potential value-adding growth opportunities. We'll be better placed to provide a further capital management commentary when we release our 2025 financial results. I'll now hand over back to Brandon to coordinate the Q&A session.

Thanks, Kevin, and also David and Shariff for highlighting the drivers of our record fourth quarter performance. We will now move on to the question and answer session, starting with questions from the phone, then moving to questions submitted via the webcast. Maggie, could you please initiate the process for questions via the phone?

Thank you, Brendan. As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. I'll repeat. To ask a question on the audio, please press star 11 on your telephone keypad and wait for your name to be announced. To withdraw your question, please press star 11 again or submit a written question via the webcast. Please stand by as we compile the Q&A roster. Hi, Brandon. So far, we don't have any questions on the audio.

Thanks, Maggie. I'll take questions from the webcast and I'll come back to you shortly. Let's start with some questions about the operational performance. There's a multi-component question. I'll take it in pieces. Starting with the question, the current Yancol stockpiles and inventory levels, how are they looking? And is the company back to matching production volumes with sales volumes given the various disruptions at Newcastle? through the middle of the year.

Thanks, Brendan. Yeah, look, sales and production are back to normal and are matched. We had a very, very good quarter, a strong production quarter and also a good sales quarter. And moving forwards, the intention is for those to be matched.

Thank you. There's a question. Additional component talking about New South Wales production and asking a question about coal royalties. Given that the royalties were revised and new royalties were implemented a year and a half ago, is there any comment on the current royalty structure and how we view that part of our business?

Thanks, Brendan. Again, we've had no discussions regarding New South Wales coal royalties and currently unaware of Any changes?

And also on the operational side, the Hunter Valley operations, can we comment on the production profile and its uplift in the fourth quarter and how it's running in relation to what we would see as the normalised levels?

Thanks, Brendan. David, you may want to comment on Hunter Valley operations, but again, just reinforcing they did have a very strong fourth quarter.

Yeah, I'll cover that, Sheriff. Yeah, look, it was a very strong fourth quarter. Hunter Valley Operations, as well as Mount Thorley-Walkworth earlier in the year, had quite a bit of wet weather. So at the halfway point of the year, both sites were a little bit behind their production target for 2025. We got more wet weather in August, but were able to mitigate the effects of that wet weather through the capital investment that we'd made in prior years. and we also saw some really good performance from our equipment fleets, our productivities. We set some remarkable records on some of our fleets for their output and on the back of that we're able to deliver our budgeted coal production for 2025. So the mines are being operated in steady state. They're productive. and we're getting the most that we can from our people assets, our equipment assets and our geological assets. Thanks, Sharon.

Thank you, David. Let's segue from the production into the coal markets. Mark Salem, I presented comments on your behalf Could you provide any additional thoughts on the coal market outlook, what we've seen so far this year and what potentially will be driving coal markets over the current calendar year?

Yeah, sure. Thanks, Brendan. And thanks for reading my section. As you know, I'm travelling in rural areas and I was a bit worried about service, so I appreciate you stepping up to read that section. um and as long as people can hear me clearly um in terms of the market you know we did see some price recovery towards in q4 um towards the end of the year and that was on the back of uh as you said china restocking uh but we've since seen that that that that price come down a little not substantially just a little bit this is this is nothing unusual coming into chinese new year and the Chinese buying slowing down a little bit. Coming out of Chinese New Year, I think we are anticipating that the market will again pick up a little bit in that high ash area because there still remains a need in southern China for the demand for this coal. From a met coal point of view, we have had a couple of supply disruptions and if those supply disruptions come through that could yield a softening in the market and we really need the steel industry to pick up which has been in a slightly weakened situation due to the collapse of the property market in China so in terms of 20 going in from 2025 into 2026 Probably a very similar scenario. The current pricing and world demand is really supply-driven, and we need just stronger demand to really have a bigger impact into that market.

Thank you, Mark. Maggie, could I please ask you to invite people once more for the audio question channel?

Of course. As a reminder, to ask a question... please press star 11 on your telephone keypad. This will be the last time that you have questions. Just one moment for our first question, please.

Hi, Brendan. Can you hear me?

Yes, Anna, we can hear you.

Yeah. Hello. This is Hannah from . I just have one quick question on the sellable production. So I noticed the ROM co-production rates have been high, but the sellable co-production to the ROM co-production, the percentage has declined to 72% in the fourth quarter of 2025. And I think the ratio is lower for the Moolaban and Heart Valley. understand the reasons behind on this low ratio for the sellable coal production to rum coal production?

Okay, Hannah, I appreciate the question. As I can see, looking at the fourth quarter numbers, our total rum coal production was about 20% compared to the prior quarter, but the saleable coal production was up 11%, suggesting a slightly lower conversion. Perhaps David Bennett could offer some insights into the relative balance between wrong coal and saleable coal volumes over the fourth quarter. I suspect it's probably to do with more wrong coal being prioritised. But, David, over to you.

Yeah, thanks, Brendan, and thanks, Hannah, for your question. Brendan's point there is exactly right. There was a lot more wrong coal came out of the mines in the fourth quarter and were unable to process 100% of that coal through the CHPPs, our coal handling plants. So the coal that we couldn't process in the fourth quarter, turning it from wrong coal into saleable coal, sits on our stockpiles just ahead of the CHPPs, and we will process that coal and turn it into saleable product throughout the first quarter of 2026. Thank you.

Thank you, David.

I see very clear. Thank you.

Thank you, Hannah. I'll move back to the webcast questions. There's a few questions all touching on a similar topic. It's the focus on our over $2 billion cash balance reported and interest in understanding what that might mean for dividends and payout ratios heading into the financial results in February. What could we possibly say on this topic ahead of the financial results next month?

Thanks, Brendan. Look, to start with, we do have a dividend framework in our company constitution. The usual practice being for the board to review the final position after the end of the year and then determine the capacity for dividend allocation. You might have some additional comments you want to make in that regard.

Sir, Sheriff, I think the framework Sheriff just mentioned has been very clearly communicated with all the investors in the past, which is about a 50% NPAT or 50% free cash flow, whichever is higher, and also balancing the debt management, growth opportunities. I think companies still follow the same baseline internally. from management perspective, we will definitely balancing all these different priorities and make a decision at both levels in February.

Thanks. Thank you, Kevin. Thank you, Sheriff. There were several questions on that topic. I think we've covered the main focus of those questions through that combined response. Maggie, I'll go to you one last time for questions from the phone line. And whilst doing that, let people know that I've exhausted the questions on the webcast. Oh, no, sorry. Excuse me. There were some additional further down the screen that I hadn't seen. Let's have a look at these ones. Okay. We're focusing in on the financial performance and the cash balance and cash generation that was reported. When adjusting for the $25 million monolab and payment, that was the additional 3.75% interest. The free cash flow adjusts to $332 million, which annualizes to $1.3 billion, implied yield of 18%. How should investors be thinking about capital management giving the free cash flow generation? We've somewhat covered the capital management component, but perhaps just worth testing that thought process on how the numbers are flying through, the $307 million increase in the cash balance, the Malarvan payment, and the implied annualised free cash flow. Kevin, could I start with you to share some thoughts on what we reported in the fourth quarter in terms of the $307 million increase in the cash balance? recognising how that might or might not be relevant to an annualised number.

Yeah. I think from the previous communication, one thing we have to appreciate is the real enterprise versus the price curve. There is a lagging effect and there is some timing difference. We should consider. At the same time, normally Q4 is a strong... quite a strong order and providing more volume from shipment perspective as well. They all contributed to a quite a healthy cash flow. But overall, as Sherry just mentioned, the whole objective from measurement perspective is to be the very cost competitive. Compared with our peers, we are still to be the lowest cost competitive co-producer in the country. For that reason, even in an unfavorable core price market, I think Yenco is still generating, generally speaking, very healthy cash flow compared with our peers. And back to the capital management philosophy we just mentioned, we will be assessing the free cash flow on a four-year basis, balancing the other priorities, and follow the guidance internally, and also internally we've been communicating, and decide our dividend management decision by February, the bottom year. Thanks.

Thank you, Kevin. We've got a hypothetical question related to coal markets. So I suspect, Mark Salem, this will be one that we call on your expertise. It relates to the US market, and the observation is currently the US exports coal into the global market. But there is speculation with AI-driven power demand levels increasing. Is there a potential for the US to need coal imports to meet power demand is my understanding of the question. Is there a scenario where Australian coal could be imported into the U.S. and is there any historical precedent for such a market setting? Barksdale, could you share your thoughts on the coal markets and in particular swings in U.S. exports and imports?

Sure, sure. Look, I suppose very simply, Australia has not supplied coal into mainland USA. And I say that because Australia was a supplier into Hawaii, a coal-fired power station in Hawaii many years ago. But Australia is not a supplier. The US is the second largest coal producer themselves, and they still have a lot of resources and a lot of surplus. They've always been known in the international seaborne market as the swing supplier. When coal prices are high, you often see US coal come into the international seaborne market. When prices are low, they withdraw and keep their production domestically. So they're not one for importing. So the US is not really on our radar as a future coal import market. in terms of mainland USA. We do sell coal into South America and some of the South American markets as well. Just in terms of AI, yeah, there is growing demand for electricity consumption in AI in Asian countries, in our more geographically located markets. So that is something we're monitoring very closely and something we do watch in that regard. So, yeah.

Thank you, Mark. Looking at the questions coming through, we've got another one that's definitely more hypothetical in nature. Given recent media commentary suggesting the potential of a Glencore-Rio merger or acquisition of some sort, the question seeks to clarify our Hunter Valley operations, which are a joint venture with Glencore, Is that joint venture or that operation subject to any change of control clauses or relevant agreements that might be triggered under such a hypothetical scenario?

Yeah, thanks, Brendan. Look, I won't be commenting on market hypotheticals at this stage. I think we're all reading the press and it's too early to form any view as to the merit of anything of this nature at this point in time.

Fair enough. Thank you very much, Sheriff. We'll come back to the market as and when something concrete requires a comment from us in relation to our specific joint venture operations or joint venture at Hunter Valley Operations. I've now concluded all the questions on the webcast, having scrolled down and found them all in the second setting. Maggie, I'll come back to you one last time for questions via the phone line. During that time, if any questions appear on the webcast, I'll take those. Otherwise, I'll be shortly moving to close out the webcast. Maggie, could you do online questions once more?

Thank you. Just a reminder, to ask a question, please press star 1 and 1 on your telephone keypad. This will be the last time announcing for questions on the audio. Thanks, Brendan. I think I'll pass back to you now.

Thank you, Maggie. Concerning I see no fresh questions on the webcast, I'll pass back to Sheriff one last time for the closing comments.

Thank you, Brendan, and thank you once again to everyone who joined us on the call. We look forward to engaging with you in just over a month when we deliver our 2025 financial results. As we reflect on the production records and the robust financial position we reported, there are three things I hope you'll keep front of mind. Firstly, Yankold delivered the production records because we have world-class assets run by some of the most capable people in the industry. This is something I firmly believe. The level of production we delivered through 2025 required sustained dedication from all of our workforce. Secondly, Yancol is highly disciplined on cost control. In our view, keeping unit costs flat compared to last year and delivering cash operating costs around the middle of guidance would be a great outcome in the current industry setting. We see our ability to operate with comparably low cash costs as a distinct competitive advantage. And thirdly, Yancol increased its cash position by more than $300 million in three months. This is a distinct reminder that we're not only a low-cost miner, but that our position as the second largest coal producer in Australia provides great leverage to improving coal prices. We look forward to speaking with you all again in February, following the release of our 2025 financial results. Have a great day.

Thank you, Sheriff. Maggie, could you please conclude the webcast?

Thank you. This concludes today's conference call. Thank you for participating you may now disconnect.