Full Year 2024 Whitehaven Coal Ltd Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Rahul Anand - Morgan Stanley Australia Ltd. - Analyst : Hi, Paul, Kevin, and Ian. Congratulations on the deal. Look, my first question is perhaps focused a bit on the unit cost going into next year. So if I look at FY24 and I back out what Queensland did in terms of your actuals, I arrive at about AUD164, AUD165 per tonne. And if I look at FY25 and I try to hold Queensland at about that level, it would imply that your NSW costs have gone higher to about $130 a tonne from about $115. So I guess what I'm trying to get at is, is there a mix shift here in your NSW production guidance numbers? Is it more coming from Maules versus Narrabri? I mean, what's driving this cost increase into next year or has Queensland cost actually gone up significantly into next year? So that's the first one, and I'll come back with a second. Thanks.

Question: Rahul Anand - Morgan Stanley Australia Ltd. - Analyst : Got it. No, that's very clear. That's very clear. Thanks. Just a quick follow up there before I move on to the second one. You've also talked about NSW still being circa 90% of your development spend. I guess within that, you've got Narrabri Longwall 203 now going to FY25. So I mean, at what point do you actually decide whether this development CapEx now starts going into the bigger Vickery or to Narrabri Southern Ops, considering that 90% development spend going there?

Question: Rahul Anand - Morgan Stanley Australia Ltd. - Analyst : Got it. I might've got that wrong. I can follow that up offline.

Question: Rahul Anand - Morgan Stanley Australia Ltd. - Analyst : That's correct.

Question: Rahul Anand - Morgan Stanley Australia Ltd. - Analyst : That's correct. I'm talking about development specifically. Yeah.

Question: Rahul Anand - Morgan Stanley Australia Ltd. - Analyst : Got it. Okay. All right, final question. Just around your balance sheet, Kevin, you did mention it briefly in your introductory comments, the Board will have a strong position early next year if the deal goes ahead as expected and you'd probably be in a net cash position. If we assume that it has gone ahead and you are in a net cash position, I guess two questions that come to investors' mind are obviously how to think about that 20% to 50% EPS range and if you think that's still relevant for the business going forward? And then secondly, you have previously said that the Anglo deal is something that you're not going to look at. Does that change your views on that side of the equation as well?

Question: Rahul Anand - Morgan Stanley Australia Ltd. - Analyst : Absolutely.

Question: Rahul Anand - Morgan Stanley Australia Ltd. - Analyst : Okay, that's very clear. Thank you. Cheers.

Question: Adam Martin - E&P Financial Group - Analyst : Yeah, good morning, Paul, Kevin. A similar to the follow-up question there, I mean, you've obviously got this net debt maybe target range, 0.5 to 1.5x, so you'll be sort of at the lower end, maybe even below it. Should we think you're going to -- once this deal is complete, will you look to go to almost a net cash position or do you think you're going to stick between that 0.5 to 1.5 and potentially give better returns over the next couple of years around dividend? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 22, 2024 / 12:30AM, WHC.AX - Full Year 2024 Whitehaven Coal Ltd Earnings Call

Question: Adam Martin - E&P Financial Group - Analyst : Okay. Yeah, no, that sounds good. And just back on the cost, can you give a bit more of a split between New South Wales and Queensland? You sort of mentioned in the April pack that you'd give us a split. Can you give us the split?

Question: Adam Martin - E&P Financial Group - Analyst : Okay, very good. No, that's all for me. Thank you.

Question: Paul Young - Goldman Sachs Australia Pty Ltd. - Analyst : Good morning, Paul and Kevin. First one on the Blackwater sell down. Kevin, I think you mentioned that there's a USD2 return management fee associated, correct me there. But also on the other side, with the offtake, is there any impact on pricing to benchmark? I.e., is there an agreed discount to any type of index being priced, et cetera?

Question: Paul Young - Goldman Sachs Australia Pty Ltd. - Analyst : Sorry, Kevin, on --

Question: Paul Young - Goldman Sachs Australia Pty Ltd. - Analyst : Yeah.

Question: Paul Young - Goldman Sachs Australia Pty Ltd. - Analyst : Right, okay. So to confirm, there's no discount attached to --

Question: Paul Young - Goldman Sachs Australia Pty Ltd. - Analyst : Right, okay. Okay, thanks. And then maybe back in the costs, Paul, I think had you used in the presentation, harmonizing Queensland and New South Wales. Interested in what that word actually means. Is that just introducing the Whitehaven culture? And so I'm interested in your thoughts there. But just more broadly around the opportunities and the cost out, you said 200 people are leaving the business. You've also got additional savings of $100 million per annum by the end of FY25. Where are these opportunities? Are we talking around tech services? Are we talking associated with systems like OneSAP? Are we talking about removing truck fleets? Can you provide a bit more information about the cost-out opportunity across Blackwater and Daunia? Thanks.

Question: Paul Young - Goldman Sachs Australia Pty Ltd. - Analyst : Yeah, that's good. Thanks, Ian. Appreciate that. Thanks, gents. That's it from me.

Question: Daniel Roden - Jefferies LLC - Analyst : Good day, guys, and thanks for taking my question. I just wanted to understand the sell down for Blackwater, the $1.8 billion. I guess what cost and tax implications you're expecting in FY25?

Question: Daniel Roden - Jefferies LLC - Analyst : Awesome. And just confirming regulatory processes, competition (inaudible) FIRB approvals to obviously go ahead. So that (multiple speakers) that timeline by how much? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 22, 2024 / 12:30AM, WHC.AX - Full Year 2024 Whitehaven Coal Ltd Earnings Call

Question: Daniel Roden - Jefferies LLC - Analyst : That's perfect. And maybe just, I guess, confirming how I've interpreted it, when that transaction does close, and let's assume it's around the March quarter '25, there will be an update on the capital management, I guess, policies and figuring out what's going to happen with the additional free cash generated by the business post that period. Is that understanding generally aligned with what you've said?

Question: Daniel Roden - Jefferies LLC - Analyst : Crystal clear. Thank you, guys. And I'll it pass on. Thanks.

Question: Rob Stein - Macquarie Research - Analyst : Hi guys, just two quick ones. The offtake, is it 30% or does it extend to a materially greater source of volume, the Blackwater? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 22, 2024 / 12:30AM, WHC.AX - Full Year 2024 Whitehaven Coal Ltd Earnings Call

Question: Rob Stein - Macquarie Research - Analyst : Sorry, so is that a 50% offtake? Is that 60% of the production under offtake? How can we sort of think through that?

Question: Rob Stein - Macquarie Research - Analyst : No problems. And then just a final question. The op cost build, it looks working capital in nature, especially in the Queensland assets. Are we expecting that to revert back to a certain number across FY26, '27? And are we expecting, once you've built the ROM stocks, that production's going to revert up to that guided rate as disclosed at the time of the transaction?

Question: Rob Stein - Macquarie Research - Analyst : Perfect. Thank you. I'll pass it on.

Question: Jon Sharp - CLSA - Analyst : Yeah, good morning, Paul, Kevin, and team. Congratulations on the sell down. I'm sure it's been a busy time. Just another question on unit cost, but more to do with this new legislation, Same Work Same Pay. I know you briefly called it out, but I'm hearing from key contacts particularly from the coal mining industry that it's having a much more dramatic impact than most people probably realize. Can you just discuss how much effect it's having on the unit costs? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 22, 2024 / 12:30AM, WHC.AX - Full Year 2024 Whitehaven Coal Ltd Earnings Call And I'm also interested to know if there are any other unintended consequences that you're seeing other than, of course, pushing up the unit costs.

Question: Jon Sharp - CLSA - Analyst : Okay, thanks. And just to follow up, are there any other unintended consequences of that that you're seeing?

Question: Jon Sharp - CLSA - Analyst : Okay, thanks. And my second question is just on the heart and fleet at Narrabri. Will you continue this indefinitely? I assume there's a certain price that you would stop this operation. There's little doubt that it's increasing unit costs and I would imagine it's taking focus away from the moneymaker, which is the longwall. Just like to know the strategic perspective, is it due to reducing risk for take or pay? Just interested in your thoughts there.

Question: Jon Sharp - CLSA - Analyst : Okay, great. Understand if you can't take the longwall in there. Makes sense. Thanks, I'll pass it on.

Question: Lachlan Shaw - UBS Equities - Analyst : Yeah, morning, Paul and team. Thanks for your time. Just a quick one with Blackwater and the blasted inventory and prestrip catch up. Can you help us with a bit more insight around how much of the OpEx guidance is accounted there? And secondly, how long is that whole process expected to play out there?

Question: Lachlan Shaw - UBS Equities - Analyst : And then just in terms of the cost, is there a way to think about that, but that just the additional cost of resetting that sort of fault back into the cost savings you might find elsewhere at the asset? Is that the right way to think about it?

Question: Lachlan Shaw - UBS Equities - Analyst : Okay, thanks. That's helpful. And then just quickly second question, just on the met coal market, the coming up of monsoon in India, we're all looking for the buyers there to come back. There's some interesting tax changes going on with the steel mills there. I mean, what are your team telling you where this hard PLV sort just above $200, what are you hearing from the market and what's the view going into end of year and next year? Thanks.

Question: Lachlan Shaw - UBS Equities - Analyst : Great, that's helpful.

Question: Lachlan Shaw - UBS Equities - Analyst : That's great. Thank you. I'll pass it on.

Question: Chen Jiang - Bank of America Merrill Lynch - Analyst : Good morning, Paul and Kevin. Congrats on the Blackwater sale. A lot of production and cost questions got asked. Maybe if I can have two questions on the Queensland coal. It's been, I guess, five months since you acquired Blackwater and Daunia. I'm wondering for -- I had a look at your management change. You had a new general manager from Blackwater and Daunia, and also, I think you made around 200 people redundant from Daunia recently. I'm wondering, is there any extra capacity or room to streamline Daunia and Blackwater? And also that $100 million per annum of the coal sale, is that included in FY25 cost guidance already? Thank you.

Question: Chen Jiang - Bank of America Merrill Lynch - Analyst : Right, thanks. So it's outside of guidance. And can you implement that from FY25 or we have to wait until you've done pre-stripping? And then because your Queensland coal as well as new Southwest coal, unit cost basis in FY25, you guided higher than FY24. I guess for Queensland, that's due to pre-stripping. But for New South Wales, I guess you mentioned longwall movement and lower volume. I'm just wondering how the benefits coming from that beyond FY25.

Question: Chen Jiang - Bank of America Merrill Lynch - Analyst : Sure, sure, understand. So around 12 to 18 months integration and all the work. Yeah, sure, understand. May I have another follow-up just on the Queensland coal? Is that part of your plan to change, I guess, your marketing strategy including the mix of how you sell the met coal product versus BHP's time? Thank you.

Question: Chen Jiang - Bank of America Merrill Lynch - Analyst : Sorry. Yeah, I apologize. Just like a customer base, I know you have very good relationship with the Japanese mills. But I guess India is where the incremental met coal are demand coming from. I don't have details on how the Blackwater or Daunia customers like versus BHP's time. I'm just wondering if you have anything under your plan to change how BHP used to operate from the marketing or customer or even coal mix perspective.

Question: Glyn Lawcock - Barrenjoey Capital Partners Pty Ltd. - Analyst : Hey, Paul, I'll try and be succinct. So look, just quickly talking around all your peers in Queensland, they talk about the below rail being an issue. The system is running about 12% below what it did at its peak five years ago. Can you just maybe talk a little bit about how things travelling for you? You had some issues in Q4. So are you comfortable the below rail can actually step up? And then just whether because it's been quite above average rain for the last few weeks. Thanks. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 22, 2024 / 12:30AM, WHC.AX - Full Year 2024 Whitehaven Coal Ltd Earnings Call

Question: Glyn Lawcock - Barrenjoey Capital Partners Pty Ltd. - Analyst : And any weather impacts from the rain we've had, above average?

Question: Glyn Lawcock - Barrenjoey Capital Partners Pty Ltd. - Analyst : All right. Thanks very much.