Thank you for standing by, and welcome to the Coronado Global Resources second quarter investor call. All participants are in a listen-only mode. There will be a discussion of results from the CEO and CFO, followed by a question-and-answer session. If you wish to ask a question, you will need to press the star key followed by the number one on your telephone keypad. I would now like to hand the conference over to Andrew Mooney, Vice President, Investor Relations and Communications. Please go ahead.
Thank you, operator, and thank you everyone for joining Coronado's second quarter investor call for 2024. Today, we released our quarterly report to the ASX and SEC, in which we outlined our production and sales statistics, as well as other key information related to safety, coal markets, and financial performance. A more detailed outline of our financial position and results will be released to the market on the sixth of August with our Form 10-Q and half year earnings release. Today, I'm joined by our Managing Director and CEO, Douglas Thompson, and Group CFO, Gerhard Ziems. Within our report, you will see our notice regarding forward-looking statements and reconciliations of non-US GAAP financial measures. We encourage all listeners to review these statements in conjunction with our other filings with the ASX and SEC.
We also remind all participants that Coronado quotes all numbers in U.S. dollars and metric tonnes unless otherwise stated. With that, over to Douglas.
Okay, thanks, Andrew. Let's get into this. For the June quarter, the Coronado team remained focused on our plan and achieved outcomes and milestones as set by our plan, delivering materially improved production, sales, cost, and revenue results. It is pleasing to report our business delivered higher group ROM coal production at 7.4 million tonnes, up 24% on the March quarter. Higher sellable production of 4.1 million tonnes, up 22%. Higher sales volumes at 4.1 million tonnes, up 8%, and materially lower group mining costs at $91 a tonne, down 27%, and higher total revenues of $674 million, up 1%, along with several other underlying and enabling milestones within our plan. These results reflect 18 months of hard work from everyone in the business to drive the business forward and produce positive results.
But the job is not finished. Our plan has more to offer. We will continue to press for further operational and cost gains in the coming quarters via the safe implementation of additional productivity improvements and the development of our organic growth pipeline. And I'm excited for the benefits ahead of our shareholders as we progress our Mammoth Underground project and expansion works at Buchanan, both of which have extremely positive prospects and continue to be developed from the operational cash flows of our business without the need to raise additional debt or equity from the market. But before I elaborate on our operations, I will start by focusing on an overview of our safety performance. As reported in a prior public announcement on the thirty-first of May, the company temporarily suspended operations at Buchanan Mine following a fatality of one of our team members, Brock Jackson.
The incident occurred at the commencement of the evening shift. We are deeply saddened by this event. I'll take this opportunity to once again extend our sympathies and condolences to the family, friends and colleagues of Brock. An investigation into the incident is underway, and until the investigation is concluded, we cannot provide further comments other than to note our continued support for his family and coworkers. Buchanan Mine resumed operations on the third of June, and there are no directives or restrictions on the mine. This tragic incident is a reminder to all of us that there is no more important outcome from our day at work than returning home to our family and friends safely. Now, turning to our safety statistics as at the thirtieth of June.
At the group level, our total recordable injury rate was 1.01, compared to 1.18 at the same time this year. If we split by segment, our Australian twelve-month rolling average total recordable incident frequency rate as of the thirtieth of June was 1.29, compared to 2.52 in the prior year. Our US twelve-month rolling total recordable injury rate was 2.26, compared to 2.56 the prior year. Both rates are lower than prior year and below industry averages. Turning to our operational performance. Both our Australian and US segments realized improved production rates, sales volumes, and lower costs compared to the March quarter.
In Australia, our Curragh Complex delivered ROM coal production of 3.8 million tonnes and sellable production of 2.7 million tonnes, reflecting increases over the March quarter of 37% and 23% respectively. These significantly improved results are multifaceted and outcomes from our plan, but are principally due to the completion of the historic pre-strip waste deficits and the subsequent removal of 4 fleets in late March, combined with improved productivity from our dragline fleet, as we take advantage of improved pit geometry gained by our engineering changes made over the last 18 months. The dragline fleets continue to meet our improvement targets, with a ratio of waste movement by draglines compared to truck and excavator at 44%, up from 37%, and total waste movements in the June quarter and year to date are on plan.
During the June quarter, Curragh also experienced less interruptions to production, with lower rainfall reported quarter-on-quarter. However, heavy rain late in June did see about 100,000 tonnes of ROM production deferred to July, and Curragh's railing support were also temporarily impacted by a traffic accident on the Blackwater line in late June that resulted in a rail outage for approximately 5 days. The cost structure at Curragh has materially improved quarter-on-quarter, following the fleet removals, productivity improvements, and contractor rationalization. The Australian segment average mining cost per ton sold for the June quarter was $81.70 per ton, reflecting a 36% improvement quarter-on-quarter due to the operational improvements previously mentioned and combined with higher production.
This cost per ton improvement equates to approximately 100 million tonnes of gross mining cost improvement in the quarter and is the lowest cost per ton rate for Curragh since the March quarter of 2022. At Curragh, we are targeting further productivity and cost improvements in the September quarter with a planned removal of an additional contractor fleet. This is about 13 pieces of equipment that are removed from operations. The removal of this additional fleet is not expected to impact current or future production plans at Curragh. Upon full demobilization, this will take the number of contractor fleets removed from Curragh to 5, and plus the introduction of the new Coronado Komatsu PC7000 excavator, which is contributing to our overall productivity and gains at site and coal exposures.
Operationally, Curragh finished the June quarter in a strong position with elevated stockpiles, and the positive momentum achieved in the quarter has flowed into July as we strive to continue to deliver according to our plan. Our U.S. operations also performed well in the June quarter, delivering improved production, sales volumes, and lower cost per ton. The U.S. operations delivered ROM coal production of 3.6 million tonnes and sellable production of 1.4 million tonnes, reflecting increases over the March quarter of 11% and 18% respectively. The June quarter ROM and sales production were higher at Buchanan as we continue to mine in our newly developed southern panels. During the quarter, the mining conditions improved, and as forecasted, yield improvements started to materialize. Subsequently, Buchanan's ROM production was up 11%, and sellable production was up 21% quarter on quarter.
The mine continued to experience improved skip efficiencies following the maintenance work undertaken earlier in the year, and our conveyor belt systems continue to perform well, resulting in skip counts continuing to operate at their best rates in the last two years. In the September quarter, our plan currently has development of the next panel in the Northern District ready for mining, and for a portion of time, we may have the ability to run both longwall sections at the same time. This is forecast to further increase the product yields from Buchanan, given the Northern District has a high-yielding section. At Logan, ROM and sellable production in the June quarter were up 11% and 14% respectively, compared to the March quarter. These production improvements are due to the reestablishment of mining in the Powellton Mine and incremental tonnes gained from highwall mining at our surface operations.
The US operations noted a significant improvement in cost per ton in the June quarter, principally due to higher production rates achieved. The US segment average mining cost per ton for the June quarter was $110 a ton, reflecting a 10% improvement quarter-over-quarter. As a result of these strong June results and our forward plans, we today reaffirm our previously announced 2024 guidance metrics. I'll now hand over to Gerhard, who will take us through our financial position and give us a bit of a market update.
Thanks, Douglas, and hello, everybody. I'll keep this short today. Our June quarter revenue was $674 million, up 1% compared to the prior March quarter, mainly because of higher sales volumes despite a fall in prices. Our year-to-date revenue was $1.3 billion, down 10% on this time last year, mainly because of lower met coal index pricing. Coronado's proportion of met coal sales revenue as a percentage of total coal revenues year to date was close to 96%.
The percentage met coal sales was higher than prior year, which was about 90%, because of the delivery in minor in prior year of a certain US thermal coal contracts that we negotiated when thermal coal pricing was way higher than met coal prices at the time. And that was kind of a pattern across the industry. So we went from 90% up to 96%. The group realized met coal price for the quarter was $195 per tonne, which is a blend of FOB, FOR, and US domestic pricing contracts, reflecting an 80% average realized price versus the Australian Premium Low Vol index.
As of 30 June, the company had a net debt position of $5 million, which is, of, you know, comprised of a closing cash balance of $264 million. We had $242 million in senior secured notes outstanding, and then $27 million in interest-bearing liabilities associated with the completion of the Curragh housing arrangement. As discussed last quarter, the business was negatively impacted in the first half by the additional payment in March to the Queensland Revenue Office of AUD 79 million, inclusive of interest, relating to Coronado's acquisition of the Curragh mine in March 2018. Coronado had available liquidity of $414 million as of 30 June, comprising of cash, short-term deposits, and undrawn available borrowings under the ABL facility.
Year-to-date, capital expenditure closed at $137 million, with the majority of spend related to our, our organic growth works at Buchanan and Curragh. In terms of, coal markets, met coal markets, both the Australian and US met coal index, prices, decreased in the second quarter. The benchmark Australian Premium Low Vol average index price was $242 per tonne, down 21% compared to March quarter, where it was, $308 per tonne. The benchmark, index, average index was, US East Coast index was $218 per tonne, down 15% compared to March quarter, where the average price was $256. So down from $256 in March quarter to $218.
Prices fell during the quarter because of an increase in seaborne supply from Australia, given the drier operating conditions. But we have seen an increase in price from late June following operational issues from some of our peers in the Bowen Basin and in the US, which has impacted supply. Subsequently, of course, now in July, prices have come down again. Different subject. Coronado expects that in the September quarter, prices will remain elevated on the back of Indian restocking appetite after the monsoon season, which probably starts at around early September. In the same period, met coal supply is expected to be restricted with the mine production issues from our peers and railway maintenance occurring, particularly in July, August, across the Queensland network.
The SGX forward curve, just as a data point, as at 12th July, is projecting an index price of $255 per tonne for the remainder of this year. These pricing projections continue to suggest a higher pricing environment for longer, and a forward pricing environment well above the long-term average price of $199 per tonne. I hand back to Douglas now. Douglas?
Thanks, Gerhard. So in the second quarter, our business continued to invest in organic growth projects at Mammoth Underground and Buchanan, using cash flows generated within our business to fund this growth. Coronado has more than 800 million tonnes of met coal reserves and 2 billion tonnes of resource to draw upon. So beyond the growth projects presently afoot, we've identified additionally potential other organic growth projects within this reserve base, which potentially have more attractive metrics for our shareholders over the long term than what's available in the market. And our present organic growth investments remain within budget and on schedule, and continue to be assessed at multiple, substantially lower than recent market opportunities, which we expect will create significant value for our shareholders over time. So turning to Mammoth Underground project, it remains on schedule, but subject to regulatory approval.
During the June quarter, we submitted the required statutory approvals for this project. All our procurement activities are progressing to plan, with equipment orders placed and delivery schedules agreed with the providers, and these delivery dates are before our planned commencement dates for the project. Mammoth has a full leadership team in place at the moment, which is supporting the construction of the project, and the response to our expression of interest for staff and workforce has been extremely pleasing. In June, we completed all necessary earthworks in S-Pit, and highwall stabilization work has commenced in preparation for portal development. Our engagements with the regulators and the communities continue to be positive. As a reminder, Mammoth has a substantial high-quality met coal reserve of 41 million tonnes of raw coal, with coal qualities expected to mirror the existing Curragh North open cut.
Once fully operational, the project is on target to deliver an incremental increase of 1.5-2 million tonnes per annum of saleable production in its first phase. And subject to receipt of the regulatory approvals, first coal from Mammoth is expected in December of 2024. Organic growth plans in our U.S. operations also remain on target, with capital works at Buchanan continuing during the quarter to invest in the construction of a new surface raw coal storage area to increase the mine storage capacity, ultimately reducing the risk of bottlenecks and allowing our longwall equipment to run at higher capacities. In the June quarter, excavation works continued with the completion of the access roads and bridge extensions, and the scheduled date for the new coal stockpile facility to be complete remains on plan of April 2025.
In the quarter, we also progressed the construction of our second set of skips to increase the mine's hoisting capacity to surface. As at the 30th of June, shaft excavation works and concrete lining works are complete all the way to shaft bottom, and the next stage of work, which is shaft equipping, is progressing to plan. Full completion of this project is expected in quarter two, 2025. Now turning to emissions reduction. We continue to progress our gas pilot project at Curragh during the quarter. This project is targeting to capture and beneficially use open-cut waste mine coal gas, with downstream use cases being explored, including power generation and use as a diesel substitute in our mine fleet.
Gas production from Europa-1 and Europa-2 wells commenced in January of this year, and we've continued to monitor gas flow from the wells to build our data record and to understand the reservoir's performance. During the June quarter, Coronado and its partners commenced a second gas converted truck trial to assess the performance of a 793F truck engine with upgraded conversions. Early results are positive and in line with what our expectations were for the trial. This trial will run over the next eight weeks. Given the positive success of our ventilation and methane, VAM unit, at Vent Shaft 16 to reduce emissions, we committed to undertake a commitment to install a second VAM unit at Vent Shaft 18. The construction of the second VAM unit was complete in April, and testing was conducted in May and June.
I'm pleased to announce today that the new VAM unit at Vent Shaft 18 was approved for operation by the Virginia Gas and Oil Board on the eighteenth of June, and is now fully operational and actively reducing emissions at our Buchanan Mine. The establishment of a second VAM unit is expected to further reduce Coronado's emissions, and this is all part of our strategic path to a 30% emissions reduction by 2030. Coronado considers itself an industry leader in the implementation of these emissions technologies. With that, I'll now hand over to the operator to take your questions. Thanks, Darcy.
Thank you. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star two. If you're on a speakerphone, please pick up the handset to ask your question. Your first question comes from George Eadie from UBS. Please go ahead.
Yeah, good day, Douglas and Gerhard. First question is on guidance for this year. When you released guidance, was the two weeks rail downtime on the Blackwater line known?
Yes. So obviously, the motor vehicle accident that occurred, that cost about five days at the back end of June, wasn't known, and we're working to mitigate that. I must say that the rail providers, above and below rail, have been very good in working with the industry to mitigate it. And then the maintenance work that was planned for the month of July has been known for a while, and we've been working to mitigate that. So that is considered.
Okay, awesome.
It's not helpful-
Yep.
-for us, but it's common to everybody in the industry that use that, that rail corridor.
Yep, just making sure it wasn't one way, moving to two. Awesome. And then maybe just on Curragh as well. So now you've taken five fleets offline. You've put more dirt in the dragline system. Both of these are absolutely great for cost, and we've seen that, which is great. But in terms of coal uncovery, is there risks here? I guess, how many strips in advance of pre-strip have you now done? Or more sort of coming at the angle, is there a risk in, you know, 3-4 years, you'll need to bring back a contractor fleet for another large double strip, pre-strip campaign or something?
No. Our intent in this plan that we've been executing is to set the mine up that it's got a long-term sustainable stripping ratio, and that's geared towards dragline operations. So the last 18 months, we mobilized additional fleets into the site to catch up on the waste deficits that occurred, but also to set up the geometry of the different pits, to have longer strike length and also better configuration for dragline productivities. And that's how we've gained... Our plan is at 44%. We're hoping to get a little bit more over time out of it, but that's the ratio that we're running to dragline and truck and excavator, and that's sustainable at the stripping ratios that we have. The plan does have further tricks available to it, clearly bringing an underground mine into operation.
It's lower cost and brings us de-risk supply because it's not exposed to the wet weather.... gives us options down the line, which will further mitigate the risk of having to bring additional contracted fleets onto site for what you described.
Yep. Okay, thanks, Douglas. Maybe just second on Buchanan, you said the next panel in the Northern District will be ready this quarter, September, and higher yields. Can we just quantify this a little maybe? Is it ready now? And how does overall yields lift from Buchanan? Are we talking sort of 60% or sort of mid-higher 60s?
So no, it's not, not ready quite yet. The development in, for that, panel, has progressed really well. We're actually slightly ahead of our original plan. The team has done well, so we're busy setting it up. It'll be ready in this quarter to start mining, but not quite now. And the yield improvements between the south and the north, is about a 6% improvement at the moment. It might get a little bit higher than that, but we're looking at mid-fifties that the north will offer us.
Okay. Thanks, guys.
Thanks, George.
Thank you. Your next question comes from Daniel Roden, from Jefferies. Please go ahead.
Good day, Douglas and Gerhard. Thanks for taking my question. Just wanted to, I guess, get a better sense on the Mammoth Underground approvals and where your head's at with that, and maybe just update us on the timing of the closure of the public review and, yeah, how much time after that is required for the regulatory approvals. Thanks.
Daniel, the good thing that we have is working through DES's process is it's fairly well defined, so we can set timelines. What we've done to our program schedule is set the outer limits of DES's design program. That gives us a delivery date of approval in late November. That's what we're working to at the moment. There's obviously gate stops as you work through it. As you've called out, public consultation is one of those. I think what I'm comfortable in saying at this stage, so that I don't work against any of DES's information, that they'll want to manage more than me publicly, is our request for information have gone very well with them to date. We're actually a little ahead of our time schedule that we've planned for the project.
Yeah. Okay, perfect. And are you still, I guess, with an expectation of it closing November, are you still comfortable with a December quarter, first production? And I assume that's gonna be very modest, but just kicking in.
Yes, that's right. It will be modest, modest, but it's a milestone that we want to achieve. All other factors, our civil works are progressing really well and actually a little bit ahead of program. Our highwall stabilization is going well at this stage, so that will put us in a position that we'll be ready for surface works as soon as available, and our surface delivery is all secure for that first pit at the start.
Yeah, perfect.
So we're in a good shape.
Awesome. Sounds good to hear. I just wanted to, I guess, you know, the balance sheet's looking, you know, like it's in a, going to be in a better position with the turnaround in costs and production. I'd be remiss if I didn't ask on M&A, so Anglo's first tenders are due in the coming weeks. You know, I guess, do you wanna refresh the expectations on how you're thinking about that M&A? There's lots of coal assets up for sale at the moment. Yeah.
You're right, there has been quite a bit of activity in the market to date, and there's clearly more. These are good assets, but what's in front of me and the team and in our plan at the moment is far more attractive for our investors and shareholders. We've got projects in our organic growth that we can manage the risk of. We clearly understand those projects, and their multiple's much lower than any of the opportunities that are presenting themselves in the market at the moment. So that's where our focus is as a business, is on our organic growth opportunities. On the Anglo process, I'd rather not comment about their assets and their process at this stage. Our focus is on our organic growth.
No, no, that's fair day. And, I think I might, I'll hand it over and back around the group.
Thanks, Daniel.
Thank you. Once again, if you wish to ask a question, please press star one on your telephone and wait for your name to be announced. Your next question comes from Chenxuan Zhang from Bank of America. Please go ahead.
Good morning, Douglas and Gerhard. Thank you for taking my questions, and congrats on a strong quarter with much lower cost. Just to follow up on that, the mining fleets and people, you know, 30 major pieces of equipment removed in March quarter and another 13 expected in September quarter. I guess, for the people and the equipment operating at Curragh now, is this going to be the norm going forward? Are you happy with the mine plan, et cetera? I guess, as you mentioned earlier, it's not a temporary removal, and you will not bring them back at some stage in the future.
I'm just trying to think if the, you know, the improvement in your cost is primarily driven by the removal of people and fleets. Thanks.
Principally, you're correct. There's obviously a host of underlying activities that drive the productivity to enable this. There are two lots. The first lot of work that was to catch up the historic deficits, and that was additional fleet that we invested in over the last period of time. That cost increase has now come out because that work is behind us, exactly as you described. Secondly to that is the productivity improvements that we've identified as potential in our plan and what we're starting to see being delivered. For example, the productivity gains that we're getting out of our dragline fleets is enabling the liberation of this additional contracted fleet, and that'll come out.
But to sustain our dragline profile going forward and our stripping ratios that we wanna have as a long-term match to our long-term mine plan designs, the fleets that we have at site is pretty much stabilized now going forward. We will continue to hunt for productivity gains, and if those productivity gains are materialized, particularly in our draglines, that's where I'll be looking for, is can we get more volume moved by our draglines and maybe in cast blast is another area that we're looking at a few projects on. That might liberate, that we can free up more fleet, but we don't see that in the immediacy. Those are projects that will deliver over time and take advantage of either an incremental ton gain or a removal of cost gain.
Sure, sure. Thanks for that, Doug. Maybe a follow-up. You mentioned strip ratio. So is Curragh, at the moment, achieving the long-term, sorry, improve the strip ratio or long-term strip ratio? Just to remind us the, you know, the long-term strip ratio for at Curragh.
I have to, as a mining engineer and engineer, qualify my answer in saying you have to average it out, because instantaneously, month to month, depending on the geometry of the pit or what you're doing in the pit, it will change and go up or below. But over time, you wanna average that. And to answer your question with that caveat, yes, we are at our average long-term stripping ratio. There is potential to drive that down over time, but it will be short-term downs and ups.
Sure, sure. Thanks for the color. Then maybe last question to Gerhard about your price realization and what's happening in the macro market. So by looking at the chart, the June quarter price realization is close to 90% of the PLV, the Premium Low Volatile high coking coal. So I'm wondering, this 90% price realization, is that mainly because of the timing of the shipments that is lagged for three months, or it's something else? And also, Gerhard, if you can provide your observation of the supply and demand for the PCI coal or second-tier quality met in the seaborne market, that'll be great.
Especially, what are the drivers for the PCI discount that is narrowed to 20 to 20% in July from 32% discount averaged in the June quarter? Thank you very much.
Yeah. Okay. So, good question. So I think, in terms of price realization for us, that has improved simply because we came from a very high price environment in quarter one, so it's a time lag. $308 per ton, I think, in quarter one, and, you know, quarter two is $50 less. So we benefit here, as I always say, you know, in a falling price environment, our price realization goes up. In an increased price environment, our price realization goes down. You know, there's just a 3 months time lag. At the same time, and that goes into your question as well, in recent weeks or months, we have seen the PCI relativity has dramatically improved.
It's sitting at about 88% to the premium global index, so very small discount on PCI in the market right now. What is driving it? Predominantly, the embargo on Russian coal businesses. Russian coal, you know, businesses were targeted by the U.S. Chinese banks stepped immediately back, stopped funding any deals with Russian, these Russian coal businesses that usually exports into China and India and South Korea and Brazil. So it's a little bit more difficult. I, I think it's temporary. I think it will take some time for the Russians to find alternative routes into the market for, for that type of coal, of, which there is, of course, you know, a lot available in Russia right now, stockpiled.
When Russia sells this type of coal, it's being sold at about $160-$170 a ton, so at a big discount to today's $200 per ton, or $197 per ton, you know? So, I think it will take a little bit of time, but they might find a way to circumvent these embargoes this year. I think the other element we see is... And look, by the way, that is, of course, very positive for us, you know? A lot of our coal sits on the secondary in indices, and that's very positive for us, and we'll benefit from that in the third quarter and going forward.
So, on the main benchmark index, we have seen that, of course, coming down now to $225. What is the driver for that? Well, the main reason why that price was very high, and, you know, and anything above $200 is pretty high, but we have seen prices above $240 for a long time... was predominantly India. India is a monsoon, and, and won't come back before end of August or even September, before they start, really building momentum again in terms of appetite for, for, for metallurgical coal out of Australia. We do see a very, I would say, subdued demand for met coal in the market, which in a way is a positive, you know, given, given the depressed steel markets, a price of $225 is not a bad price, it's a very good price.
But we do see, China export steel at record levels. We see Indonesia exporting coke, at high levels. So there is a lot of, pressure on this index, on the benchmark index, and that was the reason why prices are now down to $225. There's probably a little bit more pressure on that price, you know, maybe $5-$10 more downside before then the CFR arbitrage kicks in, and then the Chinese starts buying.
Appreciate the color, Gerhard, especially on the Russian sanction. Just to summarize, so the 90% price realization from Curragh of the PLV is due to the three-month lag in, and the PCI discount narrow. That's mainly because of the sanction of Russian coal. And then just wondering, you know, for those PCI coal from Russia, normally, do you see them as competition to Australian coal? I mean, eventually they will go to China or India, and then do you see that price discount creates downward pressure to Australian coal? Thanks.
Yeah, it's a global market. There's always competition. Australia is still the biggest PCI exporter, but closely followed by Russia. Russia owns about a third of the 60-odd million tonnes the seaborne market has on PCI. And, yeah, it's in competition. I mean, Australia is a traditional, traditional seller into China and India and, and other areas, you know, South Korea, and, that, that, is putting pressure on the prices. But of course, if you embargo Russian coal, you know, you have taken it out of the supply chain, you know, so that, that's driving up the prices. It will, it will—that means also that will remain in place for another few weeks, you know, if not months.
But eventually, Russia will find, you know, these coal producers of Russia will find their way into the market again, you know, through other means. And then there's, you know, I think the relativities will normalize. You know, remember, the relativity from PCI to benchmark is always like 70%, 73%, not the 88% we see today.
Yeah, sure, sure. Understand. Understand. Thank you so much, Gerhard, and Doug, for your color. I'll pass it on. Thank you.
Thank you. Your next question comes from Nathan Martin, from the Benchmark Company. Please go ahead. Pardon me, Nathan, your line is now live.
Sorry, was on mute. Good morning, Gerhard, Douglas, Andrew. Just wanted to come back to the cost side of the equation, if we may. Congrats again on a pretty remarkable quarter-over-quarter decline. Curragh specifically, you know, came down from $127 per ton in the first quarter to around 82, it looks like, here in the second quarter. Some commentary regarding targeting further productivity and cost improvement occurred in the third quarter. I think a lot of that may be revolving around that planned removal of an additional fleet. But would just be great to get your thoughts on, you know, how repeatable maybe that $82 cost per ton number is from the second quarter in the back half?
Or maybe is there even room to improve that for some of the productivity initiatives in the room last week?
The numbers driven by what you described in our plan, and I've been talking to it, and this is what's really dear to us as a team, is we have a plan and we're diligently executing to that plan. The removal of this fleet, we always knew would be a step change in our cost, and that cost is now out. So we've got the cost out of the business, and it'll stay out of the business. There is additional gains, as you mentioned, in this quarter. We will take some more cost out of the back of productivity gains with standing down another fleet. And then there's another element to it, which is always the denominator, and we've had a good quarter, which has driven that number on it.
So if we can sustain, which our plan does support, continued good production and sustained performance, then we will enjoy the numbers that we have in this quarter, and that's what we'll be focusing on. Second order to your question being: Is there more opportunity? Yes, there is, and that's part of our plan. We're busy driving out costs and looking for opportunities where we can offset, you know, costs that have been imposed upon the business, for example, the royalty impost. And post-2026, when the standby royalty drops off, that's another $15 a US ton that comes out of Curragh's cost profile, which is another substantial step change in our costs. So in the near term, there's incremental cost differences, and then longer term, there's major step changes in our cost position, of the asset and complex.
Appreciate that color, Douglas. And then maybe, to your comment on denominator, I think you guys mentioned that you had increased inventories a little bit during the quarter at Curragh.
When do you expect those inventories to ship, and, and could that improve, you know, upon your 2.7 million tonnes sold at Curragh in the second quarter as we look to the back half, increase that run rate?
Yeah, Nathan, you're correct. We, we did build stockpiles because we were hindered with our ability to get product to port through the rain that occurred. Firstly, the rain hindered it, and then we had a run on coal right at the end of the month as a result of that, which ended up in stockpiled ROM coal, and then we also had product at port. That will get consumed over the course of this quarter.
Okay, great. Appreciate those comments.
No problem. Thank you.
Thank you. Your next question comes from Robert Stein from Macquarie. Please go ahead.
Hi, team. Thanks for the opportunity. You would have noted, you know, several mine outages in the sector, which has had an impact on both operations, but then also permitting and approval processes. Can you just potentially give us a view on the relative complexity of the Mammoth Underground to, say, a you know, a typical geologically complex and fractured you know, underground system in Queensland? Like, where do you see the risks? How are you managing it, noting the different mining method? And then similarly, can you talk to the U.S. underground risk in that same context? And I'm really just looking for a relative view here, not, not skewing one way or the other.
So the mining method that we're gonna deploy at Mammoth is bord and pillar. The geology lends itself to bord and pillar and also the level of cover. So our extraction ratios are gonna be very favorable out of the project. The other fact that we're launching the mine straight off a highwall takes the civil costs out of the project. You know, S-Pit has come to a limit at this stage, not an economic limit. We can, and we're fully permitted to mine it all of that coal from an open cut perspective, but we've got an overland conveyor that would have to move.
So it would have been coal we would have mined to the back end of the life, but this, it gives us the opportunity to pull forward in the life of the mine and mine through an underground mining method. Relativities to the US, our US operations, I believe we've got one of the best teams in the world to manage high cover because they're mining in the Appalachians, so there's high cover and highly gaseous. Buchanan is a very gaseous mine, and we've got a team with a huge bank of experience that's got the capability to manage those complexities and done it very successfully over a long period of time. Buchanan is a two longwall mine, so a totally different mining method to the bord and pillar that we're deploying here.
Gas at the project in the first phase is pretty low in the project, so breakout gas is low, but over time it will increase, and we'll bring that knowledge to bear. And this is the benefit of having the business with strong open cut and underground skill set and knowledge that we've developed over time, that we can leverage into the development of this mine. And as we've built the business over time, built all the skill set together, they can look at other opportunities that has got a proven track record of successfully integrating and getting more out of operations that have been there in the past. I think you touched on permitting relativities to others. This is a area of mine that's fully permitted. We can mine all of this coal. What we're seeking from DES is effectively a mining method change.
We can mine it through open cut, and what we're applying for is a change under our permits. So we want to mine it through a different method, being underground mining. But it takes us through an approval process with this. So a lot less complex than trying to build a new mine and get it fully permitted from the ground up.
And just as a follow-up, the implications of Grosvenor and the outage there and I guess potentially a decreased risk tolerance from the regulator up in Queensland, you don't think that's going to have an impact, primarily owing to the mining method? Is that... Would that be fair to say?
I think it's beholden to the whole industry that we learn from each other and make sure whatever we can get from Anglo to learn, we take through the industry and distribute. So we're doing that, and Anglo has been fairly liberal with good information to industry to date that we'll learn. Different mining method, different gas, different circumstances. Our engagements with the regulator to date has been positive. We've made sure that we've spoken to them early, and we've taken them through all of our technical information, and our team has come away from those meetings fairly buoyant with the response from the regulator on the way in which we're approaching this project.
We've got great people in country supporting us, and we've got a very strong team, and we're leveraging our skills within the team to ensure that we understand the risks, and we've got engineered controls in our plan around all of them. So, positive, positive feedback from the regulator that we've observed.
Thank you for that clarity. It's really helpful. I'll pass it on.
Thanks, Rob.
Thank you. That concludes the question and answer section of today's call. I'll now hand back to Douglas for any closing remarks.
Firstly, thank you, everybody, for taking the time to join us today. I've said it a few times before on these calls, that the team has developed a plan for the near term and the long term to set the assets that we have up. We're blessed with the resources we have and the team, and we've got a plan that we're diligently executing to take full advantage of this 800 million tonnes of resource ahead of us and making sure that we extract the best value we can for shareholders. And I look forward to updating you on progress to our plan and positive results into the future. Thank you.
Thank you. That does conclude our conference for today. Thank you for participating. You may now disconnect.