Thank you, Eshe. Whether you've been following Coronado Global Resources for some time now or are new to our business calls, we appreciate you taking the time to be with us today as we present our performance for the first half of 2025, share updates on our plans, and discuss what's ahead for the remainder of the year. As is widely known, the mid-cycle environment over the past 12 months has presented significant challenges, from persistently low prices and uncertain global demand to sustained cost pressures and political uncertainty. In today's presentation, we'll talk you through how we've navigated this environment, the adjustments we've had to make, and the steps we're continuing to take to remain competitive through the cycle.
You'll see that our team has remained focused on operating safely, reducing costs, and protecting our balance sheet so that we can come out of this difficult cycle in a stronger manner. We'll also talk about the long-term cash flow improvements, including the completion of our growth projects, and provide deeper insight into our financial performance. We'll close the session with Q&A, and as always, we welcome your questions. With that, let's get into the presentation. I'll begin with a quick introduction. Coronado Global Resources is a globally diversified producer of metallurgical coal, which is essential in steelmaking, which in turn is used in the infrastructure, automotive, and manufacturing industries. We operate large-scale assets in the Bowen Basin in Australia and in the Central Appalachia regions of the United States.
These assets include the Curragh complex, which has two large open-cut mines and a bord and pillar mine, the Buchanan complex, which has two longwall mines, and the Logan complex, which has four bord and pillar mines and one presently idled open-cut mine. In total, we have three open-cut mines and seven underground mines with more than 20 years of life across these assets. We have targeted high-return growth investments both in the United States and Australia that are now generating cash and that are scalable. Our product suite attracts premium prices and has well-regarded characteristics. We've returned over $1.5 billion of free cash flow to investors since our IPO in 2018, while funding significant economic contributions to the countries where we operate and Queensland's electricity needs.
Our financial position is expected to improve rapidly in the foreseeable future due to the expansion projects that are now completed in the production phase and starting to generate cash from the second half of this year. The Stanwell rebate is ending in early 2027, together with a new coal supply agreement that has better pricing, albeit still well below market, will increase cash flows to about $150 million. Barrie will elaborate and provide more insight on this in his address later. Our continued productivity-driven cost reduction programs will see Coronado Global Resources in the second quartile of the cost curve. Our liquidity improved by up to $300 million this year, and we have no major maturing debt over the next three years. Moving to the next slide, our organic growth projects, Mammoth and Buchanan, will deliver higher sustained return to shareholders over time.
Both projects are now delivering additional production, and by the end of the year, they will be on planned run rate for an additional 3 million tonnes per annum. These projects were delivered on time and within budget, which is a testament to our people and the planning that went into these projects. We anticipate increased sellable production, higher margins, and lower costs for our business as a result. The costs for these growth projects are in the second quartile, and their multiples are better than recent industry transactions, and the payback period is very short at less than three years. We are looking forward to enjoying the benefits from our achievements that will be delivered in the second half. As we move to the next slide, you'll see that we have more options available to us for growth.
As a team, we remain focused on value-creative options that align to our business and experience in metallurgical coal. We are currently advancing options on phase II and phase III of Mammoth and further capacity at Buchanan. Collectively, these options offer more than 3 million tonnes per annum, and our open-cut mines offer flexibility and scalability. We have further long-term options in the pipeline, namely Russell County and Montgeley. As Barrie will show later, assets have inherent cash-generating ability to support these investments, even at today's low prices. Investments going ahead will, however, have to be balanced with the requirements of other stakeholders, particularly in Queensland, where our direct contribution to the economy through revenue, royalties, and discounted coal supply for electricity generation has an impact on the overall economics of the Curragh complex and far exceeds the requirements set by our U.S. operations.
In the near term, both a subdued met coal market and the level of state royalty in Queensland make progress in these projects difficult. Until we are ready, capital discipline remains our priority. We will continue the technical work and will be ready when the timing is right. Ultimately, our ability to fund and deliver growth starts with strong operational performance. Let's turn to that. Turning to our first half's performance, we've made good progress. We've achieved significant cost and productivity gains. We've achieved a $200 million lower operating cost on prior year, and after the $100 million in 2024 that were reduced at the Curragh complex, we've continued to go further with another $80 million identified and on plan for cost out in 2025. $30 million has been achieved to date, and another $50 million is to come out in the second half. Our assets have incrementally been improved.
Our U.S. operations have shown better production on prior quarter and prior year, despite interruptions and shutdowns that were required in preparation for the growth projects. Our Australian assets entered the half with a six-year record ROM production. Our growth projects are now complete, and the attractive returns are scheduled to be delivered from now. Buchanan has both longwalls operating, and these are expected to deliver up to 1 million tonnes of additional production per year. Mammoth phase I will deliver up to 2 million tonnes per annum, while all three continuous miners are now cutting coal. Both projects are already contributing on proved margins and quality of earnings. There will be a company-wide improvement in H2 on the back of these expansion projects due to reduced costs associated with them, increased production, and lower capital expenditure now that these projects are complete.
Importantly, we've strengthened our liquidity position, supported by cost discipline, improved cash flow, and the recently completed ABL and standby transactions. We will continue to explore all options in H2 to maintain balance sheet adequacy throughout this difficult market cycle. With that, I'll hand over to Barrie, and he'll take us through some of the financial details.
Thank you, Douglas, and good day, everybody. We're now on slide 10, looking at financial performance. Operational and financial performance started building positive momentum in the June quarter, despite low prices persisting. This momentum is expected to continue building throughout half two as the expansion projects ramp up. Over the last 12 months, a lot of work has been done to reduce cost and improve productivity. Mine site cash cost is $100 million lower than the same time last year, primarily at Curragh. Therefore, at the end of the half, unit cost was trending at the bottom end of our guidance range of $92 per ton. As reported with our June quarterly three weeks ago, ROM volumes increased 20% quarter on quarter, driven by a 41% improvement in Australia and continued strong output from our U.S. operations.
As a result, despite a 25% lower year-on-year price, taking about $50 a ton off the revenue line, we achieved break-even EBITDA during the second quarter without any meaningful production contribution from the expansion projects yet that'll happen in half two. We have better liquidity runway than before as a result of the new ABL facility. Only $75 million of the $150 million facility has been drawn to date, and $50 million of Stanwell rebates will still be deferred. Turning to slide 11, the chart on this page shows our response of our unit cost ease to increasing volumes. The 2.8 million ton record ROM production in the June month resulted in a cost per ton of $72, well below the lower end of our guidance range. The average unit cost for the quarter was $92 a ton at the bottom end of guidance.
The quarter performance was at an average of 2.3 million ROM tons per month. Half two dollars spent will only be slightly higher than half one due to the ramp-up at Mammoth and Buchanan, and the additional spend will be immaterial compared to our overall costs. Therefore, as both the expansions ramp up, this relationship between volumes and cost will continue to play out strongly across the second half. In the June quarter, we achieved a realized mid-call price of $148 per ton, which was $3 a ton lower than Q1. However, due to the quarter-on-quarter reduction in unit cost, we achieved break-even EBITDA in Q2 compared to a loss of $73 million in Q1.
Considering that the ROM production rate for the midpoint of guidance is 300,000 tonnes, or 13% per month higher than that of Q2, as is marked by the green star on the chart, and $50 million more cost savings is to come in half two, the results should be EBITDA generation even if prices remain flat. Cash will also benefit from half two CapEx, that is $70 million below half one, and no Stanwell rebate payments for the rest of the financial year. Turning to slide 12 and talking a bit about cash flow beyond FY 2026. As is well known, early in FY 2027, there will be an estimated $150 million or AUD 240 million positive step change in the company's cash flow when the new already agreed coal supply agreement with Stanwell becomes effective.
Since the acquisition of Curragh in 2018, approximately 3 million tons per year have been supplied to Stanwell at a deep discount to market prices, which has been exacerbated by cost following industry inflation since 2018. Come 2027, the price for 1 million tons, a third of the supply, will increase materially. 600,000 tons will go up to full market prices, which at current new pricing is a cash flow uplift of AUD 100 million per year, while 400,000 tons will increase to an agreed fixed price, which is 20% above current spot prices, worth another AUD 40 million per year. While the rebate that is deferred for the remainder of FY 2025 becomes payable again in FY 2026, it will cease in FY 2027, which is worth about AUD 150 million .
Two-thirds of the supply, the 2 million base tonnes, however, continue to be supplied at a deep discount, albeit receives a small price uplift worth about AUD 30 million . After coal deliveries of AUD 80 million to repay the current $150 million liquidity support provided in FY 2025, the net annual cash benefit is AUD 240 million or $150 million per year for five years, and then $200 million thereafter. These changes will transform the company's cash generation ability in FY 2027. However, to be ready for prices persisting at current levels throughout FY 2026, we are working on all options to create adequate liquidity runway, as Douglas said earlier. On slide 13, I'll explain the significance of Coronado successfully navigating the current low-price environment for all stakeholders, but in particular for Queensland.
Despite low prices, we continued our $105 million investment in the Mammoth underground mine over the last 24 months. It created 235 jobs in the Blackwater region in Central Queensland, which is in addition to the approximately 2,000 jobs that already existed before that. The 3 million tonnes per year of coal we supply to Stanwell, the Queensland State Government-owned corporation, is the fuel for approximately 15% of Queensland's baseload electricity supply and is therefore material to Queensland's energy needs. While the $150 million or AUD 240 million liquidity support extended to us by Stanwell was much needed and welcomed in half one, it has to be repaid in coal tonnes beyond 2027 and carries a 13% interest cost. This interest cost will add up to $100 million until it's settled.
Therefore, while it provides liquidity relief, it is not permanent capital and represents an additional cost to the business that had to be incurred to remain a going concern. The extent of the recent support should be seen in the context of Coronado direct financial contribution to the state of Queensland since 2018. This comprises an estimated AUD 3.8 billion value transfer in the form of deeply discounted coal for electricity generation and rebates, and these rebates are effectively an additional royalty on the coal we export. On top of that, there's a further AUD 1.9 billion that was paid directly to the Queensland State Government as royalties. It's worth noting that AUD 1.2 billion of this was incurred since 2022 when coal royalties in Queensland were increased. In total, this amounts to AUD 5.7 billion of permanent value transferred to Queensland in less than seven years.
Over the same period, shareholders received AUD 2.1 billion in dividends. During the first half of this year, we worked hard to discharge our responsibility to all stakeholders. We navigated a very challenging market, improved operational performance, continued investing through the cycle, and found ways to extend liquidity runway while continuing to plan for a lower for longer coal market. As Douglas said earlier, we have good optionality at our assets, and there's a pipeline of studies and projects identified that could benefit all stakeholders in the medium and long term. The chart on the left illustrates the inherent potential of our assets to fund growth using half one cash flows as an example. Before discharging our responsibilities to Queensland, the business funded all capital expenditure, including the expansion investments, even at current low prices.
This is a testament to the quality of our assets and the commitment of our people. Lastly, on slide 14, we've made good and much-needed improvements to our liquidity position in the first half of the year. We have $262 million in cash and up to $387 million of liquidity. There's only $75 million of the $150 million ABL facility drawn, and $50 million of rebate referrals from Stanwell are still to come. Since liquidity is a critical success factor for us, we are as sharply focused on working capital management as we are on cost. During the June quarter, we utilized a short-term prepayment of $50 million, in fact, at $25 million of debtors before the ABL facility and Stanwell transactions were completed. This was used to fund $25 million of ROM inventory build and cash back $31 million of bank guarantees.
In the September quarter, we expect to see the short-term prepay and factoring unwind. We'll maintain our ROM inventory at current levels ahead of the wet season starting later in the year and build the working capital associated with expansions that'll ramp up progressively over the next two quarters. We will be able to partially fund these working capital increases from the ABL facility, because it allows for a 70% advance rate on certain categories of debtors and inventory. We note that towards the end of July, areas of our coal shipping producers were late with deliveries to port, delaying the dispatch of vessels. If this trend continues, it could cause further building debtors towards the end of the September quarter.
When thinking about the September cash balance, one also needs to consider that there could be a couple of weeks' lag between working capital increasing and drawing down ABL facility funds. There'll be some lumpy payments in the September quarter, particularly our annual insurance premium, which might be partially funded over the remainder of the year, payment of takeoff pay rail obligations, and a biannual coupon on the high-yield notes at the end of September, which have all been appropriately accrued for in the June financial statements. In July, we also had to cash back a further $25 million in guarantees for U.S. workers' compensation obligations. In recognition of the current low-price environment, uncertain outlook, and cash flow position for half one, the Board did not declare an interim dividend for FY 2025. We currently have no major short-term debt maturities.
Our notes do not include maintenance covenants, and the ABL EBITDA-based covenants provide flexibility in the next nine months, starting with no testing for the June quarter. The September quarter leverage ratio is set at 5x and interest cover at 2x using quarter three annualized EBITDA, which is quarter three EBITDA times 4. This compares to a 3x threshold for both these measures under the old ABL, which would have used EBITDA for the last 12 months. By setting up the new ABL in this manner, it allows the covenant test to benefit from the reduction in unit cost for September, as discussed earlier, without bringing EBITDA losses for half one into the calculation.
We have supportive noteholders with sizable individual holdings, and our credit rating is expected to start improving over time as our expansion projects ramp up and we successfully navigate covenant tests over the coming quarters. With a cash balance of $262 million and total potential liquidity of $387 million, we are well placed to navigate the current low-price environment as well as working capital needs for the rest of FY 2025. Lastly, our half-year financial report is also available today through the ASX and SEC. I'll hand you back to Douglas now. Thank you very much.
Thanks, Mike, and well done. As we close the first half of the year, we've made positive progress on both fronts, financially and the operational front. We've delivered a solid performance in H1, which saw the half end well with earnings growth, margin improvement, stronger liquidity, further cost reduction, and record operational efficiencies. We've strengthened our balance sheet in a tough market. We've improved liquidity and have no major debt maturing in the near term. Looking ahead to the second half of the year, our focus remains on executing our plan. Our key priorities for the second half include improving our earnings through these expansion projects, continuing productivity-driven cost reductions, and maintaining our balance sheet adequacy. As you can see from the slide, we're expecting to see the positive momentum that has been built to continue into the second half.
With that, I'll hand over to Ashley, and we'll take your questions. Thank you, everybody.
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 today comes from Daniel Roden with Jefferies. Please go ahead.
Great. Thanks, Doug and Barrie, for taking my question. First, I just wanted to, I guess, go through some working capital and cash flow for half two. You've outlined $50 million of prepay, $25 million of debtors factoring, $25 million of cash backing guarantees. I just wanted to, are you able to quantify, I guess, the general working capital expectations for the Mammoth and Buchanan ramp-up and, you know, some of the other, I guess, line items like the insurance, takeoff pay and coupon expectations in kind of half two as well? Just following that as well, I just wanted to clarify, I guess it's missing from that analysis, but there's also an additional, on my calculations, $57 million of CapEx that has been accrued and not expended from half one. Is that expected to be paid in half two as well?
Thanks, Daniel, for that. On the working capital, I tried to signal kind of what the moving parts are in the second half. As we said, large parts of the working capital changes will be able to fund from the ABL because only half of the ABL is drawn currently. When you look at prepay unwinding, factoring unwinding, as well as the build for the Buchanan and Mammoth expansions, most of that will come out of the ABL. In terms of the other granular details, I think if you look at the insurance, it's likely that that will fund kind of most of that. You can pick up that out of the P&L, so that expenditure you'd be able to find. On the other bits, I mean, signaling them out, but I'm not going to associate kind of numbers to those in the public domain?
I think it's safe to say that, as we said, we're comfortable that there's enough liquidity, there's enough funding to work through these changes in working capital in the second half, and that there's adequate liquidity to navigate it. The reason for putting it out is to make sure that we do kind of calibrate expectations for September cash balance because you can kind of do that modeling yourself and see that the cash balance will probably be down a bit because of these things. As you come out in the fourth quarter, as I said, the expansions ramp up progressively, so it actually gets more and more over time. In the fourth quarter, you get most of that kicker, and that then drives the cash up again.
I think the cash flow profile has looked like this kind of all along this year, where in Q2 and Q3, you navigate the low points, and in Q4, you come out of that strongly. We've given the cash CapEx numbers, so there's $70 million of CapEx to be spent in the second half, and that includes accrued amounts that you'd see in the accounts with respect to CapEx.
Okay. I guess the $53 million ABL, is there a specific timing or catalyst that you're kind of looking for there? Obviously, it's around September. Is there a specific period where that's going to fall when it becomes liquid and available?
It is just subject to having adequate inventory and debtors. As you would see from the accounts, at the end of June, we had $22 million available that we didn't draw. We can draw that ABL in $20 million increments. We are trying to balance liquidity and cost because as soon as we draw it, we do incur higher interest costs. Despite the liquidity being a key priority, we're trying to balance cost and liquidity. When there's adequate availability of that borrowing-based debtors and inventory, and we believe it'll stay there, we'll draw down the facility. I think we've signaled enough about the working capital we'll build quite strongly in this quarter. I expect there to be a good debtors base for us to utilize the facility in the third quarter.
That makes sense. I guess you've kind of mentioned in the report as well about some additional liquidity options, and you've called out the potential for a minority asset sell down. Would you be in a position to share more detail in what form that might take, you know, stake size, what assets you're thinking about, potential buyer profile? Are there any, I guess, active discussions or indicative?
Yeah, I mean, Daniel, I think we signaled this one a couple of times that we do get approached for minority stakes in, and it's Curragh and Buchanan. I mean, we've got two mines there with a sought-after product suite. Some of the parties that want to secure offtake would talk to us, but there'd be others as well. That's the same as we've always said, and we're doing the work as things come up. As and when there's something to say publicly, we'll say it publicly and comply with the disclosure obligations. That is pretty much still the status that it was as we said before.
Yeah, okay. Thank you very much. I'll hand it over, Andrew, on the key. Thanks, guys.
Thanks, Daniel.
Your next question comes from Qing Chang with Bank of America. Please go ahead.
Good morning, Doug. Thanks for taking my question. Just for your cash flow inflection on page 12 of your investor presentation, could you please talk through how you come up with the 6,000 tons at a spot price of $100 million and then 4,000 tons at a fixed price of $40 million? My understanding is that you have 800,000 tons of thermal from 2027 will be sold to the sale-bar market or the spot market rather than whatever the fixed price you agreed with Stanwell for another five years. I'm just wondering where that $600,000 and then $400,000 comes from and the logic behind that. Thank you.
Okay, Qing. No worries. I'll step through that. If you look at the position currently, we supply 3 million tons per annum to Stanwell, and it might be 3.1, 3.2, but it kind of quoted 3 million tons over time. When we get to 2027, that turns into a baseload tons of 2 million. A million tons then becomes available, which before we did the liquidity deal with Stanwell earlier this year, that whole million tons Coronado would have had to put on the market and sell on the market. We then agreed with Stanwell that they get the option to call up to 800,000 of those of the million tons, 400,000 of which would be at spot price. For the purposes of that slide, you see, we've modeled that at Nuke. Then 400,000 is at a fixed price.
That fixed price is about 20% above Nuke that we've agreed, and it escalates with inflation. The other 200,000 tons is available to us to put on the market and sell on the spot market. If you then look at the 600, it is made up of 400 goes to Stanwell at market, 200 goes to the open market at market, and the last 400 making up the million goes at the fixed price. That's 20% above current market price. Does that explain it, Qing?
Yes, thanks. Just a follow-up. Basically, 600,000 tons and the 400,000 tons, that is related to your recent liquidity agreement with Stanwell, and you agreed that the fixed price will be a 20% premium to the Newcastle thermal coal price.
Correct. Correct.
Okay. All right. Okay. Thanks for that. I guess you still have 2 million tons planned and continue to sell to Stanwell at a fixed price. I'm wondering why there's a $15 per ton price uplift. What am I missing here? Because my understanding is a fixed price grows by inflation, but why is there a $15 per ton extra price uplift on that slide? Thank you.
Yeah, I mean, under the, so the new, we currently deliver to Stanwell under something called the XL, so that's the current coal supply agreement. In 2027, that becomes the new coal supply agreement. The uplift on those 2 million base tons has always been in the new coal supply agreement, and that's been agreed at the time in 2018 when that agreement was entered into. It gives a modest uplift to the price, but as I said earlier, it's still deeply discounted, and it doesn't get it close to the market price. You have to associate it back to why that's the case. It does relate to the acquisition of the Stanwell Reserve area from Stanwell, which are tenements that we're mining currently. Part of that discount is to repay the money we owe to Stanwell for the Stanwell Reserve area.
Obviously, having locked in the price long ago, the market's moved, inflation's moved, and the margin and cash flow impacts of that kind of is playing out currently.
Right. Thanks for that. Can I have another question just on your financial, on page 14 of the investor presentation about your covenants?
Sure.
September quarter leverage ratio five times, negative coverage ratio two times. For the ABL, why there's no covenants for the NO? I'm wondering because in the presentation, it mentioned no maintenance covenants. What is the difference? I mean, when is the next review?
Qing, are you asking on the notes or the ABL facility?
Sorry, on both. On both.
Okay. Let's start with the notes. Under the high-yield notes, when I say there's no maintenance covenants, there's nothing in terms of financial metrics that we have to comply with under the notes. There are rules around increasing indebtedness under the notes, the circumstances under which you can do it, how much you can do. As long as we operate within those, there are no triggers in the notes, and there's no review deadlines within the notes. The notes, as the most secure debt in the company, run on that basis, and it provides, as I said earlier, long-term debt into the group that doesn't mature up to 2029. That's that piece. Under the ABL facility, the maintenance covenants are the leverage ratio and the interest cover ratio. No tests in June. When we get to September, leverage will be five times , interest cover two times .
That compares to, and usually in the market, both those sets are three times. That's what you'd usually find with respect to these kinds of covenants in debt agreements, about three times. That's the one piece of flexibility we've got in there. Instead of using EBITDA for the last 12 months, for the September quarter, it'll be the quarter's EBITDA times four. That'll be used to calculate an annualized EBITDA, and then we'll do the calculations of the leverage and the interest cover on that. It all does relate back to that unit cost slide, the cost per ton slide, which is giving you an indication of how as the volumes go up, the cost will come down, and we expect that together with the cost savings to then drive the EBITDA in the quarter, which will set us up to pass the covenants at the end of Q3.
As you navigate through to December and March, the covenants progressively get a bit tighter. I think it goes to four times leverage in December. It's still four times in March next year. Then you get to three times by June next year, and the interest cover goes from two to three, I think, in March next year. It gives us a good couple of months to do the things we do with ramping up the production at the expansions, to finish the cost savings program that we've got on foot, and to allow some time for the market to hopefully improve. That's not within our gift, but if that comes through, it does change our thought quite quickly. Having said all of that, with that setup we've got, with the trajectory we expect in Q3, we have confidence around that September position.
The covenants in September will be tested in November. That actually means the test happens about six weeks after the close of the quarter. I think you asked something about when's the next review. There's no kind of ongoing reviews by Q3 under the ABL facility. We just comply with our reporting obligations, governance certificates, et cetera. There's no on-foot reviews currently.
Right. Thanks for the color. Just to confirm, no testing due and no review under the ABL facility.
No.
Okay. Excellent. Thank you. I'll pass it on.
Your next question comes from Glyn Lawcock with Barrenjoey. Please go ahead.
Morning, Douglas, Barrie. I just wanted to sort of circle back a little bit on the you talked about you're still pursuing a partial asset sale. I mean, given all your comments around liquidity, testing, covenants, etc., I mean, if you feel that comfortable about the outlook, why are we still pursuing asset sales?
Glen has been a topic of strong speculation in the market at the moment. I'll say this when I start answering your question. We're not going to get drawn on the speculation because it's not helpful for our shareholders. We, and I think most operators, particularly in Queensland, have had inbound inquiries. We're still working on getting nervous about, well, where does security of supply come into the future? We can definitely see there's a long-term supply-demand imbalance and security of supply is becoming more and more important. We've got a product suite that has served the market for more than 40 years, and they can see 20 years to come.
Folk have been interested from the middle of last year as we've been growing the business, particularly with what they could see with what we were doing with the products that were going to come out of Mammoth expansion, to potentially partake in that and see if they could secure offtake. With those inbound inquiries, we've put to the board that there's value here. Do we investigate options in this regard? None of these discussions have matured to the point that we need to announce anything. Inquiries are value accretion, and it's quite pleasing to see that people see the value that we see in our assets. That's where we're up to in these discussions. We are exploring all options to ensure that we've got adequate balance sheet liquidity.
I think anybody that's been studying the business for a while can see the underlying value of the assets, the investment we've put into it to make it now productive and lower cost operations, and sustained growth that we can get out of the assets. Making sure that that is seen in this difficult market and the persistent difficult market demonstrated and where our stock price is today demonstrated how strongly the market responds to the coal price firstly, but then secondly also sentiment and speculation around liquidity and matters like that. We want to make sure that we're on the front foot and we've got all doors open to ensure that if the market does stay persistently hard, we've got the wherewithal to make sure we get to 2027.
That Barrie has so eloquently and clearly described today that everybody can understand what we're working towards that is company changing after that agreement changes.
Yeah, that's appreciated, Douglas. Douglas, do you think in your discussions, and obviously we can't discuss them directly, but do you feel as a business, given the financial positioning, you are able to extract full, if you went down this path, you can extract full value for the assets?
That'll play out in the strategy and what is in the eye of the beholder. We know what the assets are worth. It will be up to what people are willing to bring to us over time to see if that makes sense. As I said, at this stage, we're not anywhere near that point in the discussions.
There were a lot of moving parts in the first half as Barrie Van Der Merwe went through, and the second half is just as complicated. It does look like operating cash flow was about - $250 million in the first half if I try and back everything in and out. I guess I'm just trying to understand what's the total spend just on mining cash that went out the door in the first half. It's sort of hard to see from the way the cash flow breaks down and your P&L mining costs. I'm just wondering what's the dollar spend that we can use as a runway for those savings you talk about into the second half before working capital.
Yeah, I mean, I think, Glyn, if you look at that unit cost slide with a green star on, I think the way to go about that is to decide where you sit on the volume expectations for the year, which midpoint of guidance is where that green star is, and then use that unit cost times the volumes you expect us to sell or produce to come up with a cost. I think the way to cross-check that is to do the same for the first half using the $92 a ton. I did say the dollar millions we spent in the second half won't be materially more than what we spent in the first half. I think it's using those data points to triangulate that. If you look at it, there's always this matter of inventory, and the inventory blurs that cash spend quite a bit.
If you look over the course of half one, the inventory movement wasn't that material. The ROM inventories were quite stable over the half. It moved a lot in the second quarter. Without giving an exact dollar number, I think there's enough in there to be able to derive a view with respect to the spend. Did you have a second part of the question?
If I took your revenue and took your adjusted operating cash flow of $138 million, the difference between revenue and that $138 million is about $760 million. Is that a rough guide to the spend per half in cash at a mining level?
Let me just look at something here. Give me a second. I am slightly lower, Glyn, maybe 6%, 7% lower than that. If you look at kind of mine cash costs, that obviously excludes royalties, port, rail, all of those things. If you look at actually mine cash costs spent, you know, I'd put it at about $720, $730 for the first half.
That's great. Thanks, Barrie. I'll take more offline if I need it. I appreciate it.
I remembered now what you, the other thing you said is operating cash was you had a number of -$170 million or something. I mean, the operating cash was for the half was - $35 million, but that's before capital, right? If you then knock off the capital, you get to the $170 million. Operating cash before capital -$45 million, and then post CapEx is the -$170 million. As is well known, half two CapEx much less than half one. It's important to note that ability to fund the CapEx before the contribution to Queensland in terms of Stanwell and the royalties, which we also outlined in the slides, which is more kind of an interesting point just about how the economics of Curragh sits and what the underlying potential of that asset is.
Barrie, while I've got you, just a final one. Obviously, your EBITDA for Q3, your pricing's on a lag. You pretty much know your pricing. I guess what you're saying to us is if you deliver the volume you expect at the cost you expect, you're very, very comfortable with the covenant test for Q3 under the ABL.
Yeah, I mean, I didn't use the words very, very, but we are comfortable and confident that Q3 will generate EBITDA because unit costs are coming down, volumes are shifting up, more cost savings coming through. We are comfortable that we're on a good trajectory with Q3.
Even the pricing lag, which is the one thing you can't control, that's pretty much locked away for Q3.
Look, that doesn't go across all volumes. For some, it lags, but for others, it does. It is a bit of a mixed bag. It's not quite as linear as just, you know, the PLV for Q2, and therefore that's what you get in Q3. It does depend on the individual contracts and spot sales and those things. There's a bit of a lag, but it's not for everything, Glyn.
Yeah, I mean, pricing serves marking similar to what you got in the first half so far, at least a PLV perspective.
Just say that again.
Just the PLV price, which obviously you don't sell PLV, but you sell reference to that a lot.
Correct.
The PLV price has pretty much today is similar to the Q1 and Q2. If prices stay where they are, regardless of lags or not, you're comfortable at this stage based on what you believe you'll deliver.
Yes, we are.
Does it get tougher in Q4 because the covenant reduces, but then you expect the offset from better volumes?
Yeah, I mean, that's the thing. In Q4, you've got this progressive ramp-up of the expansions, so you get more volumes. The leverage covenant becomes tighter in Q4, but the interest cover is still lenient. Of the two, the most sensitive is interest cover. On leverage, we feel more comfortable than on interest cover, but still fine with interest cover into Q4 on our current forecasts.
Yeah, so leverage drops to 4, is that right? Then stays there for another three months, whereas your ICR stays at 2, but moves out to 3 for the March quarter next year.
Correct.
All right. Wonderful. Thanks again for your time.
No worries, Glen.
Your next question comes from Rob Stein with Macquarie. Please go ahead.
Thank you very much for the opportunity. Just a quick one, aside from the result, the U.S. steel plant explosion overnight at the Clairton Coke l plant, does that have any impact on, firstly, it's a tragedy, but secondly, on the impact to Coronado and volumes, and then on the U.S. met coal market? What do you expect? What are you expecting there? Obviously, it's very early in the story, but what would be the sensitivity you expect given the size of the plant and its materiality in the U.S. market?
Rob, you said exactly it. It's very early in the incident and it's tragic. They've clearly lost some of their team members and are still working through what happened. After that, they'll probably turn their minds to the impact. They're important clients of ours. We produce about 500,000 per annum for them on the run rate year to date. We're about halfway over our annualized supply. That's about 40,000 a month. We do move it to a number of their facilities. We'll see what the impact is short term. I think longer term shouldn't really impact us with that kind of volume that's left for the rest of the year. They will need to work through what it means for their business and then outflows on into the rest of the market.
Thank you. Obviously, very difficult one to answer, but appreciate the cover. 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 Nathan Martin with The Benchmark Company. Please go ahead.
Thank you, operator. Douglas, Barrie, any commentary you can provide around domestic contracting conversations here in the U.S. for 2026? I believe Coronado contracted at a fixed price of $159 a ton annualized for 2025. I assume there's likely to be some pressure on that number just given where markets are today, but it would be great to get your thoughts.
Nathan, it's one of those things that you're starting to discuss with your clients on pricing and that. We wouldn't want to get into commenting about that too publicly because it's not fair to them or to us. It also signals to the market how discussions are going. I would describe them in this manner at this stage, very early and very mature. I think everybody knows that the industry is under pressure at these prices and are looking to a long-term sustainable industry.
Okay, Douglas, appreciate that. Maybe just one other question. I think you mentioned in your slides or in your prepared remarks some ongoing shipping delays. Could we get a little more color there? What's the potential for shipments to slip into the fourth quarter and impact third quarter results?
Nathan, interestingly, we saw because this is the drier period for Queensland. Generally, it's when most operators come out of the blocks and run pretty hard in this quarter. We co-ship and there's been some supply shortage, particularly it looks like some products that have been co-shipped with us. In some cases, we could provide the spec and agreed with the other parties that the boats would sail on time. In Queensland, in June, I think we had three boats delayed, and in July, we probably had another three to four boats delayed. We're talking days, so it's not substantial delays, but it's where you measure the month or you measure the half year and you report to the market. That becomes important because it does impact. It's days that it slips. I don't think there's structurally something wrong with the market and people's ability to supply.
It's just getting it to the port and getting it on a boat on time and out on time. We've been in a very fortunate situation with our half-year ROM production in Queensland. We've turned that into product. That's made its way down to port probably a little bit ahead of others, and we've got good capacity at port for storing product. We've been at the gate ready to run to turn it into cash as quickly as we can.
All right, great. Appreciate those thoughts, Douglas. Best of luck in the second half.
Thank you very much.
That concludes the question and answer section of today's call. I'll now hand back to Douglas for any closing remarks.
Ashley, and to everybody, thank you very much for taking the time to join us today. There is obviously some detailed information we've provided and some detailed questions. As always, our team will make themselves available to answer your questions and get into some of the detail that you may require to help inform the models. We've been working hard on executing a plan, and I think everybody can see the fruits of that, even in a very challenging market. As we get discipline around the way in which we run our operations, we address our cost base, and we make sure that we get the best long-term value for our shareholders out of the resources that we have.
We look forward to the next six months in this year and then the years ahead as we stand on the shoulders of these projects that we've delivered now and to deliver results for our shareholders into the future. Particularly with those projects now totally de-risked and they've started to generate cash, we're in a good position as a business to start lifting our heads and looking to the future for our plans. Thank you.
That does conclude our conference for today. Thank you for participating. You may now disconnect.