I would now like to hand the conference over to Chief Executive Officer and Managing Director, Barrie van der Merwe. Please go ahead.
Thank you, Travis, and good morning, everyone. Thanks for joining us today. Nothing is more important than ensuring our people return home safely every day. While we continue to work through initiatives to improve both our TRIR and severity rate, we recognize there is much more to do. Through our leadership development program, continued focus on critical controls and management verification thereof, risk assessment and management, as well as frontline engagement, we are committed to building a strong safety culture. As at 30 September, the group TRIR was 1.42, up 6% from 1.34 for the June quarter, and we continue working to drive this trend down. When we spoke in July, I outlined our reset plan. We discussed changing the mine plan to improve productivity and cost, reducing execution risk, establishing appropriate inventory buffers, improving operational stability while prioritizing margin over volume.
During the September quarter, we started to see some benefits of that work. Curragh ROM production reached its highest quarterly level in six years. Strip ratios reduced, mining costs reduced, inventory levels increased, product quality and mix improved, and earnings rose. These are all leading indicators that the reset is working. If you look at the business today, Curragh ROM production is no longer the primary issue. It produced 4.2 million tonnes during the quarter, the highest since September 2020. The opportunity and work now is to convert that into saleable, high-margin met coal tonnes through improved CHPP throughput, recovery, and operating consistency. Revised Curragh mine plan is delivering the outcomes we expected. Open cut mining performance improved, strip ratios reduced, and lower waste movement in the south translated directly into lower costs.
Mining cash costs also reduced by approximately $ 18 million Q-on-Q as lower strip ratio coal in the south reduced overburden movement and improved productivity. This will help us to invest in waste mining in the north next year to continue setting it up for increased productivity. We also built inventory during the quarter. Curragh ROM inventory increased by 600,000 tonnes to approximately 830,000 tonnes at the end of September. As part of the reset strategy, these inventories improve system stability, provide continuity and flexibility ahead of the wet season, and create future saleable production as CHPP performance continues to improve. We are starting to see improving reliability and runtime of the CHPPs, and some benefits are flowing through into higher value metallurgical coal production, as is evidenced by the 200,000 tonnes more HCC production Q-on-Q.
There's still good opportunity remaining in the CHPPs with targeted improvement of about 10% in uptime and rate, as well as a yield uptick to be achieved over the coming months. This work is focusing on automation of ROM coal reclaimers to achieve improved feed rates, updating the plant control logic to optimize the sequence, performing key critical equipment repairs, improving maintenance workflows, and updating operating guidelines and trigger action response plans. We are adopting a programmatic approach to plant improvement. Our open cut mining is delivering close to the required level, and the CHPPs are catching up to unlock the inherent value. On Mammoth, progress remains slower than what we had hoped. The mine continues to be impacted by extensive faulting in two panels, and as a relatively new underground operation, we continue to build our understanding of the geology.
While this has affected development rates and production outcomes during the year, we remain hopeful in the long-term potential of this asset. The operator, Eclipse, has implemented a detailed improvement program with our support and there's significant focus on improving productivity, development rates, and operational consistency together with associated management changes to drive the plan. While further improvements required, Mammoth remains an important source of potential future upside for our business. Turning now to Buchanan. The most significant factor affecting group performance during this quarter was the geological fault encountered in the south longwall, one of the two panels operated at this mine. The resulting roof conditions reduced ore production by approximately 700,000 tonnes relative to the June quarter and materially affected production of premium low vol met coal products.
The disruption also increased operating costs through additional support requirements and void fill activities while reducing the operations ability to recover fixed costs across the production base. This issue has now been successfully worked through and learnings embedded for the future. This should be viewed as an isolated event that is not expected to recur at the same scale. The operation has progressed through the faulted area. Longwall advance rates have returned to normal, and we do not view the quarter's performance as representative of the asset's underlying quality, capability or long-term economics. Despite these challenges at Buchanan and Mammoth, and with more opportunity remaining in the Curragh CHPPs, the group generated approximately $44 million of EBITDA earnings during the quarter. This was our strongest quarterly earnings performance since the June quarter of 2024, and a substantial improvement on the $7 million delivered in the previous quarter.
The improvement was driven by four key factors. Firstly, realized pricing improved as benchmark metallurgical coal pricing strengthened, and our product mix continued to improve. The PLV index was up about $10 per tonne quarter-on-quarter. It's currently up a further $20 a tonne, boding well for the December quarter. Secondly, the Curragh reset is delivering lower costs, lower strip ratio mining and improved mine plan execution, reduced waste movement, and improved productivity. Mine cash costs were down about $18 million quarter-on-quarter. Thirdly, there are early benefits from improved plant uptime and operating stability, resulting in greater production of high-value met coal and reduced reliance on lower-value thermal coal sales with 200,000 tonnes more HCC produced quarter-on-quarter, contributing to a 2% improvement in the group's realized price relativity to the index.
Lastly, we built a further 600,000 tonnes of ROM stock at Curragh to improve system stability and set us up for the wet season. These outcomes provide further evidence that the reset strategy is moving the business in the right direction. As we are in the final quarter of the year and the reset program is starting to embed, we are updating our FY 2026 guidance. Expect saleable production of between 14 and 14.5 million tonnes, and mining cash costs of between $105 and $110 per tonne for the full year. This revision does not reflect a deterioration in the underlying quality of our assets. Open cut mining system at Curragh is performing better than it was six months ago, and Buchanan had an isolated geological issue. Overall, ROM production is stronger and more resilient. Inventory levels are appropriately higher.
The product mix is improving and the mine plan execution is also improving with costs reducing. Rather, this revision reflects the impact of a slower ramp-up at Mammoth, predominantly driven by geological conditions referred to earlier. The ROM impact at Buchanan during the September quarter and the time required for the reset plan, in particular CHPP performance, to fully translate into saleable met coal production, as well as our deliberate decision to not bypass coal that can later be washed to yield higher margins. Also, a stronger AUD and higher diesel costs, which is outside our control, drove costs up materially and Sandeep will unpack this later. We focus on margin, not total product tonnes, and as I said before, we are not chasing a total tonnage number at the expense of mix.
In September quarter, we produced 3.4 million tonnes of saleable production, down 700,000 tonnes quarter-on-quarter, yet EBITDA improved materially. By year-end, we expect to have more than 1.5 million tonnes of ROM inventory at Curragh, setting us up well for the wet season as well as overall system stability into the new year. Before I hand over to Sandeep, a quick word on markets. The met coal market remained constructive throughout the September quarter. The Australian PLV HCC benchmark averaged approximately $248 per tonne during the quarter, compared with approximately $238 in the June quarter. Pricing has strengthened further since the quarter end, and we expect good flow-through of higher prices into December. While near-term market volatility will undoubtedly remain, the medium-term outlook continues to be supported by steel demand growth in India, constrained global supply growth, and the lack of significant new met coal developments globally.
We continue to believe the outlook for high-quality met coal remains attractive. I will now hand you over to Sandeep to discuss the financial performance, liquidity, and balance sheet.
Thank you, Barrie. The September quarter represented a step forward financially despite lower production and operational disruptions at Buchanan. The most important outcome was a significant improvement in earnings. As Barrie mentioned, the group earnings increased from $7 million in the June quarter to approximately $44 million in the September quarter. Our strongest quarterly result in more than two years. This improvement was driven by higher pricing, lower mining costs at Curragh, improved product mix outcomes, and the build of unsold coal into inventory, including our decision not to bypass ROM production as low-value thermal coal. Coal revenues increased to approximately $558 million in the September quarter, compared with $506 million in the June quarter. Group realized met coal pricing increased to $184 per tonne, compared with $171 per tonne in the prior quarter.
Australian realized met coal pricing improved to 75% of the PLV benchmark, up from 72% in the June quarter, reflecting continued progress in product mix optimization. On costs, total mining cash costs at Curragh were around $18 million lower than the June quarter, reflecting the lower strip ratio under the revised mine plan. On a per ton basis, group mining cash costs increased to $113 per ton because our fixed costs were spread over fewer tonnes. Mainly at Buchanan, our unit cost rose to $132 per tonne on lower volumes. Revised full-year cost guidance of $105-$110 per tonne reflects around $5 per tonne from lower volumes and around $7 per tonne from the stronger Australian dollar and higher diesel fuel prices. While earnings improved significantly, cash flow continued to be affected by several timing-related and one-off factors in the quarter.
Port congestion at Curragh resulted in vessel loading delays of between 10 and 14 days. At quarter end, approximately 600,000 tonnes of coal was held at port awaiting shipment. Those delayed vessels represented approximately $50 million of revenue, with most vessels already having sailed now in October. We also continued to invest heavily in inventory. Curragh ROM inventory increased by approximately 600,000 tonnes to around 800,000 tonnes at the end of September. We also carried the semiannual interest payment on our senior secured notes and paid our annual insurance premiums in the quarter. Lastly, the geological disruptions at Buchanan impacted production volumes and consequently, revenue and cash generation. As Barrie outlined, much of the inventory build was deliberate, although CHPP constraints and port congestions also contributed.
Having these levels of inventory supports system stability, improves operating flexibility, and positions the business to benefit from future improvements in plant performance while providing an inventory buffer ahead of the wet season. Adjusting for these items and excluding the prepayment arrangements, underlying business would actually be cash flow positive in the quarter. Underlying financial performance was stronger than the cash flow results may initially suggest. Liquidity strengthened materially in the September quarter. Available liquidity increased by $57 million in the quarter to approximately $155 million at the end of September. This was supported by the $75 million Glencore prepayment arrangement completed in August and reflects management's continued focus on maintaining adequate financial flexibility while the reset program progresses. Net debt reduced to $553 million compared to $606 million at the end of June.
It is important to note our net debt measure excludes the liabilities relating to Glencore and Stanwell prepayment arrangements. We have no significant debt maturities until our senior secured notes mature in October 2029. Capital expenditure for the year is expected to be around the bottom end of $150 million-$175 million guidance range. We remain focused on liquidity preservation, cash generation, and balance sheet repair. The business may not yet be exactly where we want it to be, but the trajectory is clearly improving. As operational improvements continue and inventories are converted to sales, we expect stronger earnings and cash conversion moving forward. I will now hand back to Barrie for some closing comments before we move to questions.
Thank you, Sandeep. We made good progress in the September quarter and achieved some results in the areas of open cut mining and cost, building the required inventory levels and improving product mix. The CHPPs and Mammoth still need some work, which is taking a bit of time, but we have a plan and we are executing on it. We are looking forward to the benefit of higher pricing flowing through to the December quarter, which will be supportive of cash flow together with strong production and good cost management. I remain very excited by the potential of our long-life, high-quality assets and the potential we are unlocking. Travis, please open the line for questions. Thank you.
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 then two. If you are using a speakerphone, please pick up the handset to ask your question. The first question today comes from Vikash from Primus Asset Management. Please go ahead.
Hi. Morning. Can you guys hear me?
Yes. Thanks, Vikash.
Hi. Thanks, Barrie. Thanks for the update. A few questions from my side. I understand there were some operational disruptions unexpected in 3Q. How are we positioned for 4Q or at least so far quarter to date, can you update on the recovery on those fronts? That is on the first question. Secondly, in terms of the inventory build, which you talked about, how much is further expected in 4Q?
Just say that last bit again, Vikash.
The inventory build-out, which you are looking to do, how much is already done so far in 3Q, and what is further expected in 4Q?
All right. On the first part, thanks for that. We are obviously focusing on the third quarter here and unpacking that. We will report on the last quarter, December quarter, when that occurs. I think if you look historically, the December quarter is usually a strong production quarter. With the guidance that we have put out today in terms of saleable production, as well as we guided quite a bit on where the inventory is at and where we expect the inventory to end, that should give you a good idea of what we are envisaging for the last quarter, which is running well so far. That is on that build.
But in terms of the inventory builds at Curragh, as we stood at the end of September, as we said, about 830,000 tonnes of inventory, and then anticipating that to be about 1.5 as we get to December. As we follow the mine plan, that will just drop out.
Understand. On your mining cost, I am still going through the numbers, but from what I have read and what I am seeing and your comments on it was about $18 million lower year-on-year. Can you elaborate on how should I read through? Sorry, $18 million lower quarter-on-quarter. How should I compare those numbers for September quarter versus June quarter?
Look, that sounds like a bit of a detailed modeling one. Maybe you catch up with Chantelle afterwards so we just make sure we cover that one properly for you, Vikash, if that is all right.
Understand.
Thank you.
One more question is on hedging. Are you looking to do any sort of hedges given where the met coal prices are and lock in some gains?
No, nothing on coal pricing as yet. FX, we sort of consider from time to time from a short-term perspective, but no long-term hedges.
Understand. Okay, I will get back with you. Thanks.
Thank you.
Thank you. The next question comes from Glyn Lawcock from Barrenjoey. Please go ahead.
Morning, Barrie. Barrie, could you just talk a little bit about Mammoth and the faulting? You said there's faulting in the two panels you're currently in. What drilling's being done, and is it just a case of you drilling, you've just missed the fault? Do you have any sense of the sort of medium-term outlook for faulting? Thanks.
Yeah, that's good, Glyn. We have looked at that quite a bit over the last couple of weeks. As it goes with mining projects, you do a feasibility. There's a certain drilling density going with that, and all of that was done appropriately. But there are gaps between these holes, and because there's gaps, you do find things in between that you don't expect. I think what's occurring, especially in the north mine section where the guys are, so it's a mines development getting to the northern part of the mine, which sets it up for the future. The faulting just continued for longer and was more complex than what was anticipated. Faulting in the south was less intense. I think the teams learnt a lot going through this.
We've got some plans from an equipment point of view going into next year as to kind of using some different equipment, hiring that in at times, to better navigate this kind of ground as well. Then, as I touched on in the discussion piece, there's been some changes in the management of that mine made, to also make sure we cover and respond to the faulting appropriately. I think safe to say that if you look at the productivity outlook for Mammoth compared to what we originally thought when the investment was approved, it will be a bit less. But we're still hopeful, as I said, that it can be a good asset if we learn to deal with these conditions properly.
Yeah. So that's great, Barrie. I think it was, what, originally 2 million tonnes per annum? What are you thinking? Are we 10% lower, 20% lower? Do you have a sense?
Look, I think we are working to get to a 1.8 million ROM tonne position. That's what I think is doable if we do it well, Glyn. That's what we're targeting.
Okay. No, that's great. Then maybe just one for Sandeep. What is the aggregate then, if you add in the Glencore and prepayment balance? How much is that now in total on top of what you've disclosed?
Just clarify that, Glyn. What do you mean in aggregate?
Well, you said the net debt excludes the Glencore and prepayment balance.
Oh, okay.
What is the Glencore and prepayment balance that you would have to add on top of the net debt you have disclosed today?
Yeah. The Glencore balance probably remains about just under $75 million. But if you look at the other prepayments that we would have received from Stanwell, that added another about $45 million in the quarter.
Okay. We have it from the half year finances for what it was then.
Yes, correct.
Okay. Then, Barrie, you have given us a taste for 2027 today, when you have said you are aiming to get back to 16 million-17 million tonnes. Do you think you would be at a similar cost? I just note that the 2026 guide originally was for $1,500 million of costs. If you took the midpoint of volume and the midpoint of costs.
You have been pushing $400 million a quarter, a little bit less in the third quarter. Does that mean we are sort of thinking 16 million-17 million but a slightly higher C1 than what was guided for 16 million? Or do you think with all the benefits you have got coming through, you had the 18 million down in Q3 at Curragh, so you were a $385 million quarter. But you would need to get it down to sort of three. I do not know, what is 1,500 divided by four?
You need to be down below $350 million a quarter to hit the guidance you gave us this year.
Look, we're going through the budgets now. There's many moving pieces to it. From a volume perspective, and I talk kind of waste bcms, the whole plan is drop it in the south, make the south cheaper, and then reinvest some of that and maybe a bit more in the north. Still working through that north piece. Depending on how much waste we mine in the north, that may add a bit to cost. That's the one bit that I just need to get more clarity on as we move forward. But then offsetting that, now we've done a lot of work on the procurement arrangements, the mining services contracts with the likes of Thiess and Golding, which should give us a benefit. I don't want to be too overt on the cost at this stage.
I'd rather work through it properly and not spitball it, Glyn. But I think we've got the opportunity to balance out the need to mine a bit more waste in the north with savings that's coming through the improvement program. I think the big game changer in terms of cost per tonne, per saleable product tonne, is getting that 10% improvement in rate and hours from the CHPPs, maybe a slight yield uptick because we've got a more stable system. All of that together should leave us in a decent spot with cost per tonne next year.
Yep. No, that's great. Maybe if I could squeeze one final one in. Sandeep, I think you said in your commentary you'd be cash flow positive in the quarter, even if you backed out the Glencore prepayment. I think it was what you said.
Yeah.
Can you just maybe unpack that a bit more? You talk about $50 million of lumpy cash flow in the quarter, but $40 million of that is the CapEx anyway, so it's only really $10 million. So it's a bit of a line ball decision. Were you sort of more indicating if you hadn't had the inventory build as well, you would have been a positive cash flow quarter? Or is it even with that inventory build, you think you were still positive? Thanks.
Maybe if I, like you said, break it down for you. If you look at the cash balance where it ended, we were at $155 million at the end of September. You take off the $75 million that we got from Glencore, that'll take you down to $80 million. So if you see where we were at the end of June to where we ended, that's $20 million less. But some of the things that were probably one-off lumpy cash flows in the quarter was we had some additional capital spend for long lead items that got delivered in Buchanan. So if I was to sort of normalize that from a run rate perspective, you'd probably add about a 15 million to cash. And then you had the biannual interest that we paid in the quarter as well.
If we were to pay that on a monthly basis, I'd probably normalize that at about $10 million as well. And then similarly with insurance as well, that's another $15 million. So you very quickly get to about $20 million positive. And then the inventory piece, if we were to load the inventory that port onto ships, like I mentioned, there's about $50 million of revenue. Now, you'd probably say that from a working capital assumptions perspective, that will flow into October. But we do have arrangements with our customers where we have the ability to sort of pull that cash flow forward. So even if you assume another $40 million cash flow into the quarter, you very quickly get to about positive $60 million of cash in the quarter.
Okay. That's excellent. Thank you so much for the detail. Really appreciate it. Thanks all.
Good.
Thank you.
Once again, to ask a question, please press star one on your phone. The next question is from Stefan Hansen from Macquarie. Please go ahead.
Thank you. Hi, Barrie. Hi, Sandeep. Glyn asked on Mammoth faulting. I was wondering, could we talk a bit about Buchanan, the fault that you found there, and just, I guess your understanding now of that fault and whether there's any risk that that fault has carried through into any other panels that might affect production in the future?
Yes, Stefan, thanks for that. So that Buchanan, as I said, I think that the quantum of this is isolated, and I do not expect it to recur. When you look at that mine, the ground in the south, in that south panel is more faulted and the roof conditions are a bit tougher than in the north. I think what occurred here is the team got into the failing roof. Part of the trick in the southeast is to not stop. If you stop, things get worse very fast. So the team pushed on, tried to get through that, and in that process, the situation just worsened, and we got into a challenging position. We did invoke and deploy kind of new void filling products and technologies as part of that. So we had to pivot a bit, do things a bit differently.
I think if you take those learnings, Brett and the teams developed a very good TARP plan as well as to how exactly do we deal with these conditions when they occur, which is something that we have not had as formalized in the past. So confident that if we get into it again, we will go through it differently. We will encounter roof conditions again in the south. That is just the nature of it. But I think we are very well equipped to mitigate the impact of that in future.
Okay, thanks. The longwall move, can you tell me, is that in the north or the south? How long will that take?
Yep. So we have got one coming up in the north next month. It will be somewhere between the 15th and 20th of November. We achieved that in the U.S. in about 7-10 days. The team is ready. They have actually already started putting in some of the shields. In the north, we used to have 700 ft panels. This is our first 1,000 ft panel, so that will hopefully help us a bit into next year as well. But it started to happen, and it is a fairly quick process. The guys are very well-practiced at it. As you get into next year, we will move the south in February, March.
Okay. Great. Thanks very much.
Cool. Thanks, Stefan.
Thank you. The next question comes from Daniel Roden from Jefferies. Please go ahead.
All right, good day, Barrie. Thanks for taking my question. Just a quick clarification on the indicated calendar year 2027 guidance of 16 million to 17 million tonnes. Does that include the conversion of the 1.1 million tonnes of stockpile, by any chance? If it does that imply the underlying run rate at $15 million to $16 million?
Look, in terms of that inventory level, we've got a deliberate strategy to carry a bit more inventory as a matter of course. At the end of December, that will be more because we're preparing for the wet season. I would see us carrying between 600,000 and 800,000 tonnes of ROM, kind of generally. You should expect at the end of next year, we should rebuild again to quite a high level. You should see that number pretty much as a mining delivery run rate.
Yeah, okay. No, thank you. You've called out the CHPP program. That is part of the calendar year 2027 recovery. I guess, does that need any capital, or does that capital sit inside of the, would that sit implicitly inside of that $150 million-$175 million guidance range? Or is this an additive kind of opportunity that you're looking at?
Sandeep, do you want to talk about CapEx, what we expect generally for CapEx, just generally?
Yeah. Look, there's no sort of major capital projects planned for next year. Capital from a guidance perspective, and obviously we'll sort of firm this up when we do come up with guidance in February, but it should be at similar levels to 2026.
Yeah, okay. No, thanks for that. Okay. Maybe just another one on the prepayments. Just, I guess with the layering between Glencore and Stanwell at the moment. Maybe, I guess the precedent payments there and how should we think about. I think personally, I understand the Stanwell repayment mechanism's pretty well. Just how do we think about over the next kind of 12 or 24 months, the repayments of those prepayments, and what are the conditions for those to start being settled?
Yeah, sure. Just sort of splitting them up. The Glencore, as we sort of disclosed to the market previously, $75 million prepayment obviously attracts an interest rate of about 14%, and we settle that by delivery of coal, over the next 12 months. The Stanwell one is a little bit more tricky, and as you said, you've sort of gone through that in terms of the disclosures we've made. That's obviously over a longer period of time as well. If you think about the prepayments that we are getting from Stanwell at the moment, that's linked to our liquidity levels as well. As our liquidity levels improve and go over $200 million, we'll start to see that prepayment reduce. Once we sort of get to $250 million, that prepayment from Stanwell will stop.
That gets repaid as part of our commitment to provide coal to Stanwell over a longer period of time, up to about 2040, 2043, depending on their nominations.
Yeah, okay. No, thanks for that. I'll hand it over. Cheers.
Thank you. The next question is a follow-up from Glyn Lawcock from Barrenjoey. Please go ahead.
Hi, Barrie and Sandeep again. Sorry, Sandeep. Just going back to your excellent cash flow breakdown when you ended up at about $60 million positive for the quarter. I do have to take off the $45 million in Stanwell though, don't I?
Yeah, but then there's still 15 left.
Yeah. I'm not saying it's not positive, Barrie. I just wanted to make sure it wasn't—
It is.
it wasn't an underlying $60 million. It was an underlying $15 million positive, not an underlying $60 million positive.
That's right. That's correct. I mean, the other way to look at it is to say if Stanwell paid the right price for the coal, then none of the business potential is actually the $60 million. But you're right. I mean, at some point, if we have more cash, that has to go back. So fair game.
Yeah. I mean, it would be nice if you could get them to pay the right price, but that horse has bolted.
We never give up, Glyn.
That is what we like to hear. Thanks again.
Thanks, mate.
Thank you. That does conclude the question and answer session. I will hand the conference back to Barrie for any closing remarks.
Good. Thanks everyone for dialing in. We will continue on this journey of the Curragh reset program. I am looking forward to the price tailwinds that we will see wash through in this last quarter. Then, somewhere in October, we will put out the quarterly financials. Then we will speak to you again early next year with the December quarterly. Thank you.