Yeah, great. Okay. Well, look, this was released on the ASX this morning, and obviously, calendar first quarter of each year is, from a production point of view, a slow quarter or a low quarter. Obviously, there are lots of other activity going on, and we'll talk through that. The quarter started, as you might remember, we did have a vessel ready to load at the end of December going into January. Unfortunately, the monsoon season had set in, and a window did not present itself to be able to load that vessel. We negotiated to defer with the owners and the customer to defer that vessel until the restart of operations.
That, of course, affected our, I guess receipts and Nathan's gonna talk through the financials in a little bit. What it did mean, though, is that we had a significant amount of stock on the ground that had been already mined. A lot of it had already been screened, and some of it was even loaded on barges ready to go. I guess that gave us some confidence to restart a little bit earlier than we have in the past. Our earliest ever commencement of official operations on the 11th of March. That, even though it was still, we have had a very significant wet season.
I was just looking at the numbers yesterday, and we've had, you know, 3 m of rain in about three months, and higher than certainly the last couple of years. You know, we had that stock on the ground, and that gave us some confidence to restart. Now, unfortunately, just about a week after restart, we had to evacuate most of the site and put the equipment into tie-down position and mobilize the marine equipment onto cyclone moorings because of a tropical cyclone. That passed just to the south of us. You know, there was effectively, other than a bit more rain, no real impact at the site.
We did have some pretty large waves out the front of the operation in the offshore area, up to 6 m-7 m waves. That did cause some impact on the channel. We're in a much better position. Those of you who've been with us for a while might recall we did have some issues with that last year, but we took some precautions at the end of last year to widen that channel, and that allowed us to maybe lessen the impact of that this time around. We already had the bed leveling assets on site, so the surveyor and the contract tugs supplemented by Metro and TSA tugs.
We've been going hard at restoring that. We were able to restart. Even with the restricted channel, we were able to restart barging a couple of days after the cyclone had passed through. All in all, we shipped about 100,000 tons in March, in the month of March. That is a record for March. Again, even with the cyclone, you know, we've talked about a strategy to safely, you know, and in a way that is environmentally responsible to manage pushing in on that wet season to ship, you know, 400,000 tons, 500,000 tons, 600,000 tons if we can, weather permitting.
We've just been able to take a bit of a step forward even though the cyclone came in this year. I think, you know, the ability for us to manage that cyclone safely, get everybody off, get everybody back on, and get barging within a few days was really well- managed by a combination of our team and the contractor team. A very good, I guess, you know, implementation of our crisis management processes. I think the other part obviously was the maintenance. We do a lot of our annual maintenance in this wet season, both on-site as we normally do.
Mobile equipment, fixed plant, camp, et cetera, all get as much attention as they can, and we've sort of probably spent a bit more money on that this year, just trying to get everything up to standard and be ready for what is gonna be a very big year for us. The other part of that, which has been well- flagged, was the departure of our offshore floating terminal. Ikamba left in January to go to Indonesia and was laid up in a dry dock in Batam, just near Singapore, for some quite significant maintenance and upgrade programs as well as a statutory docking.
We brought that forward a year because of some concerns over the slew bearing in one of the cranes, but we've also now completed a whole bunch of other maintenance work from, you know, sort of upgrading the boom loader, from upgrading some of the hoppers and electrical systems, and indeed upgrading the accommodation block and where people bed down overnight and some of the facilities there. So a lot of focus there. That's pretty much gone to plan, and we then took the opportunity to bunker with the fuel concerns.
Took the opportunity to bunker, we'd already always planned to do some of that, but we've effectively filled her up in Singapore to bring her back here to give us a bit of a little bit of buffer. So, she cleared all of the inbound biosecurity and customs in Darwin, and she's on her way back. She's got a few headwinds at the moment. She normally would travel at five to six knots. She's got some headwinds at the moment, so only doing about three. But still, arrival currently around the 30th of April, possibly into the 1st of May. So, we'll look at weather permitting. At this point, you know, we're still very much on for our guidance, 6.6 million-7.1 million tons.
I'll just touch a bit more on the market, and then I'll just sort of hand over to Nathan just to talk a bit about the finances. I think, obviously, we've had a lot of inbound questions on the impact of the hostilities in the Middle East and you can see the impact of that on the aluminum sector. Now, I went into a bit of detail on this at the AGM last week, so if you're interested please do log in to the website and have a look at the video of the presentation at the AGM. Effectively, there's about 6 million tons of smelting in the Middle East, 6 million tons per annum of smelting, you know, in and around the Emirates and Oman, Saudi, et cetera.
It is a pretty strong. Outside China, it's probably the largest production area for aluminum metal. We've already seen three smelters being affected by the war. Prices were already on the march anyway in aluminum because of a deficit coming into this year of roughly 2 million tons, and this could create another annualized deficit of maybe another 2 million or 3 million tons. At the AGM last week, I did flag, well, look, I mean, that's going if that occurred, then prices would go, you know, at least to $4,000, maybe higher.
I think that what we may see here, and we're already seeing a little bit, is that the cap on smelting capacity in China is probably likely to be breached, and we can see that on a monthly basis in the last few months that China's been producing roughly annualized 46 million-47 million tons of aluminum, which obviously is good for demand for alumina. I mean, alumina is oversupplied, and you can see prices have been relatively weak in alumina since the spike that occurred at the end of 2024 coming into 2025. We're still seeing, you know, prices, pretty weak prices, with a lot of the alumina refineries around the world struggling to make money.
There needs to be a shakeout for sure. This has been coming for a while and you've got some of these older refineries, particularly in inland China, that are sort of hanging on by their fingernails at the moment. You know, I think this year, there'll need to be a bit of a shakeout there. That will affect bauxite demand, but a lot of it is based on, a lot of that smelting refining capacity is based on domestic bauxite. We'll probably see a bit more of Chinese domestic bauxite coming out with those domestic alumina plants probably curtailing temporarily or closing permanently. We've seen a bit of an uptick in alumina.
I think that's mainly just due to, I guess, reactions from the hostilities in the Middle East to do with freight and fuel, et cetera. I don't think it's a fundamental change in the supply-demand balance. Look, with respect to bauxite, similarly to alumina, we've seen sort of oversupply, you know, at the back half of last year into the first quarter of 2026. We saw prices sort of drop to just above $60 a ton for Guinea and below, you know, in the low $50s for the Australian benchmark. I mean, that's as low as they've been.
There's, and y ou can see, you know, certainly for the Australian benchmark, that's as low as they've been since the beginning of 2024, and in the case of Guinea, since the beginning of 2023. We did see though some reaction, some elasticity reaction there. We saw some declarations in February from a couple of producers in Guinea saying that they couldn't make money at that level and were going to look at curtailing production. I think, you know, what we've been talking about over the last year or two from a cost curve perspective, that the costs of the marginal supply in Guinea around about that sort of $65 per ton. I mean, I think that's been borne out. We've got proof of concept there.
Again, in the AGM presentation, I've updated the cost curve analysis that we received from CM Group in a slide there, and you'll see an outlook where we see that marginal cost out of Guinea probably rising up above $70 per ton over the next few years. I think long run, the structure of the supply in bauxite is running in our favor and in terms of costs and of course at the same time, you know, Metro with our expansion is heading down the other way towards, you know, more towards that $30 per ton.
Now, unfortunately, for us, I mean, the result, t he results of the Middle East crisis from a bauxite perspective, you know, there's really little impact in terms of the supply-demand balance. There is some bauxite consumed, you know, obviously in the Middle East, but not that much about, you know, more like sort of 5 million-6 million tons in a market of over 250 in the Asia-Pacific, Middle East area. It's not a huge amount. That's not gonna really affect either the supply or the demand for bauxite.
We have seen freight rates though rise considerably and the freight from Guinea, for example, has risen from around about $26-$27 per dry ton equivalent before the Middle East war to around about $36-$37 per ton now. That will flow obviously into the cost of delivery, and therefore the cost, you know, the total cost of delivery for Guinea and other West African bauxites into China. At the moment, though, there's still a fair amount of stock of bauxite on the ground in China, particularly, based from the oversupply that's occurred in the last sort of six to nine months.
The situation is very different from the end of 2024 when just some small changes in the market caused some quite hefty spikes, as you can see there on the chart. The situation now is that we've got a fair bit more stock in the supply chain. The freight shock, if you like, the freight price shock has really not yet been fully reflected. We have seen the price jump up. It was about $68 per ton for Guinea, you know, at the end of the quarter coming into April.
We've not seen a full reflection of that freight change being passed on, and that's because buyers, you know, are really sort of less, you know, sort of not yet concerned enough that they have to sort of take all of that cost on board in buying the bauxite. I think, you know, it does mean that I think we've hit the bottom. We are gonna see prices move up.
I think the other element here is that, you know, if those prices can't be passed, sorry, if the costs for freight can't be passed on through price, that will just see the net, you know, the net FOB netback in Guinea drops even further than it was in February. The Guinean government, which has taken over some of the leases that it canceled, you know, last year, is now a producer of bauxite. It's gonna be looking at its bottom line and it's not gonna be making any money. We have seen declarations from the Guinean government about setting quotas, and we see that. I mean, the rumor is that they're looking to do it relatively quickly. The number of 150 million tons has been mentioned. That's probably about a 50-million-ton reduction out of Guinea, and that would of course obviously cause, you know, a significant supply reduction in the market.
I mean, they're effectively like the OPEC of the bauxite world now, and they'll be targeting a certain price. I've heard a mention of $90-$100 a ton for Guinea bauxite. Look, we'll see how that plays out. I think that there's definitely a direction here and certainly, I'd be expecting in the second half of the year for sure that we're gonna see some high prices in the bauxite market. Look, I might stop there. Then Nathan, I'll just pass over to you to have just a quick run through the financials.
Yeah. Sure thing. Thanks, Simon. Just wanted to touch on the financial position at the end of the quarter. So you'll recall from a cash position, we ended the year just shy of around AUD 60 million, which was which goes very close to that net cash amount. I think we fell short by about AUD 1 million or AUD 2 million. But that essentially end-of-year cash balance was really important to us for a couple of reasons. Essentially, being able to make the right value decisions, particularly around shipping activities.
You'll see from, i n terms of our net cash and operating activities, you'll recall in the previous period, you know, we had extended our season much further into January than what we did in the season just past, you know, by about two weeks. The product of that was, you know, the ROM stock of around 165,000 tons essentially got carried through to the start of the year.
What that meant for us is with a strong cash position and a strong balance sheet, it's effectively allowing us to not necessarily chase tons towards the end of the year where that weather gets a little bit more changeable and the incremental cost of that loading is certainly more expensive and, you know, not guaranteed of success in terms of finishing off the vessel. Really important to be in that position to essentially be able to make a good value decision around probability of completing those shipments.
Essentially be able to carry that ROM stockpile forward into the start of the year, which has then allowed us to effectively underwrite the beginning of the season and, like Simon said, have that confidence to start as early as we ever have, knowing that with that stockpile on hand, even if we did get the rain that we did from, you know, that interferes with the mining production side of things, is that we have the confidence of, as we did in this particular quarter, a meaningful result. Even if we, you know, you fall short of exactly what it was you intended, you still had a record March, even in spite of, you know, a tropical cyclone.
That certainly, I think very much vindicated that particular approach around ensuring that, from a production perspective, that we do allow ourselves that confidence of an early start knowing that if we do commit and we bring out and remobilize our force back on site, that we do so with the confidence of having stock on hand. So that if we do see an extension of the wet season like we did this year where it was particularly rainy, and, you know, caused some flooding in our pits, that we can still do something meaningful. I think that's been very much vindicated as the approach and it'll be something we want to keep exploring even further. Like Simon mentioned of, you know, even starting to challenge, you know, much higher sort of stockpile levels.
I think that's been good. In terms of debt, it's been, you know, we've been able to pay down debt during this quarter and be able to maintain that amortization profile which is fantastic. As you might recall, we did a restructure of that Nebari senior facility just at the end of February there, where a significant proportion of that facility was deferred from 2026 into 2027. That was I think a reasonable and prudent thing to do just to manage short-term leverage in and of itself.
Also what it did was provide us with that flexibility to actually implement our capital management policy which we've done in the form of this buyback that we announced. That buyback, now with the share consolidation, you know, otherwise executed and a couple of the recent headwinds in terms of the tropical cyclone, we're now in that position to be able to move forward with that 12-month program. In terms of FX exposure, we've spoken about this a little bit before. We're in a reasonably good position at the moment with $165 million of our net USD exposure hedged at the moment, at a realized rate of 0.64.
So, well in the money, relative to current price or current rate. That represents probably about 75% of our exposure for the year. We're well-placed at the moment. You know, won't necessarily be looking to rush in to open any further positions, particularly with where the USD rate is at the moment. You know, but obviously very closely tracking an inflated crude price. Until we see that crude oil price start to settle down and then hopefully the USD follow, we'd be looking to probably stay out of the market for a little while. Thanks, Simon.
Yeah. Thanks, Nathan. Yeah, and I'm sure there'll be, you know, I guess sort of confronting it head-on, the questions about the buyback and I think, you know, as we announced that at the end of February, that's when the hostilities in the Middle East took off. You know, that was quickly followed by, I guess, the realization, you know, within weeks that the Strait of Hormuz would be held hostage here and, you know, creating this sort of fuel crisis.
I think, you know, with the cyclone there and with, you know, waiting to understand how Ikamba, you know, was faring on its maintenance program and return towage back, you know, I think we thought it prudent just to pause and delay the implementation of that. I mean, I think the nature of that buyback is still exactly, you know, the objective is still there. I mean, we still feel the company is significantly undervalued. You know, we'll be embarking on that at the right time.
Certainly, you know, now that when Ikamba's back and we're ready to go, I think that's the opportunity for us to start that program. Yeah, look, just to kind of, I guess as we've tried to do since over the what , o ver the last number of years, is to be prudent and pragmatic and risk aware around these positions and making decisions in the full nature about what's going on in the external environment. Okay. Well, look, I might pause there. There's obviously more in the report around operations, around ESG, around exploration, et cetera. I encourage you to sort of have a good look at that.
Some excellent stuff going on inside the company, as well. Look, please take your time to read through the whole thing. Look, Peter, happy to take some questions.
Thanks, Simon. Yes, there's always one about the Ikamba. It's a fascination for that ship, which I know you love as well. The question here is, is there likely to be no need for Ikamba to leave for any wet season maintenance in the next few years?
Yeah. The current expectation and plan is that we now have about five years with her on station here. Look, I mean, we have to keep, you know, a really strong eye on some of the core critical parts of her operation. The two cranes, the boom loader, et cetera, are probably the three largest pieces of kit that we need some help in working with. You can bring large cranes to the site to help but that's often more expensive than towing her to a shipyard. There are closer shipyards in PNG, et cetera, if we needed to do some urgent stuff.
Right now, the full expectation is we don't need to go for another five years, but we'll be monitoring, you know, all of those aspects. There are kind of, I guess, hybrid alternatives to her having to go as far as Batam to get the, t hat was a combination of, I think, both cost and schedule and quality from the shipyard. We were looking at a number of different factors when we chose that option. Of course, having the ability to load with the floating crane and with the geared vessels, that's allowed us to still get going even with the Ikamba's absence.
Thank you. Next question is, the report notes that the March ship loading was disrupted by Tropical Cyclone Narelle, with related customer receipts delayed. Can you give us a sense of April- to- date progress? How many vessels have been loaded and departed, and roughly what level of customer receipts have landed in the month so far?
Nathan, do you wanna, I mean, look, we normally, I'll let Nathan sort of get a bit more specific, but at the end of each month, we publish a bit of a short summary of the previous month. We're not far away from that at the moment, so we'll give you sort of full disclosure on what's been loaded. That's not just about vessels that have departed, but ones, you know, the amount we've actually mined and shipped. We'll give, you know, usually within three or four days at the end of the month we'll put something out that covers that. We didn't actually have a ship leave during March. I think, the first, the 1st of April, we actually, the first vessel departed.
Nathan, do you want to add any more color to that?
Yeah, sure thing. Particularly, the first of the capesize vessels was the one that was probably the most delayed. Like Simon said, yeah, we'll come out with a good production update very shortly as the month closes out. Otherwise from a customer receipts perspective, you know, very normal collection activity, just in terms of, you know, as most of you know, we're, you know, we'll collect on letters of credit. As soon as those vessels are completed loading, we're more or less able to turn that into cash and liquidity. The impact of March has otherwise been addressed in April and we're in, yeah, sort of normal collection routine now.
Nathan, following on from that, there's a question here regarding outstanding receivables from Q1. Are there any that we're yet to see, or is the low cash on hand just reflective of the delayed sailing of a number of vessels into April as you know?
Yeah, certainly, impact on the delay from the cyclone. There was a modest amount of receivables, very similar to sort of year-over-year, of around a couple of mil . But I think from a cash balance perspective, you know, like I mentioned, you know, the value was really in being able to start as early as we did. But even more importantly is, you know, and obviously we track and forecast these things, you know, also being in a position to be able to fully execute the wet season maintenance program, including a lot of optimizations that we were able to perform on the Ikamba.
Not having to necessarily make sort of value impacting decisions or things like that to you know try and manage to a cash balance. We've been able to sort of get you know maximum value out of our year-end cash position.
All right.
I think, you know, we've been able to prepay some fuel as well during this period and, you know, the cost of, as I said, the cost of the program's been higher than maybe we initially had thought. That's been more about extra scope than it has been about anything else. We've just taken the opportunity to do the things that we think we need to do to make sure we're as ready as we can be for, you know, what is gonna be a big year.
Perhaps this is silly related. Nathan, could you please provide some clarity on the expected reduction in FOB pricing from quarter one 2025 to quarter two 2026? Is the FOB pricing received referenced on a realized price or index basis? The impression of this questioner was that the reduction in legacy contracts would offset the decline in the bauxite price index.
I might start that, Peter. Look, I think the pricing falls that we saw up to the end of February were probably larger than we might have hoped, sort of sitting in December, January, when we were sort of looking at the market. The price continued to fall, you know, continuously right the way through until the end of February. I think, you know, I guess the impact of that is that, you know, we around about that end of February, that's when we are pricing. You know, end of February, beginning of March, that's when we are pricing the Q2 sort of numbers.
You know, that the, y ou can see that when we priced obviously Q4, you know, around about September time when we had, you know, Guinea price was sort of above $75, and we're pricing, you know, sort of, our Q2 numbers when the Guinea price is close to $60. It's sort of been quite a significant fall in price over that period. I think at the time we'd been hoping that, as the questioner alluded to, the legacy pricing removal would offset that, but it's not been quite that way. Yeah, look, we've tried to represent in that number a price received rather than an index basis. Looking, you know, we obviously have all of our Q2 customers priced.
This still depends on the sales mix. You know, which cargos, you know, the end of June cargos, you know, we sold, you know, we run a schedule about 21 days out, so the precise number of cargos to the customer are not yet fully understood. There'll be a little bit of a trade-off. That, it also represents some higher freight costs in this quarter because of the Ikamba not being around. We've used a number of geared vessels in April, and so their freight is significantly higher than a capesize vessel. Look, we've been obviously making the trade-off.
We're still making money out of those cargos, but you know, the margin is just reduced. On a like-for-like basis, we're seeing a number of moving parts for that FOB netback price to be guided as to what we have.
Demurrage. Simon or Nathan, is there any impact from demurrage on the cost impacts for quarter one? There, it's worth discussing.
I'm happy to answer that, Simon. There'll be a marginal amount. I think, you know, the most important implication for us, particularly with Tropical Cyclone Narelle was that their harbormaster actually closed the port for a period of time, which is an important element, essentially as a protection for us on demurrage. You know, it's similar to sort of a force majeure type condition within those standard charter party contracts. We're afforded, you know, a good deal of protection there on a number of those. You know, the other impact for us is, you know, Simon just mentioned the geared vessels as well.
You know, we were pretty conservative and modest in sort of some of the loading rates that we were expecting out of those gears at the start of the year. You know, what that essentially means is, with the more conservative loading rates under those freight contracts is, you know, that you essentially bear the higher cost of that freight up front within the freight invoicing itself, and then reduce the risk of demurrage. For the most part, we would expect the cost of those vessels to have been realized.
Thanks, Nathan. Simon, that concludes our questions here. Any final comments or something for the forward-looking activities for the company and the shareholders?
Yeah. Look, I think, you know, 2026 has always been our, you know, target for the 7-million-ton demonstration. That, you know, is still firmly on the cards for us. We obviously now seeing, you know, at the end of April much more stable weather conditions. Ikamba will be, you know, back within a few days and operating pretty soon thereafter. Look, you know, it's all about to start to ramp up. The, you know, sweet spot of the year is sort of normally August, September, October, November, you know, November, that's when we have the best tides, the best weather, et cetera. You know, that's always our strongest point.
We know we need to get off to a good start, and that's what we're planning. I think the operating changes we've made you know, are bearing fruit, and we've got a really good, I think, sort of, integrated planning process now that's starting to bed down and the execution on-site, very focused. A lot of cost saving ideas coming through, as well as the productivity stuff that we've been driving. A stable environment now from May onwards is what we're after, and that will enable us to use the foundation of what we've done in Q1 in April to hit those targets. You know, that's absolutely what we're planning.
You know, if we can do that, our costs will be, you know, we're looking for that heading towards that $30 a ton . Look, fuel is about 10% of our cost roughly, so about $3 a ton. Last year, we've hedged the fuel for most of our freight is already hedged in as part of our contract. You know, we won't be seeing escalation that we touched on for Guinea and even some of our Australian competitors may see, you know, fuel escalation in their cost. Most of our freight, you know, 80%-85% of our freight's already covered. But our site-based fuel is not hedged.
We may see AUD 1 or AUD 2 in cost from, depending on how it goes for the rest of the year, with this sort of Middle Eastern hostilities and, you know. I think most of us are thinking that even if the war was to stop tomorrow, it's still gonna take several months for the fuel systems to reorganize themselves. You know, we're well- supplied at the moment, working very closely with our suppliers. We've got as expected stock on the ground for that. You know, that's how we are thus far.
Look, in pretty good shape.
Tremendous. Thank you very much, Simon. Thank you, Nathan. Thank you for everybody joining us here today. The recording of this will be available once we've loaded it and distributed the link. We look forward to seeing you again next time. Thank you.
Thank you very much.
Thank you.