Resulted in lower raw coal production and ultimately saleable coal production compared to the previous period. At New Acland Mine, the ramp up continues to progress, with the assets delivering healthy increases in both raw coal production and saleable coal production. Despite lower volumes at Bengalla Mine, the group was able to maintain saleable coal production volumes at a consolidated level, reflecting New Acland Mine's increased contribution to the group.
During the period, the thermal coal market was impacted by economic uncertainty, oversupply, and weakened demand, which resulted in lower coal prices. The group's average sale price, including hedging, was AUD 139 per ton, approximately 20% lower than the previous period, which impacted both underlying EBITDA and cash flows from operations. Despite lower coal prices, the group's low-cost assets delivered a solid margin of AUD 41 per ton.
Our business generated AUD 185 million in cash flows from operating activities, which enabled reinvestment in our assets and allowed continued return to shareholders. During the period, we returned AUD 124 million to our shareholders, representing the fully franked FY 2025 final dividend of AUD 0.15 per share. Regardless of pricing dynamics, our portfolio of low-cost assets provides resilience in a cyclical environment and assists to ensure that we continue to generate margins.
In a period where the coal price has remained subdued, we were able to generate margins of approximately 30%. This showcases our low-cost nature as well as the significant upside potential available to New Hope and ultimately our shareholders in higher coal pricing environments. Our approach to capital management is underpinned by a disciplined focus on delivering sustainable returns to our shareholders.
The group's strong cash generation allows us to sustain our current baseline of production while also investing in our organic growth profile. Our two forms of capital returns are fully franked dividends and on-market share buybacks. The pace of the share buyback has slowed in recent times following increases in company share price. However, it remains on foot to provide us with optionality.
As previously mentioned, our board has declared a fully franked interim dividend of AUD 0.10 per share. New Hope has had a significant franking account balance and will continue to utilize this value for our shareholders. The dividend reinvestment plan, which we announced in September last year, will be in operation for the interim dividend. Looking ahead, the outlook for our business remains positive.
In the short term, Bengalla Mine is expected to return to its 13.4 million ton per annum raw coal target in the second half of FY 2026. In addition, New Acland Mine will continue its ramp up, including the commencement of mining activities in the Manning Vale West pit, scheduled for the final quarter of calendar year 2026. We remain confident in achieving our full year physicals and cash cost guidance for FY26, all of which are tracking strongly.
In the medium to long term, we are focused on remaining a resilient, low-cost coal producer while executing our organic growth plans, which will enable us to continue to deliver shareholder value. Thank you very much. I'll now hand over to the operator to start the Q&A session.
Thank you. If you wish to ask a question via the phones, you will need to press the star key followed by the number one on your telephone keypad. If you wish to cancel your request, please press star two. If you're on a speaker phone, please pick up the handset to ask a question. If you do wish to ask a question via the webcast, please type it into the ask a question box. Your first phone question comes from Rob Stein from Macquarie. Please go ahead.
Rob and team, thank you for the opportunity to ask a question this morning. Just two questions on the Iranian conflict. One, diesel inputs into your operations, I'd imagine are pretty significant. Can you give us a feel for one, the cost sensitivity that you might experience? Two, just how secure your safety stock is of fuel at this current point in time?
Sure. No problems, Rob. It's certainly something which we're monitoring very closely at the moment. I guess from an impact on the business with regards to price, if we look back, you know, say the last 12 months, we probably averaged about 13% of our cost base being diesel usage. Then you could probably look a bit further at our rail providers, for example. We do have a direct impact for diesel price through those.
Although, you know, reasonably material, we're probably not looking at much more than maybe around 20% of our overall cost base to put coal on a boat. Given our low-cost base, the percentage increase on that is relative. Probably more importantly, the increase in coal price impacts 100% of our books. Although we're gonna see a bit of increase in unit cost due to diesel, you know, that should be far outweighed by the increase in coal revenues.
I guess to your second point, as I said, we've certainly been monitoring it very closely, discussing it with our diesel providers. We've also been you know discussing within our own industries, both QRC, New South Wales Minerals Council, and the MCA, and also with our rail providers and any other you know influences, anything which is influenced by price, you know, explosives, et cetera.
At the moment, we don't see any you know any near term risk in supply. We do have good suppliers coming through. We are certainly monitoring it closely and I guess, you know, thinking about how we would prepare for a situation with reduced diesel availability, but nothing on the horizon is looking concerning at the moment.
Yeah, obviously on the flip side, you're seeing pretty good demand for your product, I'd imagine right now. Yeah, has there been a thing in terms of the customer base that you're seeing in terms of whether it's different countries or different providers looking to get access to the raw materials, given the just the volatility and the change in raw material inputs, or sorry, the change in energy flows globally? Any new customers, you know, banging down the door?
I guess in our situation, we've got, you know, long-term customers who will continue to take our coal. We sell a very small amount on spot. You know, our book's well sold out. We have, you know, long-term contracts. We're seeing consistent demand. I think it's fair to say that, you know, there was a lot of learnings from the Ukraine crisis with regards to security of energy supply.
Certainly, you know, as we've seen, coal prices have increased, and we've seen the direct benefit of that given all of our coal is, you know, contracted to the indices. That is starting to flow through our result for the second half of the year for this group. I think demand will remain consistent, but, you know, I think things could change very quickly if there was a major impact to gas supplies or the like.
Sorry, just a final question. Is that what gave you the confidence to, you know, pay that that dividend that obviously the market expectations but, you know, sort of was higher in terms of payout ratio than previous periods?
I guess when you look at the dividend, that was based on our year of performance for the first half. You know, I guess, you know, we're in a good position that our assets are low cost. Even, you know, if you look at the pricing over the first half, you know, I think it's probably fair to say it's near to or at the bottom of the cycle. Given our low-cost nature, we can still pay good dividends and release that franking account asset to the shareholders.
You know, it's yet to be seen what'll happen with the Iran war over the second half, and we'll think about that as we come into the end of the year.
Well, thank you very much. That was great color.
No problem.
Thank you. Your next question comes from Glyn Lawcock from Barrenjoey. Please go ahead.
Morning, Rob. Maybe just any comments you could make. If I look at coal equivalent pricing based on gas pricing, it should be north of AUD 300 a ton. Any comments you can make on, I mean, really the coal price move of like AUD 30 seems quite low relative to all energy, all other energy. Any observations you could make?
Yeah, it's a good observation, and I think it's fair to say that discount has been around for some time now. As to why that is, there's a lot of factors in that. You know, I think that discount has just continued. You know, things can change when it comes to actual supply of gas. That's when I think you'll see a tightening, potentially if gas is constrained.
Okay. Are you seeing any other sort of movements on coal flows then? You know, in terms of, you know, obviously now with thermal almost in line with semi-soft, it's not worth washing it, not for you, but for some of your peers. I mean, it's not, you can't change it overnight. Do you think there's a bit of that going on, coal at this price is sort of moving differently in from a flow perspective?
I think on your point with semi-soft, you know, it's, we did see a bit of an increase relative to thermal, for coking coal when you know, coking coal I think about a month or so ago increased to about AUD 250, while thermal coal stayed at, you know, in the low hundreds. It was pretty, it wasn't that long ago. I think now that thermal coal prices has increased relative to coking coal. I don't think we've probably had a chance to see much movement of semi-soft flowing into thermal.
I think if that maintains for many months, then you'd probably see that movement. I think as far as general coal flows, haven't seen too much change there. I mean, our destination for our coal has stayed the same and probably will no matter what the outcome, just by virtue of the fact we've got long-term customers at both operations, you know, predominantly you know to Asia. You know, we don't have a huge spot booked to direct the coal anywhere else.
Yeah. Okay. Maybe just thinking about the dividend. I know you sort of talked a little bit about it's all about, you know, balancing the needs of the business. But I mean, you've brought your cash balance down by, you know, almost AUD 100 million over the half. You know, like where do you see that cash balance going? I mean, you've got competing needs, another 12 months of CapEx, and then you're probably out the back end.
You got your convertible note in 12 months' time to deal with that potentially. As you've said on the previous call, it's probably unlikely to be put to you at the current share price. You know, like where do you think the business needs to sit long-term cash-wise?
I think, you know, if you look at our capital requirements at the moment, the focus is, you know, capital into the business for the Acland ramp-up, and some, you know, fleet replacement at Bengalla. You know, we've got some guidance in the results which talk to that. That's certainly a focus and the best use of our funds to ensure the ramp-up at Acland to that sort of circa 5 million tons annualized production and also, you know, consistency of production at Bengalla.
That's, you know, first and foremost. Then really, you know, you've already touched on the convert. We've, you know, we're aware of that. We're managing certain outcomes which might come from that. Really it's you know, focusing on returning value to shareholders through fully franked dividends. Obviously you know, a price increase you know, there's probably a fairly strong correlation between dividends and price.
You know, it's a pretty uncertain time with what's happening in Iran, and we don't wanna get ahead of ourselves and assume that you know, that increase you know, coal price is gonna stay. We'll keep following it.
Yeah. Just finally, I don't know, you probably saw Port of Newcastle and you follow it closely. Shipments were an eight-year low for the month of February, but the weather wasn't bad. Was there something going on that saw you know, an eight-year low for February exports in the valley?
I think.
Anything you'd wanna call out on your ops? Yeah, sorry.
Yeah. I mean, it's been heightened for some time now, and we. You know, you've seen that flow through our result at the beginning of, you know, the first half of this year. We had weather impacts, which predominantly was logistics related and same with our result for the final quarter for last year. I think the fact that it's at an eight-year low, you know, there's always gonna be records set, but it's good to see the port freed up down there and ships getting out. You know, that certainly helps the whole industry.
There's nothing untoward in your first six weeks of your next quarter for Q3 at all to call out?
No.
All right. Thanks very much.
Thank you. Once again, to ask a question via the phones, please press star one. Your next question comes from Daniel Roden from Jefferies. Please go ahead.
Hey, guys. Thanks for taking my question. Just wanted to ask a quick clarification just on your pricing and contract mix over the next three to six months. I know that you've forward sold for the next three months. I just wanted to clarify if there were any hedging that you'd undertake in that period just to consider.
Yeah. We've got some existing hedging in place, and then we've also placed some more hedging in the last couple of weeks off the back of, I guess, heightened forward pricing.
I guess just to clarify on that's all, paper hedging as well.
Yeah.
It's not physical.
Yep. Okay. I guess just on the Bengalla recovery, can you provide a little bit of, I guess color around, you know, returning. You know, you mentioned, returning to that 13.4 million ton per annum run rate. Is that consistent across the entirety of, I guess the second half? Like should we just be flatlining that run rate or are you still seeing, I guess the pit realignments and resource strip recovery? Like are you gonna see a bit of a ramp-up in that capability and that's probably more of an end run rate?
It should be consistent for the majority of the half. You know, the first half was really about, I guess, overcoming those initial issues to wet weather and resequencing, but it should be a fairly consistent second half. You know, obviously, you know, excluding any unforeseen impacts due to weather. But no, it should be sort of back to where the growth project, you know, projected it to that 13.4 annualized.
Yep. Is that consistent with, I guess, with strip ratio and I guess costs as a derivative of that? Like strip ratio, is it back to, you know, kind of 4 x?
Yeah, I think there's probably some guidance there. Yeah, it's more back to life of pit expectations. Obviously there'll be some swings and roundabouts between months, but on average it should be pretty consistent.
Yep, awesome. Just one last one from me. More of just a financial kind of nuance, but depreciation was probably a little high in the period. Just wanted to. I guess I'm keen to understand I guess where that step up is, and should we be carrying that forward? Is it just you know increasing in you know overall business activity and additional purchases from equipment like heavy machinery kind of stuff? Or is it just one-offs?
It's two main things, Daniel. One, it's the completion of the growth project at Bengalla. You might remember that was about AUD 200 million, which came through to really uplift that production capacity and get us to that 13.4. Now we've seen almost a full 12 months of all of that equipment and infrastructure coming through that D&A line. The other one relates to Acland.
In there you would see, I guess, and in the 31 July 2025, you'll see commentary about the box cut. That was opening up that Willeroo pit. Those additional costs to open up that pit are capitalized and then amortized. You shouldn't see those big jumps now, and we should almost start to see that slowly unwind, but for general sustaining capital come through the business.
Keeping in mind, we do have that final AUD 130 million at Acland to spend to get to Manning Vale West. That again will impact that D&A line.
Yep. Yep. Perfect. Awesome. Thanks. I'll hand over.
Thank you. There are no further phone questions at this time. We'll now address your webcast questions. Your first question asks, are Indonesia still putting on export controls on thermal coal exports? What is the upside for steaming coal?
Yeah. That happened some time ago, and we did see some, I guess, inflationary impacts on price. It's probably been overshadowed now by what we're seeing in Iran. It's hard to sort of unpick what the impact of Indonesia is. But certainly, you know, the Iran conflict has had quite a material push up in price.
Thank you. Your next question asks, why have you extended the on-market share buyback?
Yeah, sure. I guess our capital management strategy, which you see in the slide, just points to opportunistic and flexibility in our share price. Where we've seen a significant reduction in our share price and we really feel our assets are undervalued, that's when we will buy back shares. Having that flexibility and that optionality to jump into the market when we see value, that's why we turned it on or kept it turned on and will continue to monitor the share price and be active when we see value.
Putting aside the fact that at the moment the best way to return shareholders funds or value is through dividends.
Thank you. The next question asks, you have provided guidance on the growth capital at New Acland Mine for around AUD 130 million. What is the timing expectation on that spend?
That should be over, roughly over the next 12 months. We've awarded the contract. This is for the road realignment so we can open up Manning Vale West pit. That essentially gives us the pathway to ramp up to the 5 million product tons per annum. Roughly over the next 12 months we'll be executing that capital.
Thank you. There are no further questions at this time. I'll now hand back to Mr. Bishop for closing remarks.
Thank you, and thanks all for dialing in. Thank you.