Good day, and thank you for standing by. Welcome to the Whitehaven Coal Fiscal Year 2022 Financial Results Media Conference Call. At this time, all participants are on the listen-only mode. After the speaker presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star one on your telephone. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, to Mr. Paul Flynn, Managing Director and CEO. Please go ahead.
Good morning, everybody, and thanks very much for everyone taking the time to come in through the dial-in and also the webcast for Whitehaven Coal's 2022 Full Year Results Presentation. I'm joined here today by Kevin Ball, our CFO, and Ian Humphris, our EGM Operations. Kevin's going to go through the finance section of the presentation today, and then Ian, as ever, is waiting for some questions on operations. So, I'll just move over to our presentation and draw your attention to our disclosures on page two of the presentation. There are some forward-looking statements in this presentation today, so I'll draw your attention to the disclaimer that's there on the screen now. I'll move over to our FY 2022 highlights. It has been an incredible year, I think, as everybody has already commented.
We saw global energy supply shortfalls intensify during the course of the year as a result of the Ukraine and associated sanctions for Russian coal, gas, and oil. And a s a result, coal prices are at record levels, and customers are very much focused on energy security as a priority. As you would have seen with the various reports of our quarters successfully through the year, coal prices have been very good, and we've leveraged that very well. Realized pricing for the year at AUD 325 for the year in FY 2022 compares very favorably to AUD 95 for the previous year. Despite COVID and the related absenteeism that went with that, and of course, labor constraints more generally, compounded by weather interruptions, our team delivered a solid operational performance and product quality improvements during the course of FY 2022.
We delivered AUD 3.1 billion in EBITDA this year, and AUD 2 billion in NPAT, and in aggregate, across the FY 2022 result. P leasingly, our operational performance and our focus on our people has been reflected also in our safety results. We've recorded a recordable injury frequency rate of 5.4, which represents an 8% improvement on the last year. The exceptionally strong cash flows have allowed us to maintain a disciplined approach to our capital allocation to build the business resilience and deliver shareholder value in the near and longer term. As you know, we have been successfully executing our buyback plan for 10% of the stock, and we are now returning to fully franked dividend paying as well, and of course, with a total shareholder return of 154% in FY 2022, Whitehaven finished the year number one ranked in the ASX 100.
I did want to cover a bit of context on the market before we get to our results. So I'll move across to a couple of slides on market context. Most of you will be aware of this in terms of where we are and who we service. But we are an exporter, and very small amounts go into the domestic market here for boutique users. But we are very much focused on Asia as the center of our business, although we are seeing emerging interest from Europe, obviously given the energy scarcity concerns that are playing out there. But very much focused on Asia as the center of our universe. Our thermal coal is the highest quality, and with the highest energy content you can get in the world.
Both Russia and Australia are participants in this part of the coal supply market, and so having scarcity of Russian coal as a result of sanctions is certainly playing a part in increasing prices, but it's also causing concerns with our customers. This slide here gives you some context in terms of where Whitehaven is positioned relatively across other jurisdictions on the quality perspective. Whitehaven has the highest leverage of all companies to the high-end market of the thermal market, with 89% of our products above 5500s kcal and 34% of that above 6200 kcal in the market, which is a very, very unique place, and as we've seen, the distortions between the 5500 kcal market and the gC NEWC market, Whitehaven has the greatest leverage to that benefit of all the coal companies on the market.
With this supply squeeze, we're just seeing that market diverge even further between those two markets. What is the usefulness of that? Well, of course, our coal delivers more energy per ton than any of our rivals. You can see what the relative results of consuming our coal are when consumed in power stations. This graphic you would have seen. Whitehaven watchers would have seen this, used this in previous years. We've refreshed it and updated it for you. If you look at the comparison from left to right on this slide, and you look at the typical power stations that we are servicing in Japan, say for instance, and we've thrown into this example the Isogo Power Station in Japan, an ultra-super critical power station, there is a 44% lower emissions outcome compared to our most inefficient power station operation in Australia.
That is the brownfield coal generation in Victoria. Now, that's not to say they're not playing a very important part in the security of our energy supply system in Australia, but this gives you a measure of the efficiency delivered by consuming the type of coal that Whitehaven produces with its low impurities, and obviously, our export markets are benefiting from that. Now, if I go up to the page, a little bit more context for you also provides a little bit more of the notion of how important we are to our various markets. These estimates highlight the daily contribution that we make to the essentials of life in these key markets. Of course, this is just Whitehaven's piece of the puzzle overall, but you can see that we're integral to the daily consumption or the daily provision of electricity across our key markets.
So whether that be 22.9 minutes in Korea, Taiwan, a little bit more at 27 minutes, and up to Japan at 33 minutes of every day. Now, these customers are obviously critical markets to us, but we're part of the energy puzzle for them, which they rely on every day to keep the lights on for this amount of time, and so this is something that we back up every day rather, than being weather-dependent to keep the lights on. So, over the page, the challenge here with all of this is, despite that integral nature of our participation in these markets and the reliance that these key customers place on us, there is an emerging gap in the supply of coal, and not just our coal, but coal more generally.
As you can see in this graph, 85% of the world's coal-fired generation capacity will be in emerging and developing countries, but there is service these needs. Now, this chart obviously reflects a tailing off of coal consumption across the Northern Hemisphere, but obviously in Asia, there continues to be very solid growth, but it is the lack of investment, which is a product of the collective attempts to convince the world that new sources of coal supply will not be needed, and this has contributed to the ever-widening gap between supply and demand, which is going to take a long time to resolve. And of course, the conflict in Ukraine has only exacerbated this situation. Europe and North Asia have been reliant on high-quality Russian coal, but as sanctions are coming into place, demand for seaborne thermal coal will strengthen further, and supply side has tightened.
In FY 2022, 12% of the seaborne market originated from Russia, but submitting for our markets, about 30% of the high-CV thermal coal came from Russia in our markets. And it's estimated that around 56% of Europe's high-CV coal originated from Russia, also. So you're going to see a tightening ever more of the supply-demand dynamic, particularly as we approach winter in the Northern Hemisphere. Looking over at the metallurgical coal side, we should look at that. In the short term, we're seeing softness as a result of economic slowdowns, but it remains an essential ingredient to steelmaking, and it is structurally short in the long term. It's an essential component of the economic recovery, of course. And of course, conflicts and the period post-conflicts always gives rise to greater steel demand also.
In this instance, WoodMac is forecasting strong growth in demand in seaborne metallurgical coal markets in Asia for coming decades, and Whitehaven's well positioned to take advantage of that. Thermal coal prices on the next slide, you'll have seen this slide many times, and so I won't belabor this too much, other than to say that we are in an extraordinary period. Thermal coal prices are at record levels. The customers' concerns are really about energy security, and price is important to them, of course, but energy security is the greatest concern now that they have a large portion of the seaborne trade missing from the supply feeding their markets. Metallurgical coal prices, we've all acknowledged that the difference or the inflection that we've seen where metallurgical coal prices were below thermal coal prices.
While we do think this is a short-term matter, it should resolve itself with economic growth continuing. In the meantime, for our purposes, we are able to switch some of our semi-soft pricing contracts to more gC NEWC-linked pricing, which gives us greater exposure to the thermal coal price, which is obviously superior to the current pricing for semi-soft coking coal. This slide really just summarizes all the impacts of these variables that we've encountered during, of course, this very dynamic year. Coal prices are well supported, and I think that was happening well before the Russia-Ukraine conflict. Strong demand for all fuel types, particularly high- CV coal, remains very competitive price-wise relative to the alternative fuel sources. Inflationary pressures are ever-present and constantly a battle for us.
We are very mindful of the fact that we need to manage our costs because we are in a cyclical business, but at the moment, inflation is pretty much across the board. And finally, there's weather obviously that affected us, as many of you know, during the course of this year. At Maules Creek and Tarrawonga , we lost access to those mines, faced flooding across those access. And then since that time, the Hunter Valley has experienced a number of flooding events, which has constrained rail supply down to the port for us, but during all that, we've managed ourselves reasonably well during the course of this financial year, and if we add all that up together, what's impacted FY 2022 is extending into FY 2023, so there's a very strong and tight supply-demand dynamic that we're seeing in FY 2023. Over to the results.
Starting with safety, look, our safety has been a very good result in this year, 8% improvement year on year. As we all know, this effort needs to continue, and so this job is never done, we have to say, even though if we look back over the last five years, our TRIFR has gone down 22% over that last five-year period. And if we reference ourselves to our industry benchmarks, we're doing considerably better than the industry average at 12.9% over the last five-year period. So our people are very engaged in our safety, and they're very engaged in the business more generally. Employee engagement is a focus for us, which has been challenging during COVID, and we continue to face challenges in terms of attracting and retaining the right people across our industry.
In many respects, employee engagement goes hand in hand with our local community engagement, given that 2,500 of our people live and work in regional New South Wales. Now, these are some of these stats here you've seen before in terms of other callouts here. With AUD 354 million paid to our local suppliers, there's about 200 businesses in about a month, and of course, that will include other important aspects of that report, including TCFD reporting, which we do the scenario benchmarking, and we'll also do a presentation there on our profile of Scope 1 and 2 emissions. So, f inancial results for the year, again, as we'll just go through this quickly. FY 2022 has seen record results, as I said before, AUD 325 per ton translated to AUD 4.9 billion of revenue, and that related to a record EBITDA of AUD 3.1 billion.
Cash generation from operations was AUD 2.6 billion, and of course, the impact for the year a record for us at AUD 2 billion. Well, these are great results, and the board has been fit to declare a AUD 0.40 dividend fully franked on the 16th of September, and that's on top of the AUD 442 million we've already spent in returns to shareholders, be that through the AUD 0.08 unfranked dividend for the interim. And then, of course, we've bought back 7% of the share capital of the company to date of the 10% program that we announced earlier in the year. And Kevin will talk to the capital allocation very shortly. Over to our ops, and I won't spend too much time on this because you've seen this from our quarterly reports.
So just summarizing quickly, 20 million tons in total ROM output, 18.8 million tons in terms of sales. Maules Creek was hit, as I mentioned earlier, as you know, through rain events and flooding. We lost access to the mine for a couple of weeks, and that meant that we lost about 600,000- 700,000 tons of operations during the course of the year. Our guidance, importantly, for this new year is at 11.6-12.6 million tons, and the key callouts or risks around that, as you are well aware, is labor availability, with shortages generally across every industry, but ours also. And then, of course, further weather concerns, just given that there seems to be an extension of La Niña influence weather in the first half of this new financial year.
At Narrabri was a good year in the sense that it was a return to greater consistency and operational rhythm, and FY 2022, tons at 4.8 million tons was 18% higher than the previous year. The step around from 110B was conducted with the same diligence, and the longwall has kicked off well in 110B. The scheduled relocation from 110B to 203 is expected to be in the final quarter of this new financial year. On the theme of labor and its shortages, the cut-and-flit operations, which we would have preferred to have been initiating with some volume at the beginning of this new financial year, 1st of July, that has been a slow ramp-up, and in fact, we've changed out the contractors associated with that work to try and minimize the risks associated with this labor tightness in the market.
As we gravitate back into the shallow side of the mine from 203 onwards, the aggregate of cut and flit longwall production should surface in the range of around 8 million tons per annum as we reestablish ourselves back in the shallow side of the mine. Kind of our ops did well in this year, and at 4 million tons, there's been a decent outcome, certainly the highest outcome for the last couple of years.
Obviously, everybody knows that Rocglen is no longer part of the production puzzle, and Werris Creek is coming to the end of its life with the mine at 2024. In this new year, our production guidance there will be 3.3 Mt-3.7 Mt, the split broadly similar to the previous year, although Tarrawonga will be going into an area of slightly higher strip ratio, so the split there is 1.5 Mt and 2.2 Mt. With that, I'll hand over to Kevin to go through the financial highlights.
Thanks, Paul. What you see on this slide is five years of history, and I don't propose to go through all of it. As Paul mentioned, we've reported a record EBITDA of AUD 3 billion, a record NPAT at AUD 2 billion, and record cash flows from operations of over AUD 2.5 at AUD 2.6 billion. This result has really been driven by the higher coal prices, which were AUD 230 higher than those of the COVID-affected year of FY 2021. When you look at this slide, you can see in the results the real impact of COVID in 2021 and 2020. Over the coming slides, I'll take you through the headline numbers, so let's move on. EBITDA margin, w e sold 14.2 million tons.
Our average revenue, excluding purchase coal and net of royalties, was AUD 300, so that makes the math pretty easy. With AUD 84 of average cost of sale, a AUD 216 margin or 72% EBITDA margin on sales. When we look across the business, the global demand for energy is very strong. In fact, global economic growth is driving demand for energy and driving up prices for coal, LNG, and natural gas in Asia, North America, and Europe. You see that in the JKM marker price. You see that in the Henry Hub price in the U.S. So, energy is short and prices are high. We move on to EBITDA. There's no real surprises in this graph. What it says to you is that the price delivered a bounty AUD 2.9 billion.
We picked up a little bit more, about AUD 100 million in FX, which really went to offset the costs, and we finished the year with AUD 3.06 billion in EBITDA or AUD 3.1 billion as we round up. I'll go on to costs and take you through that, but let's first have a look at prices. So let's look at the pricing. Our achieved thermal price was $239 a ton, relative to $68 in the previous year. The lower coal prices in 2021 and 2020 were largely reflecting the impact of COVID, the COVID slowdowns across the globe, and real global uncertainty. Adding to that was Whitehaven's own challenges with poor quality fault-affected coal production from Narrabri, which meant we were selling a higher proportion of volumes than usual into sub gC NEWC markets. And you would have seen that in the discounts.
That continued into the half one of fiscal year 2022. However, in the second half, and particularly the fourth quarter, we saw a return to the usual proportions of high-quality coal and a substantial improvement in the realizations. And for the June quarter, we had a 2% discount, and I think surprisingly, we had a 4% discount to gC NEWC over the whole year, which is a pretty good outcome given the environment. In a stable pricing environment and given our high- CV coal, we expect Whitehaven to achieve premiums to the gC NEWC index. However, in a rapidly changing market, there's a lag to the index, and that's what we've seen in half two of fiscal year 2022. Moving into 2023, and as prices are holding relatively steady, we're expecting to see a return to our usual pricing outcomes.
Overall, we delivered an average coal price of AUD 325 a ton for thermal and met coal products relative to the AUD 95 in the previous year. It's a pretty good outcome for the year. Let's go to unit costs. Not surprisingly, everyone in the market or everyone in the industry has been talking about some of the pressures that exist. As you can see from the chart, our unit cost moved from AUD 74 a ton in fiscal year 2021 to AUD 84 a ton in fiscal year 2022. It really wasn't, in this year, i t really wasn't about costs. With the margins where they were, the pressure was to produce the tons and move the tons with the margin involved.
As indicated, the half year, the benefit of having high coal prices has played a role in the rising costs because our product quality strategy sees us washing more coal to increase its value. So that dollar increase in costs from yields was well paid back by the quality of product, and we saw cost increases reflecting underlying cost inflation in diesel. The demurrage brought about by the weather events at the end of calendar year 2021, coming into 2022. W e saw some flooding effect in the costs, and there are some other roundings there to get you to the AUD 84. You can calculate the unit cost off the face of the P&L, so in the appendices, we've got one there. And for those of you from North America who are more accustomed to seeing a site-based cost, this is a whole-of-company cost and includes the company overheads.
So you take the AUD 84, use the equity coal sales, and take the realization, take the royalty off, and you'll get to the EBITDA that we printed. That bounty of EBITDA turned into a very good year for us on balance sheet repositioning. At the start of the year, we had AUD 809 million of net debt, and by the end of April, we were effectively cash positive. By the end of June, we had AUD 1.04 billion net cash on the balance sheet, and that story has continued subsequent to year-end. Prices are high, volumes are consistent with what we've been selling, and we've been doing well. So by the end of June, we had AUD 1.04 billion. That was after we'd returned AUD 439 million to shareholders through the interim dividend and progressing the buyback, and we'd put about AUD 177 million into sustaining capital in the business.
Let's go on to what happened to the cash. As I said, AUD 177 million has been invested in the business. AUD 774 million was used to retire the senior bank facility, the ECA, and lease principal payments. We've earmarked AUD 552 million to pay to the federal government for FY 2022's income tax bill, and we'll pay that in December. T his will fill the company's franking account, and that's why the dividend, the final dividend, is fully franked. We purchased AUD 19 million for shares in the employee share trust, so we populated that early in the second half at lower costs, and that left us with about a billion dollars of cash remaining. All of that has pretty much been returned to shareholders. Between AUD 550 million paid or earmarked for a buyback and the AUD 450 million in dividends.
In a different way, what are we going to do with the AUD 1.40 ? The AUD 1.04 billion, as I said, we've got AUD 550 million earmarked for tax. We're going to complete the buyback up to that AUD 550 million. We've got a final dividend for FY 2022, and that leaves us a little bit drawn over net cash or negative net cash after that point, but we're pretty happy with our outcome. Come over the page to balance sheet. The global energy crisis continues, prices remain elevated, and we continue to see strong monthly cash flows. We've got the balance sheet repositioned to a position of strength by repaying all of the senior bank debt. That facility expires in July 2023, and we'll work to replace that facility in this next coming year. With the balance sheet in such pristine condition, we're looking at debt capital markets.
Our rating position should have improved as a result of the strength of the balance sheet, but we see little need to enter those markets just yet. We expect to reposition our funding sources and structures over the next 18 months in a manner that reflects the strong ratings outcomes and our long-term relationships with suppliers of debt capital. Now, I know a lot of you will be interested in the capital allocation framework that we rolled out in February, so let's take a little more time there. With our strong operating cash flows, we maintained a disciplined approach to capital allocation. You would have seen that in the CapEx that we spent in the year. But first, we'll use cash to maintain and optimize existing operations, and that is important.
Second, we built cash on the balance sheet or retired debt, so we put the balance sheet in very good order. The cash we retain is likely to vary. And I know people keep asking this question, the analysts, but it's going to vary, and we're likely to take a more than 12-month view when we make those deliberations. So, be patient with us. And third, we'll return capital to shareholders, and that's what we've done to you this year. We've given you 100% of the surplus cash back, and from our perspective, we think that's sensible and prudent. After those priorities, we'll use surplus cash to invest in growth if that is the best use of capital.
The growth investments might include M&A to increase our equity stakes in our existing businesses or with our opportunities to grow in metallurgical coal and diversify our operations out of the Gunnedah Basin. Or it might include investing in our Vickery or Winchester South development projects. But we'll only invest in these growth opportunities if they deliver appropriate returns for our shareholders. Buying back shares has provided compelling returns, and in the future, if buybacks offer more attractive returns and growth opportunities, we'll deploy surplus capital into additional share buybacks. Our aim is to return up to 50% of NPAT to shareholders through dividends and buybacks, but if buying back additional shares continues to be more attractive than investing in growth, then our payout ratio may be higher.
Share buybacks have been and are expected to remain an efficient and value-creating way to return capital to our shareholders, particularly if the share price is undervaluing the company, which we firmly believe is currently the case. Y ou can look at analysts' expectations of EBITDA for FY 2022, and the EV to EBITDA ratio here in this business is fairly compelling, so capital allocation in FY 2022, I don't propose to go through this. You can see where all the money went and how we deployed that capital, and you can see that from those earlier slides, so I'll turn it back to Paul because I think people are going to want to talk at some point and ask questions.
Thanks, Kevin. Looking at the four-year guidance in FY 2023, we expect to deliver another strong year. The guidance for volume at a ROM level is 20-22 million tons for the year, and for managed coal sales, 17.5-18.5 million tons for the year also. Our costs are up, reflecting the inflationary environment we're working within, and that's manifested itself through high diesel costs, electricity, labor, as we talked about repeatedly during the course of this discussion. And our guidance for costs this year are up at AUD 89-AUD 96 for this year. All businesses that we note are experiencing inflationary cost pressures, and we're no different in that regard, but we are very mindful of the need to retain flexibility to the extent we can in our cost base because we are in a cyclical business.
Capital expenditure in this year does step up, so we've given you a range there of AUD 287 million-AUD 360 million, which sounds like a lot, but there's actually a big focus here on Narrabri and putting in place some capital expenditure at Narrabri to establish the southern areas of the mine, and there is an appendix in the back of this presentation that'll go through a little bit more detail for each of you in terms of what we're allocating capital to at each of the operations and, of course, Narrabri itself. We are expecting to allocate in a range of AUD 70 million-AUD 95 million just across our development projects. We want to make sure that they are shovel-ready to the extent we can, Vickery obviously being fully approved, Winchester South still pursuing its state-based approval.
That compares to about AUD 34 million, where we constrained that last year at both Vickery and Winchester South. And there are a number of one-off items at each of these sites that we can go through the Q&A section to give people a little bit more color, and as I say, there's an appendix in the back of the slide deck for you. And over to our outlook, and I'll just make a couple of comments just on that outlook. Look, energy security, as you heard us repeatedly remark on during the course of this and the quarters before this, clearly is front of mind for all our customers, and we think this is likely to take several years before supply and demand is able to rebalance.
I suppose in addition to that, high-quality coal and high-CV coal such as ours will be required for a multi-decade period, of that we have little doubt. Prices will continue to be well supported. Russian sanctions and, of course, weather-related events in the Hunter Valley will further support prices in the near term. In terms of the met coal, currently there is some volatility as we have all observed, but we think longer-term outlook here is very, very solid, and the price environment will remain very positive. In terms of the key focus for FY 2023, we're focused on continuing to improve our safety, environmental, and sustainability performance. We're all about optimizing our margins in this market, including maximizing our thermal coal volumes and managing costs as best we can in this inflationary environment.
As I say, those projects, we'd like to push them as close as we can to being shovel-ready . We're looking forward to another good year ahead, and I'd like to thank our team, our entire team, and our Board for all their effort and support during this challenging, but a year that's been very rewarding for our shareholders as well. With that, thanks for listening to the presentation. We'll hand back to the operator and move on with the Q&A session.
Thank you, sir. As a reminder, to ask a question, you will need to press star one one on your telephone. Please stand by while we compile the Q&A roster. I show our first question comes from the line of Rahul Anand from Morgan Stanley. Please go ahead.
Hi, morning team. Thanks for the opportunity. Look, the first one is around operating costs for next year. So Paul, perhaps if you could help us understand what part of these costs do you see as transient currently, and what's the underlying level we should be thinking of on a go-forward basis. And then the second part, sticking to guidance, is basically around Maules, the 13 million tons license. The guidance is a bit below that. I want to get a bit of color on that, please. Thanks.
Yeah, Rahul, I'll start off with a few remarks and then hand off to Kevin for some remarks on the costs. I mean, we're seeing inflation rise across the business, as you know, and this is no stranger to you, I'm sure, with all the companies reporting their various results and drawing out the same observations. Labor clearly is an important issue. Diesel, we've all observed that on a daily basis, has been influential in terms of where our cost base goes. From our perspective, there are other different structural changes which are in our costs which won't disappear in the short term.
The first of which is acceleration of debt at NCIG. I think everyone's obviously deleveraging at the company level, and you can see our infrastructure providers, of which we're a large shareholder in NCIG, made the sensible decision to accelerate debt reduction there. And so there's an element in that that's in those costs. Kevin, did you want to expand?
Yeah, Paul, happy to. Look, Rahul, the way we think about this is that diesel is going to remain elevated, and if diesel remains elevated, then the global energy complex remains elevated and the price remains elevated. But the things that are in the business that we've seen quite a lot of pressure on recently is, like suppliers who are struggling, like many companies in this country, to actually find labor to deliver. And more importantly, around trades. It's hard to find trades on the East Coast. Our labor, people are trying to pick other companies and other industries. You've got a big state government spend going on here in construction. So there's pressure on labor. There's pressure on trades. The diesel price remains high.
The NCIG piece is really about deleveraging that balance sheet to the point where it's degeared over the next four or five years, and that's going to stay there. I do think that whilst ever the spread exists between API 5 and gC NEWC, it's in our interest to wash as much coal as clean as possible and sell into those higher markets because then spread encourages it. So I guess I'll be saying to you that I'm waiting for a turn in the economy before I start telling you that costs are going to start coming out of the business.
Sure.
And just on the Maules part of the question, the challenge there is, as it always is, the presentation of the seam in your mine sequence in a particular year. We've given you a range there that we're cautious on. We're cautious.
NCIG piece is really about deleveraging that balance sheet to the point where it's degeared over the next four or five years, and that's going to stay there. I do think that whilst ever the spread exists between API 5 and gC NEWC , it's in our interest to wash as much coal as clean as.
In this current year. So we calibrated that with a measure of caution in terms of where we think that will play out during the course of the year. Of course, we'd like to be closer to the 13 million ton rate, but I don't think that's prudent given all the factors that we've spoken about during the course of this presentation and that Kevin's also just highlighted.
Sure, perfect. And look, just the last one, sticking with guidance in terms of CapEx now, perhaps fall into next year. You did point out the AUD 70 million-AUD 95 million in project capital. Is that any part of that in terms of perhaps Vickery long lead items or something? What exactly is that spend going into?
No, there's a range of things in there. There's not long lead items. No, we're not. Well, it depends on how you define that, I suppose, Rahul. There are aspects of this which are land-based. So there's land required for that project. There are some elements of offsets required also for that project given that that is now fully approved. But the majority of it, there is drilling. There is exploration drilling associated with the geotechnical work for the Rail Corridor as part of the budget for this new year. There's exploration drilling also further for geotechnical reasons up at Winchester South during the course of this year, also. But there's nothing in there for ordering long lead time items.
Yeah, and if you go to slide 46, Rahul, which you'll get to in due course, you'll see there's a couple of things in there. We're going to do a little bit of work on minimizing emissions. We're in the early stages of looking at putting a solar farm on Narrabri. We've got housing in the Gunnedah Basin. We want to try and build more capacity out there because we've got a need for people in years to come, and we want to make sure that housing isn't a barrier to entry, at least for partners. So, there's a few things in there, and we can take people through these at a later point.
The other point I'd probably just clarify for you with NCIG is we expect that to be a four or five-year program there, and that's all around while prices remain elevated, that additional amortization charge comes through, and when that comes through and it's finalized, I'm expecting that NCIG becomes probably the lowest-cost port operator on the East Coast.
Yeah, I was going to actually ask, do you have an order of magnitude, perhaps, Kevin, in terms of what kind of dollar savings could be if it was completely debt-free?
I think NCIG. NCIG's operating costs, you'd expect that to be somewhere in the AUD 2-AUD 3 range if you ran that port, and you get the benefit of cargo assembly at the port, so you're delinking the logistics chain. You're just basically railing and railing and railing to a stockpile. So I think that port at the back end of the 2020s, say 2027- 2030 and beyond, is going to be the best port to be in the New South Wales.
Perfect. That's very helpful. Thank you. I'll pass it on.
All right, mate.
Thank you. And I show our next question comes from the line of Alex Ren from Credit Suisse. Please proceed with your question.
Good morning, Paul, Kevin, and team. Congrats on a solid result and an incredible year, like you mentioned. Two from me. Please, slide five, could you remind us what's your volume exposure to that? It's $375 a ton, Japanese reference price, please. Then the next one would be on slide 31, net cash waterfall, net cash waterfall chart. So, going back to AUD 74 million net debt, but this calculation is based on AUD 1 billion net cash as of June 30. I'm just thinking post-June 30, correct me if I'm wrong, you're minting about AUD 400 million free cash flow a month. So as of today, that gives you roughly AUD 700 million headroom for cap management. Just wondering, is this a ballpark number you're considering for the next round of buybacks at the AGM? That's it.
5% is the answer to the first question.
The answer to the second question is that we look at it year- on- year, Alex, so we're not interrelating the first quarter of fiscal year 2023 to support the 2022 result. The buyback, you'll see a notice of meeting come out. The Board has approved an increase to go back to shareholders and seek approval to increase the buyback limit. That should be out, I'd say, in the next week or two. Sorry, Paul.
It's all right.
When's the norm coming out?
In about a month's time.
In about a month's time. But it'll be in buying back shares. And we'll really kick off this buyback, the current buyback that's outstanding, tomorrow with the trading window open tomorrow. And your estimate on the math is pretty much on the money, as far as what you're printing. The fourth quarter is running into the fourth quarter of 2022, is running into the first quarter of 2023 at the same numbers.
Great, understood. That's it from me. Thanks.
Thank you. And I show our next question comes from the line of Paul Young from Goldman Sachs. Please proceed with your question.
Thanks. Morning, Paul and Kevin. I hope you're both well. A question on the market, Paul, and on the slide five, thanks for that slide. That's actually really helpful as far as understanding the customer mix. I'm curious about two things. One is that the sales into Poland, I know two customers, small volumes there, but what's the outlook for, I guess, increasing sales to Europe, noting that I think Russia stopped selling coal into Western Europe around sort of end of July there? And then second one is around what customer demand is like at the moment for locking in fixed prices for 2023 at above gC NEWC at premiums, and what's your appetite for that?
Yeah, thanks, Paul. Look, as everyone knows that we obviously contributed to the humanitarian aid that went into Poland. In addition to that, we've obviously had a couple of opportunities to sell metallurgical coal into Europe. So there's some trials going on there. Look, there are inbound inquiries, Paul, but I have to say our traditional customers in Asia are also exhibiting anxiety around security of supplies. So we need to balance all that with them given the long-standing nature of those relationships. But there's plenty of inbound inquiry coming out of Europe. I see almost on a daily basis, there seems to be new announcements coming out of Europe about facilitation of greater coal consumption across Europe, be that power stations being reinvigorated, be that rail haulage given preference on the rail lines over passenger traffic for coal shipments. There's just a series of pronouncements coming out there.
We think that's just going to drive greater demand. We know that everybody in the European ports has been filling up their stockpiles ahead of the incoming winter, and that was happening very vigorously before the sanctions came into place in early August. In terms of your second question, in terms of locking things in, we have been opportunistically taking opportunities to lock in higher prices where that's been an opportunity that's available to us. We have some contracts where that is available. But having said that, we've been in a rising market for a while now. And so every time we've done that, we've seen the prices continue to progress further northward. We're a little cautious on doing that. The previous question obviously was about the JFY number, and that's about 5% of that is obviously locked in.
Korean tons generally are locked in for 12 months as well. But we are, at the moment, I have to say, preferring to stay at the market rather than trying to lock in numbers. Our focus is locking in the premiums, as we've talked about in the past. We want to make sure that the index may vary, although we think it's going to be stronger for longer here. But our focus is locking in those premiums on our sales as a means by which we can set that marker as high as we can for the next six to 12 months.
Great, thanks, Paul. Just last one is around the coal trading, and you did really well. I mean, I think it was probably a record EBITDA from coal trading in a year. Can you just explain how that sort of came about, what opportunity there was, and how you're approaching that, your coal trading or coal purchases at the moment?
Yeah. Young, I think in there is what you see in the open cut and underground is the value of the coal delivered out of those. And then what you see in the coal trading and blending segment is really the portfolio benefit of lifting products out of markets that they ordinarily would fall into. But pulled together, you get a real uplift on results. And that's the AUD 200 million that flows through pretty much out of blending benefits. The coal trading in the current year, I'd probably say that Jason and the team have done pretty well down there.
But really, with the demurrage and the weather events, the real coal purchasing has been about helping customers and delivering coal to customers and defraying demurrage rather than trying to make a margin on it. We do like the fact that 5,500 product is being priced at a big discount to gC NEWC, and with the business in better performance in 2023. I'm hoping and looking forward to coal trading coming back into the fold.
I think it generates the benefit of having access to the high-CV coal.
To blend, yeah.
You cannot blend 5,500 with 5,500 and earn AUD 200 million. So, that's really the benefit of having access, really to that higher- value coal, which has been able to take advantage of that spread.
Yeah, but that arbitrage is still there, gentlemen, o n those two coal products, 6,000 versus 5,500. So, we can probably assume that you'll get further. You'll continue to benefit from blending, I presume, in this market.
Yep.
Okay, great. All right, thank you. That's it from me.
Thank you, and I show our next question comes from the line of Chen Jiang from Bank of America. Please proceed with your question.
Hey, good morning, Paul and Kevin. A few questions from me, please. Just looking at your capital allocation, it seems like Whitehaven prefers buyback versus franked dividends. Just wondering, how should we think of the split between buyback and dividends going forward? And could you please also remind us your franking credit at the end of FY 2022 and any franking credit you are expecting for FY 2023? Thank you. I have more after this.
Okay, last question first. We'll pay AUD 551 million in tax to the ATO in the first week of December, which will fill the franking account and allow the full- year final dividend to be fully franked. So that was that question. So, remind me again your first one.
Yes, sorry. F irst one is about how should we think of the-,
Buyback.
Yes. Split between buyback and dividends because it seems like Whitehaven prefers buyback at this stage because your policy of 20%-50% including buyback. Thank you.
Yeah, no, I think that's a very good question. Look, and I think when you've got a free cash flow yield of about 70% in the business, buying back the stock is as good a choice as you can. I think when we think when the share price starts to show value, then clearly within that 20%-50%, there's space to play. But I think you should work on 20% of NPAT being paid as a dividend until the business gets back to a realistic set of valuation metrics. And the balance coming out of buybacks. And as we said in that capital allocation framework, if we can't find a good use for it, we'll put it to work on further buybacks. And that's why we're going back to the shareholders in October seeking an increase in the refresh of the 10% in the 12-month period.
Right, great. Thanks. So, refresh of 10%, you mean additional 10%? Are we referring to, d o you have any preference of on-market buyback or off-market buyback which can utilize the franking credit?
Yeah, look, I think the way we think about that is that we'll refresh the 10%. We'll execute on the balance of the 10%, the first buyback. Our inclination is to, following the AGM, if shareholders approve that resolution, then we would seek to launch another on-market buyback. And then with the franking account populated, it's probably either late in the second half or in FY 2024, early in FY 2024, when we'd be able to contemplate an off-market buyback. But there's a bit of water to go under the bridge there, and there's a lot of work to get done. But that's our preference at the moment, or not our preference, that's probably our way of thinking at the moment.
Chen, what we're signaling here is that the buyback that we're undertaking now is not a single expedition into the market. We see value in continuing to follow this up, as Kevin's just outlined, and subject to shareholder approval. We believe we'll take the balance of the 3% of the first buyback tranche, if I can call it that, by the time of the AGM, more or less, based on the pace at which we've been executing that program.
But there's very strong value in the stock, and we think the buyback's been very good for shareholders over the last six months. And so we'd like to finish that program around then. But assuming that shareholders view that favorably, then we'll be able to continue on into the post-AGM period and with a further tranche, as we're saying, of on-market. And then that will facilitate the opportunity, whereby the Board can then contemplate after that.
Right, thanks, Paul. Just a follow-up. So, Whitehaven is comfortable and confident that, because you have AUD 180 million roughly pending from the original AUD 550 million buyback. And I guess, Whitehaven is confident to complete the remaining in a month, roughly speaking in.
Yes.
Okay, okay. Thanks. Can I switch the gear to your CapEx guidance for FY 2023, please? Looks like CapEx from Narrabri has tripled by looking at the FY 2023 guidance. I'm just wondering, are all those CapEx in FY 2023 sustaining CapEx? If they are, is that the level we are expecting from Narrabri going forward? Thank you.
Yeah, Chen, I'll make a few remarks, and then I might even hand it to Ian because I know he's been waiting eagerly for some questions. You're right to focus on Narrabri, and certainly the tripling is certainly interesting. This is not a tripling of sustaining CapEx. That's not the case. There's a significant body of work here that's required, I think, as we've been talking to people about progressively over time, moving into the southern domain of the mine. And so the establishment of mains, and you would have seen in the current areas where we're mining, we incrementally advance the mains in advance of production of the associated panel nearby. But in moving to the south, you do actually have to put in a separate set of mains in there.
There's not just mains, but there's all the infrastructure that goes with that that is required, ventilation shafts and so on. Then, of course, there's a small amount of CapEx involved here, which is, while it is necessary for the 200 series panels, it does have the added benefit of, and is necessary sequentially to be developed before we move to the 300 series panels as well. There is some infrastructure here which has an enduring benefit for the life of mine that needs to be put in place in order to open up those panels. Ian?
I think, Jiang, a sort of addition to that, Paul, is there's a few lumpy things. For example, we're building what we call a brine dam for regulatory approval, and that should see us complete in that area for a period of a few years, so there's some lumpiness associated with next year's cost there.
Yeah, yeah. And then, of course, there's the stage three biodiversity offsets we've called out separately there. That does cross the boundary of being the 200 panels and the 300 panels in effect, because having now had that life extension approved at a state level, it does trigger the requirement to put in place all the biodiversity offsets for the combined 200 and 300 series panels.
Thanks for that. Can I please ask last questions on your slide 40, your options to grow? I'm just wondering, maybe it's a question for Kevin, do you have any target on gearing and net debt that you are comfortable to develop with Winchester South and the Vickery? And how should we think the timing to develop those projects? Because you mentioned you only undertake one development project at a time. Thank you.
Thanks. Look, happy to answer the question there. Thermal coal assets, I think, you'll find will be difficult to find funding for. And so that will need to be funded off a balance sheet or through sell downs or through other structures. And those things are all on the table. I think the energy security debate is now causing customers to focus on incremental supply into the market. And that debate, I think, will evolve over the next year as people try or as countries try and solve their energy needs and put in place a little bit of a buffer so they don't suffer what they're currently going through. On the Winchester South program, that's a couple of years behind Vickery in terms of getting an approval. However, we're very confident that the funding for a met coal project is available, and that's certainly our expectations.
In terms of gearing, I think we would safely say to you that having had a geared balance sheet for most of the time that Paul and I have been here, our view on that in a thermal coal business is don't do it. The world is not there at the moment supporting that arrangement, at least in the equity markets. But having said that, a met coal business will support some level of gearing. I think you're going to have to wait and see how the portfolio emerges and develops over the next two, three, four, five years, and then we'll see some gearing come back into one side of the business being the met coal side of the business.
Great. Thanks, Kevin. Thanks, Paul. I'll pass it on. Thank you.
Thank you. And I show our next question comes from the line of Peter O'Connor from Shaw and Partners. Please proceed with your question.
Good morning, Kevin. Good morning, Paul. Great presentation. Thank you. Kevin, back on slide 40, so on growth, Narrabri, Vickery, Winchester. Can you give us any more precision in the milestones that we should expect in starting with Narrabri? FID, when will that be? And if we think about that last CapEx number that you talked about in one of the presentations we had over the last couple of years, that is the CapEx that sits in that 2024-2027 period. And it's the CapEx that you've tripled for FY 2023 part of that, or is that just preparation and separate? And I'll come back about Vickery and Winchester.
I think FID for Narrabri stage three will be a year to two years away. And there's still a little bit of work going on there, and Ian can talk to that. The spend that we're incurring in 2023 is largely around the 200 precinct coming off the existing mains. And that should tail off, or I'm expecting that's going to tail off. There'll be a bit more of it in 2024, and it should tail off in 2025. And then the stage three kicks in. CapEx for the other projects, I think Vickery or commitments for Vickery, I think you'll see that considered over the next 18 months, 12 months to 24 months, sort of that period in my mind. And Winchester South, again, is a couple of years behind because of how it's been progressing through government review.
Sorry, I'll just add something to Kevin's remarks just on stage three. Stage three, Peter, we're already convinced of the merits of stage three. The timeline that Kevin's referring to is obviously we've been approved at a state level. There is an overall federal overlay still required with that, and you saw the usual attendant sort of legal shenanigans that goes with that.
So, while the Board is already attracted to the merits of stage three already, formally, we need to clear those other legal wranglings out of the way. W e think that, and plus that federal approval, we think that probably takes at least 12 months to get over the other side of that. You can see us starting to do things which have synergistic benefit for the 300 series panels. So there is some shared, if you like, some shared infrastructure which essentially the currently approved 200 series panels are bearing, but is necessary sequentially to have in place for the 300s.
Okay. Got it. So the spend continues in 2024, roll of 2025, then you start the proper spend when you do FID. Got it. And so, [crosstalk]. Sorry, Paul?
Sorry, as you say, Peter, there's no capital in there for new long walls or anything like that associated for the later years.
Got it. And sorry, clarifying, Vickery, you said 18- 24 months? Did I hear that right?
I did.
Yep.
Yep, you did. That's f ine. And Winchester, you said several years later?
Yeah, look, there's two years involved in that. Again, just sequentially, we have another public exhibition period yet to occur for Winchester South for its state-based approval. And then there's the usual deliberations that go on at the state-based level thereafter. And then, of course, you've got the EPBC overlay at the federal level. So we think two years is still the right answer there.
So, typically, two years from now is Winchester. So that sounds like the two [crosstalk].
Two years, Winchester. Two years in Winchester.
Yeah. They both have got two years of work. So Vickery and Winchester land FID sort of in two years time. Is that what you're saying?
Winchester is obviously not approved fully yet. Vickery is. The work that we're doing at Vickery is all about detailed design, detailed design, and then refining the business proposition for that mine. Of course, we observe the fact that it'd be fantastic to have Vickery online right now. But there's assessments of that detailed design, the recosting of things based on the inflationary environment we're in, the lead times associated with ordering equipment and so on that need to be considered. That's the work that's going on at the moment, Peter.
Okay. Great. And the Vickery update, any update on the appeals or the process there?
I think we're clear of all the Vickery-related ones. We don't have any outstanding carrying on there. No, it's really just stage three, obviously, attracted a case that challenged the IPC's approval of stage three, and then it is also caught up in this broader EPBC legal case that's been brought that covers all. Sorry, operator, I think we might be.
Sorry, Paul, your line keeps dropping out. It has done throughout the entire call. You're not until your provider, because it's been pretty poor performance. Last question.
Oh, okay.
The profits of May today have been extraordinary, and I know that will catch the eye of a lot of people and a lot of headlines. Royalties, Paul, where are we at with royalties in the state from an industry perspective, from a local perspective? Any rumblings, any discussions, any progress in that area, or is it all quiet on that front?
Yep. It's quiet on that front. Can you hear me better, now? Can you hear me?
I can now. Yeah, I can. Yep.
Yep. Okay. Yeah, look, all quiet on that front. Of course, the New South Wales State Government brought out their budget just recently. No change in royalties there. There, of course, is a risk associated with any change of government potentially, given what's gone in Queensland being very negative for the industry, of course. But from what we understand, the Premier here has been making comments to the effect that that's not part of any plans they have. And, of course, ahead of an election, we'll be seeking similar sort of commitments from the opposition. So we hope we have a more stable environment in which to work from a royalty perspective than what's being demonstrated in Queensland.
Thanks very much.
Thank you. And I show our next question comes from the line of Glyn Lawcock from Barrenjoey. Please proceed with your question.
Paul, good morning. Just if we could firstly start on the CapEx for Narrabri, can you maybe just clarify how much is actually going to go into the 200 precincts over the next three years, and then what is the stage three extension on top of that?
Sorry, Glyn, you're asking for a dissection between stage two and stage three. Is that what you're asking for?
Yeah, just I'm curious to know. [crosstalk] Just curious to understand the total CapEx that's going to go on sort of the next three years that Kevin talked about, which is stage two or the 200 precincts. And then what are we then going to have to spend on top of that for the stage three expansion? It just feels like the CapEx has grown for Narrabri. I'm just trying to understand now what is the next three years, and then I've got this other capital on stage three. So just indicatively, what is the capital split over the next three and then stage three after that, just in round numbers?
Yep. Just hand over to Kevin. He's got his schedule in front of him here.
I'm going to have to add things up for you, Paul.
Right.
[crosstalk] So Narrabri stage three. Yeah, I was going to say th e Narrabri stage three isn't going to change from the numbers that we've given to you in the past, which is around that 400 million.
400 million. Yep.
And we're holding that number. The Narrabri South development, or the Narrabri mine, is going to be quite a heavy investment in the current year and next year before halving again, I think, in 2026 and 2027. So that's just getting the bulk of the development done for the Narrabri mine.
And Kevin, that reflects the sort of expenditure on the shafts, which is sort of a one-off that we'll be doing in this year's guidance. And as I said, the dams and a few other things, and then that will drop off in the stage two area, so.
And the bulk of the Narrabri South establishment is in the 2024 year, Glyn. So it drops by about 2/3 in the 2025 year and then tails away in 2026 and 2027. So it's really a 2024, 2025 spend in setting up Narrabri South. And the main component of that, as you say, is a big spend in 2024 and 2025 at about those numbers we're looking at.
Kevin, just to clarify then, it looks like you're spending about AUD 100 million in 2023 on the 200 series precinct and the mains development. Do we sort of hold AUD 100 million in 2023, AUD 100 million in 2024, and then drop it down? So you're looking at maybe AUD 350 million just over the next three years on Narrabri, and then another AUD 400 million for stage three. So we're talking AUD 700 million-AUD 800 million. Is that fair?
No, I think you're a little bit over the top there, Glyn. I think the AUD 400 million is the 2024-2028 in Narrabri stage three. And I think you're probably talking about, at a managed level, about AUD 200 million in total in Narrabri South precinct establishment, for which we'll have 77.5%.
Okay. So that's 100% those numbers, obviously.
Yep. That I'm talking about. The numbers in the guidance on 46 are equity. So they're our numbers. And the numbers I'm telling you here are managed level. So as I said, it's about AUD 400 million at the managed level for stage three, and it's probably about AUD 200 million for the Narrabri South precinct establishment at the managed level.
100%. Okay.
The change there that you'd observed there, Glyn, is the fact that, obviously, a couple of years ago, we finished the mains in the 100 series panels, if I can call it that, the 100 series mains, and for everyone's reference, I'm talking about page 22, just so when I'm referring to individual pieces of the puzzle. Those mains, of course, we drove year- on- year in advance of actually accessing the panels to the north of those mains.
Now, the change in the main plan that's come about is that the 200 series mains that we've been talking about for a couple of years now, that obviously is where you're seeing that expenditure now, which gives us access not just to the exploitation of the 200 series panels. So we have a combination of south to north extracted panels and also north to south extracted panels in that 200 series. That's why we need the access with those mains. But those 200 mains also then provide the access to the 300 mains as part of stage three.
Okay. That's clear. Thanks. Yep. Very helpful. Thanks. And then maybe, Paul, if you could just Kevin made a comment about 20% of the profit would go to dividends and the remainder buyback. But clearly, as you said, AUD 400 million a month, and you're not going to be spending a serious amount of money on Vickery or anything for a couple of years, you're going to seriously have a lot of money to get back. So you'll probably pay back more than the 50%. So is that how you'd pro-rata it? If you pay back 50%, I get 20% as a dividend, 30% as a buyback. And if you go to 100% payout, it's 40%, 60%, or is it not that clear?
I think what you're pointing to here, Glen, quite rightly, is the fact that there's a dynamic environment at the moment, and the cash generation of the business is significant. Directionally, the split between the 50% at the upper end of our returns to shareholders has been split. For the moment, we'll be continuing to be split in that fashion. You're quite right to point out the fact that this is an extraordinary period that we're going through. To the extent that there's surplus capital in the business, we're very focused on making sure that we're using it for the most accretive means for shareholders. To the extent that that means we'll be buying back more stock because that is the most accretive means by which we can reward our shareholders, then we'll continue to do that.
At some point, as you know, and we've discussed in the past, at some point, those projects will come into the frame as being a superior return for shareholders for that surplus capital. But at the moment, the buyback looks very good at these rates. And I know that's as compelling to say that now at AUD 7 something as it was when we started this program back at AUD 3 something. And that's just the nature of the dynamic market we're in.
Yep. So, can you share with us, Paul, what percent buyback you think you'll ask shareholders' approval for? I mean, obviously, if prices move even higher as we head into winter, you don't want to have to be curtailed or hamstrung by a low percentage.
Yeah. Look, we're acknowledging all of that. And you'll see that come out when we publish or release our notice of meeting for the AGM, which is, as I say, about four weeks time, I believe. So we're acknowledging the point you make. And we want to be providing guidance to shareholders that this is not just a one-off thing, that we expect to be in the market as a participant buying back stock whilst it's cheap. So we will be asking for some flexibility from shareholders to do more. But that'll come out with a notice of meeting at around, I think, the 25th of September.
Yeah. Just go big or go home, I guess. Final question. Just how are you thinking about Vickery now? I mean, we've got obviously a very different market. Your cash generation is very big. Do you still think a partner's necessary to mitigate risk, or how do you now think about it?
It's a good question, Glyn. Thanks. I mean, it probably requires a longer answer than the time we've got available to us. But there's still risk here. And of course, the market looks great at the moment, and there's a lead time associated with building it. And let's assume we've optimized both the OpEx and the CapEx, which we are currently doing at the moment, but that requires more work. Inflationary impacts are reflecting in all dimensions of that model at the moment. And there is risk. So you start tomorrow, even if it was to be started tomorrow, there's two-year lead time before you start ramping up. And so that's not just we know our customers are very keen to see the coal. That was obvious when I was in Japan a month or so ago.
And so there's a lot of anxiety about new supply coming on to assist them. We're keen to be able to provide a solution there. But part of that discussion with them, as you would imagine, is, well, what assistance can you provide us in managing our risk in doing that? So that's part of the ongoing discussions over the next few months. We'd like to understand what participation they can provide to assist us in pushing forward. And of course, you're observing that the balance sheet's strong, so we could do it on our own anyway. But we think there's a sharing of risk here that's required.
Okay. That's great. Thanks, Paul.
Thank you. And our last question in the queue comes from the line of Stuart Howe from Bell Potter Securities. Mr. Howe, please proceed with your question.
Not a high point, Kevin. Just two quick questions from me relating to guidance for the year. Firstly, on CapEx, obviously, the last few months, incredibly strong pricing. Has that to any extent brought forward CapEx into FY 2023 that would have otherwise been spent in outer years? Have you sort of advanced anything to bring that number up while cash flow is incredibly strong?
No. No, Stuart. It isn't really reflected. I know that some might have heard that that's the case, and it's a relevant question to ask. But no, this is just the timing of our plans for Narrabri as we move into the southern domain. That's the big driver in this. And of course, we ratcheted back over the last two years during COVID, the capital associated with our development projects. So those are the two buckets really that have taken a step up in this period. And you can't put that work off forever. The detailed designs of these projects for Vickery and Winchester South need to be done, as does some of this drilling and other things of the land purchases that we've mentioned earlier. So it's not really about just the better financial circumstances of pricing.
Great. And then secondly, just on the cost of coal guidance, I know you don't provide guidance to the asset level, but obviously, it seems like a lot of that is probably relating to Maules Creek. And that's just some comments around trends that you're seeing. We'd expect Narrabri to fall away as you get into those shallower areas. Is that sort of right? Narrabri is falling, and perhaps Maules Creek is the majority of that cost increase.
It's not just that. As Kevin mentioned, there's an impost across every ton associated with debt reduction at NCIG that we refer to. And that's in the order of AUD 3 a ton. So that affects every ton sold that goes through NCIG, of course. We have a blended outcome because we do use PWCS. It's true in relative terms that Narrabri should be coming off as we produce more tons. And this year, we're guiding a little bit more, of course.
But the full benefit of that increased volume won't come until we're fully into 2023 and beyond. But its costs are affected by inflation as well in the same way that Maules are. So I wouldn't say it's right to say that Maules is bearing the brunt of all this. They're all subject to the same inflationary pressures. The relativities of them are that Narrabri, as you say, will improve relative to the open cuts as we move into the shallow ground.
Yeah, and I would say, Stuart, that the open cuts are bearing the burden of the diesel cost, so it's about a liter of diesel per BCM of overburden. And across the group, the strip ratio is about seven. So what was AUD 0.60 a liter is now AUD 1.50 a liter. And that flows through with yield into cost. So that is the impost in the open cuts.
Yeah. Electricity prices are crazy, but it's a small piece of the puzzle relative to the diesel's impact on the business as a whole.
Yep.
Great. Thanks, guys. That's all from me.
Thank you.
I think we're out of time here, now, operator. We better move on.
All right. That concludes our Q&A session. I'd like to turn the call back over to Mr. Paul Flynn for closing remarks.
Yep. Thanks, everyone, for taking the time to dial in today and plug in today. Look, I'm sure there's plenty more questions that will emanate from the discussion today. So look forward to catching everyone up over the next few weeks. And if there's any questions, of course, you know where to find Kevin, myself, Ian, and Kylie, of course. Thanks very much.
Thank you. This concludes.
The impost in the open cuts.
Yeah. Electricity prices.
I'm going to now disconnect.