Thank you for joining us today. I would now like to hand over to Managing Director and CEO, Paul Flynn. Please go ahead.
Good morning, everybody. Thanks very much for joining us for Whitehaven's September quarter production report. As usual, I am joined here by CFO Kevin Ball and our COO, Ian Humphris. The three of us will try and make sure we get through this and answer all your questions at the end. To kick off, let me just go through the highlights. It has been a very good quarter for us, a very nice platform from which to start the year. Our TRIFR rate at 7.4 across employees and contractors for the quarter, a little higher than previously, but a little work to be done there. Our managed ROM production outcomes for this quarter, very strong at 11 million tonnes ROM. While only a meager 3% up on June, it was significantly up period on period.
September quarter equity sales of produced coal at 6 million tonnes, 5% down on the quarter, from a June quarter comparison basis. We will talk to that because we have had some disruptions at both RG Tanna and PWCS, which I know many of you have already seen with other people reporting similar sort of issues. Our unit cost performance has been very good. We are at the lower end of our guidance of the range of AUD 132-AUD 147. We can talk about that in a little bit further detail later. Our achieved prices across the portfolio at an average of AUD 226 per tonne, 2% up on June. Our net debt for the period, slightly up at AUD 1.4 billion for the September quarter. Mostly as a result of some lumpy items in terms of dividends returns and so on, buybacks.
Of course, slippage in relation to sales as a result of the port, which I will expand on a little bit further, but temporary factors. Moving to the state to state split for the quarter. Both states doing well and sharing the load very evenly, in fact. Queensland's managed ROM at 5.5 million tonnes for the quarter, very good. New South Wales did the same number. One slightly less than the June quarter, and New South Wales is up actually quite materially for the quarter. Queensland's equity sales produced coal at 2.8 million tonnes for the quarter, down 12%. We will get to the issues there, but that is RG Tanna causing some disruptions for our sales flow during this quarter period.
New South Wales equity sales at 3.2 also had some disruptions, but nowhere near to the same extent, given that we've got obviously two port facilities to move coal through for New South Wales. Whereas in the case of Blackwater, its dependency on RG Tanna is 100%. The September quarter average price for Queensland was [AUD 257] per tonne. And with the 12-month rolling average realization of 74% relative to the PLV Hard Coal Index. New South Wales has done well, AUD 198 realized per tonne, giving us 103% of the gC NEWC average for the quarter. Going over to the table across, you can see that the numbers look pretty good across for a very good start to this year. So 11 million tonnes, as I mentioned, at a group basis. The saleable production 8.5 million tonnes.
The managed sales and produced coal 7.5 million tonnes, and a stock build which goes along with the various issues associated with the port that I'll get to. The Queensland splits you can see there and New South Wales, evenly spread. Good managed saleable production relative to sales. Both quite consistent, but again, I'll get to the operational matters that are causing us a little bit of timing-related issues with shipping of sales. Over to Queensland, like I said, 5.5 million tonnes, very good start to the year. Very pleased with the start that we've laid out there. Managed sales are 3.5 million tonnes. Is not really where we wanted to be, 12% down on the June quarter. And our primary concern there has been the performance of RG Tanna as a result of both some planned and unplanned loading outages.
Which we've given you an estimate of that at 12 days during the quarter. That is on an equivalent day basis, if I can say that. The disruptions actually went across a lot more than 12 days, and sometimes it was one ship loader versus others. Some planned, a lot unplanned, but we've tried to express it in an equivalent days basis for you at least, just to give you a scale of the total disruption across the quarter. And that's the 12-day number that we've given you. As a result, obviously we've got a bit of stock build and that's natural, and that should unwind during the December quarter. It may spill into the following quarter a little bit as well. But we've got good stocks at 3.1 million tonnes.
And look, we are seeing an improvement in RG Tanna's performance, but certainly it was disruptive during this past quarter. Blackwater's ROM production at 4.1 million tonnes was in line with the June quarter, but June quarter was actually a big quarter itself, so it's actually a very good performance to see quarter on quarter. Total sales of Blackwater as a result of all of what I just said before, lower than where we would expect it to be at 2.3 million tonnes, reflecting just the timing related matters. But we do think this does unwind, and so it is a timing related matter, in terms of how you position that in your thinking about the performance. Daunia has done what it should have done. So 1.4 million tonnes is bang on our plan.
Less of course than the big June quarter, but June is always a big quarter, so it was completely in line with the plan we had for Daunia. Total sales at Daunia for the quarter, 1.2 million tonnes. Down as well, but also consistent with our plan. New South Wales operations at 5.5 million tonnes of ROM production was a 10% improvement on the June quarter, with Narrabri delivering a strong uplift for the quarter, which is very welcome. The managed sales of produced coal 4 million tonnes, 5% higher for the quarter, despite the fact that we do actually have a few planned and unplanned outages at PWCS in particular. Despite the disruptions of that, we've been able to make sure, because of the exposure to both port facilities, we could continue to sell coal.
The loader impacts, the unplanned components of that have been dealt with, but there is still a planned outage which sees one ship loader at PWCS out and will coming back for completion during the month of November. As I say, with NCIG and our exposure there, plus one ship loader back up and running from those unplanned outages, the vessel queue should moderate and so deliver a good sale performance in the second quarter. Closing stocks are 2.2 million tonnes, so they are higher as a result. Maules has done well at 2.7 million tonnes. Of course, less than the June quarter, which is always a bit chunky, but certainly in line with our plan. Very pleased with sales at 2.1 million tonnes as well.
Narrabri obviously being the standout for the quarter in terms of underpinning a very strong result from New South Wales at 1.9 million tonnes. Done very well. The next longwall move for us, as we've been saying before, is about March of 2027, and it is scheduled for nine weeks, as we've mentioned previously too. But good result. Sales 1.4 million tonnes for the quarter. Positive, good stocks held. So we'll see a strong second quarter from a sales perspective as well. The Gunnedah Open Cuts have done what they should have done. So that's very positive to see that at 900,000 tonnes of production for the June quarter. Vickery obviously 600,000 tonnes. Tarrawonga at 300,000 tonnes as well.
We've added a further point in there just to highlight to everyone that our road haulage limit has been approved to now go to 4.1 million tonnes for the Gunnedah Open Cuts, which was previously 3.5 million tonnes, that road haulage limit. So we will be ramping up to that limit over the balance of this financial year. I'll just flick over the page and talk quickly about the coal sales and our realized pricing. Equity coal sales of our produced coal at 6 million tonnes, split between New South Wales at 3.2 and Queensland at 2.8. The sales mix in terms of revenue was 57/43 from a met to thermal perspective. For the Queensland operations, we achieved an average of AUD 257 for the quarter, which was up obviously on the June quarter and significantly up on a period on period basis.
The PLV Hard Coal Index averaged $248 for the quarter and varied quite significantly. You can see the range we provided there from $229 to $278. Quite a spread across the period. Our realized prices in U.S. dollar terms, $ 184, and that is 74% of the PLV Index for that period. We have also provided you some splits there in terms of the sales mix, in terms of 58% for the primary products of the hard coking coal and semi-hard coking coal, which as a group achieves 78% of the PLV Hard Coal Index and 39% for PCI and semi-soft coking coal, which on average achieved a realization of 68% relative to the PLV Index. There is obviously a small balance of thermal product that comes out during the period.
New South Wales has not had the same spread in terms of range up and down, but AUD 198 has been a good result for us overall. We achieved $ 140, 103% of the gC NEWC average for the period. The range has not been as volatile, if I could say, ranging from $ 130-$ 145 across the quarter. The market dynamics, there is a bit going on in market dynamics for sure. The PLV side of things, let us just deal with the met coal side of things. Chinese demand, of course, because of the various things that we have seen there, safety reviews and production shortfalls and then transportation issues or diesel availability issues in China or Mongolia as it plays out, certainly has seen Chinese steel mills active in the market. We have been able to take advantage of that.
It is not a market we chase historically, I have to say, but when the price is right, there is no harm in dealing with it. We are seeing strong underlying demand from Japan, a little bit Europe, in fact, Korea as well. Indian steelmaking capacity is obviously increasing, but with the monsoon impacts there is evidence that perhaps the Indians are a little bit hesitant to buy back into the market at these elevated prices, and we think they may be waiting a little bit until they see further price changes. On the thermal side of our business, energy security concerns obviously continue to support the coal price. Whilst the Middle East conflict continues, we feel like there is going to continue to be a firming of the thermal coal price in our markets. All our customers are expressing demand for all their option tonnes.
We have seen increased activity in the thermal market from a Korean perspective, where they have been winding, previous to the conflict, been winding down some of their thermal electricity production. That has gone the other way now. Of course, the underlying uncertainty about the export volumes out of Indonesia remains present in the market, and we do see that constraint and year-on-year reduction of export tonnes supportive indirectly of the gC NEWC Index pricing itself. Longer term, our views of both these markets are structurally short, has not changed in any way. In terms of our production cost performance, we have done very well. We are at the bottom end of our guidance in this quarter, which is a very good outcome considering we are dealing with elevated diesel prices.
Now, we've given you some numbers here to work with just in terms of how we performed in that first quarter, what we've been exposed to from a diesel perspective. Just to remind everybody, we've said that AUD 1.16 per liter is the average across the full year that we've assumed would deliver a midpoint of cost guidance outcome. We have assumed, as we mentioned before, that there was a resolution of conflict over the course of the year. So in terms of our budget estimates, we've started high and trend will taper off towards a more normalized position at the back end of the year. Thus far, for the quarter we've seen, we've had an average of AUD 1.38 per liter is the outcome. That's actually a little less than what we assumed for the first quarter.
We're not going to get ahead of ourselves there because I think the second quarter will probably be a little bit higher than what we've assumed. So the net of those, we may be okay. That just gives you the relatives of what we've exposed to and to remind you what our assumption is for the midpoint of our guidance for the full year. The balance sheet itself, as I mentioned earlier, AUD 1.4 billion net debt. Slightly up over the previous period, but really just a function of payment of dividends and our buyback program as well, of course. We paid the AUD 84 million, which was the AUD equivalent payment for the contingent payment to BMA at the conclusion of year two. So a couple of anomalies there.
The cash inflow's obviously been a little bit less than we would expected because of the port issues that I mentioned earlier, so our sales are a little bit lower, but our stocks are good. So you'll see the second quarter being a pretty healthy cash inflow period for us, which will be nice. We've got the stocks and sales ready to go, so that should not be a concern in any way. On to the contingent payment structure. As you all know, we're in our last year. In fact, now we're in our last six months of it. So if we look at it year- to- date, having passed two quarters under this arrangement, we estimate that we're going to be paying to BMA in the order of about $109 million thus far. So that's just based on the price we've realized so far.
That'll be subject to verification, of course. If these prices continue at the levels they are, then you can perhaps double that and get an estimate of where we'll be. This is obviously a self-funding arrangement, and looks like year three will actually yield something materially for the vendors, which is what this arrangement was intended to do. Of course, the final payment under the deferred structure is due in April, of course, being $100 million. Buyback program continues to move along. We took 1.8 million shares out of the market at a cost of AUD 14 million. Moving over, just for the record, is the expenditure on our development project. Nothing too much to draw to your attention in that regard. That leaves us with our guidance for the full year unchanged.
As you can see from the very solid start to the year, we have laid a pretty strong platform to project ourselves healthily towards the better end of our guidance. On the cost side of things in particular, we are at the bottom. That is, of course, aided by very good performance out of Narrabri. A little bit of a mixed benefit by a little bit more New South Wales in the period than budget because of that outperformance from Narrabri, so that is very good. But nice to see the volumes driving the costs down and the cost out programs that we had concluded as a result of last year's cost out programs. That run rate in terms of cost reduction has continued into this new year, which has been very positive.
Despite the fact that we have not given you a separate target for cost reduction this year, we are very focused on making sure that we continue that momentum, and there are various cost out programs across the business to continue that really good work. With that, I might just finish up. As I say, very good, strong quarter. Sets us up well for a very good year. I will hand back to the operator to get the Q&A started. Thank you.
Thank you. Thank you, sell-side analysts. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star two. If you are on a speakerphone, please pick up the handset to ask your question. Your first question comes from Rahul Anand with Morgan Stanley. Please go ahead.
Hi, Paul and team. Thanks for the call. Two questions, one maybe on the NSW side, and then perhaps one on Queensland. On the NSW side, I take it Narrabri is a bit variable and a very good result there. So I am going to focus on Maules. Pretty strong start to the year. Typically the first quarter last two years has been about 500,000 tonnes lower, and obviously in the past years that has meant that the second half has been a big lift for the asset. Now, I just wanted to understand, does this first quarter mean you can still do a big lift in the second quarter and beyond into the second half? Or should we think about this year as a bit more balanced across quarters? I am just trying to think about where the asset ends up as we get towards the later part of the year.
That is the first one. Thanks.
Yeah. Thanks, Rahul. It is a good question. I did not focus on it because it has just been a steady performance, and the orientation of your perspective is the right one to observe. We are trying to iron out the quarter-on-quarter variation for sure. The team, if you look back over the last few quarters, have actually done really well. Productivity there is doing very nicely. We are seeing constant improvements there. We do not want to have the heavy emphasis on the back end of the year because there are natural consequences or there are natural impacts that will occur anyway, which cause you to have a little bit more second half orientation because the weather, say for instance, can play out during the course of the year, and everyone is trying to compensate for that in what time remains in the financial year.
That lent itself to more Q4 orientation than we would like. The key objective for the team is, it has been very clear, smooth it out over the year. That works well from every dimension in our business. Blending, take-or-pay absorption, utilization. Every perspective of our business is better when we have got a seamless delivery. So it is nice to see them doing exactly that. I would not, if I were you, ramp up your expectations on Q2. We want orderly progress throughout the year to deliver our results.
Got it. No, that is clear. Thanks, Paul. The second one is on Blackwater. Obviously, that is the second asset which has done really well this period. Just wanted to touch on that a bit. You talked about productivity driving the ROM result. Is there a bit more detail you can provide there, just around sort of how much improvement is coming from the dragline? Is it rebuilding the overburden in advance? I guess what I am trying to solve for is really, how do I think about the further upside that is possible in this asset going forward? Thanks.
Yeah. At the risk of talking down the business, I just don't want you to run away thinking that it's 4 x 4.1 million tonnes gives you the answer, because we obviously got Q3 and weather and so on. Even though we have been the beneficiary across New South Wales and Queensland of dry weather. That has underpinned the operational performance that we've experienced, and very positive. You're right that Q4 and Q1 look very good. So we're pleased with that. As you know, the dragline operations can actually have lumpy coal delivery and that is part of the feature of dragline mining. That in the case of such a big mine like Blackwater, you can all of a sudden have a pit release up to 1 million tonnes of coal pretty quickly. So you do get a flurry there.
Which made it a little bit all the more annoying, that we were suffering RG Tanna the way we have been, not being able to conduct a seamless sales program based on that release of very strong coal production during the course of the quarter. So we have got those healthy stocks on the ground and also at the port ready to go and very keen to get that shipping queue down, during the course of this next quarter. So the team's been on the ground there, been up visiting the port, trying to work out what's going on and working with the port to make sure that that queue does come down, and we're unimpeded from our sales targets in Q2 in particular. Very front of mind for us.
Got it. Perfect. That's my two. I'll pass it on. Thank you.
Thank you. Your next question comes from Dan Roden with Jefferies. Please go ahead.
Hey, Paul, Kevin and Ian, thanks for taking the question. I just wanted to start with, I guess the inventory build in Q1 and, I suppose just wondering out of the 1 million tonne of equity stock builds, if you could get a bit of color around where that sits inside of the supply chain. Is that sitting at port stocks? And probably a quick follow-up on that, is usually when you see building an inventory that has like a dollar per tonne benefit net back onto the unit cost. So I guess, how should we think about the benefit from that inventory move in Q1 and, depending on the sale quantum into Q2, should you expect that to net back off in Q2? Thanks.
Yeah. Thanks, Dan. Look, the stocks in Queensland in particular, so no issue at Daunia. No challenge there. Stocks at RG Tanna are very healthy. So, that's definitely well railed and waiting of course, to make sure that we can push the ships through as quickly as we can, which as I said before, has improved. So, that's positive. But there is a queue there which we want to bring down.
I think it was about 40 odd ships I think I saw yesterday. So we want to bring that down quickly. But everybody going through that port is suffering the same as us, so it's not peculiar to Whitehaven. The stock build, and given that we had such a strong production period for this quarter, as I say, aided by good weather, generally what that means is actually we've got on the stockpile a bunch of coal which has come at low cost rates. Because if you run well, then the cost per tonne has obviously benefited from that. So the benefit of that actually sits on the balance sheet and will emerge in the next quarter to the extent the sales have been held up a little bit.
So the next quarter actually cost-wise, we'll get the benefit as you draw down those stocks at those lower rates because that occurred at a time when you were highly productive and the per tonne rate sits there encapsulated in the balance sheet waiting to be released for the sales when they occur. That's the impact that you will see in Q2.
Yep. Yeah. Okay. Yeah, that was what I'm talking about, I guess the unit cost. Maybe just moving to, I guess diesel cost. I was thinking that, I think pretty decent outcome. Definitely relative to some of the other peers that have reported, what realized diesel costs they were at in the quarter. How are you seeing the exit rate there? In terms of what price are you paying for diesel, I guess today? Are you doing any hedging, or are you trying to secure like you seeing any shortages in the market? Are you concerned about that?
Yeah. Look, Dan, good questions. I think the diesel supply, we've got pretty good visibility on volumes coming our way. We've got two tier one suppliers who are doing a great job. We have a regular routine conversation with those guys two or three times a week around what expectations are over the next two or three months. From a volume perspective, we think we're in pretty good shape. From a price perspective, as Paul said, we started the year with the diesel price a little bit lower than what we thought that diesel price would be. As we go into the second quarter, that diesel price is holding up. Crack spreads are still being held up. Brent crude today, [$113], Aussie at AUD 0.70 .
It tells us that diesel price is going to be higher in the second quarter, leading into the third if it doesn't start to soften. Our expectation is that diesel prices will be higher in the second quarter, leading into the third than they had been in the first. We're currently in, I want to say, like the 150s, 160 sort of range. That sort of price for diesel. It might get a little higher if crack spreads stay where they are and Brent continues to rally. Again, across the business, I'm seeing EBITDA margin expand in the business as a result of being long energy. So, I'm looking for an uplift in EBITDA in the second quarter, as Paul says, because of the drop in the benefit of having the low-cost stocks, sitting in stocks and the release from that.
I think performance is continuing quite well. Yeah.
Yeah, no, absolutely. You guys have set yourself up pretty well into the quarter. Maybe just one more before I hand over [crosstalk] .
I was going to say one thing. Hedging we do not do.
Yeah.
We have not done hedging probably I would say for the best part of more than a decade.
Yeah.
Generally, we have ended up on the wrong side of that conversation. So we are an at the money coal stock and we are an at the money with inputs. We are not trying to guess that.
Yeah, no, perfect. One more quick one just before I hand over. What comfortable level of inventory do you want to enter wet season with? I guess, you kind of talked around it, but what are you comfortable holding, I guess, stocks that are at port going into wet season?
Yeah, look, I think that our stocks last quarter, when we finished the year, we are pretty happy with that. In fact, that was on path to make sure that we are in a good position to be able to deal with the ebb and flow of sales and weather and so on, and even a changeout. In Narrabri's instance, obviously, we have been doing very well. That continues to go well. We want to make sure that we continue to sell during what is this year or this next changeout going to be an extended changeout. Nine weeks is obviously a good three weeks longer than what we normally have. During a six-week period, we would normally zero out the stock during that time.
Then, you would start in the new wall with a fresh stock base and with no remnants from the last production in the previous panel. We are going to build some more stocks at Narrabri. The market is hungry for the coal, and the pricing that we are receiving for Narrabri discrete cargos is pretty solid. We are just going to balance that. But yeah, we are a little higher than what we need to be, but that will unwind quite naturally with the sales program we have got in Q2.
Yeah. Awesome. Thanks for the call. Appreciate it. Thanks guys.
Thank you. Your next question comes from Chris Creech with Morgans. Please go ahead.
Morning, team. Thank you for your time this morning and a really good result. Just a quick one, I have two. I have one on Daunia. Obviously, now that you are jumping into Pandora, is the autonomous haulage production as much as you are expecting now that you are in a, I guess, a bit of an easier pit to deal with, Paul, without, I guess, all the faults and everything, and the steep declines in the coal seams?
Yeah. Look, Chris, I am just going to assist you with the nomenclature just there for that southern area of Daunia. We are calling that Atlas South. Just for your benefit, Pandora just has some negative connotations with it. Call me sensitive, but I just think we should change the name. Atlas South it is. Look, it is going well. That is very positive. Obviously, we have a digger down there opening up the box cut, going nicely. The production, obviously, is coming from still the northern end of the pit. Doing well. The structure is not such a big concern down there. The primary concern there, as you would imagine, is because it is a little bit further south, the hauls in time, the costs do increase a little bit because the hauls are longer.
That is the key thing that is a feature of being down in Atlas South. So far, progress has gone very well and coal production has been good in the quarter. Certainly, in line with our plan. The team are doing a good job to balance production in the main area of the pit, but also managing very well the box cut expansion. Anything, Ian, you want to throw in there?
I think one of your questions was alluding to a unit effectively working down there unimpacted, I guess, by other units, and that is what we saw down there. We had a 600 tonne excavator. The initial dumps were fairly close. Good dry weather, as Paul's indicated. The production rates we got out of that were tier one. So, when it was operating by itself down there.
That's perfect. Thanks very much for that, Ian. Then just quickly, one on Maules Creek's extension. I know you guys are still working through the approvals process for that one. With the High Court's decision recently with MACH Energy, does that give you guys any pause in terms of the Maules Creek? I know that you're still going to be progressing it, but does that change anything in terms of what you then factor in for your application for your extension?
That's an interesting question, Chris. No, the answer to the question is no, we're not concerned by it. That obviously was not a new issue. That's been bubbling along there for some time. The outcome's pretty annoying for them, not for us so much. You've seen the government obviously take a very pragmatic and supportive approach to dealing with that issue, and so they will fix that. In our instance, though, we're not concerned. You saw the HVO process come to a conclusion, and we now have draft conditions for the continuation project, and those conditions are consistent with the HVO ones. So we're comfortable with that, feel that that's the right answer. This process is actually a little ahead of schedule, which is nice.
We're likely to have an IPC hearing this side of Christmas and have that over and done with by the time we get to the end of the calendar year, which again is advance of the schedule we've allowed for. Yeah, we're just pushing forward. We note all the noise, but the noise actually, in a way, it's actually dealing with wrinkles in the system that we would like to have dealt with before we get to that point of the approval process. So it's useful in that sense.
Yeah, it makes complete sense. I will pass that on from there, but thank you very much for your time, guys.
Thank you. Your next question is from Jon Sharp with JP Morgan. Please go ahead.
Yeah, morning Paul and team. Congrats on the result. Paul, just first question, you said just previously that you would be, or your team would be working with the port to try and get the queue down. I think you said the queue, or maybe just it is more about getting more coal out. Just interested in what you can do to help clear sales there. What are you actually doing practically?
Yeah, look, we have set up quite a, well, I would say a useful dialogue now between them and ourselves. Obviously, we are a big user, the biggest user there. And we are very familiar with what a good operation, which is comparable, such as NCIG looks like in terms of how it functions. And chief of our concerns here is demurrage related issues, not just cash flow, but then demurrage related concerns that stem from this less than seamless delivery of our sales. So, whereas NCIG efficiently run as it is, a newer facility of course, and higher capacity, often runs a dispatch. So our expectations are for it to run like that, not like how it is currently performing.
Marketing, Ian and Jason both been up there talking to the team up there, done tours, had a look at the ins and outs of the operations, and can see various differences between NCIG and RG Tanna. We're trying to assist them with the observations we have from NCIG in terms of ways in which they might look at optimizing the performance there. I mean, it's an older facility, and it's not as rated as highly in terms of throughput. Those are two points which are worthwhile noting up front. The comparison from NCIG to RG Tanna is not like for like in that sense, but the style and mode of operation is. We think there's opportunities to run this a little better.
We're going to continue to invest in that dialogue, make sure that we get our other user group friends in the discussion as well, just so we can demand a little bit more of this government-owned facility.
Okay, great. Thanks for that. Then second question, just more of a market question. Still a lot happening around the world. I'm sure customers focus on energy security. Just interested in what you're seeing, with customers, are they interested in more long-term contracts with higher CV thermal? Also, can you just quickly remind us, I know you've probably told us many times, just what the lag in what you get in terms of the spot, what lag is it? Is it two months?
Yeah. Thanks, Jon. Look, customers are feeling concerned about. They're not concerned from us. We're a very reliable supplier. I was in Japan 10 days ago, and the encouragement was, keep doing what you're doing because we're relying on you. An interesting stat, and I think I've told you before that, and you'll see in our presentations, that Australia is a big piece of the energy puzzle in Japan, and Whitehaven, 48- minutes of any day in Japan. Australia's actually eight hours of every day of Japan, which is quite extraordinary. Their dependence on us is critical. Their encouragement was to continue to push forward and think about ways in which you can assist us.
We do meet with the government when we go there at each trip, and just an indication of how concerned they are about the continuity of supply of energy, both LNG and coal. They told us they had set up an arrangement for emergency procurement for LNG out of Asia. You are going to have to Einstein to work out where the focus of that would be. That is Malaysia. In terms of getting emergency access to more LNG. Then, they said that they are looking to set up a similar arrangement for coal, and the conversation turned to how could you assist us with essentially emergency stockpiling of coal, in the event that things take a turn for the worst. I mean, it is pretty bad anyway, but gets worse, o r that there are disruptions in flows and so on.
We have opened that discussion up with them in terms of way in which we could assist them. They understand the logistics chain, the fact that it is relatively slow moving and to be able to build stock quickly and hold it, in the event of emergency, obviously would need some real planning. The reason for telling you this is just a heightened level of concern they have about the continuity of the supply arrangements both on LNG and coal as well. Look, all our customers are very concerned. Our sales are healthy. As I said, we have taken all our upside tonnes, and to the extent that we can bring tonnes forward, we are doing that. But we are seeing that behavior also from Taiwan and Malaysia, so it would be remiss of me not to also highlight that because it is not just Japan that is exhibiting those concerns as well.
Okay, great. Just quickly, remind me what the lag is with pricing.
Oh, sorry. Generally, it is a month of scheduled shipment, but we have a few other contracts which average two months, but they are not the majority of contracts. If you are just using a month, you will be there and thereabouts. The average of the months of scheduled shipment. Do not take the spot, take the average for the month.
Great. Thanks, Paul, and interesting information and stat there from Japan. Appreciate it. Pass it on.
Thank you. Your next question comes from Glyn Lawcock with Barrenjoey. Please go ahead.
Morning, Paul. Good to see Vickery. I am sorry, good to see Narrabri have its best quarter in, I think, what, four years? If you start annualizing that. Is there anything, especially call out in the quarter, just everything went extremely well? How is it going this quarter? Can you think about it continuing at that sort of rate?
Yeah. Morning, Glyn. Yep, it's very positive to see the quarter doing very well and that should continue on, which is nice. Ian's been waiting patiently for a question, and it would be probably remiss of me if I start taking any credit for that. I will let him answer what's going well.
Yeah. Look, I think, Glyn, we mapped out, got the processes in place at the mine. How to deal with the various structures, et cetera. I think your question about how we are traveling now. Good. We are nearly through the map sort of heavy structure, the remaining heavy structure we see in this block. A lot of work going. On the annualized question, obviously we have got the move coming up, so a lot of work going into the planning of that equipment. All the workshops we have got to get this stuff to and all the parts. No, tracking along well.
Okay. Paul, just the increased ROM for Gunnedah Open Cuts. I know it's only just over 500,000 tonnes, but do they come from Vickery or Tarrawonga or a combination? Is Vickery maxed out at the moment, so it has to come from Tarrawonga?
No, that is a good question. No, we can take it from either. If you are looking at the cost base of Vickery is lower, so that says do more there. The 4.1 million tonnes is a useful addition because the 3.5 million tonnes—t here are two things which are good there. The 3.5 million tonnes was the limit, historical limit, and they said, if you want to go higher than that, you have got to build an overpass across the highway in order to do more. They have released us from that obligation and also given us the 4.1 million tonnes at the same time, which is two ticks. Which is excellent. We can take it from whatever pit is able to supply it. There are some blending opportunities between the two of them, depending on which seam is popping up for production at that particular time.
We will be ramping up between now and the end of the year to make sure we can get there. We think we have got pretty much the equipment necessary and people to do that. That is a positive outcome for us, and that approval is now entrenched, so that is a permanent piece of the Gunnedah ops business. It is important to us, even though it sounds like only a small thing and 500,000 tonnes, but, as you know, the cost base of that part of our business would benefit from more volume. That is an important step in the absence of a broader and bigger Vickery solution.
It will take all the way through the next nine months to get that extra 600,000 tonnes, it sounds like, or can you do it quicker?
We are ramping up already, so it is just a matter of hitting our run rates. You have got to open up the pit a little bit more. But, we do not want to put more equipment in there. We just want to drive the utility of the equipment we have got. That is the focus of it.
Yeah. Can I just squeeze in one on Vickery? I mean, I just listened to you talk about the thermal markets, and obviously there's a heightened degree of uncertainty with all your customers, and they're scrambling a little bit, some of them. You believe in structurally short markets, medium to long term.
Yeah.
What are you waiting for Vickery, then? What more do you need to see? It doesn't sound like you've got more work to do.
Yeah.
What is the sort of timeline you are thinking?
So you are in favor of us stepping forward with Vickery, Glyn?
Well, if you believe in the structurally short markets and you believe in the price, I am just curious, what do you, as a company. It sounds like you have got everything in place to push ahead. You are comfortable in the markets and the outlook. So is it you are worried about the construction and you cannot get the people to build it, and it is going to cost too much right now? Just what are you weighing up as a board and a management team, I guess? I am just trying to understand.
I'll take that as a yes from you. There's not too much that's not obvious to everybody already. I mean, we've obviously just done Queensland, and that's been bedded down nicely, pointing in the right direction. We feel good about that. That's nice. And obviously the big Vickery was delayed because of the Queensland opportunity jumped in front of it. Scroll forward two years, we feel like we're comfortable, as I say, on top of Queensland. More work to do there, don't get me wrong. We're still working hard there from an optimization perspective. But it is the right time to go back and just reconnect with the bigger Vickery alternative. Make sure you understand the CapEx. Make sure you understand the OpEx in this inflationary and impacted environment.
Then the obvious part of it all is, the coal price looks really good, but what happens if peace breaks out? That'd be great, for most things, maybe not so much the thermal price, in the short term anyway. The market demand is good, so we're positive of that. So it's really just about making sure that all those underlying assumptions are still consistent, and that there's a price pathway that you could see past and beyond this conflict, that would be sensible to use as your assumption if you were to consider the balance of capital required to go to the 10 million tonne scenario. So you're absolutely right. All these things look like they're well positioned. We feel the same. But we've just got to do that work first to revalidate all the important variables, in this puzzle, not the least of which is the funding.
Now, we've got lots of good expressions of support from customers on this. We are obviously wanting them to share the risk with us. So you'll see us, and we can talk about this over the next coming quarters. We are going to explore each of those expressions and try and pull them into something that's more actionable, over the next six months.
No worries. For the record, Paul, I do agree with your view of the coal price is probably going to be stronger for longer. But no worries. Thanks for that. Appreciate it.
Thanks, Glyn.
Thank you. Your next question comes from Lachlan Shaw with UBS. Please go ahead.
Morning, Paul, Kevin, and team. Thanks for the call. Two from me. Just firstly on the port terminals, obviously planned maintenance, you can get organized around, but the unplanned issues, how should we think about this? I guess, key question here, are you confident that there are mediations in place and that there would be, on a go-forward basis, hopefully better performance at the ports? I will come back with my second.
Yeah. I will let Ian. Ian was actually on the ground over this last week having a look at what is going on there. He has got fresh eyes in terms of what he observed there.
Yeah. Thanks, Paul. Paul touched on it earlier. Obviously, the Gladstone port is not a new port compared to the other ones that we see around. The team there are doing a lot of work understanding, I guess, the age, the maintenance of that. Some of that stuff you can't buy spares for off the shelf, for example. Carrying that. I was encouraged by the body of work that's going on there to get on top of that and ensure that that's in place. Over a period of time, there's obviously what money needs to be spent at that port to, I guess, modernize. If you take electrics, for example, some of that type of thing, gets to a life where you've got to put the next generation in there. The team are working through all of that as we speak.
But currently they're back up and running—
Yeah.
—at capacity. We just want to make sure there's an active program that everyone feels confident in terms of maintenance and renewal, refurbishment of the parts that need to be dealt with, such that we're not encountering such clunky service delivery, when that's the sole port that obviously Blackwater uses. That's not to say we can't move ourselves around here and manage our risk by accessing other port arrangements. We are actively exploring that just to make sure we can balance our risk exposure here. Those conversations are constructive. Obviously, we don't want to be paying any more because we've already got port access with take-or-pay arrangements. We don't want to be paying any more than what we're currently paying.
But if we're not getting what we want, then we're going to have to make sure that we have alternatives here in the event of any further unplanned issues. We want to continue to grow, so we don't want to be hampered by any clunky service delivery in that regard.
That's really helpful. Just to clarify, let's say maintenance capital has to step up for a period. Is that to be borne by the port operator and not the port users? Is that the situation?
Yeah, that's not our focus, no. No, we are paying for a service. They haven't lowered the charges to us off the back of not doing maintenance, so why should we be paying more for that backlog of maintenance being rectified? That's how we feel about it.
Yeah.
I'm sure the other users feel the same way. Like I say, in the meantime, we'll also make sure we manage our risk by providing potential for access through other infrastructure, just to balance that risk exposure.
Got it. That's really helpful. Thanks. My second question was really on thermal coal and I suppose a market question, picking up a little on Glyn's point. JKM LNG has picked up. We're just about to start Northern Hemisphere winter. Restocking has commenced. The European buyer is competing with the Asian buyer for scarce cargos, but [JKM] is up.
But still arguably, not reflective of a look-through basis—
Yeah.
—in contained energy. What is the sense, what are your customers telling you? Is the phone sort of ringing off the hook? Do you think prices got more upside, more legs in the next three, six months?
The last part of the question, yes, I do. It does not go dramatically because there is no risk around our supply. We are supplying to them. So I just think it continues to tighten over time. It is not going to be dramatic like the Russian invasion of Ukraine. There are no supply issues with us, and there are no other supply issues of coal related at our customer destination. But this just continues to tighten over time. The dynamic you are referring to, of course, on an energy equivalent basis, it is already staring them in the face that LNG, if you are buying on spot. Now, many of our customer jurisdictions are not heavily spot exposed. They are long-term contracted players. And I was trying to get a bit of detail from them, and a lot of them were basically saying very politely about 20% is their spot exposure. So that is not insignificant.
But on an energy equivalent basis, LNG spot is four times the price of Newcastle benchmark coal. So, that is staring them in the face. But they do have the protection of the other 80%, which is oil price-linked long-term contracts, and the oil price has not gone up four times. So they are not as heavily exposed as you might think there. But it is still nasty, and so yeah, that is a very constructive backdrop for anybody who has the capacity to deliver a few more tonnes into the market because there is obvious anxiety there.
That is clear. Thank you.
Thank you. Your next question comes from Stefan Hansen with Macquarie. Please go ahead.
Morning, everyone. Just a quick one from me, just on RG Tanna again. There are quite a few decent sized coal mines along the lines that feed into that terminal who I assume have had a similar constraint as Whitehaven last quarter. Just wondering if there is a minimum capacity you guys will be able to access this quarter to start clearing the inventory. I imagine the others are wanting to try and access pretty strong coal prices as well. Just wondering if you guys are assured of some volumes that you can get out.
Yeah. Everyone has the same experience, so that is certainly, as I said before, not a Whitehaven issue. I am sure everybody wants to get their tonne through, and they do have capacity to, on a ramp basis, do more than what they had been doing. I think they are doing 55 million to 60 million tonnes, I think maybe in that order, when they are operating properly. That is still probably 10 million or 15 million tonnes, maybe a bit more, less than the theoretical capacity of the facility. So there is some sprint capacity available to be able to draw down this queue. And yeah, we are pushing them obviously because we want to get our hands on that, and as I say, I think we are the biggest shipper through RG Tanna. We want to make sure we get our fair share.
We've got plenty of stock on the ground there, so it's ready to go. We just need the shipping queue to cycle through as quick as possible.
All right. Good stuff. That's it from me. Thanks, guys.
Thank you. Your next question is from Chen Jiang with Bank of America. Please go ahead.
Morning, Paul and Kevin. Thanks for taking my question. Firstly, congrats on a strong result. Just a follow-up on the thermal coal market. Given currently, like you mentioned, checking the cost of using gas versus the cost of using coal. We've been talking about coal to gas switching in the past because of the push for decarb. I'm just wondering, have you seen from your customers from the JKT market, given current, especially this year, elevated gas prices. Have you seen any gas to thermal coal, especially the high CV thermal coal like you guys produce kind of thing happening? I have another one after this. Thank you.
Yeah. Thanks, Chen. Yeah, look, when we were in Japan just recently, we were asking a lot about this. The general response from the market was the coal's running hard, and there's not a lot of switching capacity. So that's a challenge for them because they're already working pretty diligently to make sure that they maximize their coal-fired fleet. Like a lot of countries, Japan's actually going through quite a reset of expectations internally because all their macroeconomic assumptions had been on the basis of declining population equals declining energy consumption. That has now changed in Japan. When we're talking to the government in particular, you can see they're busily trying to reorient the assumptions around that because per capita energy consumption is now going up.
So the capacity to actually switch a hell of a lot more into coal is relatively limited, so that's positive from a price perspective for thermal coal. The other thing that's positive from the thermal coal price is the change in direction from Korea in terms of the utilization of their coal-fired plants. Because they were number two, maybe even the biggest importer of LNG in the world now. Obviously, that's hurting price-wise, and their coal-fired fleet was winding down. So they've arrested that now and ramping that back up. So we're seeing a lot of interest in supply into Korea. So that's going to further put positive pressure into the market for thermal coal.
Great. Thanks for the color. Good to hear. It seems like for the coal plant, whoever wants to shut down, it probably will take longer for them to do that given the gas price. Thanks. Another question, just on the Daunia. A follow-up question on Daunia and Blackwater. Just on the Blackwater ROM coal, if I annualize, I'm wondering, are you being able to do the current run rate? By looking at the Blackwater, it would be more than 16 million tonnes.
How should we think about your long term? Because you can do 4.1 million tonnes, and by looking at the past few quarters, I think you've done that as well. Secondly, on Daunia, remind us the box cut in the Southern Domain, is that for the full FY 2027? Because if I annualize 1.4 million tonnes, that's like 5.6 million tonnes. So that's it for Daunia and Blackwater. Thank you, Paul.
Yeah, thanks, Chen. Look, again, I'll just cautious anybody using 4 x 4.1 million tonnes because we have the wet season coming. So the 4.1 million tonnes is really positive. So that is a demonstration of the capability of the mine. So tick on that box. But running that run rate right across the full year, I think we should be cautious on that with the Q3 weather season yet to unfold. Despite the fact that the weather has been very dry and good for mining, but it's raining up there over the last few days in particular. That's just a constant reminder that we just need to temper our enthusiasm for the simple annualization of one quarter's good numbers, as encouraging as they are. So I understand the motivation, but we're cautious on just multiplying that by four. Daunia had a good period, but everything's going well there.
We don't give separate guidance on Daunia, obviously, across the course of the year. But I think that's a reasonable position, if not a little bit conservative, just in terms of where we might go with that. But that's all I'll say, given that we don't want to split out numbers and undo our guidance that we've currently set.
Sure, understand. Thanks for that, Paul. The box cut in the Southern Domain is through the whole FY 2027?
Yeah, and through into FY 2028 as well. It's not a simple thing. That is a large mine. Yeah.
Yeah. Sure. Got it. Thank you so much, Paul. I will pass it on.
Thank you.
Thank you. That concludes our question -and -answer session. I will now hand back to Mr. Flynn for closing remarks.
Thanks all for your time this morning. Thanks also for making the adjustment in timing, given that we are a little bit earlier. I know everyone has got a lot on today. So thanks for your questions. If there is anything we have missed, you know where to find us. Look forward to discussing it with you. Thank you.
Thank you for participating. You may now disconnect.