Welcome, ladies and gentlemen, to the Whitehaven Coal's Q4 FY 2023 quarterly production update. All participants are currently on mute. Following the presentation, we will open the call for questions. To queue for questions, you may press star one on your touch tone keypad. Thank you for joining us today. I will now hand over to Mr. Paul Flynn, Managing Director and CEO. Thanks, Paul.
Good morning, everybody, thanks for taking the time to dial into our final quarter for the FY 2023 year. As usual, I'll run through some highlights for you and then, move through the body of the report and on to Q&A. To kick off, just a few highlights on the front page of our report. I'm sure, as a number of you have seen already, the pricing environment still remains pretty solid. It has drifted off over the course of the year and the last quarter in particular. For this financial year, we achieved an average of AUD 264 for the quarter, and the full year as a whole, the average there being AUD 445.
Run of mine sales, or run of mine production, I should say, at 5.1, was a solid result. The total for the year just crept over the 18 million tons per annum at which was just at lower end of our guidance, but 5.1, 19% up, was a good result. Total equity, sales and produced coal, 3.3, was steady period on period, and managed sales for the produced coal at 16 million tons at the upper end of our revised guidance. Cash generations, again, has been pretty good, $430 million in the June quarter. Across the year, $4.2 billion, which is very positive and reflective of that strong pricing backdrop. Balance sheet's in good order with cash of $2.65 billion.
Just a quick update on the buyback, which I'll get to later, but during the quarter, just under 39 million shares purchased during the course of the quarter. I'll summarize that a little bit later on, but hitting that solidly at an average, as you can see there, about the AUD 6.50 and change type level across the quarter. On to safety. Safety has been continuing a good trend for us. Our trip and all the efforts applied across the business to try and improve our safety performance, which by industry standards is pretty good, but obviously this job just requires constant diligence.
Our trip rate at 4.7 was a 13% improvement on last year, which is nice to see that continuing in the right direction. Moving over to the page there, as I say, 5.1 million tons, 19% up on the March quarter, was positive. A 51% increase in from our open cut performance, and then Narrabri, of course, going through an extensive change now, which I'll talk about a little bit later. The totals for the quarter there, as you can see, totals and full year, 5.1 and 18.2 for the full year. On the ROM production, saleable coal production at 3.8 and 15.7. The managed sales, as I mentioned, for the year, total at 16, and for the quarter, 3.9, 4.
The quarterly results cascade down with the same impacts period on period, which is quite positive to round out this year. At Maules Creek, Maules Creek did step up quite nicely in the quarter, and at coal production near 3.4 million tons for the quarter, 48% up on March. That's positive. It ended up being at just under the 9.6 mark for the year after achieving that 3.4, which is very good. Production was certainly a flurry in the back end of the quarter, so we've got a hungry market there, which is keen to get every ton of Maules Creek coal.
That coal left the mine site pretty quickly and wasn't, didn't leave us with a whole lot of stock there, but we are building stocks during this period and certainly into the new year as well. That 9.6 was 15% below last year. You obviously know that there's been a big weather impact on this year, which has been challenging for not just ourselves, but for mine production throughout both Queensland and New South Wales. I'm sure those monitoring the port will see the tonnage volumes going through the Newcastle port. To Narrabri. Narrabri tons at 450,000, obviously a lot less than what we've done in the previous quarter, but experienced...
Narrabri successfully navigated its way through what's been our largest and most complex relocation for the longwall. Obviously, going from our deepest panel production in the northern panels across to the shallowest one on the southern side. They're very positive to get that done, and of course, there's further complications of reorienting the equipment to be able to cut to rehang our equipment. You cut back from south to north, but obviously the tailgate and main gate size swap when you're doing that. Yeah, that was a nice job to get that all done, and we're back into production now. There is a relatively cautious ramp up associated with this change.
We did experience some supply delays in terms of overhauls of equipment and so on, which delayed the start of, or the recommencement of cutting. We are moving quite well, and once we get the panel squared up, we'll continue to push to greater volumes there. That looked like a really solid outcome for everybody to navigate through that on time, subject to those delays, and safely as well. The year's total at 5.3 was 9% less than the prior period.
Again, first solid, strong half, second half, obviously, with that change-out and a relatively slow conclusion to 110B as we came to the final end of the fact, with a little bit of ground stability type concerns in that deep ground. Very pleased to have all that behind us now and moving ahead in this new financial year. Gunnedah Ops had a good quarter across both the mines, Tarrawonga and Werris. Both did well. Volumes there at Tarrawonga are at 730 versus 521, a positive step up there compared to where we've been in the past.
Werris Creek at 550 versus 260 also came home with a wet sail, which is positive to see that round out in what was otherwise being pretty good operating conditions relative to what we experienced in the first half. In aggregate, they've ended up with a pretty good total of 1.27 versus 782 in March, and 3.4 for the year's total, which is very positive. Onto our equity sales.
You can see the table that we provided here, as you know, generally, in a softening environment, we're going to realize better than the average for the period from a realization perspective, and you can see that's exactly what's occurred again in this quarter, as it did in the previous. The average price, as I mentioned previously, AUD 264 versus AUD 400 for March. You can see that trend across those columns through there, just to see that we are in a price environment that has moderated quite considerably. Our thermal coal prices there, just on a US dollar basis, are $177 for the period.
Metallurgical coal prices achieved during that period for us at $218 US, and the average, well, the index for the quarter was $241. As a result, you can see that premium there in a softening environment. In a stable environment, I just have made that comment there. Just in a stable environment, we should be a little bit over the average of the quarter, so a small premium in a stable environment. Because of that softening environment, obviously, we bring the lag effect of better priced tons from prior periods into the realizations in a particular quarter, giving rise to that 10% in this quarter.
The coal reservation policy, I know this is not particularly an exciting piece of the report for anybody, least of all us. We have delivered and met our commitment during the period. In fact, during the quarter, we supplied a total of 299,000 tons under the policy. You may recall that we previously said that we're going to submit about 200,000 tons per quarter into this policy. There was an opportunity to actually to supply to our preferred location and drag in some tons from next quarter into this one. Rather than running the risk of supplying one of the less optimal power station destinations, the opportunity was too good for us to take that up.
We did, and supplied into the preferred power station, which was advantageous to us. Just for pricing there, we've helped everybody understand that the realized pricing, AUD 115, is less than the AUD 125 cap, which the system has imposed, that being at 5,500. Clearly, we've put in there less than 5,500 in winning those tenders and so received a commensurately lower price as a result. Moving on to the market more generally. I mean, the market itself, as everybody has acknowledged, has been typified, I think, by a market that's well supplied in coal, oil, and gas across various markets after what was otherwise a relatively mild winter.
Our customers generally have reasonable stock levels still, moving into their summer. We've seen buying being relatively modest, although all our commitments are being met, all our customers are taking all the shipments that have been previously scheduled, which is very positive. I made the comment earlier just about tonnages through the port, you can see there that we certainly have seen volumes less right across the market, as people deal with the impacts of that first half wet period. We know that many mines are still dealing with the legacy of lots of water on site and having to move that around in order to meet their obviously, their environmental obligations during that period.
Moving on, from a cost perspective, we've given you a steer in terms of our costs, unaudited as that might be. AUD 103 is where we think those numbers will end up. The audit process will bottom that out over the next six weeks, and we'll release our results in the third week of August. The buyback summary.
Again, we've provided you a bit more color, just in terms of the total buyback performance, and then the financial year-on-year impacts of the returns to shareholders that we delivered through the buyback, the buyback period, and then add that to our dividend payments as well during, again, FY 2022 and FY 2023 gives you a sense of where we've been. In aggregate, since the buyback started, we've purchased 196 million shares, which is in the order of, depending on which way you calculate it, 19% to 19.5% of the stock since the buyback program started, whether or not you include...
Depending on whether you include milestone shares or not, the milestone shares, obviously subject to restrictions, can't vote, don't receive distribution, and they're not subject to the buyback either. In aggregate, since that program started, we have 196 million shares, which is very positive. As I mentioned during the quarter, we were hitting that pretty well, to continue that momentum with the buyback program, which I think generally has been well received by our shareholders overall. Just to go through now a couple of comments, just on individual, on individual projects. I'll just draw out quickly the highlights for you on that.
The Narrabri Underground Project, you may recall, has had two legal matters to deal with, one being state-based, where there was a challenge to the IPC's approval of Narrabri Stage Three . Fortunately, that's now been dealt with and in our favor, and so we can move on with that one. There, but you will recall that there is a second matter at the federal level, which encapsulates, I think, 19 projects under what's loosely called the reconsideration request. Which asks the federal minister to go back and re-look at a number of different projects there across various industries, seeking EPBC approval, one of which is now at Stage Three. The minister has set that aside, but there is an appeal.
There is an appeal on foot there, which we'll need to work our way through. Very positive that the state-based one has been dealt with. We're working collaboratively with the federal government. We have joined that matter, even though the case is not against us, just to stay close to it. Highlights just on Winchester South. The positive news there is that the Coordinator-General's Office has declared the project, or our EIS to be adequate, which is great. There's a slightly different process, as many of you know, compared to the New South Wales process. Having been declared adequate, the government then goes through the process of finalizing their report on the project.
That is a very important milestone for us, so we expect a few months now of preparation from the government in before the release of their report. It's nice to see that milestone met. There's a little bit of extra information there just on group exploration activities. I suspect no one's gonna get too excited about that. That's a compliance requirement for the ASX requirements, given that we do spend money under the exploration banner, even though that regime is broadly focused on junior explorers given the importance of exploration to them.
To say the balance sheet's in good shape, and after returning AUD 1.6 billion in capital through dividends and buybacks, we've got AUD 2.6 on the balance sheet, AUD 2.6 billion on the balance sheet, which was very positive. There is some tax to pay. We are in the PAYG tax regime, as many of you will know. During the course of this quarter, we did bottom out the reorganization of our finances in this period. Refinancing our contingent facilities for the various bonding requirements that we have. Our AUD 1 billion, previously undrawn facility, we didn't renew that. Company's been well capitalized, and you'll see us use cash going forward for many of these purposes.
The Safeguard Mechanism Watches, there has been some change in regards to the Safeguard Mechanism, which started on the first of July. As many of you will know, there was still some negotiation between the government and the industry on the treatment or the application of the Safeguard Mechanism changes and the treatment to open-cut and underground mines. Whitehaven has been working very, very well with a range of other industry participants and with the government to bottom out what we think is at least incrementally better than what was previously proposed for underground mines in particular.
For those who've been watching this, there is a change in the average emissions intensity variable, which is used there and at 0.0653. That's a little bit more positive from our perspective. There is a more useful glide path for the transition from your site-based production variable through to an industry average over time, which again, is more sympathetic to the needs of underground miners, of which we have one. We've also given you an estimate there as to what we think the impact of that will be in this next financial year, about $1 a ton for FY 2024.
That does change over time, so I don't want everyone just to impute that there's only AUD 1 per ton payable there. It will change as emissions profiles do change, and of course, ours and industry more generally, but ours more specifically, our ability to minimize exposure to this regime by reducing our emissions, particularly at Narrabri, given the underground mines are generally more emitting from a CO2 equivalent perspective than open cut mine. Then again, they measure their emissions with a higher degree of accuracy, whereas the open cut mines are more subject to estimation. As I say, you shouldn't impute this AUD 1 per ton for the rest of the mine life.
We're just giving this to you for next year, and our mitigation measures and other things will play out over the coming years, and then you'll see us give more guidance in terms of what we think the impact of that is over that period. From a Vickery perspective, early works are continuing there just in terms of getting ready for early mining there. There are a couple of secondary management plans and so on, which need to be signed off before we can actually commence operations on site. We're looking forward to bringing that in in the coming months. The guidance is tabulated there for you over on the page 9 of the whole report.
As I say, we just crept over the 18 million tons of 18.2, which is positive. The sales were at the upper end of the revised guides at 16 million tons, and our equity sales also at the upper end there. The 103 number we've given you from a cost perspective, as I say, that will be confirmed with the release of the full year audited financial results. Obviously, at that time, we'll be giving you guidance on FY 2024 as well. With that, I'll wrap up the presentation of the quarterly report, and I'll hand back to our operator to open up the Q&A. Thank you.
Thank you very much, Paul. If anyone would like to ask a question, please press star one on your phone now. Paul, we have our first question from Chen Jiang from Bank of America. Go ahead, please.
Hey, good morning, Paul. This is Chen from Bank of America. Just a quick question on your production. I understand, you provide a guidance on 24th of August. How should we think of your normalized production outlook beyond the weather and the supply disruptions? Hopefully, those are behind us. By looking at the run rate from Maules Creek, I think the run rate is around annualized 13.4 million tons. That's a good indicator. Just wondering, how should we think about your normalized production outlook from here? Thank you.
Yeah, thanks, Chen. Look, we will give guidance, as you say, 24th of August, so we won't be uncovering too much of that right now. A couple of comments just in relation to the points that you've drawn out there. Yes, of course, on an annualized basis, you know, June was positive to see you running at that rate. Of course, we're captive to a 13 million tons per annum approval limit, so you can't do that across the course of the year. As I previously mentioned here in our last quarter, when we spoke about the couple of challenges that all our industry, and we particularly have been facing.
ve referred to Maules, I just want to draw out a couple of things there. I called out before, manning and then congestion impacts and essentially related productivity impacts that stem from that, from keeping the autonomous fleet at Maules Creek separate from the manned fleet, as the transition required as we complete or exhaust all the out-of-pit dumping spaces available to us and transition 100% into in-pit dumping later on at the end of, essentially the end of this next 6 months, the first half period. So look, on the labor side of things, we are doing pretty well there, actually.
It's nice to see that we're making good strides in terms of manning up the fleet, which I'd say, assuming that we continue to operate the same level of autonomous equipment at the moment, we're pretty much on the mark now with the manning side of things. That's great. The congestion impacts we mentioned before, just about keeping those fleets separate, will carry on into this new year. The question is a good one in the sense that the obviously, the totals for this year would not be what you should infer for next year. There is a price to pay from a productivity perspective in keeping those fleets separate.
The reason why we think that that price is worth paying is because we like to think we're on the back end of the development of the AHS system. That with the available time remaining, we can hopefully cross the line of commercialization with this product and move into a broader deployment of autonomy across our overburden fleet at Maules. I'm not giving you a specific number, obviously, because we'll do that in the third week of August. You shouldn't infer this run rate for the top end, and you certainly shouldn't infer this year's full actual production at Maules as being the basis for next year's. It'll certainly be higher than that.
Right. Thanks for the color, Paul. Maybe a second question on your coal mix. Just realized that you sold 91% of high CV sales. I guess that's pretty high. I'm wondering, that 91% of high CV, is that due to market conditions, or that's because of your mine plan, or it's because of the coal reservation? Just if you can share some color on that. Thanks.
Yep. Thanks, Chen. As a general statement, as you know, Werris is the only mid CV mine that we have, and that will be coming to an end, so in the early stages of calendar 2024. Small tonnages emerging at the end of FY24, crossing into FY25, from early mining at Vickery, will bring in a higher quality substitute, which will be good. On average, our CV across the business will be going up with the loss of Werris production and the advent of Vickery production. Generally, we've been washing everything, as you know, just to take advantage of the spreads between API 5 and GC NEWC.
We've continued that process throughout the year, we are anticipating continuing doing that in this new year. Those spreads still, certainly still warrant us doing that. To the extent that we have mid CV sales coming out of Narrabri, say, for instance, which is certainly possible, that's really just a function of blending across the business to the extent that, as we noted earlier, in the year, when we had all those weather impacts at Maules Creek, which curtailed production of high CV coal and meant a paucity of clean stock available to blend with Narrabri, we did have, as you've noted there, mid CV sales occurring as a result of that 9% of the thermal.
That's the broader way in which that's managed, but, we would see the proportion of higher CV in coming years greater as a result of that swapping out of the Werris tonnes for Vickery tonnes.
All right. Thanks. Thanks for that, Paul. Operation. Maybe last question on the share buyback on page six of your release. Just wondering for your capital return, about buyback for FY 2023 to calculate, you know, 50% of NPAT as the, you know, we return to shareholders. Should we use AUD 724 million, or we should use AUD 949 million on page six? I guess the difference is the buyback announced from the first batch, but completed in FY 2023. I'm just wondering which number we should use to calculate your FY 2023 shareholder return. Thank you.
Ooh, I think you need to use the buyback that was conducted post AGM, because the previous buyback was really rounding out the tail of FY 2022 buyback, we'd accounted for that in the cash allocation at that point. Chen?
Okay. Thanks, Kevin. Yeah, that's all. Thank you very much. I'll pass it on.
Thank you. Our next question is from Paul Young from Goldman Sachs. Go ahead please, Paul.
Morning. It's Kevin and Paul. It's Paul Young here. Paul, the first question's on Narrabri. You mentioned about the move to the 200 series. Just took a little bit longer than expected, and the ramp-up's taken a little bit longer also. Can you just, maybe run through, you know, how that actually has gone and, you know, maybe in July, how production's been running at Narrabri on that ramp-up?
Thanks, Paul, Paul. There was a range of things there, just as I mentioned there before, as finishing out 110B, as I mentioned, that was definitely slower than we would have liked. There were definitely a few ground stability issues there in the back end of 110B, which is pretty annoying, given that the first half of the year had been such a positive run rate. As you know, in that piece of ground, that's prone to happening. The relocation itself was well done. We did suffer some delays with suppliers and not just components, but labor on their side as well, causing some issues.
As we moved into panel 203, we've definitely been treading gingerly, I'd say, just because we know we're that's the first panel, obviously, on that side, and there is a little bit of washout in section that you encounter there, just on the on the as maybe eastern side of the panel. So we're treading gingerly there as we're less than halfway through to get the, to square up the block. So we're operating relatively modestly until we ramp up. As we currently speak, we've got Ian here as well, so he can chime in with some commentary there. Yeah, I think we're in the sort of 15s to 20s type level now.
You're asking for some feedback on the production levels now. That'll ramp obviously as the block squares up. Ian?
As Paul touched on, we're about 170 meters into the block, which is sort of around 400,000 tonnes. You know, we need to get through to around 300-350 meters just to settle in that, what we call getting square. As Paul said, we're taking that steady as we move through there.
Okay, that sounds like some good progress in July, so that's great. Next question, Paul, and maybe it's for Kevin, is actually on this refinancing. Any further details you can provide us, just on the size of that refi, you know, which banks are involved, you know, the rates, et cetera. Just curious, considering that, you know, I guess the items that you're covering there.
Kevin?
Paul. Yeah, look, Paul. I think we went through that process. It's a range of banks. I'd say to you that it is increasingly difficult in a thermal coal producer to be to attract external funding. The contingency side of that was well supported. The actual lending side of that, we sat there with AUD 2.6 billion-AUD 2.7 billion on the balance sheet. As you know, we've talked about getting into the US debt capital markets in time, and we were very, very, I'd say, reserved in the way in which we approached that. We've helped a number of banks achieve their decarbonization within their own portfolio strategy, and looking forward to 2024 and working in debt capital markets.
Okay, thanks, Kevin. Last question from me, Paul, is on, you know, the labor and cost piece at the moment, which we know is high and, you know, labor inflation is high, and its capital and CapEx's inflation is still coming through. There are a number of opportunities, of course, out there in the market across certainly metallurgical coal in for trade sale perspective. How do you think about the buy versus build scenario at the moment?
Yeah, that's a good question, Paul. I mean, labor costs, yes, as you rightly point out, certainly are still running at vibrant rates, and certainly well above the national averages. You know, when we hear about the, you know, the government highlighting the rate at which wage inflation is acting on average across the economy, you know, our industry, I'm pretty sure, is a substantial premium to that. And as you say, capital costs also, we're seeing those continue to rise.
Part of the process with with our with our Vickery project is to to move in the second half into a phase of trying to validate what we think the capital should be once individual suppliers are pressed to put a number on the table to see what that looks like. The build versus buy conundrum, there's just vastly different risk profiles associated with that, as you know. Vickery, we're interested, obviously, for that trade I mentioned earlier to Chen's question. That's obviously swapping out the low quality for the high quality. That makes a lot of sense for us.
We've done a lot of work on Vickery, so getting the approval ready, and the board will have a look at the full version of that later on in this calendar year. We would seek to put down firm numbers for the capital on the table for them so they can assess that. Having said that, there will be a checkpoint next year, by which once those, once the tender numbers have come back, we'll come back to our board just to make sure it's within the margin of error that they would contemplate when they do assess that project at the end of this year. Yeah, of course, M&A has different, a whole range of different other risks associated with that.
you know, that's about all I can say on that one. We've-- obviously, the backdrop of that is, is, the buyback, which has also been a very effective use of capital. That must be in that mix as we weigh up, the various, streams that you mentioned.
Okay. Thank, Paul. Thanks, Kevin. Thanks, team.
Thank you. Our next question is from Steven Henderson at Shaw and Partners. Go ahead please, Steven.
Yeah, good day, team, and thanks for the update. I have a couple of questions regarding updates on the balance sheet and refinancing. In your last production call, you stated discussions were ongoing, and you were considering refinancing for the company's AUD 1 billion credit facility. This morning we found out this isn't happening. I know Paul just asked a similar question, if you could maybe expand a little bit on this, what went wrong here exactly? Does this mean you plan on funding Vickery and Narrabri extensions with internal sources of capital?
I'll hand over to Kevin. That's right. We didn't renew our funding, as I mentioned earlier. There's no problem in dealing with the contingent side of that. It's all the bonding and other requirements. Obviously with a lot of cash in the business and obviously the price is improving, there's no doubt that some of the banks have chosen to not participate in the refinancing as we go forward. As Kevin said, thermal coal and that's no new concept to all of you on this call. Thermal coal has been less appealing from the bank's perspective in terms of how they want to decarbonize their lending portfolios.
as Kevin said, in the end, they have, they have been able to remove some emissions from their portfolios as a result. going forward, no doubt, so right or wrong, banks view Vickery as being a thermal project. that's not our view of it, of course, and it has a very good semi-soft coking coal product, which we expect to be producing a lot out of that site in the fullness of time. that's how they perceive it, and there's no way that we could change that based on the discussions we were having with people. met coal is different thing.
Just to round out the discussion from a Winchester South perspective, we still have got positive expressions of interest for funding a Winchester South project in the fullness of time. We've done a little bit of restructuring in terms of internally from a corporate structure perspective, just to provide some added rigor around how those funds would be deployed in the event that banks commit to a project that's predominantly met coal related. It's hard yakker. I mean, that's no news to anybody on the thermal side of things in funding this industry.
You can see our peers are experiencing similar sort of, dialogue with the banks. Our desire here is to keep all the banks interested in our business as we put more met into it with Winchester South. Kevin?
Yeah, thanks, Paul. You know, I'd say to you that I'd go back in a little bit of history, but I'd say, you know, we started out with an AUD 1 billion facility when we kicked off Maules Creek, and that was really there to help build Maules Creek. We, through 2015 and 2017, we refinanced that. In 2020, at the bottom of COVID, we refinanced that again. I'd probably say to you that I would say to you, it's fairly challenging when you go to a bank and say, "I've got AUD 2.6 billion on a balance sheet, and sir, can I borrow some money?" Because they look at you and go, "Well, why do you need that, first of all?" That certainly played into the conversation. I'd agree with Paul.
I think the opportunity, a number of banks took opportunities to say, "Well, you've got plenty of cash and come back and see us when you've got something else you want to do." At the moment, we'll take our opportunity to decarbonize. On that front, the contingent side of the world was really well supported. A diversified group there. I'd say to you that I think anybody who's in thermal coal is gonna be facing similar challenges in organizing funding from traditional sources. Which is why we've kept the line of opportunity, the line of inquiry open in terms of the debt capital markets. It's why we're running a pretty extensive program with offshore capital providers in discussions there.
Yeah, I think that's the summary. I wouldn't say anything went wrong. I would say we took the opportunity to reduce the process. We're always gonna reduce the size of it, and that's what we've said to market. As I say to you, AUD 2.65 billion-AUD 2.7 billion worth of cash and most of the capital providers said, "Well, I'm not terribly sure what you need this for, Mr. Ball." We'll make a decision to do something else. If that answers your question?
Yeah, no, that helps a lot. It's interesting you mentioned that, certainly the met coal side of things and banks may be being a bit more open to that. I noticed that there was a piece in The Australian at the end of last week, Whitehaven looking at buying those 2 BHP mines, met coal mines, but weren't able to secure capital, is what the report said. Look, I'm just wondering, maybe you've lost relationships with the Big Four banks. They're not interested in getting involved in Whitehaven projects moving forward, whether they be thermal or met coal? Maybe some comments on that.
I think I'd probably come back to you and say, I'm pretty confident that was an article in The Australian.
Yeah, that's right.
Was it, Steve? Yeah. I'm probably... I don't pay much attention to that particular part of what comes out of The Australian.
I wouldn't worry about that too much. I don't know where that commentary came from, Steven. There's substantial interest in the banking community for met coal exposure. Winchester South obviously is the focus for us. There's been no shortage of people interested in that, as I said. There is some restructuring we require just to ensure that bank funding, to the extent that banks are interested in met coal only, then it would be structured in a way that would be sympathetic to that need.
Obviously, the thermal business being unlevered, obviously is a credit-enhancing opportunity, I suppose, when someone comes to finance a met coal mine. Otherwise, I don't know where that comment came from. That was most peculiar. We certainly don't have any problem with relationships with any banks around town. Not at all.
Yeah. Oh, that's fantastic. Look, if you indulge me, just one more, digging down into the contingent credit facilities. You noted in your report that the big money's coming into some port and rail infrastructure. Can you provide a little bit more detail about what this is exactly?
Well, you'd understand that at the back of this, you've got take-or-pay arrangements at Newcastle and take-or-pay arrangements with ARTC. Your port and rail facilities are really just those arrangements. Each of those providers of that service require facilities at the back of that to support those arrangements.
Yeah, as it's always been.
As it always has.
Yes.
Yeah. There's nothing.
Okay.
terribly, nothing terribly, new or innovative in that conversation. It's pretty standard for the industry.
Right. Thank you.
Okay. Thanks, Steven.
Thank you. Our next question is from Tony Mitchell, Shaw and Partners. Go ahead, please, Tony.
Congratulations, Paul Flynn. Very good result. I don't think you'll answer this, but I feel obliged to ask the question. Is Whitehaven Coal interested in either Daunia and Blackwater? If so, when do you expect to find out when the whole process is gonna be finished?
Heavy must be the burden on you, Tony, to ask that question. Look, the simple answer to that is that we look at all assets that fit in the strategic crosshairs of the business. Any question around timing or otherwise, be better directed to the person or the organization running that process, which is BHP. We're having a look around. As I've said previously, we look at all those things that fit between those parameters. Can't really comment too much more on that. Of course, Daunia is proximate to Winchester South, so I mean, that's obvious why we would want to have a look at that. Beyond that, I think it's best those other questions on timing would be better directed to BHP.
Okay. Thank you.
Thank you. Our next question is from Chris Chu at Jefferies. Go ahead please, Chris.
Thank you. Morning, Paul. Question just on waste development at Maules. Is there any, I guess, sort of deficit that we should be thinking about there, given the labor and weather events of sort of recent times and congestion issues and I guess perhaps what looks like accelerated coal sales in the June quarter, or is that all kind of running as per plan? Thanks.
Yeah. Yeah, look, Chris, no, nothing particularly there to be concerning from a from a waste removal perspective. We don't have a deficit. In fact, our our inventory. Our inventory of broken stocks on ground is increasing, which is good. We had an objective to elevate that, and that's been positive. That's definitely heading in the right direction. You may recall there were some constraints there a couple of years ago when we transitioned to a new a new explosive services provider, there was a slowdown required whilst we transitioned to those new products. Those products have been working very well. No, broken ground stock's not a problem at all, so I wouldn't be inferring anything for the new year in that regard.
I don't know if you, Ernie?
I mean, I think as we indicated, the plan always was in the mine schedule for the year to have a lower strip ratio in Q4. That's just the way the sequence worked. You know, we saw a full range of the seams presenting themselves. You know, I think historically, people have asked questions about Braymont, it only represented sort of, in the quarter, about 13% of what we produced. We were down in the bottom seams, and they delivered well. That overarching, as Paul said, was, the average strip ratio for the year sort of panned out as we'd always planned it to be. It was just lower in Q4, just due to the sequence.
Okay, thanks. Perhaps just a second question on Maules as well. With the AHS integration, is there any, I guess, detail you can give us there on, in terms of the confidence around the commerciality and whether and what you're seeing that, you know, gives you a bit of confidence that's gonna deliver what you'd like it to?
Yeah, I mean, look, we've obviously been on the AHS journey for a number of years now. We're continuing to push that through into FY24. As Paul said, you know, the out-of-pit dumps will finish probably towards the end of Q1 this year. They'll be running into the southwest area of the mine. You know, we've been running up to the two of the larger fleets of gear in AHS and introducing the manned coal fleet with that. I guess that's the journey for sort of the next 24, 12 months to see how that integration works, and the plan is to integrate the other larger trucks with that.
We'll have a good firm handle in the next 12 months as to whether or not, I guess, AHS has a future at Maules Creek.
Yeah, I think, Chris, the limiting factor there is just that separation. You know, how long can you keep the separation of the AHS fleet in the autonomous zone away from the rest of the balance of fleet? That's easier, of course, when you have out-of-pit dumping opportunities, but we'll have filled that all up. That's probably a negative in that sense only, because broadly, in-pit dumping is a much more useful thing to be doing than hauling long distances to out-of-pit locations. When you're all inside the pit, and you've got to keep fleets separate, that's pretty dysfunctional from our perspective. We're not going to see the highest level of productivity as a result of congestion and having to manage that balance.
That's why I was saying earlier, there's a, there's a limited period of time here, A, that you can physically keep those fleets usefully separated, and B, there is a productivity impact, you just don't want to bear that for too long. What I'm saying to you is, it's not, there's not a bottomless pit of patience here. We do need to cross this threshold of being able to integrate the manned and unmanned as in saying, we are doing that now, which is very positive to see. That's very positive. I was out there the other day, and I could see, you know, not just the intermingling of services related equipment, but the trucks as well. That's positive.
We do need a bit more work before we can roll that whole integration across the whole pit. That's this next, this next financial year, the next 12 months will be the real go or no-go type decision.
Great. Thank you.
Thank you. Our next question is from Glyn Lawcock in Barrenjoey. Go ahead, please, Glyn.
Good morning, Paul. Maybe if we could just dig down a little bit on cost. I know you're gonna give us guidance, but firstly, just with Narrabri, the move into 203, I know you're still ramping up, but what sort of cost reduction are you expecting there? Are you still expecting, and you still think you can achieve what you know, that benefit of not having to do roof bolting now that you're back in shallow ground? What sort of benefit should that give us relative to the cost of where we ended, you know, the last panel?
Thanks, Glyn. Look, That's a very interesting area for us as well, because, yeah, we are transitioning away from obviously the cost basis associated with lower volumes in deeper ground and all the attendant works that go with that. You started the roof bolting. There's obviously roof bolting still required in shallow ground. It's just in the past, we've had secondary support patterns there, which have been quite intensive. We do see the shallow ground being an opportunity for cost reduction, no doubt about that, not just the least of which is obviously more volume, then, as you say, those types of services no longer being required in the same intensity as what they were before.
The problem we have with this. We'll give our guidance in six weeks' time. The challenge here is that the basis of comparison sort of gets lost over time because we're in such an inflationary environment now. There's no doubt that certain things will be, certain activities will be required in the deeper ground that are not or less required in the shallow ground. I don't know if you want any other color in that you want to describe there as-
No, I think you covered on most of it.
Yeah, it's just so if you go back and look, Glyn, just at the equivalent panel back on the northern side and go back at that year's accounts and have a look at that segment note, you can see the average cost back there. I mean, that environment, I'd love to see the costs associated with that, but that's just not possible. It'll be a higher base just because of the inflationary impacts we're dealing with the human capital, the services. I mean, there will definitely be a reduction based on operating the deep ground for sure.
Paul, maybe I can ask a slightly different one then. A year ago, you guided the cost to be AUD 89-AUD 96, and you ended up at AUD 103. You know, your volumes come in about 11%, 12% less than you expected, predominantly weather. If you don't have the weather impact, you know, what else drove that sort of AUD 11-AUD 12 cost impulse, actual versus guidance for FY 2023? Just, you know, if you pulled out the weather, like, what would the weather be of that AUD 12 increase in costs? If we can think maybe the rest is inflationary, some of it's your manning issues. Just trying to understand what made up that AUD 11-AUD 12 cost impulse versus the original guidance. Thanks.
Yes, that's good. We can certainly provide that color when we put the full year results out. We'll put a brief out, as we have in the past, that'll go through that for you, Glyn. One of the ones you didn't mention there, which is obviously, and obviously material, is the underutilization of take-or-pay, just from those weather events, obviously not getting the volume out the port that we would have otherwise expected. Those fixed take-or-pay costs do bite you.
Just in terms of the numbers that you've referred to, that we've given for the 103 unaudited for rounding out this year, but that includes clearly, the amortization of the debt at NCIG, which is a big step up, but that's a sensible thing to be doing at this time, as we accelerate the debt reduction at NCIG, all the, all the players are. That's before we even talk about, Kevin, what, that was $3?
It's U.S. $3 a ton. Yeah. 14 million tons.
Yeah, there you go. That's before you mention things like fuel costs, year-over-year as well, which have been jumping around, but incrementally, they're over and above where they were at the beginning of the year. We'll put that bridge in the pack there when we publish the full year results. Yeah, there's a lot of pieces of the puzzle there, not the least of which you mentioned, labor and manning. If I refer back to the period I just mentioned, Glyn, and the equivalent northern panel at this depth of cover, you know, if I think of even about just the wage position back then, I mean, that is vastly removed from what we're paying those same people in today's environment.
Okay. Okay, the previous guidance, which was 20-22 million tons of ROM for FY 2023 at cost of AUD 89-96. Yeah. Volume-wise, it shouldn't be unrealistic if there's not the weather impact, that there's nothing else had gone wrong at the mine other than weather, that you can't get back to FY2 023's guidance for FY 2024, and unit costs may be higher than what FY 2023 was, but not as bad as FY 2023 it turned out to be.
The challenge of that, Glyn, is the challenge of that, which I just referred to or reminded people about just again, from that previous question, which focused on Maules Creek in particular. You know, there is. It goes to the guidance, which we'll clarify for you on the 24th of August. You know, the tons from Maules Creek will be slightly less than you would otherwise expect because we're willing to take a sacrifice on the congestion associated with the fleets for AHS. As you rightly say, all things, other things being equal, there should be cost reductions when the group is running at those run rates. That's a fair and reasonable statement.
I just say, I think it was Kenny who asked the question before: What should she infer for next year? It's certainly not going to be Maules rate, as we just rounded out in the conclusion this year, it's also not going to be 13 million tons, given that there is a productivity issue that needs to work out. Werris obviously comes off, just to throw that extra one in there as well. There'll be a few less tons there, of course. We'll have half a year of tons there. There'll be a gap before you see material tons from Vickery .
Sorry, Paul, you dropped out there, but can you hear me now?
Oh, I. Yeah, I can hear you. No problem. Sorry, where did I drop out? Sorry, what part?
Just on the outside of them. Werris Creek coming off six months, so get less tons.
Yeah.
Dropped the other second.
Yeah, that's right. You'll get six months of Werris next year, but then that falls away, and then there's a gap between you seeing material tons from Vickery, is what I said. That must have been the bit that you missed.
Okay. Then sorry, just continuing on cost, right at the labor the point, the AUD 1 a ton on the Safeguard Mechanism, what's the AUD 1 getting me? Is that you have to pay to buy offsets, or is that money you're spending to help reduce your emissions? I'm just trying to understand what's the AUD 1 getting me.
Yeah. Yeah, that's not any money spent for reducing emissions. That's we've just assumed there the costs associated with the Safeguard credits, purchasing credits. Now we have budgeted monies for next year, which we'll speak about when guidance is given, and we can talk about. There's money is there for studies, for further emissions reductions efforts, particularly at Narrabri. We have allocated some monies for that. What that AUD 1 is referring to is that transition from the site-specific production variables versus the industry average in the first year, the FY24, that impulse is AUD 1. You know, it's just the cost of carbon, right? That's a carbon tax by another name, and that's how it starts.
Yeah, some of it is actually studies, not just a straight get the dollar allotted by credits, is what I'm saying.
Nope, nope. That dollar is just the tax.
I'm getting something for it, in that you're gonna do some studies which may, in the long run, help reduce the dollar.
No, no, you don't get anything for tax.
I think what Paul's trying to tell you, Glyn,
is Studies are different things.
The carbon abatement, is the carbon, the carbon credits you've got to buy, the cost of those. Then on top of that, which we'll get in guidance, will be what capital and what operating costs we think we're gonna incur as a result of working through mitigation strategies in the business.
Oh, sorry.
Those mitigation strategies are
I thought the dollar was included.
No, no. No, no, I said excluded. Yeah.
Oh, excluded studies at Narrabri. Okay.
Yeah. You would think... You'd naturally think, Glyn, that doing those studies and then doing those work would lead to reductions in future years, not necessarily in 2024 or 2025.
That's right.
Okay.
Just paying the government for the Yeah,
For the ACCUs, the cost of ACCUs.
Do I at least get AUD 0.30 back?
Yeah, you'll get the tax result back, but, that is a small victory, would be how I'd describe that.
Hey, I'd take AUD 0.30 on the dollar.
Yeah, I think we will do. We will do.
Thank you, Mr. Positive.
Thanks again.
Thank you. Our next question is from Lachlan Shaw at UBS. Go ahead please, Lachlan.
Yeah, morning, Paul and Kevin. Thanks very much. Just a couple ones, might have been covered already. Sorry if I have, I was late to join the call. Just to come back to cost and labor. If you think about labor costs going forward, and I suppose EAs and pattern bargaining, I mean, how should we be thinking about how sticky some of those nominal costs are likely to be in the next, you know, couple of years?
Ian's here, and he's been in the thick of all that stuff, just negotiating our different EAs, which are all staggered across the year, renewals. Look, those costs are definitely gonna be sticky, right? I mean, once they're there, you agree on a three or four-year arrangement. When you do that in an inflationary backdrop, that generally yields increases which are higher than what you've seen in the past. It goes back to Glyn's question, just the cost period on period. When I refer back to this, that same shallow panel, on the northern side of the mains at Narrabri, I mean, that period was typified by wage adjustments in the order of 1% to 1.5% type per annum in that era, if I could refer to it. That is definitely not the era we're living in today.
I guess recently we've signed up all of our, I guess, EAs that were out there, so Maules, Tarrawonga, and also GBH, the trucking company we bought. I guess the increases we've seen there have taken us back to market effectively to get some equivalence with our labor force.
Okay. Are you able to give us an approximate % increase compared to the previous set of agreements, or not?
Yeah, I mean, you know, there's a range there, but nominally about a sort of a 5% increase, and then that ramps down over a period of time each year.
Okay, got it. That's helpful. Thank you. Then the second question, it may be having a look at just, it's obviously a dry out, and most people think that El Niño kind of kicks in the gear as we move through the year. You know, noting you've written up the Port of Newcastle, shipped 155 million odd tons, in FY 2022, 132 last year. When you look at industry like, and yourselves included, potentially, you know, what's the potential, do you think, for volumes to get back to those sorts of levels in the next 12 months or so?
Lachlan, I think you might have got those numbers quite, just around the wrong way, I think. The volumes were, the FY 2022.
Yeah, sorry, AUD 155 in FY 2022, AUD 132 in FY 2023. Yep.
Yeah, that's right. 132 this year, so down a lot. My understanding of that is that, you know, look, there is... I think as the weather conditions improve, and they have been decent for mining over the last quarter, no doubt that's positive. Whether or not we head into Everyone seems to be projecting sort of extremes going forward, whether or not that plays out that way, I don't know. The limiting factor I understand with our friends in the Hunter Valley has been just water management, you know, because everybody's carrying more water. You've got obviously regulations around discharges of water off-site, so everyone retains a hell of a lot of water.
In warmer weather, though, people will use more of that in-pit water that they've got, and same for us at Tara and Maules and so on. Look, I'm just thinking that constraint will unwind over the next six months as people consume water during the summer period and hopefully get back to a more normalized basis of production after that. 20 million tons year-on-year is actually quite a big reduction, and particularly at a time when, you know, the market is. Well, it's definitely going to be needing the high CV end of the market in particular, needing more of that coal as you hit trend into the northern winter again.
Yep. Yeah, okay, that makes sense. Makes sense. Thanks very much again.
Thank you, Paul. We don't have any further questions.
Well, thanks, everyone. That was good timing. If there's any further questions, please reach out to Kylie and the team, we'll look forward to catching up with you individually over the next little while. Of course, we'll have the full year results coming out on the 24th of August. Thanks very much. Thanks, operator. We'll hand back to you.
Thank you, Paul. Thank you. That does conclude our conference for today. Thank you for participating. You may now disconnect. Thank you.