...Welcome to the 2024 Annual General Meeting of Yancoal Australia. My name is Greg Fletcher. I'm Co-Vice Chairman and Independent Non-Executive Director of Yancoal, and Chairman of the Audit and Risk Committee. I'm pleased to chair today's meeting, and welcome those shareholders, interested parties, and staff in attendance. I begin today by acknowledging the Gadigal people of the Eora Nation, traditional custodians on the land on which we meet today, and pay my respect to elders, past and present. I extend that respect to any Aboriginal and Torres Strait Islander people here with us today. This year is the 20th anniversary of Yancoal. The company was established in 2004, ahead of Yanzhou, now Yankuang Energy, acquiring the Austar Coal Mine. Over the next 20 years, through prudent acquisition and asset expansions, Yancoal has grown to be a leading large-scale and low-cost coal producer.
The company holds interest in seven producing mines and operates two more on behalf of Yankuang Energy. Total annual production across the nine mines is around 70 million tons of raw coal and 55 million tons of saleable coal, making Yancoal the second largest coal producer in Australia. I've been informed by the share registry that a quorum is present, and I declare the annual general meeting open. Please let me introduce you to my fellow directors attending in person or via telephone conference today. The Chairman, Mr. Ru, Co-Vice Chairman, Ning Yue, Independent Director, Dr. Geoffrey Raby, Independent Director, Mrs. Debra Bakker, and express my apologies for Mr. Xiao, Mr. Huang, and Changyi Zhang, who aren't able to join us today. Mr. Ning Yue was appointed to the board last September. Ning Yue has extensive coal mining and management experience.
He joined Yankuang Energy over 20 years ago and has held several senior roles in directorships. Mrs. Debra Bakker was appointed to the board in March. Mrs. Bakker has experience encompassing precious metals, base metals, and critical minerals mining, as well as a background in corporate finance. She holds several directorships with companies in the mining sector or related industries. Also in attendance is Yancoal's Chief Executive Officer, to my left, David Moult, who will present the 2023 review. And I'd just like to acknowledge some of our executives in attendance, Laura Zhang, our Company Secretary, Kevin Su, our Chief Financial Officer, and Mark Stanton, head of our Marketing and Logistics. I will now commence today's proceedings. The commentary provided today includes forward-looking statements. The notices and disclaimers on slides three and four pertain to these topics.
This year, we have again encouraged shareholders to participate in the AGM via webcast. In addition, we have done our best to ensure that all shareholders and proxy holders will have the opportunity to participate in the meeting, including for those entitled, the ability to ask questions at the end of the formal proceedings. Every effort was made to ensure that proceedings proceed smoothly. Being a dual-listed company, the relevant documents have been disseminated on both the Australian Stock Exchange and the Stock Exchange of Hong Kong. Today's meeting can be observed online by the Computershare Virtual Meeting Services platform. This allows shareholders, proxy holders, and guests to observe the meeting virtually. In addition, shareholders and proxy holders can submit questions in real time.
If you have joined us through the Computershare Virtual Meeting Services platform, you can start submitting your written questions now, and we will address them later in the meeting. Please also note that your questions may be moderated or amalgamated if we receive multiple questions that deal with the same topic. I would now like to invite David Moult, our Chief Executive, to provide the 2023 review.
Thank you, Greg, and shareholders, members of board, ladies and gentlemen, good morning, and thank you for attending today's annual general meeting. At Yancoal, keeping our workforce safe is always our first consideration. Through constructive programs and the concerted effort of all our people, key, key safety metrics improved sharply mid-year and have remained low. A 35% reduction in the total recordable injury frequency rate is the result of our people embracing safety initiatives and working cohesively. Having established a new reference, we worked hard to consolidate and maintain this level by embedding gains made across all the mines. It was gratifying to see our leaders' and workforce efforts recognized through Yancoal being named as finalist in the 2023 Australian Workplace Health and Safety Awards. Our focus on sustainability, as with safety, is continual.
This year we moved beyond the environmental, social, and governance report published in past years. In April, we replaced it with our first sustainability report, which integrates previous disclosures and begins our transition to align with international sustainability disclosures. We will continue to keep abreast of the Australian Sustainability Reporting Standards as they develop, as well as the requirements of the ASX and Hong Kong Stock Exchange. Existing initiatives include upgrades to our mining, or our mining fleets, and actively exploring renewable energy opportunities. At the start of 2023, we said we needed to prioritize mine recovery plans and would recover and would increase our output in each successive quarter. We delivered on these targets, and in the fourth quarter, we produced at our highest rate in three years.
For 2023, we were pleased to report a AUD 7.8 billion in revenue, AUD 3.5 billion in operating EBITDA, AUD 1.8 billion in after-tax profit. We still held AUD 1.4 billion of cash at the end of December. Since the end of the last year, we have further increased our cash holding and utilized AUD 249 million to pay the AUD 0.325 per share, fully franked dividend the board declared in February. Combined with the AUD 0.37 per share interim dividend, the 2023 total dividend was AUD 0.695 per share, fully franked. This was a 50% payout ratio and a 14% yield on the AUD 4.95 year-end share price.
Turning to the coal markets, a slowing global economy and mild winter in the Northern Hemisphere diminished demand during 2023. A supply-side recovery compounded the downward pressure on coal indices, noticeably with Australian and Indonesian exports rising by 22% and 12% respectively. For the past year, we have considered the thermal coal markets that remain relatively balanced, but subject to the influence of short-term factors, such as seasonal demand drivers, and supply disruptions. This still remains our view. Coal indices are currently trending sideways under current market conditions, and price differentials between coal indices now better reflect the inherent value of different coal types. Total ROM coal, on a 100% basis, increased by 19% to just over 60 million tons as mine recovery plans took effect and productivity levels improved.
Our attributable saleable coal production increased 14% to 33.4 million tons. A fourth quarter annualized run rate of almost 39 million tons per annum demonstrated that most of our mines have recovered from the disruptions in prior periods. The 33.1 million tons of coal sales had a typical split between the thermal coal and metallurgical coal production we produce. Our cash operating costs were AUD 96 per ton. While we are focused on minimizing our cost, cash operating costs, inflationary factors, including labor, explosives, electricity, and spare parts incurred over recent years may only partially unwind, if at all. That said, we have reestablished our position at the low end of the operating cost curve, where we see our natural competitive advantage. Our implied operating cash margin for the year was AUD 115 per ton.
A notable achievement, given the operating conditions. Keeping costs under control during periods of elevated coal price is more challenging than when coal prices are low. Revenue and EBITDA were the second highest level in the past five years. This is a direct relationship between realized price, revenue, EBITDA, and the EBITDA margin. This relationship results from the Yancoal's high volume, low-cost production profile. The profit after tax and operating cash flow tend to replicate the revenue and EBITDA profiles. The step down in the operating cash flow incorporates a large one-off tax payment made in early 2023 on the record 2022 earnings. The positive aspect of paying cash tax is franked credit accumulation, which allowed Yancoal to pay fully franked dividends in recent periods. The board elected to prepay the last of our interest-bearing loans during the first half of 2023.
In total, we repaid more than $3 billion of loans since the start of 2021. The loan repayment saved us almost $300 million in financial costs, in finance costs last year. Yancoal returned cash to shareholders via fully franked dividends. Franking credits eliminate withholding tax from distributions to shareholders outside Australia. As mentioned earlier, the board allocated AUD 429 million to the 2023 final dividend. Combined with the AUD 489 million allocated to the interim dividend, this was a 50% payout ratio. We have distributed to shareholders AUD 2.5 billion of unfranked and AUD 1.8 billion of fully franked dividends since 2018. This year, we aim to produce at a level similar to the second half of 2023.
The 2024 guidance is for 35-39 million tons of attributable saleable production. Output will vary quarter to quarter due to mine plan sequences, long wall moves, and planned maintenance, and there will be a second half weighting to the production profile. We aim to bring the cash operating costs per ton down from the full year 2023 level, and are focused on output, given the direct relationship between the volumes we produce and the per ton cash operating costs we report. We have guided cash operating costs of AUD 89 per ton to AUD 95-AUD 97 per ton for the coming year.... Overall, it was another very strong performance by Yancoal in 2023. We finished the year with great operational momentum and a very strong financial position. That completes the 2023 review.
I would like to hand back to Greg Fletcher for the remainder of the meeting. Thanks, Greg.
Thanks, David. We will now move to the formal consideration of the business before the annual general meeting. Anyone attending in person today will have been issued an attendance card. Yellow indicates a non-voting shareholder, blue indicates a voting shareholder or proxy holder for the Yancoal Australia Annual General Meeting, and white indicates a non-voting visitor. Persons holding either a blue or yellow card are entitled to speak at this meeting. However, only those persons holding a blue card are entitled to vote at this meeting. If any shareholder here is eligible to vote and does not have a blue or yellow colored card, would you please raise your hand now?
For the benefit of people online, we're just addressing a matter in the room. Please give us one minute.
Resolutions will be decided by poll conducted at the end of the meeting.
The poll results will be available on the ASX and Hong Kong Stock Exchange websites later today. The following summary outlines the items of business for today's meeting. In accordance with the notice of annual general meeting for Yancoal Australia, which was published on our website and dispatched to shareholders. The notice of meeting contains the text of each resolution to be put to this meeting. With your approval, I now move that the notice of annual general meeting be taken as read, and that the text of each resolution be taken as read. All those in favor, please raise your blue attendance card. All those against, please raise your blue attendance card. The proposal is passed and notice is taken to be read. Thank you. Item one is the receipt and consideration of the company's financial report for the year ended 31 December 2023.
I will take that report as read. A representative of ShineWing has reported Yancoal's auditor is present and available to answer any specific questions about the preparation and content of the auditor's report. Item two is the election of and re-election of directors. Two individuals are nominated to be elected. One is an executive director and one as an independent non-executive director. Two existing directors are nominated to be re-elected as independent non-executive directors. The biographical details for all four directors are contained in the explanatory notes to the notice of meeting. Item three is the adoption of the remuneration report. The remuneration report is contained within the 2023 annual report. I will take the report as read. This vote is advisory only and not binding on the company or its directors. Voting exclusions apply to this resolution, as they outlined in the notice of meeting.
Item 4 is the approval of a termination benefit payment. The STIP payment is allocated to Mr. Ning Zhang, following his decision to resign as Executive Director, Co-Vice Chairman of the Board and Chair of the Executive Committee. Voting exclusions apply to this resolution, as outlined in the notice of meeting. Item 5 is the approval of the issue of securities under the equity incentive plan. In the absence of such an approval, future issues of securities under the plan may still be made, but must be counted towards the company's capacity to issue equity securities under the 15% limit under the ASX Listing Rule 7.1 at the time of issue. Shareholder approval will be effective for three years, provided there are no material amendments to the plan. Voting exclusions apply to this resolution, as outlined in the notice of meeting.
Item six is the issue of STIP rights to the Co-Vice Chairman under the Equity Incentive Plan. Approval is sought for the issue of up to 16,541 STIP rights to Mr. Ning Yue, the Co-Vice Chairman and Executive Director of the company, under the company's Equity Incentive Plan, on the terms set out in the explanatory notes to the notice of meeting. Voting exclusions apply to this resolution, as outlined in the notice of meeting. Item seven is the reappointment of the auditor and authorization to fix the auditor's remuneration. At each annual general meeting, the company must appoint an auditor to hold office from the conclusion of that meeting until the next annual general meeting. It provides the board the authority to fix the auditor's remuneration for the year ended 31 December 2024.
Item 8 to 10 are general mandates related to issuing and repurchasing shares. Unless the company obtains these general mandates, its ability to exercise its right to issue shares without obtaining shareholder approval is limited, and the proposed repurchase mandate gives the company the flexibility to repurchase the shares if and when appropriate. The passing of resolution 10 is subject to the passing of resolutions numbered 8 and 9. The reason for this resolution is to ensure flexibility to allot and issue more shares if the proposed repurchase mandate is exercised. Yancoal is dual listed on the ASX and Stock Exchange of Hong Kong. Unlike ASX listing rules, the Hong Kong listing rules require companies to seek approval for general mandates to issue and repurchase shares at each AGM. The company's existing mandates were last approved by shareholders at the company's end 2023 AGM.
Unless otherwise renewed, the existing mandates will lapse at the conclusion of this year's AGM. Yancoal has sought the maximum mandate permissible under the Hong Kong listing rules. However, it still may not exceed the limit by the ASX listing rules in relation to share issuance. Both the ASX and Stock Exchange of Hong Kong set out clear limits and parameters on share issuances. The company seeks the full flexibility afforded under these limits and parameters in order to maximize its capacity to benefit shareholders should suitable opportunities arise. Item 11 is the reinsertion of a proportional takeover provision. The proportional takeover provisions exist in the form of Rule Six of the Constitution of the company, and is sought to be reinserted for a further period of three years, commencing from the date of this AGM.
The board's recommendations for all resolutions are set out in the explanatory notes to the notice of meeting. I'm now going to cast the votes for the proxies I hold on all resolutions, in accordance with the directions provided by shareholders or otherwise, as set out in the notice of meeting. As mentioned earlier, a poll will be conducted for these resolutions at the end of the meeting. The proxy votes received before the meeting have been counted. The totals are shown on the slide. We will now take questions from shareholders as any matters relevant to the business of the meeting. We will begin with questions submitted in writing, before moving on to questions from shareholders in the room, and then to questions submitted by the webcast. Could I request any speakers from the floor? Please raise their hand.
Someone will bring a microphone to you, so you may state your name before speaking. If you are a proxyholder or representative of a corporate proxy, please also state the name of the shareholder you are representing. Questions received by the webcast platform may be consolidated or summarized to facilitate the session.
Beginning with questions received online. Sorry, not online. In writing, ahead of the meeting. The first question combines several similar questions. It relates to the company's constitution, directs 50% of net profits or net cash flow to be paid as dividends, subject to board's discretion. Given the large amount of cash currently accumulating, what is the intended use for that cash surplus, given the debt reduction already completed? And specifically, has the company given consideration to conducting either a buyback or implementing a dividend reinvestment plan?
Thanks, thanks, shareholders, and thanks, Brendan.
The board routinely considers capital management initiatives. When allocating capital resources, several factors are considered, including the fiscal position, growth opportunities, company constitution, and the equity market elements, such as the free float and daily trading volumes. Until now, debt reduction and dividends have been the preferred mechanisms. Three most recent dividends have been fully franked. The franking is advantageous for domestic and international shareholders. So currently, there is no plans to implement a buyback or dividend reinvestment plan, but the company reserves the right to consider doing so at any time.
The next question comes through: Could you comment on the new directors, Mr. Ning Yue and Ms. Debra Bakker, and the capabilities they bring to the company?
Thank you. The addition of Ning Yue and Debra Bakker enhances the board's collective skill set.
As an executive director and chair of the executive committee, Ning Yue provides a crucial function in the running of the company and its operations. His mining engineering qualification and more than 20 years of experience overseeing coal mining operations, makes him extremely well suited to carry out this role. Debra Bakker has a diverse skill set that is complementary to those of the other non-executive directors. Debra Bakker has, over the years, held prominent roles in the banking and finance sectors, both in Australia and overseas. In recent years, she has excelled as a director, serving on the board of several companies in the mining and related industries. Yancoal is fortunate to have both these people join the existing board members.
Next question coming through in writing ahead of the meeting: What is being done to ecologically rehabilitate the mine sites to promote native regeneration?
Thanks, Brendan.
At Yancoal, we're committed to the responsible practice of rehabilitation, and recognizing that mining operations temporarily disrupt the natural landscape, we seek to ensure that these disturbances are managed and rehabilitated efficiently and effectively. Recently, the Taskforce on Nature-related Financial Disclosures introduced a framework designed to guide organizations in addressing evolving nature-related risks and opportunities. This framework offers guidance and recommendations on disclosing nature-related impacts, dependencies, risks, and opportunities, catering to various stakeholders. While the recommendations remain voluntary for Australian entities at this time, we have reviewed the proposed disclosure metrics for the mining sector against our existing measurement practices. In 2023, Yancoal initiated a comprehensive assessment across four of its mining sites to explore the potential generation of Australian Carbon Credit Units through the environmental planting methodology under the Australian Government's Emissions Reduction Fund.
Thank you. Another question on a similar topic: standing water and contaminated water is an issue in our climate. What processes are being looked at to reintroduce water after purification?
Again, we recognize the significance of water as a valuable and shared resource. Our water management practices adhere to stringent regulations and compliance with our licensing conditions. We have comprehensive surface and underground water management plans, and these plans govern the daily interactions between our operations and water resources. Water management at Yancoal is subject to both Commonwealth and state legislation. The Yancoal Water Accounting and Reporting Standard was developed in accordance with the Minerals Council of Australia Water Accounting Framework. The MCA framework provides a consistent approach for water accounting and reporting across our owned and managed operations, supporting compliance with our regulatory obligations. At Yancoal, we recycle water on site through the reticulation of stored mine water to reduce the demand for use on other input sources.
During 2023, we recycled 9,298 megaliters of water, on site, a 4% increase compared to 2022. All water interaction is licensed and managed in accordance with the water management regime within the jurisdictions within the Yancoal operations. Mount Thorley Warkworth, Moolarben, Donaldson, and Premier have discharge licenses with quality and volumetric limits.
Thank you. Could you please comment as to whether Yancoal will largely stick to its knitting, rather than embark on even larger renewable energy projects than considered for the Stratford Mine?
Regarding the concept of a renewable energy hub at Stratford mine site, it's still the subject of a study and internal and external approval processes. Yancoal is evaluating the merits of the project in the context of its obligations for the site. The concept revolves around assessing how the company might best manage and utilize the site post-mining, given the specific aspects and topography of that site. The company's primary business remains mining.
Thank you. And one more question submitted in writing: Can the chairman indicate the extent that Yancoal is seeking to diversify into minerals in Australia?
Yancoal's coal mines have finite reserves and resources. Most of the mines exhaust the reserves over the next 15 or maybe 20 years, at current production rates and economic projections. Accordingly, the board needs to consider pathways that could carry the company beyond this horizon. The board also needs to consider the outlook for various commodities and the Australian government policies regarding foreign investments into critical minerals, mining, and processing as it contemplates the pathways ahead. Having built itself up over the past 20 years through the acquisition, optimization, and expansion of coal mines in Australia, the company clearly has core competencies it can leverage in assets of this type.
That said, the company's three large, low-cost mines are some of the best thermal coal mines in Australia, and we are mindful that any new assets introduced to the portfolio need to complement the existing assets. We have said we are open to diversification beyond coal, but we'll be astute regarding growth opportunities we might pursue, as we have demonstrated in the past.
Thank you. That concludes the questions received in writing ahead of the meeting. We'll now proceed to questions from people in the room. If you raise your hand, someone will bring you a microphone, and we will ask that you introduce yourself and then proceed with the question.
My name is Bob Anderson, and my question is in relation to the items heard in the election variables. The United Nations has said very clearly that there must be no more new coal mines because of the world's climate crisis. It's very obvious with increased frequency of severe floods and fires in Australia and many other countries.... The Intergovernmental Panel on Cl imate Change says we are now at nearly 1.5 degrees of warming, on track for 3 degrees by century's end. Terrible consequences predicted for humanity, as well as species. From Yancoal's own records, of its proposed new coal mine expansions in New South Wales, Yancoal's HVO mine expansion will account for 1,165 million tonnes of greenhouse emissions over the life of the expansion.
That's 86% of New South Wales' known emissions from currently known emissions from proposed coal mine expansions. HVO's and Warkworth's proposed expansions added together account for 90% of known emissions from proposed New South Wales coal mine expansions. So my question to the directors, and indeed to all of you, is: What am I going to tell my children and grandchildren? What will you tell your offspring about this company's massive contribution to catastrophic global warming, ignoring reputable international scientific advice?
Thank you, Mr. Anderson. You know, as a shareholder, all shareholders have the option to invest in a coal mine or coal company, and we play an important role for the Asian region to provide energy source for people throughout the region. There is a demand-supply equation, and we are meeting the requirements of a lot of people in this region and their livelihood. So coal has a long future. And as shareholders, you have the option to invest in a coal operation or coal entity, such as Yancoal, or not invest. So coal will be around for a long time. And I think we have an obligation to our shareholders to maximize the returns to those shareholders. And I don't have a problem with providing energy to people in the Asian region so that they have better quality lives.
Having been in China and worked with people, that many, when they were growing up, were working off oil lamps for study. That's no longer the case, and I think it's part of, it's coal. So I think coal has had, and will have, an important role in the future. And I think all directors, both new and past, are very mindful of that, and the important role that coal plays in not only Australia, but in this region and internationally. So we might have a different view.
Thank you. The next question from the floor. Nancy? Excuse me, Nancy.
... My name is John Epstein. So I wouldn't mind making a minor comment on what the gentleman spoke about. So I asked him, if Australia stops exporting coal, coal is a very common resource around the world, and Russians, they don't care. They'll take our market, given this is Russia.
Yep.
So I think people need to realize that if they're going to do it... Oh, sorry. If they're going to complain, they need to complain and be effective in their complaints and not penalize us, Australia, Australian shareholders and Australian workers. My question relates to the takeover that was put in, I think it was last year, for around AUD 5.05 a share, which way undervalues the company. So I just want to make sure I've got Yancoal shares, and I don't want to, I still think it's a rip-off, quite honest. I don't want to be ripped off, and if I am going to be ripped off, I'd like to be given plenty of notice so I can sell my shares. And I'm sure all these gentlemen have got that way. Thank you.
Well, all I can say. It was an independent board committee formed to opine on that, and we probably had very similar views to yourself. No, no, but we are very mindful of shareholders, and if we had similar offers, we'd, we're very mindful that shareholders deserve the best return. So-
But the company, the holding company, you know, the major shareholder, is in a position of strength, basically, aren't they? So they can kind of force.... They've got levers where they can force a result, particularly now. I think they're in or out of it now. You know, so that is a concern for the future of the company, in my view, anyway, and it's about trust and trusting. I noticed, you know, the head of the company, you know, they're not here. So the chairman's not here. So, you know, it's a question I would have liked them to answer.
You know, what I can say is, the Chinese majority shareholder has been very, very supportive of this company through bad times. And if it wasn't for our majority shareholder, we wouldn't be here today. You know, as we reflect back to 2015, they invested in the expansion of Moolarben, and in 2017, they invested in the C&A transaction. And today, all shareholders reaping the benefit there. So they have the best interest of Yancoal, similar to us as directors, but also you guys as shareholders, that they want the same things that you want. They want a very successful company, profitable company, one where the share price is increasing. So they have the same requirements. And if they did provide an offer, we'd consider that, but have not heard a thing and don't anticipate.
Thank you.
Dr. Ben Levingston, first of all, thank you for your outstanding performance to shareholders. I'm very happy by the generous dividend and frankly, couldn't ask for more. My concern is that this 50% provision and dividend would that be still maintained if Yancoal were to enter into an acquisition trail? As I understand, there are a lot of assets under Mitsui and Anglo American that might end up for sale. If you were to acquire any of them, you'd still be able to maintain your generous dividend and franking. Other point I would like to make about this point. It should be noted that Yancoal reduced its pollution in Asia, because you provide high quality, energy-rich coal. So in places like China and Japan, without Yancoal and Whitehaven Coal, they would end up reducing a lot dirtier coal.
That's something that is not really mentioned.
Thank you very much for your question. Each six months, we sit down as a board and review the dividend, and we've been consistent in terms of our 50% payout. As David pointed out, you know, I think last year the yield was 14%. Come August, we'll again look at the dividend, but we weigh up, you know, other opportunities. And it's really around the whole capital management. So it will be something we'll be addressing again in August, as we will next February. And if there's other areas that we should be providing that cash, we'll look at that as a board. But I can also say that our majority shareholder, Yankuang Energy, loves their dividend and loves the dividend to be maximized.
So you've got a big driver in probably the two major shareholders, being Cinda and Yankuang Energy, like their dividends to be at and to be consistent around that 50%.
Thank you very much for taking my question. And first of all, first of all, I want to, kind, just say, you know, you, you management and the company did a great job, and, you probably, compare your peers, you know, you are the only one actually debt-free and have so much, cash flow. So I, I want to ask two questions, and the first one is, on page 56, on the- regarding the, CapEx cycle. Do you actually, most other coal company actually have to increase their expenditure, but I look at, this year, you know, the first, you actually, the, the CapEx, commitment is actually lower than last year.
So, I just want to ask, you know, how you actually decide what kind of the time frame, the trend of CapEx? Are you going to decide every year, or you have some sort of three or five years plan? And if you want to spend that money, and can you give us a bit of detail, you know, where are you going to spend that money? And my second question is about, again, about dividend. I look at it, you know, you previously you paid an even higher, like 68%, even a hundred eight percent. So, now you have a lot of cash, and the CapEx is not very high.
So, can you give us a bit of color, like, you know, I, I know this is a good idea to conserve money for bad time, and future or... You know? But anyway, I just want to say, even you pay 50%, you are still the highest dividend paying company, you know, in, in among your peers. But I just want to know, you know, how you consider, give that kind of consider- consideration to determine what kind of payout ratio on, on a yearly basis?
... Thank you very much.
To do the CapEx?
I'll do that. Thanks for the question, and capital is always an interesting question, but I think if you think back a few years when we acquired our major assets, and that's Mount Thorley Warkworth and Hunter Valley Operations, we bought mines from Coal & Allied, Rio Tinto. And at that time, Rio Tinto had spent no money on them for many years. So we put a capital program in place at the time to lift those Tier One assets up and keep them as Tier One assets. So we've been through a bit of a hump, where we've been heavily investing in those two operations to get their equipment back up to the level that they should be. Because Tier One assets don't stay as Tier One assets unless you look after them.
So that's why we've sort of gone up a hump, and we'll be on a hump for maybe this year and coming up a bit next year. But that'll get us with new, efficient, low-cost equipment operating in those mines, and we'll lower our costs as well. And capital is actually done on a life of mine planning process, actually. But we focus on the life of mine, then we bring it back to five years, and then we look at each year independently and decide where we should be investing that cash. And just remember, when we put capital into something, we're always looking for it to return something to us. Otherwise, there's no point in investing if we don't get a return.
That was a capital one. Do you want me to take the dividend one, or, Greg, you want to do it?
Oh.
Greg, earlier on, dividends looked at each six months, and yes, you're quite right. We had an exceptional year a couple of years ago, and we had an exceptional dividend payout at that time. But when Kevin, my CFO, and I talk to investors in lots of places, we always focus on the fact that we have a policy and our intention is to stick to that policy. And that policy is 50% of free cash flow, or 50% of NPAT, whichever is the greater. Yes, we're carrying a bit of cash there at the moment, but we think that keeps us in a strong position.
And taking the earlier point about acquisitions, coal mining, every coal mine has a finite life, so our intention is to make sure we keep Yancoal strong. So we'll look for opportunities, and we need to be in a strong position to take advantage of those opportunities as well. But at the end of the day, acquiring assets means we only do it if it makes sense to shareholders. We don't buy assets for the sake of buying assets. What we do is we acquire assets that add value to the company, which adds value to shareholders, which hopefully gives you better returns into the future.
So from a different point of view, directors will consider it every six months, but at the moment, we will look at trying to maintain our policy as well as we can. And the cash we've got at the moment puts us in a strong position, with no debt, to secure Yancoal into the future.
Thank you so much for your education. I just want a bit more education also. You know, I mean, it's very profitable too, last year, especially, you know, the thermal coal, and our company is still doing very well. But unfortunately, you know, all the met coal company in Australia, they, they couldn't even pay dividend. So I know the met coal is a very small portion of your production. Would you, could you please kind of educate us why that is the reason? Thank you very much.
I don't... I'm not sure. Well, I'll say this: I can only talk about Yancoal, and if you look at Yancoal, our objective is always to be the lowest cost producer. And we track our performance against all our peers, and that's against thermal coal mining companies and met coal mining companies. And I can tell you, we're at the bottom of that cost curve, and that's what we've always aimed to be, because we have a strong opinion that if we can keep ourselves at the bottom of the cost curve, no matter what the market does, and we have no control over the market, we'll always be in a strong place.
All I can say about some of our other peers, and I don't know which ones you're referring to, but they, they're carrying higher cost base than we are. So therefore, when they get movements in, even whether it's met coal or thermal coal price, they get margin squeeze. But our Yancoal's objective is always to be that lowest cost producer, so we can. And I look to Mark, my guy here on the front, who hasn't had a question today, but on the market, we always get very high prices, but unfortunately, occasionally we don't. So we just have to be in a strong position so we can survive that cyclic nature of our coal market.
Thank you. I'm Beverley Smiles. I'm an appointee of shareholder Martin David Curzon. My question is, the Moolarben Mine has capacity to produce more ROM coal under current approvals. So why are you pursuing the Open Cut Three expansion project when there are significant biodiversity impacts, especially on critical koala habitat? This is raising public and government agency concern.
Yeah, thank you for your question. Moolarben actually works to its approval levels, and that's what we're operating at. There are areas of coal that we examine all the time, and that will be subject to state and federal approvals. And those state and federal approvals, as you're aware, are very detailed, and they will look at us very closely before we get any approval for any expansion. But we're not actually increasing the output in Moolarben. We're just looking at other coal that is within our mining lease that we already have. And all those points you raised, and all very good points, I add that, will be taken account of by our state regulators and our federal regulators.
Of course, the federal regulators have just been producing, and it was in parliament yesterday, actually, a new EPA federally as well. So we are very closely regulated, and I can guarantee you we'll, our approvals will be going through the normal approval process, and we may get approval, we may not get approval. That, that'll be the result of the state government and the federal government.
Thank you. I have another question, if I may. So what risk assessment are you undertaking of the increasing impacts on production and transport of coal from more intense extreme weather events? Mines are being impacted more regularly by floods and bushfire, workforce cut off by flooded vantage roads, rail lines buckling in extreme heat and taking a long time to repair. Coal loader at Newcastle is knocked over during an extreme storm event. These types of events will be intensifying, so how are you considering their impact on Yancoal operations into the future? Thank you.
Again, thank you for the question. If I can focus on our bit that we control, which are basically the mine sites. What we've done over the last 18 months is following risk assessments and looking at the impact of the rains we've had over the last 18 months, we have worked through a process of improving our infrastructure, improving the capacity we have for managing water, holding more storage on site so that when we do get rain events, we've got storage for holding water, and we can then utilize that water at times when we don't have much rain. That infrastructure is all in place now.
We've spent a lot of money in the last 12 months doing that work, and that will put the operations in a place that will manage the rain side of it. On the heat side, from a mine point of view, we're very conscious of it, and majority of our equipment these days is air-conditioned, and we are looking at making sure that we take on board potential higher temperatures as well. On the rail lines, I don't have control over them at all. You know, I don't even have control over the trains. So the rail operators will be doing the work on focusing on rail and the impacts of rain, adverse weather conditions on the rail.
And of course, at the port, it was quite an unusual occurrence, the one at NCIG, when that ship loader got impacted. And it was a direction and a very unusual wind that caused it. But that has been taken up, and we know that from talking to the port managers that they have recognized what the failing was on that. There were other loaders actually standing that didn't get impacted. And again, I'm sure they have taken that into account in the redesign now of the.
If I may, like, there's massive coal stockpiles at the Moolarben mine at the moment. The Sandy Hollow railway line seems to be under repair more often than it's operating. And, and I'm just wondering, you know, you know, at some stage, there's gonna be a problem for your operations. That's why I'm asking what risk management are you-
Well-
considering into the future?
Yeah. You're quite right. We've had very big stockpiles, and we have been very conscious of it, and some directors have been asking me lots of questions about them as well. But what caused that was that derailment in December, basically. And if you remember, there was a... It wasn't one of our trains actually coming to one of our mines. It was going to one of the other mines in that area. And that caused a very long delay while the rail line was repaired and everything else. And unfortunately, Moolarben at that stage was going at full capacity, therefore, we were producing all the coal, and we ended up with big stockpiles. What we've done this year is we've still got big stockpiles, but they're getting smaller.
We're holding some of the coal in the mine itself, and we've been managing our coal preparation plants in a way that allowed us, through increasing capacity on the rail system, when we have had increased capacity, we've actually been running at rates a lot higher than we actually need to get those stockpiles down. So we're very conscious of it. And yes, I'm sure you can see the stockpiles from where you are, but we have got plans in place to reduce them. Sorry?
Operation stockpiles.
Yeah. We're down, we're getting back to our normal operating levels, and hopefully, if every part of that coal chain works, then we'll be able to manage them very, very comfortably.
... Is there any further questions from the floor before we revert to the questions online? Moving on to the questions received through the online webcast platform. Did any of the five main proxy advisors, ACSI, Ownership Matters, Glass Lewis, ISS, and ASA, cover Yancoal? And did any of them recommend a vote against any of today's resolutions?
Thank you. Yancoal subscribed to Glass Lewis and received a copy of the proxy paper. The paper supported all items on the agenda, other than items 8 and 10, advocating lower maximum limits and caps on discount rates applied. As noted during my earlier comments, both the ASX and Stock Exchange of Hong Kong set out clear limits and parameters on share issuances. The company seeks the full flexibility afforded under these limits and parameters in order to maximize its capacity to benefit shareholders should suitable opportunities arise. Perhaps it's also worth clarifying that Yancoal must adhere to the listing rules for both markets. It cannot exceed the limit in one market, even if a higher limit applies in the other market.
Although item eight requests a mandate to issue up to 20% of the issued shares, the company may not exceed the ASX limit of 15%.
That next question coming from the webcast platform: Do you have thoughts as to whether Yancoal will soon have a free float of 30% or more, allowing Yancoal to qualify for possible acceptance into the ASX 300 index?
Since about 2019, I forget whether our free float was about 15%, thereabouts. It has improved a lot since then. I think with Glencore selling their shares in 2022, that also helped. So I think today, our, our free float's 28%, circa. To get to the ASX 200, we need a 30% free float, so we're 2% away. I'm hopeful that we can get there.
Well, that'll increase the share price. Sorry.
For people online, there's a follow-up question from the floor on this topic.
Sorry. So if you get to the 30% of that, and the top 200, that means it's exchange-traded funds and all the wonderful things happen, that should be a major boost to the share price. Is that the way you see it?
I hope you're right. But sure.
I think.
Returning to the questions on the webcast. In 2017, we paid Rio Tinto AUD 3 billion in cash for its Mount Thorley, Warkworth, and HVO mines. Over the seven years that we've owned these assets, have they delivered operating profits that exceed AUD 3 billion? And which of these three operations has been the best purchase?
I think they're all Tier Ones, basically. And they've been a great buy, and they've probably paid themselves time many times over. So I wouldn't say one's better than the other. They're all, they're all low cost, and they're all Tier One mines, so a great acquisition in my view.
Moving on to the next question. The New South Wales government is increasing coal royalties by 2.6% to 10.8% on July 1 this year. How much do we estimate this increase is going to cost us in 2024, 2025? Didn't the New South Wales Labor Party promise not to do this when in opposition?
I'll answer the second bit of the question while I think about the first bit, and I'm not quite sure, Kevin, I don't want you on my mind on the number, but, but yeah, I think, I think you're right. I think the Labor Party did say when they were in opposition, they wouldn't do it. But like every party, when they get into government, they find out that maybe the bank hasn't got as much money in it as they need. And they've seen what happened in Queensland with the increase in royalties, and they took a decision that they were going to do it. But I didn't agree with it. However, the way the New South Wales government did it was far better than the Queensland government.
At least they talked to us about it, and they didn't follow that process that they did in Queensland, where they have an ever-increasing percentage, up to 40%, above a certain coal price. At least they've stayed with a fixed rate. So I didn't support it, but I think it was managed better in New South Wales than it was in Queensland. And I'm not quite sure how much it's going to impact us, but it will impact us. It's a couple of percent on . . . Because it's not a straightforward calculation, importantly. It's not just on the revenue, it's on revenue and other sort of deductions. So it's not a straightforward number, but yeah, it will have an impact. But I wouldn't suggest it is too material.
We have a question relating to the appointment of Ms. Debra Bakker. Could the Chair comment on the recruitment process that led to her appointment to the board? Was a headhunter involved? Did the full board interview Ms. Bakker, and did the interview—did they interview other candidates? Did Debra know any of our directors before engaging with the recruitment process?
So Debra Bakker didn't know anybody from Yancoal or any directors. So that's probably the first point. Second point, we did have a headhunter who identified, I think, about 60 candidates. And we went through a process of interviews and brought that down to a shortlist, I think it was 5 candidates. And they were interviewed by a number of the directors. And Debra ended up meeting a number of the, not all directors, but the chairman, two of our other Chinese directors, Ning Yue, and myself as part of the process. So it was a process that probably went for, oh, I'd say three months, thereabout, and it was very thorough. We, you know, reference checks, et cetera.
And as I said before, I think we're very lucky to have a person of Debra's experience and capabilities that really expands the skill set that we have on the board. There is a question in relation to Dr. Raby, who has been an Australian ambassador and has been on the board of Yancoal for 12 years, thereabouts. And I can confirm that Dr. Raby is very comfortable with continuing his role on the board. And there was part of the question referring, has he been pressured by people in government at all? And I can assure you that Dr. Raby is, has been and continues to be very independent. Has actively contributed over the last 12 years and continues to contribute. And again, we're very fortunate to have Dr.
Raby on the board. He's currently in China and can't be with us today, but he brings a very strong skill set, including a great understanding of China. A very good views on strategy as well, as well as his probably his economic background brings that commercial aspect as well. So a man of great integrity, and there has been no pressure, and Dr. Raby is going to continue to contribute to Yancoal and its future success.
We've now addressed all the questions that are visible on the webcast, webcast platform. I'll hand back for the remainder of the meeting.
Thank you. I thank you for all those questions. In accordance with rule 7.7D1 of the company's constitution, Chairman of the meeting, I request that each of the resolutions is decided by poll and declare voting on all resolutions is now open. The results of the polls will be calculated with the assistance of Computershare, acting as the scrutineer. If you are entitled to vote, the reverse of your blue admission card is your voting paper and instructions. Please record your vote for each poll by placing a mark in the appropriate for or against box on each card you are holding. The sum of the votes cast for and against each resolution must not exceed your voting entitlement. If you are a proxyholder, you should have a card and a summary of votes for each shareholder that you are representing as their proxy.
If a proxyholder has been directed to vote in a particular manner, then the proxyholder will be deemed to have voted per those directions by completing the voting card. In respect of any open votes by a proxyholder may be entitled to cast, you need to mark a box beside the motion to indicate how you wish to cast your open votes. If you have a query concerning any of the polls, please raise your hand and a member from Computershare will assist you.
For the benefit of people observing on the webcast, we're undertaking the voting process now. People are filling in documents. The documents are being collected.
... Well done. Thank you. I now declare the poll closed. Our Computershare has now collected the voting cards. The results of the poll will not be known until the meeting has closed. The results of the poll will be announced to the ASX and Hong Kong exchanges later today. Having completed all items on the agenda, I will now announce the formal proceedings of today's annual general meeting closed. I would just like to thank those in attendance today and call an end to today's annual general meeting for Yancoal Australia Limited. But for those in attendance, we have our executive team here, so please feel free to, circulate, ask questions, and, but thank you very much for your attendance.