Bathurst Resources Limited (BRL) Earnings Call Transcript & Summary

Hi. I'm Richard Tacon, CEO of Bathurst Resources. Welcome to our webinar to go through the quarter 1 of FY '25. I will just share the screen, and we can go through the presentation. As usual -- look, if there's any questions, send them through to the various e-mail addresses that are on our website, and we'll attempt to get those answers straight after. Again, thanks very much for attending. Usual disclosures. We have had an update to the resource and reserves which was put out on the 31st of October. So any reference to resource and reserves will be related to that recent announcement. Not a lot has changed in our shareholding base, in particular, since the last time I spoke to you. Share price has been sort of bouncing between $0.70 to $0.80. And again, we've got about the same amount of cash in the bank. So just under $140 million in the bank, and still no debt, and we'll sort of talk about that more as we go through. For anyone who's not familiar with Bathurst, we are a coal mining operator. We're based -- all of their operations are in New Zealand, but we've also got 2 projects in Canada. So we've got 4 operating lines, 2 in the North Island, Maramarua, Rotowaro, principally supplying a thermal coal to a steelmaking process. The only steel mill in New Zealand, produces about 60-odd percent of New Zealand's cladding and structural steel. Stockton is our export mine on the West Coast of the South Island, produces about 1.2 million tonnes of high-quality coking coal for the export market. We've got offices in Wellington and Christchurch. We've got a distribution route in Timaru and our fourth operating mine, 100% owned by Bathurst is Takitimu in the Deep South, which produces coal for processing, value-add to New Zealand prime production. We're a medium-sized business within New Zealand. We employ directly about 675 people. Quite a bit of money going out of those operations into the particularly regional areas, West Coast, Center of the North Island and the Deep South, the southern area. We're in a growth phase at the present time in terms of we've got additional cutbacks going on at Rotowaro, Maramarua and at Stockton. So our staff numbers are elevated on where they were 12 months ago. So just looking at the results, we'll just go across each of the sort of major operating areas, export, which is centered on obviously the Stockton mine. Key thing here is we're moving a little more dirt than we were a quarter ago. And -- sorry. No. I apologize. I'm not sharing the screen. I've just been informed, apologies for that. So let me go back to the beginning, just -- I'll have to fix that up. Missed the one important step. So the slides I've been dealing with so far. I'll just flip through these. So again, the corporate structure operations in New Zealand with the North Island and South Island, and our contribution to New Zealand, we have 675 people and quite a considerable amount of money flowing into the New Zealand economy. Right. So keep -- try to keep us back on track. Yes. So at Stockton, we have been moving additional dirt from where we were 12 months ago, a little bit in front of where we anticipated it would be. Again, same as with production and sales, we're pretty much equal to sales, a little bit ahead in production but obviously quite a way behind where we were for the same time last year, and that's all to do with logistics. So the tunnel collapse, which again, we've got another slide as we move further forward occurred in mid-June earlier this year. We've been trucking coal around that from -- directly from the mine to another rail loadout and then carrying on with rail from that point, which is called Ikamatua through to Littleton. In terms of revenue, obviously, there's a couple of impacts on that with the reduced volume, but also we've had reduced pricing from where we were last year. With Rotowaro, considerably more dirt we removed, well over 1 million BCM more for the quarter from where we were 12 months ago, and that's really in relation to the Waipuna West extension cutback. Sales are a little bit in front and by that EBITDA is a little bit in front as well. With Maramarua, again, pretty much where we were 12 months ago. We are a little bit behind what we were forecasting, mainly due to the slow work during the winter time getting into the M1 extension. So that will be where the major coal comes over the next couple or 3 years. Sales are pretty much in line and EBITDA is pretty much in line. Takitimu, we've actually moved more dirt in the last quarter than we did 12 months ago. Sales were up, and consequently, revenue and EBITDA is quite considerably up from where we were, again, anticipating, but about the same level as we were last year. So in terms of revenue, we're slightly behind, again, mainly due to the impact of the Tawhai Tunnel on the export. EBITDA is, again, slightly in front of where we anticipate it being in terms of forecast, but quite a way behind where we were last year, really just around the -- again, the impact of the tunnel, the additional costs. So in terms of Bathurst, we've got NZD 140 million in the bank. We've got 0 debt on apart from about $1.2 million in lease finance. And we're anticipating we're going to make somewhere between $55 million and $65 million EBITDA for -- at Bathurst level for FY '25. Again, that's down on where we were last year. We ended up with $91 million for FY '24. Most of it is in the export business. Again, the double impact of the export pricing coming off from what were record highs in 2023, '24, down to probably not as far dip as we've been. We've got down to $180, we're back up to around $200 now, and then increases in overheads at BT and BRL level, mainly around upskilling and upsizing to meet the growth aspirations of the company, and we'll talk about that when we get into the projects. And for Bathurst, obviously, we've got -- this is going to be the first full year with the Telkwa project, which we took over in January earlier this year. So just looking at the tunnel. Again, the accident occurred on the 15th of June, we put it in a trucking plan immediately. We have trucked a considerable amount of coal around this issue. It's in Reefton, it's around about 1.5 hours drive from the mine. And then the rail load out we're using is about 15 minutes past that again. So it's about a 4-hour round trip for the trucks, and we do really appreciate the patience of our local communities that we're driving these trucks through. This is not the usual way we'd like to operate, but normally, all of our coal goes by rail. And obviously, there's additional costs in that as well, but there's also just additional disruption. So again, we thank our local communities. So the work has been progressing well in terms of the recovery of the threefold areas within the tunnel. It's an old tunnel. It was built in the late 1800s. They've recovered one of the folds and they're working their way through the second one. Really, the target now is to be back into full railing by the end of January, and we've got the shipping plan aligned around that reopening. We'll also be going to 7-day logistics from that point, whereas the present time, we only do 5-day logistics of 1 train on Saturday. Export market. I mean, it's come off quite away from where we were back in '23, '24. We're still not at sort of record low levels, though from where we were, say, 10 years ago. We got down to below $180. We hedge around about 35% of our overall production. And so we're actually locking in reasonable hedges even now up to 12 months out at around USD 200 to USD 250 range. So today, we're sitting at about USD 204 a tonne at around [ $59 to $60. ]So still good revenues flowing from the sales. And obviously, we are going to be behind for the first 6 months but we're looking to catch up most of that tonnage in the next 6 months. So looking forward, New Zealand's sort of political landscape changed quite a bit. About 12 months ago, we had a change of government to a coalition between National Act and New Zealand First. They've introduced a bill called the Fast Track Approval Bill in March earlier this year. That's been through the [indiscernible] committee process. It's just coming out of that now. And we're looking to that bill to then go back into parliament sometime this year and hopefully, with enactment be before Christmas or soon after. Critical thing here is that bill is centered around a Fast Track process #1, but mainly around a one-stop shop. So you put it in 1 application in, there might be multiple regulators involved in assessing that application. It will eventually go to a panel, and the panel will actually approve or not approve the project based on the set of conditions that have been vetted by the various regulators. And the test is regional or national significant development or economic growth. So that's the sort of the underpinning part of the Act. And the idea is particularly around for the regions, but also nationally. New Zealand needs development and this bill is a very good attempt. So we've got 2 projects that have been accepted, so the Buller Plateaux continuation project, which is set around Stockton and then also bringing in our 100% owned Denniston assets. And the Rotowaro mine extension project, which is a continuation of use of the existing infrastructure out to about 2029 for existing reserves within the holdings that is discovered by the existing coal mining license. And then also, we've got some areas to the north that could be added to that utilizing the existing infrastructure hub. So Bathurst has really got 3 parts of the business. We've got BT Mining, which is a joint venture we formed to buy the Exxon LNG assets back in 2017, which is Stockton, Maramarua and Rotowaro, and each of those have got extension projects that we've outlined. Maramarua is a smaller internal one, whereas Rotowaro and Stockton, our larger projects that we'll look to put through the Fast Track. Takitimu. We've got plans for that to go through the '26, '27. And obviously, the Buller Plateaux is the growth project for us, adding to the infrastructure or utilizing infrastructure at Stockton and adding to the tonnes that will come out of Stockton. And our 2 Canadian projects, Tenas and Crown Mountain with our joint venture with Jameson and Crown Mountain. So with the Buller project, what we're looking to do is utilize the Fast Track, so get an application in early next year. On the balance of things, as we note so far, we should have an outcome of that by the end of next year. So at the end of '25, we'll be looking to then construct the civils and the additional mine infrastructure that will be required to bring that on into '27. So that will build up steadily as we open up pit room and also as capacity is available within the Stockton system to accept that coal, and this coal will ultimately or ideally be blended with the remaining coal reserve within Stockton, to then get a consistent output of around about 1.2 million tonnes coming out of the complex over the next 25 or nearly 30 years -- sorry, 15 or so years. So if we combine that with the remaining reserve, which is the dark blue on the graph on the bottom here, with the Buller project, as you can see, the idea here is to remain around about 1.2 million, 1.3 million tonnes of high-quality export coal going into the international market out through FY 2039 or potentially longer, depending on what other projects we can bring on. So that's just looking really at the Denniston and the remaining reserves within Stockton, including the [ Upper Wyoming ] mining permit area. Now there is other coals available in the area, and we are still assessing those. But as we move forward, the idea will be to extend it around about that same ultimate capacity. With Canada, we've now got the 2 projects, Tenas, we took over in January and Crown Mountain, which was -- we've been in a joint venture with Jameson since 2018. The beauty of that project with Crown Mountain is it's allowed us to give a -- basically learn the BC jurisdiction. Learn about the structural geology in British Columbia, but also interactions with First Nation groups and others. So that's really the -- we believe earn us the right to then go into a 100% project up in Tenas, which is further north and closer to the coal port. So it's probably the closest coal reserve within BC to a port. So both projects have been through various stages of definitive feasibility studies. They are both being renewed as we speak with -- they're both pre-COVID. And so obviously, we had quite a significant uplift in cost, but also we've had quite a considerable change in paradigm for revenues around coking coal. And also, obviously, changes in the capital structures across both those companies as well. So we're looking to build a business that will -- for us, deliver around about to our account, about 2 million tonnes, 1 million tonnes out of Tenas and 50% share of 2 million tonnes out of Crown Mountain. Tenas, we believe, will be an earlier project. It's a smaller spend. We're looking at spending around about CAD 100 million to bring that on, whereas Crown Mountain is a larger project, 2 million tonnes for 15-plus years, but it will be around about $300 million build. So in terms of the environmental assessment process in British Columbia, we are in -- Tenas has come out of the application development review phase. We've got a number of requests for information from the main regulator, the EAO. We're working our way through those. We're anticipating we're going to have those completed by mid next year. And then we'll be looking to try and put a final application into the fixed assessment and hopefully, ultimately leading to a decision which we intend to be positive. So at the same time, we've been dealing extensively with First Nation Groups both with Jameson at Crown Mountain, but also on our own at Tenas. On the back of that, we brought 16 of First Nation people out to New Zealand in May this year, had look at our operations, but probably more importantly, had a direction with First Nations Groups in New Zealand that we deal with extensively. And we gained a lot of that out of that. We gained a lot of knowledge about what was important for them, but also more importantly, they're gaining a lot of knowledge about how we operate but also how New Zealand operates in terms of dealing with issues like development within First Nation areas. So we're very comfortable with the project is up to the present time. We've got sort of cash within the business to be able to fund it, and we're looking to move that forward as quickly as possible. So ultimately, what we're looking to do is on a total equity basis. So there's 100% of Bathurst tonnes, 100% of Tenas, 65% of BT and 50% of Crown Mountain, build up to by '28 around about a $3 million -- 3 million tonnes a year export or internal use steelmaking business. So all of this coal will go into steel making, whether it's a domestic steelmaking process in New Zealand or an international steelmaking process across most of the Central Asian countries. So probably just to break down a little bit further in terms of the next 3-year horizon. The joint venture is fully funded. We've got $200 million in cash sitting within that business. We've got teams that they are already actively working on the existing operations, and we'll look to take those 2 projects through the Fast Track. With 100% owned Bathurst, again, we're utilizing cash reserves at the moment to bring on the Buller project. and we're targeting ultimately somewhere around about 800,000 tonnes a year average. Obviously, that income will then be available 100% to Bathurst about a NZD 50 million build to get onto first coal. With British Columbia, again, we're using existing cash reserves for the funding at the present time. Tenas will ultimately in around late '26, early '27, we will need around $100 million capital to build that project. And we've been engaging with various institutions and financial providers over the last few months to try and shore up where that capital will come from. And it will be a combination of debt, hopefully, using our existing cash that we've already got within the joint venture, but we're not relying on that at the present time. Crown Mountain, a little bit further down the track. But again, we're looking at a USD 300 million to USD 350 million build. And again, we're talking to potential fund providers for that. So just really to map all that up, we've got a strong balance sheet. We've got 0 debt sitting at the present time. We've got large cash balances held within the joint venture. So we're fully funded in that way. We've got legislation and we've got a political system in New Zealand that's actually looking for further growth and looking for mining to be part of that growth. So we're looking to actually utilize that as much as possible over the next couple of 3 years to bring these projects forward, leveraging the joint venture infrastructure, which is allowed for by the joint venture agreement, as we've seen. Projects in British Columbia, again, Tenas will have a low unit cost. It's a low strip ratio, about 3:1 strip ratio, relatively low capital will bring it on and then backing that up again with cash being generated out of New Zealand and out of Tenas by that time to bring forward the Crown Mountain project in combination with our joint venture partners, Jameson. So ultimately, what we're looking to be able to do is then build up basically a series of cash flow-generating projects that will allow us to be independent from our existing joint venture and allow that then to take forward 100% Bathurst generated cash into projects and also dividends. So thanks very much. Again, if there's any questions, send them through to our Wellington e-mail address, and we'll look to get those answered quick smart. So thanks very much for that. Sorry about the rocky start with a non share, but we'll move past that. Thanks a lot. Bye.