Bathurst Resources Limited (BRL) Earnings Call Transcript & Summary

Welcome, everyone, to the Bathurst Resources Half Year Results for FY '25. I'm Richard Tacon, CEO of Bathurst Resources, and I'll take you through the slide pack that's been uploaded through the exchange. So thanks, everyone, for joining. Standard disclosures. A little bit about corporate summary we're up to. Not a lot of change, I think since the last time I addressed you. Market cap about $145 million, share price around $0.75. We've still got about $140 million consolidated cash, so that's 65% of the cash balance of our joint venture and the 100% owned cash within Bathurst including restricted short-term deposits, leads us to an enterprise value at the end of December, which hasn't changed a lot up until today of around about $19 million. And no real debt. We've got some lease financing. Just a quick overview, again, of the operations for anyone that's not 100% familiar with Bathurst or wants an update. We've got 2 mines in the North Island of New Zealand, producing a subbituminous product, which predominantly goes into steelmaking into New Zealand's only steelmaking company, Glenbrook. So that produced about 600,000 tonnes between them. We do supply some coal into process heat, which is value-added of New Zealand [ prime] production and also into lime production. That -- those 2 businesses are owned by BT Mining, which we hold 65% of, and we're the mine operator for that and the Stockton mine. So Stockton is the export operation, producing hard coking coal for the export market, about 1 million tonnes a year, and it's situated on the northern part of the West Coast of the South Island. And then we've got the Takitimu mine down South, which produces around about 200,000 tonnes of coal each year for the process heat market, again, value-add to New Zealand prime production. So dairy, abattoirs and then vegetable processing, mainly leading to export products. And obviously, we've got corporate office and head office in Wellington and in Christchurch. And with the Buller project shown there, which is adjacent to the Stockton, which we'll talk about as we go further forward. We've also got 2 projects in Canada, the Tenas project, which we took over ownership of late 2023 and the Crown Mountain project in the Elk Valley of British Columbia, which we've been involved with since 2018, and we own 22% of that project. It's worthwhile just looking at our contribution to New Zealand, we employ directly just under 700 people. And obviously, there's a bunch of other contractors and others that sit on top of that as well. About $85 million in wages going directly into regional areas. And I suppose that's one of the key things about this. We operate in the West Coast and the Central North Island, which are both regional areas where we've quite significant employees, but also quite significant contributors to the local economies. Around 60 odd -- $66 million going into direct government fees through royalties and taxes and then through supplies about $240 million. This is all based on numbers at the end of the FY '24 financial year. So just some of the results in a bit more detail. So the export business, the key thing here is we are highly affected in terms of the sales. And obviously, then we match the production to the sales because of the Tawhai Tunnel collapse. Now that has now been rectified. I've got a slide a little bit later on just showing a couple of pictures, but that was reopened on the 13th of January this year, and we've had really good service from our service provider, KiwiRail, since that point in time. Obviously, it led to a lot of additional cost, but also we had to then scale our sales plan to be able to make sure we maximize the shipments to our customers where if we get out of sync with their blending, then we end up losing that customer for potentially a year or longer until we can get it back into that blend. So we did prioritize some shipments. And so by that, we were down on sales quite significantly. We did though take the opportunity at the time to actually not really lay anyone off. We did scale back some of the contract operations, but we managed to actually move more dirt and by prioritizing some of the coal crews into overburden removal, which has allowed us to actually open up more pit room and give us a larger inventory as we go further forward. With the Rotowaro mine, we've moved into a new phase. We're now heavily into the Waipuna West Extension. So there's been a significant uplift in the amount of overburden that's been removed. Coal production has matched that as well. We're mining sort of really the remaining coal out of the Waipuna West unit, which was started 5 years ago. Bulk of those sales are going into steelmaking. And obviously, you can see from the revenue, we've had -- with increased sales, we've had increased revenue and increased EBITDA. With Maramarua, it's been a bit of a growth period as well. We were granted the resource consents to allow us to go into the next extension area, which is called M1. And we're doing the sort of the preliminary works for that during the 6 months. So a little bit of uplift in overburden and -- but unfortunately, a bit of a decrease in sales as we're seeing some of our dairy customers, in particular, moving away from coal and into wood-based products. So some of that's wood waste, some of it's white pellets. It will consolidate around the numbers that we see there now, around 160,000 tonnes and the bulk of that's going into steelmaking now with a little bit into lime production. So pretty steady in terms of revenue, but we have had an uplift in cost because of the development into the new areas, which we'll recruit as we go further forward into that area. Takitimu. The mine right down the bottom of the South Island supplying coal into dairy, abattoirs and others. Pretty steady in terms of production and sales. Revenue is up a little bit, and we did incur a few additional costs during the year. So we're pretty much even where we -- even pegging where we were last year. But Takitimu is unfortunately now on the last of its reserves. We will be -- we'll get this financial year and next financial year out of it, and then we'll be into a final rehabilitation and closure phase. Really an important part of our -- obviously, our corporate structure and our cheapest producer. And also in terms of safety performance, we haven't had lost time injury for now 3,150 days, a significantly long period of time without injuring someone seriously. So looking at the results on a consolidated basis, revenue is slightly down on the half year, which is mainly due to the export side of the business. And an EBITDA is pretty much level pegging where we were for a similar period last year. We are anticipating though, we are going to be somewhere between $45 million and $55 million EBITDA for the full year. And hopefully, there's some upside to that. So just on a sort of summary basis, around $141 million in consolidated cash between the 2 businesses, $0 debt apart from some lease financing. And again, we're going to earn somewhere around about $50 million for the full year. So given the sort of the headwinds that were there in front of us, particularly with the tunnel, we moved quickly to get that rectified in terms of getting a trucking stream going, which then allowed us to preserve the bulk of our customers. We've seen the export pricing come off compared to the period last year, quite significantly. We're down sort of around $200 where we were sitting around $240, $250. And also, we've had the drop-off in tonnage. We had an improvement in the North Island, including the overheads, but we've also had a bit of a decrease in the South Island, including overheads. So they will pretty much cancel each other out. And obviously, we're investing more money into Telkwa for the Tenas project as we move forward into the environmental assessment phase. So again, we're projecting we're going to be somewhere between $45 million and $55 million EBITDA for the full year. So just the tunnel, I mean, it was quite an impact on our business. So it's probably worth just exploring a little bit more what happened there. The tunnel is an old tunnel. It was actually constructed in the late 1800s. We first got notified of the closure on the 15th of June 2024. We put in a trucking program pretty much immediately. We did have access to a rail loading facility, not that far away from actually where the tunnel collapse was at [ Tawhai ] but it was around about a $50 impasse in terms of per tonne impasse in terms of trucking. And we did manage to be able to work with our customers to set up a shipping plan that would maximize the freight capacity that we actually had and make sure that we kept our major customers and kept in their blends -- keep them satisfied in their blends. So the main thing, they had 3 localized areas of collapse within the tunnel, but then the whole tunnel actually had to be rehabilitated. So it was extensively shock credited and new anchors. It's basically a 100-year fix is what they've been terming it. And obviously, with the relaying of the rails, the picture demonstrates what the tunnel looks like now, and we are seeing good service out of that tunnel. So we've gone to 7-day rail from the reopening the tunnel, which is 21 trains a week for us, and we're seeing very low cancellation rates from our providers. So we are pretty confident we're going to be able to get the tonnes through in this next 6-month period. Export market, pretty flat, but flat at levels that are sort of around about USD 200 per tonne on a prime hard, prime low-vol basis. Yes, predominantly, we're seeing softness in the Chinese market, which I think has been sort of well reported. Indian market is still pretty strong, but we are also seeing further coals coming out of particularly Canada and the U.S. that is looking to supply that market as well. So really, until the Chinese market improves, we probably are going to see this relatively flat curve. But it's still a long way in front of where we were going back 7 or 8 years ago. And given all of the headwinds that have been sort of facing the market, we're reasonably comfortable with where we are. We also -- as we've talked about before, we hedge around about 30-odd percent of our overall production and up to 40% in any 1 month. So we have got a book of hedging going out about a 12-month period, which holds our pricing up around that USD 200 as well. So let's sort of have a look at some of the developments. I mean the most exciting one, obviously, for us and for most other businesses in New Zealand that have got either a complex or a larger project is the passing of the Fast-Track Approval bill into an act in December last year. This is a fairly wide-ranging act, which really allows a single application to then lead to multiple approvals from multiple regulators. So in our case, a single application for the Buller for instance or the Buller Coal Project, continuation project will lead to mining permit, will lead to the access arrangements with public listed land. It will lead to land use consents with local and regional councils. So it's a one-stop shop process. At the present time, the timing would indicate we're going to put an application in for Buller in June, and we should be out of that process in January, February, given the time frames that have been stated within the act. We've also got the Rotowaro mine continuation project, which is a continuation of supply to the major customers up there, which is obviously steelmaking and potentially power generation. And both of those projects are listed in Schedule 2 of the act. What that means is, there was a process that was run prior to the enactment ran by an independent panel. We had to put an application in, which then went through sort of eligibility [ rule]. Criteria around the project had to be identified as a priority for central and local government, had to deliver regional, national economic benefits. And the project will support those developments without damaging the environment. So obviously, we put 2 projects up and both of them were accepted into the bill. So they're in schedule too. So again, just looking at the structure of our business, we've sort of covered, some of this has been going through. The BT Mining joint venture, we own 65% of that joint venture. We are the mine operator of Stockton, Maramarua and Rotowaro under the 100% Bathurst banner, we've got Takitimu and we've got the Buller project, which is really continuous with the Stockton export. And in British Columbia, we've got the Tenas project, which we own 100% of and Crown Mountain, which we own 22% of today. So within the BT joint venture, there's growth projects in there as well. I'll go through that sort of the combined project a little bit more. We've got a plan to sort of work its way through. But the main thing here is really extension of the life of the export hub. So that's making sure that we've got land use consents for the existing infrastructure and also the existing reserves within the Stockton Holding and including Cypress, which sits outside of the Stockton holding, but was within a mining permit that's continuous with it. And that really then -- that preserves that infrastructure and access to the market for the remaining coal within BT, but also the remaining coal within the Bathurst and Buller project. So there's a southern extension, which is termed Mount Frederick South, which I'll show you in the plan in a minute. That is a low ash, high rank coal, which is very similar to the Millerton coal, which is where the bulk of our production comes from now, which meets the market, and we'll access that through an existing haul road. With the North Island, we've got the Rotowaro extension. Again, it's a similar style of project. We've got coal mining licenses that cover these projects now, which are all encompassing bundles of rights. So they include land use consents, they include access arrangement and they include mining permits. So they expire in early '27, and that's why we need to renew those. So this will preserve the hub of infrastructure. So we've got obviously a washery there. We've got crushing and loading facilities. We've got a rail unloading facility, which is being utilized by the only remaining power station or coal-fired power station in New Zealand. And we've also got a rail loading facility, which allows us to access particularly the steelmaking market. And we'll utilize the Fast-Track Approval process as we've already outlined to take them forward. Maramarua has got a further extension of the M1 pit called M2, which gives us about another 3 to 4 years of production. And we're assessing that at the present time and will most likely go through the standard consenting process because we've already got access to the land. We've already got mining permit. It's really just a matter of extending the land use consents to cover the changing blocks. And then within 100% Bathurst, obviously, we've got current operations. As I said, unfortunately, Takitimu we're getting to the end of the reserve there. And also, we're getting to the end of the customer base with some of our process heat customers are moving away from the use of coal and into either electricity or wood-based products. So we're looking to have a closure for that in FY '27. But the Buller project, which is the exciting part of this, we've done a lot of work there over a lot of years. People will remember this project going right back to 2010. It's the thing that originally bought Bathurst into New Zealand. But now that we've got access to the infrastructure through the joint venture, this project is now infinitely more fundable. So the idea is that we are combining the Buller project with the 2 projects, the Stockton extension plus the Mount Frederick South into a combined application, and that application will be put before a panel in June this year. So just looking at the Buller project. So -- the sort of -- the combined area here is within an ecological grouping called the Buller Coal Plateau with a mix of plateaus. So there's the Denniston Plateau to the south. There's the Deep Creek area in the central and there's a Stockton plateau to the North. So at the moment, obviously, the joint venture, we're mining coal in Millerton, Hope Lyons and Rockies. Also a little bit of coal coming [ drive ] and then about 1/3 of the coal we produce comes out of Cypress, which is actually in the Upper Waimangaroa mining permit area, which is outside of the Stockton CML. So the Stockton coal mining license is in the area that I'm depicting now. And then the mining permit area, which we've got access arrangement for out to 2037 is in the central area. And then we've got the Stockton plateau area, which is made up really of 3 main project areas. So we got Escarpment, which was consented back in 2014. We've got Sullivan, which is again is a coal mining license with an expiry in 2027. And we've got the Whareatea -- West Whareatea area which is subject to a mining permit. So we've got resource consents for all of Escarpment. We've got land use consents, which is -- and access arrangements tied up as part of the coal mining license of Sullivan. And really, we've got none of those things for West Whareatea. So the idea is that we combine this plus Mount Frederick South, which is an area pretty much equal distance between the washery and the Denniston Plateau. Mount Frederick South, it used to be termed Deep Creek. It's actually -- half the coal is in Bathurst, which is a halo around the outside of this -- the mining permit area and then half the coal is within the BT area within the [ Upper Waimangaroa ] mining permit. So -- by combining all of those assets together, we end up with about a 20 million tonne reserve, which will then take us through including the coal that's remaining in the Stockton about a 20- to 25-year life. So the wash plant is probably the integral part to it all, which was built in 2010 in the middle of Stockton here. And then there's a road and then an aerial, which gets the coal down to the rail loadout, which is at [ Ngakawau] the north of this plan. And then we'll construct either by rehabilitating existing roads or constructing new roads, a haul road, which will go from Mount Frederick South through to Cypress and then ultimately link up to existing haul roads up to the wash plant. And the same with Denniston. We've got an area of existing roadways that need to be rehabilitated and/or upgraded to get coal up onto that Mount Upper [ Waimangaroa ] haul road. So in essence, this project is about preserving the infrastructure hub that already exists and then progressively bring additional reserves to maintain around -- somewhere around 1.1 million tonnes of export into the international market. So with the British Columbian projects, as I said, Tenas project is a greenfield site in an area in Northern BC or Central Northern BC. We took over the project in 2012, and it's a coking coal project, which will have, I think, a lot of interest in particularly the Korean and Japanese market where there's been a lot of interest shown already in the buildup to it. So we're in the final stages of preparing the environmental assessment for that, and we are looking to get that environmental assessment into the regulator in September of this year. Crown Mountain is on a little bit of a slower burn. It's in the Elk Valley, sort of nestled in between some of the major mines of now Glencore in the Elk Valley, well-known producer of hard coking coal into the Asian market in particular. So we own 22% at the moment. And for -- basically, as we move further down the development phase, we've got the option under the joint venture agreement to pay some further money to bring it up to CAD 121 million, which then gives us 50% of the project. And obviously, the remainder of the CAD 121 million, which is about CAD 107 million goes in this first capital for the build. So just looking in a little bit more detail. As I said, Tenas is a very much a greenfield site. So the -- the mining area itself is on forestry blocks that was last clear-felled around 40 years ago, very slow growing in these areas. And the idea is that obviously at mine -- at the end of mine life will be returned to forestry blocks. The coal resource is quite extensive area, but it's been quite deliberately centered in between sort of 2 major tributaries of the Telkwa River, which flows then into the Bulkley River, which is a major river structure within this part of the Canadian [ wood ]. So the mine will be joined to a rail loadout on private land, which we own, where we load the rail right beside the main rail, which will then allow us to rail that coal through to the coal port at Prince Rupert. So the haul road is around -- about 11 kilometers long. Again, all of the land deals and/or private land, which we own at this end of it are in place and/or public land. And it's got a build cost of about CAD 100 million. All right, skip that listing again. So Crown Mountain has come out of the sort of process planning phase. The assessment work that had been done prior to that has been accepted. There is some request for information. They're working their way through and then they look to go into the application development and review phase, which is then really where the [indiscernible] get pulled out of the application. It goes off to all of the individual regulators. They get to comment and come back and it's a very iterative phase. Tenas has come out of that phase. It is now answering the remainder of some RFIs around water, interaction with First Nations still [ carbiou ]. So we pretty much finished those. The idea now is we update the environmental assessment documentation. And then, as I said, looking to submit that in around September this year. And that then gets into a lockdown 150-day process. So again, getting that in this year, we're looking to get out of that process sort of in the late -- middle to late 2027. There's also a parallel mining permit application process. So once we've actually got the effects assessment lodged, we will then commence work on the mining permit application. And of course, there's consultation with both First Nations, local and federal agencies all the way through this process as well with open houses and other sort of regulated processes, but also nonregulated process where in particular with First Nations, we spent a lot of time over the last 12 months since we took over the project in building the trust and building those relationships with the various First Nations groups that either represent the landholders or the landowners and/or other interests within the areas. In terms of capital management, just briefly, we've got plenty of cash within the joint venture that we're fully funded for the developments that we require within the North Island and South Island, particularly with the export business and the maintenance of particularly that infrastructure and the remaining coal within the Stockton areas. With Bathurst 100% owned assets, obviously, we've got requirement there to fund the initial developments and the phases we're in now. And then we'll be looking for around about NZD 50 million to get to production with the Buller project. With British Columbia, we're still working through really the full funding requirements. We know it's going to be around a circa CAD 100 million to get to full production at Tenas. We are funded at the present time to get through into the early stages of the submission of the Environmental Assessment work. And obviously, with the Crown Mountain, we provide a 20% of the funding that goes into the ongoing research work and requests for information with the regulator in terms of taking forward that project. So ultimately, what we're trying to achieve. So at the present time, we've got a strong balance sheet. We've got 0 debt. We've got large cash balances within the joint venture. We've now got a Fast-track legislation, which allows the -- gives us an approval path, a consent path. And not only consent path, it also gives us access arrangement and the other approvals that we require. So once we come out of that, it's then not a matter of death by thousand cuts. It's we have got our approvals and we can get into it. So really, it's looking at the life extensions of the existing JV assets, but also then the introduction of the 100% owned assets into that, utilizing the joint venture structure, which is allowed for by the joint venture agreement. In Canada, and again, it's a matter of just taking forward in the logical sequence, the Tenas project and then supporting Crown Mountain with Jameson, our joint venture partners, and bringing on the Crown Mountain project as that becomes further down the development pipeline. So the end goal is we want to produce basically 100% owned cash flows out of these various businesses, which then we can then return to shareholders and also to continue to develop the company. So I think in a nutshell, that's the sort of the update at the present time. Again, I think, just to reiterate, very exciting development with that passing of the Fast-Track act that now gives us a clear pathway, and it's up to us now to get that application in front of those panels by the middle of the year and then get out of it by early next year. So as usual with these things, if there's any questions, please e-mail them through on the e-mail address that was included with the invitation, and we'll get back to you as soon as we can. So thanks very much, and look forward to the next 6 months. Thanks, everyone.