Bathurst Resources Limited (BRL) Earnings Call Transcript & Summary

Hi, everyone. Thanks very much for joining our FY '25 full year results release and an update on the company. I will just share my screen to bring up the presentation that was released earlier today. Thank you. Okay, and disclosures. For those unfamiliar with Bathurst, I'd just like to give a quick overview of our structure. Obviously, Bathurst is an operating coal mining company. We've got 4 operations in New Zealand with various ownership structures, some 100% owned, some owned through a joint venture with a New Zealand family-based company. We own 65% of that joint venture, and we are the mine operator. Adjacent to our Stockton operations, we've got the Buller project, which again is 100% owned by Bathurst, and the recently acquired Tenas project, which we've had now for a couple of years, and we'll talk about that as we move further forward, and the joint venture with Jameson Resources with the Crown Mountain project in the Elk Valley again in British Columbia. So we've got a solid base of existing operations, and then backing that up is some longer-term projects that we'll certainly discuss as we go further through. Market cap of around $190 million at the end of July, an enterprise value of around AUD 35 million. We've got about NZD 170 million in consolidated funds at the present time. Very experienced Board that has been together since 2015, and we are in a good position to take this company forward. So I think the core strategy has been -- over a large number of years now is to have successful, safe, profitable operations. So we've got a combination of operations through the joint venture, which is Stockton, Maramarua and Rotowaro and then 100% owned Takitimu. So supplying different parts of the markets where Takitimu principally supplies process heat energy to value-added New Zealand production, Stockton 100% export into the steelmaking business and Maramarua and Rotowaro principally supplying the only steelmaker in New Zealand. And then surrounding each of those but also introducing some new greenfields and brownfields site, we've got a number of growth projects that allow us to take the existing tonnage forward but also increase our overall exports, particularly the Tenas project by really 100%. And the intention of that strategy is then to start having reliable and repeatable capital returns back to shareholders. So what we're doing is really building on the success we've had by taking assets that we purchased back in 2017 through the joint venture. We've proven that we can operate those. We've generated a lot of cash through that business. And we now want to take that business forward but more on 100% owned Bathurst asset. So again, really the same picture. We've got 2 mines in the North Island. That's -- [indiscernible] sorry. Stockton and Maramarua and Rotowaro in the middle of North Island. Stockton is on the West Coast, which is right beside the Buller project, which is part of the development we'll talk about as we move further forward, and Takitimu is right down in the deep south that mainly supplies coal into the south and the southern parts of Canterbury. And we've got a head office in Wellington, and we've got a suboffice in Christchurch. So just looking at the results for the last financial year ending 30 June this year. Revenue was down quite considerably from FY '24 but still very positive, around $270 million. We generated $44 million EBITDA at a consolidated level out of that. Revenue, we've got, as I said, NZD 178 million, these are all in, at the end of the financial year, and we made a profit of NZD 4.4 million again on a consolidated basis. Obviously, quite a bit down from last year but still very much at a positive. Looking at each of the sort of main operating areas, starting with export. Key thing here, I suppose we had nearly 6 months -- anyone that's been following the company, we had a -- we didn't. Our rail supply had a tunnel collapse in the -- part of the supply chain. That really knocked out the first part of our logistics from the mine to a town called Reefton, which was a distance of around about 100 kilometers, that knocked it out for about 6 months. So it happened in late June 2024. We didn't get that operating again on full until earlier this year, middle of January 2025. Cost us about $15 million in direct costs. We did get some insurance relief from that. But the key thing was that we did have to pull back on a little bit of tonnage. We actually made up nearly all of that tonnage by the end of the financial year, which was we were down by one boat, 50,000 tonnes, which slipped into the next financial year. But the key, I suppose, for us was we met the requirements of our major customers. We did miss one business development boat, but it wasn't really contractual coal anyway. So as you can see, quite a considerable drop-off in the export pricing as well, which then led to reduced revenue and reduced EBITDA. Rotowaro, we're in a major cutback phase. So we've finished the remaining coal within the Waipuna extension area, which was the project we're working on for the last 4 years. We have now moved into the Waipuna west extension, which has got quite a large stripping requirement. So we had a 50% increase in the stripping from '24 to '25, and also -- but we did move into some more coal sales. So some of that was offset. So we ended up with a larger EBITDA of around $80 million to $90 million. We've got the same sort of a burden this year. We'll do about 10 million bcm this year, and then that will drop right off for the subsequent years. So there's a lot of cash tied up now in that cutback, and we'll start seeing that cash flowing through into the business over the next 3 or 4 years. Maramarua, similar story. A little bit of a step down in sales as we've had some of our domestic customers fall out, but we are increasing the amount of coal going into steelmaking from that business. EBITDA is reasonably consistent, but we did do a 600,000 additional bcm as we're moving into the M1 pit, which was -- we got the resource consent for earlier during the early part of 2025. Takitimu, we're on the wind-down here, unfortunately. We are looking to extend into another block, but really, the customer base is not there to support it. So people are moving away from coal or just moving away from the district altogether. We'll have a good strong EBITDA year this year. We were down a little bit last year just on decrease in tonnage and a slight increase in the amount of overburden to move. We've got about 12 months' worth of full production, and then we move into a final year of rehabilitation. In terms of our sort of contribution to New Zealand, which is very important now as we move into this next phase of the business, looking at our fast-track application, around 700 employees across the most of the operating mines, that $90 million paid to employees. Our payments into the government directly is about $11 million. And obviously, there's also flowing from the taxes that have been generated through from the employees and also from suppliers through normal GST. That's down quite considerably from the last year because in the last year, we had obviously some large tax payments that came through from the extraordinary pricing from FY '22 and '23. Our health and safety stats, we've been working really hard. Obviously, if you look at a lost time injury frequency rate of 4.5 is high compared to what you see with some of our compatriots in Australia and maybe in the U.S. and Canada, we've come down from an even higher base. So a lot of work being -- going into risk management, a lot of work going into training in particular. We've introduced a learning management system, which standardized through a database our recordkeeping and our competency analysis but also then move into e-learning. We've got sort of a tale of 2 sets of operations. Stockton, Rotowaro, our 2 larger operations, we've had a number of injuries through there. But then we've had Takitimu, we've had over 3,000 days lost time injury free now, and Maramarua is over 1,500 days lost time injury free. So we've got to take the learnings from those and then translate them to the 2 larger mines -- sorry about that. Looking ahead, we're looking at a consolidated guidance or consolidated EBITDA guidance of around $45 million, a range of $35 million to $45 million. Principal change there, obviously, the export pricing is quite a way down even on where it was last year in terms of average. We are seeing a drop-off in the -- an increase in the EBITDA generation out of the North Island, and we'll also see an increase in cash generation in a couple of years out of the North Island. But we also are incurring additional costs with the closure of Takitimu and Canterbury in the South Island operations. And the business has always been profitable. We have -- obviously highly dependent on international coal price. So graph here depicts -- the darker blue is the EBITDA generated on a consolidated basis out of the export business. Again, FY '21 was affected by COVID. FY '20 was affected by COVID. And then we had the large increase in coal price depicted by the red line through the '22, '23 period but then scaling off again into '24, '25 to then '26. So pretty much a fixed price sort of business, fixed cost, but any increase in that export coking coal price, and we will see the business jump up in profitability quite successfully. Just in terms of the curve, we are seeing a curve in [ more ] contango. I think most proponents and most analysts are saying that the supply-and-demand equation is not really changing. We're not seeing new supply coming into the business, and we're not seeing demand dropping off either of those. So the pricing is projected to increase well above USD 200 over the next couple of years. Key thing for our business now is to consolidate where we are now but also to bring the new projects on so we can take advantage of that higher pricing going further forward. So let's talk about that now. The Buller project is right adjacent to Stockton. The intention here is to use the existing stock and infrastructure under our control. There is coal still left in the Stockton holdings, the reserves there for another 3 years. And then we're planning on bringing in Buller coal and some coal that's sort of held between the 2, Denniston and Stockton plateaus to add up to maintaining about 1.1 million tonnes of export out for another 15 to 20 years. Tenas project is totally greenfield, no other mines in the area. As I said, we've been in there since '22. We are working our way towards putting in the final application for environmental certificate through the Environmental Assessment Office, and then we'll move into the permitting phase. So that's a really exciting project, around 750,000 tonnes a year for about 20 years. The Buller project is looking to average around 850,000 tonnes for about 13 or 15 years, which then adds to the remaining coal within Stockton. What that looks like is a graph, the lighter blue is the tonnes remaining in Stockton. As you can see, after '29, things start dropping off fairly significantly. But the idea there is we'll then replace that tonnage with tonnage from the Denniston and the Mount Fred area. That allows us to maintain about 1.1 million tonnes well past 2040. The idea is that we'll utilize existing infrastructure, connect the 2 plateau areas with a dedicated haul road, utilize any additional capacity within the Stockton CHPP. And then as the Stockton reserve drops off, we'll replace those tonnes with tonnes from the other development areas. We've obviously already got existing rail and port access, and we've already got existing customer bases, exactly the same coal seams, and we'll meet exactly the same market requirements. In terms of planning for that, we're looking to get the fast-track application then sometime later this year. We will then look to be getting that granted later in the next calendar year and FY '26. We're looking to release a pre-feasibility study of that project early in September and then backing that up with the DFS later in the next calendar year. Really, we've got some early works we can start doing on the access road once we've actually sort of got some certainty around getting accepted into the fast track. We are already listed with this project in the Fast Track Act. So we've already met the referral stage. We've now just got to go through and get through completeness and then on to -- into a panel and then ultimately out the other side if we can convince a panel that we've got the right conditions to meet the -- any environmental impacts in particular. Obviously, we believe it's going to be economically significant on a regional and/or a national basis. We're looking at a business here that injects about $300 million in revenue into the New Zealand system every year. So it's certainly regionally significant, if not nationally significant. In terms of the fast track, it is a process that was obviously introduced by this present government in December last year, 2024. It really does set out a pathway that has got very fixed time frames in it. But I suppose the most important thing is we make one application and then there's the avenue to get all of the various resource consents, approvals and permits that we need to go operating, which is really what the new part of it is. So it is called fast track, but really it's a one-stop shop. That's the key to it. And the time frames that are set for both the panel and the named parties within the act, who we've got to consult with upfront, and then who will be required to comment on the project and also time frames on us to actually get those comments back. So it is a very sort of first-in, first-out process, and we are now working hard on that application to make sure that we can go through that very time-limited process very quickly. So there is avenue at the end of it for judicial review and appeal by anyone that either is a statutory partner to the FDA or who has been invited into the FDA. And so again, one of the key things that we're doing upfront is making sure that we've consulted with everyone as much as possible, but also that we've addressed as many of the issues that they may have brought up early and that we know are going to be brought up as part of the project in our initial application. So as far as possible, we want that to be agreed on. And if we can't agree it, then we clearly state what the range of our disagreement is. Tenas, this project is sort of in middle BC directly north of Vancouver, about a 2-hour flight north in close proximity to the Ridley coal port, which has got plenty of capacity. And we've got a block of land that we own right beside the main roller line. So in terms of infrastructure, this project is well set up. As I said, it's completely greenfields. There [ is another one of the ] mine in the area. We've got good support locally. We're working through with First Nations groups that have got either interest land or a registered interest. And as part of that, we brought a group of people out -- 16 out to New Zealand to have a look at our existing operations but also to have an interaction with First Nation groups in New Zealand that we deal with on a regular basis both on the West Coast but also on the North Island. And I think we all got a lot of learnings out of that and have built a level of trust that I think is now starting to flow through. So again, we're looking to get that final environmental application in October, November this year. That will take about 6 months to get through that process, and then we will then start working on the permitting. Once we've actually got the environmental certificate, assuming that flows, then we can then start doing some of the other preworks that will require to bring the project into production. So again, there is no infrastructure there. We've got to build the lot, and we are looking to update the PFS over the next couple of months as well to give the market indication of what -- where we think the capital is going to be and where we think the costs are going to be. Again, same thing, we're looking to get the last of the information requests that have come through from the last phase of the [ EAO ] process, get that effect assessment started, and then we'll move on to the permit documents. And then once we get through that, we can then start into the actual building of the project, looking at getting into first coal into FY '28. So what we're ultimately trying to build is a business that will be predominantly 100% owned Bathurst coal, up to 2.5 million tonnes a year going into steelmaking, a combination of international steelmaking in the Asian markets we supply now, so into India, South Korea, Japan and a small amount into China, and then -- but still maintaining through the joint venture a supply of coal into New Zealand steelmaking business as well. Where we stand today, we've got about $170 million consolidated cash at the end of July. We've got zero debt on our balance sheet, both in terms of the joint venture but also at Bathurst level. We're anticipating at a Bathurst level generating somewhere between $35 million and $45 million EBITDA again this year, asset backing of $1.75 a share, and we've got a cash backing of about $0.66 a share at the present time. So we are -- we've got a good path to the future, but we're also building that path on existing good cash flows. So that's really the story of this business. We've got good profitable operations through the joint venture but also privately owned, 100% owned. We did a successful capital raise, which sets us up for the next 2 years at Bathurst level to go through the consenting of both Tenas and the Buller project. We've got good cash reserves within the joint venture. So the joint venture is fully funded for any development work, which includes haul roads and the mine developments of an area between the Denniston and the Stockton plateau. We've got access to the fast track. Again, we've got listed project with the Buller project. We've also got the Rotowaro extension. Really, that extension is waiting on customer support. We've done the environmental work that sits behind it. We just now are looking to try and secure the hub through some local environmental assessment work so that we can take that project forward if we can get really an MOU or a further confidence around that the customer base is going to want that coal. The Fast Track Bill was passed, but also we've also got metallurgical coal listed as a New Zealand critical mineral because it is -- a large part of New Zealand's export story is gold and metallurgical coal, which has not been listed on a lot of other critical minerals lists around the world except for Europe. And we're progressing the environmental assessment work and the DFS for the Tenas project. So thanks very much for that very quick overview.

I think there was one question that came through on the invitation list, which was around recent protester action that went on at Stockton. First question was, how much did that cost? It was about $0.5 million in additional trucking and also security. And then the next question was, did it affect the revenue? And no, it didn't. We didn't -- we managed to truck around the affected area. And even at a small rate, it won't affect the shipping plan at all. We're fully stocked, and we're back into full 5-day logistics now. We are going to move to 7-day logistics. We've eaten up some of our resilience in that system. So we want to get that resilience back by Christmas. And the final question was, are we going to have further action? These opponents have said they will try and disrupt us further into the future particularly once we get the application in. We are beefing up our security. We did already have quite significant security, but we've learned from this exercise, and we'll be looking to try and make sure that we don't have another repeat of this incident. But thanks very much for that. Yes, I look forward to updating you further as we move into the exciting next phase with the fast track application. Thank you, and all the best.