Coronado Global Resources Inc. (CRN) Earnings Call Transcript & Summary

Thank you for standing by, and welcome to Coronado Global Resources Full Year Results Presentation. [Operator Instructions]. I would now like to introduce Andrew Mooney, Vice President, Investor Relations and Communications. Please go ahead.

Thank you, operator, and thank you, everyone, for joining Coronado's Full Year 2023 Investor Call. Today, I am joined by our Managing Director and CEO, Douglas Thompson; and Group CFO, Gerhard Ziems. Today, Coronado released its full year financial results to the market, including its Form 10-K annual report, full year earnings release and results presentation. All of these materials are available for free on our website at www.coronadoglobal.com. Within our presentation, you will see our important notices and disclaimers and reconciliations of non-U.S. GAAP financial measures. We encourage you to review these statements as well as our other filings with the ASX and SEC. I'll remind everyone that Coronado quotes all numbers in U.S. dollars and metric tonnes unless otherwise stated. With that, I'll hand over to Douglas.

Thanks, Andrew. Coronado Global Resources achieved strong operational gains in 2023, resulting in improved ROM coal production performance and improved safety results that ultimately saw the business to deliver the second highest annual group revenue in the history of the company. Our team made notable progress in optimizing our business and marked several milestones that has us firmly on the path to achieve our future production target of 20.5 million tonnes per annum by 2025. In 2023, we remain focused on maximizing the potential of our existing assets without the need to raise additional capital debt. We have invested strongly in our Buchanan and Curragh Complex and achieved some significant milestones. At Curragh we have completed the recovery of historic deficit pre-strip waste and the record total waste movements achieved last year has decongested the pits improved the mine's overall pit geometry and strike length, which enhances dragline performance in 2024. With this milestone achieved, our team is concentrating improving efficiencies and cost reductions, which will see us, remove 3 fleets in the first quarter of this year. At Buchanan, our team brought into production the newly developed Southern longwall district. This marks the completion of the development of this new longwall section, the associated ventilation shafts and the installation and commissioning of all the new longwall equipment. This new Southern District at the Buchanan and the completion thereof in bringing duration into operations, we are fully focused on the next key milestone that being the construction of the second set of skips to debottle production and thereby capitalizing on the productivity gains now available to us by having 2 distinct fully equipped longwall districts. Additionally, the Curragh underground project continues to mark all set milestones and is expected to produce first coal in December subject to approvals. In 2023, our emission reduction projects progress to plan. Given the success of our first VAM unit we commissioned in 2022, we are constructing a second VAM unit, which is expected to come online at Buchanan in mid-2024, thereby ensuring that Coronado has proven tangible and low CapEx projects to honor our intent of 30% emissions reduction by 2030. These improvements have provided a solid platform for the year ahead as we target higher production rates, lower cost and improved margins. Before Gerhard and I elaborate on the financial results and forward plans of our business, I'd like to discuss our safety results. A total recordable incident rate for the year was $0.77 compared to 1.41% in 2022. This reflects a 45% improvement year-on-year and is our best performance since the company was listed. In both our Australian and U.S. segments, I'm again pleased to advise that the safety performance continues to remain well below relevant industry averages with a 80% improvement and a 36% improvement realized over the last 3 years from Australia and the U.S., respectively. These are strong results, and I congratulate our teams on their safety performance, but I'll remind all the tasks with improving safety is never done. Turning to the next slide. It is the fundamental focus of the Board, the executive and the entire Coronado team to generate shareholder value. Our shareholder value proposition is supported by 3 pillars under which we have made significant strides in 2023. Met coal is a critical mineral. Our commodity touches every aspect of society and is key to the renewable energy transition. And met coal is in a market which is in structural shortfall of supply and the pace of change driven by the energy transition is set to exacerbate this shortfall. As a result, Coronado is extremely well positioned given our long life assets to take advantage of the supply-demand imbalance and resulting price environment. In 2023, we performed substantial drilling at our underground project that proved up JORC Reserve and resource of 41 million tonnes. Pillar 2, since inception in 2013, the Coronado team has a proven track record of successfully integrating, operating and developing new assets that have delivered substantial returns to shareholders since listing in 2018. In 2023, we continued the trend with the investment in our operations and our strategic growth projects. The payback on investments at Curragh is evident by the step change in cost that will come from removing 3 truck and excavator fleets and the increase in waste movement by our 4 draglines. Dragline cost per tonne is far cheaper than truck and excavator cost per tonne. To drive Curragh further up the value curve, we have implemented a restructure of the mine into 3 distinct operations to drive further operating simplicity and results in productivity gains. And the completion of the development of the new Southern District at Buchanan will see cost reductions and improved efficiencies in 2024. We also continue to execute our organic growth plans at Buchanan and the Curragh underground. These underpin our 2025 production targets. Pillar 3 our commitment to prudent financial management and a strong balance sheet ensures we maintain a sustainable business. Throughout 2023, we maintained a strong balance sheet that has funded our organic growth pipeline without the need to raise capital or further debt. Our ongoing commitment to being a responsible custodian resources we own is evident in our track record. In 2023, we continue to make tangible progress on our ESG initiatives by completing additional rehabilitation works and investing in emission reductions technologies. So what does this all mean for shareholders in the near term? In short, our business is targeting higher tonnages, lower costs, lower capital expenditure and higher margins over the next 3 years that we believe will substantially be sustainable into the future. The investments we have made to date and continue to make in accordance with our well-advanced plan is bearing fruit. Our fully funded underground at Curragh and Buchanan Works will deliver more tonnes to the market. Our cost per tonne will fall, given the forecasted higher met coal production rates and the improvements we've already implemented and will be implementing at each of our sites to improve productivity. Our investment in organic growth remains committed and fully funded from the cash flows generated within the business. These investments are well advanced, and we expect to see a return to a capital profile more weighted to sustaining in the near term. This all translates to higher margins, higher free cash flow generation for our business, all of which is within our control. In addition, we have line of sight to the completion of the existing stand well agreements that we forecast will deliver substantial value uplift late 2026. These gains for our business are set against the backdrop of higher for longer met coal prices. The Coronado team, the Board and I are excited to execute upon our plans to deliver substantial returns to shareholders. I'll now hand over to Gerhard to go into more detail on the company's results and market outlook.

Thank you, Douglas, and hello, everybody. Today, I will go into a bit more detail on our financial results for the full year. Capital management strategy and plans and also elaborate on what we are seeing in both the met coal and steel markets in the short and longer term. So on Page 10 now, Coronado's capital management strategy focuses on 4 key pillars: number one, maintaining a strong balance sheet with enhanced liquidity and prudent debt levels. And number 2, delivering shareholder returns; number 3, prioritizing organic growth expenditure to increase existing production rates, improved efficiencies and boost margins. And then number 4, ensuring we retain the financial flexibility to pursue acquisitions of high-quality met coal assets when they become available. So Coronado closed 2023, maintaining a strong balance sheet despite the impacts to steel and network markets from global economic headwinds, including high inflationary pressures and high interest rates in addition to higher Queensland government royalty rates. Our business maintains healthy liquidity levels and is investing in our organic growth plans from cash generated from our existing operations without the need for additional capital. Our capital management strategy will continue to apply in 2024 as we continue our growth investment mandate from the Board that will then translate to higher production, lower costs, higher margins and ultimately higher shareholder returns over time. Turning to our 2023 results on Page 11. Our company generated group revenues of USD 2.9 billion, the second highest in history. More than 91% of our revenues were generated from met coal sales, and we realized an average met coal prices across all of our products of $216 per tonne, reflecting a mixture of FOB sales and then FOR in the U.S. particularly and domestic price arrangements in the U.S. And while revenue was the second highest in history, it was lower than the record level set in the prior year, given average met coal prices fell 19% year-on-year. So we closed the year out with adjusted EBITDA of USD 382 million and a net income of USD 156 million. Within these numbers, our business paid USD 630 million or close to USD 1 billion in corporate taxes, government royalties and rebates that substantially added to our operating costs. On Slide 12, we generated USD 268 million in operating cash flows in 2023 that directly funded our growth projects. Group CapEx was USD 228 million, and we closed out the year maintaining a healthy liquidity position with available liquidity of USD 489 million. Our business had higher than normal inventory levels at 31st December 23, with the closing inventory balance of USD 192 million, 22% higher than 2022 with higher port stockpiles due to port congestion at year-end. Most of these stockpiles have been moved as we sit here today. And in quarter 1 this year, we made a potential additional payment to the Queensland government for assess and duty related to the acquisition of Curragh from back in 2017. So we may make this payment. That's not clear. The balance of payment is approximately USD 54 million based on the determination from the Queensland revenue office. We are currently considering our legal options on this method, but are required by law to make a payment before commencing any appeal forces. Slide 13. Today, Coronado's Board of Directors declares a biannual francs 40 fixed dividend of $0.005 per CDI to shareholders in accordance with its dividend policy. The dividend record date is 12 March 2024 and payment date will be 4th April 2024. The declaration of today's dividend does not require met in senior secured notes purchase offer and is made with the confidence that a strong balance sheet is retained. We continue to pursue our growth opportunities and in order to provide the company with maximum flexibility to achieve this strategy only declares a biannual fixed dividend at this time. And subject to the delivery of our strategic growth trends, ongoing operational performance and market conditions, the Board may determine to declare special dividends as the year progresses. Turning to Slide 15, and I'll shift gears and discuss what we are seeing in the met coal and steel markets now. Here at Coronado steel starts here is our motto. The inherent chemistry of steel production, which was both, mined Iron Ore and metallurgical coal commodities. And it is these commodities that underpin existing steel uses such as for automobile, transportation, infrastructure and buildings, amongst other things. But steel is also a critical commodity in the development of all low-carbon technologies, including hydro, wind, solar, nuclear and electric vehicles. We have shown this slide many times before, but it continues to win through. McKinsey Research steel is the #1 critical commodity used in the development and advancement of renewables for a low carbon future. On Slide 16, steel is used in almost every aspect of the world's infrastructure. In 2023, total global steel production from the blast furnace process was 1.3 billion tonnes. This level of steel production sustains current infrastructure development, but the ever increasing demand for renewable infrastructure will further drive increased demand for steel. To produce 1.3 billion tonnes of blast furnace year, 1 billion tonnes of mined metallurgical coal is required, making met coal a critical material for the renewable transition. And in fact, Met coal has been reaffirmed that as a critical raw material by the European Union to have built the world's infrastructure needs and renewable energy transition. Slide 17. McKinsey Market Research indicates that total global crude steel production is forecast to increase by 17% to 2.2 billion tonnes by 2050. And the method of generating were overwhelmingly continue to come from blast furnace methods, primarily in Asia, which rely heavily on met coal supply. In Asia, currently 81% of steel production comes from blast furnaces, and this is only predicted to 4% to 62% by 2050 with very optimistic hydrogen replacement outlook in module. This underpins the need for high-quality met coal for the next 20 years plus, not only in Asia but globally. Slide 18. Given these forecasts for steel production, I can reiterate to the market that Coronado is well positioned with reserves in the top metallurgical coal locations in the world. We continue to maintain long life operating assets in excess of 20 years and met coal resources exceeding 2 billion metric tonnes. Based on today's latest JORC reserves and resources update we have released. The strong reserve and resource base underpins our position as a long-term sustainable supplier of high-quality metallurgical coal for the years to come. Slide 19. Our geographically diverse asset base is located near key rail and port infrastructure providing access to both domestic and seaborne markets. Our broad range of met coal products produced from our Curragh Complex in Queensland and our Buchanan and Logan Mines in Virginia and West Virginia in the United States are well established and highly valued for the attractive coke-making characteristics. We maintain a diverse high-quality customer base across a range of global markets, but Asia remains our #1 destination for Coronado met coal. Our key export destinations in Asia, India, Japan, South Korea and China. Slide 20. Met coal prices in 2023 were lower than prior year due to generally lower global economic confidence, inflationary pressures and rising interest rates. Average benchmark Australian premium global hard coking coal index price in 2023 was $296 per tonne, down 19% compared to the average index price of $364 per tonne in prior year in 2022. However, despite the fall in prices, the average PRV index plus remained firm throughout the year and remained well above the historical average of $197 per tonne. Since September 2023, the Australian PRV index has improved primarily due to a combination of continued tight supply from Australia, which was impacted negatively by wet weather and reduced port throughput in Queensland and heightened demand from Indian and Asian steelmakers who were restocking from lower inventory levels. And as far as the improvements in the PRV index PCI quotes have been trading at a much larger discount given the Indian and Chinese markets continue to import discounted PCI and lower grade met coils from Russia. The global economic environment and soft steel demand outlook continues to put pressure on steel margins with steelmakers continuing to make lower demand through lower hot metal production and reducing demand for raw materials. Despite end-user demand weakness, Coronado anticipates that market optimism stemming from an improving global economy and the Chinese government's easing policies and expected new stimulus post Lunar New Year celebrations will assist in improving steel prices and margins. We expect that continued strong demand from China and India were key metro prices supported in the first half of 2024, particularly given the Australian supply remains constrained by wet weather in the borne basin as well as ongoing port constraints. And the forward curve estimates are projecting Australian index prices just under $300 per tonne in FY '24 and then even reaching into 2025. Turning to Slide 21. Global economic confidence is projected to return in the midterm, which will underpin infrastructure projects requiring steel. India, one of our largest markets is forecasting GDP growth rates north of 6%, with most other key markets, excluding China, forecasting modest worth rates between 1% and 3%. And while GDP rates in India are at 6% steel production increases are even higher with steel production increasing by 12% in '23 from 2022 levels. And over the long term, Indian steel growth is projected to increase by 277% to 531 million tonnes by 2050. These growth projections bode well for us, given our large long-life reserve base and our significant exposure to India. Slide 22, looking at met coal markets longer term. AME forecast indicated a 70% increase in global export demand from met coal by 2050. As you can see in the chart, the majority of demand growth is planned to come from blast furnace steel production in India. India export demand is forecast to increase by 283% by 2050, the majority of which will need to be filled by supply growth from Australia. But as we have stated previously, it is difficult to see how that supply will materialize and match demand given the limited approvals for new mines in the high-quality medical regions of particularly Australia and North America. In order to meet projected 2050 demand levels and forecasted met coal production from Australia will need to nearly double from existing levels. But we foresee an approximately 145 million tonnes shortfall in met coal supply by 2050. A lack of supply, therefore, should ensure higher prices for longer, which places more emphasis on companies like ours to continue operating and developing long-term long-life assets. I'll now hand over to Douglas to discuss 2024 initiatives, guidance and investment plans. Douglas?

Thanks, Gerhard. In 2024, Coronado is guiding for salable production between 16.4 million and 17.2 million tonnes, mining costs between $95 and $99 per tonne and capital expenditure between $220 million and $250 million. With several milestones achieved in our business plan, we are guiding for higher sale reduction levels in 2024. Production is expected to increase in the U.S. post the investment and development of the new Southern District at Buchanan and similarly, at Curragh with significant works that has been completed in recent years to recover historic pre-strip deficits and combined with anticipated fewer wet weather impacts, we see higher production at Curragh. Mining costs per tonne sold is expected to decrease due to higher production and the elimination of 3 contractor fleets at Curragh. Capital expenditure levels are expected to broadly align with 2023, given our continued investment in our well advanced growth projects. As a business, we have 4 strategic priorities that will not only ensure success for our business in 2024, but also into the future. Firstly, the health and safety of our people remains our highest priority. Secondly, asset optimization of our high-quality asset base will be achieved by our focus on the drive and delivery of operational and commercial excellence. Thirdly, delivering our growth plans, we have significantly progressed our organic growth projects at Buchanan and Curragh investment and investigations into opportunities for incremental organic growth beyond this in the near term. And we continue to be alert and inquisitive about inorganic growth opportunities as they present themselves. Fourth, capital management. Our ability to achieve asset optimization and strategic growth is underpinned by our focus to maintain a responsible capital management strategy and strong balance sheet. Now I'll address our operation focus areas and priorities for 2024 by segment, and I'll start with Curragh. In January, we announced internally the restructuring of the Curragh Complex, splitting the operations into 3 distinct units: Curragh North, Curragh South and Curragh Underground. This operating restructure is the final step in the one Curragh plan that is seeing Curragh optimize the mine plan, remove complexity and enable growth. Streamlining structure provides greater oversight of operations that we anticipate to translate into improved efficiencies, higher productivity rates and lower costs. The benefits targeted in 2024 from the works achieved to date include, as previously announced, we will reduce our truck and excavator fleets from 16 to 30 in the first quarter of 2024. The improved ratio of waste movement by draglines will increase to 44%, up from 37%. And additionally, Curragh has planned with further contractor and procurement initiatives to reduce costs in 2024. Incremental growth at Curragh also remains heavily in focus with a continued investment in our underground projects and our gas projects. Turning to Slide 26. The Curragh Underground project remains on schedule, subject to approvals. The project underpins the strategy to deliver sale production of 13.5 million tonnes per annum from the Curragh Complex by 2025. Coronado has extensive experience in underground mines, having operated longwall and Bord and Pillar operations in the U.S. for many years, and we are leveraging the experience of our COO, Jeff Bitzer and his team to develop this project. Our business is targeting first coal in late 2024 and will ultimately produce 1.5 million to 2 million tonnes of metallurgical coal per year from this new line. Substantial drilling works that I mentioned earlier have been completed, and this has proven 41 million tonnes of reserve of high-quality met coal, similar to the quality that exists at Coronado Open Cut recently. The project cost for the Underground is expected to be in the second quartile, and this will average down groups cost per tonne. We are currently procuring the necessary equipment and progress in the government approvals. Turning to the next slide. It's important to remind the investment community of the substantial valuation uplift to our business that will be achieved once existing Stanwell coal supply agreements expire. As a reminder, the current Stanwell agreements are legacy. We inherited these when we procured Curragh back in 2017. And to summarize the existing agreements under the coal supply agreement, coal supply Stanwell Power Station in Queensland approximately 3 million tonnes per annum or below market price to coal. In addition, we pay a rebate but keen to a royalty for certain percentage of volume of all export coal sold. Coming late 2026 early 27, these arrangements under the CSA will expire, and we internally estimate an increase of USD 29 million in our EBITDA as a result of this. While we will retain a coal supply agreement for Stanwell to supply approximately 2 million tonnes at the end of the present CSA, we will now have an additional 1 million tonnes of export met coal to sell into the market, which will boost our revenues. Additionally, the Stanwell rebate will no longer be payable, substantially reducing our costs. So in a scenario, we were producing 3.5 million tonnes with only 2 million tonnes going to Stanwell and no rebate expense, we're excited about the future margins to be achieved, particularly considering the projected future supply demand imbalance that Gerhard described in his address. Turning to our U.S. segment. In 2024, our first production priority is to realize the improved flexibility and productivity gains at Buchanan following the major milestone works recently completed by the establishment of the Southern Mining District. We are expecting to see lower costs and higher productivities from the Southern District as the development costs are now complete. Conveyor distances are shorter and the new district is closer in proximity to hoisting of people, material and coal to surface. Capital Works at Buchanan continued in 2023 on the construction of the second set of skips to ultimately increase the mine's hoisting capacity to surface. And we also progressed the investment in the new surface coal storage area to increase the mine's capacity. The completion of these projects is expected in 2025. And this will increase the salable production from our U.S. operations to 7 million tonnes per annum by 2025. Additionally, we are undertaking a study to potentially implement upgrades the Buchanan coal processing plant to increase throughput in Hill, thereby potentially boosting the U.S. sellable production above the 7 million tonnes we presently have in sight. Now I'd like to talk about Coronado's rehabilitation and emission reduction products. The business strives to ensure that we need to or exceed environmental obligations with the intent to restore the land to agreed rehabilitation and closure criteria. In the last 2 years, our business has completed 269 hectares of rehabilitation. That's 269 football fields. In addition, we have well progressed rehabilitation at Curragh with significant reshaping and toxin works completed late last year, and this area will be receded post the weather that we've recently occurred. Turning to Slide 36. Coronado has tangible projects underway to reduce our emissions as evidenced by the VAM units that we've implemented at Buchanan. The VAM project in 2023 has continued to prove success and reduce emissions from the mine. And given the success of this project, we commissioned the installation of a second VAM unit at our new ventilation Shaft 18. Construction is progressing well and is forecast to be completed mid-2024. The establishment of the second VAM unit is expected to substantially reduce our emissions further. And this will put us firmly on our path to a 30% emission reduction as targeted by 2030. At Curragh we continue to make progress in our emissions reduction plans via the Curragh Gas Project. This project targets the capture and beneficial use of open cut waste mine gas. These wells are now complete. We finished that work in late 2023, and the surface production facilities are installed, and I'm pleased to announce that these wells will become operational in late January 2024. And with that, I'll hand over to the operator to take your questions.

[Operator Instructions]. Your first question comes from George Eadie with UBS.

My first question is on mining costs. Taking the midpoint of 24 guidance implies down 4% year-on-year in U.S. dollar millions. So can we just unpack this a little more with EAs locked in at 4% to 5% and total cost as a trend not going backwards in the industry. Can you help us get a bit more confidence in this improvement beyond just parking of gear and contractor rationalization at Curragh, please?

The step change that we've got is obviously the fleets that we're taking out of the operations. Those fleets have served their purpose. As I mentioned, the deficit waste that came from pre-COVID and through COVID, we needed to make the investment to recover that deficit waste. That project is now behind us, and that turns off these fleets, and that's a substantial cost that was in the business through last year. In addition, the development of the Southern District at Buchanan and all the development work in that area, vent shafts and associated required setup for the Southern District didn't enjoy any production associated with that. So now that, that development is behind us, production tonnes will flow as well. So those 2 are big step change costs out of the business, tangible steps and cost side of the business. Referencing our EA, we successfully signed a 4-year EA last year at 4, 3, 3 and 3, which is a good outcome in the market. And then we've got a number of other projects afoot to reduce costs across site. And these include contractor rationalization, the way in which we house our people when they come to site, particularly in Australia. That will all bear fruit and have been projects that have been a foot over the last year. And then the obvious other driver behind it is the denominator with the increased production that we're going to be seeing, the denominal changes on the cost as well.

Our next question is from Chris Drew with Jefferies.

Another one on the guidance perhaps on the production side. 2023, we saw weather issues, dragline sites, geotech issues dealing with the waste movement catch up at Curragh, lots of things slowing up a little bit there. It looks like you're going for about a 6% production lift on top of that in 2024. How should we think about this guidance? In the past, it's been a little bit of a stretch to reach. Are we trying to be a bit more conservative here? It looks like that increase given all the issues through 2023 is not too substantial?

We've been diligently executing a plan to set our assets up for the long term. And the guidance that we've provided and the mine plans that underpin reflect that. Clearly, wet weather and things beyond our control, like the derailment and Porter 1 in Queensland and then the port challenges at the back end of the year and then that amplified for all producers in Queensland by the unprecedented whether it started at the end of the year, the unforecasted wet weather has impacted. So that has all been considered. Our mine plan considers changing trends in weather. We've accommodated that into our plan. The work that we've done in the Buchanan operations now puts that geotech behind it. The Southern District is a new mining area and the development of new panels. It's actually E-16 that we've moved into the moment is well advanced, and we're not picking up the same geotech challenges in the development that we saw in East 14 and 15. So we believe those challenges are firmly behind us. The investment we've made into our major infrastructure tools, for example, or draglines. I think, unfortunately, the Propel challenges that we had on one of our draglines last year, set us back from a cost perspective, but particularly from a production perspective, the benefit of that will be born this year because we're now ahead of the curve on the maintenance on that trade line. And the investment that we made through last year on the other 2 draglines we bare foot, and we're already seeing that come through in the productivity and reliability of our Dragline fleets. So all in all, we're quite comfortable with the guidance that we've given as it's well supported by the plan and it's underpinned by these improvements that we've identified.

So if I could also just a couple of quick ones on the numbers for Gerhard. It looks like there was a reasonable tax gain coming through in the fourth quarter, perhaps just what's happened there? And does that mean lower cash tax payments might be likely to come through soon? And secondly, the stamp duty payment comments, just some clarification. Have you paid that deposit you were talking about? Or is that still to go out? And how much would you expect that to be ahead of taking the potential legal action there?

So on the tax gain, yes, you're correct. You see that there. I think, first of all, it's twofold. In Australia, we have made tax losses. But I think the big one here is really coming from the U.S. The U.S. incentivizes as part of the Tax Cuts and Jobs Act in 2017, incentivizes exports, and it's called the foreign intangible income, FDII. And so we benefit from this. As we export, we can claim tax benefits on our exported coal in the U.S. So that line is a combination of both. On the stamp duty, so far, this year, we have not made payments. We have made a small payment last year. When I say small, it was about AUD 20 million based on what we believe we should pay. That was last year in 2022. In '23 what I said before, we may have to make a payment in quarter 1 this year that relates to the balance between what we have paid and what the Queensland revenue office calculated we should pay. Now that number is in dispute. We are seeking legal views on this. But we will have to pay the balance first even if we go into appear. The question is whether we can put it on a payment plan, and you can imagine I'm working on this as we speak.

And that balance is about AUD 15 million?

That's $50 million, yes.

[Operator Instructions]. Our next question is from Jim Xu with Barrenjoey.

Just another question on guidance. How has the year started in terms of costs? And what kind of weather have you recurring your 2024 guidance? Is it just based on the return to the 10-year average rainfall or does it assume another year of elevated rainfall?

Jim, firstly, on the costs, as we've come into the quarter, obviously, we've got the step changes that we're talking about, where we'll be taking out these fleets. So they started the year with our operational and then we're working through our obligations with our contractors to give notice and step the fleets down, but it all sees in accordance with our mine plan, and that cost will be out in the end of quarter 1. In the U.S., the development that we did last year was complete; we actually bought the Southern District into production right at the beginning of January. So those costs are behind us. And then with regards our planning, particularly around weather, we do use a 10-year long-term average like the industry usually does from looking at how much time would be committed by weather. But we have made allowances in the last couple of years considering the last couple of year's impact with additional rain in our time usage model.

And then just maybe another question just on Slide 8. You provided a longer-term estimates of production costs and CapEx. Are you able to provide a bit more color on the split of growth in sustaining CapEx in '24, '25 and '26? It just looks like it's a lot above consensus. And for the growth CapEx, is it just the growth projects at Curragh and Buchanan?

The growth is all the growth that we've got within the business that we're projecting here over the next while. So it's considering the building of a new mine. And if you benchmark the costs that we're projecting here versus are sustainable historically, and look, I don't want to give guidance or we normally don't, but we generally say about 130 is sustaining. So if you're thinking along the terms of about 130. And then if you compare that against other projects where we're bringing an underground mine of high-quality met coal of about 2 million tonnes online for a capital investment to build a new mine at Curragh, building out the Southern District at Buchanan, which will include now the completion of the skips project, which is about 40% sunk on progress, and then we'll finish the sinking through the course of this year and a cup that new shaft or the skips into early next year. And then the completion of the additional storage surface areas and then associated costs for another 1 million tonnes of production out of the U.S. section segment is a great return. And our Board is excited about what we can bring from the return of these projects. And you'll see the step down that starts and the return to more sustaining profiles. And once again, this is all funded out of the money we're generating out of the business. We've grown the business to be a substantial player without having to go after make substantial debt or buy at market multiples.

With no further questions in the queue. I would now like to hand the call back over to Douglas for closing remarks.

Hello, everybody. I know that it's a busy couple of days for all of you. So thank you very much for making the time to join us. I'd like to take a moment to thank our employees, our contractors and our partners that work with us diligently to execute the plans that we have. As a business, we've got a solid plan. That's a fully funded plan, and we're excited to deliver upon it and generate sustained returns for our shareholders into the future. Thank you.

Thank you. This will conclude the conference for today. Thank you for participating. You may now disconnect.