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

Thank you for standing by, and welcome to the Coronado Global Resources' Full Year Results Presentation. [Operator Instructions]. I would now like to turn the conference over to Chantelle Essa, Vice President, Investor Relations. Please go ahead.

Thank you, operator, and thank you, everyone, for joining Coronado's Full Year 2024 Investor Call. Today, I am joined by our Managing Director and CEO, Douglas Thompson. Today, Coronado released its full year financial results to the market, including our Form 10-K, annual report, full year earnings release and results presentation. All of these materials are available for free on our website at coronadoglobal.com. Within our results presentation, you will see our important notices and disclaimers and reconciliations of certain 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 remind everyone that Coronado quotes all numbers in U.S. dollars and metric tons unless otherwise stated. I will now hand over the call to Douglas.

Thanks, Chantelle. I'd also like to welcome all of you to the full year results presentation, and thank you for making the time. As we navigate through the presentation today, we're pleased to start with our highlights. We've uniquely positioned ourselves to be at the right time for competitive advantage within the met coal market. 2024 has been a year of performance improvement and preparation for growth. We have repositioned for scale and lower cost structures. We've achieved major improvements in our existing operations with substantial productivity improvements and cost reductions. We're investing for growth in the business at multiples better than the industry, and we're on the cusp of significant cash improvements with Stanwell legacy contract expiring. We have multiple opportunities, which we are pursuing for further expansion due to the large reserve base that we have. We remain uniquely positioned for the potential advantage that will come from the tariffs and the trade flows that will result. We are located near key rail and port infrastructure, providing access to both domestic and seaborne markets. Our met coal is well established in key markets with our attractive product characteristics, and we maintain a diverse customer base focused on Asia, where the largest demand for met coal now and into the future. Our business is poised for significant growth with the Mammoth underground and Buchanan expansion projects set to deliver an additional 2.5 million to 3 million tonnes per annum of incremental metallurgical coal to the seaborne market once at full capacity. Both projects are designed to offer higher margins that are expandable, low-cost capital intensity and attractive payback periods. Leveraging our deep underground experience, these projects are positioned for success. Mammoth achieved first coal production in December 2024, and at Buchanan, we are on track to bring the raw coal storage area and the second set of skips into operation in Q2 '25. To showcase these exciting developments, we have prepared a video to give you a closer look at the progress that we've made, and we'll be showing this to you at the end of my address. So we'll now move on to our operations update. We'll follow that with a bit of a financial results summary. We'll spend some time talking about the market. We'll look at our guidance and near-term priorities for the future. And ultimately, we'll get to some Q&A. So with that, let's turn to safety first. Our group total recordable incident rate as of the 31st December 2024 was 1.18. Both our regions are well below respective industry averages. These safety outcomes are a result of daily focus and effort by our people and the leadership teams. Our group performance reflects major improvements in our existing operations. We achieved a 5% increase in ROM production year-on-year from '22 and 2023. Our total saleable production reached 15.3 million tonnes, further supported by higher-than-planned ROM inventory build of 600,000 tonnes at the end of the year. And our sales performance was maintained at 15.8 million tonnes. At our Australian operations, the dragline systems hit a 55% peak waste removal, marking a 3-year high. This is a delivery of exceptional results from our dragline systems performance and is a 15% improvement on the prior year. Increased dragline efficiency enabled us to reduce the number of truck and excavator fleets that we need in Curragh, this has reduced from 16 to 11 through the course of 2024. We introduced a new operating structure aimed at optimizing production and improved our overall efficiency. These efforts supported the 5% productivity improvement across all our truck and excavator fleets in 2024. And all these improvements contributed to approximately $100 million reduction in our cost. At our U.S. operations, Buchanan and Logan delivered strong performance, both delivering an 11% increase in ROM production. At Buchanan, the operations continue to benefit from the flexibility offered by our 2 longwalls. Skip efficiencies was maintained at an impressive 97% due to improved utilization during longwall moves. Overall, we achieved up to a 6% improvement in efficiency and a longwall availability. At Logan, we saw a successful reentry into Powellton underground mine and the expansion of our surface works, including the addition of a highwall miner. To finish the operational section, we have mentioned cost reductions in numerous times on these calls. To highlight the magnitude of $100 million reduction, mining costs have decreased 66% from January to December. Our aspiration is to reduce our costs further, another 25% once our Mammoth project is in steady state. We're targeting $82 a tonne for our Australian operations, which will reposition us on the cost curve. Our cost-out program is a critical priority for the business, and it is well developed with robust action plans and will continue to deliver additional cost savings. And then the additional productivity and volumes that will come from Mammoth Underground will also play an important role in the cost reduction by increased sales. Moving to our financial results. We maintained a strong balance sheet discipline despite the impacts on steel markets and met coal markets from global economic headwinds. Our company generated a group revenue of $2.5 billion, which is our third highest in history. And 95% of our revenue was generated from met coal sales, and we realized an average met coal price across all of our products of $185 a tonne, reflecting a mixture of free on board, free on rail and domestic pricing arrangements. While our revenue was the third highest in history, it was lower than the record set in prior years, given the average met coal prices falling 19% year-on-year. The company closed the year with adjusted EBITDA of $115 million and $340 million in cash. Within these numbers, we not only funded our very accretive growth projects with a capital expenditure of $250 million, our business also paid $413 million in corporate taxes, government royalties and rebates that continue to substantially add to our operating costs. We generated $74 million of operating cash in 2024, and that is $156 million if you take out the noncash movements and the deferred stamp duty that remains in dispute. We successfully issued a $400 million 9.25% senior secured notes due in 2029, and this offering was many times oversubscribed. To note, the tenure is beyond the current Stanwell agreement. The Board declared our biannual fixed franked ordinary dividend of $8.4 million, which is USD [ 0.005 ] per CDI as per our dividend policy. The dividend will go ex dividend on the 11th of March, and we will have a 12th of March dividend record date. On the 4th of April, the dividend will be paid. Going on to the markets. In 2024, the global met coal market demonstrated resilience. Export demand grew by 6% to 388 million tonnes despite facing multiple global challenges. While met coal prices declined to a 3-year low, falling approximately 20% due to uncertain economic conditions and the weak market sentiment in China, the outlook remains positive. Forward curve pricing for '25 and '26 shows promising increases with prices projected to $227 a tonne from $229 a tonne, seeing some potential recovery and stability in the market. Looking ahead, the global crude steel production is forecast to grow by 16%, reaching 2.1 billion metric tons by 2050, further boosting the demand for met coal. As steel production increases, met coal export demand is expected to capture a large share of the market, increasing by 12% by 2050. These trends, along with the expected growth in both steel production and met coal export demand sets a strong foundation for long-term growth and continued business success in the years to come. The future of the met coal industry looks incredibly promising with a strong demand expected to persist through to 2050. Global export demand for met coal is forecast to grow significantly, reaching 482 million tonnes by 2050, driven primarily by blast furnace steel production in India. And India's demand alone is projected to increase an impressive 181% by 2050, making it a key driver in global growth. Coronado with its high-quality long-life assets is well positioned to capitalize this growth demand. India continues to be one of our largest export markets. In 2025, we will also see the industry faced potential supply shortages of around 15 million tonnes due to cost curve pressures and operational constraints. And we've grown our business at the right time to leverage this potential opportunity. Now looking forward to our guidance and our future priorities. The 2025 guidance range considers the ramp-up of Mammoth and the Buchanan expansion. Coronado is guiding for saleable production between 16.8 million and 18 million tonnes and mining costs between $92 and $105 per tonne and a capital expenditure of $230 million to $270 million. With several milestones achieved in our business, we are guiding for higher salable production levels in 2025. Production is expected to increase following the ramp-up of Mammoth Underground and the completion of the Buchanan expansion project. The production increases are weighted towards the second half of the year, reflecting the timing of these projects. And our mining cost per tonne sold is expected to decrease due to the higher production and our continued cost-out programs. On our existing operations, our 2025 priority is to continue to improve productivity, reduce cost, drive performance reliability and leverage market dynamics. At Curragh, we will be focused on delivering productivity and reliability improvements and the cost-out program remains critical. At Logan and Buchanan, we see steady state from these operations in 2025. Throughout 2024, Buchanan's dual longwalls have demonstrated the required throughput rates that we have planned for 2025, and we will continue to leverage the ongoing incremental gains we can get from these assets. We are well positioned by having Australian and U.S. assets to take advantage of freight opportunities, tariffs and the trade rebalance that we will see. We will also have the ability to optimize on product mix based on market requirements. We're excited to execute our existing growth projects with Mammoth Underground and Buchanan as they are key catalysts of guidance growth in 2025. And as these projects are being delivered, we're assessing expandability scenarios for these projects of Mammoth Phase 2 and Phase 3 and further capacity expansions at Buchanan. It's important to make clear the substantial value uplift our business will be achieving once the existing Stanwell supply coal agreement expires. From late '26, early '27, these arrangements will expire, resulting in significant cash flow increases. While we will retain a coal supply agreement to Stanwell for a supply of 2 million tonnes per annum on average at the end of this current CSA, we will now have an additional 1 million tonnes to sell into the export market, which will boost our revenues. Additionally, the Stanwell rebate will no longer be payable, substantially reducing our cost base. And the size of this cost reduction is approximately 10% lower mining cost at a group level. We'll also maintain a focus on our existing exciting reserve base with Mon Valley and Russell County in focus. And we'll be inquisitive about opportunities that will present themselves around M&A. So to offer deeper insights into our vision, our improvements and growth projects, we will now play you that brief video I mentioned earlier, which will hope bring you closer to the business and provide you further color to what I presented today. [Presentation]

[Operator Instructions] I see no questions. That concludes the question-and-answer section of today's call. I'll now hand back to Douglas for any closing remarks.

Well, thank you, everybody, for participating. I know I don't present that well that there's no questions. I suspect people have moved on to the next calls that are back-to-back today. But thank you for making the time. In closing, our business has taken a long-term view on creating shareholder value, and I think you can see that through what we presented today. We've completed major improvements at our operations, and we've invested significantly in the growth and cost reduction that is demonstrated. And as we reach our milestones that we've achieved to date and continue to achieve, we're positioned to deliver increased margins, increased volumes and resulting cash flows. With that, thank you for your time.

Thank you for participating. You may now disconnect.