Mastermyne Group Limited (MYE) Earnings Call Transcript & Summary

Thank you for standing by, and welcome to the Mastermyne Group Limited FY 2021 Results Conference Call. [Operator Instructions]. I would now like to hand the conference over to Mr. Tony Caruso, Managing Director and CEO. Please go ahead.

Good afternoon, and welcome, everyone, and thank you for joining us for the Mastermyne Full Year 2021 Results Presentation. On the call with me today is Brett Maff, our CFO, and together, we'll be taking you through this year's results. So this year has been quite an exciting year for the business as it marks a real turning point in what will be a very different-looking business moving forward, and we look forward to sharing that story with you in this presentation and taking you through how we've done that and also many other highlights from the FY '21 year. As I say, it's been a year with many highlights, despite some challenges from low coal prices in the first part of the year, but which have now turned quite strongly and rallied and joined the strong performance of commodity prices more broadly. So on Slide 4, just talking to the operational highlights for FY '21. We'd like to start with our safety performance, which has been our best safety performance on record since the company has started. And our ability to work safely is one of our key licenses to operate, and we're really pleased to have delivered this excellent result, which is a culmination of many years of hard work in the area of safety, and I'll talk to that a little bit later on in the presentation. One of the other highlights has been our investment in learning and development, where we've seen significant investment and effort go into growing the skills of our people in preparation for the growth pipeline that we have in front of us. And there has been significant coverage across the resources sector around the impact of labor shortages across many industries. And the work that Mastermyne has done in this area sets us up to avoid those challenges. Our internal learning and development is based on the 70/20/10 principle, which is around 70% of that learning and development is done on the job, 20% is done with others and 10% is in that formal training and education space. Our order book stands now at a record high of $1.1 billion, with further growth to come from the execution of the second whole of mine contract or the mine operation contract, which we now refer to them as, and I'll talk to that a little later in the presentation also. But with this order book, we now have a very strong and long-term visibility to revenue and profit across multiple high-quality projects. So again, a real highlight to the work that was done in the year. To talk to the mine operations, for some time, we've been progressing with a strategy to move into these mine operations contracts. And whilst it's taken us a little longer to achieve that than we would have liked, we're really pleased to finalize the first of these contracts with Sojitz Blue at the Crinum underground mine in Central Queensland, producing high-quality metallurgical coal from that operation. The mine operation strategy is a real game changer for Mastermyne as it creates a very high-quality, repeatable income stream, with opportunity to increase our margins in the business based on strong performance. We identified a change in the landscape a few years back, where we saw a lot of the major resource companies leaving the sector, and junior miners and other more opportunistic investors were filling that void, acquiring the assets at very low prices and then looking to operate them with a very different business model to their former owners. And many of those new entrants had little to no expertise in underground mining, and that's the role that Mastermyne has been able to take up alongside these owners, bringing a low-cost, low-risk approach to mining of these underground resources. As I mentioned, these contracts are long term, they're very synergistic with our contracting business and they rely on strong partnering principles between Mastermyne and the owner to operate successfully. And again, we'll talk to particularly Crinum and Cook later in the presentation. As I say, after finalizing the Crinum contract, we quite quickly announced the second mine operation contract, Cook Colliery, and I'm pleased to say that work has started on that project in taking the mine out of care and maintenance. And whilst we're doing that, we're also finalizing the mine operator contract in parallel to that work at [indiscernible]. So that's the 2 contracts we'll talk to a little bit later in the presentation. And then just lastly, before I hand over to Brett to take us through the financial highlights, I just wanted to flag the strong cash position the business has finished the year on. So cash at bank of $24 million is the result of some excellent operating discipline that reinforces the cash generation that the Mastermyne business model delivers year-on-year. And only with a small amount of debt for some high purchasing -- high-purchase mining equipment, we finished the year with a very strong net cash position of $19 million. And that's important for a number of reasons to maintain our dividend payout, but also being well capitalized to fund the growth that we've got coming through and locked in for next year. So in terms of our highlights, as I say, operationally, very good safety performance, investment in people, a very strong order book, 2 whole of mine projects coming through and a very strong net cash position.

Thank you, Tony. I'll now step through the 2021 financial results. So as Tony mentioned, quite a strong result for the year despite our price cycle headwinds around the coal pricing, which occurred in the first half. But what we did see was a significant increase in coal pricing in met coal and thermal coal pricing from the first half to second half. The metrics there around the first half finished at about USD 100 per tonne for metallurgical coal. By the end of financial year, the coal price was at $195 per tonne, and we're currently sitting at $220 per tonne. What that does is obviously gives us some confidence around further activity in the coal markets as for the projects and tenders are now moving into the market. On last year's results, we achieved revenue of $233 million, which was in line with our guidance of $230 million to $240 million. EBITDA, we achieved $22.3 million, which again was in line with our guidance of $22 million to $23 million. The EBITDA margin, we maintained that at 9.6% on a lower revenue base, with some active management around our projects and ensuring we generate the most margin possible out of those projects; also managing our overhead costs, which were maintained at about 8% on overall revenue, and that also included, and we'll talk about it later, about our hard rock investment to diversify into that marketplace. EBIT was at $9.7 million, which was in line with the lower revenue, but also reflects an increase in our depreciation on our equipment investment, which throughout 2020 and '21, we've mentioned before around our loaders with Sandvik, the 8 loaders we've purchased and also 4 secondhand continuous miners purchased during 2021. NPAT was stronger at $5.9 million for the second half. Again, we've seen that increased activity from first half to second half. We generated 65% of our NPAT in the second half of the year. On the back of the NPAT performance, we have announced a dividend of $0.0225, which will be fully franked, which will bring the full year dividend to $0.03 per share, which is approximately 56% of our NPAT. In terms of, moving forward, an effective tax rate, so we still have $19 million of tax losses remaining, which results in an effective tax rate of approximately 26%, and we expect that to continue into the future with those tax losses to be utilized. As I step through to the next slide, I'll now talk about our capital position and also around our cash at bank and undrawn facilities and as we talk about our growth prospects for the future. So as Tony mentioned, strong cash at bank position of $24.4 million at the end of the year, with a net cash position of $19.3 million. That's also something to crow about in regard to -- we've also paid $4.7 million of dividends for the period. We acquired the remaining 33% of the mine site business. We own 66% of that as majority owner and acquired that during the financial year, and we'll talk about that a little bit further in the presentation. And also, equipment investment, we invested $7.3 million in the remaining loaders purchased from Sandvik and the 4 continuous miners, as mentioned. Again, with that cash -- net cash position, that's in alignment with our capital management strategy that we've communicated previously with maintaining $20 million of net cash and also returning to shareholders in dividends approximately 40% to 60% of our NPAT for the year. As we move through to operating cash, we've highlighted there that we've got a very strong return of EBITDA to operating cash. Operating cash is defined here as operating cash less our sustaining CapEx, so our ongoing capital, and we've returned 77% of our EBITDA in operating cash position. The main impacts of that EBITDA to operating cash conversion is really around the tax payments, which flow through. In addition to that, then the available funding position. So in addition to our $19.3 million of net cash, we have available funding facilities of our invoice finance facility of $20 million and an equipment leasing facility of $10 million. Both of these facilities are undrawn, giving us approximately $49.3 million of available growth funding to fund these projects into the future. In addition to that, we also will have our strong cash generation on our EBITDA as we move into 2022. So I now hand back to Tony for the next slide in the presentation.

So on Page 7, to talk more -- to talk in more detail around our safety performance. I mentioned earlier that our safety performance was our license to operate, and this will become increasingly important as we move into the mine operations contracts, where we will take on the statutory responsibility as the coal mine operator. So we've been working over a number of years to develop a very robust safety management system to support our safety approach, and that ensures a high level of compliance, which is needed to operate in this industry. But we've also been working on those soft areas around influencing good behavior and more so, over the past few years, working on this area we call psychological safety, which is fundamentally about providing an environment where our people are comfortable to report and address risk issues and safety issues without fear of repercussions, and that's continued to work really well across our business. And again, it's about reinforcing the right behavior and the behaviors we're looking for in the business and then rewarding the right behaviors. And we've got numerous examples across the business where this is working really, really well. And the majority of our sites now have all worked extended periods without injury. With these strong results, the risk is always becoming complacent. So we start to turn our mind to being very proactive in this space, and that's a lot about learning from the incidence of others and incorporating those controls in our business, so we don't repeat those incidents that have occurred elsewhere. And this process takes us down the path of becoming a high-reliability organization, and we're using these HRO principles to guide us to where we need to go, to ensure that we have sustained and repeatable outcomes with respect to our safety. So all of this goes to developing maturity -- the maturity of our business and being confident that we're aware in managing the changing risk profile in our business as we move into the mine operations contract space and also as we move across into the hard rock sector, where we're a little bit more unfamiliar with the risks associated with the hard rock sector. And so it leaves us in a very good position moving forward, and as I said earlier on, it's a result that we're extremely proud of, to be able to operate in a high-risk industry with safety results, like we've achieved this year, is a credit to the entire organization. So just moving on to now sort of more operational focus, starting on Page 9 or Slide 9. And look, this is the principal message we want to get across to our shareholders and potential investors, and that is that the business has used FY '21 to develop a very strong position and outlook moving forward. The introduction of the mine operations contracts is a game changer for Mastermyne, and we've secured revenue in this area already, but importantly, there's still a very strong pipeline of further opportunities coming ahead of us. To explain a little bit about this mine operations revenue stream and where it came from and, importantly, why we think it's not going away anytime soon, you look back over the downturn in the industry and, more recently, where you've seen a number of the major operators starting to exit this space and the junior miners coming into the space. And as I previously mentioned, a lot of these companies don't have the capacity or the capability to operate these underground mines, and that's the role that Mastermyne is filling very, very successfully. The other thing that's really worth noting in this area is the limited competition in the underground coal space. Mastermyne has enjoyed a very strong market share in this area, and as a result, we have quite a robust business and a lot of the right people and equipment in our business to be able to meet the demands of moving into this revenue stream alongside the mine operators. But if you look at the mine operations, this year, we're talking -- or sorry, FY '22, we're talking about an $80 million revenue stream coming out of the Crinum, and we do talk about Cook in this area as well. But what's really important is that this year is really the growth period or the ramp-up period before we move into sort of more sustained full rate -- full run rate operations in FY '23 and beyond, and you can see that revenue growing up to $150-plus million a year. So this brings a material shift around our projects, the scale of our projects, the control of our projects. This revenue is very long term. It's very sticky revenue. We provide all the equipment on these projects, which makes it very difficult for the contracts to change contractors very, very quickly. And the last thing -- the last point I'd make there is around the margin. So again, the contracts will be different for each of the operations, and they'll be commensurate with the risk profile in each of these projects. But what we are already starting to see through the negotiations is there is an ability to improve our margins through these contracts as well. The contracting business, a very mature business for Mastermyne, been operating for 25 years in this space, and this fundamentally is what Mastermyne started with. Historically, this business runs between $200 million and $300 million a year, and in the last 4 or 5 years, it's been sort of more in the $250 million to $300 million range. The relationships in this business are all long-term relationships with Tier 1 customers, and later on in the appendix, you can see we're working alongside the Anglos, the Glencores, the BMAs in this area. And these contracts are always tied to production activities, and why that's important in underground coal mining terminology being tied to production means that we don't see a lot of shifting around of the work because the work that we're supporting in the underground operations continues to run regardless of the price cycles. So it makes this work, again, very resilient. And probably the last point again there is around met coal, so our exposure to met coal being predominantly operating in Central Queensland, which is where most of the met coal is mined. It stands the reason that our met coal exposure is significantly more with only a very, very small amount of business actually done in the thermal coal space. And whilst we're quite commodity agnostic, we do see that there is more use of contractors in the met coal space; hence, the bigger order book in that area. Moving into the hard rock space. And why this is important in terms of our strategy going forward is it brings diversification to the business. We're looking here at very much a countercyclic commodity base, whereas, currently, we operate primarily in coal or totally in coal. By adding the hard rock business, we get that countercyclic play from a commodity point of view. But importantly, expanding across into the hard rock space is a very natural and synergistic fit with our business. It makes sense for us to move across into this adjacent space staying with the underground -- with the underground methodology and also sticking to the East Coast. So this is an area that we've invested significantly in this year in terms of bringing people on board to make sure that we understand technically the work that needs to be done, but also tapping into the synergies of the overall Mastermyne business and generally contracting in the underground resources space. And then lastly, the other services, we talk about Wilson's mining and mine site, and these are -- these have been, I guess, quite complementary to supporting the mine offerings of the business. And we use our long-term customer relationships to unlock the opportunities for these businesses. And we're always on the lookout for opportunities to add niche services to the main parts of the business, and the Wilson's mining business is a specialist ground support business, which links in quite nicely with the Mastermyne business, and that acquisition we made about 18 months ago and has performed very, very well, and we've been able to grow that market share through, again, working alongside the Mastermyne business and unlocking those opportunities through our customer base, but also through the way that we manage our underground operations. Also, the mine site business, as Brett alluded to, we've now taken full control of that operation, and we'll bring that closer in under the Mastermyne operations. And that becomes a very important feature moving forward, which I'll talk about a little bit later in terms of being able to ensure we've got a good growth pipeline of people, and they're being trained and onboarded through that RTO organization. So whilst we also do work for external customers, the strategy around the mine site business was really around mitigating risk in resourcing our growth pipeline moving forward. So again, just to recap on this slide. We are becoming a very different business where we were traditionally just the contracting revenue stream. We've now added the mine operations to that, which significantly lift the order book, but also extend the order book quite substantially with really high-quality revenue and potentially stronger margins. And then we add that to the hard rock diversification, and the business starts to look very, very different moving forward. I'm on Slide 10. Just to talk to the FY '21 sum -- to -- sorry, FY '21 year. The contracting business, as Brett alluded to, performed very well despite some challenges this year, and those challenges really stemmed from lower coal prices in the beginning of the year. Particularly in New South Wales, we saw thermal prices come off a little bit, and whilst we don't have a huge exposure to thermal coal, we did see some of those operations start to contract quite quickly. And then that was followed by the met coal operations in Queensland, where we saw some contraction as a result of the dip in commodity prices, but also affecting the year was the closure of the Grosvenor and Moranbah North underground operations, which are quite large projects for Mastermyne. In the latter half of the year, we've seen both of those operations now reopen, so there were temporary closures due to underground heatings, and we've now seen those operations back into -- back in production and ramping back up to full production over the next couple of months. And accordingly, we've seen our revenues increase commensurate with those operations coming back online. But offsetting that was the Aquila operation, which is Anglo's new underground longwall operation in Central Queensland, where Mastermyne has been engaged to develop the underground operation and get the mine ready for longwall production, which is due to commence sometime in the new calendar year. And what we've seen is the scope increased quite significantly at that operation over the year, and that's largely offset the contraction in the Queensland operations. The Wilson's business, as I alluded to, this year was our first full year of owning that business. We had a half year previous to that, and we've seen some real success in that business in terms of regaining market share. The ground consolidation services that this business provides is very niche. It's very profitable business and -- but it can be quite a lumpy business. So it's important to have a very strong, diversified customer base in this business, and that's really been -- the focus in the last 18 months is to diversify the customer base and win back market share, and that's occurred and has been quite successful. So we saw an excellent contribution from this business this year to the overall Mastermyne results. I mentioned the acquisition of the mine site business, and we'll talk a little bit about that later. And we've also extended contracts through the year at those mines, Integra, Broadmeadows, Moranbah North, which was around the Wilson's chemical business, and at Tahmoor in New South Wales as well. And just to finish that slide. The labor market for underground coal mine workers remains quite stable, and we're not seeing any major resourcing issues at this point. And it's probably worth noting at this point that the underground labor market is very specific to underground coal. So we don't typically see a lot of competition for the labor that operates in the underground coal mine area. And I think the other important feature about this is that we're not seeing huge expansion of coal mines, which is putting demand on the labor resources. So a combination of the fact that this labor is very specific to the underground coal space, and there's not a lot of new work or new expansion coming through in this space means that we're not seeing any critical labor shortages across our operations. And you can see on Page 10, there the labor numbers coming down from FY '20 to '21, which obviously corresponds with the earnings. But quite quickly, you can see it moving through the half year and full year as we ramp up the Crinum operations throughout the year. So to talk to the Crinum operation on Page 11. The feature that is contracted, it has been executed. It is for a 7-year term to reestablish and operate the Crinum underground mine using board-and-pillar methodology. So to be clear, these mine operations projects are not longwall projects. We're using board-and-pillar methodology, which is essentially using miners and shuttle cars and multi-bolters. It's a very flexible mining method, very low-risk mining method. And what we find is if we do incur any sort of geology issues, it's very quickly to relocate the panels into other areas, which is very different to the longwall mining method. The Crinum contract value is at $600 million to $660 million range, which equates to about a $80 million to $100 million annual revenue moving forward over that 6-year, 6.5-year period. 180 full-time personnel at full production, and again, it's a point worth noting that these projects are not labor-intensive. If you look at that sort of revenue, that sort of revenue across the contracting business or a longwall operation, the numbers required for us to deliver a project of this size would be substantially larger than the 180 that we'll use on this project. And the mine over the duration of the life of the mine will produce about 11 million tonnes. So we run at a run rate of around about 1.8 million tonnes a year of 3 production units. So that's a very conservative production rate for those 3 machines. The work on site has already commenced, and I am pleased to report that, that's tracking to schedule and budget. So we're recovering ventilation shafts. We're recovering the main access trips into the mines, and that's all progressing really quite well. And all that means is we're on track to deliver first coal late this calendar year and then ramping up through the second half to those 3 production units from January through to June next year. The CapEx on this project is around that $20 million to $25 million, and that will be over 20 -- majority over '22, but some of it will fall into '23 as well. And as we said, that funding -- sorry, that CapEx will be funded out of our cash reserves and out of our existing facilities. Key personnel are now all engaged on the project. So all the key statutory roles and key engineering roles are now filled. And importantly, we've got a very strong candidate base coming through for all roles from the deputies to the trades and the operators as well. So in many cases, we've been oversubscribed for those roles. The equipment is also well underway. So those overhauls are now occurring. So the machines are now in workshops, and that work is being carried out to overhaul those machines. And those machines are the investments that we made in the last 24 months in securing that equipment, both domestically and abroad, having strategically invested in the low point of the cycle to secure that equipment when there wasn't huge demand and the pricing was very reasonable and bringing that into the country and storing that equipment so that we didn't see any risk from -- or sorry, we mitigated the risk from lead times and availability on equipment. And importantly, the equipment is a really important feature of these contracts because it ties us very tightly to these contracts. The equipment is very bespoke. It is not readily available and, as a result, creates a real point of differentiation for us on these mine operations contracts. So Crinum, well underway, the project is tracking really well, and we're quite excited to be moving towards first coal at the back end of this year. On Page 12, we talk to the second mine operations contract, which was announced at Cook Colliery. Cook Colliery is located in Central Queensland and, again, is a high-quality metallurgical coal operation and is owned now by QCoal, who are a very well-experienced and well-regarded mining organization, operating across the Bowen Basin on a number of open-cut sites. And that's important because this is an established operator. This is an operator that is familiar with the coal mining space. They've been operating in this market for several years. And whilst this is their first entry into the underground, they are a very quality partner to work with this Cook Colliery operation. And Cook Colliery, as everyone may understand, has had quite an interesting past. And a lot of the issues that have manifested at Cook Colliery has been from owners, who have had difficulty in terms of funding the projects and have had to make decisions that weren't necessarily in the best long-term interest of that mine. With Cook Colliery and having QCoal as a partner, we've got a high-quality partnership there with an experienced coal mine operator, and importantly, the contract is not being overemphasized in terms of production and costs, and the commercial model that we'll enter into all that's being intended for this project is a very low-risk contract model, which was -- which is largely an alliance-style contract, where Mastermyne will only take the risk on our performance, and we won't take any of the owner's risk. And that's quite an important feature for this contract moving forward. So Stage 1 is underway. The works is -- it's only very early stages, but the work has now commenced to take the mine out of care and maintenance and move that into production. And the timing of this project, subject to agreeing the mine services contract, will be to commence operations -- sorry, commence production late this year, early next year, and the project is on track to meet that time frame. Just moving to Page 13. So we just wanted to talk to the execution risk as we have in front of us quite a strong pipeline and a number of these projects, which have now landed or are very close to being landed. We wanted to talk to the work that Mastermyne has done in terms of executing that execution -- sorry, mitigating that execution risk. We've expanded the management capability and support systems to cater for the growth, and we understand that there will be an increased focus on supporting our mine operations project. And whilst most of that support will be provided directly from the sites, there is an increased requirement to have the systems in place to manage the larger and more complex suite of projects coming through. And asset management is an example of that where we've expanded the fleet substantially for this whole-of-mine operations. And to ensure that we unlock the full value of these projects and ensure the availability and reliability of the plant and equipment on these projects, we know we need to have the people and systems to back this up to ensure those quality and repeatable outcomes, and that's led to significantly increased investment in asset management through additional roles and also developing our asset management framework to support the increased plant profile. And that's just one example of many areas that we've invested in over the past few years as we prepared for these mine operations contracts and to mitigate execution risk on these projects moving forward. And that also leads into the people investment, which I spoke to earlier, which is also about ensuring that we have the skills within the within the business to be able to deliver the growth. And the investment into the people development not only ensures that we've got skills in the business but, importantly, that we maintain the Mastermyne way of doing business. So that culture is extremely important to us because that culture, we believe, is a significant differentiator for us in the business. So that investment in people over a long period of time is what sets us up to have the right people available for the right roles. And you can see some of the statistics there around coordinators completing diplomas of project management, employees that are completing deputy programs, certificate to an underground operations and also our MasterMe program, which is a very strong cultural piece that we do with their workforce. So all of this is building towards developing a pipeline of people that will ensure that as we grow our projects, we've got Mastermyne people that can move across onto these new projects and ensure that we build these projects and we deliver outcomes that are consistent with the way that Mastermyne has always done its business. And we can always -- and then we backfill the projects that these people come from, and that allows us to grow without having to expose the business to the risk of bringing in new people that we've not worked with previously. So this is a really important piece of investment that we've made over the last couple of years. We've also invested, as I said, into the procure -- the acquisition of mining equipment. And again, this is really important in terms of making sure we've got the right equipment at the right time. For some time now, we've been canvassing, both domestically and abroad, mine sites that have been offloading for various regions, good-quality secondhand equipment. And we've essentially stockpiled that equipment here in Australia, and that's ranged from continuous miners of which we bought 4 last year through to multi-bolters that we bought in from Norway, and this is all the machinery now that will be deployed onto the project. So ensuring we had the equipment available to us, it was understood, and it was ready to move straight into the overhaul phase, ensures that we're not exposed to any risks around equipment availability or significant extensions of lead time as we see coal price come back up and demand for equipment increasing accordingly. And then the last area I mentioned -- we've mentioned a few times is around the acquisition of the mine site business. And this is around making sure that we've got the RTO to support the strategic pipeline of people that we need to bring into these projects. So having this in-house resource to onboard and train people through a very controlled process, which is our underground simulators, and deliver people on to the projects under a nationally-accredited framework is key to making sure that when we bring our clean skins on, it is through a very structured process. We'll also use the mine site resource to develop and sign off on our formal underground qualifications, things like our deputies tickets. So having access and control to developing this pipeline of people through the RTO so they can move into our projects will be highly beneficial ensuring that we have the right resources at the right time as we meet the growth opportunities. And so a lot of work being done in terms of mitigating execution risk, which sets us up to meet the pipeline that we've got coming through this year. On Slide 14, we talk about our hard rock diversification and being very clear on our strategy. So like our strategy to grow the mine operations revenue stream, we've progressed well with the growth of our hard rock revenue stream and, this year, has predominantly been around engaging the right resources to lead this expansion. And to that end, we've engaged some high-quality management personnel to head up this area of the business. Already, we're starting to see an increased number of tenders submitted this year for the hard rock projects, and that's as a result of having the well-connected individuals from the hard rock space now working in the Mastermyne business. And obviously, having that hard rock experience also gives us a high degree of confidence in the tenders we are submitting in terms of derisking our entry into this space. We've seen the tender pipeline also growing quite significantly. We've now got a tender pipeline of $250 million in the hard rock area. And what we've seen through the [ BD ] process is that there is a high level of interest from the sector in another quality mid-tier contractor coming into this space. So we've been really encouraged by how receptive the sector has been to Mastermyne coming in with the hard rock business to come into the space. And that hard rock expansion is extremely synergistic with our coal business, and we understand there are technical differences in the operations, which is why we're building that specific operational team. But there's also strong synergies in the support functions across the 2 areas of the business, the coal business and the hard rock business. And that's areas like human resources, asset management, commercial and contract management and all of our back-office support. Also seeing a lot of interest from the hard rock clients in some of the coal mining methodology, so things like using road headers in hard rock as a means of extraction and also the strong supporting processes that are used in coal, like short-term interval controls and planning and project communication. So with that, it's opened up many doors to conversations with hard rock clients, and all of that is resulting in that expanding pipeline of hard rock opportunities. And just to finish off that slide. In terms of our hard rock expansion, we're also continuing to assess acquisition opportunities in the hard rock area to accelerate our entry and provide us with a larger, more meaningful footprint in this area.

Thank you, Tony. I'll step through now on Slide 15. In regards to our guidance for financial year 2022, but also then the backup behind that around the impact of the mine operations projects, our order book supporting that as well as the tendering pipeline in front of us as well. So revenue guidance for 2022 is in the range of $300 million to $320 million, with approximately 85% of that guidance is secured in our secured order book already. EBITDA guidance for 2022 in the range of $28 million to $32 million, and EBIT is expected in the range of $14 million to $16 million. In addition to the $300 million and $320 million range on our $250 million secured order book, we will have each year a recurring purchase order revenue, which is in the range of $30 million to $40 million, and that's usually for the businesses of Wilson's and mine site and other ancillary works. For 2022, it should be noted that the Crinum and Cook projects, as Tony mentioned, are in the ramp-up phases, and we'll see full run rate contribution in 2023, and I'll talk about that impact in the following slide. The contracting business revenue is stable with upside, given the increasing activity and higher coal pricing, and that's usually running around that $250 million to $300 million mark in addition to our mine operations contracts. The other contract we mentioned there is the mine operations contract with Dysart East, and we're working with Bengal Coal on that project. That's moving through -- we've finalized the mining services contract. We're now moving through conditions precedent and financing arrangements for that project. Expectation for start of that project is probably until the start of 2020 -- financial year 2023. In addition, the final item for guidance is around CapEx, which we note is approximately $30 million to $40 million. As we mentioned, majority of that will be in 2022, but it will span some in 2023 due to the ramp-up projects for Crinum and Cook, as we said, supported by our current available funding capacity and as we move through our strong cash generation on EBITDA into 2022. So I'll step through to the next slide, Slide 16. So again, some further detail on our mine operations contracts and then our tender pipeline. So as you can see for the graph on the left-hand side, as the Crinum and Cook projects move through their establishment phase, generating just under $100 million of revenue for next year, as those contracts move into full ramp-up contribution, they'll be delivering $150 million plus on average for each financial year. And these are long-term contracts. The Crinum contract is 6.5 years and expecting Cook to be a similar term. And as I mentioned, on top of that, the mine operations contract is the contracting business, which is running around that $250 million to $300 million mark as well. . On the right-hand side, we show our tender pipeline. And as we've mentioned, as we're seeing additional activity due to increased pricing, we're seeing increasing in projects in our mine operations area and also seeing an increase in our hard rock pipeline, again, due to the investment we've made recently and moving into those projects as they come to the table. I'll step through to the next slide. Again, just outline some further detail around our order book. So as we mentioned, book-to-revenue secured revenue is now $1.1 billion. That excludes Cook, as we mentioned, is still going through finalization. All of our contracts, long mine life and large-scale longwall operations are related to longwall operations. Our secured order book for 2022 is at $246 million, with $196 million in 2023 and the remaining $640 million for 2024 and beyond, so again, supporting the long life contracts that we have. It should be noted also our secured order book exposure is 95% exposed to the met coal. We have limited exposure of our order book to our thermal coal projects. And also, I mentioned in addition to the order book is the $30 million to $40 million recurring purchase order work. What we've also need to mention is around the contracting business. While you can see that the order book is dropping off there, we do expect replenishment as tenders begin to come through and work awarded, and that typically is what we see on our long-term contracts. On the right-hand side, we then have highlighted our client list and our book revenue tenure. And as you can see there, long-term blue-chip customers and multiple years to run on those contracts. And typically, the contracting business is recurring-type contracts. So I now hand back to Tony for a final couple of slides.

So just last couple of slides. So look, commodity prices, I think, it's been well noted the recovery in metallurgical coal prices. The point we just want to make here is that reminding people that there's currently no near-term [indiscernible] for met coal in the steelmaking process, which is obviously driving continued demand and driving export volumes. And it's those export volumes that really support the Mastermyne order book more so than coal price. And we're also seeing through stronger pricing in the metals markets that increase in opportunities in our pipeline in the metal space as well. So just to finish off on Page 19 and summarizing the results. We wanted to leave you with a couple of key messages, starting with we're in great shape, we have executed on our strategy around delivering our mine operations revenue stream and expanding across into the underground hard rock sector. We are a very different business moving forward, and there's continuing opportunities coming through in both of these areas. In FY '21, it was a tough year, but we delivered a good result. We delivered a good set of results. But equally importantly, we used the year to set up the business to execute on the strong order book that we've secured. We've invested in people, in developing our systems, in sourcing equipment to ensure we give ourselves the best opportunity to deliver on our projects on time, on budget, productively and, most importantly, safely. We have a long-term, high-quality order book at $1.1 billion and a significant pipeline of opportunities ahead of us. And reminding people our order book is at a record high with a second mine operations contract yet to be included. We'll continue to generate strong cash from the business, and that will be used to fund our growth, but it will also be used to continue to support the payment of dividends to our shareholders. And our last point is just around our guidance, and 85% of our revenue underpinning next year's guidance is already locked in, and that's a great way to be starting the new financial year. So on that note, I just want to say thank you, and I'm going to hand back to the moderator for any questions.

[Operator Instructions] Your first question comes from Andrew Tan with Bell Potter.

Congratulations, it's a really good-looking [indiscernible]. So just had a question about the margins. So just trying to understand the guidance, EBITDA margins for '22. So [indiscernible] range is 50.52 range is 9.3% to 10%. Your second half margins were 10.3%. So just trying to understand the margin profile in FY '22.

Yes. So as you move into '22, so we've still got our contracting business, which is running around that expectation of that 9% to 10%. And then we've also got the ramp-up period for the Crinum project. So really, when we will start generating sort of higher margins on that project once we get into production phase, which won't be -- there'll be some in this financial year and the '22 financial year, but at the back end.

Okay. So I guess your [ establishment ] work for Crinum and Cook would be lower margin, and therefore, just a drag on that overall margin in '22?

Yes. That would be correct, Andrew.