New Hope Corporation Limited (NHC) Earnings Call Transcript & Summary

Thank you. Good morning, all. Thanks for joining our call today. I'm Rob Bishop, Chief Executive Officer of New Hope Group. I'm joined here by Rebecca Rinaldi, our CFO; and Dom O'Brien, our Executive GM and Company Secretary. This morning, we released our quarterly report for the third quarter of the 2025 financial year. Hopefully, you've had a chance to go through it. But in any case, I'll briefly step you through our key highlights before we open up the line for Q&A session. The third quarter of the 2025 financial year was another solid performance in what has been a rather volatile market. Firstly, looking at our safety, our 12-month rolling average TRIFR was 3.65 at the end of the quarter, reflecting an 11% improvement compared to the previous quarter. Safety will always be a key focus for us, and it's positive to see those metrics continue to improve. During the quarter, we moved 16.3 million bcms of prime overburden, a 10% increase on the previous quarter, driven by strong mining performance and favorable conditions, especially in the Hunter Valley. Group run-of-mine production was 4 million tonnes, slightly lower than the previous quarter at Bengalla Mine cycled through a high strip ratio section of the resource. This was partially offset by a 13% step-up in ROM coal production at our New Acland Mine, which continues to increase volumes. Saleable coal production of 2.8 million tonnes was in line with the previous quarter as Bengalla Mine unwound its ROM inventory that was built in the previous quarter to maintain consistent feed to the prep plant. Coal sales, which totaled 2.7 million tonnes were 3% higher than the previous quarter. In terms of financials, the group achieved an underlying EBITDA of $155 million for the quarter, down 27% on the previous quarter, largely due to a softening of coal price. Our average realized price was AUD 148 per tonne, excluding domestic sales, which was a 7% decrease on the previous quarter. Whilst the coal price has declined in recent months, we continue to remain disciplined with our unit cost control with Bengalla Mine achieving an FOB cash cost, excluding royalties, of $75 per sales tonne, comfortably within our guidance range and a 2% improvement on the previous quarter. The group finished the quarter with an available cash balance of $659 million post the payment of our fully franked interim dividend of $0.19 per share for a total of $161 million. Our strong level of liquidity continues to support our on-market share buyback of up to $100 million, which we announced during the quarter and of course, also supports our focus on rewarding shareholders with fully franked dividends. Turning to our guidance. At New Acland Mine, we have experienced constraints with rail capacity, which has resulted in our product stockpile nearing maximum capacity. As a result, we've taken the step to revise New Acland Mine FY '25 physical volumes with all the details outlined on Page 9 of the quarterly report. Overall, in light of the volatile global market and local challenges, we are pleased with our ability to remain a resilient low-cost producer and continue to provide further shareholder returns. I'll now hand over to the operator to start the Q&A session. Thank you.

[Operator Instructions] Your first question today is a phone question from Paul Young with Goldman Sachs.

Rob, the first question is on Bengalla and just where we are in the mine plan and how the mine is tracking to achieve consistently the 13.5 million tonnes of run-of-mine production. So can you just step through, please, just how the mining fleet is performing and the wash plants and what's left remaining to actually consistently achieve the target of 13.5 million tonnes?

Thanks, Paul. I think on the whole, Bengalla has been achieving the required throughput at the mine for some time now, both in the pit and the prep plant, all kits all but delivered. There's a few ancillary infrastructure capital, which needs to be executed. Prep plant is performing well. Probably our biggest impediment to consistently performing is downstream rail logistics and port logistics. Recently, we've had significant rains in the area, and that's caused congestion in the port due to freshwater and ships not being able to come in. And rail has certainly been a point of concern. If you recall, at the end of fourth quarter last year, we had issues, and it's looking like there could be some more protester activity in this upcoming quarter. So -- but all in all, everything we can control is going well on site. Currently, the drag line is in its planned shut, which is going well. And with regards to, I guess, life-of-mine performance and strip ratios, et cetera, you've probably seen in the quarter, we had slightly higher strip ratio for the quarter just going -- [indiscernible]. That's really just a function of where the dragline was in that quarter and also just geology, but we expect that strip ratio to come down in this quarter coming and be at sort of that 4x, 4.5 to 5x strip ratio for the life of the pit.

Okay. Good news on Bengalla that you're achieving that 13.5 million tonnes and it's all done there. So that's great. Just maybe moving to New Acland and just noting that you've increased your run-of-mine guidance but reduced the saleable and that's all due to the rail issues. I was wondering if you could just expand that a little bit as far as like adding consists and rail paths or what actually do you need to see there from the provider to achieve that? And then also just a commentary on -- if you can add just on coal yields, like they seem to be pretty low still. Like are we going to be sitting at current yields for sort of life of mine? Or do you expect that coal yields will actually improve as you move into new pits?

Yes, good questions. I'll focus on the rail piece first, and that was probably one of the points that most people would have seen in our quarterly report. We are facing challenges. It's fair to say with ramp-up on the rail line for both Aurizon and QR. We're working very closely with them. And certainly, we've seen good feedback and response from both parties. But it is challenging. We've only got a certain amount of stockpile capacity at the site and particularly at [indiscernible] where our rail load out is. So we're managing that, but it has caused us to be a bit sort of conservative, I guess, with our guidance. And you would have seen that change in the quarterly. But certainly, good response from those 2 parties, and we expect to be able to ramp up to that 5 million product reasonably within expectation time frames. From a -- I think your other question was with regards to yield. Yes, it is a bit lower at the moment. That's just by virtue of the fact that we're starting up the pit. We're seeing a bit more of a high ash product being mined at the moment relative to our low ash gold product at the site. Yield will improve, and you'll also see another improvement in yield once we get over to our Manning Vale West pit, which is probably about a 12 months -- 12 to 18 months away. And that really gives us the flexibility to mine from the 3 separate pits for the life of the mine and yield should be roughly in line with where they were for Stage 2 production, along with total production around that circa 5 million tonnes per annum.

Okay. And just a final one on the coal market. I know you point out that the [ 6,000 kilocal ] market is finding a bit of a floor and you agree with that. You're also saying the Indonesian coal exports starting to decline on -- due to a function of price, but also maybe some demand, nuances at the moment. But just you make a comment on the forward sales book that it's well supported and you sold majority of your production forward for the next 6 months. Can you maybe talk through -- have you locked in a price? And if so, can you talk through that?

So it's not so much locking in a price. Most of our contracts are term contracts, which are pegged to the indices. We have very little fixed price contracts now. We did have some on the JRP, Japanese reference price in prior years. They've now moved to pegged to Newcastle index. Probably the only fixed price we really have now of a material nature would be our domestic sales out of Bengalla. So we've locked in most of our volume for the next 6 months, more shorter term, definitely locked in further out sort of 4 to 5 to 6 months is probably about 70%, but certainly well placed. And we -- most of our coal is pegged to that 6,000 index with relative premiums or discount depending on what spec of coal we're selling.

Your next question comes from Paul McTaggart with Citigroup.

Rob, I just want to circle back with the issue of trying to get coal from New Acland out. Is that just above rail capacity issues? Or is it access to slots? I mean, because you obviously go out through Brisbane from [indiscernible]. But what specifically is the problem there? Is it just because it's not a dedicated line and you've got to share it with passenger traffic, et cetera?

Yes, that certainly is a big part of it. So it's a bit of a mix between the -- getting the trains, but also a big part of it is the parts. And you make a correct point that it is a shared rail line and Cross River Rail project certainly will impact us from a ramp-up perspective. As you may be aware that, that project is delayed sort of circa 2 years at this stage. And hopefully, that doesn't get any worse. But there's a lot of shuts required for that, which impacts our ability to get parts. But as I stated previously, we certainly have had good response from both QR and Aurizon, but it is a bit of a juggling act. And obviously, now we've got the clear path to ramp up from an approval perspective, we're a little -- we are disappointed that we can't go as hard on our ramp-up, but we're certainly pushing as hard as we can to get to that 5 million product.

Your next question comes from Daniel Roden with Jefferies.