New Hope Corporation Limited ($NHC)

Thank you for standing by, and welcome to the New Hope Group FY '26 Q3 Quarterly Activities Report and Investor Call. [Operator Instructions] I would now like to hand the conference over to Mr. Rob Bishop, Chief Executive Officer. Please go ahead.

Good morning, everyone. 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 Dominic O'Brien, our Executive General Manager and Company Secretary. This morning, we released our quarterly report for the third quarter of the 2026 financial year. Hopefully, you've had a chance to go through the report, but in any case, I'll briefly step you through our key highlights before we open up the line for Q&A. Operationally, it's been a great quarter for both Bengalla Mine and New Acland Mine, as we're really pleased with our position heading into the final quarter of the 2026 financial year. While our High Potential Event Frequency Rate improved, we've unfortunately seen a deterioration in our 12-month moving average TRIFR, increasing to 4.43, 17% higher than the previous quarter. The safety of our people remains our highest priority, and we are focused on continuously improvement in these aspects of safety and wellbeing. In terms of our physical performance, we moved 18.2 million BCMs of prime overburden, a 4% increase from the previous quarter, driven by strong mining conditions. Notably, year to date, we've moved 52.9 million BCMs of prime overburden, 13% higher than this time last year. Group run-of-mine coal production was 4.3 million tonnes, up 5% compared to the previous quarter, following an increase in prime overburden movement. Bengalla Mine continues to see improved operational performance, successfully operating at 13.4 million tonnes per annum run coal production rate during the quarter. New Acland Mine cycled through a higher strip ratio, achieving sustained prime overburden movement. Run coal production was 1.6 million tonnes, 9% lower than the previous period, in line with an increase in strip ratio of 9%. Saleable coal production was 3 million tonnes, 9% higher than the previous quarter, driven by the increased run coal volume at Bengalla Mine. Group coal sales were 3.2 million tonnes, 10% higher than the previous quarter, reflecting strong mining conditions and favorable logistics across the group. Following the increased coal sales, Bengalla Mine achieved an FOB cash cost, excluding royalties of $74 per sales tonne, 12% lower than the previous quarter. Looking to financials, the group's underlying EBITDA for the quarter was $130 million, 22% higher than the previous quarter, reflecting the uptick in coal pricing. Our average realized price was $140.70 per tonne, a 1% increase on the previous quarter. Realized pricing was affected by the strengthening of the Australian dollar. This impact was partially mitigated by the strong hedge book the group has in place, which covers approximately 50% of the revenues for the 2026 financial year. During the quarter, New Acland Mine was also selling a larger portion of high ash stocks as a result of off-peak seasonal demand, meaning New Acland received a lower realized price when compared to the previous quarter. The gC NEWC index average price for the quarter was $127.60 per tonne, a 17% increase from the previous quarter. Global coal markets observed favorable pricing movements during the quarter, driven by concerns surrounding LNG availability, resulting in a shift from gas to coal for power generation. The increase in gC NEWC pricing and API 5 pricing has remained strong post the quarter end. Energy market volatility is expected to continue, given the impact the Middle East conflict has had on energy supply, highlighting support for thermal coal generation as a long-term, reliable energy supply. Coupled with an expected supply shortfall due to aging thermal coal assets and underinvestment in new projects, this supports our view that thermal coal pricing will remain above historical averages over the long term. New Hope's low-cost operations are well-placed to continue providing a source of reliable, secure energy to our customers. During the quarter, the group paid the FY '26 interim fully franked dividend of $0.10 per share or $84 million, and ended up the quarter with a cash and cash equivalents of $572 million. The company successfully placed $300 million of senior unsecured convertible notes alongside the concurrent repurchase of 97.77% of our existing notes. We achieved very favorable terms and reduced near-term financial risk by extending the company's maturity profile to April 2032 at a pre-tax coupon rate of 2.635% per annum. I'll now hand over to the operator to start the Q&A session.

[Operator Instructions] Your first question today comes from Paul Young from Goldman Sachs.

Rob, really good quarter, certainly from Bengalla and operationally. Just, I'll just start with asking the question on diesel again. We all went through that in the last month, just an update as far as how that's tracking. I know you've said previously that 13% of your site cash costs are diesel, that's on a free-on-rail basis, and the diesel price gets passed through by the rail operator. You said you've had no supply issues near term. Can you just provide an update on the supply situation?

From a supply perspective, we've certainly had positive feedback from our key supplier. At least for the next 2 months, we've been told that supply is not an issue. Fair to say we're monitoring that closely. Obviously, we've got industry looking at it, discussing with government, we're discussing with not only suppliers for site, but also our rail providers, et cetera. At this stage, no cause for concern for the next couple of months. Obviously a lot's happening in the Middle East. Things are changing pretty quickly, we're keeping a good eye on it. I guess from a cost perspective if you look at the FOB cash costs for the quarter, it was $74 for Bengalla, which is lower than the prior quarter. We are expecting unit cost to increase across the group for the fourth quarter due to diesel prices. From a percentage perspective, I know I sort of stated it in site cash costs in the prior quarterly call. If we look at it from a total FOB cash costs, it's prior to the conflict were about 9% of total FOB cash costs for diesel, which was about $8 a tonne. We're expecting our full year forecast and that's obviously based on estimates to be around about sort of that $10 per sales tonne. You know, slight increase. It's probably important to note that obviously the increase we're seeing through price realization is far outweighing that. That sort of gives you a feel for the total impact at an FOB level.

Okay. Just on Bengalla had a really good quarter, as I said, you can see in the numbers and you ran at the 13.4 run rate, which is. Which is great and have been doing that for, I think for a couple of months. At times, I should say. You know, you're going through the mine fleet sort of replacement or refurb at the moment with a bit of capital to spend. Just as far as that rate's concerned, I know you're permitted for 15. I know you run last time we caught up, you ran through, I think the team ran through 30 different scenarios and the sweet spot was 13.2 to 13.5. But with coal prices where at the moment, can you actually flex Bengalla at all? I know it's obviously a big mine. It's not that simple. Just based on how things are going, is there any flex to go beyond 13.4?

I think to your point when we, I guess we're assessing what we could get out of the pit, that 13.4 is really sort of an average, annualized sort of run rate on average for the remainder of the life of the pit. There will be periods of time when we get very favorable conditions where we would exceed that 13.4. And then obviously when we go through times of wet weather, for example, and have logistics constraints or port constraints, then we may fall short. That 13.4 is really an achievable rate on a longer term basis. For us to ramp up past that consistently and get to a 14 or 15 rate, that would be very challenging. It would require a fair bit of capital from a particularly from a prep plant perspective and yellow gear perspective, but it would mean significant congestion in the pit. That's one of the key reasons why we feel that's just not sustainable. The 13.4 is really something which is realistic. It's certainly pushing the pit to a, I guess, a level which we can comfortably say is achievable. You know, there will be times when we slightly achieve that if we have a very dry month, for example. We have seen that in the last few months. We've had weeks where we well exceeded that run rate. The good thing is on a quarterly basis, we've seen a good consistent production level of that. We've sort of I think at the last quarterly call, we gave that guidance that the current quarter end at that point in time was running well and we see a pretty good runway for the end of the year and for years to come.

Your next question comes from Khyla Maher from Barrenjoey. Please go ahead.

I was just wondering, if we look at Q4, if you were able to sustain Q3 saleable production for both New Acland and Bengalla into Q4, you should be able to reach the top end of guidance. I was just wondering if there's anything to suggest that this wouldn't be achievable and you wouldn't be able to achieve towards the top end, like any planned shutdowns or anything else that we should be aware of heading into Q4?

Yes. I think from a guidance perspective, you touched on that. We feel as though we're within guidance and some of the metrics probably at the higher end or the better end, I would say. You know, we're confident that what we can control, we'll perform to that level. You know, having said that, we have been thrown some curve balls particularly with weather in prior years. You know, we feel as though we've put some strong mitigants into our logistics space, for example, where we've procured a number of different suppliers for rail, for example, to cover off any potential downside from a rail perspective. You know, weather can cause problems. I guess the promising thing is we've come into the end of the third quarter really well-placed. You know, we're certainly on top of, those aspects which we can control. Yes, pretty confident that we'll have a strong fourth quarter.

Yes. Okay. Also just similarly on the sustained CapEx at Bengalla, I know you've spent $58 million to date. To achieve the midpoint, it'd be spending roughly half, like basically that again, just in the final quarter. Are you expecting to come in below guidance, I guess? Or are you still expecting a big capital spend, sustaining capital spend at Bengalla in Q4?

Thanks, Khyla. Yes, you're right. We have been tracking quite low on the sustaining capital. At this stage, we're expecting to come in at the lower end of guidance. A lot of the capital though is required, I guess, by third-party approvals and what have you. There is potential for us to drop below guidance, and if we do drop below guidance, we'll obviously update the market accordingly. At the moment, tracking at the very low end of that range.

Your next question is a follow-up from Paul Young from Goldman Sachs. Please go ahead.

Just a few follow-ups and/or additional questions, actually. Firstly, just on New Acland, Rob, I know you mentioned around the higher ash production in the period, but can you just remind me what kilocalorie or what energy content that coal ash has, and should we be looking at the reference price in New Acland at the 5,500 benchmark or the 6,000 kilocal?

Yes. I have touched on the mix for New Acland previously. We do have a number of specs of coal at New Acland, which we produce, which is similar to what we produced in stage 2. So the higher ash product will be referenced to the API 5 index. I guess, the lower ash, high CV coal will be referenced to the Newcastle index. I think during the quarter, we had about 76% of our coal in the higher ash range, whereas the prior quarter, that was 55%. So certainly as we're ramping up the mine, we are seeing a bit of movement quarter on quarter, depending on which part of the pit we're in. We'll probably continue to see that a bit as we open up the Manning Vale West pit later this year. Once that's opened up and we've got three pits running at steady state, you should see more of a consistent profile of coal. To answer your question, yes, we do have coals which are referenced to both Newcastle and to API 5.

Okay. Thanks, Rob. Just a question on the thermal market. I know near term your book's generally pretty full and you're still building that long-term customer base and the book at New Acland. If you look at the market at the moment, there's certainly market observations are suggesting that Korea is restocking at the moment. Demand in Europe seems pretty good. Chinese coal inventories are pretty low. Do you have any observations just on the market and incoming inquiries over the next 3 months leading into Northern Hemisphere summer that could suggest a bit of a uptick in pricing?

Well, I think you probably covered off a few points there with regards to China and Korea. We're certainly seeing, what we believe interest from Korea, which would indicate some switching from gas to coal. You know, we believe that it's been pretty dry in China, so their pump hydro, or sorry, their hydro generation is low, so that's obviously meant pivoting to other power sources including coal. That stocks are low, as you said. I think it's got the potential for not only some restocking, but you know, if there is a warm summer in the Northern Hemisphere, which many are predicting, that could see a heightened demand and potentially a fairly quick uptick in price. I think it's fair to say that throughout this crisis, pricing has probably been a bit more subdued than what we would have thought. I think that's just been due to the fact that stocks were probably high. There was probably unsold stocks, but I think that's sort of edged its way out of the complex. I think now there's a real opportunity given what's happening in the Middle East there is gas shortages. There will continue to be no matter what happens. We feel as though demand if it stays where it is or it increases, it's definitely going to see price maintain or increase fairly materially.

As there are no further phone questions, we will now pause momentarily before addressing questions from the webcast. Your first question from the webcast asks, during the quarter, you raised a convertible bond, could you please provide some background?

No problem. During the quarter, as I stated in my narrative before, we successfully issued the $300 million senior unsecured convertible, which is due in April 2032. So the fixed coupon for that, very low at 2.625% per annum. I guess comparing that to the prior one, which was 4.25%, so a material benefit there. At the same time or concurrently, we repurchased the existing CV for $293 million, or just over $293 million. That had an existing put option of 12th of July, 2027. So that was nearing. That note could be cash settled. I guess from a proactive nature, we pushed through this transaction, and that mitigated that risk of having to pay that out in the next sort of just over 12 months away. As I said before, that pushes the maturity date out to end of first quarter 2032. There's probably a few other favorable terms which was realized in that. The coupon rate was low, which I touched on. We've also pushed up our strike price for when it was struck, obviously the conversion price. I think a very good outcome overall, and I think the note was 3x oversubscribed as well. Very keen investor base there for that type of instrument.

There are no further questions at this time. I'll now hand back to Mr. Rob Bishop for any closing remarks.

No problem. Thanks very much for your time today. I appreciate you dialing into the call and have a great day.

That does conclude our conference for today. Thank you for participating. You may now disconnect.