South32 Limited (S32) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for standing by, and welcome to South32 Limited Financial Results 2020 Investor and Analyst Q&A. [Operator Instructions] Please be advised that today's conference is being recorded. I would like to hand the conference over to your first speaker today, Mr. Graham Kerr. Thank you. Please go ahead.

Thank you. Good morning, everyone. Thanks for joining our financial results conference call for the year ended June 30, 2020. I'm joined by our Chief Financial Officer, Katie Tovich; and our 2 Chief Operating Officers, Jason Economidis and Mike Fraser. Before we get started, I'd like to talk about our safety performance. We were deeply saddened by the death of one of our colleagues, Duncan Mankhedi Ngoato, following an accident of Ifalethu Colliery at South Africa Energy Coal in May. We undertook a detailed investigation and the learnings from this have been shared across our operations to help prevent a similar tragedy occurring again. For the people who are dialing into the call, you can find a short video on our website, which provides an overview of our financial results. What I'll start with today is talk about our strategy, which remains unchanged and is underpinned by a strong belief in disciplined capital management or capital framework, and we believe it's a strategy that is fit for all cycles. Before we get into our performance for the year, I did want to touch on COVID-19 and our response, which has been built on 3 areas: keeping our people safe and well; our plant, safe and reliable; and supporting our local communities. On top of that, we've also taken a number of steps to maintain and keep our strong balance sheet. We took quick action to reduce our capital expenditure in both '19 and '20, and we also suspended our buyback to ensure that we can actually keep a strong balance sheet in these uncertain times. Our approach to capital management and our capital allocation framework remains unchanged. And one important point to note is we have extended the life so we can have flexibility to restart when we see conditions improving. If we move on to our operational performance, it was great to see that we set 3 production records for the year. At -- sorry, at GEMCO, we set one also at Hillside Aluminum and also Brazil Alumina. And 9 of our 10 operations lowered their costs over the year. What we can't ignore was the fact that we did see volatile markets and weaker prices across the board, which impacted our underlying profitability. We believe we are well placed entering FY '21 and expect to see further costs and increase volumes in our operations. For example, Worsley is on track to reach nameplate capacity and a unit cost of $205 a tonne. At Illawarra, it was great to see the start of a third longwall in the back quarter of the financial year that's completed. And we talked today, in the presentation, about a plan to maximize productivity of the 2 open longwall faces at Appin for the next 4 years and then transition to a simplified mine layout with longer panels from FY '25, which has the impact of reducing material capital expenditure and costs and continues the focus that we spoke about earlier in terms of value over volume. For our manganese business, it was great to see GEMCO open up additional markets for some of the low-cost product -- low-grade product coming out of GEMCO. At South Africa manganese, we continue to remain agile to respond to market conditions and continue to be the flex producer. In terms of the strategy around the portfolio, we continue to exit our lower-returning businesses, which is reducing complexity, enabling us to further simplify our footprint and our overhead structure as we go forward. In terms of our new projects, it was great to see the continued unlock of value at Hermosa with an additional tonnages add to the Taylor resource and the work progress to date, the more updated information around Clark in terms of initial resource statement and also some of the good news that's come out of the initial study around the processing of the material and the attractiveness in the battery market and also the broader land package. At the same time, we added another base metals growth option with the Ambler Metals Joint Venture in Alaska with Trilogy. We continue to believe in investing through the drill bit to add options to our portfolio with the bias to base metals. And at the same time, for our more mature projects, we continue to advance Eagle Downs which we're expecting a final investment decision by the end of this calendar year. And Dendrobium Next Domain towards the back end of their financial year. But again, like all expenditure in South32, all our projects must compete for capital, including capital returns. With those short introduction notes, I'll hand back to the operator for questions.

[Operator Instructions] Your first comes from the line of Sergey Donskoy from Societe Generale.

Yes. Can you hear me?

Yes, we can hear you clearly.

So I have 3 maybe short questions. First of all, regarding your interim agreement with Eskom, you mentioned in the press release that the long-term agreement is currently being reviewed by NERSA. This interim agreement, is it close to the long-term agreement in terms of the terms? And does it cover -- and does the new agreement cover all of 3 port lines? Or only numbers 1 and 2? That's my first question.

Maybe give us all the questions and then I'll sort of get you responses to them.

Yes, sure. So second question is regarding Arctic prefeasibility study, if you could remind me what is the expected timing around it? And lastly, the sale of South African Energy Coal, what have been the latest development, if possible?

Okay. No problem. We'll start with the first one with the power agreement at Hillside. Mike, you're closer to the action there, so why don't you give a summary of where we're up to?

Yes. Look, I think we've made very good progress with Eskom over the last 12 to 18 months and actually getting to a solution where we have now an agreement with them around what the long-term solution would look like. And that contract will include all 3 top lines, and it'll be a reset of that contract for an initial period of approximately 10 years, which would start once we get NERSA approval. The interim arrangement is intended to just kind of bridge that time period from when the dispute period kicks in, which was essentially the 1st of August until such time that we get NERSA approval. And NERSA is the only thing outstanding on that approval is essentially waiting for the DMRE to update the long-term policy framework for long-term industrial agreement. So that's essentially what we have. The interim agreement that is in place, will approximate the new agreement that kicks in once NERSA has approved the arrangement.

Thanks, Mike. Maybe touching on the Arctic PFS. We have yet to give a date around that. Obviously, we just closed the joint venture agreement with Trilogy in February this year. We're in the process of this year, we had planned to be out in the field and do some more exploration work. But with COVID-19, that, actually, exploration or time in the field was canceled this year to make sure we protected the traditional owners. I should call out that Trilogy, who is our joint venture partner in this space, has publicly talked about completing their own feasibility study, which we've yet to see and had input into, but that's obviously something that's coming along the pipeline. We're certainly interested in some of the news flow you might have seen around the Ambler Metals joint venture as a record of decision that was made, which really, for us, is one of the keys to unlock that region. If you look at the grades and the style of deposit with Artic being a VMS-style deposit, it certainly would have been developed anywhere else in the world. It had all-weather access. So a road that sort of heads out from the Dalton Highway, I think, will be incredibly important for the future of that project. I would also draw out that at the Ambler Metals joint venture, you have the bornite deposit, which is a larger, lower grade kind of deposit. But we're also really excited by the belt where Artic is in terms of that VMS belt. Typically, as you're aware, they are carrying clusters, and there's been very little exploration done in that region. We have also picked some of our own land just outside the area of interest as well for some of the prospectivity we've seen up there. But if we move on to the SAEC piece. The SAEC transaction is still on track to be completed by the end of this calendar year. There are a number of approvals or material conditions that have to be met as part of that process. I would start by saying Seriti, which is the counterparty for this process and is led by Mike Teke, we continue to have very good engagement with Mike and his team on a regular basis. They're obviously super keen to get a hold of the assets and integrate it into their business because there are a lot of natural synergies that exist. In terms of the approval processes, I'll sort of work through those in pieces. The first one is called Section 11, which is around mineral rights of both the operating and the prospecting leases. That's granted by the DMRE, Department of Mineral Resources and Energy. That is from -- all engagements for us has been progressing really well. We know the Minister, Mantashe, was in a hospital for a period of time with COVID-19, but he's out. And certainly, we're comfortable with how that's progressing at the moment. The other one in South Africa, a large one will be South African competition, which has 2 limbs to their mandate. One is around efforts in the interest of South Africa. Hard to argue, it isn't because Seriti is a black empowered group. It'll be a South African-owned entity versus overseas-owned white company. So I think that works in that favor. And from a competition perspective, together, we'd probably produce somewhere depending on a given year of 30% to probably 36% of the imports to Eskom. We don't think because of actually the size but also the nature of the contract, there are any competition issues. And certainly, the major, if you like, receiver of this Eskom is talked a lot about trying to develop a strong base of high-quality, reliable coal to supplement some of the more junior coal, which a bit more variable in grade and quality and delivery, if you like. So I think that's a positive. A couple of other things we will need to get us some foreign competition approvals, which we've already obtained. So that's being done. The material condition that's sort of sitting in there and tied together, they lie with Eskom. One is around the consent for the transaction to occur and sort of move the contracts along. And the other one that we've clearly stated is we have 2 contracts in South Africa Energy Coal related to Eskom. One is Khutala, which feeds the Kendal power station. It's cost plus. It's not an issue. The other one has always been the Duvha contract, which is more problematic because it's fixed price, been inflated over time, but it hasn't kept up with how the world actually moves. So for a long period of time, that has been loss-making for us. And that's a piece that we've talked to Eskom about what we call hardship relief. We've been having a very good dialogue with Eskom. There's some interim relief in place now. And certainly, the intent is to sit down with Eskom, Seriti and ourselves and look at the total coal package of this transaction delivered to Eskom, which we think puts it in a much better position than where they are today. Does that help?

Yes. It does.

Your next question comes from the line of Sylvain Brunet from Exane.

My first question is on coking coal. First, to get your read on the rather weak pricing conditions we've seen in spite of some supply disruptions in Australia in terms of your competitors. So how should we interpret the headlines we're seeing on China implementing more restrictions on imports, although that may be applied more to [ assemble ]? My second question on coking coal is to wonder if you have changed any of your long-term price assumptions and views in the context of more steel makers looking into hydrogen substitution, although this will take some time. And the third one, which is still a coking coal question, is around Eagle Downs. So in the context of the weak market conditions and a long-term outlook, which is not as clear-cut as before. And in context of your -- the concerns you had expressed around the resource itself, should we expect Eagle Downs to be officially mothballed sometime soon?

Yes. Look, thank you. Maybe I'll start with the Eagle Downs question, and we'll work our way through that one. Eagle Downs is coming up for a final investment decision towards the back end of this calendar year. They're in the process of completing the feasibility study that will form the basis to make a decision around the economic outcomes that they put forward. The big outstanding item, as you alluded to, was actually around the coal quality. That coal quality we've been drilling for a period of time now, and the team are actually putting the results through the lab analysis. And that, obviously, will be reflected in the feasibility study and will be reflected in the economics. I think the comment that we have made in the past is, look, at a time when prices might be low in terms of the met coal market, that obviously will waver into some of the short-term view of value in the Eagle Downs project. To answer your question, our long-term price has not really changed. It's around that 140-ish -- it's around that 140-ish mark, which isn't vastly different from most people's consensus when you have a look at it. So I don't think we have any heroic assumptions in that space. I think what we would expect is that the team will come back with a proposal around Eagle Downs towards the back end of the calendar year. It will have to compete with capital, like everything else we actually do. The first path I had to look at probably about 3 or 4 months ago, saw the project, not quite hit the hurdle rates that we'd be looking for, but that was before they finalized some of the work around port and rail access and also around coal quality. Again, part of the impact on the financials will be what is the access to the ocean for us. And the other piece will be the coal quality. And the thing we're certainly not interested in doing is building a met coal project in the Bowen Basin when a number of other projects might be getting built. So I think if you asked sort of my position for this stage, while no final decision has been made, I think it's less likely than more likely we'll proceed with Eagle Downs. Your question that you asked around why do we think of hydrogen. Look, hydrogen is something we watch with interest. Keep in mind that we -- if you think about the global met coal seaborne market, we're only about 3% of that. We have a large domestic contract, which is tied to BlueScope next door for domestic sales. Certainly, they're in the process of looking at a furnace rebuild and reconfiguration, and they've got no intent to sort of move down the hydrogen path based on their public disclosures that we have seen. Globally, we sell, again, about 3% of the global market, of which some of our product goes into India, South Korea and Japan. And probably a small bit for us goes into China. But not a significant amount, and we'll talk about the Chinese impact in a second, what's going on. We do think over time, hydrogen will come into play. But I don't think that's a short-term issue in the next 20 years. It's probably beyond that time frame. But recognize, in some cases, technologies can move much faster. There are a number of different, if you like, approaches that have been tested at the moment around hydrogen and steel making. We would say the 2 main processes that people talk about: One, I'm not sure is going to be the solution because of -- it substitutes PCO with hydrogen. The other one is probably where I think the industry will end up going. But again, I think it's probably a 20-year plus horizon. And again, I'd leave you with the comment, we're only 3% of that seaborne market. If we sort of go on to your other question around markets and what do we see at the moment. Look, we clearly see some weak demand, particularly ex-China steel, but we are expecting to see some recovery in the second half of this calendar year, as we see some of the capacity restart in Japan and other parts of the world. And we'll also see, obviously, in view in quarter 3 -- sorry, moving into quarter 4 from quarter 3 start coming out of monsoon and working through some of the high port stocks they have. So as a consequence, we do see a demand recovery coming towards the back end of this calendar year. I think we should note at the moment, now, we have already seen the exit of high-cost U.S. supply to start bring the market back towards some balance. We're also seeing a number of supply disruptions or under deliveries in Australia, which I think has started to tighten the market. So from our perspective, we probably do see a bit upside on price about where we are today. Your question around the quotas, I think, is an interesting one. It's always a little bit hard when I talk about quotas to sort of distinguish between thermal and met coal going into China. But we would say that, look, if you look through the numbers and our analysis, which show the half year, if you use last year's benchmark, they're probably about 76% usage of their quotas. So we do see not a strong demand for met coal, if you like, at the moment. The buyers are bidding at lower levels, and that's really -- it's a factor in higher cost due to extended cargo clearance times and the risk of cargo non-clearance. So we think it is having a short-term impact. But towards the back end of this half, we would expect to see some more pressure upwards on price. And it's fair to say I've seen a few other broker notes out there talking about a similar thesis at the moment. Did that address all questions?

Yes, Graham. Great.

Your next question comes from the line of Myles Allsop from UBS.

Just a couple of quick questions on Hillside. Is the cost of -- how does the cost of power under the new contract compare to the current cost of power? Just to get a sense as to how it will impact margins looking forward. And then in terms of the timing of the restart as a buyback, I mean what do you need to see? Would you restart midyear? Or will it always be a decision made around the reporting sort of cycle? And just on the balance sheet as well, do you -- once we've exited South African coal, what do you think the right net debt number for the business is going forward when the closure provisions kind of halved?

Yes. Look, absolutely. Look, I'll take the first one around the power cost and then Katie can actually talk to you about the buyback with the CFO hat on because that's really her role. Look, the power contract, you heard Mike talk about the interim agreement and where we're going in that place. The way, if you're going to model it, I would model it very close to what we actually see at Mozambique. In terms of the similar cost basis, a similar percentage and a similar kind of structure. What it does, too, I guess, is the change. As I had mentioned, we had in the past where you had some downside protection, but you also lost some of the upside under the old contract. But I think we should be very realistic. You were never ever going to possibly be able to keep that contract in South Africa. So the new one, if you're going to model it, do it very similar to what you see in Mozal in terms of percentage of costs. Katie, maybe you talk about the buyback?

Thanks, Graham. I guess probably the overriding point in terms of the buyback is that our capital management framework remains unchanged. We do prioritize a strong balance sheet through the cycle. What we did do this year, which was different in response to COVID-19 impacts was that we suspended our buyback in March. This was prudent given the uncertainty related to COVID at that time. Certainly, in terms of the signals, in terms of when do we come back into the market, look, I mean, we will continue to monitor the financial performance of the business and the COVID uncertainties in relation to our operations. And I think if you look across our business, we are seeing different COVID impacts in different jurisdictions that are having impacts either in terms of logistics or people availability and so on. So we really want to just understand, as we look forward, those ongoing impacts to our operations. I think what you will have seen is the Board today extended the buyback execution period. So we now have until September 2021 to complete the buyback. We don't need to do that in a specific time cycle when we are confident that the situation has stabilized, particularly in relation to COVID uncertainty on our business and operations. We have the flexibility to come back into the market at the right time. So at this stage, it's really around consolidating our balance sheet position and continuing to monitor, but we have that flexibility to jump back in at the right time. I think -- and in terms of the second question around balance sheet, look, we've always said we will revisit the balance sheet structure once we complete the SAEC transaction. At this stage, we talked to the $0 to $250 million net debt number. As I said, we're focused on ensuring that we consolidate our balance sheet position for the period of uncertainty that's still ahead of us. And we will reassess the balance sheet post the divestment of SAEC.

Thanks, Kate.

[Operator Instructions] Your next question comes from the line of Brian Morgan from Morgan Stanley.

Just 2 questions related to met coal. On Appin, I guess some of the benefits of lengthening the longwall. Maybe you could just give us a bit of color on what the trade-offs might be in doing that? And then on Eagle Downs, assuming come the end of the year, the project isn't bankable. What would your options be?

So maybe we'll start with the Appin one. And Jason, why don't you sort of just give, people on the call, a quick outline of how we're approaching Appin?

Yes. No problem, Graham. Thank you. So as we previously advised, we are -- we have returned to a 3-longwall configuration in April of this year. We have, though, got a mind plan change that will take effect between now and FY '25. That will give us longer blocks, wider blocks. And just to give a little bit of color on that, we'll be going from 2-kilometer long blocks to in excess of 4-kilometer long blocks, and we'll move from 305 meters wide to 320 meters wide. Ultimately, that leads to a lot less longwall moves. A lot less capital, we'll actually be reducing our vent shafts from 4 to 2, which is circa $120 million to $160 million for the size and depth of vent shafts that we need, which is more than 6.5 meters and over 550 meters deep. That'll be about 30 kilometers less development as we progress to the long longwall blocks in FY '24, but our objective is to be at around about 7.6 million tonnes per annum at around about an all-in cost of about USD 100 a tonne. Now just to talk about what is that sort of -- what does that mean from a trade-offs point of view. Or we can talk about it reduces complexity, it reduces the footprint, reduces gas drainage. We reduce our continuous miners from 7 to 4, which overall then reduces our labor requirements, which overall leads to lower costs. The specific question around trade-offs. The one thing that would typically happen when you go to single longwalls is that you are then impacted by the longwall moves. We won't be suffering from that because we will be using both of our longwall assets on a step-on, step-off arrangement. So I think that any of the issues with only having one longwall operating will be far outweighed by the benefits.

Thanks, Jason. On the Eagle Downs, I would start on Eagle Downs by saying that, look, our partner in this is Aquila Resources, which is Baowu. We've had a good open relationship along the way. As you would expect, there's a possibility where there's different incentives about developing the project. Each party has their own take-or-pay commitments depending on the size, it means that there could be different incentives for each partner to actually develop the project. When we entered into the agreement, there was enough flex in that. So neither party could be dragged along by the other party. And enough, if you like, mechanisms, without getting into too much detail because of commercial sensitivity, to ensure that if one party really wants to go ahead and the other one didn't, there was a fair and equitable way to actually move forward. The biggest thing for us is to finish the study. Understand the coal quality is part of that process and then look at the economics. And simply, if the economics aren't where they need to be, we won't take the project forward.

Sorry, can I just follow-up on that one? In the event that you decide to not take the project forward. And there's an asymmetry between the benefits to your partners and to yourselves. Would you be able to sell the project to them or get another partner in? Or what are the options?

So all those options exists. There's a goal in the line for them. There's a potential for us to sell our interest. There's a potential for them to sort of buy us out. There's a potential to do a variety of different things. There's some normal protections, you'd expect, that we would not lose the investment we've made. Another outcome could simply be that we both look at the project and think, look, there are more value, ripe opportunities that are in there. But they're not apparent today, so there's a process of deferring the project for a period of time. They are all the things that sit on the table, and there's lots of flexibility for ourselves and Baowu to work through that. Again, for us, it's all about first making sure how the economics stack up.

[Operator Instructions] Your next question comes from the line of Amos Fletcher from Barclays.

I have 2 questions. First one, just following up on Myles' points around the buyback and what you need to see to restart. Can you talk about where you are seeing any kind of impact from COVID on the business at the moment? I mean as far I can see, it looks like it's ticking over pretty well. And then secondly, on manganese markets, can you just talk about why prices have been so weak given the strength of Chinese steel production, and in particular in comparison to what's been going on in iron ore markets? Just interested in your views on that.

So perhaps if we tackle the COVID one first. What I would say, we've had the benefit of, obviously, operating around the globe in a number of different jurisdictions. And as part of that, we have seen the buyer sort of roll out of the -- a sequence of different countries that it's basically hedged. And then a number of these countries have actually seen, if you like, the second wave come through as well. What we have seen is a number of countries that have put in places lockdowns and those lockdowns, for example, at Arizona restricted our ability to actually do drilling on the ground to complete the feasibility study on time. And to give you a sense of the quantum there, in Santa Cruz County where we're operating, there's probably 1 in 3 people that tested positive for COVID-19 there. They're slowly now just coming out of lockdown, and then we'll start getting people back on the ground in a controlled manner. In Australia, we had a lot of things in place, for example, at the start around GEMCO oil and where we've changed our roster system, we separated people on the plane. We looked at where we brought people from Cannes and we brought people from North territory to have screening, hygiene metrics in place. That had an impact on our production in the early days. But as we've seen, obviously, COVID-19 outside of Victoria and Australia become much more contained or suppressed. That's allowed us to sort of have those controls in place that reduce the roster length, et cetera. I guess the unknown thing we don't know is what happens if you do get that large breakout and what does that mean for some of the operations in Australia today. We have seen, for example, Colombia, there's some impact there on the operational side with potential furnace shutdown that we deferred, and there was a lack of ability to get people in that would do the work in terms of technical specialists and some of the workers. And only now we're starting to see some of the COVID cases really have an impact, if you like, on the operations in South Africa. We think they're all manageable. I think the teams are doing an amazing job working through this. But if you have seen in various jurisdictions, it doesn't mean that governments don't stop/start restrictions. So when we talk about the -- bringing back on the buyback, it's driven by not only the price uncertainty because, yes, China is rebounded relatively quickly from a JD perspective, but the rest of the world isn't coming back at that same rate yet. So not only are prices not dramatically shifted for us since March for our key commodities. I think the other point I would say is we still have that little bit of operational uncertainty to see how the world handle the going forward. To Katie's point, though, we've always believed in returning excess cash back to shareholders. We're certainly not building a war chest to sort of fund our projects or look at M&A opportunities. We've extended the program, so we actually can get back into the marketplace when we have that cash in the bank, which I think is important. The second question around manganese. Manganese, I think, it has been the typical year you see in manganese, volatility up and down. We've seen prices down, then prices go up, prices go down, prices go up again. Nothing's probably fundamentally changed. In terms of China, still needs to basically import roughly 90% of its needs. It does have about a 6 million tonne stockpile, at the moment, that's made up of the various grades, if you like, there. That 6 million tonne stockpile stands like a lot compared to 3 years ago. But the real change between now and 3 years ago is they've dramatically increased their reliance on that 90% of imported ore. So when you look at it on a [ limited ] 3-month's basis, that hasn't really shifted. What you have seen though is places like Gabon. We see in places like South Africa, get a lot more product out in the market in the last couple of months, which really -- you've actually seen that puts some downward pressure on pricing. You've obviously also seen places like GEMCO hit a production record. So there certainly is more supply going into the marketplace at the moment. There are potentially some, if you like, as we mentioned, things that are working in our favor. One is we are starting to obviously see the steel production, as you said, pick up rate in China, and that should start chewing through some of those stocks that exist at the port. I think the second thing is, it has shown over time that the economics work. So this downward pressure on price, I think, will drive a few other people out of the marketplace. Even though there has been a little, if you like, support in the market for the last couple of weeks. The other thing, as always, is disruptions are a risk. I mean while it's not materially having an impact at the moment, there is a lot of discussions in South Africa about trucker strike and take our numbers. In FY '21, we probably plan to set about 28% of our product, if you like, on the truck as well as our rail allocation of the MECA2. So yes, we continue to run the business as we always have. In terms of -- GEMCO is the best asset in the industry, we run South Africa as a swing producer. We watch the price and turn it on our base on what that looks like. Our long-term view has not changed in terms of our attractedness and what we see in manganese, we still see a long-term price that supported around the $4.70. That remains unchanged.

Your next question comes from the line of Ian Rossouw from Barclays.

Just a quick question on the coking coal operations. You've seen a lot of press -- in the Aussie, press around these claims that the mining company's definition of high potential incidents is different to the sort of government's regulatory and therefore underreporting accidents. And I just wanted to get a sense from you around your coking collaborations, how gassy are they? And what you're doing around safety, given the big focus from, I guess, a state on that and the media? And then likewise, going forward, I mean, how do you think this -- and I guess, the focus from the state changes permitting issues going forward? And I guess, delayed timing, et cetera.

Maybe a couple of distinctions, and I'll get Jason because he's been right on the face of this when he was in charge of the operations in Illawarra. Illawarra is in New South Wales, which is a different regulatory environment. Appin is a gassy mine. So make no mistake about that. The piece that you're talking about is obviously the inquiry that's going on with Queensland, and particularly around Anglo, where they talked about what they classified as material incident versus what the government did. Maybe, Jason, you can talk about the difference between the 2 regulated New South Wales and Queensland and then how we approach it where you are.

No problem. Thanks for the question, Ian, and thank you, Graham. So first of all, from a -- as Graham said, we are a gassy operation. One of the things that I'm very proud of that we've been able to achieve is that we've actually had no production-related gas exceedances at the Appin mine in nearly 3 years now. And that comes as a result of doing significant amount of drainage. So we drain below the seam, we drain in the seam, and we're actually drain above the seam. So for us, we do an enormous amount of prework before we mine. So from that point of view, there's definitely a lot of work that goes into it to give us the comfort that we're mining safely. As far as the reporting between the 2 states, we have -- the New South Wales regulator has a very stringent requirement for notification. So we know for the -- similarly to Queensland. So from that point of view, the regulators have a marginally different approach, but it is on the same thing, which is to make sure that we're mining as safe as possible. So I don't know if there's any further question that you've got.

No, that's great. And maybe just on some of the media reports around companies not reporting, I guess, fatalities on contractors in transportation. I noticed in your statement, you did actually mention the fatalities there. But how does that differ from, I guess, other companies?

Look, I think the whole industry is maturing. When you'll -- we made a conscious decision about 12 months ago to start talking about the fatalities that we have that we can control that go into our statistics under the ICMM reporting. But we've also started to talk about fatalities that, if you like, not necessarily, we see -- well, they're not actually within our control, but they're related to our operation. And the most common one you see in that space in the mining industry will be around the transportation of material from the mine site to the port. And we certainly have seen those across our business. We had 2 over the last year. An example of one would be somewhere like Cerro Matoso, where we take the product roughly, I think, from memory mark, around 360 kilometers to the Cartagena port. And we had a fatality there where a truck driver was essentially driving the product to the port -- what we think had a sleep overnight, slept to be under the truck and the truck rolled. That's the kind of fatality, the ones that aren't necessarily in our control, but we try and influence.

Thank you, ladies and gentlemen. As there are no more questions, and we have exhausted our time, I will hand the conference back to Graham Kerr for closing remarks.

Thank you, and thanks, everyone, for your time today. Just maybe leave you with a couple of comments. Look, FY '20, while price is not kind to us, I think it was great to see that had 3 production records. It was great to see 9 of our 10 operations decrease their unit costs. We still, despite some of the challenges around price, generated $583 million worth of free cash flow. We still have an incredibly strong balance sheet after we acted the protect it. We do believe in an on-market buyback, we're looking for those, if you like, a situation where we have more certainty around COVID-19 operational, but also financial impacts in terms of pricing to start building cash back on the balance sheet, and we have the flexibility to actually turn it back to our shareholders. But don't forget this year, we did actually return USD 424 million in shareholder returns. And at the same time, despite all these challenges, we continue to progress the exit of low-returning businesses in our portfolio. And progress our development options around things like, again, Taylor, Ambler Metals, Eagle Downs potentially and also Dendrobium Next Domain. But thanks for your time and support today, and have a nice day.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may all disconnect.