Stanmore Resources Limited (SMR) Earnings Call Transcript & Summary

Thank you. Good morning, everyone. Thanks for joining us today for our 2023 Full Year Results webcast. I would like to begin today by acknowledging the traditional owners of the land on which we meet the Turrbal and Jagera Peoples here in Meanjin Brisbane. I also acknowledge the traditional custodians of the lands on which our operator base, the Barada Barna, The Jangga, the Widi peoples of Central Queensland. I will begin with a summary of our highlights on Slide #3. 2023 was another fantastic year for Stanmore and the first full year of ownership of our new SMC assets, where our focus has been on embedding these operations into the Stanmore culture and our operating model. Our efforts have translated into impressive results highlighted here, including below average -- below industry average safety performance, above guidance, saleable production of 13.2 million tons and below guidance FOB cash costs, across the consolidated group of USD 86 per ton. Financial outcome of the full year underlying EBITDA of USD 1.1 billion, demonstrated the significant earnings capability of our portfolio in a more normalized pricing environment and also supporting a dividend declaration of USD 0.82. Together with capital appreciation, Stanmore provided a total shareholders' return of over 40% for the calendar 2023, significantly above the ASX 300 average and adding to significant returns provided since the last equity raise back in March 2022. Moving on to the detail for today's presentation. We will start with a summary of our safety performance on Slide 5. Safety is central to everything we do at Stanmore and is integral to our social license to operate. For previous announcements, we have recently shifted our public reporting to focus on the serious accident frequency rate or, of course, serious accidents of over TRIFR or total recordable injury frequency rate. Whilst the TRIFR will remain an important metric, particularly with regard to informing our current efforts to improve lead indicator, identifies that SAFR provides a direct benchmark to the reported industry averages and is consistent with the latest focus of the Queensland Safety Regulators and we'll sharpen our focus on actions and initiatives to prevent the most critical incidents. On that note, we were disappointed to record our first serious accident for 2023, right in the back end of the year in December, contributing to a closing SAFR of 0.19. That's still well below industry average. We are also conscious of the increase in TRIFR over 2023 and aim to provide, to improve our processes, quality of investigations, procedures and understanding of lead indicators to ensure this does not translate into any serious accidents further. And we can endeavour to get this back on the right trajectory, with a goal to return our employees safely home to their families. I'll move now to the next slide on to sustainability. We are progressing on our sustainability journey aligned with the expectations of our stakeholders as a pure-play met coal company. Sustainability road map developed this year or in 2023 provides the direction for ESG for the next 5-years. On environment, our focus is on our material matters. We have developed our first decarbonization plan and identified various initiatives to contribute to our emissions reductions. The Q1 that we are busy with at the moment, it's our South Walker Creek Gas to Electricity project. We don't go in discussions with true partners, as well as with the Queensland [indiscernible]. Also completed a renewable diesel trial as we look to find solutions to reduce diesel emissions, while we wait for OEM equipment solutions. We have also costed action plans to reduce our reliance on externally sourced water, and we are working on data collection for the upcoming stock story requirements -- reporting requirements, including of Scope 3 emissions from 2026. In the social space, we developed during 2023 as social performance strategy and action plan including the development of our community investment framework, which we intend to adopt to our systems and creating lasting value for the communities in which we operate. We continue to deliver on our reconciliation action plan, as we look to go from the reflect phase to the innovate phase later the year. Finally, in the governance area, we are focused on the ongoing development of -- and implementation of robust governance management processes to match the size and scale of our business. However, ensuring we maintain our strong culture of an agile and entrepreneurial company. In Slide 7, here we have -- following from our very strong performance of over 270 hectares of rehabilitated land in 2022. We delivered another 191 in 2023. Our focus is using also production equipment were not required for production to create good rehab outcomes. There is a great photo on the right here of some of our newly rehabilitated land in 2023, showing the contouring of all dragline piles and truck shovel, dumps leveled, contoured, subsoiled, top soiled and seeded to great effect. The teams are looking to the process of doing our first pilot certifications, and we look to implement that in the coming years. On people and community, Slide 8. Touching briefly, we remain proud of the positive impact we have on the communities and regions in which we operate. In 2023, our impact to the regions was significant, with 507 or 67% of our total employed workforce living and breathing in these communities. Whilst from a procurement perspective, $223 million was spent in these local communities. Contribution to the state government via royalties were AUD 825 million, demonstrating the sizable impact of the increased royalty regime introduced from 2022 in Queensland. This figure represents almost 30% of our market cap and over half of our underlying EBITDA in U.S. dollar terms. Moving to Slide 10 on -- with our [ vertical coal ] markets. Starting from our product mix, our product mix continues to align with our strategy to be a leading met coal producer with PCI and coking coal comprising 93% of production and over 97% of revenues. Geographical demand trends have proven to be dynamic over the last couple of years with the trade flows adjusting to the Russian sanctions, and continued growth in demand from India and Southeast Asia. Stanmore's customer mix remained stable and focused on traditional markets such as Japan, Korea and Taiwan. We have seen European demand stays strong at 21% amidst ongoing Russian sanctions, albeit, North America volumes have returned to the market, the thermal prices reducing back below the metallurgical coal. In the end, Southeast Asia continues to grow, as we will highlight in the coming slides, our forecast will be key drivers for growing demand going forward. In Slide 11, we have included a few slides summarizing key trends in steelmaking and metallurgical coal demand from key research houses such as Wood Mackenzie. As you can see here on Slide 11, crude steel production capacity is forecast to continue to grow, increasing by almost 17% through 2020. And obviously, we see a decrease in China of 22%, which, to be fair, to [ square ], is quite significant. Thus, we still see a net positive growth. And as mentioned in our last slide, the clear drivers for this expansion are India and Southeast Asia, which are projected to more than offset the decreasing output from China. Slide 12 shows the forecast change in global blast furnace, steel production outside of China. Whilst traditional steelmaking countries are expected to increase output from alternative methods such as gas based, direct iron reduction and electric arc furnaces steel making. The expansionary phase in India and Southeast Asia is forecast to be primarily driven by the more competitive and scalable conventional blast furnace steelmaking route. Wood Mac has projected total BF -- BOF steelmaking ex China to increase 23% in the next 10 years, and 54% till 2050. While India's share loan is expected to increase almost 200% over the same horizon. Zoom-in on the PCI market on Slide 13, which as a reminder currently comprise around 60% of our production. Demand is projected to steadily increase with India's share of export -- export demand forecast to increase 3x till 2050, driven both by India steelmaking growth, but also by the increasing PCI injection rates, which also grows with the maturity of steelmaking operating practices. PCI remains an important input to conventional steel making, improving costs by reducing the amount of coke required, something which has become increasingly important in light of the current 40% discount of PCI to premium hot coking coal. At these price levels, we also see increasing demand for PCI, as a blend filler in coke making, creating a new source of demand and providing some support for prices. On Slide 14, with Australian exporters set to benefit from growing demand out of India and Southeast Asia, this naturally leads in to the conversation of supply we can see here in this slide. Projected growth in demand will require increasing supply for seaborne met coal, of course, especially from Australia. Stainless current operating portfolio and future development is in step with these projections, with development opportunities like Lancewood and Eagle Downs providing potential increased exposure to the hard coking coal market. Of course, growth in supply remains subject to sufficient investments supporting the development of new mines as well as consideration of the logistics network and challenging regulatory environment in Australia. The growth till 2033, [ out ] for 2050, above includes WoodMac's expectations for possible and probable projects, hence, still lots of uncertainty considering all regulatory and funding challenges as well. On the short-term dynamics from Slide 15, which shows the historical price of premium hard coking coal and the discount to PCI in the area -- in the area chart. Premium hard coking coal prices have remained strong over the last 12 months with PCI relativity softening from the middle of last year and remaining soft and well below long-term average of around 75% to 80%. Weaker steel market sentiment and compressed margins continue to weigh on the demand environment. However, we see the current price and disparity between Australian coking coal grades to be primarily a function of supply. On the PCI side, exports are concentrated to Australia, around 1/2 to 2/3. In Russia, around 1/3 of the market with any significant disruption from other markets impacting prices. Following lower volumes from Russia in 2022, which aided very strong relativities, volumes normalized in 2023 and have increasingly provided competition to Australian exports in key markets such as India and Southeast Asia, while traditional markets still with ongoing trade sanctions. Nonetheless, in our view, tightness in prime coking coal, the supply from Australia will -- with many large operations performing at lower levels in the past 3 months has kept the premium coking coal at elevated levels and is the primary driver behind persistently low relativities for lower PCI and semi-soft grades. This trend is clear on Slide 16, showing that 2023 was the lowest annual metallurgical coal export figure in over 10 years, with [ further ] supply interruptions from major producers. Export figures from Queensland ports in January '24, show supply is still tight, with wet weather holding back any recovery in supply and distorting prices for premium products in the short term. Moving on from markets and on to our operations from Slide 18. Total saleable production for the year was 13.2 million tons, exceeding the upper end of our guidance by 0.2 million tons and once again demonstrating the output capable from the portfolio in a full year, of full ownership of our new asset portfolio. Consolidated FOB cash costs remained steady year-on-year, notwithstanding continued challenge from inflation and labor. Whilst our average sales price was USD 76 per ton lower year-on-year following the record highs in 2022. Focusing on each asset and starting with South Walker Creek on Slide 19. It's been another very strong year with salable production increasing 5% compared to annualized '22 volumes. CHPP performed exceptionally well, delivering nearly world benchmark operating levels at close to 8,000 hours with 0 no coal delays and underpinning the strong production results and feeding into our strong sales performance with only a steady increase in unit costs. We look forward to how South Walker Creek will continue to deliver in future years, with multiple ongoing projects to improve and expand this foundation assets. On Slide 20, we see the Poitrel also had a robust year, achieving multiple records including drilling meters, explosive tons loaded and impressively a mine record for total material movement. Whilst the first half was challenged with wet weather early in 2023, catch-up of inventory stripping and logistics constraints. We are pleased to report a very solid second half in '23 with sales volumes increasing almost 50% in the second half. Unit costs were up USD 9 year-on-year, which is primarily a factor of inflation, but also lower yields due to the mining of lower [ SIMS ] with higher ash thermal coal product recoveries as per the previous discussions. But also the fact that coal flow was maximized in the second half of 2022 to leverage from the record high price environment, and some stripping catching up was required in the first half of 2023. Stockpiles were proactively healthy at the end of 2023, with 900,000 tonnes of ROM providing buffer and derisking the plant for wet weather impacting early now in 2024. Lastly here, Isaac Plains on Slide 21. We achieved an all-time record for saleable production and sales, supported by healthy opening stockpiles for 2023, maximizing utilization of the recently upgraded CHPP, as well as the washing of some volumes at Poitrel earlier in 2023. Pit ratios increased as anticipated with the mining sequence continuing downstream at Isaac Downs. Whilst waste movement at Pit 5 North commenced in the second half ahead of first run right at the end of the year in December. Nonetheless, unit costs remained relatively steady year-on-year given the high volumes. I'll hand over to Shane now to discuss our financial results.

Thanks, Marcelo. And Let's start with a summary of our key financial performance metrics on Slide 23. It's important to remember here that all 2022 comparative figures include the SMC assets, South Walker Creek and Poitrel only from May 2022 onwards. So 2023 is really our first full year of consolidated reporting, including these assets. As always, too, I'll remind everyone here that all financial figures used are quoted in U.S. dollars, which is Stanmore's functional currency. Total income was 4% higher year-on-year with the additional 4 months of SMC sales, which helped to overcome a reduction in coal prices in 2023, relative to 2022's record levels. Coal remains largely steady -- sorry, costs remained largely steady year-on-year, flowing through to an underlying EBITDA of just over USD 1.1 billion and operating cash flow USD 737 million, which supported significant deleveraging, funding for value-accretive organic growth CapEx and the USD 52 million special dividend declared in November. All while transitioning the balance sheet from a net debt to a net cash position during the year. Further to the special dividend declared last year by reference to 2022 cash flows, we are again pleased to return cash to shareholders with today's fully franked dividend of USD 0.084 per share calculated by reference to 2023 cash flows with our commitment to creating value for shareholders, further demonstrated with total shareholder returns of over 40% in 2023. Moving on to a more detailed summary of our financial performance on Slide 24. From a P&L perspective, full year underlying EBITDA translated into net profit after tax of USD 472 million and EPS of USD 0.524 per share, reflecting normal course of business earnings, noting that the 2022 figures were affected by significant one-off nonoperating adjustments and deferred tax benefits related to the SMC acquisition. Looking at the underlying EBITDA walk forward. As you can see here, the primary driver for lower EBITDA was the normalized price environment. Following those record high coal prices in 2022, partially offset by the additional 4 months of production in our South Walker Creek and Poitrel. Isaac Plains were slightly lower year-on-year due to anticipated strip ratio increases and noncapitalized overburden and advanced removal for the development of Pit 5 North, where first run of coal mine was not actually produced until December. Turning now to the dividend termination on Slide 25. As previously highlighted, we are pleased to announce the fully franked final dividend of USD 0.084 per share following careful consideration of our dividend policy, as it applies to our results for 2023, which when taken together with a special dividend of USD 0.0582 per share in November, has generated a dividend yield of 6.2% in just under 4 months. Importantly, as the special dividend was effectively determined by way of application of the policy on 2022's results, today's announcement demonstrates our 100% commitment to our dividend policy since our equity raise for the SMC acquisition last year, rewarding our shareholders for what has been a very successful few years for Stanmore. With regards to this dividend calculation specifically, you will notice that we have opted to reserve funds for the upcoming fully accrued BMC acquisition earn-out payment, which will be made mid-2023. This represents just a portion of our major cash commitments coming up, and we consider reserving this amount to be prudent to ensure the business remains adequately funded to meet future cash requirements as well as our ongoing CapEx program. On that note, we have provided further detail on our cash position and balance sheet on Slide 26. As you can see on the waterfall, a major achievement in 2023 was transitioning to a net cash position in just under 12 months, since the SMC acquisition. Overcoming almost USD 800 million of debt raised at the time of the acquisition in May 2022. Cash generation since that time has been used to solidify balance sheet strength with deleveraging of almost 50% in 2023 and following the debt sweep payment of USD 77.5 million in early February this year, increases our total deleveraging of the acquisition debt facility to $385 million or 63% of the facility since its commencement. As mentioned on the previous slide, we do have some significant cash flow requirements this year, which have been previously guided to market that included a catch-up tax payment of between USD 155 million to USD 170 million. The SMC earnout, as mentioned earlier, of USD 150 million and upfront consideration for the 50% Eagle Downs acquisition of USD 15 million. These commitments are expected to be partially offset by the USD 136 million in proceeds for the sale of the Southern portion of Wards Well, which is expected to complete and therefore, be received this year. Before I hand back to Marcelo, Slide 27 includes some additional detail on the breakup of capital expenditure. As you can see here, there are numerous significant capital projects going on, which are largely roughly 60%, related to growth and improvement projects. When aligned to our 2023 capital expenditure of USD 200 million, the sustaining portion of around 40% sits at that USD 70 million to USD 80 million mark for the portfolio. I'll now hand back to Marcelo to provide a more detailed update on some of these key capital projects from Slide 29.

Thanks, Shane. Starting with South Walker Creek. We have a significant pipeline of growth projects, which will strengthen South Walker Creek status as a world-class asset. I would also highlight here that the dollars quoted here represent the original budget for each project, with the percentage being the amount of that budget spend by the end of 2023. The MRA2C project involving a major creek diversion to open up an area of 58 million tons of ROM coal is progressing well, with significant infrastructure advancements occurring in 2023, with the completion of the 66 kV power line relocation, the majority of the required water infrastructure. Importantly, the material movement commenced in August '23 is on track with the current plan, with project being ahead of schedule and well under budget at this stage. The South Walker Creek CHPP expansion and mining expansion is progressing well, with some key achievements of 2023 being the award of the CHPP upgrade contract. And the dry hire contract for the additional 3 truck and excavator fleets with the mobilization of the first additional fleet well underway. We commenced the access to the [ white ] South pit in 2023 with clear and grab and site preparation ahead of the majority of the work expected to occur in 2024, which will enable access to high-quality, low strip ratio coal during 2024. The last major project we wanted to highlight here for South Walker is the dragline 27 AC upgrade, which will be completed in 2024. This upgrade has been in planning phase since 2022. And in 2023, we were able to complete the factory acceptance testing of the major electrical equipment required for the AC upgrade, ahead of the major shutdown and upgrade to start in May this year. On Slide 30, Poitrel had a very positive 2023 with the progression of the 2 major projects currently in progress being the ramp-up -- the ramp-down North development and the Ramp-30 Levee. The Ramp and Box-Cut is very important for Poitrel's production profile. And for the strip ratio competitiveness and despite somewhat weather challenges early in 2023, project recovered and was able to move over 80% of the planned Box-Cut volumes by the end of 2023. The Ramp-30 Levee project is a critical project to enable us to continue mining towards the southern part of the mine and sustained strike length with a large certified flood mitigation structure. The team were able to reach 1 to 1,000-year flood height in November '23, well ahead of schedule and other budget. We also commenced revegetation of the levee and disturb the area prior to the wet season. In relation to our development project on Slide 31, at the end of December, we acquired the remaining 50% in the MetRes joint venture, which owns the Millennium complex. Millennium concluded conventional Open-cut activities in 2023, with the operation focused on underground coal mining activities going forward. The achievement of '23 for the Mavis underground was the completion of the underground construction and the transition to operations with the continuous minus place change units. Studies for the Lancewood development projects continue to progress with exploration activities commencing after EA amendments, focusing initially on water bores for groundwater modeling as well as baseline ecology work. The study team completed further optimization of open-cut mining operations and refined infrastructure and coprocessing optionality. And we intend to conclude the prefeasibility study within this year to be able to make some decisions on how to approach the project, including infrastructure options to support all the regulatory approval submissions. Lastly, I just wanted to do a quick recap of the deal we signed with South-32 for the purchase of 50% in Eagle Downs announced earlier this month on Slide 32, which, of course, remains subject to completion. This is an asset that has turned the rounds over the last decade, being on various 50-50 joint venture structures originally between Vale and Aquila and more recently, between South-32 and Aquila, which is majority on and control but the Chinese giant steelmaker Bao. For Stanmore, it is a transaction that makes sense and aligns with our strategy, adding a large hard coking coal deposit to our reserve base, providing optionality at low upfront cost. Unlike previous owners, our neighboring assets allow us to option year development pathways, potentially utilizing neighboring infrastructure at -- for Poitrel and Isaac Plains and reducing start-up development CapEx and our enlarged [ revenue port ] contract portfolio via both BCT and NQXT are also critically enabled for a potential development. The transaction remains subject to the satisfaction of conditions precedent, and we are also in discussions with Aquila to consider the purchase of an additional 30%, which may take us to 80% ownership. As it stands, the asset comes relatively unencumbered from any previous [ revenue port ] take-or-pay arrangements and have all the regulatory approvals required for start-up construction and future operations. We look forward to completing this transaction and bring it into a stage where we understand the development requirements and the potential they can offer to our portfolio in the long term, including as a growth opportunity but also as a future replacement through the shorter life of mine at Poitrel and Isaac Complex. I'll now hand briefly back to Shane to close -- to close out today's presentation, we now updated 2024 guidance.

Thanks, Marcelo. On Slide 34, we have the update to guidance. Given we provided 2024 guidance as part of the market update and special dividend declaration in November last year, this is really just an incremental update following the acquisition of the remaining 50% of the Millennium Complex. Which was previously equity accounted for as an investment rather than fully consolidated into our overall results. As per the table on Slide 34, we are guiding to saleable production of between 500,000 to 600,000 tonnes out of the Millennium Complex in 2024. coming from the Mavis Downs Underground, which has been ramping up through the back half of 2023. Being an underground operation in a development phase, it's naturally a higher cost than our Open-cut portfolio and therefore, has a slightly inflationary impact on Stanmore's consolidated free onboard cash cost per tonne with guidance, therefore, being adjusted to between USD 99 to USD 104 per tonne, while CapEx has also been adjusted to include the remaining development activities of Millennium in 2024. This concludes the formal presentation. I'll now hand back to the operator to commence Q&A.

[Operator Instructions] Your first question comes from Jim Xu from Barrenjoey. Your next question comes from Tom Sartor from Morgan Financial.

Marcelo and Shane. Well done on another strong set of numbers, and thanks from our network, who certainly appreciate the dividend flowing now also. Just had a couple of questions on the asset deals. You had a busy few months. It looks like the Millennium Complex spent a chunkier than expected amount of development capital in '23. Can you just remind us of the scope of the opportunity there in terms of sustainable and your production may be, life of the underground? And maybe if Shane, you can update us on how the debt to the JV from Stanmore was or is being accounted for in the balance sheet, please?

Tom, I will start maybe with '23. Probably the easiest way to explain the additional capital is that -- I mean that's -- it was mostly working capital. I think the ramp-up challenges that we faced, just basically required more injection of working capital given that we are not getting the tons. So I mean, development -- the actual development capital hasn't been higher than the previously anticipated and -- and hence, there's still a similar situation now for the first quarter of this year where -- we mean, we are still like expecting ramp-up volumes to get to the levels we want. You've probably seen in our guidance slide that we have derated the amount for Product Coal in Millennium to around $500,000 to $600,000 this year. That's basically to reflect the still, let's say, ongoing ramp-up, okay? I think we are probably going to get into more benign conditions soon, both from a geological -- I mean a structural or geotech standpoint, but also some water that we faced in the last 45 days ingressing from those all the highwall mining plunges, okay, that were mined in that pit. I think we are confident that we should be able to achieve those 0.5, 0.6 this year. Hopefully, increasing slightly from that going forward in 2025 and '26. Mavis was always meant to be a short-life asset, Tom. And our target is to prove up reserves in the Millennium side of the complex, okay, move the existing equipment into Millennium to be able to extend life. To do that, we require some EA amendments because the -- there was only open-cut mining approvals on the Millennium side. We are busy working on that as we speak.

Yes, Tom, just on the loan between Stanmore and MetRes, I mean, obviously, that now is 100% owned entity. So it eliminates on consolidation. But previous and immediately prior to the acquisition, we did need to assess the fair value for accounting purposes of that loan. So you may notice in the accounts that there was provision set aside for potential credit losses on that just based on where coal prices are at, long term from some of the research houses. So for accounting purposes, we had to provide around $18 million against that loan for that purpose. But now that it's 100% owned, it fully eliminates some consolidation, and we'll continue to support that asset based on where we see the future for Millennium going forward.

No worries. That's clear. And just a reminder, it's a prime hard product, more or less from the underground now and it gets close to 100% realization. Is that right?

Not really. I think it's the -- we have around 60% as a low vol hard coking coal but it's prime hard, Tom. It's -- the Mavis coking coal has been marketed for many years, right, back in the days, and it was always attracting 100% of the Tier 2 [ low volume ] index, not the prime one. And the balance, which is around 35% to 40% is 20VM PCI.

Got you, no Worries. And just quickly on Eagle Downs, I appreciate it's a longer-dated option. Just curious about what drilling and/or evaluation expenditure you might want or need to spend there over the next few years? Or is it too early to say?

Tom, the project has been extremely -- let's say, steady and the results are extremely well defined. There's been a lot of exploration from all angles possible from drilling to coal -- I mean, coal quality structure, seismic and gas. So it's very well defined, 2 very robust, bank feasibility studies done by the owners in the past, the 40% build access drift. So we don't expect that any significant amount of that acquisition is required. What we are looking now is really to do optimization studies to see what's the entry capital to get the project started, okay? Of course, starting with risk development, getting to coal and of course, lower mining ventilation and all the infrastructure required. Our aim is to minimize startup capital. But as I said before, I think first, we need to get the acquisition completed and, let's say, the final format of the joint venture aligned with the joint venture partner. I think it aligns well with our strategy. It's next [ Poitrel ] assets. It's a hard coking coal asset. It has all the approvals in place, it's a potential long-term replacement for Poitrel and Isaac Plains and puts us into the hard coking coal space and adds around 1 billion tons of resource to our portfolio. 3 years ago, we were a company with 300 million tons of reserves ahead of us, I think we're going to -- we are now in a very privileged position if you complete this deal, to have 4 billion tons of resources with multiple options to choose from.

Your next question comes from Brett McKay from Petra Capital.

Just on the growth options going forward. When do you expect you'll be in a position to, I guess, clarify what the optimal approach is to the optionality in the portfolio now? I know that Eagle Downs hasn't been -- hasn't closed yet, but just in terms of a longer-dated time line, if you could provide a little bit of guidance around when we may find out a bit more about Lancewood. Obviously, you're doing a pre-feas there this year Eagle Downs. You've still got a Isaac Plains underground in the portfolio. So you do have lots of optionality now in the portfolio, but can you give us a bit of a feel for when we would know exactly how you're going to approach all these options? And then I understand how not only the capital is spent, but also the production profile, how it might develop over time?

Sure, Brett. I think it's quite relevant. And I expect that that's an important information. I think there's a bit of work we still need to do to be able to provide better visibility. What I can say is Lancewood is a project that we will need to go through its own let's say, the full regulatory approvals. Our conclusions to date is, if we stay under the 2 million-ton run off buying per annum, which is the threshold for us not to require any EIS in Queensland. It doesn't seem to be economic. It's quite a large box cut. It's a very compact pit. And we started more than 9 to 1 strip ratio compared to Isaac, Downs where we were at 3 to 4 to 1 to start. It's quite a large box cut, which will require more capital and at a scale to be justified, but that's going to be probably above that 2 million tonne run threshold. That means that we will need to go through a full EIS and its own, let's say, environmental approvals. So I don't think we would be seeing a start of construction in Lancewood in less than 3 years, for example. And that provides a bit of visibility because Eagle Downs, for example, conversely is ready to grow. It has all the approvals in place. It's a question all of us understanding the attractiveness of the project. What's the -- how low we can bring the CapEx to be able to get started and how staggered is the investment until we get to first call, right, because we're going to have to do drift development, development underground to get to a long-haul box developed and ready to be mined. Fortunately, there's a lot of degassing that was done in Lancewood -- sorry, in Eagle Downs. And so I mean, we believe that we may be able to stop mining, a lot ahead that we would otherwise if we needed to get -- to start gas drainage from scratch. So I think we need a bit of time, Brett. But I think we may find that there's probably a way for us to stagger these investments given Lancewood will -- I mean, ineptly we will take another at least 3 years until we are able to start disturbing the ground until we have approvals -- and Eagle Downs likewise, it's not a project that's got to be built in 1.5 years or 2 years. It's a large development, and we should be able to spread it well. But it's, again, focus now in completing the transaction, doing the work to be able to get to that point. So I hope to be able to provide that visibility sometime in the second half this year, Brett, to the market about what we can expect in terms of timing, in terms of general options for Lancewood. And obviously, subject to us completing Eagle Downs, get to a point towards the end of the year where we are -- we know what the project can be for us, and we may be able to start taking some decisions.

Okay. That makes sense. Just quickly, can you provide us an update on the weather events you had earlier in the year clearly, that was a topic of conversation on the quarterly call. Just looking at what's happened since then it doesn't look like it's been overly wet, do you feel like there's potential for you there to catch up any of those lost tonnages that we spoke about a month or so ago?

Yes. I think catching up is already happening as we speak. So you're right. I think it hasn't been throughout recently. January, the first half of February were quite difficult. Poitrel was very well set up, as I said earlier, since late last year, we brought a lot of coal forward. We had a lot of [ run inventories ], which we helped a lot. We achieved around 800,000 tons in January. February, it's looking really strong, okay? So we will be -- we will have caught up quite a lot in February already from the lower January, both from sales, but also on production. I think by the end of Q1, we should be back to where we wanted to be as part of the plan of the budget for this year.

Okay. Great. And just lastly, on the dividend, just noting that you pulled out the $150 million that you need to pay for PMC on an ongoing sort of forward-looking basis, is that something that the company will continue to do is to sort of ex out big chunks of -- will not even be modest chunks of expected outgoings from that dividend pool? Just trying to understand the Board's decision around those upcoming payments, especially considering the growth profile of the company and how it will evolve over the next sort of 12 to 24 months? Just trying to get a read on how the dividend outlook will mold for or evolved over that time?

Yes, Brett, [indiscernible], this one. So it's -- it was a bit of a unique situation with the BMC that it was a confirmed committed payment that related to a past transaction. We do have other cash commitments coming up in 2024, as mentioned on the call, around a large tax payment expected in midyear and some other payments as well. But -- we thought that this one was more unique in the sense that it did relate to a past transaction and it was known and committed to at the time and making dividend declaration. So I don't expect this to be something that's really repeated on an ongoing basis beyond the cash flow sweep adjustment that we make each year, which, as you know, is connected directly to cash flows generated from the prior year. And I'd also probably point out that it is timing in nature, for example, when we -- if we assisted down at this time next year and have a look at this calculation, again, because we have reserved or preserved this $150 million from dividend decision for 2023, we'll have to adjust that back when we look at cash flows that we generated in 2024. So it's really just about timing of maintaining adequate cash and liquidity for those big one-off sort of chunky items, which we don't expect to see too many, all going forward.

Your next question comes from Jim Xu from Barrenjoey.

Marcelo and Shane. Hopefully, you can hear me this time. So maybe just another -- maybe just following up on the balance sheet. So I understand your acquisition debt facility is noncallable up until May of this year, given it's got fairly restrictive cash sweep in that facility, are you looking to refinance it? And how advanced are those discussions? And then further on, just that if you do refinance it and it becomes a kind of interest-only payments, how will you provision for the debt repayments and when you think about your dividend?

Yes. Thanks, Jim. So the acquisition financing, as you pointed out, can be repaid at par value following a 2-year anniversary, which is the 3rd of May this year. So we are free to refinance at any time. But if we do it after the 3rd of May, that will be at par. So it is something that we have been considering. I think I maybe mentioned that a couple of occasions previously as well. it just gives us a good opportunity to have a look at the market and consider, I guess, our optimal debt structure and more normalized debt facilities as well for the whole company as a corporate. So to that end, it is something that we are considering moving forward with in the first half of this year and doing some planning for that as we speak. In terms of how that looks like and what that looks like going forward. That's really something that will sort of play out through that work. I think the objective for us is to have facilities that are at that are normalized for the size of company that we are now. And also looking for improvements on where that pricing has come in as well, given the change in our credit profile and risk profile as an organization. So they're probably the 2 keys, together with allowing the capacity to consider future growth, if we want to start to develop some of our organic growth platforms or otherwise.

Maybe just to add to that, Jim, it's reasonable to assume these restrictive sweeps that we have as part of the acquisition facility. It wouldn't be something that we would be looking to as part of a more normal let's say, refi structure. Having said that, depending on the structure, it will may not necessarily see only interest-only type of structures. We may see some more normal amortizing profile as well depending on the, let's say, on the stretch of the overall facility and the profile of the lending group, okay? I think that's more -- there's a lot of work happening as we speak, as Shane said. And yes, we look forward to update you guys when we have a bit normal progress.

Understood. Maybe just a follow-up question on safety. Your SAFR is still well below industry averages, but both SAFR and TRIFR have increased over the past year. Has there been a main driver of the increase in the TRIFR anything the management you would like to focus on, in particular?

Jim, I normally would like to safety as a rabid dog, you'll keep your foot on its neck, otherwise it goes and bite you. So it's -- you can have a take the foot off and I don't think there's any fundamental structural issue. I think the culture is good. It's positive. The systems are in place. And we were working at a TRIFR level of 1.5 is extremely low, right? So -- it's not very unusual for you to see some of those -- I don't know those recurrences happening. And I think what we need to do when they happen is understand the drivers, the lead indicators, and that's what we are working hard on is to make sure that we focus on leading initiatives to be able to see them coming. And as I said, the focus on SAFR is really to prevent the serious one. Those are the ones that we really need to be on top of that we cannot afford them happening, okay? I think, as I said, a lot of work, good work going into that. And I hope to see that those trends reversing soon.

Okay. And if I can just sneak one more in, a quick one. Just wanted to confirm with the Eagle Downs acquisition, are there any take-or-pay liabilities associated that? Or have they been all held to be equal level and cleared by them?

No [indiscernible] take-or-pay. There are some existing commitments for power infrastructure. This was a part of the implementation of the transmission lines and the power infrastructure available to the project. There's no power supply, but it's not a long-term payment of infrastructure and water supply is around just above 600 megaliters of raw water as a contract, which is fundamental for the project. I think in terms of carrying cost for the project, they are significant. And we also want to be talking to the JV part because even on our existing business, we should be able to absorb some of the, for example, water requirements given that, we also have a lot of reliance on the Braeside Borefield, to South Walker and Poitrel. And so again, Water Power a minimum site can [ maintain ] at the moment as we speak. That's all. Okay.

And so are you able to give any guide on the size of the carry cost of the project?

At the moment, between AUD 2 billion AUD 14 million per year, that's the basic carrying costs at the moment, as we speak. On a 100% basis, okay Jim?

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

Well, thanks, everyone, for the questions. It's been a privilege to present such a fantastic result today. I would like to take the opportunity to thank our employees and our major contractors. Last 2 years has certainly been a dynamic period. And at the end of the day, it's our employees who show up each day, they underpin our business and its successes. So of course, I would like to thank our major shareholders that have been with us through this journey and continue to show the support for the fundamentals of our business. We look forward to engaging with all of you in the coming days. Thanks, everyone, for your time, and have a good day.