Thungela Resources Limited (TGA) Earnings Call Transcript & Summary

Good afternoon, everyone, and welcome to Thungela's interim results presentation. I'm Ryan Africa, Investor Relations for Thungela. And I'd like to take a couple of minutes to introduce today's agenda. But before that, please allow me to draw your attention to a couple of important messages from our attorneys. We'll talk us through the H1 highlights and also briefly touch on our strategic initiatives, including the Elders project. Our CFO, Deon Smith, will then talk through the operation and financial pit to submit questions via text, which will then be read out during the Q&A session. It is possible to follow today's session across both platforms simultaneously. Although you will have to mute one of the season out of the way. Allow me to hand over to our CEO, July Ndlovu, to take us through to get us interim results.

Thank you, which we first introduced earlier this year and the release of our annual results in March. As I say then, our people is at the core of what we do as a business and is no staff for all decisions, choices and actions we take. And throughout this presentation, we would demonstrate how Thungela is actively delivering all our papers to responsibly create value together for a shared future. The first half of 2022, you've seen a number of highlights, but let me start with safety. Today, I'm pleased to say that in the last 12 months, everyone at Thungela went home safely to their families. This shows that it is possible to operate a fatality-free business. Coal prices saw to record levels in the first half of 2022. On the back of this, the business generated a record profit of ZAR 9.6 billion, very strong cash generation with adjusted operating free cash flow of ZAR 8.9 billion. This puts the business in a solid net cash position without doubt an excellent set of results despite continued poor rail performance. On the back of this strong cash generation, the Board declared an interim ordinary dividend of ZAR 60 per share, returning ZAR 8.2 billion to shareholders of Thungela. This represents 92% of adjusted operating free cash flow. The employee partnership trust in cooler Trust received a combined ZAR 0.5 billion whilst we reserve a further ZAR 200 million for the Green Fund. This means that will distribute all excess cash above the liquidity buffer of ZAR 6 billion and reaffirms Thungela's commitment to disciplined capital allocation and returning cash to shareholders. Adding this ZAR 60 dividend to the credible total shareholder return of more than 1,000, 138% from listing through to 30 June 2022. The [ disadition ] to the 2 trusts gives meaning to creating value in the area. Thungela is also committed to building sustainable livelihoods in our host communities. And to this end, is launched an enterprise and supply development program called Thuthukani in isiZulu uplift. Australia implementation ZAR 2 billion. I'll elaborate more on elders a little later in the presentation. Turning to Stacia hazard identification and illumination. We continue to make progress on eliminating fatalities and injuries. The total Thungela commitment to continuously improve self-performance and above all, eliminating fatalities and accidents in the workplace. In the next couple of slides, I'll unpack how our key areas of focus are aligned to these strategic pillars in the upliftment for those communities and also the nation more broadly. In addition to the dividend of ZAR 8.2 billion pretax per qualifying employees. For the CPP on the other hand, the distributions create a firm foundation [indiscernible] we are ultimately relied on law enforcement, regulators and the courts to hold these syndicates can bank in the respected business [ Incubeta ], to launch an enterprise and supply development program called Thuthukani, which in the markets we serve. This approach recognizes that a responsible transition to renewable energy will be underpinned by continued is target of reducing our absolute emissions by 15% of the 2016 baseline by 2025, that the early achievement of our 2025 target is partly attributable to factors such as production changes and poor Tier 4 performance, a review of our emission reduction targets has been underway since early 2022. And progress is being made in detailed energy mapping, baseline determination ratios on an annual basis while we chart the pathway to net 0. We are implementing energy efficiency improvement projects such as [indiscernible] to transfer in disclosure. Our reporting and disclosure processes continue to evolve. And it is our intention to be compliant with recommendation from the outset. And you may recall that we spoke about the importance of elders as far back as our Capital Markets Day in May last year, originally envisaged. We have consistently said that we'll pay careful attention to ESG factors when making investment decisions [ minasections ]. Construction will commence in the third quarter of this year, [ Invesco ] is planned for the end of 2023. Let me -- and in this case, we've approved a project which has significant social benefits. We also powered the complex crew solar power, that competitiveness of an asset is crucial to long-term sustainability. And in the case of elders with an asset that is come when we decide to allocate capital to a project rather than returning to shareholders, we must be confident that we generate to maximize shareholder value through the cycle. We have spoken extensively about the Elders project, acquisition opportunities in great detail. But after trade diligence and careful consideration, we have determined that these opportunities when neither better than Elders nor the relative attractiveness of these opportunities so that we can decide how to fund the project we've just approved. So we'll continue to evaluate other potential diversification opportunities and targets in the coming months. So far as forint a number of highlights for Thungela in the first of 2022, but it would be remiss of me not to touch on a point of concern, which continue to negatively affect our respects of our country. The disappointing rail performance in H1 of 2022, continued to undermine our full potential as a business that trains become available. Our efforts to prioritize equity sales rather than put volumes annualized run rate of 53.3 million tonnes for the industry as a whole. It is our expectation that industry throughput will improve in the second half of the year, especially as a result of the maintenance shut, but we have planned our business in a manner that does not require a material ramp up and step up in H2 of 2022. During the first half of this year, we track -- commenced with the evaluation of alternative logistics, logistic arrangements in order to move additional equity core to the market. The movement of Cote port of Richards Bay via road and the loading vessels through alternative bulk exporting facilities will begin in the second half of 2020, we touch on our full year guidance in a bit more detail. With that, let me now hand over to Deon to take us through the financial.

Good morning to everybody on the call. So we are indeed very pleased with our financial results for the reporting period up to the end of June 2022 clearly reflects the impact of operating in a strong energy price environment and highlights our leverage to achieve thermal coal prices. Record adjusted whilst our export saleable production was lower at 6.1 million tonnes compared to the 6.7 million in H1 2021, as per tonne is 927. So as July mentioned earlier, our strong cash flow generation and in reference to the ZAR 8.9 million ideation today. In reflecting on the first 6 months of 2022, we have experienced unprecedented volatility liable energy to safeguard economies and livelihoods and to support the transition to a lower carbon future. The geopolitical tension, which resulted in clearly added to an already constrained supply of coal due to limited investment in projects, restricted access to capital, more generally, logistics challenges and adverse weather conditions across some of the main producing countries. We have also seen a shift in the flow of energy across the globe to compensate for advice for our export quality coal of $240 a tonne for the first half of the year compared to $75 a tonne in 2021. In unpacking the trends I mentioned earlier, it's worth noting that coal exports from RBCT into Europe has increased by 720% from 0.5 million tonne are expected to prevail for some time. And as a result, the thermal coal forward price curve remains well above historic price levels and indeed well above any back up away, but also focus on areas where we could redeploy equipment and people to other activities such as rehabilitate -- is a regulatory calculation of an earnings margin. So to be specific, EBIT over gross sales. Double-digit TFR performance on the slide reflects the impact of our fixed stranded cost on our unit cost. The result in ZAR 927 revenue of ZAR 16.1 billion, resulting from the higher realized prices and a weaker rand. The higher prices also resulted in increased corporate tax 21. The Board approved the initiation of a price risk management strategy to underpin the sustainability of our lower-margin export operations. The aim of this program was to lock in firm prices and accordingly, a minimum firm margin for a maximum percentage of our production and sales. We accordingly entered into a series of coal swap agreements during Q4 2021 at a firm average price of approximately $150 a tonne. To put this into perspective, prior to the demerger, our business experienced 2 consecutive years of $60 to $70 prices -- and the capital support agreement with Anglo American was accordingly priced at the floor of Brent, ZAR 1,175 a tonne were around $80 a tonne. So these $130 a tonne coal swap instruments were essentially priced at almost double that, so ZAR 2,000 a tonne, which is a level of pricing where our business is highly cash generative. In unpacking the income statement and cash flow impact, as mentioned earlier, the strong price environment in H1 2022, especially post the Ukraine conflict resulted in record half year revenue of ZAR 26.2 billion, which included all physical export sales into the market, including sales from those lower-margin operations. As the derivatives, which we entered into Q4 '21 matured, we utilized around ZAR 2.1 billion of this revenue to settle those financial instruments. As outlined at our year-end results in March, we were not overly excited to report a fair value profit on those instruments end of December as perversely, large losses on these coal swaps, which represent a small percentage of our sales equate to enormous free cash flow on the larger part of our sales, which is what we are reporting on today. The Board supported the continuation of this price risk management strategy, and we accordingly rolled this program forward, albeit at a higher firm margin and lower volumes, mainly due to limited liquidity in the forward market. At the end of June 2022, we had coal swaps of approximately 625,000 tonnes in place with maturities up to the end of Q1 2023. These coal swaps have an average firm price of $198 a tonne for H2 2022 and $211 a tonne for Q1 2023. In other words, we are set to a firm price of more than ZAR 3,000 a tonne for that 625,000 tonnes of our sales up to the end of Q1 2023. Given the strong forward curve at the end of June 2022, we recognized a noncash fair value loss of ZAR 1.5 billion in our income statement and a further ZAR 347 million in relation to the Anglo American Capital support agreement. Those are both noncash. This fair value movement was calculated as at end June 2022. The movement based on the forward curve on a particular date, such as Friday last week, would have resulted in a ZAR 500 million movement. If I now turn to adjusted operating free cash flow. Adjusted EBITDA of ZAR 16.7 billion represents an all-time record for this business and bringing this -- in bridging this number, sorry, to earnings before -- so this is earnings before interest, tax depreciation and more down to operating free cash flow. You will note that we paid taxes of ZAR 3.7 billion. So that's corporate taxes. That is on top of the approximately ZAR 1 billion royalties number I spoke of earlier. We also adjust for the derivative settlement of ZAR 2.1 billion as well as a working capital build of ZAR 1.8 billion. The working capital movement is mainly a higher export receivable balance given what prices did in H1 2022. We spent approximately ZAR 0.5 billion on sustaining capital, which results in an adjusted operating free cash flow of ZAR 8.9 billion. And this is also the basis of our dividend policy. In terms of capital expenditure, at ZAR 514 million, our H1 2022 sustaining capital represents around 34% of the lower end of our full year guidance of ZAR 1.6 billion. Whilst this is slightly below historic H1 average percentage spend, we typically see much higher delivery and spend rates in the second half of the year, which reflects the typical planning, design and execution cycle for our business. With the Elders production replacement project now having been approved for execution, we envisage spend to ramp up during the last quarter of 2022 with approximately ZAR 150 million of project mobilization, long lead time orders and civil work expenditure being planned as we speak. Our stated dividend policy is to target a minimum part of 30% of adjusted operating free cash flow. The minimum dividend would therefore be ZAR 2.7 billion. Given our net cash balance of $14.8 million at the end of June 2022, coupled with continued strong fundamentals for our business, the Board has declared a total ordinary cash dividend of ZAR 8.2 billion, or in other words, ZAR 60 per share, representing a payout ratio of 92%. As July mentioned, a further ZAR 0.5 billion has been allocated to the employee and in Nkulo community position trusts. The Board also resolved to contribute a further ZAR 200 million to the green fund in order to increase the cash available for future environmental rehabilitation obligations. This ZAR 200 million is in addition to the ZAR 188 million already paid into the green fund during the first half of 2022. We remain committed to a disciplined approach to capital allocation and have accordingly resolved to return all excess cash above the liquidity buffer of ZAR 5 billion to ZAR 6 billion as of the end of the reporting period to shareholders and, indeed, stakeholders. In response to TFR's inconsistent and poor rail performance, we have curtailed production, thus affecting our ability to take full advantage of the strong pricing environment. Taking into consideration, TFR execution since the pre-close and trading statement issued on the 30th of June. And we anticipate real performance for the remainder of this year to probably remain constrained. While we continue to implement mitigating actions, this uncertainty has necessitated a review of our full year guidance for export saleable production and unit cost. We are accordingly revising our export salable production guidance to a range of 13 million to 13.6 million tonnes for 2022. So that is down from the 14 million to 15 million tonnes previously guided. This range assumes a potential stock build of between ZAR 400,000 and up to 1 million for the full year, should TFR only be able to rail at the first half rate, which is extrapolated to an annual rate of 53.3 million tonnes for the industry. Our revised guidance range for export saleable production also implies a step-up in production of 13% to 23% in the second half of the year. We are comfortable that the step-up will be achieved as first half production was lower due to curtailments already in place. Furthermore, our business is seasonal, and we are typically able to achieve higher second half production due to few interruptions in rain events. Recognizing that the improvements of TFR are likely to be gradual. We continue to use the levers at our disposal to mitigate the impact on our operations and particularly financial performance. As July set out earlier, we continue to truck volumes between sites in order to optimize stockpile management and indeed train distribution patterns. This also allows us to continue to prioritize the railing of higher-margin coal. In addition, we have reestablished previously used stockpile facilities to provide further product mix flexibility. As a result of the change in export saleable production guidance as well as materially higher royalties, the group is now likely to incur FOB cost per tonne of ZAR 1,000 25 a tonne to ZAR 1,065 a tonne, including royalties or ZAR 885 a tonne to ZAR 915 a tonne, excluding royalties. This represents a measured increase over the guidance originally provided and a healthy stretch for the business operating in an environment characterized by abnormal global inflation and lower production. We confirm the capital expenditure guidance range of between ZAR 1.7 billion and ZAR 2 billion for total CapEx for 2022. We're sustaining CapEx likely to be at the lower end of this guidance range. We will provide guidance for 2023 at the release of our 2022 annual results in March next year or earlier as may be appropriate. So with that, let me now hand back to July. July?

Thank you so much, Deon, for quite an impressive set of numbers. So let me wrap up before handing back to Ryan for questions and answers. We've shared a lot today, but let me review with the following key messages. Thungela is committed to running a fatality-free business, and every effort will be made to ensure that everyone returns home safety every day. With the price environment expected to remain strong for the balance of 2022, our ability to capitalize on this is very much dependent on Transnet. The Elders project to provide superior shareholder returns in addition to sustaining regional jobs and supporting local suppliers. Thungela is able to demonstrate a commitment to exceptional shareholder returns as we declared a dividend of ZAR 8.2 billion to shareholders, representing 92% of adjusted operating free cash flow substantially in excess of our targeted dividend payout ratio. Considering the dividend, disputing to the EPP and CPP and the additional contribution to be made to the Green Fund in the second half, we've distributed all excess cash above the liquidity buffer of ZAR 6 billion. The employee in Nkulo, our community partnership trust are set to receive ZAR 0.5 billion. This vision will make a meaningful impact on the lives of our people and empower the CPP to create a legacy beyond the life of [indiscernible]. We also recognized the important role that smaller businesses play in the [ prosperate ] of the country and [indiscernible] to Thuthukani enterprise and supply development program. Finally, we're contacting our path to net 0 by 2050 continues, and I look forward to providing you with an update on our intermediate carbon emission reduction targets in March 2023. At this stage will also be largely compliant with the requirements of the TCFD. In closing, I'd like to thank everyone in Thungela for their commitment and agility in navigating a challenging operating environment in the first half. I am proud of what we've achieved in the first half of the year, and we look forward to continuing to deliver on our people of responsibly creating value together for a shared future over the remainder of 2022 and beyond. Ryan, back to you for questions.

Thank you very much, July. [Operator Instructions] Operator, please could I ask you to open the line for our first question.

This question comes from Brian Morgan of RMB Morgan Stanley.

Just if I may, 3 questions. The first question is just your thinking around price realizations for the second half of this year. Do you expect them to remain in line with the first half, widen or narrow in the second half? And that's the first question. Second question is just on operational integrity. All of the operations with the exception of Mafube, so volumes dropped year-on-year in the first half, and that's obviously for other reasons. But just a question for me is, to what extent do you think the operations are sustainable going forward? Is there -- are the operations able to ramp back up to prior production run rates were we unconstrained from a rail perspective? And or has there been some kind of operational damage done to the capacity of the operations to run fully? That's the second question. And then third question is we've had low tilting for 15 years, and it's taken 15 years of lobbying to get the government around the idea of deregulating power generation in South Africa. Shall you contact that long in transport infrastructure? Do you have any thoughts in this regard? Is there an intense lobbying going on? Do you think we can ratchet it up? That's it from my side.

Thanks, Brian.

So maybe you can take the first one.

Yes. I'll kick us Good morning -- well, afternoon, sorry, Brian. I'll kick us off on the quality or the discount to benchmark price. For different reasons, we hope and believe that the discount of around 13% would prevail for the balance of the year. Whilst the quality discount might widen slightly, we have a couple of plans on grade to offset that. So if all our plans work out, we should be able to achieve that 13%. I will get July to sort of give you a sense on the operations, given he's much closer to those. But from my perspective, Brian, we have certainly pulled up hand backs on a number of the operations in H1 for various reasons. And that was all intentional. So I'm quite confident the operations can bounce back and that those levers are very much -- that's a controllable for us and no permanent damage to the throughput capacity or capability of any of those operations that I'm aware of. July?

I think that's right. Brian, it may not look obvious, but we have pulled then breaks at Greenside we put then breaks at Casella, we've put in breaks at Zibulo. All these intentional decisions we took given the real constraints that we've got. But those decisions are taken with the intention of doing one thing and one thing only, which is maximize cash flow given that constraint. So from where I'm sitting, I don't think any of the decisions that we have taken are long-term damaging. We should be able to ramp up if we need to. Your second -- your last question is probably much broader. Like you -- I'm optimistic that it won't take us 15 years to come to realize what needs to be done to repair and create integrity in critical infrastructure. And there are a number of solutions that will have to play out. Privatization is not the only solution. But clearly, if that is one of those that to allow all of us to get better real performance, we are obviously supportive. But as a shareholder, what government, what they can do is wait and 2, we figure out what we need to do to get private partnerships on that infrastructure to get performance. The Transnet Freight Rail is in desperate need of recapitalization for them to catch up, one on backup -- I mean, on backlog maintenance and 2, on acquiring additional equipment which they desperately need to get back to their historical performance. I think that is a year and now a discussion that needs to be had between Transnet. As is industry and government so that we can get the infrastructure performing. Whilst we're deciding what all these models look like, which we're quite supportive of.

Brian, sorry, I trust that it addresses your queries. Thanks for those, Brian.

Yes, that's good.

The next question comes from Ben Davis of Liberum.

Congratulations on a fantastic set of results. I just had 3 questions, if I may. First, the -- you've got Elders project being approved by the Board is effectively replacing tonnes. What else in aggregate is it going to have an impact in terms of cost position and also on product qualities of the coal just in aggregate for Thungela. Secondly, just wondering in terms of that turnaround, building starts in Q3 and you think you'll have first tonnes coming out by Q4 next year. Is there any key hurdles or bottlenecks in terms of delivery of that? And then lastly, obviously, at current coal prices, your bank accounts keep filling up rather quickly. Just wondering what sort of flavor the bank account looks like at the moment and whether you would ever consider quarterly dividend payments to deplete it quicker?

Ben, seeing that all those questions, I'm going to let my CFO tackle all of all 3.

I'm going to do our first your last one, Ben. I might help on the second one. On your first question on Elders, it is indeed a production replacement project as you've termed it. The qualities of that project is very similar to the qualities that we get from Hydro currently. It's very close, so contiguous almost. And therefore, we mine exactly the same seam and the washability of that coal gives us a range of anything between 5.5 and 5.8, 50. And then it's about playing with what the most optimal output is. But arguably, based on data we have today, I would think that we will wash it to 5.7 products. So that's consistent quality to what we've seen in that region and for our portfolio. What it does for a cost per tonne as operations typically get older, so Goedehoop, as you know, Ben, we typically sink shafts in the sweet spot. And when you get to the end of the mine, you start mining remnant coal. And as a result, something like clearly, Goedehoop is a slightly higher cost at the end of its life. We're, therefore, expecting Elders, yes, and inflation and all those good things to come in at a similar but probably a better cost position than Goedehoop. We -- our current plan is to bring Elders in at an OpEx cost around $65 a tonne, which is -- that's on FOB per tonne basis, which is very competitive, and that's H1 and therefore, should improve -- retain or improve the position of our portfolio on balance. The last part of your question, I don't know the cash balances this morning. But at the end of July, we had ZAR 16.8 million in cash in the bank. So that compares to the ZAR 14.8 million at the end of June. So clearly, yes, you are correct that cash balance keeps on coming in.

Your question on ramp-up and if there are any constraints to the ramp-up. When we develop these kind of projects, we simulate what it would take to develop the boxcar to begin to develop the coal -- I mean, the portal into coal, we're quite comfortable with the assumptions the team has taken in terms of development plus the ramp-up that is required. We don't see any risk that we haven't taken into account that could derail us on this specific quarter.

At this stage, I am going to move to the questions that have come in through the webinar. I see a number of questions have come in. I'm going to try and group them as much as I can. And I think we've also do some of them throughout the course of the presentation. I'm going to start with those relating to the number of questions relating to Transnet. So I'm going to start there. The first question is from Nicolas Wallace. Well, an incredible result. Have you considered contracting private locomotives through the likes of Grindrod to transport your coal? If you feel isn't a feasible solution, could you expand on why?

Look, bringing in a third-party set of locals is not a strip for -- yes, we could go and do that on our own. But to do that, we then have to have opposite TFR a contract to be able to put them on the rail tracks. And you're introducing them into an existing system. Therefore, we would have to develop an appropriate planning system and scheduling system that allows third-party to operate on the side with Transnet. So unless the regulatory environment and the rules have been developed adequately is something that we can consider, but we may not actually be able to execute it for the reasons that I've just explained. So yes, we have looked at alternatives, but there are constraints to us being able to pull the trigger on that. The other point really to be made is that on the bulks or heavy hauling corridors, only certain types of locals are suitable to operate on those lines. So it's a little bit more complicated than just that someone is good lockers. But all those are things that we've been looking at in the last year.

The next question also related to Transnet, comes from [indiscernible]. Transnet has communicated that they gave up sourcing spare parts from the Chinese OEM and instead opted to reengineer or reverse engineer the parts. From your interactions with Transnet, can it be confirmed that South Africa has the technical capability to achieve the same?

The first point to be made is that I should be very careful to speak on behalf of Transnet and that's not what I want to do here because I can't -- that question is appropriately addressed by Transnet. Same to say that in the interactions we have had, we did quite some -- quite a piece of rigorous work together to understand what it would take to disaggregate the components in a local and whether, in fact, we could find those components locally and from other OEMs. And the answer is, yes, a substantial part of that we can. And then there will always be proprietary OEM-specific components that would have to back engineer. But again, we should not underestimate South Africa's ability to innovate around these kind of things. If we set our minds to be able to do it, we will be able to do it.

The store relating to Transnet. The next question is from Bruce Williamson at Integral Asset Management. Actually, there are a couple of questions, 3 questions. Question one. What additional export tonnages do you expect to export in assume H2 2022 via road transport? And our logistics cost compared to TFR costs? The second question, due to CapEx and export tonnage is caused by Transnet polling performance. Have you add retrenched any of your employees?

Happy to take the second one first. No, we haven't yet had to retrench any of our permanent employees. As I mentioned earlier, our aim was to constrain or curtail production in areas that we were able to eliminate cost as easy as efficiently as possible. We have unfortunately had to reduce a number of contractors, scope of work as well as the number of contracts we have in place. So clearly, we went for the lowest hanging fruit first. In terms of volumes, it would be difficult to speculate today as to what that upside volumes could look like. Safe to say that the trial that we're busy with and that July spoke about earlier will give us much needed intel as to what the constraints and the challenges could be. And also, indeed, what that cost or that incremental cost would be. We had some views and thoughts. But clearly, that would be firmed up once we've completed such a trial.

I'm just going to do the further question related to this. Jack Elliott from August, I would like to know which alternative board facility I plan to export coal from in H2 2022?

So we better this year, but we're evaluating -- put evaluating the general -- the general-purpose terminal at [indiscernible]. We're going to prioritize the general [indiscernible] for a slightly different reason, because again, our team is evaluating whether it's possible to take coal from the warehouses that we have found there back into the RBCT system. If we could do that, that's a far more efficient outcome for us. So we're looking at all these possibilities in terms of our ability to get to the market.

I see there are a number of other questions relating to Transnet, but I think we've largely covered those. So I'm going to move off that topic for now. The next question is from [ Jane Petersen ] at Vise. In terms of M&A, which geographies would you consider mostly places like Australia or the U.S.A. or also places like Indonesia?

So when we communicated with Australia, we say that -- we are looking at geographic diversification in coal where we have the right to win. And that means 2 things. Firstly, that you would want to target in geographies where you know how to operate in Sub-Saharan Africa, Africa is something that we understand. The developing economies is something that we understand. The developing world is something that we understand. But the other lens is to say that we believe if we've got the ability to win, it's based on our operating skills our operating capabilities in coal. And therefore, we'll be looking at thermocoal assets in general, wherever they may be. But again, it's on the basis of whether we think those assets -- asset characteristics are superior to everything -- to anything that we have seen. And secondly, whether we think we can add value to those assets. And if all those pieces come together, yes, we look irrespective of which geography it is. But of course, I don't want this to sound like we go, including the most unstable regions we'll be very thoughtful. The key criteria here is do we have the ability to go and win and deliver superior returns for shareholders.

A related question on M&A comes from Mark Zand at Wexford. Could you comment on the M&A targets that you looked at? What continent, what product? Did any of these projects wind up being sold to someone else?

As you can imagine, when you do M&A, a lot of these things are covered by NDAs for very good reasons. And so for that reason, I would be able to share with you which targets we have looked at. Safe to say that you can almost guess which are the core regions where one would have to go and look. But I didn't -- given the nature of the agreements we go into when we evaluate these opportunities, be able to share the specific targets with you.

I'm just going to the next set of questions. We have a question from Chris Reddy at All Weather Capital. Please can you provide further commentary on the impact of selling more coal to Europe versus Asia?