Westshore Terminals Investment Corporation (WTE) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen. Welcome to the 2025 Annual General Meeting of the Shareholders of Westshore Terminals Investment Corporation, which I now call to order. My name is Dallas Ross. I'm a Director of the company and acting as Chair today. Also with me here today is Glenn Dudar, Vice President and General Manager of Westshore Terminals; and Nick Desmarais, the Secretary and Vice President of Corporate Development of the company. This meeting is being held in a virtual-only format by online web, and we welcome all of you who have joined us today. Please ensure you remain connected to the Internet during the course of this meeting. If you need technical assistance, please see the section entitled Technical Assistance in the Management Information Circular respecting this meeting. As this meeting is being held virtually, I would like to remind you that voting on all matters described in the management information circular for the meeting will be conducted by electronic ballot. To allow sufficient time for voting, the polls for all matters being voted on will be opened following these introductory remarks and closed at the end of the formal portion of the meeting. Only registered shareholders and duly appointed proxy holders who have properly logged into the meeting will be able to vote at the meeting. I also remind you that if you are a registered shareholder and you have already voted by proxy, you do not need to vote again unless you want to change your vote. If you plan to vote at the meeting, you may choose to vote on each resolution immediately or wait to cast your vote until after the motion for an item is proposed. In order to expedite the proceedings today, I will be proposing and seconding all motions and for any motions not included in the circular, the motions will be determined based on the preliminary scrutineer's report in reliance on the discretionary authority granted in the proxies deposited for this meeting or on a poll at my discretion. If you have a question on a specific item of business under discussion, you are welcome to ask it by using the Q&A section at the top of the screen and typing out your question. Questions will be answered during the question period. The first agenda is the appointment of the scrutineer. I now appoint Marissa Bintima of Computershare to act as scrutineer. I am advised by the scrutineer that there are 51 shareholders present or represented by proxy, representing 44,945,464 common shares, which is 72.76% of the total issued and outstanding common shares. The notice of the meeting was mailed to all registered shareholders of record as of May 6, 2025. The Secretary will now report on the quorum.

Mr. Chairman, Article 11.3 of the articles of the corporation provides that a quorum for this meeting is the presence of 2 or more individuals present in person, either holding personally or representing as proxies not less in aggregate than 10% of the issued and outstanding shares entitled to vote at the meeting. The scrutineers' report on attendance shows that we have a quorum.

Thank you, Nick. I therefore declare this meeting to be properly constituted for the transaction of business brought before it. I now declare the polls open on all resolutions included in the management information circular for the meeting. Moving to Item 3 on the agenda. The minutes of last year's Annual General Meeting held on June 18, 2024, have been verified by the signatures of the Chairman and Secretary of that meeting. Unless there is any objection, I will dispense with reading them. I would now like to ask Glenn Dudar to make his presentation on the operations at the Board.

Thank you, and good morning. Before I get underway, please note the standard caution about forward-looking statements. I'm pleased to welcome all of you to the Westshore Terminals' Annual General Meeting. Thank you for joining us. Today, I will provide an update on the many activities that have taken place at our terminal over the last year as well as what's ahead for 2025 and beyond. Diversification continues to lead much of our thinking in terms of current operations and future growth. In addition to being a steelmaking and thermal coal export terminal, we are rapidly advancing towards also being a potash export terminal, operating as BHP's sole terminal service provider for their Jansen potash mine. We started the potash project 5 years ago, and we are well on our way to completing the project next year in 2026. For a marine terminal like Westshore, this is a significant pivot and these sorts of changes don't happen often nor quickly. This is the largest scale transition in our 50-plus years of business and one that will see us become a very different operation from what we have been. Beyond the infrastructure build, we need to develop procedures for every aspect of the receiving and loading of our new cargo and then train the workforce. And as we transition into potash operations, we will be to maintain the purity and quality of the potash and what will continue to be, at least in the shorter term, a coal dominant site. I am pleased to report that throughout all of this change and disruption, we continue to serve our current coal customers with significant volume throughput. Last year, we also saw a transition with our largest customer, Teck Resources, selling their assets to global mining giant, Glencore. They are now operating as Elk Valley Resources, a subsidiary of Glencore Canada. The Elk Valley Resources mines performed well in 2024, and this translated into Westshore handling their additional produced volume. When it comes to our U.S. customers, like many, we are monitoring the cross-border situation for any tariffs that could impact our customers and subsequent negative impacts to our business. Critical for Westshore is the fact that we operate as a flow-through. We don't take ownership of the product and are strictly a service provider in the logistics chain. We have a strong relationship with all of our customers and maintaining this will continue to be a key focus as we navigate these challenging times. When it comes to government policy, for some time, we have seen climate policy shifting towards lower carbon energy, but the transition -- this transition is softening with a notable change in sentiment in the U.S. and elsewhere. While the impacts of Canada's new federal leader are yet to be fully known, we continue to be engaged with the federal government on the potential for a 2030 thermal coal phaseout. Globally, we believe the demand for high-quality coal we handle remains strong. Simply put, we need energy to fuel transformation and coal continues to play a major role in meeting that demand. Our operational performance in 2024 was solid, and we shipped 26.8 million metric tons of coal, which aligned with our anticipated projected volumes. This equated to handling 1,687 trains from Class 1 railways and loading 300 vessels. Looking to export destination markets. Of the 14 nations who received exports handled through Westshore, the majority, 78% of the coal exported went to Japan and South Korea. This overall weighting is similar to 2023, and we anticipate the majority of shipments will continue to be destined for these key Asian markets. In 2024, revenues were $405 million, and our profit before tax was $158 million. Given the level of construction at the terminal, we are pleased with our performance over the last year. Looking ahead to 2025, we are projecting slightly lower volumes, approximately 26.5 million tons, down from 26.8 million tons shipped in 2024, still a tall order with the construction activity on our site. As many of our shareholders are well familiar, Westshore's top line revenues are driven by coal throughput volumes combined with customer handling rates. These handling rates are unique to each customer and can vary through their specific contract with Westshore. The average loading rate for a period reflects the customer mix, U.S.-Canadian exchange rate and global coal prices and the sales rates achieved by our customers. In 2024, we saw an increase in the average handling rate to $13.76 and are projecting a slightly lower average of $13.20 for 2025. We are pleased to have delivered sustained and positive shareholder returns. In Q1 of 2024, the quarterly dividend was increased and was maintained at $0.375 per share per quarter for a total of $1.50 per share annually. Diversifying into potash is not a small step for Westshore. It is a huge undertaking that will shape the future of our company for decades to come. Our contract with BHP is a long-term multi-decade contract with the option to extend many decades into the future. This mine is expected to be the largest potash mine in the world with an estimated operating life in excess of 100 years. Building the infrastructure to handle potash affects a significant portion of our site and work must be coordinated to allow ongoing coal terminal operations to coexist with project work in multiple locations across the site concurrently. The work schedule for 2025 includes continuing to construct the potash shed and railcar dumper as well as starting the installation of the conveyor network that will connect the dumper to the storage shed and on to berth 2. Westshore's potash project is on schedule to complete next year, and we anticipate meaningful potash revenue starting in 2027 once we have completed the necessary commissioning and start-up activities. As a result of the higher-than-budgeted inflation rate and delays in the outsourced design engineering and increase in labor and other project costs to maintain the project schedule, we expect the total cost of the project to be approximately $225 million above the original budget, and Westshore is responsible for these additional costs. Based on the information currently available, we expect these costs to be incurred starting in Q2 2026 through to mid-2027 and will be funded through cash reserves, cash from operations, a 5% holdback and the balance from borrowing. Despite these potash project overages, we remain in a very solid financial position. Our commitment to provide a safe workplace is core to every operating decision we make, and that is coupled with our commitment to also be responsible operators who are equally focused on support for our local community, care for the environment and delivering returns for our shareholders. In 2024, Westshore proudly made the largest donation in our history, a $1 million 5-year commitment to the BC Cancer Foundation to help fund their new Surrey Cancer Center. In 2024, we set new records in our key safety indicators, evidence that our approach to safety is paying dividends. It has been gradual change, but we are seeing the buy-in from our workforce and the related safety performance improvements. As you can imagine, the potash project is a big focus for everyone at Westshore and will continue to be through 2025 and 2026. At the same time, our existing coal customers will continue to remain a key priority for all of us. Coal has a strong future and will remain fully committed to our coal business, delivering premium service to our long-term customers. While diversification activities are advancing at the terminal in parallel, we're looking ahead to 2035 and beyond, building our 10-year capital investment plan centered on critical infrastructure upgrades as well as automation and technology improvements to reduce costs. We look forward to a strong year ahead. I would like to take a few moments to recognize and thank Bill Stinson for his many contributions to Westshore. Not only has Bill been a steadfast Board Chair, but he has also been a valued adviser to me and the rest of our leadership team. Bill, thank you for your unwavering support throughout your tenure. I want you to know how much you have not only contributed to Westshore's vision and success, but to my success as Westshore's Vice President and General Manager. Thank you.

Thank you, Glenn. We provided registered shareholders and proxy holders the opportunity to submit questions to us in advance of the meeting, and none were submitted. We will now open up the meeting to any general questions. And there are no questions still. Moving to Item 6 on the agenda. I place before the meeting the report of the directors, the consolidated financial statements for the corporation ended December 31, 2024, and the auditor's report. This report was mailed to all registered shareholders. The next item of business is Item 7, namely the election of 8 directors to serve until the next annual meeting. But just before I identify this year's slate, I would like to take this opportunity to recognize and also thank on behalf of the company and its shareholders, 3 retiring directors who have served the company and made great contributions over the many, many years they have served, namely Bill Stinson, who Mr. Glenn Dudar already has thanked, but he was fantastic and long-serving Chair. Brian Canfield and Glen Clark as well. Thank you very much all for their years of dedicated and important service to the company. I also want to welcome the new independent directors who will be joining the Board. Now the nominations for election as directors are the persons listed in the information circular. All of them are qualified and have consented to serve. Those persons are Dallas Ross, Clark Hollands, Steve Akazawa, Dianne Watts, Nick Desmarais, David Schellenberg, Dirk Lever and Glenn Dudar. There were no other nominations and nominations are closed. I move and second to elect those persons just nominated as directors of the corporation for the ensuing year. The next item of business is Item 8 on the agenda, namely the appointment of KPMG as the auditor of the corporation to hold office until the close of the next annual meeting. I move and second that KPMG be appointed the auditor of the corporation to hold office until the close of the next general -- next annual meeting. There being no further discussion at this time, the polls on all such resolutions are now closed. I direct the scrutineer to provide a report on the results of the polls.

No change.

Based on the scrutineer's initial meeting report, I declare that those persons nominated as directors have been duly elected by acclamation as the directors of the company to hold office until the next Annual General Meeting. And secondly, KPMG LLP, chartered accountants, have been appointed as the auditors of the company. I direct the recording secretary of this meeting to attach the scrutineer's final meeting report to the minutes of the meeting. As we have completed all of the business of the meeting, I move, second and declare the motion approved that the meeting is now concluded. Thank you all for joining us today.