Whitehaven Coal Limited (WHC) Earnings Call Transcript & Summary

Welcome, ladies and gentlemen, to the Whitehaven Coal's Q4 FY '23 Quarterly Production Update. [Operator Instructions] Thank you for joining us today. I will now hand over to Mr. Paul Flynn, Managing Director and CEO. Thanks, Paul.

Good morning, everybody, and thanks for taking the time to dial in to our final quarter for the FY '23 year. As usual, I'll run through some highlights for you and then move through the body of the report and on to Q&A. Now to kick off just a few highlights on the front page of our report, I'm sure as a number of you have seen already, pricing environment still remains pretty solid. It has drifted off over the course of the year in the last quarter. In particular, for this financial year, we achieved an average of AUD 264 for the quarter and the full year as a whole, the average there being AUD 455. Run-of-mine sales -- run-of-mine production, I should say, a 5.1 million tonnes was a solid result. And the total for the year just crept over the 18 million tonnes per annum, which was just a lower end of our guidance, but 5.19%. That was a good result. Total equity sales of produced coal 3.3 million tonnes was steady period-on-period and managed sales for the produced coal of 16 million tonnes at the upper end of our revised guidance. Cash generation, again, has been pretty good, $430 million in the June quarter and across the year at $4.2 billion, which is very positive and reflected that strong pricing backdrop. The balance sheet is in good order with cash at $2.65 billion. And just a quick update on, on the buyback, which I'll get to later but during the quarter, just under 39 million shares purchased during the course of the quarter. And so I'll summarize that a little bit later on, but hitting that solidly. Average, as you can see there about the $6.50 and change type level across the quarter. On to safety. Safety has been continuing a good trend for us. Our TRIFR and all the efforts applied across the business to try and improve our safety performance, which by industry standard is pretty good. But obviously, this job just requires constant diligence. And our TRIFR at 4.7 was a 13% improvement last year, which is nice to see that continue in the right direction. Now moving over to the page there. As I say, 5.1 million tonnes, 19% up on the March quarter was positive, a 51% increase from our open cut performance. And then in Narrabri, of course, going through an expensive change, which I'll talk about a little bit later. The totals for the quarter there, as you can see, total and full year 5.1 million tonne and 18.2 million tonne for the full year. On ROM production, salable coal production at 3.8 and 15.7. The managed sales, as I mentioned, for the year, total at 16 and for the quarter, 3.94. And then the quarterly results cash paid down with the same impacts period-on-period, which is quite positive for to ramp up this year. At Maules Creek. Maules Creek did step-up quite nicely in the quarter and that coal production near 3.4 million tonnes per quarter, 48% up on March, that's positive. It ended up being just under the 9.6 million tonne mark for the year after achieving that 3.4 million tonne, which is which is very good, but production was certainly was flurry in the back end of the quarter. So we've got a hungry market there, which is keen to get every ton of Maules Creek coal. So with that the coal left, the mine stopped pretty quickly and wasn't -- didn't leave us a whole lot of stock there, but we are building stocks during this period and certainly into the new year as well. That 9.6 million tonne was 15% below March. You obviously know that there's been a big weather impact on this year, which has been challenging. Well, not just ourselves but for mine production throughout both Queensland and New South Wales. I'm sure those monitoring the port will see the tonnage volumes going through the Newcastle port. On to Narrabri. Narrabri tonnes at 450,000. Obviously, a lot less than what we've done in the previous quarter, but experienced Narrabri successfully navigated its way through what's been our largest and most complex relocation for the longwall, obviously, going from our deepest panel production in the northern panels across to the shallowest one on the southern side. So they're very positive to get that done. And of course, there's further complications of reorienting and equipment to be able to cut to rehandle our equipment, so you cut back from south to north, but obviously, the tailgate and many gate size swap when you're doing that. So yes, that was a nice job to get that all done, and we're back into production now. There is a relatively cautious ramp-up associated with this change. We did experience some supply delays in terms of overhauls and equipment and so on, which delayed the start of the recommencement of cutting, but we are moving quite well. And once we get the panel squared up, we'll continue to push to greater volumes here. But that looked like a really a solid outcome for everybody to get through that on time, subject to those delays and safely as well. The year's total at 5.3 million tonne was 9% less than the prior period. Again, first, solid strong half, but second half, obviously, with that change out and a relatively slow conclusion to 110B as we came to the final end of that with a little bit of ground stability type concerns in that deep ground but very pleased to have all that behind us now and moving ahead in this new financial year. Gunnedah Ross had a good quarter across both the mines. So Tarrawonga and Werris both did well. Volumes are Tarrawonga at 730 versus 521 positive step-up there. compared to where we've been in the past. And Werris Creek at 550 versus 260 also so came home with a wet sale, which is positive to see that round out in what was otherwise been pretty good operating conditions relative to what we experienced in the first half. So in aggregate, they've ended up with a pretty good total of 1.27 versus 782 in March and 3.4 for the year total, which is very positive. On to our equity sales. So you can see the table that we provided here. And as you know, generally in a softening environment, we're going to realize better than the average for the period from a realization perspective. And you can see that's exactly what's occurred again in this quarter as it did in the previous, so the average price, as I mentioned previously, AUD 264 versus AUD 400 for March. And you can see that trend across those columns through there just to see that we are in a price environment that has moderated quite considerably. And so our thermal coal prices are just on a U.S. dollar basis $177 for the period. Metallurgical coal prices achieved during that period for us at USD 218, and the average or the index for the quarter was $241. So as a result, you can see that premium there in a softening environment. And in a stable environment, I just have made that comment there, just in a stable environment, we should be a little bit a little bit over the average of the quarter, so a small premium in a stable environment. But because that's softening, obviously, would bring the lag effect of better priced tonnes from prior periods into the realizations in a particular quarter, giving rise to that 10% in this quarter. On the coal reservation policy, I know this is not particularly an exciting piece of the report for anybody, least of all us. But we have delivered and met our commitment during the period. In fact, during the quarter, we supplied a total of 299,000 tonnes under the policy. You may recall that we previously said that we're going to submit about 200,000 tonnes per quarter into this policy, but there was an opportunity to actually to supply to our preferred location and drag in some tonnage from next quarter into this one. And so rather than running the risk of supply, one of the less optimal power station destinations. The opportunity was too good for us to take that up, so we did supplied into to the preferred power station, which was advantageous to us. Just for pricing there, we've helped everybody understand that the realized pricing $115 is less than $125 cap, which the system has imposed. That being at 5,500. So clearly, we put in there less than 5,500 in winning those tenders and so receive a commensurately a lower price as a result. Now moving on to the market more generally. The market itself, as everybody has acknowledged, has been typified, I think, by market that's well supplied in coal, oil and gas across various markets after what was otherwise a relatively mild winter. And so our customers generally have reasonable stock levels still moving into their number. And so we're seeing buying being relatively modest, although all our commitments are being -- all our customers are taking all the shipments that have been previously scheduled, which is very positive. I made the comment earlier just about tonnages through the port. And you can see there that we certainly have seen volumes less right across the market. And as people deal with the impacts of that first half wet period. And we know that many mines are still dealing with the legacy of lots of water on-site and having to move that around in order to meet the, obviously, their environmental obligations during that period. Moving on. From a cost perspective, we've given you a steer in terms of our costs, unaudited, that be $103 is where we think or the -- those numbers will end up. The audit process will bottom that out over the next 6 weeks, and we believe our results in the week of August. On the buyback summary, again, we've provided you a bit more color just in terms of the total buyback performance and then the year -- the financial year-on-year impact of the returns to shareholders that we've driven through a the buyback period and then add that to our dividend payments as well during the FY '22 and FY '23 gives you a sense of where we've been. So we aggregate since the buyback start and we purchased 196 million shares, which is still in the order of -- depending on which way you calculate it, 19% to 19.5% of the stock since the buyback program started, whether or not you include -- depending whether you include milestones or not the milestone shares obviously subject to restrictions don't receive distributions and they're not subject to the buyback either. But in aggregate, since that program starts up 196 million shares, which is very positive. And during the quarter, we were hitting that pretty well to continue that momentum with the buyback program, which I think generally has been well received by our shareholders overall. Just to go through now a couple of comments just on the individual projects. And I'll just draw out quickly the highlights for you on that. The Narrabri underground project, you may recall, has had 2 legal manage to deal with, one being state-based. There's a challenge to be its approval of Narrabri Phase 3. Fortunately, that's now being dealt with and in our favor, and so we can move on with that one. But you will recall that there is a affected matter at the federal level, which encapsulates, I think, 19 projects under what's loosely called the reconsideration request, which asked the federal minister to go back and relook at a number of different projects there across various industries seeking EPBC approval, one of which is now in Narrabri Stage 3. And so the minister has decided that there's an appeal on there, which we'll need to work our way through. So very positive that the Stage price 1 has been dealt with, and we're working collaboratively with the federal government. We have joined that matter, even though the case is not against us, just to stay close to it. Highlight just on Winchester South. The positive news there is that the Coordinator-General's office has declared the project -- our EIS to be adequate, which is right now is a slightly different process, as many of you all know, compared to the New South Wales process. But having been declared adequate, the government then goes through the process of finalizing their report on the project. But that is a very important milestone for us, so we expect a few months now of preparation from the government in -- before the release of their report. So it's nice to see that milestone met. There's a little bit of extra information there just on group exploration activities. I suspect I'm going to get too excited about that. That's a compliance requirement for the ASX requirements, given that we do spend money under the exploration banner, even though that regime is broadly focused on junior explorers given the importance of exploration to them. So the balance sheet is in good shape. And after returning $1.6 billion of capital through dividends and buybacks, we've got $2.6 billion on the balance sheet, $2.6 billion on the balance sheet, which is was very positive. There's some tax to pay. We are in the PAYG tax regime, as many of you know. And during the course of this quarter, we did bottom out the reorganization of our finances in this period. So our refinancing, our contingent facilities for the various funding requirements that we have and a $1 billion previously undrawn facility, we didn't renew that. And so the company is being well capitalized, and you'll see it is us capital for many of these purposes. For the Safeguard Mechanism watchers, there is quite, there has been some change in regards to the Safeguard Mechanism, which started on the 1st of July. But as many of you know, there are still some negotiation between the government and the industry on the treatment or the application of the significant safeguard mechanism changes and the treatment to open cut and underground mines. And Whitehaven has been working very well with a range of other industry participants and with the government to bottom out what we think is at least incrementally better than what was previously proposed for underground mines in particular. And for those who have been watching this, there is a change in the average emissions intensity variable, which is used there and at 0.0653 so that's a little bit more positive from our perspective. And there's a more useful glide path for the transition from your site-based production variable through to an industry average over time, which, again, is more sympathetic to the needs of underground miners of which we have won. And we've also given you an estimate there as to what we think the impact of that will be in this next financial year, about $1 a tonne for FY '24. That does change over time. So I don't want everyone just to impute that there's only $1 per tonne payable there will change as mission profiles do change. And of course, ours and industry more generally, but ours more specifically, our ability to minimize exposure to this regime by reducing our emissions, particularly at Narrabri, given the underground mines are generally more emitting from a CO2 equivalent perspective than some cutback, but then again, they measure their emissions in -- with a high degree of accuracy whereas the other cut lines are more subject to estimation. So as I say, you should impute it's $1 per tonne for the rest of the mine life. We're just giving this here for next year and our mitigation measures, and other things will play out over the coming years, and then you'll see us give more guidance in terms of what we think the impact of that is over the period. From a Vickery perspective early works are continuing there just in terms of getting ready for early mining there. There are a couple of secondary management plans and so on, which need to be signed off before we can actually commence operations on site. And so we're looking forward to bringing that in the coming months. The guidance is tabulated there for you over on the Page 9 of the whole report, as I say. We just crept over the 18 million tonnes at 18.2 million tonnes which is positive. The sales were at the upper end of the revised guidance at 16 million tonnes and our equity sales also at the upper end there. So the $103 number we've given you from a cost perspective, as I say, that will be confirmed with the release of the full year audited financial results. And obviously, at that time, we'll be giving you guidance on FY '24 as well. So with that, I'll wrap up the presentation on the quarterly report, and I'll hand back to our operator to open up the Q&A. Thank you.

[Operator Instructions] Paul, we have our first question from Chen Jiang from Bank of America.

Paul, This is Chen from Bank of America. Just a quick question on your production. I understand you provided guidance on 24th of August. How should we think of your normalized production outlook beyond the weather and the supply disruptions? Hopefully, those are behind us. But by looking at the run rate from Maules Creek, I think the run rate around annualized 13.4 million tonnes. So that's a good indicator. Just wondering how should we think about your normalized production outlook from here.

Yes. Thanks, Chen. Look, we will give guidance, as you say in 24th of August. So we won't be uncovering too much of that right now, but a couple of comments just in relation to the points that you've drawn out there. Yes, of course, on an annualized basis, June was positive to see running at that rate. Of course, we're captive to a 3 million tonnes per annum approval limit set is that across the course of the year. But as I previously mentioned here in our last quarter, when we spoke about the couple of challenges that all our industry and we particularly have been facing. And then as you've referred to Maules, I just want to draw out a couple of things there. I called out before manning and then congestion impacts and essentially related productivity impacts that stem from that from keeping the autonomous fleet at Maules Creek separate from the manned fleet, as the transition of required as we complete or exhaust all the out-of-pit dumping spaces available to us and transition 100% into in-pit dumping later on in the end of -- essentially the end of this next 6 months, the first half period. So look, on the labor side of things, we are doing pretty well there, actually. And so it's nice to see that we're making good strides in terms of manning up the fleet, which -- and I'd say, assuming that we continue to operate at the same level of autonomous equipment at the moment, we're pretty much on the mark now with the manning side of things, that's great. But the congestion impacts we mentioned before, just about keeping those fleets separate, we'll carry on into this new year. So the question is a good one in the sense that obviously, the total for this year would not be what you should infer for next year, but there is a price to pay from a productivity perspective in keeping those fee separate. And the reason why we think that price is worth paying is because we think -- we like to think we're on the back end of the development of the AHS system, and that with the available time remaining, we can hopefully cross the line of commercialization with this product and move into a broader deployment of autonomy across our overburden fleet at Maules. So I'm not giving you a specific number, obviously, because we'll do that in the third week of August. But you shouldn't infer this run rate for the top end, and you certainly shouldn't infer this year's full actual production at Maules has been the basis for next year. It will certainly be higher than that.

Right. Maybe a second question on your core mix. Just realized that you sold 91% of high CV sales, so I'd be that's pretty high. I'm wondering that 91% of high CV. Is that due to market conditions or that's because just because of your mine plan or it's because of the coal reservation, just if you can share some color on that?

Yes. Thanks, Chen. As a general statement, as you know, Werris is the only mid of the mine that we have, and that will be coming to an end in the early stages of calendar '24. Small changes emerging at the end of FY '24, crossing into FY '25 from early mining at Vickery will bring in a higher quality substitute, which would be good. So on average, our CV across the business will be going up with the loss of various production and the advent of Vickery production. But generally, we've been watching everything, as you know, just to take advantage of the spreads between API5 and gC Newc. And so we've continued that process throughout the year, and we've anticipating continuing doing that in this new year. Those spreads certainly still warrant us doing that. And to the extent that we have mid-CV sales coming out of Narrabri say, for instance, which is certainly possible, that's really just a function of blending across the business to the extent that as we've noted earlier in the year, when we had all those weather impacts at Maules Creek, which curtailed production of high CV coal and meant a paucity of clean stock available to blend with Narrabri. We did have, as you've noted there, mid-CV sales occurring as a result of that 9% of the thermal. So that's the broader way in which that's managed, but we would see the proportion of higher CV in coming years, greater as a result of that swapping out of the Werris tonnes for all Vickery tonnes.

All right. Maybe last question on the share buyback on Page 6 of your release. I'm just wondering for your capital return, buyback for FY '23 to calculate 50% of NPAT as return to shareholders. Should we use $724 million, or we should use $949 million under Page 6. I guess the difference is the buyback announced from the first batch but completed in FY '23. I'm just wondering which number we should use to calculate your FY '23 shareholder return.

I think you need to use the buyback that was conducted post AGM because the buyback was really rounding out the tail of FY '22 buyback, and we've accounted for that in the cash allocation at that point, Chen.

Our next question is from Taylor Hernia from Goldman Sachs.

Paul Young here. Paul, the first question is on Narrabri. You mentioned about the move to the 200 Series, it took a little bit longer than expected and the ramp-up second a little bit longer also. Can you just maybe run through how that actually has gone and maybe in July, how production has been running at Narrabri on that ramp-up?

Yes. Thanks, Paul, Kevin. Yes. Look, there's a range of things there. I just mentioned there before, as finishing out 110B, as I mentioned, that was definitely slower than we would have liked. And there was some there were definitely a few ground stability issues there in the back end of 110B, which is pretty annoying, given that the first half of the year had been such a positive run rate. But as you know, in that degree, that's prone to happening. The relocation itself was well done. We did suffer some delays with suppliers and not just components but labor on their side as well, causing some issues. And then as we've moved into Panel 203, we've definitely been treating gingerly, I'd say, just because we know we're on -- that's the first panel, obviously, on that side, and there is a little bit of washout in section that you encountered there just on the -- maybe the eastern side of the panel. And so we're treating gingerly there as we're less than halfway through to get to square up the block. So we're operating relatively modestly until we ramp up. So we're as we currently speak, I've got in here as well, so you can chime in with some commentary there. Yes. I think we're in the sort of 15 to 20 type level now. You're asking for some feedback on the production levels now. That will ramp, obviously, as the block squares up. Ian?

Yes. So as Paul touched on, we're about 170 meters into the block, which is sort of around 400,000 tonnes. And we need to get through to around 300, 350 meters just to settle in that what we call getting square. But as Paul said, we're taking that steady as we moved through there.

Okay. That sounds like some good progress in July. So that's great. Next question, Paul, is and maybe it's for Kevin actually on this refinancing. Any further details you can provide us just on the size of that refi, which banks are involved the rates? Just curious considering that, I guess, the items that you're covering there.

Kevin.

Paul. Yes. look, Paul, I think we went through that process. It's a range of banks. I'd say to you that it is increasingly difficult in a thermal coal producer to be to attract external funding. The contingency that was well supported. The actual lending side of that, we sat there with $2.6 billion, $2.7 billion on the balance sheet. As you know, we've talked about getting into the U.S. debt capital markets in time. And we were very, very, I'd say, reserved in the way in which we approach that. So we've helped a number of banks achieve their decarbonization within their own portfolio strategy. And looking forward to 2024 working in debt capital markets.

Okay. And last question, Paul, is on is on the labor cost piece at the moment, which we know is high and labor inflation is high, and it's capital and CapEx is -- inflation is still coming through. So there are a number of opportunities, of course, out there in the market across certainly metallurgical coal in the trade sale perspective. So how do you think about the buy-versus-build scenario at the moment?

Yes, that's a good question, Paul. Labor cost, yes, you rightly pointed out, certainly are still running at vibrant rates and certainly well above the national averages. When we hear about the government highlighting the rate at which wage inflation is acting on average cross economy, our industry, I'm pretty sure is a substantial premium to that. So then as you say, capital costs also -- we've seen those continue to rise. So part of the process with our Vickery project is to move in the second half to a phase of trying to validate what we think the capital should be once individual suppliers pressed to put a number on the table to see what that looks like. So the build-versus-buy conundrum, just vastly different risk profiles associated with that, as you know. Vickery, we're interested, obviously, for that trade I mentioned earlier to Chen's question, it's obviously swapping out the low quality for the high quality, that makes a lot of sense for us. We've done a lot of work on Vickery. So getting the approval ready, and the Board will have a look at the full version of that later on in this calendar year. We seek to put firm numbers for the capital on the table for them so they can assess that. Having said that, there will be a checkpoint next year by which once those -- once the tender number that come back, we'll come back to our Board just to make sure it's within the margin of error they would contemplate when they do assess that project at the end of this year. And so yes, of course, M&A has different a whole range of different other risks associated with that. That's about all I can say on that one. But we -- obviously, the backdrop of that is the buyback, which has also been a very effective use of capital. So that must be in that mix as we weigh up the various streams that you mentioned.

Our next question is from Stephen Henderson at Shaw and Partners.

I have a couple of questions regarding updates on the balance sheet and refinancing. In your last production call, you stated discussions were ongoing, and you were pursuing refinancing for the company's $1 billion credit facility. This morning, we turned out, this isn't happening. I know Paul just asked a similar question, but if you could maybe expand a little bit on this? What went wrong here exactly? And does this mean you plan on funding Vickery and Narrabri extensions with internal sources of capital?

Yes, I'll hand over to Kevin. Yes, that's right. Look, we didn't renew our funding, as I mentioned earlier, and there's no problem in dealing with the contingent side of that. It's all bonding and other requirements. But obviously, with a lot of cash in the business, then obviously, the price is improving. There's no doubt that some of the some of the banks have chosen to not participate in the refinancing as we go forward. Now as Kevin said, thermal coal and that no new concept to all of you on this call, thermal has been less appealing from the bank's perspective in terms of how they want to decarbonize their lending portfolios. And as Kevin said, in the end, they have been able to remove submissions from their portfolios as a result. So going forward, no doubt, no doubt. So right or wrong, thanks view Vickery as being a thermal project. Now that's not our view of it, of course, and it has a very good semi-soft coking coal product we expect to be producing a lot out of that site in the fullness of time. But that's how they receive it, and there's no there's no way that we could change that based on the discussions we were having with people. Met coal is different things. So just to round up the discussion from Winchester South perspective, we still have got positive expressions of interest for funding a Winchester South project in the fullness of time and a little bit of restructuring in terms of internally from a corporate structure perspective, just to provide some added rigor around how those funds would be deployed in the event that banks commit to a project that's predominantly met coal related. And so yes, so look, it's hard [indiscernible] on the thermal side of things in funding this industry. You can see our peers. Our peers are experiencing similar sort of dialogue with the banks. And our desire here is to keep all the banks interested in our business as we put more meat into it with Winchester South. Kevin?

Yes. Thanks, Paul. So I'd say to you that I'd go back in a little bit of history, but I'd say we started out with $1 billion facility when we kicked off Maules Creek, and that was really there to help build Maules Creek. We -- through '15 and '17, we refinanced that in '20 at the bottom of COVID, we refinanced that again. I'd probably say that it's -- or I would say to you, it's fairly challenging when you go to a bank and say, "I've got $2.6 million on a bank on a balance sheet and circa borrow some money." Because they look at you go, well, why do you need that, this fall. And that certainly played into the conversation. I'd agree with Paul. I think the opportunity -- a number of banks took opportunities to say, well, you've got plenty of cash and come back and see us when you've got something else you want to do. But at the moment, we'll take an opportunity to decarbonize. On that front, the contingent side of the world was really well supported, diversified group there. And I'd say to you that I think anybody who's in thermal coal is going to be facing similar challenges in organizing funding from traditional sources, which is why we've kept the line of opportunity, the line of inquiry open in terms of the debt capital markets. And it's why we're running a pretty extensive program with offshore capital providers in discussions there. So I think that's the summary. I wouldn't say anything went wrong. I would say we took the opportunity to reduce the process. We're going to always going to reduce the size of that, and that's what we've said to the market. But as I said to you, $2.65 billion, $2.7 billion worth of cash, and most of the capital providers similar terribly sure what you need is for all. So we'll make a decision to do something else. Does that answer your question?

Yes, that's helpful. It's interesting you mentioned that certainly the met coal side of things and banks maybe being a bit more open to that. I noticed at the end of last week, Whitehaven looking at in those 2 BHP mines, met coal mines, but weren't able to secure capital is what the report said. Look, I'm just wondering maybe you've lost relationships with the big 4 base and getting involved in Whitehaven projects moving forward? When do they be thermal met coal? Maybe some comments on that?

I think I'll probably come back to you and say I'm pretty confident that was an article in the Australian. I think -- yes, that was a Yes, yes. I'm probably, I don't pay much attention to that particular part of what comes out of Australian.

I wouldn't worry about that too much. I don't know where that commentary came from Stephen. There's been -- there's substantial interest in the banking community for met coal exposure. So our Winchester South, obviously, is the focus for us. And there's been no shortage of people interested in that. As I said, there's some restructuring we're required just to ensure that, that bank to the extent that banks are interested in met coal only, then it would be in a way that would be sympathetic to that need. And obviously, the thermal business being unlevered obviously is a credit-enhancing opportunity. I suppose, when you -- when someone comes to finance a met coal mine, but otherwise, I don't know where that comment came from those most particular. We certainly don't have any relationships with any banks around town, not at all.

Yes. All right. Fantastic. Well, look, if you're indulging just one more digging down into the contingent credit facilities. You noted in your report that the pods coming into this important rail infrastructure. And can you provide a little bit more detail about what this is exactly?

Well, you understand that the back of this have got take-or-pay arrangements to Newcastle and take-or-pay arrangements with ARTC. And so important rail facilities are really just those arrangements. So each of those providers of that service require facilities at the back of that to support those arrangements.

As it's always been.

As it always has. So there's nothing terribly new or innovative in that conversation. It's pretty standard for the industry.

Our next question is from Tony Mitchell Shaw and Partners.

Congratulations, Paul, very good results. I don't think you'll answer this, but I feel obliged to ask the question. Is Whitehaven interested in either Daunia and Blackwater? And if so, when do you expect to find out when that whole process is going to be finished?

Heavy must be the burden on you, Tony, to ask that question. Look, the simple answer to that is that we look at all assets that in the strategic crosshairs of the business. And any question around timing or otherwise, we better directed to the person or the organization running that process, which is BHP. We're happy to look around, as I said previously. We look at all those things that fit between those parameters. I can't really comment too much more on that. Of course, Daunia is approximate to our Winchester South. So I mean that's obvious why we would want to have a look at that. But beyond that, I think as those other questions on timing would be better directed to BHP.

Our next is from Chris Drew at Jefferies.

A question just on waste development at Maules. Is there any, I guess, sort of deficit that we should be thinking about there given the labor and weather events of sort of recent times and congestion issues and I guess perhaps what looks like accelerated coal sales in the June quarter? Or is that all kind of running as per plan?

Yes. Chris, no, nothing particularly there to be concerning from a waste removal perspective. We don't have a deficit. In fact, our inventory of broken stocks on ground is increasing, which is good. And so we have an objective to elevate that, and that's been positive. That's definitely heading the right direction. You may recall there were some constraints there a couple of years ago when we transitioned to a new explosive service provider. And so there was a slowdown required whilst we transitioned to those new products, but those products have been working very well. And so no, broken ground stocks, not a problem at all. So I wouldn't be inferring anything for the new year in that regard. [indiscernible], Ian.

No. I mean, I think as we indicated, the plan always was in the mine schedule for the year to have a lower strip ratio in Q4. That's just the way the sequence worked. And we saw a full range of the scenes presenting themselves. I think historically, people have asked questions Braymont, but it's only represented sort of in the quarter, about 13% of what we produced. We were down in the bottom scenes, and they delivered well. So that overarching, as Paul said, as, the average strip ratio for the year sort of panned out as we always have planned it to be. It was just lower in Q4 just due to the sequence.

Okay. And perhaps just a second question on males as well with the AHS integration. Is there any, I guess, detail you can give us there in terms of the confidence around the commerciality and whether -- and what you're seeing that gives you a bit of confidence that -- that's going to deliver what you'd like it to?

Yes. I mean, we've obviously been AHS journey for a number of years now, and we're continuing to push that through into FY '24. As Paul said, the out-of-pit dumps will finish probably towards the end of Q1 of this year, and then they'll be running into the southwest area of the mine. And we've been running up to sort of 2 of the larger fleets of gear in AHS and introducing the manned coal fleet with that. And I guess that's the journey for sort of the next 24 -- 12 months to see how that integration works, and the plan is to integrate large -- the other larger trucks with that. So we'll have a good firm handle in the next 12 months as to whether or not, I guess, AHS has a future at Maules Creek.

I think Chris, the limiting factor there is just that separation. How long can you keep the separation of the AHS fleet in the autonomous zone away from the rest of the balance of the fleet. And that's here, of course, when you have out of pit dumping opportunities, but we'll have filled that all up. And that's probably a negative in that sense only because broadly, in-pit dumping is a much more useful thing to be doing than holding long distances to our pit locations. But when you're all inside the pit, and you've got to keep fleet separate, that's pretty dysfunctional from our perspective. So we're not going to see the highest level of productivity as a result of congestion, having to manage that balance. And so that's why we've -- that's why I was saying earlier, there's a limited period of time here as you can physically keep those fleets usefully separated. And b, there is that productivity impact. You just don't want to bear that for too long. So there's what I'm saying to you is it's not a bottomless pit of patience here. We do need to cross this threshold of being able to integrate the manned and unmanned as saying, we are doing that now, which is very positive to see. So that's very positive. I'll go there that in a day, and I could see not just the intermingling of services-related equipment but trucks as well. So that's positive. But we do need a bit more work before we can roll that whole integration across the whole pit. And so that's -- this next financial year. The next 12 months will be the real go or no-go type decision.

Our next question is from Glyn Lawcock.

Maybe if we could just dig down a little bit on costs. I know you're going to give us guidance. But firstly, just with Narrabri, the move into 203, I know you're still ramping up. But what sort of cost reduction are you expecting there? Are you still expecting and you're still thinking achieve what that benefit of not having to do roof bolting on and you're back in shallow ground? What sort of benefit should that give us relative to the cost that we ended the last panel?

Yes. Thanks, Glyn. Yes, there is, that's a very interesting area for us as well because we are transitioning away from obviously the cost basis associated with lower volumes in deeper ground and all the attendant works that go with that and you started the roof bolting on. There's obviously roof bolting still required in shallow ground. It's just in the past, we've had secondary support patterns there, which have been quite intensive. So we do see the shallow ground being opportunity for cost reduction, no doubt about that, not just the least of which is obviously more volume. But then, as you say, those types of services no longer being required in the same intensity as what they were before. The problem we have with this, and we'll give our guidance in 6 weeks' time. The challenge here is that the basis of comparison sort of gets lost over time because we're such -- we're in such an inflationary environment now. And so -- but there's no doubt that certain things will be -- certain activities will be required in the deeper ground that are not or less required in the shallow ground. But we will -- I don't know if you want any other color Ian, that you want to describe there?

No. I think you covered on most of it.