Whitehaven Coal Limited (WHC) Earnings Call Transcript & Summary

Good morning, everybody. Thanks very much for taking the time to join us today for the full year results for Whitehaven Coal's financial year 2025. I'm joined here, as always, with Kevin Ball, our CFO; and our IR team with Kylie and Karen here to support as well. As usual, Kevin and I will go through the slides, and you bear with us, and we'll get to the Q&A session for what's been a very good year for Whitehaven as our first full year of our expanded footprint with our now enlarged portfolio of assets. Quickly turn over. Of course, there's some forward-looking statements here, so I draw your attention to the disclaimer that's there. Let me just start the highlights, and I'll start with safety being an important feature of our business, first and foremost. Safety performance has been good. So we're pleased with the result now with our expanded business. And our TRIFR was 4.6 for the year. And I've given you just some numbers there, incorporating some historical data. So the New South Wales and Queensland combined performance is there for you to see. And so on a 5-year average basis, which is how we set our targets, you can see that we're doing pretty well relative to the average of the last 5 years. So we're pleased with the progress, but more work to be done, of course. Another pleasing aspect of our performance here is that our environmental enforcement actions performance has been pretty good, 3 years without any incidences at all. So again, the team is very focused on this, making sure that we manage ourselves properly in compliance with all the various conditions. There are thousands of upon us on any given day. And so we need to make sure that we are compliant with all of those. I'll turn over now to the highlights. Now you've seen some of these, but it's important just to call out some of them. We've had a very good year. And certainly, execution has been excellent across pretty much every dimension of our business. We're pleased with it. Of course, Daunia and Blackwater successfully integrated into the business and have either met or exceeded their wrong guidance. At 39.1Mt, it's a very good result, 60% better than last year and in the top end of our range. Equity sales also in the very good part of our range of 26.5Mt as a result of the Queensland acquisition, a good step forward. The average price for the year at $215 was broke up in 2 parts, as you can see. Queensland, $232 on average income for the average revenue for the year. New South Wales $193 million. Our costs at $139 million were at the bottom -- just below the bottom end of our guidance, which was a terrific result from the team. So nice to bring that around. The total revenue of $5.8 billion, split between Queensland at $3.5 billion and New South Wales at $2.2 billion. The underlying EBITDA at $1.4 billion. You would have seen one of that accrue in the first half and in the second half, $400 million, broadly consistent with the downturn that experienced certainly in that second half and certainly have a year of 2 halves in this particular financial year. The underlying NPAT $319, $309 million was a decent enough result given all that I've just mentioned. The statutory result was actually double that at $649, our underlying NPAT at $649 million because it includes the one-off gains associated with the formation of the joint venture. As a result of these good outcomes, the Board has seen fit to declare a fully franked final dividend of $0.06 per share, which will be paid on the 16th of September. And equal in value, buyback of up to $48 million will be engaged in over the next 6 months as well. The aggregate of this works out to be about 60% of our underlying NPAT in line with the capital allocation framework, which has been updated, and we'll talk in a bit more detail on that a little later. Now those highlights are great, and it's easy to look at that at a superficial level, but let's just dive very quickly just to the structural change within the business that I wanted to highlight for you. And this is an important point, I think, for our shareholders to see. Now what we've provided here for you is the attributable tonnes per share and then also the attributable EBITDA per share, and that's now analyzed across pre and post buyback and then pre and post acquisition. So what you can see here is a really interesting story where because we haven't used new equity, the buyback obviously drives a significant step forward in terms of attributable tonnes per share and attributable EBITDA per share. And then when you overlay the acquisition across the top of that, then you can see the big step forward that the attributable EBITDA per share also takes as a result of that. And so you can see in the context of EBITDA per share, you're actually 3x what it was if you're a shareholder as you've taken this ride with us through this very short period of time through which we've executed both the buyback and the acquisition. Now obviously, the chart or the bar to the right on both these scenarios just points to a bright future. And as you can see, there will be volume growth as we know there will be. We're driving hard to move our costs down. Productivity improvements and cost outs will drive better margins. And our margins are pretty low based on the cyclical low position we're in at the moment. And of course, the continued use of our buyback is going to amplify the positive effects of all the above as we go forward. So a nice structural change for our shareholders to be in. Moving over to markets. And I'll just focus on this. Again, you saw -- I know you've watched many of these aspects, but I will just summarize quickly. Obviously, 2 sides of our business with the thermal and the met side of our business now, which are much more balanced and lower-risk business, which is great. The PLV performance during the course of the year certainly has taken more of a cyclical turn and has dropped 32% down to USD 196/t for the year, whereas the thermal side actually a little less dramatic than that, 11% down year-on-year, down to USD 121/t. Now we've seen some good signs since June that says the thermal side has firmed, which is good. And on the met coal side of things, also there would appear to be some nice policy announcements coming out in China, in particular, focused on constraint of surplus production of coal and of course, surplus steel production, which I know there's been lots of conversation about that. So I think those 2 factors and also a settling position potentially on the side of the trade discussions and tariff-related movements does point to hopefully further stability in the market. And with the effects of those policies in China, we expect there to be a firming of the market and prices will go along with it. Overall, you've seen this slide before, 64% of our revenue was generated on the met side, 36% on the thermal side of our business. And you can see the distribution of the sales by destination. Japan clearly remains the standout for our business, a terrific market, takes nearly half of our total volume, which is good. India has actually emerged as -- it's always been a part of our business, but India has emerged 11% now, which is good because that footprint, we know will expand considerably as we go forward. A new thing for us, of course, is sales into China. That's obviously met-based, having never sold really any thermal coal there. And then Malaysia and Korea taking up 7% of the business overall, and there's a spread of other smaller destinations. But yes, Japan continues to be an excellent market for us. And we remain confident about the outlook for the business because there's a supply-demand gap here that we know is going to continue to drive robust pricing into the future. So on the thermal side, there on the left-hand side of the page there, you can see out to 2040, a projected gap there from quality insights to assisting us with our views on these things. It's about 150 million tonnes difference between the runoff of mines and the growing appetite for thermal coal across our region. And on the metallurgical side, perhaps more modest growth, but this is actually a more modestly sized market. So the 61 is actually really important in a market that's actually much smaller in total volume. And so both of which give us the confidence to move forward, and we look forward to enjoying the tension that the supply-demand delta creates in the pricing market. The upside of things, I'm not going to go over too far because I know you've seen all that through the procession of quarters during the course of the year. only really to summarize that we've had a very good year operationally. And we've done well relative to the guidance we gave you at the beginning of the year. We took a conservative position in doing that, and I'll get to guidance in a moment. And we've done the same again in this year in terms of taking a conservative view. But the 39.1Mt is in the upper end of our guidance, very good, and the sales are similarly so at 30.2Mt. So very good results across the business. If I move over to the actual operations themselves, the '24 Queensland, very good start to our first year of ownership, and we want to continue to see that momentum going into the new year. Both new mines, Blackwater and Daunia have certainly exhibited better than historical performance over the last few years. And so that's terrific. Proportionately, Daunia has had a step up, which has been really good. Blackwater is doing the same, but we want to see more momentum in this year from both of them, and we're encouraged to think that, that will come. We did set ourselves a target of $100 million out of cost by 30 June of the year. We did achieve that and which is very positive and the teams have done a great job there in Queensland in delivering on that undertaking. So -- and you saw the benefit of that comes through our costs at $139 for the year. We'll continue to see further cost outs and benefits and productivity improvements in the course of the new year. New South Wales did a good job as well at 19.1Mt, that rounded out a solid year. The open cuts did very well. Narrabri, obviously, less than what we would have liked, but it did have a very long and extensive change out for 8 weeks as we did some serious refurbishment work on many of the legs with that change out. So 19.1Mt off the back of that was actually a solid outcome all around. And we're looking forward to seeing that continue in this new year. So as far as Narrabri goes, we have some revised CapEx news for you, which was the action item I'm asked to come back and release that to the market once we've gone through the various hurdles with our joint venture partners. We have done that, so I'll speak to that shortly. So the only other thing to mention off the back of this is similarly with last year where we had $100 million out of Queensland, it was our cost out target. In this year, in this year, we are seeking to take another $60 million to $80 million of cost out of the business, and that is across the whole business. So as I mentioned in the quarter just gone by, our focus has turned to New South Wales as well, just to make sure that we are optimizing the underlying structure of the business there in the same way as we've been doing in Queensland. And so the $60 million to $80 million that we're intending to take out here covers both New South Wales and Queensland and corporate, by the way. And that is outside the guidance range that we'll talk about a little bit later on. So with that, I'll hand to Kevin.

Thanks, Paul. I'm over on the 5-year financial graphs. As you know, '22 and '23 were really strong years with [indiscernible] coal prices compared with FY '25, which you'd have to think you're at the bottom of the cycle in the second half of FY '25. Full year underlying EBITDA, as Paul said, of $1.4 billion in FY '25. You can see the scale and the benefits that have been delivered to us by acquiring Daunia and Blackwater with nearly $900 million of EBITDA contributed by those 2 mines. Underlying NPAT at $319 million, a pretty strong first half and a pretty soft second half with coal prices where they're at. At a statutory level, I've got to apologize, these accounts have got a lot of noise in them as a result of that acquisition and divestiture, but we're going to take you through that and explain those in slides that are coming up. Our results are translating really well into cash. You can look at the cash generated from operation versus the underlying EBITDA, and you can see that's translated into net debt coming down from $1.3 billion in FY '24 to $600 million in FY '25. So we're pretty happy with that. So we reported $1.355 billion of underlying EBITDA. The D&A combined at $607 million includes $238 million for New South Wales and $369 million for Queensland. That's lower than what we initially guided, and that really reflects the settlement of the acquisition accounting within the 12 months of ownership. We had net underlying financial expenses of $289 million. About $190 million of that relates to the interest payments on the USD 1.1 billion credit facility and the balance of that is drawn from a number of places. Other interest charges of 40-odd leases, lease interest of $14 million, some noncash [ underlyings ] of provisions of about $50 million, amortization of the upfront fees on setting up that facility for $20 million, and then we had some interest income of $27 million, which was down substantially from last year. An underlying income tax expense ratio of about 30% continues to hold, so you can use that in your models. And it came to an underlying NPAT of $319 million. As I said, there's plenty of noise in these numbers, but it's good noise. We've got $330 million of net gains from recurring items on a post-tax basis. And that's all spelled out in Note 2.2 of the financials. But if you got questions, just give us a call and we're going to take you through those things. We booked a post-tax gain on the sale of the 30% of Blackwater of $274 million. And because coal prices were lower than we expected when we went into the contingent process, contingent price mechanism with BMA, we remeasured that at the end of the year, and we booked a gain of $289 million, but that just simply reflects that we haven't paid BMA what we expected because coal prices softened. We had about $37 million of post-tax transition and transaction costs when we sold the 30% and we fleshed out SAP as we had a little redundancy in restructuring costs in Queensland. So that's those explanations. And as you know, the U.S. denominated debt, the cash and the deferred consideration is all in U.S. dollars. So when we retranslate that, we pick up some gains and losses here. So the total of these are about $195 million after tax. If I take you over the page, we said we'd give you a little bit better detail on depreciation, amortization and finance and hopefully, we do that. So if you look at the depreciation and amortization, net finance for FY '25, D&A came in at $607 million, as I said before. We said we'd be about $750 million on guidance when we talked to you earlier this year. We're better than that because that just reflected the acquisition accounting where we rebuilt and restructured that cost of acquisition just at the end of the year. The FY '25 D&A for Queensland, there were some one-off adjustments. There are some assets in there that we had on the books when we brought them on that we found were surplus. So we took the hit on that. for depreciation, we estimate it's about $16 to $18 a tonne of own coal sold for New South Wales and about $23 to $28 a tonne for Queensland. And because a lot of the depreciation charge is based on units of measure, it's a function of how well we produce in the pit, how well productivity forms. On the amortization side, that's about $6 a tonne, and I think that's pretty safe to use in your models. And we -- I think the net financial expense, we've told you where that is historically. But there's plenty of noise in that number with $568 million of net finance expense, I think $219 million of that in cash and noncash is about $350 million. This year, in this financial year, you should expect that we will look at refinancing the USD 1.1 billion. The non-call period for that finishes in March 2026, and we would expect to be talking to potential providers of debt capital over this next year. So stay tuned for that as we go through the year. The segment result over the page on that. We give this to you. I think this is a really handy slide. From this, you can pretty much work out what the unit cost is at each of those bases, New South Wales and Queensland. But what you really do see is New South Wales -- sorry, Queensland contributed $3.5 billion of revenue, close to 60% of overall revenues and nearly $900 million in EBITDA. So the acquisition is really helping diversify Whitehaven Coal, has helped to diverse Whitehaven Coal quite well. The net finance expense of $289 million, the underlying components we talked about, I expect that to be down next year. And as I said at the half year, the financials show really do show the benefit of that diversification. And as Paul said earlier, you see that in the participation per share, all without issuing a share in the process. So a good outcome. Moving forward, we've told you we think we can do better at Daunia and Blackwater. That's certainly the focus in FY '26. And we're really well placed, I think, to look at a recovery in coal prices and see that translate to better economic performance. Over the page, as I said, we think we can continue to improve. At the group level, we realized $215 a tonne and a unit cost of $139, and we paid the various governments an average royalty of $25 a tonne. In Queensland, you know that's a tiered structure. The average royalty in Queensland was about 12.5%. And the average royalty in New South Wales, as you know, is a flat structure is about 10%. So on the cost side, guidance was about $140 to $155. We thought it would be a high year, and we expected it to be a higher year because we closed Werris Creek, put that into rehab. That was a really low-cost operation, bypass 100%, closer to the port. And we brought on Vickery and we're digging a box cut at Vickery. We're mining through the hill at Tarrawonga. So '25 and '26 are periods of higher cost in this operation. Productivity improvements, we're focused on that pretty heavily in Queensland and in New South Wales. We're seeing benefits from that. And we've reduced the cost in Queensland, but I think there's still more to go there. As we said, we rebuild blasted stocks at Blackwater. That's helping us. There's still more to go on the productivity front there and on volumes. But I think overall, in the bottom of this market, it's been a pretty good outcome. That would be my summary for it. So I'm pleased with the second half result, and I'm pleased with the strength of the balance sheet. If I take you over the page, this is just a standard bridge that we use each year. It will help you understand how we think about things. You can see the New South Wales price was softer, and this is trying to bridge you from $1.4 billion EBITDA, which had 1 quarter of the whole operation in to $1.355 billion, which had all of Daunia for all of the year and 3/4 of Blackwater in there for the year. But you can see softer coal price. We're down on volume because of Werris Creek closing and Vickery just starting up. Our costs were up as a result of that switch in proportion of coal from different places and higher cost operations. But you can see $600 million in EBITDA, which is the proportion of the year from that operation that's come through in here. So it really has contributed quite strongly to the performance. If we go over the page on to net debt again, it's been a really busy year. You can see that the business delivered $1.1 billion of cash. We had to pay BMA $1.104 billion, which is a combination of the USD 500 million, the $363 million in stamp duty that we paid and then there was about $56 million that we got back in a completion adjustment from BMA. So that's how you get to the $1.104 billion. And the $1.719 billion is the sell-down of $1.080 billion to Nippon Steel and JFE. So -- sorry. In that process of selling down Blackwater and in that process of remeasuring that contingent liability, there was taxes that had to be paid. That's about $150 million. So really, the $1.719 million is more like [ $1.55 billion ] net. And the capital expenditure and other acquisitions of $448 million is what we spent on Capital expenditure, what we spent on the remaining 7.5% of the final payments there for the 7.5% of Narrabri. And we also bought a seat at the table at the DBCT coal terminal in Queensland. So that was $24 million. And we gave shareholders 200 -- well, call it $200 million, it rounds up to that. In here, the next line in there is really the leases that are paid for, and we've got some foreign exchange variations and others. But we finished the year with net debt at about $600 million, which we're really pleased with. And I think the balance sheet with 10% gearing and a leverage ratio of less than half is really well positioned to get through the bottom of this cycle, and we've seen the coal prices turn in that late in the half or late in the year anyway. So a strong balance sheet with gearing of 10% a leverage that's less than half a turn. We've got plenty of liquidity on the balance sheet. So I think that's good. The sell-down or the receipt of the proceeds from selling down that 30% joint venture in Blackwater improved our liquidity. But we're holding that cash on the balance sheet of $500 million of that to meet the second payment to BMA next year, okay? Coal price contingent payments, we paid $9 million in the 2nd of July. So that structure, which was really an upside, downside sharing structure is working as anticipated. And if I look at where we're up to in July year-to-date, we're not -- we don't expect to pay anything out of the first -- the May, June or the April, May, June, July period. So coal prices need to recover in order for us to pay the BMA out of this. And as I said, we intend to reposition our funding sources. So I think very busy year, but a pretty good year, a business really well positioned, bottom of the cycle with the turn coming and looking forward to 2026. So with that, I'll hand it back to Paul.

Thanks, Kevin. I'll just switch over now to the refresh of Whitehaven's capital allocation framework. And just reminding everybody, I suppose we're not looking for wholesale change with the capital allocation framework. It's certainly served us very well, and we get good feedback on the clarity that this provides. But we have said that with the acquisition that we would revise that at the end of the 2 years. But because we've been able to accelerate the derisking of the balance sheet with the settle down of Blackwater, we committed to revising that and announcing that with the full year results, and this is the outcome of that process. As I say, it served us well in terms of balancing the needs for CapEx within the business. And so I'll just go through the parameters that we've changed within the capital allocation framework itself. As Kevin has mentioned, we're modestly geared and we'll continue to stay that way and both on a gearing metric, but also on a leverage basis as well, depending on how you'd like to measure it. If we look at, historically, we were in a business which was half the size, we were -- the payout ratio from NPAT -- group NPAT was 20% to 50%. That was wider than what we would -- we think is necessary now with the broader based lower-risk business. So we are narrowing the range of that and elevating the top end. So we've gone from 20% to 50% to now 40% to 60% of our underlying group NPAT. So that's an improvement. And then that is total returns. So when we look at that and the 2 instruments we're using in which to deliver those returns through dividends and buybacks. And basically, we're going to take a position where we have a balanced in value approach to dividends and buybacks now within that 40% to 60% range. And as we've already noted at the beginning of the presentation, we're at 60% in this current year. So which -- so that's the changes to the structure of the capital allocation framework itself. Of course, money to be spent on -- well, in the internal competition for the allocation of that incremental level of capital remains the same. So whether it be money for internal projects, Vickery or Stage 3 or M&A from time to time, they must go through the same hurdles that this dictates and as I say, it served us well. We don't have any M&A on our agenda at all. So that part is not part of the immediate considerations for how to allocate capital within the framework. So if we look at the outcomes, 16th of September, we will pay, as I said earlier, a $0.06 fully franked dividend which totals about $48 million of capital. We intend to buy up to about the same amount, $48 million in shares back over the next 6 months through our buyback program. So a balanced by value approach, as we've mentioned. And that takes the full year dividend outcome to $0.15 per share fully franked. And with the buybacks added in, that's $191 million of capital returned, which represents, as I said, 60% payout ratio of the underlying group NPAT. So I hope those changes, anyone can process those. I think it's a better outcome where we were before. It should be more consistent payout ratio than what we've had before with the 20% to 50%. So a narrow range, but the top end is higher and a balanced approach in value to delivery of the dividends and buyback. One of the other action items we had or commitments we made to you to come back to you with was obviously the revision of the Narrabri Stage 3 capital. So I do want to spend a little bit of time just going through that. So I've got a couple of slides here, which does that. Now a couple of key points I should just mention, which were influential in terms of the revision of CapEx. So obviously, the time -- the much delayed approval of Stage 3 was something which was grinding on us for some time, unfortunately, which has been very annoying. And so -- and then that consumption of time going through that process also diminished the opportunity for the walk-on walk-off scenarios we mentioned before. And so we have jettisoned the idea of having the walk on walk off, and we've now deferred the decision on a new longwall for 10-plus years. And so the other decision which we've taken, which is influential in this is to look at the changing the direction of mining. And under those other scenarios, we were going to go from north to south. And in this scenario, in the scenarios we've now adopted now we are going from south to north. And so that makes a number of different changes relevant here. And so that means access will be used through the 201 mains for the 300 series panels. And so you only incrementally drive the 201s as you need incremental access. And -- but the 300 series mains and the 301 mains are no longer required to be done upfront. In fact, the 300s, not at all. 301 access is only required in the same vein as 201 as you need to incrementally drive it to get access to develop the next panel. So that will be incremental over time, not something which was going to be a large [indiscernible] of capital upfront. with the previous iteration of Stage 3. So a much lower CapEx profile now as a result, and I'll walk that through the assumption in terms of volumes for us modeling out Narrabri, we're in the 6 million to 7 million tonnes range. And I think as we talked about, I got the question last quarter about this as well, and that's how we think about the average volumes for Narrabri over the life of mine. I'm over the page now just to go through what the implications of this are. So the previously discussed $800 million to $850 million capital has changed dramatically. So Narrabri Stage 3 capital is now $260 to $300 million, the bulk of which is actually deployed to the maintenance of our existing longwall. We will make this last longer. There's clearly a trade-off there in terms of less capital upfront, more in maintenance over time to make sure we keep this wall in good shape. Of the $260 million to $300 million, we spent -- we've already spent $40 million of it. There's about $15 million in the new guidance that we're giving you. And then there's a bit more that's got to go into this -- the balance of capital goes over the next 6 years outside guidance. But a big reduction from the $800 million to $850 million, as I say. I mean, if you look at like-for-like basis on an inflation-adjusted basis, that will be well over a $1 billion in capital for this project. So which given Narrabri has been producing less in recent times, the deferrals in the receipt of approvals and our view on the direction of mining, this is a far superior outcome from our perspective in terms of -- from a capital management perspective, but also then given the competing demands that the enlarged business has for capital, the obviously need to fight for its capital just like every other site does within the portfolio. So I think there are positive changes to be made. Just to go through quickly some of the other outcomes from that. We've given you some numbers there in terms of the sustaining CapEx requirements for the mine. So life of mine is $8 to $9. In the next couple of years, that does go higher in the short term just to be setting up balances of infrastructure needed over the next 2 years, but life of mine is the $8 or $9 that you should use in your model. Remaining CapEx for the 200 series panels is there's about $80 million in that, and $60 million of that will be spent between 2026 and '27. So overall, we feel like a much better optimized plan for Narrabri, a big reduction in capital required for Narrabri. The trade-off in tonnes is not too difficult at 6Mt to 7Mt, we feel that's an appropriate thing to do. But overall, a much better outcome for our investment in Narrabri. I'll kick over now just to our guidance. Now I'll start by saying, look, last year and the year before, we took a measured approach to guidance. So we took quite a conservative position, which we thought was prudent to do. We feel it's prudent to do that again. We're only a year into this bedding down these assets, and there's more bedding down to do, even though the year has shown great promise, and we delivered good outcomes at the upper end of our guidance. And so our intention is to do the same, but we are going to start the year with sensible guidance that doesn't bank in everything. And so just for everybody's understanding, it's the same approach to last year. So we're talking about 37 million to 41 million tonnes of ROM at the group level. We're talking about managed sales 29.5 million to 33 million tonnes across the group as well. And obviously, just to remind everybody when they're comparing year-to-year that, of course, the sales guidance at the equity level is only 70% of Blackwater. I'm sure I understand that, but just to remind everybody because when you look at the numbers year-on-year, you think, well, what's the difference? But of course, we've sold 30% of Blackwater and very happy to have done that. The cost guidance itself at $130 million to $145 million. And reminding everybody knows, we came in at $139 million just at the bottom -- below the bottom end of our guidance. And we're certainly aggressively targeting costs again to try and drive a better outcome. But again, that's just be conservative to start off with here. The $60 million to $80 million I mentioned already, that run rate change of annual cost savings we want to see by 30 June at the end of this financial year '26. We did deliver on the $100 million last year. We intend to deliver on this as well. but that is outside of the guidance, so on top of the guidance range that we've given you there. And our other levers there to continue to drive things improvements. Blackwater, obviously, we're continuing our journey with the pre-strip inventories being rebuilt. We are continuing to see good opportunities with the AHS system and the productivity that we can deliver by driving that harder with the support of the OEM. And we're always trying to maximize our margins by tweaking and refining not just the marketing strategies, but then also the cost base of the business more generally. So there will be more of that in this new year as the 60 to 80 highlights. And as I say, we intend to deliver that on top of the cost outcomes that naturally form from our guidance. Given what we've done with Narrabri, you can see the CapEx profile for this year is lower than last year. And so our CapEx guidance at $340 million to $440 million reflects not just the timing of the markets being what they are, but also that lower CapEx expectation for -- or demand for Narrabri with the revised approach to Stage 3. So with that, I think we'll finish up the formal presentation, a very good year from us. We're happy to have got through the first year well, setting ourselves up for FY '26 in a positive way and look forward to the questions in the session with the sell-side analysts. Thank you.

[Operator Instructions] your first question comes from Rahul Anand from Morgan Stanley.

Two from me. Firstly, on Narrabri, look, very good rationalization there, obviously, on the renewed mine plan, and I think absolutely makes sense to allocate capital judiciously to the asset given its history and growth options that you have within the portfolio now post acquisition of BHP assets. Look, I just wanted to touch upon some of the guidance that's been provided and updated for Narrabri. So obviously, you've gone to 6 million to 7 million tonnes. There's minimal impact to the mine life there as well. How should we think about, I guess, the coal quality impacts, cost impacts and potentially where you can make up the lost tonnes from within the portfolio, like where would your targets be? That's the first one. I'll come back with a second on the guidance.

Yes. Thanks, Rahul. I'm not sure how you managed to be the first question every one of our calls, but well done to you. Look, we're very happy -- well, we're happy to have bottomed out the CapEx provisions for Narrabri. So we think that's a more sensible approach. And as we've said and you rightly point out, given its recent performance, this is the right answer given the competing demands of capital within the business. Look, the coal quality does -- we've said that the ash does increase over time. And so that -- that changes its profile. As everybody knows, it sort of sits just under gC NEWC spec today. And that does drift further into, say, if I can just use in round terms, it drifts further over time into the Korean market. And at the back end of its life, there's actually some 5,500 as well. And so that's okay. It's still our cheapest coal by some margin. And so at that 6 million to 7 million tonne rate, we're even less, it's still our cheapest coal. So that's the right way to think about it in terms of volumetrically. The blending opportunities across our business with that coal is the bit that is very interesting to us because -- just to use the most extreme example, you all understand what the APR 5 number is today relative to gC NEWC and be able to capture that benefit with blending is part of the reason why Narrabri continues to be very interesting to us. And of course, that's part of the reason why Vickery continues to be very interesting to us because the 2 of those married together, that's essentially $40 up for grabs there in blending benefit across the difference between APR 5 and gC NEWC. So that's how we think about it. There's, of course, more tonnes. I think the better part of -- the other part of your question was just what are the other options in the business. Vickery, of course, is one of them that requires capital. That's off the table for the next 12 months as everybody has heard from us in the past. That's prudent given where the market is at. But as I say, Vickery itself is a very interesting prospect and in the right market is going to come on at some point in time, if I can say that. The returns of the stand-alone project is very interesting to us as is that pending benefit I've just highlighted. And then Maules Creek continues. Once Maules Creek continuation project is approved, we'll be able to reorient the pit. And we feel that, that is the key to getting close to the 13 million tonne approval. Maules continuation project is actually set at a 14 million tonne approval actually, but that's just to cover the spikes. We're very happy to see the continuation project deliver the 13 million tonnes that would be very positive. But that increased strike length that reorienting the pit run north to south would deliver, that would certainly give us the productivity benefits that we struggle to attain in the back end of -- in the southern end of the least at the moment where pit intensity, mechanical intensity in the pit is the enemy to good productivity. So we think that will free up the fleet in a much more positive way. So that's where we certainly expect to get more tonnes. And Queensland is just another story altogether, of course, in terms of incremental tonnes. We've got great aspirations for both sites up there and of course, Winchester South in time. But -- and as many of you have visited the sites, you'll see the potential there. We're delivering on that potential. We delivered more tonnes than they've seen in recent years in this past year, and our plan is to do that again. Now okay, we've given you conservative guidance, but I think that's the right thing to do.

Great. Now, you've kind of answered my second question, but I'll bring it up anyway. So FY '26 guide, obviously, you just touched upon Queensland. So the guidance is basically FY '25 production already sits at top end of guidance for next year. '25 was basically your first year, you had weather impacts there and yet you produced quite well. And then if I think about NSW as well, very marginal lift into guidance for next year. Narrabri, I think, just has this current longwall move, but none others planned for next year. And then Maules as well at 11.5 rate, a bit of gap between the 13 that's nameplate. Admittedly, you don't get there without the investment, but you think that you can potentially year-on-year do a bit better. So I guess the question is, is this basically just being too conservative in terms of guidance? Or are we missing some impacts that you're potentially expecting to production from Queensland and NSW into next year?

Right, we're just being conservative again. I think that's the right thing to do. I wouldn't say too conservative. I'm just saying conservative. We think that -- as you rightly point out, the midpoint of guidance is what we did last year. That's factual. And as we did in this past year, we plan to get in the upper end of our guidance, and we certainly want to do that. Now we're at the beginning of the year, not towards the end of the year, where that's solvency with greater confidence, but that is our intent. And we feel like we've got the momentum to carry that into the year. But we're not going to bank that all at the beginning of the year, and I think that would be the wrong posture to take as far as guidance setting goes. But all of what you just summarized is appropriate. We have had weather. There's no doubt. So you just have to look at the window, not for you here in Melbourne, but here in Sydney and New South Wales and Queensland. We've had certainly some weather. So we've taken that into account, of course. And Narrabri is back and cutting, but we've had a slow ramp-up. So we factored that in as well. So look, I think we're just -- it's the right thing to be conservative in this instance. And we certainly plan to underpromise and overdeliver to use that overused term of phrase. So that's the intent here for sure, not just on the volumes, but on the cost as well.

Your next question comes from Paul Young from Goldman Sachs.

Paul, just to touch on, I think, the underpromise, overdeliver strategy, which is the right one, I think, for FY '26. But just to dig into the Queensland guidance a bit more and considering we were up on the site in June, and we just saw how well the Daunia truck fleet is performing and also what you managed to achieve at Blackwater. So just curious around the -- like is it a simple approach how you set the guidance? And by the way, I'm not disagreeing with this. I'm just -- obviously, the sites come through with their budget for the year. Are you just applying like a simple safety factor and the same safety factor across both Daunia and Blackwater. Just wanted to understand what the strategy is and how you've come up with that guidance.

Yes. Thanks, Paul. Look, we're just being conservative, Paul. As everybody you included, would have seen the opportunity up there. We are delivering on that. The weather in the first month of the year has been unseasonably annoying. But that's okay. This is -- we at the beginning of the year and the momentum the team is doing really well. So we're positive that we can do well. But we have taken a conservative position. I think it's the right posture to take. I mean this is only the second year. And whilst we feel like we've got our hands around the assets better, we still got some work to do in terms of getting that pre-strip where we want it. The fact that we've mined faster has actually chewed into the incremental improvement in the pre-strip inventory balance. Now you would have seen that we talked about that when we're up there. So we need to step that up again because we're mining faster. And that's a high-quality problem. And Daunia itself, no doubt can do better. It's had a very good year. Proportionately, it's done better than Blackwater but that's easy to say because it's a smaller mine. And the things we're able to do there have a more immediate effect than the longer-term systemic alignment that we need in terms of getting the dragline system working better. The AHS system is delivering a good step-up, and we want to see that continue in the year. It still needs to get to manned equivalent basis. That's our target. And that's the pressure you're keeping on [ Cat ] to help us achieve that.

Yes. No, understood. And then just with respect to the strategy over the medium term, Paul, and I think we've come out with on focusing on just brownfields CapEx and reducing really sensible and returning more to shareholders -- capital to shareholders, which is great as well. And you've obviously got the deferred payment second deferred payment to BHP, I think, in the June quarter of next year. So it's still -- you still got some cash outflows with the BHP payment. So Paul, is it -- I know your option rich if I called that as far as like a few projects are shovel-ready. You've got working through synergies with Daunia with Winchester South, but you've got a lot of organic options. But there's also a lot of inorganic options as well that I'm not going to go through them all, but you know them up in Queensland and close to both your assets. So is it more the fact that we just get through -- you just get through this fiscal year, get through that payment, assess everything and then just make a decision on where you think the best opportunity is?

There's a lot in that one. There's a lot in that question, gosh, I comment. There's a bunch of stuff in there, Paul. So yes, look, the next bullet payment well in hand. We have the money in the bank. It will stay there. That won't be touched. So that's rest assured that the balance sheet is in good state to be able to deal with that as and when it arrives. And then you've obviously just got the USD 100 million that's the further 12 months then from then on the 30-year anniversary. And so again, that's not something which should trouble the business too much at all. You're quite right, we have internal options. Those internal options are all about sweating the assets today, make driving what we've got harder. As I said, Vickery, which is the obvious answer for some of the reasons I mentioned earlier, Vickery is obvious and fully approved to do so, but not in this market. We've taken that view and the Board is 100% behind the notion of that, let's sweat the assets and continue to drive the returns. And let's get the cost base even sharper. That's our focus for this year, just margin protection because the market has been a little bit variable, to say the least, and margin protection should be to balance that. The assets you're talking about around our space, look, they're not particularly compelling from our perspective, given the other options we have. And so that's how we think about it. So I don't expect to see playing in any of those spaces at all. And look, that doesn't mean we don't have to look at stuff. Of course, we look at everything as you know, but they don't form part of our strategic picture, if I can say that. So we've just got too many -- as you say, we don't have too many options. We're options rich. I think you coined that phase and prioritizing those options is the job we have before us. We're keen to make sure we make the right decisions in maximizing our returns to shareholders.

Our next question comes from Chen Jiang of Bank of America.

My first question is a follow-up on Narrabri Stage 3 on Slide 26 and 27. It's good to say you have $500 million CapEx reduction, which is very significant because you don't need to purchase longwall or constructing of ventilation, et cetera. But I'm wondering -- I guess you have assessed the economic benefit of mining the 200 versus 300. But I'm just wondering, is there any other trade-off in volume, quality or geopolitical conditions, not mining you previously planned? And also what stopped you to mine Narrabri beyond the 7 million tonne per annum?

Yes. Thanks, Chen. That's -- there's a lot in that question, too. I'll try and get through it all. Look, our view of Narrabri is that this is the right answer given its recent history and quite frankly, given the other options within the business. Narrabri still forms a very important piece of our puzzle. And so 6 million to 7 million is the right answer volumetrically, given that you -- we're not contemplating the walk-on walk-off scenarios, as I said. So you will have change-outs. And so that tempers the total volume that you might have otherwise achieved had you been able to eliminate the change-outs by virtue of having 2 long walls on a walk-on, walk-off scenario. So as I say, we -- it's an important piece of the puzzle. It is our cheapest coal, and there's certainly very good lending options within the business with the high-quality thermal that we have coming out of both malls and of course, as I mentioned earlier, Vickery. So there's nothing else that stands in our way in optimizing that. There's the 200 panels, it's not a 200 versus 300 type thing. That's not -- it's just a sequencing. 200s will get done before we get into the 300s. Now there is preferentially obviously a desire to stay on the shallower side of the mine. So as you can see in the diagram there, the panels that we're highlighting that sort of get taken first are the ones in that shallower end before. So we don't take all the ones in the 200, we flip over to the 300 to stay in the shallower side of the mine. So that is just us optimizing what we believe to be the right answer from a volume and cost perspective in the mine. It also actually, coincidentally, corresponds with the better quality side of the mine as well. So there's a little bit more CO2 as you go to the western boundary and the ash, and the ash certainly creeps up a little bit more there too on that side of the mine. So it's about all us just pulling the right levers we feel to make sure we optimize our investment in Narrabri.

Maybe a question for Kevin, please. Kevin, you mentioned earlier in the call that why haven't we refinanced the debt, the USD 1 billion debt? Are you happy to carry the USD 1 billion debt on your balance sheet? Or is there any plan to deleverage from here given you have changed your dividend policy based on the group in the past. So if you deleverage your balance sheet, that will improve your dividend going forward?

Chen, that is a really good question. I'm going to say like for USD 1.1 billion of debt, we are collateralized well beyond that from a security perspective. So what we're looking for is a better price structure a little more flexibility in terms, and we're probably going to look to see if we can put more in the capital stack outside of private capital. We'll be looking for a lower rate. And we'll be looking to try and push this business or help get this business towards the top end of that BB, if not investment-grade credit. Look, the feedback from investors through the last few years is they've been delighted with providing us that capital. And we've been delighted in taking that capital and buying these 2 assets. So it's been a great deal for all of us. We're 2 years in. It's settled down. We've got reasonable numbers. We should be able to go to market and tell a pretty good story, I think. So I'm looking forward to doing this over or the whole team is Kylie is the GM of Capital Markets, is leading this charge. So we'll be busy in '26 doing that. And to Paul's point, the focus of the CFO in '26 is about putting the funding structure in place for the long term, not on M&A.

Sure. Just a follow-up on your answer. So there's a plan to reduce your interest payment going forward after you...

Reduce the interest. I think we'll finish up building managing -- keeping debt on the balance sheet, but managing the cash position to get to a net debt position that works because the business of funding for coal business is about maintaining relationships with providers of capital and you want to keep those relationships warm. So you manage that through a net cash position, and that gives you flexibility through facilities and cash to manage whatever comes your way in the process. But underlying that, Chen, is a plan to keep sufficient liquidity on the balance sheet that no one calls you up and say, oh, you're in trouble, aren't you? And we've done that pretty well, I think, for a few years now, so the best part of the last decade to be honest.

Your next question comes from Lyndon Fagan from JPMorgan.

Just wondering if you're able to give a split of the Queensland production guide between Daunia and Blackwater.

Sorry, Lyndon, was that -- you wanted the split, is that what you said?

Yes.

Yes. Okay. No, we prefer to keep it aggregated. We took the decision now over a year ago that we'll provide guidance on a state basis. And you can see where we ended up last year. So you can infer a split there pretty reliably. But yes, we won't be giving guidance on an individual mine-by-mine basis.

From a qualitative point of view, I guess if ROM coal is up 3.5% at the midpoint, which of the assets is sort of -- is one doing better than the other? Obviously, it's going to be heavily weighted to Blackwater, but any color?

We're happy with the guidance that we've given you, and you can have the average realizations that we've given you, and you can see where that implies obviously a product mix, which we've also given you. So you can -- you've got enough there for your models, I think.

Okay. No worries. And then I guess on the cost out front, is this year the last year that you expect to realize sort of cost out related to the new management sort of regime? Or do you expect the sort of that to be a multiyear thing still? I'm just wondering if at the end of the exit rate of this year is sort of a steady state Whitehaven operating regime.

Yes. Fair call. Look, I do think in terms of overt cost reductions initiatives that we publicly discussed, I do feel like this would be the second and probably last year of that. Now that's really as a result of -- the cycles dictate cost focus as and when, as you know. And so this is not the first time we've focused on our cost base, and it's the right time to do it. Obviously, Queensland with the transition in, it was right to deal with that then and the continuation of that in this year. But we didn't turn our attention to New South Wales just because we had our hands full, but we will be doing that this year. So in terms of over expression of further cost targets over and above guidance, yes, I think you can say this is the last of those last of that. But that doesn't mean the cost journey has -- will stop or that you should use that as the exit rate because what we do see, what takes over is a productivity drive. And so that's where we think the real upside comes. And so say, for instance, just to use a case in point. At the end of this year, so we would like to see the continuation project at Maules Creek done by, say, '28. And the productivity benefit with the same fleet of being able to manage the fleet across a much bigger strike going north to south is going to be a really nice productivity benefit for us and obviously the cost base of Maules Creek. So the conversation in subsequent years will all be about productivity, and that will manifest itself in improvements in our cost base. But I think, yes, the $60 million to $80 million we've tabled for this year is at this point in time, it's the last time we need to be talking explicitly about a separate program outside of our normal cost and productivity focus.

And a quick follow-up. Of that cost out number, how much would you apportion to New South Wales? -- you've been running those assets a long time. I can't imagine there's too much [indiscernible]

Well, that's right. But every side of the business creeps over time, right? And particularly when you focus over the last few years has been drawn to something else. And so -- and inflation has had its way with the business and the cost base. And so you're right to say that New South Wales has been ours all along, and therefore, it should be reflective of how we want to operate. But I would say here that turning our gaze to New South Wales is already unearthing opportunities for us. And so we are seeing -- and that's not to mention that the corporate side of things shouldn't also -- everybody should share the load in the cost focus. And so rather than trying to stood it up for you, I'm just saying that Queensland has got more to do. New South Wales needs to tip in. And so we'll report to you how this is going during the course of the year.

Your next question comes from Rob Stein from Macquarie.

I've got a question on the capital allocation framework. So when we look at the 60% to 40 -- sorry, 40% to 60% of NPAT, when we're thinking about this from a 1 half to second half point of view, are we to infer that the first half, you're going to keep a bit of your powder dry conservatively so that on a full year financial basis, you'll meet the target? Or are we to think about this as in any given period, you'll pay out 40% to 60%? And I've got a follow-up.

I can answer that one really quickly, and it's as simple as we've typically been conservative in the first half. We've typically always been conservative in first half. We view our numbers as being an annual result. And so we would generally be conservative in the first half and then true up in the full year. And I don't see that changing. This is not a real estate investment trust. It's a commodity business.

That's useful for forecasting, so I appreciate that. And then just on the refi or the upcoming refi. Do we expect this to come as one big chunk? Are you thinking about it as diversifying your funding sources? How should we think about this as a combination of bonds, loans and particularly the flexibility that long-term debt can give you? Just sort of any steer on that would be interesting.

Been sitting in the steering committee have you? So the short answer to that is, I think, yes, we'd like to diversify capital sources, but we're really happy with the group of investors we've got. That group of investors or capital providers also have different arms that provide funding at different levels and pricing structures. So we're really early in this process. We are seeking to diversify. For your modeling purposes, I think what you need to consider is that today, we're probably paying about 10.5% on this thing. And I think you'd be looking at somewhere with a 7 handle on it, 7 to 8 for a funding price that comes through. If I got better than that, I'd be pretty happy. But at the moment, markets are priced pretty well, actually. They're really constructive. So if I got to a 6, I think I'd be delighted. But for your modeling purposes, I think 7% to 8% pick a number in that range, and that's probably where we're aiming to get to. And it's probably likely to get concluded after the noncall period expires in March next year.

Your next question comes from Lachlan Shaw from UBS.

Just a couple of clarifications, I guess. So just on the capital guide for FY '26, the range $340 million to $440 million. Can you give us a bit of a sense in terms of what's in the bucket? And what -- how do you think about what's going to sort of put you at the top end of that range versus the bottom end? I'll come back with my second.

Happy to. Look, there's money in there for the development projects at Winchester South and Vickery as we keep pushing those a little bit forward. We're very careful in what we commit to and spend there, but clearly, we're looking to move those forward. We've got about -- about half of that, I think, is a component maintenance, right, which is really our major overhauls on gear that we've acquired. So that I think we're going to spend that money because it really does support the productivity of the business over the coming years, and we need to do that right. And the balance of that is material that we're working our way through. And traditionally, we revisit and review as we go through, and we're very tight on how we spend that. So our underperformance in capital or underspend on capital in the past has been really around the nonmajor overhauls and about those things that we take a good look at through the year. So that's probably the answer I'd give you, Lachlan.

We've really hit -- we've always been relatively parsimonious in our capital, I would say, last year, obviously hit the bottom of our guidance. And obviously, when the market is in this state of commission as well, we'll look very judiciously at the capital. I think that the number is already pretty tight. So for the sake of your modeling, take a midpoint, and we'll update you during the course of the year how we're going.

Yes. Got it. That's really helpful. And then just -- maybe back to Narrabri, so the 6 to 7 sort of capacity kind of guide is helpful. Do you have a sense in terms of -- you talked about the mine plan shallower cover versus deeper cover. Do you have a sense about how that might vary when you're moving between the shallower sections and deeper sections just given all the learnings in the past at the asset?

Yes. That's an interesting topic. Yes, we have a lot of learnings that came from the 100 series panels, of course, and we've -- and you've been there and seen with us the journey as we've moved from the shallow side of the mine to the deeper. And so we have seen lower productivity in the deeper grounds for sure and a little -- and an increase in cost associated with increased roof support that goes with that. And so when you're on the shallow side of the mine, you can unwind the roof support to some degree. And so there is an improvement on that side and just productivity generally improves when you're in that shallower ground, and that's just waiting event related. So our desire for sure, and this is there are lead times associated with developing these panels, as you can see from the diagram, the panels are not of equal length between the 200s and 300s. There are 6 kilometers long in the 300s. So the lead time associated with developing a panel there is longer than what you would otherwise take in the 200s. So that dictates how quickly you can actually get into the 300s. And so the plan is depicted there is sculpted in a way that allows us to get to the shallower side of the mine as soon as we can because we know there's productivity and cost benefits in doing that. qualitative, as I mentioned earlier, qualitative the coal quality is actually better on that side of the mine, too.

Your next question comes from Glyn Lawcock of Barrenjoey.

So you've obviously outlined conditions impacted your business in the first 6 weeks of fiscal '26. Can you help me understand what does that shape off your guidance for the first 6 weeks and the weather we're experiencing outside?

Yes. Look, the guidance is the guidance. So I'm not going to go into a raging exercise, Glyn, if you had weather and you didn't have weather. But we've obviously had impacts -- we've had impacts on both states in weather. And the most notable, obviously, as you would have seen, has been flooding in the Gunnedah region. And look, that was nowhere near as significant as the last flood we had. And so broadly, we've lost about a week there across our operations there. Now the mines themselves are fine. It's just -- as you know, it's the access into them that causes us the grief. And so if the river is rising and the access is about to be cut off, we've got to evacuate everybody. And so we've lost a week across the operations in New South Wales, whereas in Queensland, it's been wet, and that's been more of a productivity issue as opposed to having to evacuate everyone. You're still there and working, but productivity can drift off when you're parking up equipment because of damage to roads and things and so on. So yes, so it's -- we have taken into account that would be prudent to do, and we have done that.

Okay. And then you made a comment about Narrabri. It's obviously starting back up next panel in, but you said slow ramp-up. Just what issues now are we experiencing? And then just how leading into that, you gave us some idea of CapEx and sustaining for Narrabri. Now that you've had Queensland through a good year and a bit, what do you think the sustaining capital is for the business as a whole as well?

Yes. Look, we've given you Narrabri sustaining CapEx. We haven't given you guidance for the business as a whole because there are different profiles to that, and we can give you annual guidance there anyway. We'll tell you if there's other issues. There's no particular lumpy capital in there other than the fact we're getting into a new rhythm with the draglines and shovels and the chunkier stuff. And we are uncovering that there's a little bit more maintenance required there than what we probably planned, but it's well manageable within the envelope of what we thought we would be doing. And then, of course, there's fleet renewal over time, which both in New South Wales and Queensland, we'll update the guidance for you as and when. Narrabri, the only thing that I'm pointing to there is that we've been just cautious just because we went through a very significant overhaul of the wall, and we'll continue to do that because we didn't get to give all the trucks a birthday. Half of them got a good birthday, which is nice. And it's just a matter of how much time you've got. And so we'll rotate that through successive maintenance periods as we give them a birthday. It's easier, obviously, do it during a change out, but there's only so much time to get that done. We can do some of that work in our maintenance days, and we are doing that as we go through this year. But we had a few commissioning issues just because it was such an extensive refurb that we gave the wall. So there were a few commissioning issues that went on, and that contributed to slower productivity rates with waiting events when you stopped, as you know. So overall, we're in reasonable form. But yes, it's -- we're taking it cautiously and we're in better shape now, but we're taking it cautiously just because we want to make sure that we understand all the areas where targeted maintenance is required because we have laid in, as you can see from the guidance we've given you, a little bit more sustaining CapEx required to make this longwall last longer.

All right. And what do you think a new longwall would cost us, Paul? I know it's 10 years away, but if I had to buy one today, just roughly?

That's a really interesting question. I mean I would have said to you a couple of years ago, $300 million, $400 million, but I don't think that's real anymore because there's no one -- and that would have been a European procurement, whereas I don't think that's the case anymore. So I think the numbers are likely to be half that and will come out of China. So given that they are the experts in underground mining and 60%, 70% of their volume comes from underground longwall being a big piece of that. They are the experts. And we're obviously using Chinese technology in our trucks now and the big refurb we've been through incorporates a lot of Chinese gear. So we're comfortable with that, and we understand the quality dimensions of that generally has been pretty good. But I always said half that cost, that historical cost.

Interesting, I guess, that option then to push it out 10 years just for the sake of 200. But I guess you've done all the math.

Yes, we've done all the math. We looked at it all. There's lead time associated with it as well. And then there's the other competing uses of capital and then there's a point in the cycle you're in. So all of those things have to be married in that capital allocation framework. And we're comfortable with the decision in terms of the approach we've taken now.

Your next question comes from Rob Stein with Macquarie.

Just on the contract with Aurizon for Maules, noting that, that contract is being restructured, is there any implication on what that means for Maules going forward in terms of upside capacity? And do those savings, do they amortize to '26 or '27?

Yes. Thanks, Rob. Yes, that's been an important development for us. It does provide us a structural change in our cost base in New South Wales, not just Maules. So that's New South Wales. That contract is for New South Wales. And that starts at 1st of July. So we're still under our current arrangements with both PN and Aurizon for the balance of this financial year. And so we need to make sure that everyone remains focused in what's otherwise a transition period for PN to take on the balance of work. But yes, look, it was a very competitive process. And from our perspective, it results in a material improvement to our costs on a per tonne basis, Kevin.

$3 and $4.

Yes, it's between $3 and $4 a tonne improvement on New South Wales. In '27.

So in effect, as Paul says, we've rightsized number of consists for the task that we have and we've created enough flexibility to deal with growth in periods to come. So we're really pleased with the outcome and the process we went through.

Yes. I mean there's 2 dimensions to that. Just to highlight that, the number we've given you the $3 to $4 range is the aggregate of 2 things. There's -- we took the opportunity to ensure that we were able to minimize surplus take-or-pay exposure, which we were carrying for some time, that's gone. As Kevin says, we now got flexibility to surge as required with these new arrangements. And then there's just the straight cost out opportunity, which came from that tender. So the aggregate of those 2 impacts is in that $3 to $4 range for New South Wales. So half that, obviously, when you consider the group on a per tonne basis.

That concludes our question-and-answer session. I'd now hand back to Mr. Flynn for closing remarks.

Thanks, everyone, for your time and interest in wrapping up the year-end financials, another good year for us. Business is doing well. And -- but if there's any outstanding questions anyone has, you know where to find us. So we look forward to engaging with you all over the coming weeks. Thank you.