Whitehaven Coal Limited (WHC) Earnings Call Transcript & Summary

Good morning, all. Thanks very much for joining our December 2025 quarterly report. I know everyone's got a busy day ahead of them with various calls. So I'll try and get through our highlights quickly and discussion on our quarter and move on to the Q&A. So thanks very much for making the time. But first, we're pleased; we feel like we've underpinned a good first half with a December quarter that's built nicely on the September quarter. So I'll just run through the highlights for us. Safety has been very good, I have to say. We continue to make good strides here in this area. And I think the enlarged group is starting to see more consistency across the group, which is very positive at 2.9 for our TRIFR. The managed from production for the quarter at just over 11 million tonnes was fantastic, so 21% up on September. Relatedly, the equity coal sales produced coal at 7 million tonnes for the quarter, relatedly 18% up on September. So I think that lays a good foundation for the second half of the year. Obviously, the met coal markets improved. So we've seen a 9% improvement there quarter-on-quarter, nice to see. Extra volume in the quarter has allowed us to bring our costs down relative to the first quarter. So we're about the $135 mark per tonne, subject to all the auditing processes that go with that, which we'll release with the half-year results shortly. In terms of cost savings, we're on track to deliver our $60 million to $80 million, which is really good. So we can talk about that. We'll talk about the detail of that actually at the half year in terms of progress and where we're actually seeing the savings come from. And overall, our net debt came down to the tune of $100 million during that period. And so that's a positive movement given the activities of the quarter. From a split between the 2 halves of our business, Queensland, 10.3 million tonnes for the quarter versus -- for the half versus 9.7 million tonnes in New South Wales for the half. So Queensland ROM production, 5.6 million, good result, New South Wales at 5.4 million. We'll get into the ins and outs of the individual mine performances shortly. The Queensland equity sales at 3 million tonnes was actually surpassed surprisingly. This is quite a reversal from our normal pathway as New South Wales at 4 million tonnes for the quarter. Average price December prices realized were AUD 225 for Queensland and AUD 163 per tonne for New South Wales. So overall, a good set of numbers, and I think that's really laid a really good foundation for the second half of the financial year. The volumes, we split over the page for you as usual. So as I say, 11 million tonnes, very nice to see that quarter come in versus the 9 million on the previous quarter. That sets us up at 20 million tonnes overall for the year and puts us in a good position for the run home in the second half to be able to point towards the top end of our guidance, which is nice. I won't go through all the details of individual sales and equity ROM, you can see all of that there. I'll jump over to some more commentary on the performance of the individual mines. Queensland operations at 5.6 million tonnes, that's very good to see. We've had weather as everybody knows, in and around. And so that's been a positive result. We have had some weather pushed the quarter end as well, which everybody is aware of, and we've had plenty of inbound discussion on. So we can talk about that in the Q&A. But overall, sites have done very well. Blackwater at 4 million tonnes, 24% up on September. Daunia is 1.6 million tonnes, 11% up on September. So both doing well. Blackwater sales at 2.7 million. It's a little bit lower than September, but that's just a timing-related matter of when we're washing and shipping coal. Daunia 1.1 million was 17% higher than the September quarter. Again, shipping does affect the Daunia outcomes month-to-month and quarter-to-quarter just because a ship is a large proportion of the production of a particular month. So if it slips from 1 month, then actually do see the differences. New South Wales operations at 5.4 million tonnes of ROM production for December, very positive. Sales were strong. And so our managed sales of our own coal, 4.9 million tonnes in the December, so 39% up. Overall, operations there have been pretty good. Stocks are reasonable at 1.4, 32% lower than September, but that's a function of the fact that we've actually sold well during this quarter. Maules production at 2.6 million tonnes, a little bit lower than where we'd like to be, even though higher than the September quarter. So the momentum is building there after the weather we had in the first quarter. But we didn't gain all the ground back that we wanted to gain in this quarter. So there is a sequencing thing which will play out in the second half. And as you know, we generally have a little bit more weighted to the second half, and Maules Creek will be part of that delivery in the second half. Narrabri has done well, and I think that's nice for people to see. 1.8 million tonnes for the second quarter is a big improvement, 48% up on September. September was okay, but December has done even better. Just reminding everybody, there's no change out in this year. And even though we continue to drive well in Narrabri, I don't think we should be just annualizing that number quite yet for everybody. Just let's get through the next few quarters and make sure we've got consistent build in production performance as we've been seeing in recent times, but very, very encouraging. So nice to see Narrabri sales, of course, because we had an abundance of coal during the period. Obviously, the sales mix is influenced by the abundance of Narrabri coal in that period. So you'll see that in the realizations, and we can talk about that a little bit further. Kelron Rochester did what they needed to do. So 900,000 tonnes in the quarter. You can see the split between Vickery and Tarrawonga, 600,000 and 300,000 respectively. So good results from them and good reliable performance, I think, from the operations production team. Flipping over the page to say the equity sales of 7 million tonnes was very good. Sales mix. The sales mix for the period at 53% revenue for met coal sales versus 47%. Obviously, it takes into account the sell-down of Blackwater, but probably more influentially, the strong sales in New South Wales is really the driving factor of that. And when you flip over to the back page, you'll see the volumes, you can see why that is influenced by the thermal sales in this particular quarter. So timing-related matter generally. But when you have an abundance of coal coming out of Narrabri in particular, that is influential in terms of the split of revenues in a particular period. Queensland operation, AUD 225 per tonne, as I mentioned before, up 13% from the average of AUD 200 in the September quarter. The PLV average of USD 200 for the quarter was up 9%, as I mentioned earlier. So that's nice to see the improvement there. And you can see the bookends of the range at AUD 191 per tonne versus AUD 212 per tonne for that period. We realized USD 150, so 75% of the PLV for our met coal sales, which is broadly in line with the average that we've seen over the 12-month realization period. The split between sales of our met coal was 63% for the primary products, the hard coke and the semi-hard and 34% for the PCI semi-soft. Again, this is -- that will be influential in terms of the realizations that you see. It's nice to see the hard coke coming up, but there has been a delayed effect in the secondary products, so the PCI and the semisoft and the relativities to the PLV has responded post the quarter end. So we've seen improvements there, but not in the quarter itself in the same way. New South Wales operations, the average price of AUD 163 was good. That is down on where we've been in the past, 7% higher for the September quarter. Overall, the realization outcome is a little low. So just at 99% of the average of GCC for the period. But again, that is an abundance of Narrabri coal turning up with a flurry, which is excellent. But as a result, that changes the mix in terms of obviously, the premium products in New South Wales versus the Narrabri quality profile and the associated pricing that comes with that. Look, overall, I think it's a good set of results. And whilst we're very conscious of the weather that's been up in Queensland in more recent times since the quarter end, we did actually experience perhaps less than the allowable weather days that we normally budget for in the first half, but we chewed a few of those up in the start of the second half. So we can talk about that if anyone wants to dive in that a little bit more. Otherwise, the market itself, we feel pretty good with the improvements that we're seeing. We still hold firm to the view that both the met coal and the high CV thermal coal markets are structurally constrained, and we're seeing that play out. So weather, whether it be weather or supply constraints or logistics constraints in Queensland in particular, which we've seen a bit of not just during the last quarter, but certainly manifesting itself with this weather-related activity post the December quarter end, does serve to constrain and you've seen the pricing of the PLV respond accordingly. Overall production costs, I think as we say, we've done pretty well. So at $135 for the half, that's a pretty good result. We -- that's towards the bottom end of our range that we've given you. We -- our commentary in the first quarter was a little higher than that, but with the volume improvement in the second quarter, you can see the impact that, that has. So that's positive. The color on the $60 million to $80 million of cost outs that we're working on, we will give you that with the half year results. But we feel good about hitting our target there, which is very positive across all of our sites. Balance sheet is what it is. I mentioned that already, but we're making cash right through this period. And hopefully, we've seen the worst of all that, but that's a nice thing to be able to say when we know that many of our peers have got their various challenges going through there, but we've been able to put ourselves in a good position and the business feels more robust even at the bottom of the curve. Payments to BMA, you can see that there. This is an estimate, but obviously, it's been a very -- a period of subdued pricing was always going to indicate a lower contingent payment, if not at all. But in more recent times, the improvements means that we are actually going to pay something based on that improvement in prices in more recent times. So very shortly, we'll have the second payment to BMA of USD 500 million, which is already in hand, as you know, from the sell-down at the Blackwater joint venture formation. So that's very positive. And that will then throw us into the third year, of course, in terms from a lapse time from the deal consummation. So in the third year, we only have USD 100 million actually payable as a deferred payment. And again, tripping over into the second -- from the second into the third year for the contingent payment, obviously, we haven't and don't expect to pay anything significant in this year, and we've given you an estimation there of about USD 9 million. But you can do your own calculations in terms of where this goes in terms of the current improvement in prices if that is maintained. So you can do the math there. So for instance, if you're using USD 250 per tonne, you've got our realizations. And so -- and then you also know what the trigger threshold is at USD 134 per tonne for next year. So you can do your own accounts there in terms of what you think the contingent payments might be for the third and final year once we enter that in April. The share buybacks, as you've seen, we've been tracking along there, not at any great pace, but we've certainly taken a few shares off the market there, which is good. 4.4 million shares being bought back for a total of $32 million. And so we'll continue to value the buyback process, and we'll update you on the half in terms of how we see the buyback playing out in the second half. Nothing really to see on development projects. I won't really go into any of that. We did finish up -- other than to say we finished up, obviously, the hearings at the back end of December for Winchester South, and we'll wait for a judgment to come out. I suspect there's a few months before we'll see anything there. Perhaps the middle of -- perhaps the end of this financial year, so the middle of the calendar year would be based on previous performance. But we feel confident about what's going on there. And so we feel like that will come out in an orderly fashion. But obviously, there is always the risk of an appeal. And so let's see how that plays out. Based on the solid quarter and the production and the cost outs and our cost performance more generally, we feel pretty confident about where we are from a guidance perspective. So that all remains unchanged. So you can see from a ROM production perspective and our sales performance, which I'll say has been very good to turn the first half at 20 million tonnes puts us in a good position because historically, we've got a little bit more in the second half than we got in the first half. And so that's going to put us well positioned in terms of where we go, subject to weather, of course, in Queensland, in particular, puts us in a good position to build upon that for a good second half performance. So overall, happy with all of that. I might throw open to everybody for Q&A. I've got Kevin and Ian here with me as well. So any questions on the finance side or operationally, please feel free to ask questions. So over to you, operator, and we'll get the Q&A started.

[Operator Instructions] Your first question today comes from Rahul Anand with Morgan Stanley.

Paul and team, two operations-related questions from myself. Obviously, a very strong period at Narrabri, benefiting from no longwall moves, but then also the strong ground conditions, I believe, given it's in the shallower part of the ore body. Just wanted to understand, is there anything to call out for the second half of the year in terms of ground conditions that you can foresee beyond the longwall move? And then perhaps into next year when you step into 2.04 million tonnes, are there any learnings from 1.06 million tonnes perhaps that we should be thinking about when we start thinking about sort of the numbers for next year in terms of production? That's the first one on Narrabri. I'll come back with the second.

Rahul, look, Narrabri has done well. That's not to say without -- it's not without its ups and downs in Q1, as we called out with the September quarter, we had some -- certainly a range of mechanical issues associated with that very extensive refurbishment of the wall. So -- and roof falls that went into that as a result of having mechanical outages. But we've done really well to close out that quarter, of course, and then this quarter builds nicely upon that. Ground conditions are decent, but that doesn't mean you don't have waiting events and falls from time to time, and we've had a little bit of that, but we continue to operate very well. So I think the team are managing that. We have seen good performance, and we expect that to actually continue for the balance of the year. And as you've noted, there is no change out in this year, but we may need to revise -- it won't come into this year. But in terms of when it falls in terms of the new financial year, we may need to bring that forward a little bit a few weeks if we continue to perform the way we are. So look, it's very positive in terms of the activity levels there. And as I say, we had a flurry of coal during the quarter. So the sales team need to jump on that rather than having to sit around because it is a logistics business and you need to move the stock, which we've done. But otherwise, yes, look, I think it's encouraging. Ground conditions, as you're alluding to, probably incrementally better in the next panel, quite frankly. So those intrusions that we've mentioned with the washout of the seam actually diminish as we step further away from that side of the mine. So still in shallow ground in relative terms, but the influence of those intrusions diminish in the next panel.

Got it. Okay. Perfect. And I'm sure there'll be more questions on Blackwater. So I'll step away into Maules Creek, just sticking with NSW. On that asset, look, in the past, we've obviously heard Whitehaven having the intention to have a more sort of balanced year first half to second half. But again, it seems like the production there seems to be weighted in the second half, and I know it was in line with your plan for this year. But how are you thinking about the production weightings in that asset? And kind of how do you see the potential to kind of push that asset a bit more towards its license capacity?

Yes. That's a good question and probably one which requires a more detailed response than we can probably give you right now, Rahul. But look, more broadly, Narrabri, Maules Creek has done well, but it hasn't delivered all the tonnes that we would like evenly throughout the course of the year. And as you're rightly pointing out that it's been second half weighted and it will be again this year. Now operationally, we are turning the pit around. So in turning the pit, we are in a period of some spatial constraint, if I can say that. And that drives a certain level of inefficiency in terms of how we're driving production there. So as you know, the Maules Creek continuation project, which we're in the process of pursuing our approval for, will allow us to reorient the pit basically along strike north to south and open up a lot more ground and you'll see productivity improvement so that we can perform at a level, as you say, which is more indicative of the approved production limit of the site of 13 million tonnes. So once we're able to do that, then I think that the efficiency of the site will improve dramatically. But at the moment, we are -- the mechanical intensity in this space constrained area that we're in at the moment does cause us to be less productive than what we would think is going to be indicative longer term once the continuation project is approved. Ian, you want to add anything to that?

Yes. No, that's correct, Paul. And so I mean, Rahul, you know how the multi-seam operation goes there and the footprint we've got. So the coal really comes as it comes as we go down, and we don't have a lot of control. As Paul said, we are starting to turn the pit around. So we'll be set up for continuation. And then once that happens, we can then make the strike length a lot longer and give ourselves some more flexibility.

I think that's a key point that's often overlooked here. I mean it's not a 2 or 3 seam mine is that we've got 3 or 4x that depending on which part of the pitch you're in. And so that does add complexity to the operations.

And how long would it take all up in terms of getting the mine turned around? And when would you kind of be at a spot where you're kind of comfortable that you've got enough fronts open and you're kind of seeing the benefits of that?

Yes. I mean, as Paul touched on, we are turning the orientation, so it will be in the right direction for the longer-term plan, but the ability to go into the new areas, obviously dependent on approvals, but hopefully, around the '27, '28 period, that would be good.

The next question comes from Paul Young with Goldman Sachs.

Good quarter. All the summary is pretty comprehensive actually on, I think, all the items in the quarterly. But I just want to touch on the wet weather in Queensland. It seems like most of the coal miners are this time around seem better prepared from an sort of inventory perspective and pumping, et cetera, the ability to pump water out, et cetera, and recover from this. So what is the sort of state of play for Blackwater and Daunia in the pits? And how quickly can you sort of recover from the recent rains?

Yes. Look, Paul, we're -- I think you're right in terms of everyone's preparedness for the weather was good. And our stock levels, as you can see, put us in a good position to deal with our shipping requirements as soon as the port was back up and running at DBCT in particular. I think everyone's managed that better than they did in previous episodes of heavy weather. And I think we've done well. So pleased with that. I mean, overall, the downtime post the December quarter was rounded up, call it a week in terms of downtime. But with stocks at healthy levels and as long as the port is open, we've been able to recover pretty quickly on that. There has been some logistical constraints, and this is not weather related, just with haulage. And we've noted some of that particularly down the Blackwater line. So we've seen disruptions there, which have been causing some consternation in the December quarter. So -- but that is improving now. So we understand the labor constraints have been resolved or being in the process of nearly being fully resolved, and that will allow us to be shipping at a level more consistent with where we'd like to be. But yes, look, I think we're in a decent position to deal with weather. Of course, we're only at the beginning of the season. And so I just caution everybody that there'll be more of that, obviously, as we balance out through Q3, maybe a little bit of Q4. But the team is doing a great job in preparing for it and managing it once it occurs.

Yes. And maybe bringing Kevin to the conversation on -- just with the balance sheet, Kevin, just cash flow movements. I know you're reporting in February, so we give us all the numbers, but just high level, just a modest reduction in net debt in the quarter. Was that mostly related to just that buildup in stocks and just receivables and inventories, Kev?

Yes, yes. Look, I think the SEM was really kind to us. So the vessels were front half of December. We managed to collect an awful lot of that in December. So it was a good period. But I'd say, Paul, don't underestimate the effort across the whole business in managing through the bottom of the cycle. This is not just -- it's an effort by everybody in the business is the way I'd say.

The next question comes from Daniel Roden with Jefferies.

First one I just wanted to touch on was, I guess, coming into more of an outlook into the second half FY '26. Obviously, pricing has improved a fair bit. And I just wanted to, I guess, understand from your perspective, what are some of the changes you're seeing to your price realizations? If I'm looking at some of the underlying data, it looks like your products are benefiting a decent amount relative to some of the other products in the market. So I just wanted to see if you have any comments on, I guess, the outlook on not just price but price realizations for your products as well.

Thanks, Daniel. I think I've got what you're saying. You've got a bit of scratchy line there. So I'll try and cover that off. But if I haven't covered it off, just let me know. The outlook for the second half looks pretty good, obviously, with prices responding. Initially, the PLV went first, as I said, and then the sort of the low-vol hard coke has followed realization-wise, but then you've seen the PCI and semi-soft starting to improve in relative terms also. I mean the semi-soft sort of type levels that we're seeing their realization relative to the PLV in the late 60s, we think that's a little low. And so we're working hard to try and drag that up. But when you're in a rising market, there's a lag impact, as you know, and you're seeing the reverse of that in the falling market. We outperformed obviously relative to the index for the quarter in a falling market, but it takes a while to manifest itself in those realizations in a rising market. But we are seeing good results. If you just look at the PLV, look at the low vol relative to the PLV. I mean that's pretty decent realizations there now. Our products, generally, we're trying to structure all of them relative to PLV rather than -- we don't particularly want long-term exposure to the low-vol hard coke index. So we're trying to move all our sales across to a relative PLV basis and only a few more to go on that. So overall, I think we're improving our realizations as we go. But as I say, in a rising market, you'll need to have a couple of quarters to see the full effect of that.

Yes. Okay. And maybe just on, I guess, the near-term aspects. When we're at the site visits at Blackwater last year, you outlined, I guess, several kind of initiatives and operational levers that you could pull to, I guess, capture any strength in the market. I guess if you are seeing -- we are seeing a bit of strength in the market right now, maybe that last a little while, maybe it doesn't. But what are kind of the, I guess, trigger points for that? And if you could remind us on what some of the, I guess, the near-term levers you could pull like the thermal coal bypass, improving yields, maximizing the Blackwater CHPP. What are some of the initiatives you could pull near term? And what stage gates would you need to see to, I guess, execute on them?

Yes. Look, I think we're just using the opportunity -- with the demand being good, we're using the opportunity to sort through our customer contracts and chase down the best realization profile for contracts that we can. So in this December quarter, we end up having a little bit less hard coke than we would have liked out of Narrabri -- sorry, out of Daunia. So that was -- that turns around in this quarter that we're in now. So that will be nice to see. That product is well sought after. And so we are using that opportunity to drive the realization improvements that we're chasing before. We're not chasing the thermal in this year. So there will be a little bit of that turns up from time to time, as you can see, I think revenue-wise in this period. But we're not chasing that, and we won't activate that until we've actually filled up the wash plant as we discussed at great length when we're on that site visit, as you say. So we do want to fill the wash box up before we start expanding opportunities by taking advantage of the infrastructure in the north for the thermal bypass opportunities. But overall, we're basically just trying to drive our costs down in this period, continue to do that, drive the productivity for the existing big fleet we've got. We think we've got plenty of capacity to do more in the installed fleet. So we'd like to see a little bit more productivity upside manifest itself there before we start putting more equipment into the pit. But overall, happy with the productivity improvements we're seeing. Just let's see how the weather goes in Q3. But I think we're well prepared as Paul is asking for about just recently on active management of the weather impacts in the Queensland regions.

Okay. And if I could just throw one more quick one in. But I guess at the acquisition of the Queensland assets, there was kind of an outlined plan around reducing the overall strip ratio, I think specifically at Blackwater and the target for that was FY '27 kind of completion. I guess what's the run rate of that? Are you seeing further improvements, I guess, into FY '27 and kind of beyond? But if you could just, I guess, make a comment on how you're seeing, I guess, the stripping ratio at Blackwater and Daunia?

Yes. Look, just to clarify that, it's not a strip -- it's not -- I don't want people getting confused about strip ratios coming down as well. I think that was what we're referring to as a deficit of pre-strip ground that we inherited when we bought the place, Blackwater, in particular, you're referring to. So we're doing well. We're doing well in terms of recovering that ground. So we inherited a deficit of pre-strip ground. So we're obviously stripping hard, and we have put in more capacity, as I just mentioned, to actually deal with that. So we are on track to get ourselves into the green zone as our TARP refers to at the end of this financial year. And so the challenge here is that we -- because we are mining a little quicker than what historically the mine has been doing, we are consuming that. So the pressure is on us to keep going. So we thought we might get to the end of that journey earlier than the full 2 years of our ownership. But because we are mining quicker, inventory of pre-strip ground will be in that green zone at the end of this financial year. So you still got another 6 months to go. But overall, no change in strip ratio, just so I can be clear with -- for everybody, just so there's no confusion about that. We're not targeting some reduction in strip ratio or that is not related to that. The strip ratio is consistent over time. It's just that we inherited a deficit in pre-strip ground that we are correcting.

And the other aspect of that we've touched on is to get the blasted inventory up so we can do that, and we're largely on that path. To be frank with you, we're managing that within the cost environment. So we're not out in advance of where we need to be. But -- and those inventories are healthy, but also sort of tend to fluctuate around the wet weather as well.

Your next question comes from Glyn Lawcock with Barrenjoey.

Paul, Happy New Year to you. Just maybe just a little bit more detail, if you could. Just so we're obviously well prepared for the wet weather, got a rain event, which was quite severe. Does that put you now on the back foot if we get more rain events as you say, we still got another couple of months of wet season? Or do you think you could cope with another one as well?

Yes. Thanks, Glyn. Happy New Year to you, too. No, no, I don't think it puts us in any accumulated sort of position here that we should worry about. Now our team was able to be able to deal with the water as and when it came on to the site, and we were just well prepared to manage the flow of volume of water. We're able to manage our discharge points well. We're able to manage our environmental compliance in terms of quality of water leaving site and so on. So I think that's all gone very well. It doesn't leave us with any accumulated issues that we need to be able to counter if there's further water. We actually have plenty of water storage of Blackwater in particular, not that we want to use anymore because we feel we've got adequate water. We've got a few years of water basically on site. And over time, we would like to reduce that. But we do have plenty of water. So the more immediate impacts, as you know, it's really just about -- if we've got an accumulation of water in a particular pit and it's obviously at the bottom of the pit. But if you've got coal down there, then you're obviously going to get the water out of the way before you can get to the coal. And so at any one point in time, we generally have one of our pits with a lot of coal exposed. And so if it goes under water for a week whilst you're pumping, then that can cause some delay in that coal release. But other than that, I think we're in decent shape.

Yes. And I think just building on that, as part of getting to know the products and some more flexibility around stockpiling, et cetera, the sites did a great effort in actually getting some of that coal that was in the bottom of the pits up to what we call our top of pit ramps. And I think you would have seen it there, the infrastructure and the road quality for the sort of coal haul roads is excellent. So even in the wet weather, it's very easy to get going and keep the feed into the prep plant. So good job by the site there.

Okay. That's good to hear. And then, Paul, not an easy one, I guess, because it requires quite a bit of digging apart. But just when you look at the price move, we've put on about $70 a tonne in the last couple of months, which is great. When you talk to your customers and you look at -- it's been a combination of maybe demand and the weather, can you split that apart? Do you have a sense as to like the customers thinking $250 run too hard. They're happy. I mean, obviously, they would have liked to be paying $185 like last year. But just your thoughts around sort of pulling apart whether this has really just been a rain event price move? Or is there something else as well?

Yes. I don't have a split for you, Glyn. And just the way you've couched the question, you understand that I won't be coming out with one of those. But yes, the question...

Yes. Just [indiscernible].

Yes, yes. That just highlights the complexity of that dynamic. I think there is definitely 2 parts to that, as you point out. The customer side of things, we definitely got more -- we've got more demand. So that is definitely improving. And we're seeing that out of India in particular. So that's nice to be able to say. That's been coming for a while because you may recall in previous quarters, the last 2 quarters, we've mentioned that customers were asking for upside tonnes in their contracts. So that is good to see. There's no doubt that the weather plays a part of all of this. And as we've seen, there's been constraints, the weather, in particular, last year and this year hit the coast pretty hard, but not so much the pits as much. And so the coast knocked out the ports and their ability to get the logistics chain flowing as quickly as we'd like. So I do think there's a good portion of this is weather related. But as I say, we're at the beginning of the season. And let's see how the balance of the year plays out. But it's not all weather. There's definitely underlying customer demand, which is driving demand. I mean I know I keep saying it, but I wish we had more Daunia because Daunia is definitely in high demand. And as I mentioned in the answer to a question earlier, we are using that opportunity to make sure that we can sell to the right customers who are going to pay us what we believe to be the right price for that product. The limitation of all that is, obviously, there's only so much of it, and it would be nice to have a bit more.

Your next question comes from Rob Stein with Macquarie.

Paul and team, two questions from me. Interestingly, you'd wish that you had a bit more Daunia. I'm just curious, given the current market environment, potentially some coal assets changing hands, does that change your M&A strategy given that you could potentially come into a period of high pricing, which may accelerate your degearing? And then I've got a second follow-up question that's related.

Yes. Thanks, Rob. Look, no M&A activity on our front. We're pretty much just doing what we do and ensuring that we don't lose focus on the optimization of these assets now nearing 2 years into our ownership. But the aspects of Daunia that I mentioned before, the reason why I say that is that Daunia is a very low ash hard coke product. And it's in demand because generally, ash levels are rising in the PLV market. And so it's a very good blend stock for people. That's why people chase it because they like it. It's got good coking properties, but it actually is the low ash in particular, that allows them to tolerate some of the higher ash profile hard coats that are now starting to enter the market. So that leaves -- that puts it in strong demand. So we can sell 2 or 3x over if we had more of it. It is just that the limitations of the site that we're -- and our processing capacity that it is what it is. But obviously, the scarcity keeps the demand.

And so as a follow-up then with the optimization focus, you're looking at high pricing, probably if you considered this 3 to 6 months ago, you would have thought more around returns refinancing, et cetera. Does that put you in a better position to potentially raise payouts to shareholders? How do you think about the refi in that context, given that I think on the last call, the one before, we've spoken about potentially tapping the U.S. market at some stage this calendar year.

Yes. Look, better pricing begets more happiness for shareholders more over, right? It just -- it absolutely does. So payout ratios and things are well established with our capital allocation framework. But when there's yes, when cash flows are improved, then of course, we can look at where we position that within those ranges. So we're very focused on that and shareholders have been very supportive during this period when we've been navigating through a relatively austair period from a cash flow perspective and everybody has been doing the same. And so I think we've been responsible through that period. But to see this better pricing now and the next quarter or 2, I think that will trickle into the bank account will make things generally easier. And the refinance is more based on the fundamentals of the longer-term business anyway rather than the spot pricing. But Kevin and the team are well entrenched in that process already. And Kevin, do you want to make some remarks relating to that?

Look, I'd say -- I think like you say, good prices make -- put smiles on people's faces. But the real thing in refinance is the acquisition transformed Whitehaven from -- it brought a much better balance into the business. And the other thing it brought now that we've had 2 years of ownership, we've really been focused on trying to convince an equity market and position ourselves in a debt market that these assets are solid through the cycle and will deliver solid returns. And that's really been our focus. We want to get the value out of these assets. And happily, I'd say we're not done. We're on track and we're delivering. But I do think we're well positioned to have a discussion with debt markets about a new Whitehaven coal different to a Whitehaven coal in, say, 2020. And I think that's broadly the discussion we're having with people, and we're getting plenty of inbound inquiries about how can we help. So I think it's -- I'd say it's less about [indiscernible], more about run a business for the long term and run a business properly for the long term. And that's what we're seeking to do here.

[Operator Instructions] Your next question comes from Chen Jiang with Bank of America.

Paul and Kevin, congratulations on another strong quarterly update. My first question is related to the coal market. Obviously, the PLV market, as you mentioned, is tight, cyclone, et cetera, and spot USD 250 per tonne. I'm wondering if you can provide any color in the, I guess, non-PLV coal market, it's more like a second-tier quality coal market. By talking to your customers in Asia, how is the demand and supply like versus PLV? I guess, by looking at PCI and semi-soft coal price versus PLV, it seems like the discount to PLV have increased. So the spread is widening. Is my understanding correct?

Yes. Thanks, Chen. Yes. Look, it is wider because the PLV has taken the run first for sure. And so there's a lagging effect that we would perceive that's going to play out and improve over the coming quarter. And so I think the semi-soft is a real good case in point, as I say, I think 68%, I think our realization was in the quarter. Our conversations with customers are certainly at levels above that. Now it's not 75%, say, for instance, of course. But we do feel like 67%, 68% is too low. And so our discussions are focusing on an improvement on that in the second half. Now everybody keeps their cards close to their chest in terms of those negotiations, but nobody is saying it shouldn't be higher. It's just a matter of how high can we get it up in these coming quarters. So I think that will change. But I think the PLV jumped ahead quickly, and you see the low vol went with it, but the PCI and the semi-soft will take a little bit further to trickle down. So I think that directionally is going the right way. It's just that I think the next quarter will be interesting to see where it lands.

Sure. Maybe another question for Kevin, please. Kevin, by looking at the current buyback program announced, I think, last February, $72 million, that is going to expire this quarter. And then looking at your -- I mean, how -- the value of shares bought back, it seems like 94% almost completed. I understand that you have a 40% to 60% payout now. I'm just wondering if the Board has any preference of dividends versus buyback?

Look, I think good question, Chair. I'd say that, that buyback program over the last 2 or 3 years has really helped this business quite solidly. I think the dividends, we've got a bunch of shareholders that prefer franked dividends. We've got a bunch of shareholders who prefer buybacks. I think we'll get to February and the Board will sit down and say, well, what's the program that will apply in the second half of fiscal year '26, and you'll get that with the financial results. But I think the business is doing well. It's got a robust balance sheet. I think you should expect to see us continuing the same path we've had for a number of years, just moving forward with dividends and buybacks and really positioning the business and maintaining the business for the long term.

I'll now hand back to Mr. Flynn for closing remarks.

Thanks all once again for all joining the December quarter for Whitehaven. We're very happy with the second quarter and the building blocks we put in place for now the second half. If there's any further questions that we haven't been able to knock off during the course of the Q&A and the presentation, please get in touch with us. Look forward to engaging with you all over the coming weeks. And thanks again for your attention.