Yancoal Australia Ltd ($YAL)

Good day, and thank you for standing by. Welcome to Yancoal acquisitions of Kaselco Mine conference call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to turn the call over to Head of Investor Relations, Mr. Brandon Fitzpatrick. Thank you. Please go ahead.

Thank you, Desmond, and thank you to everyone joining us for this briefing on Yancoal's acquisition of an 80% stake in the Kestrel coal mine. We have Sharif Burra, our Chief Executive Officer; and Kevin Su, our Chief Financial Officer, to provide an overview of the acquisition and several members of Yancoal's executive leadership team are also present to participate in the question-and-answer session. Jason mentioned the phone line. There is also the opportunity to submit written questions via the webcast. You can do that at any point. The commentary provided today is based on the announcement and presentation published on the Australian Securities Exchange and the stock exchange of Hong Kong announcement platforms last night. Slides 2 and 3 contain notices and disclaimers relevant to today's presentation and the forward-looking statements it contains. Please make yourself familiar with the content of these 2 slides. Throughout the presentation, we use Australian dollars unless otherwise stated. Sharif will now provide the transaction overview.

Thanks, Brendan, and thank you to everyone joining us on the webcast. We really appreciate you taking the time at short notice to hear about this exciting update. Before looking at the transaction in more detail, I want to take a moment to thank all the people, both within Yancoal and our corporate advisers who contributed to getting us to this point. Takes an incredible amount of effort from teams working cohesively to bring an acquisition of this nature to fruition. Slide 5 provides the transaction summary. Last night, we announced that Yancoal has agreed with EMR and Adaro to acquire their 80% ownership in the Kestrel Coal mine through the 100% acquisition of the Kestrel Coal group. Kestrel is a high-quality, long-life metallurgical coal mine, which we view as strategically aligned with our operating strengths. Being a producing mine from the date of completion, Kestrel will immediately contribute to our production volumes and operating cash flows and will increase the metallurgical coal contribution of our portfolio. On completion, Yancoal will become the operator and majority owner of the mine. Our partner in the mine will be Mitsui, which holds the other 20%. We consider Mitsui a strong partner and look forward to working collaboratively with them as co-owners of the Kestrel mine. The upfront consideration is USD 1.85 billion. This includes a USD 40 million deposit. There is contingent cash consideration, which is capped at USD 550 million, with payments only made if annual benchmark coal prices exceed a threshold price. We will fund the upfront cash consideration through existing cash on our balance sheet and a USD 1.2 billion acquisition facility. We also have in place a USD 200 million working capital facility for additional support. If payments are required in the future for the contingent cash consideration, we intend to fund them from operating cash flows as they represent an upside revenue share arrangement. The acquisition is subject to conditions and approvals. Provided all the conditions are met, we aim to complete the transaction towards the end of the September quarter this year. Turning to Slide 6. The map shows Kestrel's location in the Queensland Ban Basin and its position relative to other Yancoal mines and regional infrastructure. Why do we like the acquisition? It is a large-scale operation that produced 5.9 million tonnes of high-quality metallurgical coal last year. It enhances our existing portfolio by adding a significant hard coking coal volume to our product mix. It has a long mine life, 25 years of production fully underpinned by 164 million tonnes of marketable reserves. It has strong margins. At last year's coal prices and with cash operating costs of AUD 147 per tonne, Kestrel was in the top 35% of global seaborne metallurgical supply on the margin curve. It has infrastructure and logistics in place and proximity to other Yancoal mines. Looking at Slide 7. We can see the acquisition in the context of Yancoal's 22-year journey for prominence in the Australian coal sector. It started with a single mine, [ Ostre ] back in 2004. And I'm sure many of you know this is where I started my journey with Yancoal in 2005, a temple underground operation or as the underground mine manager. Over the next 2 decades, the company acquired, expanded and optimized mines to become Australia's second largest coal liner. We see this acquisition as continuing our strong track record of value creation through selective acquisitions. I'll now hand over to Kevin to take a closer look at the strategic rationale for the acquisition.

Thank you, Sharif. The next 5 slides is for the 5 key points on Slide 9. There are scale and diversification, longevity on the margin my logical coal market value, cash flow contribution at attractive multiples and utilization of cash and data structures. Slide 10 looks like the increase of scale and diversification. We see the attributable saleable production, expanding our privation as the largest public company listed on ASX of but not adding volume just to increase the short-term outlook. The additional reserves represent about 17% of the pro forma marketable reserves. These highlights that is not just additional body but a long-term budget. Using 2025 production data as a reference, we see casual if both, all product mix and algebra. Slide 11 compares cash flow against the other and the brand home lines in Australia. It is the largest underground coal mine just to handle our own modeling and by far the largest metallurgical [indiscernible] It has the third largest multiple reserves of any underground mine. These reserves support a 25-year [ market. ] And imports is a productive 1 using production volumes per employee as a productivity measure in the right segment behind our [indiscernible] Yancoal is how to operate large efficient on local mines. So we see ourselves as more than capable to [ effectful ] integrating casual into our portfolio. Slide 12 provides [indiscernible] 80% of production is hard coking coal. This is price of the last premium mobile article in one. This product is very well regarded by cashless customers and is one we don't have in our current product mix. The remaining 20% is a peak base sold as a high energy [indiscernible] can fit against the global cotenancies. This is similar to the thermal coal we produce from our [indiscernible] We see Kestrel products and implanting authorization in international core markets. On Slide 13, we have to project -- we have projections for the metallurgical coal markets or to 2050. Authorize raised by cashless 25 year mine [indiscernible] coal prices have been substituted in recent times. Our view, which is supported by external industry analysis is a supply deficit likely emerges in the future. The increased global demand will be driven by Asia and in particular, India. Kestrel is already supplied into India with over 30% of sales going there in 2025. Additional sales to India further diversifies our customer base, Kestrel's next 3 largest destinations for the sales are ones where we already have strong customer relationships. Moving on to Slide 14, we see the EBITDA generated by Kestrel's over the past 5 years. And importantly, the strong EBITDA margins. These margins are very similar to yen cost margins over the same period, further demonstrating that this acquisition should complement our existing operating margins. Using a 2025 EBITDA and the background [indiscernible] a proxy for enterprise value. The EV to EBITDA multiple we are paying for cash flow is below our peer group average. In summary, we see the acquisitions adding operating cash flow and margins similar to our existing portfolio at a favorable mark. Slide 15 gives additional information on the funding structure. We will utilize USD 315 million to USD 850 million from our cash balance. The final amount will be influenced by our cash balance and completion, which intend will be most significantly influenced by our achieved core price its now and completion. The remainder will be funded through a USD 1.2 billion financing facility with additional support available through a USD 200 million working capital facility. The following structure allows us to maintain the strong financial position with a healthy cash balance to support operating requirements and dividend distribution in line with the company's constitution. On 2025 pro forma basis, our net debt-to-EBITDA leverage ratio would be 0.9x to 1.1x, and our gearing will be 15% to 18%. In the context of our broader capital management objectives, we see this as appropriate or caps. I'll now hand it back to Sharif to look at the case mine more closely.

Thank you, Kevin. Slide 17 recaps some of the information we've seen earlier in the presentation. Kestrel is a large-scale operation, producing predominantly high-quality metallurgical coal and has a long mine life. We produced almost 6 million tonnes of saleable coal in 2025 on a 100% basis. Our share of the saleable coal production will be 80%. Over the past 8 years, about AUD 1.4 billion has been invested in the mine and infrastructure. We view it as being in good condition and well-placed operate efficiently in the coming years. Existing mine plan incorporates larger and more productive longwall panels in future years. These are referred to as the 600 and 700 series. On Slide 18, we see the past operational performance. Kestrel has a strong history of yield and saleable coal production. The chart on the lower right of the page shows the margin curve, the global seaborne metallurgical coal supply. Unlike a cost curve, which only considers production costs margin curve captures the difference between realized price and cash operating costs. This normalizes for coal quality and gives a truer sense of relative position against global peers. Kestrel sets in the top 35% of global metallurgical coal supply on the margin curve. We view this as one of the clearest indicators of its quality. Slide 19 shows an aerial view of the mine and its infrastructure. As mentioned earlier, it's been well funded in the past and the infrastructure is in good condition. The 10.5 million tonnes per annum capacity in the coal handling and preparation plant exceeds current run-of-mine coal production rates, ensuring it will not be a constraint. Slide 20 has additional information on the logistics. The 2 main points to note are contracted rail volumes of about 6.8 million tonnes per annum and contracted full capacity of 7.8 million tonnes per annum. Both contracts provide excess capacity over the typical annual production rate, again, enduring [indiscernible] Slide 21 provides a detailed comparison of our existing mines and Kestrel. Test will complement and balances the existing portfolio with regard to geographical spread, mine type, product type and scale of production. We included Slide 22 as a reminder of how Yancoal after our last major transaction, the acquisition of interest in the MTW and HVA mines in 2017. Since 2018, we've returned over $5.3 billion to shareholders as dividends. More than half of this amount was fully franked. We repaid debt early, and we're in a net cash position within 5 years of that acquisition. Following the cash flow acquisition, we will put our balance sheet back to work. But as Kevin mentioned earlier, the pro forma gearing ratio would be approximately 15% to 18%, half the level it was after our last acquisition. Post completion, we see Yancoal well placed to continue its capital management objectives of balancing our financial position, distribution to shareholders and future growth initiatives. The final slide is an adaptation of the slide that closed out our 2025 results presentation in February. The cash flow acquisition allows us to build on the outlook for this year and beyond. We have an experienced management team and workforce, and we are excited about working with the team at Kestrel and Mitsui. Scale and operating margins are 2 key elements that drive our performance. We see cash roll contributing to both of these. The transaction will apply an appropriate mix of cash and debt that leverages our balance sheet strength. We have a proven history of returning cash to shareholders in accordance with our dividend policy and see the cash flow from Kestrel contributing to this capability. Post acquisition, we still aim to create future value for shareholders by continuing to deliver strong production and cost control performance with balanced capital management. We strongly believe tests a high-quality and attractive acquisition that will deliver on the Ancoles value-adding growth aspirations and positions the business to deliver strong performance and shareholder returns in the future. Now I'll hand back to Brendan to open the Q&A.

Thank you, Sharif and Kevin, for taking us through this exciting update on the business. We will now move on to the question-and-answer session, starting with questions from the phone and then moving to questions submitted via the webcast. Desmond could you please initiate the process for questions from the phone?

[Operator Instructions] The first question from the line comes from Glyn Lawcock from Barrenjoey.

A couple of questions. Firstly, just once you take control of the asset after regulatory approval, do you have any thoughts around whether you would sell down to a steel mill? I mean, obviously, previous acquirers have all chosen to sell down. Is that something you consider? Or given the financial position the company does no need. And then I have a second question.

Yes. Look, thank you for the question. It's not something we're currently considering.

Okay. That's great. And then I'm conscious you haven't yet taken control of the assets, but obviously, you did a lot of due diligence. Just a couple of questions around that. The cost base, as you said, $147 a tonne do you see much opportunity to do much with that based on what you've seen so far with the asset? And then there seems to be excess pond rail associated with the Kestrel mine relative to the 6 million tonnes. Is there capability across the rest of your portfolio that maybe take advantage of that once you get ownership?

Look, thanks for the question. Our primary objectives continue operating with cash flow mine as a successful, productive, well-managed coal mine. And so we will obviously spend our time and have a good look at the asset and look for opportunities with regards to costs. With regards to logistics, again, we haven't factored in any synergistic benefits with regards to the deal at this stage, but we'll certainly be focused on those opportunities as and if they present once we have acquisition once we're taking control of the cash flow margin.

We have our next question from the line of Lawrence Lau of BOCI.

I have a few. First of all, I realized that the processing yield of this mine is quite high, 75%, 76%. I just wanted to try to know, do you think this kind of processing you can be sustained in the future? Secondly, I understand that Mitsui, just wonder if you talked to Mitsui at this stage? And what is the attitude of Mitsui about this transaction? And Thirdly, what is the estimated maintenance CapEx of this month after you take over? And finally, I realized that there's an estimated transaction cost of AUD 200 million. Sorry, USD 200 million. Just I would like to note, will that be charged against your P&L or will be considered as part of the consideration.

Okay. Lawrence, I appreciate that 4 questions there. Let's go back to the start, looking at the operational profile, that 75% yield of the assets delivered in the past. What can we say about the potential yield going forward, do we think?

Yes. Thanks, Lawrence. So as a first quarter call, I'd point you to Appendix 3 of the market release and the competent person's report and the drill statement and all of that information should be in their comprehensive amount of detail. With regards to Mitsui, I'm not going to comment on Mitsui. Having said that, we have a very good relationship with Mitsui. We hold them in the highest regard, and we really look forward to working with them at Kestrel

Thanks, Sharif. The next question of the 4 was maintenance CapEx. Perhaps, Kevin, do we have anything that we can offer on a view from maintenance CapEx going forward? Or is it too early at this point to establish the view?

We do have a technical model from our due diligence one, but we are not in a position to disclose better forecast for now.

And then that final question from Lawrence, the $200 million that's been identified as transaction costs. The question was, how would that be expensed and recognized on our income statement.

Lawrence, out of the $200 million [indiscernible] majority of it is stand duty. So for stand duty purpose way, we have to recognize it as the expense.

Thank you, Lawrence, was there anything further?

I think that's good enough at this stage.

Desmond, do we have further phone line questions?

We'll have a follow-up questions from Glyn Lawcock from Barrenjoey.

Just wanted to understand the balance sheet of Kestrel. Could you maybe provide a little bit of color around the actual balance sheet that you'll be inheriting? And will that come across? Or will it come across with just inventory? And then I had a second one after that.

Thank you, Glyn. Look, Kevin, in the first instance. The cash flow balance sheet, what can we say about the nature of the assets and liabilities that would carry across upon completion?

First of all, the acquisition is cash flow that freight basis. But the one way you look at the bidding is clearly big on enterprise value. And if we look at the existing balance sheet structure, they do have some tests to support the previous acquisition since 2018, which is something we will adjust as part of the completion caps. But I think as I mentioned, the acquisition basis is cash rate at right.

Okay. And then just the second question was just around the coal. You talked about it being 80% metallurgical or 20% thermal. I just wondering if you could maybe break down a little bit more. Is it all -- is it a mixture of sort of semi-soft coking coal and semihard or -- and what sort of price relativities we should be expecting for the mid mix? And then also similarly for the thermal any sort of comments you can help us understand the price realizations for the coal types you expect from Kestrel.

Glyn, certainly appreciate that the interest in that topic from the market perspective. We do have the Competent Persons statement, which provides a detailed view of the assets. But in terms of the product mix, what's probably the most reasonable thing to say at this point in time is the 80%, 20% split as indicated on Slide 12. That's indicative the production profile will vary over time depending on which locations are being mined, the coal quality and even how the wash plant is utilized to optimize output and meet customer requirements. I expect our marketing team will be looking to leverage their capabilities in that regard. So I think we'll leave it at the indicative level at this point in time. Once we have move to acquisition and operation of the asset would be in a far better position to provide a more definitive view going forward.

I'll move on to some webcast questions now. We'll come back to the phone lines later to see if anything else has come through. Something high level to start with, we're putting some of our balance sheet to work. There's interest in knowing how our capital management plan will look going forward, whether there be any shift in priorities what the transaction might mean for dividend policy in the forward periods? Kevin, could I look to you in the first instance, please?

Sure, Brendan. In short, Yancoal will not change our position about dividends. Yancoal has a strong track record of displaying capital management and returning value to shareholders. Following the transaction, the company expects to retain such flexibility to balance objectives across shareholder returns, balance sheet strength and funding future growth. And I put a few numbers here, and you can see where you disclosed our cash balance at more than AUD 2.5 billion right as of the end of last year. And in the presentation, we quoted, the upfront cash potentially going to be USD 350 million to USD 850 million which equivalent to about AUD 900 million to AUD 1.2 billion. But we disclosed last time, that's about $2.1 billion of cash. As such, we do have sufficient liquidity, yes. Thanks.

Let's stay on the topic of the balance sheet and the capital management several questions coming through of a similar topic. So I'll amalgamate them. The general thrust of the questions are the USD 1.4 billion debt facility. What can we say about that in terms of the interest rate, it will carry the finances, the tenure of the facility and how that will fit into our balance sheet?

We would love to share. But for now, a lot of key terms, including the one Brendan just mentioned, subject to confidentiality provisions. As a result, we are not able to disclose externally. But the one thing we can assure the market, the interest rate is very market consistent and competitive for a 5-year facility and this is in line with the prevailing international [indiscernible] along market conditions.

Let's extend on that topic. Would there be a scenario where the balance sheet and the funding structures could be restructured over time? Is there a process where the bonds or other elements could be utilized at some point subsequently?

The short answer is yes. As of today, we do believe we have the most effective acquisition funding structure. But we will keep improving it. And I think we do identify in the future but opportunities by refinancing the facility, we can achieve a better cost profile, we could further improve the financing structure.

Let's move on to the topic of some of the elements the income statement that are coming through. And I'll link a few questions here. There's one that's observing that the difference between the apparent EBITDA and net income for the reported 2025 period from Kestrel and an extension of that or a variation on that is the price to earnings ratio relative to the EV-to-EBITDA multiples that we did carry in the presentation pack. What can we say about that past performance in 2025? And any future outlook for earnings, EBITDA multiples going forward. Kevin, I think I'll turn to you again for this one.

Thanks, Brendan. First of all, the valuation is very complex from a complete future [indiscernible] we probably will not look at this whole acquisition valuation from a PE perspective, but we probably look at EBITDA results multiple. And we also need to case the local mining is 25 years. And then another reason why probably it's not the fast idea to refer to 2025 EBITDA or PBT as there are a lot of reason for the 2025 profit at a lower point such as very relatively low average coal price. They do have some impact from a costing perspective. We know there's some normal items in 2025. Also, they had some sales volume issue as well. As a result without the intention to put elaborating, we do feel we need to have more capacity valuation methodology along this number.

Thank you, Kevin. Desmond, could I come back to you to check for the phone line, please?

We do have a question from the line of Peter Wang of CICC. Peter, your line is open. You can go ahead.

So most of the questions have already been addressed by the company. So I would just like to follow up with 2 more questions. Firstly, regarding financials of the Kestrel mine itself, what was the ASP for the mine in 2025 and the cash cost in royalties, what would that be?

Peter, I caught the first part of the question, you were asking about the achieved sales price in 2025 for Kestrel. I Missed the second part of the question. Could you repeat that part, please?

Yes. And then what about the cash costs including royalties? Cash costs, including royalties.

Okay. So we do have that the free on board cash costs, that's mentioned in the slide pack at 147. As free on board. The royalties would be calculated on that Queensland royalty structure, which is tiered. I don't have that number at hand. But if we do have a comment on the achieved sale price, then someone will be able to back calculate it outside the call. But I'll just look to anyone. Do we have the achieved sale price?

USD 145 per tonne. USD 145 per tonne in 2025 was the achieved sale price.

I see. That's the branded ASP, right?

That's right. What we would refer to as the ASP.

Yes. Okay, I see. So I will just move to my second question. Do you have any plans to expand the production level at Kestrel or you would just continue to maintain the production at around $6 million.

Okay. The question is production expansion beyond the current run rate of 6 million tonnes on a 100% basis of salable products. Sharif will hand to you.

Yes, our intention is to run the asset as it has been run at that indicative production level. Having said that, once we have operational control, we'll always look for opportunities a further improvement.

I appreciate there are people who have lodged questions concurrently. So there is some overlap and some that have already been addressed, looking at debt facilities and tenure that's been covered. There's another question on the debt. It notes we raised the debt in U.S. dollars. Was there any consideration to alternate currencies such as an RMB borrowing strategy. [indiscernible] an example of that was provided by the person asking the question?

Thanks, Brendan. Yancoal is very open for all sort of financing options as [indiscernible] mentioned, and including RMB the facility, which we have very strong relationship with many Chinese banks to achieve a lower interest rate. As the question just mentioned. However, it's -- it's slightly more complicated topic as involve hygiene, bunching risk, which need to be also catered in total.

Thank you, Kevin. We've touched on the cash-free, debt-free basis. Looking at the operational aspect of the mine. There's a question about the current mining leases development licenses, environmental approvals and so on, asking for some sort of comment on time line and renewal processes mindful that we've talked about the 25-year mine life and looking for some context press to turn to Sharif initially and then move to more detailed observations. Yes.

Thanks. So I think the first I'll make here relates to the Kestrel West approvals, which are being progressed well by the site team sufficient time frame to approve -- to obtain these approvals Head of commencement of Mining and Kestrel West and this is scheduled for the early 2030s. And we'll obviously provide an update to the market as when 1 is available when we have operational control.

Yes. With regards to especially MDL 182, yes, they are -- those tenements, although it comes up for renewal, that work currently ongoing, and that application needs to go in the next month to be in time for the required 6 months before the expiry. But other than that, there's no other issues on the deals.

But I think it's fair to say all of these would be seen as business as normal processes to work through. The reserves underpin the mine life, the mining license covers the reserve that sits in the allocated region. So let's move on to the next question. The Mitsui is preemptive rights, we've touched on that earlier. And something of a more technical nature with regards to the current longwall panels, the future on more panels. There's a reference to currently mining in the 500 series, moving to the 600 or 700 series some years into the future. Do we have any knowledge or comment on bolt depth coal-mining aspects on productivity and whether that links through to a view on yield in past periods compared to the future periods.

Yes. Again, Brendan, I'd point you to Appendix 3 of the market release the competent person's report, and there's certainly sufficient detail within that, I believe, than most of those questions.

If I can add on to that, he's as far as the due diligence work, we do assess all these areas. We have seized the faults to work has gone in the integrity and the confidence of it. So all of that has been assessed as part of the due diligence.

Thanks very much. Looking at the price realization and the benchmarks we referenced, the reference in the materials, the Platts premium low-vol hard coking coal benchmark what relatively. What relativities are assumed in the contingent consideration modeling. We do have a footnote in the announcement that provides an example. But Kevin, perhaps if you could just reiterate that example of how the contingent cash consideration could be calculated?

Yes. Basically, when the average sell price with the index part of oil index price about 2025 on annual basis, annual basis, then we will, based on the relativity and to properly share 30% of the revenue. However, better reactivity as whether we have announced on Page 3. The footnote 10, we have example how this calculation will be done and we quoted I realize the pricing relativity is 85%, which is only indicated only, and this may vary depends on the future production conditions.

Thank you, Kevin. There is a question of a similar nature. It's identifying that the coal quality in Kestrel priced against that benchmark is somewhat different and the price realization of the discount achieved. That's what we've been talking about in the past periods. It's generally been about the 85%, but that would vary at times depending on market conditions. I think that's a reasonable duration. Is there anything additional you make on that? Getting head checks around the table. Another question on net debt, which we've covered. Going back to some higher-level topics of conversation. We touched earlier on about capital management and use of the balance sheet, having positioned ourselves to acquire the Kestrel mine. What is Yancoal thinking about future growth opportunities M&A scenarios and what the company might or might not pursue in forward periods. Sharif, I will turn to you for a comment on how we might think about growth beyond this opportunity that we've positioned ourselves for?

I think with regards to other M&A activity, I don't comment on market speculation. Our focus at the moment is on executing announced acquisition of Kestrel. There is potential for mine life extension and regional upside of Kestrel, including progression in traditional mining areas and broader opportunities within the surrounding but we will assess and look at those opportunities over the course of time.

Thanks, Sharif. And another high-level question. Looking at the capital structure of the business. We've talked about the potential for refinancing or restructuring the balance sheet earlier, Kevin, is there any scenario where the free float of Yancoal could be increased and if so, how might that play out?

Yes, that's a very good question. We have been looking into any potential options could further improve Yancoal's free flow, but it is largely depends on 2 major shareholders, which is Yancoal Energy [indiscernible] who have been holding about 70% of Yancoal shares and it will need for them to dispose in the market. And also, there's some other potential equity raising opportunity could further improve the freight food, but this is going to be considered in due course at a later stage.

Let's look to the coal markets now. I'll come to you, Mark, sale our EGM, Marketing and Logistics, who joins us online. One of the questions we have coming through, Mark, is what is the company's view on the future coal price and demand from Asia? And then I'll extend to some additional comments about the Kestrel products. But Mark, if I could turn to you in the first instance, a comment on the company's broad view on the future of the price for coal and demand in Asia.

Sure. Sure. Thanks, Brendan. Sorry, I'm just remote I have some feedback. No, confirming the ecology is coming through well. From a hard coking coal point of view, as Slide 13 shows, there's a deficit of supply going into the -- and that's one of the attractions of increasing our exposure to hard coking coal. That market will continue to grow. As you can see, the growth -- also on Slide 13, with the growth of India and Southeast Asia. If you look at typical supply demand dynamics, if there's a shortage of supply with increased demand, that should see strong prices moving forward. So naturally, any forward price assumptions are based on a lot of analysis and we use our independent forecasters to help us and assist us informing our forward pricing views, which, of course, we can't necessarily disclose market mix, again, it will expose Yancoal to agree to market in India. Currently, our exposure is only around 3% to 4% of our sales currently are into India, whereas the cash low profile will increase that exposure into the growing Indian market.

Thanks, Mark. That leads into the -- another question, which talks about the market breakdown of Kestrel. We can see that we've provided that pie chart in the presentation pack on Slide 13. India at just over 30% being the largest single destination. And then North Asia, where we already have existing customer relationships. One question we have on the product and the Link the customer breakdown is with Mitsui as the 20% partner, how does that work in terms of the offtake from the production volumes, the marketing rights what are we able to say about the product split and how it enters the market and who influences or where it goes?

Thanks, Brendan. Look, I can't really comment on Mitsui's position at the moment because naturally, a lot of the more commercial confidential information will only become available to us now. But I understand Mitsui has a very cooperative relationship with the markets, especially in Japan. They don't actually have an offtake per se as we understand currently but we will be working very closely with Mitsui to develop those markets. In relation to the broader marketing mix, a lot of the Japan, Korea, Taiwan steel mills are existing customers of the Yancoal portfolio. And so we already have strong relationships with those customers.

Sorry, I got you going. So I was just wondering, did that answer the question?

Yes, I think that was rate satisfactory. Thank you. I appreciate we've got 10 minutes left to the scheduled termination of the webcast. Small come back to you just to check if we have any more questions coming through on the phone lines. And if not, I'll use the final 10 minutes to continue with webcast questions. Any final on place.

No questions at this line. Please continue.

Thank you. Looking at some of the operational questions in detail. There was an observation that there may have been some past production issues at the Kestrel mine are looking for some comment or clarity on what may have occurred in the past, the current situation and how Yancoal would intend to operate the mine once it becomes the operational control entity.

Thanks, Brandon. I think this probably refers to the friction emission event in December of 2024 which Kestrel had on Longwall 501 when the share of mandate contacts to semen and ignited a small popular mean at the coal face, resulting in production interruption for about 3 weeks. But the operation was safely and successfully returned to a steady state thereafter. This was certainly one of the key areas of technical due diligence for us. We spent a lot of time building our understanding of operating procedures and the geology and the gassiness of the resource, et cetera. So we're quite confident with our technical expertise and experience regarding that aspect of the cash flow line.

Pulling that through revisiting that topic of CapEx. We talked about the total spend over the past several years. In the context of CapEx going forward, we'll assess that in the future at as we note that the CapEx has been -- the asset has been well capitalized, and we certainly don't see it needing undue CapEx in the short term.

Thanks, Brendan the coal handling preparation plant had significant capital investment as has the longwall and the second set of longwall equipment in addition to gas drainage activities in the current mining areas.

Okay. There are several questions coming through that are financial in nature. So Kevin, I'll look to view for some of these questions. With regards to the cash contingent component, the USD 550 million we have identified, is there any inflation adjustment. Does the $225 million average price reflect the operational cost inflation? And is there anything that -- or any nuances that we need to be aware of with that cash contingent calculation.

The $550 million contingent payment is not an inflation adjusted -- the USD 225 per ton average price is the [indiscernible] to be used for calculation.

Thanks, Kevin. On Slide 14, we present the EBITDA over the past 5 years. There's a question asking what would the free cash flow have been after CapEx. Do we have the details at hand to provide a response to that?

We do have the free cash flow post CapEx but we have a lot of numbers. So I'm happy to discuss, for example, in APAC [indiscernible] and 2024 is 192, and 2025 post CapEx is 124.

Thanks, Kevin. So obviously, linking to the EBITDA profile, we can see on Slide 14. There are those coal price cycles working through for cash flow, much the same way as we've seen for the Yancoal portfolio over a similar time frame, the expansion and contraction of EBITDA and free cash flow with the coal price cycle. We've got another question here. The mine profits on a 100% basis identified as being USD 26 million in 2025 in U.S., call it, $14 million in 2024. What can we say about the profitability in past years? And how we viewed the asset acquisition and the value opportunity for Yancoal going forward.

Sure. Thanks Brendan. As I mentioned earlier, [indiscernible] 2025 example. We appreciate the profit in 2025 was unfortunately low but it's due to quite a few reasons we have already identified. First of all, the mining driver was very low average sales price. As I mentioned, ASP was USD 145 to come comparatively much lower than the previous one. And also, during the year, we also understand due to the friction ignition accidents, what the shaft just mentioned. They also have an internal mix product mix change as a result of the higher semi compared with the coking coal proportion. And due to the whole to manage the issue and also they need putting all the cooling cost and also carbon tax and plus due to the initial events and they have -- they use the production. And then also the sales as a result, we have much lower sales. That's about 5. 4 million shipment versus 8.2 million [indiscernible] So there's a lot of reason to just unfortunately contributed to a lower profit in 2025, and that's exactly what I have been considering in the valuation more make sure in the future, we test all these different drivers from a valuation perspective.

Yes. Thank you, Kevin. A few people have asked a similar question. Curious to know if we can provide the identity or the breakdown of the lenders for the debt facility. You mentioned earlier, it's that commercial and confidence terms. I don't know if we're in a position to disclose that.

We are not able to disclose the identity of the bets. But one thing we could disclose is after completion in our annual costs, there will be an average funding cost, which is a standard discount by then, you could see the average funding cost.

Coming back to that concept of completion, we've targeted completion by the end of third quarter of this calendar year. Are there any specific undertakings or conditions that Yancoal anticipates from FIRB regarding the ownership structure? Any other conditions that might be relevant to reaching completion as planned. perhaps share in the first instance for a view on the completion date and the requirements finish, but if you want to make?

Thanks, Brendan. Yes, look, we've nominated our completion date, and we'll obviously be working towards that. With regards to the Fed, I'm not going to comment on any anticipated conditions that may or may not eventuate in that regard. What I would say is if you look at the history of Yancoal, we have a very strong track record of merger and acquisition, and I'm confident that we will be in a strong position to obtain these approvals moving forward.

I appreciate we're right on the 12:00 cut-off mark. I can see there are several more questions coming through. I apologize that we've not necessarily covered off each and every question that the participants have had, but I am available that the team is available. Please reach out through the e-mail channel in the first instance, and we will follow up with any unresolved questions that exist. But if Sharif, I could hand over to you to provide the closing remarks, and we'll move to conclude the call on time shortly.

Thanks, Brendan. As I said at the start of the call, I thank you all for joining us on limited notice to hear about the acquisition and what it will mean for Yancoal. We strongly believe cash flow is a high quality and attractive acquisition that will deliver on Yancoal's value-adding growth aspirations and positions the business to deliver strong performance and shareholder returns in the future. We look forward to working closely with the current owners, EMR and Adaro through the coming months to reach transaction completion. Kestrel is a well-run, high-quality mine with a strong team. We also look forward to welcoming the cash for team to Yancoal and working collaboratively with them, our new joint venture partner, Mitsui as well as local stakeholders and communities. We see this acquisition as another great step forward for the business. The release of our first quarter production report is set to the 20th of April. We'll have another opportunity to speak to you next week during the webcast for that report on the 21. Thank you, and have a great day.

Thanks, everyone, for participating. Desmond, could you please conclude the call?

Thank you. That concludes today's conference call. Thank you all for participating. You may now disconnect your lines.