Whitehaven Coal Limited · ASX:WHC
Whitehaven Coal — FY2019 Earnings Presentation
56 slides from Whitehaven Coal's earnings presentation, Aug 15, 2019
Slide 1: Full Year Results FY2019
Full Year Results FY2019 15 August 2019
Slide 2: Disclosure
Disclosure STATEMENTS CONTAINED IN THIS MATERIAL, PARTICULARLY THOSE REGARDING THE POSSIBLE OR ASSUMED FUTURE PERFORMANCE, COSTS, DIVIDENDS, RETURNS, PRODUCTION LEVELS OR RATES, PRICES, RESERVES, POTENTIAL GROWTH OF WHITEHAVEN COAL LIMITED, INDUSTRY GROWTH OR OTHER TREND PROJECTIONS AND ANY ESTIMATE
Slide 3: Agenda
Agenda Highlights Safety Financial Performance Guidance & Growth Operations ESG & Community Outlook for Coal Summary
Slide 4: Highlights
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Slide 5: Highlights
Highlights Record EBITDA, NPAT, Dividends and ROM coal production • TRIFR of 6.16 at 30 June, 11% below the previous year and below the NSW average • Record equity ROM coal production of 18.4Mt, up 4% YOY • Equity sales including purchased coal of 17.6Mt, up 2% YOY • Record Underlying EBITDA and NPA
Slide 6: Safety performance
Safety performance Improvement continuing Safety (TRIFR) and Production (ROM Mt) 25 • Safety as measured by the TRIFR continued to improve over the year 20 • Whitehaven recorded a TRIFR of 6.16 at the end of the year compared to 6.91 at the 15 end of the previous year 10 • Safety is always a key foc
Slide 7: Financial performance
Financial performance
Slide 8: Financial highlights – Record profit
Financial highlights – Record profit Profit and Loss FY2019 FY2018* Comment Net profit after tax before significant items ($’m) 564.9 524.5 Increase of 8% Underlying EBITDA ($’m) 1,041.7 1,011.9 Increase of 3% Cash generated from operations ($’m) 964.1 925.9 Strong conversion to cash Dividends (cps)
Slide 9: Record full year result
Record full year result Financial Performance – A$ millions FY2019 FY2018* Revenue 2,487.9 2,257.4 Other income 3.9 6.8 Operating expenses (905.0) (767.2) Rail, Port, Marketing and Royalties (508.9) (457.3) Admin and other expenses (including net FX gain/loss) (36.2) (27.8) Underlying EBITDA 1,041.7
Slide 10: Margins and costs
Margins and costs Margins increased due to higher realised premiums on thermal coal FY2019 FY2018 • Realised thermal and metallurgical coal prices Coal Sales (equity basis, excluding Mt 15.6 16.0 averaged US$100/t and US$119/t respectively in purchased coal) FY2019 compared to US$98/t and US$119/t i
Slide 11: Cost discussion
Cost discussion Cost increases due to a number of factors Strategic factors (~ $2/t) • Introduction of the three product strategy resulting in increased washing and lower yields relative to the prior year at Maules Creek and increased haulage and processing from the Gunnedah open cuts Structural fac
Slide 12: Balance sheet
Balance sheet In good shape for the coming growth phase while continuing shareholder returns 30 June 2019 30 June 2018 $’m $’m Cash on hand 119.5 111.8 Strong balance sheet supporting a sustainable capital allocation framework Senior secured bank facility (drawn) 160.0 275.0 ECA** and leases 135.8 1
Slide 13: Most free cash flow returned to shareholders
Most free cash flow returned to shareholders FY2019 free cash flow $916m Debt Lease Dividends Investing Retirement payments Other $496m $194m $127m $93m $6m • Total FY2019 • Includes $47m • Senior debt dividends of sustaining capex and ECA net 50cps and $31m for repayments Narrabri mains • Includes
Slide 14: Shareholders distributions
Shareholders distributions Returning excess cash to shareholders over the past two years 297.6 1,090.9 198.4 • Shareholders being rewarded with capital returns and dividends 267.5 • Total returns to shareholders amount to ~ $1.1 billion in two years 129.0 198.4 • Payout ratios of 95% in FY2019 and 7
Slide 15: Guidance for FY2020
Guidance for FY2020
Slide 16: FY2020 production & cost guidance
FY2020 production & cost guidance Key Elements Range Comments Production & Sales (Whitehaven Managed) ROM Coal Production Mt 22.0 - 23.5 Production weighted to second half (H2 60%) Maules Creek Mt 12.0 - 12.5 Narrabri Mt 6.0 - 6.5 Longwall changeout scheduled for the December 2019 quarter Gunnedah O
Slide 17: FY2020 capital guidance
FY2020 capital guidance Spending on new projects underpinning next phase of growth Key Elements Range Comments Sustaining Capital $m’s 55 - 63 Narrabri Mains Development $m’s 22 - 26 Current Narrabri mains development completed in FY2021 Expansion & Growth Capital Operating Mine Projects $m’s 50 - 5
Slide 18: Growth
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Slide 19: Whitehaven Coal value enhancement programme
Whitehaven Coal value enhancement programme Vickery Project approved Tarrawonga Vickery construction operating at completed Winchester South Vickery EIS Lodged 3.0Mtpa ROM first coal Rocglen Closes Coal First open cut coal at Vickery FY19 FY20 FY21 FY22 FY23 FY24 AHS demonstration Maules Creek comme
Slide 20: Whitehaven production profile
Whitehaven production profile Strong growth profile from expansions and new mines Whitehaven Saleable Coal Production Profile (Mt) • Vickery production to ramp up from 40 35 late FY2022 and Winchester South still 30 in ramp up phase in FY2027 25 • Low cost expansion production from Maules Creek and
Slide 21: Current operating mine expansions
Current operating mine expansions Significant expansion potential at current operations Project Current Status & Outlook Tarrawonga Expansion to 3.0Mtpa ROM Coal Mining equipment has begun to arrive on site. Work on upgrading mine infrastructure has commenced. All equipment expected to be operating
Slide 22: Indicative Vickery project timeline
Indicative Vickery project timeline Project Construction IPC Public Hearing Commences Construction EIS Lodged with Project Approval Completed First coal H2 FY21 DoPE Granted First Coal Railed from site FY19 FY20 FY21 FY22 FY23 FY24 Note: The forecasts on the time line are based on current knowledge
Slide 23: Vickery update
Year 7 Mine Plan Vickery update Whitehaven’s next mine • EIS lodged in August 2018 for a 10Mtpa ROM coal mine • Independent Planning Commission (IPC) formed with public hearings held in February 2019 • IPC released Issues Report in April 2019 • Whitehaven expects to respond to the matters raised in
Slide 24: Indicative Winchester South project timeline
Indicative Winchester South project timeline Large core drilling Inaugural JORC programme Reserves Primary approval Submit EIS achieved First coal mined Final from open cut instalment paid (US $50m) FY19 FY20 FY21 FY22 FY23 FY24 FY25 Project achieves co- ML application Construction commences Constru
Slide 25: Winchester project update
Winchester project update High quality met coal asset Morvale • JORC Coal Resources released in October 2018 (530Mt) • Large diameter core drilling programme for coal quality Poitrel Daunia assessment completed in June 2019 • Data collection for EIS ongoing • The project was declared a Coordinated P
Slide 26: Operations
Operations
Slide 27: Coal sales
Coal sales Stable sales before next growth phase Equity Coal Sales - 000t FY2019 FY2018 Change Whitehaven Managed Coal Sales (Mt) 25.0 Maules Creek 6,982 7,231 (3%) 20.0 Narrabri 3,994 4,032 (1%) Gunnedah Open Cuts* 5,040 4,846 4% 15.0 Coal Trading 1,615 1,256 29% 10.0 Whitehaven Total 17,631 17,365
Slide 28: Sales to premium markets
Sales to premium markets Most sales to premium markets in Asia Thermal Coal Sales FY2019 Metallurgical Coal Sales FY2019 7% 5% 5% Japan 8% India Korea Korea Taiwan 12% Japan Malaysia 40% 11% Vietnam Indonesia China Other SE Asia 59% Other New Caledonia Taiwan India 14% Other 13% 16% • Managed coal s
Slide 29: ROM coal production
ROM coal production A platform for strong growth Equity ROM Prod - 000t FY2019 FY2018 Change Whitehaven Managed ROM Coal Production (Mt) 25.0 Maules Creek 8,790 8,215 7% Narrabri 4,513 4,402 3% 20.0 Gunnedah Open Cuts 5,055 5,110 (11%) 15.0 Whitehaven Total 18,358 17,727 10.0 5.0 - FY 2015 FY2016 FY
Slide 30: Maules Creek
Maules Creek Planning for autonomous haulage and expansion Maules Creek ROM Coal Production (Mt) • Record ROM coal production of 11.7Mt as the mine 14.0 continued to ramp up to its approved production rate of 13Mtpa ROM coal 12.0 • Revised marketing strategy leading to more coal washing 10.0 and an
Slide 31: Narrabri
Narrabri One of the most productive underground mines in Australia Narrabri ROM Coal Production (Mt) • A strong final quarter lifted ROM coal production to 9.0 6.4Mt, above the revised guidance range for the year 8.0 • New higher capacity hydraulic cylinders to be installed 7.0 at the next longwall
Slide 32: Gunnedah open cuts
Gunnedah open cuts Equipment for Tarrawonga expansion arriving at the mine Gunnedah Open Cuts ROM Coal Production (Mt) 7.0 • ROM coal production for the Gunnedah Open Cuts 6.0 including Sunnyside was 5.1Mt for the year 5.0 • Lower production was due to Rocglen coming to a close and planned lower pro
Slide 33: ESG & Community
ESG & Community
Slide 34: Our community and social engagement is key to our success
Our community and social engagement is key to our success Leave a social and economic legacy that outlives mining operations Instil community trust and build recognition through Long-life well-defined community projects mean partnerships Promote local and responsible we help ensure economic growth e
Slide 35: Whitehaven is viewed positively in the region where we operate
Whitehaven is viewed positively in the region where we operate 95% 94% 95% Awareness of WHC 13% Very positive 15% 17% Whitehaven’s reputation in Somewhat positive the Gunnedah, Narrabri, 26% 29% 27% Neutral Tamworth and Liverpool Somewhat negative Plains Local Government +2% +14% +16% 20% Areas cont
Slide 36: We help bring about positive change for Indigenous communities
We help bring about positive change for Indigenous communities We partner with Indigenous people connected to the land where we operate to create a stronger future, together. Our commitment, outlined in our Reconciliation Action Plan, aims to help address issues affecting local Indigenous 12% $22.5m
Slide 37: Outlook for coal
Outlook for coal
Slide 38: IEA New Policy Scenario (NPS)
IEA New Policy Scenario (NPS) World Primary Energy Demand NPS (Mtoe) 18,000 16,000 14,000 • Under the NPS, the IEA projects that world primary energy demand increases by 27% 12,000 in the period from 2017 to 2040 10,000 • Absolute coal demand will increase by about 8,000 2% over the period but coal’
Slide 39: Recent world energy consumption
Recent world energy consumption Primary energy consumption grew by 2.9% in 2018 World Primary Energy Consumption (Mtoe) 2018 Energy Consumption by Fuel 14,000 4% 7% 13,500 4% 34% 13,000 Oil Natural Gas 12,500 Coal Nuclear 12,000 Hydro 27% Renewables 11,500 11,000 24% 2010 2011 2012 2013 2014 2015 20
Slide 40: Global share of electricity generation
Global share of electricity generation IEA projects that coal remains the largest source of electricity in 2040 World Share of Electricity Generation (NPS) 100% • Recent data released by the IEA and the UN indicates that 80% countries are falling behind with their Paris commitments 60% • Under the I
Slide 41: Why the growth in Asia?
Why the growth in Asia? Increasing per capita consumption to drive higher electricity demand Electricity Consumption per Capita 2017 (kWh) Southeast Asia Electricity Generation – IEA NPS 9000 (TWh) Developed 2,500 8000 7000 2,000 6000 Developing 1,500 5000 4000 1,000 3000 500 2000 1000 - 2017 2025 2
Slide 42: The year ahead
The year ahead
Slide 43: Focus for FY2020
Focus for FY2020 Progress growth options and improve operational outcomes • Focus on cost reduction and business improvement at all operations • Progress the growth options at Maules Creek and Narrabri • Obtain approval for the Vickery project • Resolve the potential sell down and formation of a joi
Slide 44: Thank you
Thank you www.whitehavencoal.com.au
Slide 45: Appendices
Appendices
Slide 46: Coal Resources
Whitehaven Coal Limited – Coal Resources – August 2019 Measured Indicated Measured + Inferred Competent Report Coal Tenement Resource Resource Indicated Resource Person Date (A) (B) (A + B) (C) CL375 AUTH346 Maules Creek Opencut* 382 174 556 44 1 Mar-19 ML1701 ML1719 Resources Narrabri North Undergr
Slide 47: Coal Reserves
Coal Reserves Whitehaven Coal Limited – Coal Reserves – August 2019 Recoverable Reserves Marketable Reserves Competent Report Tenement Proved Probable Total Proved Probable Total Person Date Maules Creek Opencut* CL375 AUTH346 340 120 460 310 100 410 1 Mar-19 Narrabri North Underground** ML1609 102
Slide 48: Financial reconciliation
Financial reconciliation Underlying result to Statutory result Financial Performance – A$ millions FY2019 Significant FY2019 Underlying items Reported Revenue 2,487.9 - 2,487.9 Other income 3.9 - 3.9 Operating expenses (694.3) (40.5) 1 (734.8) Coal purchases (210.7) - (210.7) Rail, Port, Marketing a
Slide 49: IFRS 16 Leases
IFRS 16 Leases Background • WHC has adopted IFRS 16 Leases from 1 July 2018 and restated comparative periods • The new standard requires operating leases and some rental arrangements to be brought onto the balance sheet as a ‘lease’ liability and right of use asset, effectively aligning the treatmen
Slide 50: IFRS 16 Leases
IFRS 16 Leases Impact of adoption on FY2019 profit or loss Financial Performance – A$ millions FY2019 excl IFRS 16 IFRS 16 $/t FY2019 IFRS 16 impact impact* as reported Revenue 2,487.9 - - 2,487.9 Other income 3.9 - - 3.9 Operating expenses (980.4) 75.4 $4.80 (905.0) Rail, Port, Marketing and Royalt
Slide 51: IFRS 16 Leases
IFRS 16 Leases Impact of adoption on FY2018 profit or loss Financial Performance – A$ millions FY2018 IFRS 16 IFRS 16 $/t FY2018 adjustments impact* Restated Revenue 2,257.4 - - 2,257.4 Other income 6.8 - - 6.8 Operating expenses (839.1) 71.9 $4.50 (767.2) Rail, Port, Marketing and Royalties (457.3)
Slide 52: Where we operate
Where we operate Whitehaven is the largest independent producer of high CV coal in Australia • The recent acquisition of the Winchester South project in Queensland increases exposure to met coal 52
Slide 53: Mine summary data
Mine summary data Key Attributes Maules Creek Open Cut Narrabri Underground Ownership WHC 75%, Itochu 15%, J Power 10% WHC 70%, J Power 7.5% 3 others each with 7.5% JORC Resources 600Mt 636Mt JORC Reserves Marketable Proved & Probable 410Mt Marketable Proved & Probable 216Mt Estimated LOM >35 Years
Slide 54: Mine summary data
Mine summary data Key Attributes Tarrawonga Open Cut Werris Creek Open Cut Ownership WHC 100% WHC 100% JORC Resources 68Mt 13Mt JORC Reserves Marketable Proved & Probable 30Mt Marketable Proved & Probable 10Mt Estimated LOM ~10 Years ~6 years Approved ROM Production (Mtpa) 3.0Mt 2.5Mt Strip Ratio 10
Slide 55: Mine summary data
Mine summary data Key Attributes Rocglen Open Cut Sunnyside Open Cut Ownership WHC 100% WHC 100% JORC Resources 6Mt Minor Remnant Coal JORC Reserves Marketable Proved & Probable 0Mt Minor Remnant Coal Estimated LOM Production ends June 2019 Rehab Project Approved ROM Production (Mtpa) 1.5Mt 0.5Mt St
Slide 56: Mine summary data
Mine summary data Key Attributes Vickery Open Cut Project Winchester South Open Cut Project Ownership WHC 100%, may form a JV by selling up to 30% WHC 100% JORC Resources 505Mt 530Mt JORC Reserves Marketable Proved & Probable 178Mt Reserves yet to be released Estimated LOM ~20 years >20years possibl