Whitehaven Coal Limited · ASX:WHC
Whitehaven Coal — FY2020 Earnings Presentation
51 slides from Whitehaven Coal's earnings presentation, Aug 26, 2020
Slide 1: ASX Announcement: FY20 Results Presentation
ASX ANNOUNCEMENT 26 August 2020 FY20 Results Presentation Attached is Whitehaven Coal Limited’s FY20 Results Presentation Yours Faithfully, Timothy Burt General Counsel & Company Secretary Authorised for release by the Board of Whitehaven Coal Limited Whitehaven Coal Limited ABN 68 124 425 396 Level
Slide 2: FY2020 Full Year Results Presentation
FY2020 Full Year Results Presentation 26 August 2020
Slide 3: Disclosure
Disclosure FORWARD LOOKING STATEMENTS 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 P
Slide 4: Contents
Contents Whitehaven’s markets FY20 Results FY21 Outlook Appendices 3
Slide 5: Whitehaven's markets
Whitehaven’s markets
Slide 6: Whitehaven's customer base is in Asia
Whitehaven’s customer base is in Asia 4 18 Japan • Whitehaven’s coal products are exported to Asia 2 6 Korea 1 2 Taiwan • Our coal products are used: India 2 - 1 1 Vietnam 1. In high efficiency, - 1 Philippines low emission (HELE) Malaysia - 1 electricity generation Indonesia 1 - 2. to make steel an
Slide 7: The future of coal in Asia
The future of coal in Asia Continuing demand for high quality coal Seaborne thermal coal demand Asia ex-China (Mt) “Coal demand in Southeast Asia is forecast to grow by more than 5% per year through 2024, led by Indonesia 500 and Vietnam. The region’s strong economic growth will drive electricity an
Slide 8: Our business has a strong future
Our business has a strong future High quality product portfolio aligned to forecast demand in nearby markets • Our strategy is to own and operate large, lower cost mines, We exist in a supportive policy and producing a mix of high quality thermal and metallurgical coal. regulatory environment • One
Slide 9: COVID-19 impacts
COVID-19 impacts Impact has been on coal prices • Whitehaven has not recorded any cases of COVID-19 among our workforce. Our location in regional NSW is a benefit. Our mines have continued to operate largely unaffected by COVID-19. Total ‘direct’ cost ~$1m • gC Newcastle thermal coal pricing headwin
Slide 10: FY20 Results
FY20 Results
Slide 11: FY20 operational and financial highlights
FY20 operational and financial highlights Production Safety Vickery Earnings Liquidity $1bn Senior 20.6Mt 4.13 TRIFR1 Expansion Project $306m $468.8m Debt Facility managed ROM a company IPC approval EBITDA refinanced to production record received July 2023 1 Total recordable injury frequency rate (T
Slide 12: Record safety performance
Record safety performance Safety is always a key focus for us • Record safety performance – Whitehaven recorded a TRIFR of 4.13 as at 30 June 2020 25 20 20.6 ROM coal production (Mt) 15 and TRIFR 10 5 4.13 0 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 ROM coal production (Mt) Total R
Slide 13: Environmental management
Environmental management Rehabilitation in progress During FY20, we undertook significant rehabilitation and offset-related work, Sunnyside July 2018 Sunnyside August 2020 including: • rehabilitating 103 hectares of land • planting 106,917 trees in offset areas • revegetating 1,709 hectares of land
Slide 14: Local communities increasingly view us positively
Local communities increasingly view us positively Drivers of the statistically significant increase in positive, and decrease in Local community sentiment towards Whitehaven Coal negative, sentiment include growing community recognition of: 60 • Local employment – 75% of the 50 workforce living arou
Slide 15: ROM coal production and sales
ROM coal production and sales FY20 ROM production impacted FY20 Sales supported by stock by operational challenges draw downs and coal trading Whitehaven Managed ROM Coal Production (Mt) Whitehaven Managed Coal Sales (Mt) 14.0 13.1 14.0 12.2 12.2 11.7 11.8 12.0 11.2 11.2 12.0 11.4 10.9 11.0 10.8 0.7
Slide 16: Premium product sales into premium markets
Premium product sales into premium markets • We produce and sell high quality coal products into premium Asian markets • Managed coal sales, including purchased coal, were 20.2Mt1 for the year (17.2Mt thermal and 3.0Mt metallurgical) • Sales into the growth markets of South East Asia2 accounted for
Slide 17: Maules Creek
Maules Creek • For FY20 managed ROM production was down 8% at Managed ROM Coal Production (Mt) 10.7Mt vs pcp of 11.7Mt • During the year, Maules Creek operations were impacted by the previously reported labour shortages, and dust and smoke events associated with drought conditions and 10.7 regional
Slide 18: Maules Creek geological X-section
Maules Creek geological X-section N FY21 FY22 HERNDALE (2%) ONAVALE (2%) TESTON’S (5%) THORNFIELD (2%) FY20 BRAYMONT (25%) JERALONG’S (10%) MERRIOWN (11%) VELYAMA (7%) NAGERO (7%) BASEMENT VOLCANICS NORTHAM’S (10%) THERRIBRI’S (9%) FLIXTON (3%) TARRAWONGA (5%) TEMPLEMORE (2%) A (%) Percentage of res
Slide 19: Narrabri
Narrabri Managed ROM Coal Production (Mt) • For FY20 managed ROM production was down 5% at 6.1Mt vs pcp of 6.4Mt • In April Narrabri recorded 1.0Mt ROM production – the second time in its history that it has recorded a million 6.1 tonne month • Q2 FY20, 8 week longwall change-out from LW108 to LW109
Slide 20: Gunnedah open cuts
Gunnedah open cuts • For FY20 managed ROM production was down Managed ROM Coal Production (Mt) 24% at 3.9Mt vs pcp of 5.1Mt as Rocglen entered into rehabilitation phase in the final weeks of FY2019 and Sunnyside entering into rehabilitation phase in August 2019 • For the continuing operations, Werri
Slide 21: Financial highlights
Financial highlights Earnings and cash generation impacted by softer coal prices Profit and Loss ($m) FY2020 FY2019 Comment Decrease in global COAL Newcastle Index price, SSCC Underlying EBITDA 306.0 1,041.7 prices, increased costs and decreased sales volumes Underlying net profit after tax (NPAT) 3
Slide 22: EBITDA
EBITDA • Lower USD coal prices in FY20 compared with FY19 were partially offset by a weaker Australian dollar • As a result of lower ROM production and the mine closure of Rocglen, sales volumes were 1.3mt below FY19 • Unit costs were higher in FY20 than FY19 – see following slide $m 1,200 Realised
Slide 23: Unit costs
Unit costs FY19 vs FY20 $/t 2.0 0.5 1.0 2.5 1.5 0.5 Short term or timing Medium to Long Term 75 67 FY19 Labour and skill Build of lower Under-utilisaton of Maules Creek Maules Creek Tarrawonga FY20 shortages at Maules cost inventory rail, port strip and haul yield strip ratio Creek & and overheads d
Slide 24: D&A and net financial expense
D&A and net financial expense FY20 Drivers Depreciation & amortisation $224.6m • Leased fleet amortisation: $16/t • Finance lease – straight line amortisation over asset life • Operating lease – straight line amortisation over lease term • Owned PP&E depreciation – combination of straight line over
Slide 25: Balance sheet and net debt
Balance sheet and net debt 30 Jun 2020 30 Jun 2019 Comments $m $m Cash on hand 106.8 119.5 ~$100m cash balance Senior secured bank facility (drawn) 638.0 160.0 $A1bn drawable facility maturing July 2023 Fully amortising facilities to fund Tarrawonga fleet and Narrabri ECA1 68.1 28.4 longwall Mobile
Slide 26: Financing
Financing Diversified sources of capital, no near term maturities & strong liquidity Senior debt facility ECA2 Finance leases Bank guarantees3 Liquidity as at 30 June $638.0m as at 30 June $68.1m as at 30 June $216.3m as at 30 June $454.3m as at 30 June $468.8m drawn • $1bn syndicated facility • Ten
Slide 27: Net debt bridge
Net debt bridge 56 312 52 788 216 136 (146) 298 162 Net Debt Lease strategy Restated Cash inflows Investing cash ECA Dividends paid Other Net Debt 30 June 2019 Net Debt from operations outflows 30 June 2020 26
Slide 28: EBITDA to operating cash flow
EBITDA to operating cash flow Annual (29) (26) (35) (22) (30) (14) Timing (5) 306 146 EBITDA Narrabri Overburden in Working capital Payments for Interest paid Income taxes Other Cash inflows development advance investment rehabilitation paid from Operations investment investment activities 27
Slide 29: Investing cash flows
Investing cash flows Investing in increasing production volume and operational resilience FY20 guidance $77m - $89m1 FY20 guidance $130m - $148m2 FY20 guidance USD17m Sustaining PP&E Growth Projects Acquisitions FY20 $62m FY20 $134m3 FY20 $20m • Water security – $19m • Sustaining capex $39m • Tarraw
Slide 30: Capital allocation
Capital allocation We balance prudent debt levels with providing returns to shareholders and investing to sustain and expand production Senior bank facility net of cash A$m 140 1,000 Strong thermal coal pricing – provided capital allocation optionality 900 120 gC Newc USD/t 800 100 700 80 600 500 60
Slide 31: Capital management
Capital management Maintaining a strong balance sheet is always Whitehaven’s priority Capital allocation Shareholder Debt Growth returns • Cost of debt • Dividends • NPV of project Considerations • Tenor • Buyback • ROCE • Structure • Franked vs • Greenfield vs • Liquidity unfranked Brownfield 30
Slide 32: Growth portfolio overview
Growth portfolio overview Whitehaven operates a growing business of long life mines Assets Approved Production1 LOM • Potential mine ramp up to 16Mtpa ROM with the roll out of AHS2, commencement Maules Creek 13Mtpa ROM >30 years Brownfield projects of in-pit dumping and 16Mtpa modification applicati
Slide 33: Vickery Extension Project
Vickery Extension Project 10Mtpa metallurgical and thermal coal open pit mine in NSW’s Gunnedah Basin • Approval from the Independent Planning Commission NSW received 12th August 2020 • Next steps • Federal approvals process • Secondary approvals and management plans • Final Investment Decision (FID
Slide 34: Winchester South
Winchester South Metallurgical open cut coal mine in Queensland’s Bowen Basin • A focus on project optimisation and approval • PFS Technical and Infrastructure studies well progressed • Maiden JORC Reserves by the end of 2020 • Draft EIS assessment by the end of 2020 • Strategic location in the Bowe
Slide 35: Narrabri Stage 3 expansion
Narrabri Stage 3 expansion Extending LOM to 2044 from 2031 • EIS studies completed, submission Q3 2020 • Engineering Studies further advanced • Ventilation & Gas management • Geotechnical • Conveyor Design • HV Power design • Coal Quality • Large Diameter boreholes complete • Confirmation of key coa
Slide 36: Corporate structure to deliver the strategy
Corporate structure to deliver the strategy Capabilities and resources to support growth of the business CEO EGM Company Corporate, Chief EGM EGM Health, EGM Secretary & EGM Project EGM People Government Financial Marketing & Safety & Operations General Delivery & Culture & Community Officer Logisti
Slide 37: Outlook
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Slide 38: FY2021 production, sales & cost guidance
FY2021 production, sales & cost guidance Key Elements FY20 actual FY21 range Comments Managed ROM Coal Production Mt 20.6 21.0 - 22.8 Weighted to the second half (H2 ~55%) Maules Creek Mt 10.7 11.3 - 12.0 Weighted to the second half (H2 60%) Narrabri Mt 6.1 6.0 - 6.7 Longwall change-out in the June
Slide 39: FY2021 capital expenditure guidance
FY2021 capital expenditure guidance Key Elements FY20 actual FY21 range Comments Sustaining Capital $m 39 30 - 35 Underground and open cut sustaining capital expenditures $m - 30 - 35 Major rebuilds previously funded in lease refinance Narrabri Mains Development $m 23 5 Remaining secondary support t
Slide 40: Focus for FY21
Focus for FY21 Improve operational outcomes and maintain a strong balance sheet • Operational compliance improvement • Operational focus - productivity and cost improvements (Project STRIVE) • AHS roll out at Maules Creek • Obtain Federal approvals for the Vickery Expansion project • Explore the pot
Slide 41: Appendices
Appendices
Slide 42: Where we operate today & in the future
Where we operate today….& in the future Gunnedah Basin, NSW and expanding into the Bowen Basin, QLD • Four mines in the Gunnedah Basin producing high energy thermal coal and metallurgical coal • Coal railed to Newcastle for export with access to two coal terminals • Vickery Extension project near ou
Slide 43: Mine summary data
Mine summary data Key Attributes Maules Creek Open Cut Narrabri Underground Ownership WHC 75%, Itochu 15%, J Power 10% WHC 77.5%, 3 JV partners each with 7.5% JORC Resources 590Mt 610Mt JORC Reserves Marketable Proved & Probable 400Mt Marketable Proved & Probable 212Mt Estimated LOM >30 Years >20 ye
Slide 44: Mine summary data
Mine summary data Key Attributes Tarrawonga Open Cut Werris Creek Open Cut Ownership WHC 100% WHC 100% JORC Resources 67Mt 10Mt JORC Reserves Marketable Proved & Probable 28Mt Marketable Proved & Probable 7.5Mt Estimated LOM ~10 Years ~6 years Approved ROM Production 3.0Mt 2.5Mt (Mtpa) Strip Ratio 1
Slide 45: 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 >20 years possib
Slide 46: Resources
Resources Whitehaven Coal Limited – Coal Resources – August 2020 Measured Resource Indicated Resource Measured + Indicated Inferred Resource Competent Report Tenement (A) (B) (A + B) (C) Person Date Maules Creek Opencut* CL375 AUTH346 ML1701 ML1719 372 174 546 44 1 Mar-20 Narrabri North Underground*
Slide 47: Reserves
Reserves Whitehaven Coal Limited – Coal Reserves – August 2020 Recoverable Marketable Competent Person Report Tenement Reserves Reserves Proved Probable Total Proved Probable Total Date Maules Creek CL375 AUTH346 330 120 450 300 100 400 1 Mar-20 Opencut* Narrabri North ML1609 97 5 102 93 4 98 2 Mar-
Slide 48: Profit and loss
Profit and loss Earnings impacted by softer coal prices Financial Performance – ($m) FY2020 FY2019 Revenue 1,721.6 2,487.9 Other income 3.5 3.9 Operating expenses (including purchased coal) (916.3) (905.0) Rail, Port, Marketing and Royalties (463.3) (508.9) Admin and other expenses (including net FX
Slide 49: Unit cost calculation
Unit cost calculation The unit cost is calculated off the face of the P&L. It includes operating expenses, selling & distribution expenses, administration expenses and share based payment expenses. Coal purchases, royalties, depreciation & amortisation, FX and significant items are excluded. For exa
Slide 50: Covenants
Covenants Strong banking relationships Three tests are required to be satisfied and evidence of their satisfaction is provided in the form of a Compliance Certificate1: Gearing – Net Debt /(Net Debt + Equity) Gearing test serves to cap secured lending Net Worth The net worth test aims to ensure that
Slide 51: Leasing conversion of mobile fleet now complete
Leasing conversion of mobile fleet now complete Conversion of mobile fleet from operating leases to finance leases • With the change in accounting standards (per IFRS 16) operating lease assets have been brought onto the balance sheet • Leased equipment is amortised, equipment is overhauled at inter