Whitehaven Coal Limited · ASX:WHC
Whitehaven Coal — H1 FY2020 Earnings Presentation
47 slides from Whitehaven Coal's earnings presentation, Feb 20, 2020
Slide 1: Half Year Results FY2020
Half Year Results FY2020 20 February 2020
Slide 2: 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 3: Contents
Contents Whitehaven’s Market H1 FY20 Results Growth Outlook for Whitehaven Appendices 3
Slide 4: Whitehaven's market
Whitehaven’s market
Slide 5: Whitehaven's customer base is in Asia
Whitehaven’s customer base is in Asia • Whitehaven’s coal products 5 17 Japan are exported to Asia 2 4 Korea • Our coal products are used: 1 1 Taiwan 1) to fuel high efficiency, low India 2 emission electricity 1 1 Vietnam generation, 2) to make steel 1 Philippines and, 3) in other smelting Malaysia
Slide 6: Strong growth outlook across Asia
Strong growth outlook across Asia Economic and population growth requires additional energy and infrastructure Urban Population Real GDP Population Growth Growth Growth 1 India 0.9% 9.5% 2.3% 5 1• Increase in 4 6 2 Malaysia 1.2% 6.9% 1.9% electricity 3 Indonesia 1.0% 7.4% 2.1% requirements 1 7 4 Chi
Slide 7: Increasing electricity consumption in Asia
Increasing electricity consumption in Asia Evolving environmental regulatory requirements driving transition to higher quality coal Asia’s electricity consumption Asia’s sources of electricity generation1 12.0 100% 8% 16% 21% 11.0 15% 80% Other 3% 13% 10.0 13% Renewables % of Total Generation 10% 1%
Slide 8: Electricity consumption driving thermal coal demand
Electricity consumption driving thermal coal demand High grade thermal coal demand outlook vs tightening supply Global seaborne high grade thermal coal demand Global seaborne high grade thermal coal supply ( >5600 kcal/kg, NAR) ( >5600 kcal/kg, NAR) Asia Australia 600 CAGR 600 and Russia 2.2% CAGR 0
Slide 9: Increasing infrastructure and construction in Asia
Increasing infrastructure and construction in Asia Coal is an integral component to the production of steel and construction materials Share of global infrastructure investment Crude Steel Production (2016-2040F Cumulative) 70% 1,600 59% 1,400 61 65 60% 45 54 58 36 40 26 27 22 25 26 73 74 1,200 22 7
Slide 10: Infrastructure and construction driving metallurgical coal demand
Infrastructure and construction driving metallurgical coal demand SSCC and PCI demand outlook Global Seaborne SSCC & PCI Coal Demand Global Seaborne SSCC & PCI Coal Supply 140 140 120 120 100 29 28 27 100 29 29 29 29 29 28 29 33 33 25 27 80 25 80 8 8 9 9 23 24 7 7 8 10 Mt Mt 21 21 10 8 8 9 9 9 60 15
Slide 11: H1 FY20 Results
H1 FY20 Results
Slide 12: Highlights
Highlights • TRIFR of 5.72 at 31 Dec, 7% below the previous year and below the NSW coal mining average of 14.64 • Realised thermal and metallurgical coal prices averaged US$70/t and US$94/t respectively in H1 FY20 compared to US$110/t and US$124/t in H1 FY19 • Narrabri longwall change out completed
Slide 13: Safety performance
Safety performance Improvement continues Safety (TRIFR) and Production (ROM Mt) 25 • TRIFR continues to improve 20 • Whitehaven recorded a TRIFR of 5.72 as at 31 December 2019 15 • Safety is always a key focus for the business 10 5 0 FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 FY2
Slide 14: Financial highlights
Financial highlights Profit and Loss ($m) H1 FY2020 H1 FY2019 Comment Reflects decrease in global COAL Newcastle Index EBITDA 177.3 550.8 prices and ROM production Net profit after tax before significant items 27.4 305.8 Per above Cash generated from operations 122.3 466.7 Per above Dividends (cps)
Slide 15: Profit and Loss
Profit and Loss Financial Performance – A$ millions H1 FY2020 H1 FY2019 Revenue 885.1 1,270.1 Other income 1.4 1.8 Operating expenses (including purchased coal) (466.0) (451.9) Rail, Port, Marketing and Royalties (227.9) (248.9) Admin and other expenses (including net FX gain/loss) (15.3) (20.3) EBI
Slide 16: EBITDA
EBITDA $m 600 Realised Prices H1FY20 H1FY19 500 Thermal (USD/t) 70 110 Metallurgical (USD/t) 94 124 400 (332) 300 551 39 (38) 200 (51) 7 100 177 - H1 FY19 Price FX Sales Volume Costs Other H1 FY20 • Costs and volume impacted by labour shortage at Maules Creek along with dust events associated with t
Slide 17: Unit costs
Unit costs H1 FY19 vs H1 FY20 AUD$/t 80 75 1 1 2 1.50 70 1.50 76 65 69 60 H1 FY19 Labour shortages at Underusage of Take- Increased strip ratio Narrabri mining Increased washing of H1 FY20 Maules Creek & or-Pay rail & port at Maules Creek conditions Maules Creek drought/bushfire product impact on pr
Slide 18: Unit costs
Unit costs H1 FY20 to FY20 Guidance AUD$/t (0.5 - 1) (0.5 - 1) (0.5 - 1) 73 - 75 76 H1 FY20 Increased Maules Creek Increased logistics utilisation Increased production FY20 guidance productivity 18
Slide 19: Drivers of D&A and net interest expense
Drivers of D&A and net interest expense H1 FY20 Drivers Depreciation & amortisation $116.1m • Leased fleet amortisation – straight line amortisation over lease term • Owned PP&E depreciation – combination of straight line over life of equipment and ROM profile of life of mine • Mineral tenements amo
Slide 20: Balance sheet
Balance sheet 31 Dec 2019 30 June 2019 4 $m $m 84 Cash on hand 121.3 119.5 Senior secured bank facility (drawn) 550.0 160.0 ECA1 and finance leases 169.8 135.8 297 IFRS 16 leases 106.2 134.1 587 Total loans and borrowings2 814.7 415.3 Net debt excluding IFRS 16 lease liabilities 587.2 161.6 132 (92)
Slide 21: Investing - capital expenditure
Investing - capital expenditure Investing in increasing production volume and operational resilience Sustaining PP&E Growth Projects Acquisitions H1 FY20 $34m H1 FY20 $81m H1 FY20 $17m • Water security – $16m Operating mine projects • Narrabri mains development $13m • Tarrawonga expansion to 3Mtpa –
Slide 22: Financing
Financing Diversified sources of capital Senior debt facility ECA2 Leased equipment Bank guarantees3 as at 31 December as at 31 December $22.4m as at 31 December as at 31 December $550.0m drawn $253.6m $424.3m • $1bn syndicated facility • Tenor of eight years e.g. • Tenor - Four or five years • Refi
Slide 23: Capital allocation
Capital allocation A balance between prudent debt levels, expansion and shareholder returns $140 Strong thermal coal pricing – provided capital allocation optionality $120 gC Newc USD/t $100 $80 $60 $40 Start Paid 1. Recommencement Maules $835m down of dividends Record return to Creek debt $20 onlin
Slide 24: Coal production and sales
Coal production and sales ROM production impacted by operational challenges; sales supported by stock draw downs and purchased coal Whitehaven Managed ROM Coal Production (Mt) Whitehaven Managed Coal Sales (Mt) 14.0 14.0 12.2 12.2 11.7 11.8 12.0 11.2 11.2 11.0 12.0 11.4 10.9 0.7 10.2 10.8 10.4 0.1 1
Slide 25: Premium product sales into premium markets
Premium product sales into premium markets 1% 1%0% Thermal Coal Sales H1 FY20 Metallurgical Coal Sales H1 FY20 1% 4% 7% Japan 4% Korea 5% 13% Taiwan India Malaysia 11% Korea Philippines 49% Japan Vietnam 14% Vietnam 56% New Caledonia Taiwan Indonesia 17% China Other 17% • We sell to premium Asian ma
Slide 26: Maules Creek
Maules Creek Managed ROM Coal Production (Mt) 14.0 • For the half managed ROM production was down (33%) at 4.2Mt vs pcp of 6.2Mt 12.0 • During the half, Maules Creek operations were impacted by 10.0 labour shortages and dust and smoke events associated with drought conditions and regional bushfires
Slide 27: Narrabri
Narrabri Managed ROM Coal Production (Mt) 9.0 • For the half managed ROM production was down (30%) at 8.0 2.0Mt vs pcp of 2.9Mt 7.0 • During November and December, longwall production ceased while the longwall was relocated from the completed LW108 6.0 panel to LW109 panel and the 398 leg cylinders
Slide 28: Gunnedah open cuts
Gunnedah open cuts Managed ROM Coal Production (Mt) 7.0 • For the half, managed ROM production was down (31%) at 1.3Mt vs pcp of 1.9Mt 6.0 • Werris Creek’s H1 FY20 production was impacted by mining 5.0 conditions • During the December quarter, three new Hitachi EX5600 4.0 4.5 excavators were success
Slide 29: Water security
Water security • We confirm no interruption to FY20 production at any of the company’s mines on account of water security considerations • Significant rainfall volumes received in the North West NSW region since January have materially improved water storages at all our operational sites • The Namoi
Slide 30: Growth
-N WHITEHAVEN COAL AEE
Slide 31: Why grow?
Why grow? The growing economies of Asia and their evolving environmental regulations are providing the opportunity for Whitehaven to…. • Range of metallurgical and thermal coal products Diversify • Operating jurisdictions • Export markets Securing sustainable returns for all Whitehaven • Premium pro
Slide 32: Growth portfolio overview
Growth portfolio overview Whitehaven operates a growing business of long life mines Assets Production LOM • Mine ramping up to 16Mtpa ROM with the roll out of AHS, Brownfield projects Maules Creek 13Mtpa ROM >35 years commencement of in-pit dumping and 16Mtpa modification application • Extends mine
Slide 33: Whitehaven's Growth Strategy in Action
Whitehaven’s Growth Strategy in Action FY20 FY24 Construction Construction completed Vickery IPC and DPIE Approval commences First coal trucked First coal railed from Continued ramp up Gunnedah CHPP Vickery mine site Maiden Coal JORC EIS submission Government Winchester South Reserve approval Constr
Slide 34: Corporate Structure to deliver the strategy
Corporate Structure to deliver the strategy Capabilities and resources to support growth of the business CEO EGM Corporate, Company EGM Chief EGM EGM EGM Government EGM Secretary & Health, Financial Marketing & Project People & & Operations General Safety & Officer Logistics Delivery Culture Communi
Slide 35: Guidance for FY20
Guidance for FY20
Slide 36: FY2020 production, sales & cost guidance
FY2020 production, sales & cost guidance Unchanged from 5 December 2019 market update Key Elements Range Comments Production & Sales (Whitehaven Managed) ROM Coal Production Mt 20.0 - 22.0 Production weighted to second half (H2 ~60%) Maules Creek Mt 10.0 - 11.0 Skilled labour shortages and drought i
Slide 37: FY2020 capital expenditure guidance
FY2020 capital expenditure guidance Unchanged from 5 December 2019 market update Key Elements Range Comments Sustaining Capital $m 55 – 63 Narrabri Mains Development $m 22 – 26 Current Narrabri mains development completed in FY21 Expansion & Growth Capital Operating Mine Projects $m 50 – 58 Tarrawon
Slide 38: Focus for H2 FY20
Focus for H2 FY20 Improve operational outcomes and progress growth projects • Operational focus • Improve equipment utilisation and productivity at Maules Creek • AHS roll out at Maules Creek • Obtain NSW Government approval for the Vickery project; Final Investment Decision remains to be undertaken
Slide 39: Appendices
Appendices
Slide 40: Gunnedah Basin and expanding to Bowen Basin
Gunnedah Basin and expanding to Bowen Basin Whitehaven is the largest independent producer of high CV coal in Australia • Winchester South will increase Whitehaven’s metallurgical coal production 40
Slide 41: 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 600Mt 636Mt JORC Reserves Marketable Proved & Probable 410Mt Marketable Proved & Probable 216Mt Estimated LOM >35 Years >25 ye
Slide 42: 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 43: 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
Slide 44: Resources
Resources Whitehaven Coal Limited – Coal Resources – August 2019 Measured + Indicated Tenement Measured Resource (A) Indicated Resource (B) Inferred Resource (C) Competent Person Report Date (A + B) CL375 AUTH346 Maules Creek Opencut* 382 174 556 44 1 Mar-19 ML1701 ML1719 Narrabri North ML1609 147 1
Slide 45: Reserves
Reserves Whitehaven Coal Limited – Coal Reserves – August 2019 Recoverable Reserves Marketable Reserves Report Competent Tenement Person Proved Probable Total Proved Probable Total Date Maules Creek CL375 AUTH346 340 120 460 310 100 410 1 Mar-19 Opencut* Narrabri North ML1609 102 5 107 98 4 102 2 Ma
Slide 46: IEA Stated Policies Scenario
IEA Stated Policies Scenario The International Energy Agency’s central scenario Note: The IEA’s Stated Policies Scenario reflects the impact of existing policy frameworks and today’s announced policy intentions. The aim is to hold up a mirror to the plans of today’s policy makers and illustrate thei
Slide 47: Lease Fleet accounting treatment
Lease Fleet accounting treatment Acquisition of PP&E and Recognition of related lease liability Dr PP&E Cr Lease Liabilities Depreciation of PP&E Dr Depreciation Cr PP&E Payment of lease charges Dr Interest expense Dr Lease liabilities Cr Cash 47