Release Date: August 26, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Stanmore Resources Ltd (STMRF, Financial) produced 6.8 million tonnes of saleable coal in the first half of 2024, significantly higher than the first half of 2023.
- The company declared an interim dividend of 4.4 US cents per share, totaling USD40 million, demonstrating a commitment to shareholder returns.
- Stanmore Resources Ltd (STMRF) maintained a strong and diversified sales book, with significant sales to European, Japanese, Korean, and Taiwanese markets.
- The company reported a strong balance sheet with net cash of USD192 million, an improvement of USD66 million over the half-year.
- Stanmore Resources Ltd (STMRF) secured binding commitments for a new USD350 million term loan and USD100 million revolving credit facility, reflecting improved financial stability.
Negative Points
- The company's serious accident frequency rate increased from 0.1 in December 2023 to 0.48 in June 2024, indicating a concerning trend in safety.
- Total revenue was down just over 10% compared to the prior comparative period, primarily due to lower coal prices.
- The market for premium grade hard coking coals softened, reducing from almost USD340 per ton in early January to the low two hundreds in recent days.
- Stanmore Resources Ltd (STMRF) faced higher leasing costs compared to the comparative period, impacting overall cash outflows.
- The company experienced logistical constraints and timing issues, particularly affecting the Isaac Plains complex, which saw lower comparable saleable production for the first half.
Q & A Highlights
Q: What can we expect regarding future dividends now that the financial health of the business has improved?
A: Shane Young, CFO: With the refinancing commitments announced today, we no longer have a cash flow sweep requirement, providing the board with more certainty about cash flows. This allows the board to apply the dividend policy with confidence on a six-monthly basis, depending on the outlook and cash flows generated.
Q: Can you provide more details on the refinancing terms relative to the acquisition facility?
A: Shane Young, CFO: The previous acquisition facility had a fixed rate of 11.5%. The new facility, placed with commercial banks, offers significantly improved terms with single-digit pricing. It is now a floating interest rate, which we are comfortable with, anticipating a general softening of interest rates over the medium to long term.
Q: Do you expect the current PCI (Pulverized Coal Injection) relativities to be maintained?
A: Marcelo Matos, CEO: The low 50s were unsustainable, and the mid-80s to high-80s levels are also not sustainable long-term. The current high levels are likely a distortion due to sanctions and market tightening. We expect normalization as trade flows adjust.
Q: What is the outlook for the cost structure, particularly regarding leasing costs and strip ratios?
A: Shane Young, CFO: Leasing costs are expected to continue at around $4 per ton. Strip ratios will increase, particularly at Isaac Plains, impacting costs. We are working on optimizing mining hygiene to counter yield reductions.
Q: Are there any plans to scale operations down if MET coal prices remain low?
A: Marcelo Matos, CEO: Currently, there is no reason to scale down significantly. We will monitor the situation closely and adjust if necessary, but the current prices do not warrant a slowdown.
Q: What is the status and outlook for the Eagle Downs project?
A: Marcelo Matos, CEO: We are focused on optimization studies to minimize start-up capital. The project has a large, high-quality deposit, and we aim to make a final investment decision by mid-next year.
Q: How do lease payments impact FOB cash costs?
A: Shane Young, CFO: Lease payments are excluded from FOB cash costs as they are considered financing cash flows. This makes our FOB cash costs comparable to others, but it's important to consider lease cash flows when assessing total cash outflows.
Q: What is the expected tax payment process going forward?
A: Shane Young, CFO: Future tax payments will depend on coal prices. The significant tax payment this year was due to high prices in the past. We will guide the market accordingly based on future tax return assessments.
Q: What are the main factors affecting the coking coal market, particularly regarding China?
A: Marcelo Matos, CEO: China's steel production and export levels significantly impact the coking coal market. The Chinese government's policies on steel capacity and production controls will be crucial. The market is sensitive to changes in China's steel production and export dynamics.
Q: Can you provide more details on the PCI market dynamics?
A: Marcelo Matos, CEO: PCI is used across all steel-making markets, with Australia and Russia being the largest producers. The market is relatively small but volatile, with fluctuations impacting prices significantly. The current high levels are partly due to sanctions and market tightening.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
