Release Date: August 06, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Coronado Global Resources Inc (CODQL, Financial) reported significant production and cost improvements in both Australia and the US, with production increases of 24% and a reduction in mining costs per ton of 27% in Q2.
- The company maintains a strong balance sheet with healthy liquidity levels, allowing for continued investment in organic growth projects without the need for raising additional capital.
- Coronado's safety performance improved, with a 14% year-on-year reduction in the total recordable incident rate.
- The company is progressing well with its growth projects, expecting first coal from Mammoth in December 2024 and Buchanan expansions to be completed in Q2 2025, which will add up to 3 million tonnes per annum.
- Coronado declared a biannual fully-franked fixed dividend, reflecting its commitment to shareholder returns while continuing to invest in organic growth projects.
Negative Points
- The company experienced a tragic fatality at the Buchanan mine, which is under investigation, highlighting ongoing safety challenges.
- Coronado faced mechanical delays at its overland conveyor and bucket reclaimer, impacting coal flow in late July and early August.
- The elevated Queensland royalty regime continues to pressure earnings and cash flow, affecting the entire industry.
- The company reported negative free cash flow for the half-year, impacted by a one-off payment of debts related to stamp duty.
- Coronado's exposure to Russian coal imports into India and China poses a risk to met coal prices, potentially affecting future revenue.
Q & A Highlights
Q: Can you explain the timeline and process for the Curragh underground project approval in Queensland?
A: Douglas Thompson, CEO, explained that the approval process is well-defined with set timelines. The public review period ends in August, and the outer limit for approval is expected in the second half of November. The company has already completed several steps, including civil works and infrastructure setup, and is awaiting a mining method change approval.
Q: What is the outlook for capital expenditure, particularly regarding sustaining CapEx versus growth CapEx?
A: Douglas Thompson, CEO, stated that after the first half of 2025, growth capital expenditures will conclude, transitioning to sustaining capital. Currently, two-thirds of growth capital is allocated to Buchanan and one-third to Mammoth, with $140 million earmarked for sustaining CapEx this year.
Q: How does Coronado plan to manage free cash flow and balance sheet priorities?
A: Gerhard Ziems, CFO, emphasized maintaining a strong balance sheet as a priority. Once positive cash flows are achieved, the focus will shift to shareholder distributions. The company aims to maintain at least $200 million in liquidity to navigate downturns.
Q: What are the impacts of Russian coal on the market, and how does it affect Coronado's pricing strategy?
A: Gerhard Ziems, CFO, noted that Russian coal is entering markets like India and China at significant discounts, affecting PCI prices. However, the impact on met coal benchmark prices is less pronounced. Coronado expects met coal prices to rebound after the monsoon season.
Q: Can you provide an update on the Buchanan expansion timeline and any potential delays?
A: Douglas Thompson, CEO, confirmed that the Buchanan expansion is on schedule for completion in May 2025. The project is progressing well, with no anticipated delays, as all necessary materials and infrastructure are in place.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
