Earnings call transcript: Stanmore Coal Q3 2025 sees steady production growth

Stanmore Coal (SMR) reported its third-quarter 2025 earnings, showcasing a robust operational performance despite challenging market conditions. The company maintained a strong balance sheet, increased cash reserves, and achieved record production levels at key sites. With a market capitalization of $12.6 billion and impressive revenue growth of 305% over the last twelve months, Stanmore demonstrates significant market presence. The stock saw a slight decline of 0.67% following the earnings call, closing at $2.24, amidst broader market stability. InvestingPro analysis reveals 10+ additional insights about Stanmore’s performance and future prospects.

Key Takeaways

• Record production at South Walker Creek and increased output at Pollo Trail.
• Cash balance rose to $190 million, while net debt reduced to $90 million.
• Met coal prices improved, with expectations of higher demand from India.
• Guidance remains at the lower end for saleable production, with steady cost management.

Company Performance

Stanmore Coal demonstrated resilience in Q3 2025, with significant production achievements and financial improvements. Record production at South Walker Creek and increased output at Pollo Trail highlighted the company’s operational strength. Despite subdued market conditions, Stanmore maintained a strong cash flow and reduced its net debt, showcasing its robust financial management.

Financial Highlights

• Cash balance: $190 million, an increase from the previous quarter.
• Net debt: Reduced to $90 million.
• Total liquidity: Increased to $420 million.
• Quarterly capital expenditure: $22 million, the highest to date.
• Production: South Walker Creek at 2,500,000 tons, Pollo Trail at 1,900,000 tons.

Market Reaction

Following the earnings call, Stanmore Coal’s stock experienced a minor decline of 0.67%, closing at $2.24. This movement reflects investor caution amid stable broader market conditions. According to InvestingPro data, the stock shows a beta of 2.03, indicating higher volatility compared to the broader market. Based on InvestingPro’s Fair Value analysis, the stock appears overvalued at current levels. Investors seeking similar opportunities can explore the most overvalued stocks list.

Outlook & Guidance

Stanmore Coal maintained its guidance at the lower end for consolidated saleable production, with no changes to free onboard cash cost guidance. The company expects to finish the year towards the higher end of its lowered cost range. Key projects, such as the Isaac Downs Extension, are progressing as planned, with an environmental impact statement submission anticipated in early 2026.

Executive Commentary

CEO Marcelo highlighted the company’s operational success, stating, "We are pleased to have delivered a robust quarter operationally." CFO Shane emphasized financial resilience, noting, "The business continues to generate cash during subdued market conditions." These statements underscore Stanmore’s strategic focus on maintaining operational efficiency and financial stability.

Risks and Challenges

• Market conditions: Subdued demand and price volatility in the coal market.
• Regulatory changes: Potential impacts from government policy and royalty discussions.
• Environmental challenges: Ongoing commitment to environmental compliance and project approvals.
• Currency fluctuations: Impact on cost guidance and financial performance.

Q&A

During the earnings call, analysts inquired about capital expenditure allocation and future exploration investments. Discussions also covered the impact of currency fluctuations on cost guidance and touched briefly on the potential Anglo sales process. These questions reflect investor interest in Stanmore’s strategic investments and financial management.

Full transcript - Stanmore Coal (SMR) Q3 2025:

Marcelo, CEO, Stanmore: Thank you, and good morning, everyone. Thanks for joining us following the release of the September quarterly activities report. I’m joined here today by Shane, our CFO. I’ll begin with an overview of our operational performance before we discuss each asset in detail. Firstly, I’m pleased to report that our safety performance remained industry leading with our twelve month serious accident frequency rate maintained at zero.

Operationally, the quarter came out broadly in line with expectations with a strong pickup in ROM production run rate after our teams made significant progress with waste removal and pit preparation early in the quarter. This translated into higher saleable production quarter on quarter and has positioned the business in good shape ahead of a strong fourth quarter to finish the year. As part of today’s update, we made a slight revision to our full year saleable production guidance, maintaining the lower end of consolidated guidance, but narrowing the range by reducing the upper end of production range to reflect lower expected annual output from the Isaac Plains Complex. Isaac Plains suffered most severely from the adverse weather in the first half and our latest plans now show a bottlenecked CHPP in the fourth quarter. However, partially offsetting this impact is a strong recovery and higher production out of Potrero compared to the previously guided range to keep the lower end of the consolidated sale of our production consistent with prior announcements.

Moving now into the body of the report and a quick summary of each asset. South Walker Creek had a strong quarter and is now firmly back on track with a planned ramp up production for 2025. Long production hit another quarterly record, increasing 2,500,000 tons, up from the 2,300,000 ton record in the prior quarter. Meanwhile, saleable production also stepped up to 1,800,000 tons, surpassing the previous record set in the September 2023. These results were supported by strong core recovery, which was driven by significant overburden removal early in the quarter.

This is reflected by more than 8,600,000 cubes of prime overburden removal in the month of July, which ultimately facilitated almost 2,000,000 tons of ROM production across August and September. As highlighted in the report, the CHPP operated above the upgraded nameplate capacity throughout the quarter, also contributing to the strong output. Guidance has remained unchanged for South Walker Creek with healthy closing ROM inventories and robust FEED preparation providing confidence heading into the fourth quarter. Pollo Trail has continued to show consistent production with raw volumes increasing by a further 170,000 tons in the September to 1,900,000 tons. Strip ratios increased quarter on quarter in line with the revised mine sequence, which was adjusted to manage wet weather in parts early in year.

Similar to South Walker Creek and as previously anticipated to the market, this resulted in higher stripping volumes in the September, which is expected to be counterbalanced with lower strip ratios in the December and support a normalization of strip ratios for the full year. With the year to date saleable production tracking above the midpoint of guidance, we are pleased to have made an upward revision to full year production guidance at Wipro. Lastly, the Isaac Plains Complex has reported mostly steady numbers against the June. As you may recall, Isaac was the most severely impacted asset by the wet weather early in the year and therefore has had the most protracted recovery volume timeline. Nonetheless, ROM volumes were slightly up with 1,000,000 tons for the September, while saleable production was in line.

Strip ratios increased quarter on quarter, which was impacted by elevated overburden removal at Pit 5 North, ahead of mining at the satellite pit reaching its conclusion later this year with strong ROM coal volumes expected in fourth quarter. Although Isaac claims is back on track ground coal production wise, the CHVP is expected to be fully utilized in the fourth quarter, which ultimately is expected to be the limiting factor for sale of a production volume that would otherwise be required to meet the previously stated guidance range. As such, we have made a downward revision to the range to more accurately reflect these operating conditions, which has ultimately led to a reduction in the upper end of group level consolidated saleable production guidance. On the development front, we invested 5,400,000.0 in exploration activities this quarter, including key groundwater and drilling programs at Isaac Downs expansion and Eagle Downs projects. The Isaac Downs Extension project remains on track for environmental impact statement submission in early twenty twenty six, whilst Eagle Downs development studies and design work are progressing as planned and as previously indicated.

I’ll now hand over to Shane to summarize the financial aspects of this update.

Shane, CFO, Stanmore: Thank you, Marcelo. Turning to the corporate section of the update, cash improved by US10 million dollars over the quarter with our closing cash balance as at thirty September increasing to US190 million dollars This also saw Stanmore’s net debt position reduced to US90 million dollars and total liquidity increased to US420 million dollars quarter on quarter. We are pleased to see the business continuing to generate cash during subdued market conditions despite elevated overburden stripping in the third quarter and US22 million dollars in capital expenditures, the highest quarterly capital spend this year to date. Overall, the balance sheet continues to be in strong shape, supported by committed working capital facilities that remain untapped and available for use. Both of these factors have the business well placed to withstand lower met coal prices for longer, which continue to lag in what has been a bullish run for commodities generally in the past few years.

Moving on to the updated guidance position. As highlighted by Marcelo at the outset, we have made some tweaks to the sale of production guidance range in this quarterly report. The most notable change is a reduction in Isaac Plains complex saleable production guidance. Although the complex recovered well over the third quarter, we now expect that the fourth quarter will be constrained by CHPP capacity and have therefore opted to prudently adjust the range to reflect our latest output estimates. This change has been partially offset by a boost to sale of production guidance at Portrell, which has had an outstanding recovery from wet weather aided by our recent capital investment in the Ramp 10 box cut completed in mid-twenty twenty four.

Importantly, these adjustments do not change the lower end of our consolidated saleable production range and have only narrowed the range at the upper end of guidance at the consolidated level for 2025. As highlighted in the report, our plans are tracking around the midpoint of the new guidance range, which is also well within the original range. There has also been no change to free onboard cash cost guidance, which as you may recall, was lowered by US4 dollars per tonne at the midpoint as a part of our March quarterly activities report. Consistent with previous messaging, we currently expect to finish the year towards the higher end of the lowered range. Capital expenditure guidance has also been reaffirmed with no change.

With that, I’ll hand back over to Marcelo to conclude the call with a quick briefing on markets.

Marcelo, CEO, Stanmore: Thanks, Shane. Net coal markets have been relatively stable and remain range bound with the quarterly average premium oil price remain steady quarter on quarter in what is typically a seasonally weak period. Within the quarter, prices improved from the mid-170s per ton to close at around $190 per ton. This is understood to have been driven by what we believe was a sentiment driven reaction to announcements made by the Chinese government towards enforcing production limits in some loss making domestic coal operations from September in China and lower Mongolian imports. This also contributed to the narrowing of the gap between the China CFR prices netted back to FOB Australia and the FOB Australia indices by almost 20% over the quarter and flow through to a favorable movement also for the Tier two hard coking coals, which similarly improved by 21% over the quarter.

The latter point is particularly important for Stammon, given its relevance to the pricing of our portrayal coking coals. China steel exports moderated through July and August, but picked up again in September, which cumulatively resulted in a 3% reduction quarter on quarter. Year to date, Chinese steel exports remain at elevated levels year on year and this has continued to weigh on ex China steel producer margins. And as a result, demand for seaborne met coal exacerbated by India seeking to continue to manage inventories at low levels. Contrasting this, new coke making commissioning is expected in India in the coming eighteen months, which should materialize and improve demand for seaborne metallurgical coals.

That concludes the spoken part of today’s call. And I will hand over to the moderator so we can take your questions.

Conference Moderator: Thank you. The first question today comes from Brett McKay from Petra Capital. Just

Greg, Analyst, Petra Capital: a couple of really quick ones for me around the CapEx and the accelerated stripping costs in the quarter. Just clarifying that $22,000,000 that you call out in the report of CapEx, I assume that’s outside of the accelerated stripping. Can is that can you confirm that, Shane?

Shane, CFO, Stanmore: Yeah. I can confirm that, Greg. Yeah. We don’t capitalize stripping as sand or as part of our accounting policies. So that’s outside of the what would be normal overburden stripping.

Obviously, as part of that, though, where we have box cuts and we did have an e ramp box cut in Q3 that contributed to part of that capital. Do capitalize box cuts, which are the initial box cut to open up a new area of a pit or a mine.

Greg, Analyst, Petra Capital: Okay. And just, I guess, relating into my second question, if you can just give us a loose understanding of sort of where that $22,000,000 was spent. You mentioned the box cuts. Is there anything else to call out there?

Shane, CFO, Stanmore: Yes. Probably the other call out was the RMI or Portrell wash plant tailings pumping project, which is well underway and is a project which will enhance not only the way we safely move tailings, but also the cost efficiency of doing so going forward.

Greg, Analyst, Petra Capital: Yes. Okay. Perfect. And just on exploration cost in the quarter, just going forward, is that going to be a number that we sort of see more of given the work that’s that’s underway at Isaac Downs extension, Eagle Downs, etcetera, or is it sort of a a higher number for the that particular quarter?

Marcelo, CEO, Stanmore: Brett, 5.4 on the line. That’s Aussie dollars. Right? Analyzing at 20 Aussie. It’s probably higher as a quarter, okay, given some specific work that was being done during the quarter.

But no, I think on an annualized basis, we are looking at probably something lower than that.

Shane, CFO, Stanmore: Lower than for the year.

Marcelo, CEO, Stanmore: Sandy is pointing here to me another good point, which is the I mean, it’s been a bit of a timing issue given that wet weather delayed a bit of work early in the year. So that’s a bit of catching up as well, especially on groundwater, that acquisition for example, the likes of Isaac Balls extension.

Greg, Analyst, Petra Capital: Okay. Yes, fair enough. And just finally on the cost side of things, I know that at the half, we were at the top end of that revised or generally revised guidance, and you’re still flagging that the year will complete towards the top end of that range. Just given the extra volumes coming through in the second half. Can you explain some of the dynamics around why that cost probably isn’t coming down a little bit in the second half?

Shane, CFO, Stanmore: But I think it’s it’s more a function of we’re delivering on what we expected, you know, when we were sort of advising earlier in the year about the where we would land in the full year guidance. It it was a full year expectation, And I think actually we’re delivering on that. So part of that story is those additional volumes coming into Q4. It’s obviously heavily dependent on the foreign exchange rate and where those exchange rates end up for the rest of year. I think where we’re tracking at the moment, we are still expecting, like we mentioned, to to finish within the range.

But it’s a US dollar number, so it is it is sensitive to that.

Marcelo, CEO, Stanmore: Yeah. I’ll just I’ll just add one point to that, Greg. If you look at South Walker and Isaac, our prescript is a part of money services contracts, right, with Goldie and South Walker and Absa in Isaac claims, and we pay for material moved. Right? So to a certain extent, the wet weather impacts or delays somehow contributed to, let’s put it, costs despite the lower coal volumes in the first half as well.

Okay, because that pushes some of that material movement into the second half. So yes, there’s a bit of that effect as well. Yes.

Shane, CFO, Stanmore: One final thing to add, Brett, is that we’ll absolutely see a lower quarterly FOB number for Q4. But obviously, the numbers we quote for guidance are full year numbers.

Greg, Analyst, Petra Capital: Yep. Understood. That’s it. Thanks, James.

Conference Moderator: The next question comes from Glen Lawclough from Barron Joey. Go ahead.

Glen Lawclough, Analyst, Barron Joey: Good morning, Marcelo. Marcelo, congratulations. It’s nice to see a little bit of cash despite the low coal prices. But given the current environment, status of any discussions you may be having with the government around relief or whether that be royalty relief or changes to royalty? Just I mean, surely, this is now showing to the government how tough it is for the industry?

Marcelo, CEO, Stanmore: Really? Discussions have never stopped. K? There’s strong level of engagement. As you’ve seen as part of some public statements, the the Queensland government is is looking at providing what they call a stable environment with some certainty, okay.

And they’ve been signaling, of course, supporting in the regulatory space around approvals and so on. Of course, we are yet to see any movement on the royalty space because I mean, stability of royalties is not necessarily under the current regime a good thing. There is a dialogue in place. I think we have seen some mines closing and some job losses, which of course always trigger some sensitivity around the investability in the state in the future. As I said, we are yet to see any short term relief, but I mean, we continue to work and work hasn’t stopped.

Glen Lawclough, Analyst, Barron Joey: Okay. So there’s nothing we could see coming down the pipe that would benefit Stanmore at the moment?

Marcelo, CEO, Stanmore: I hope we could, Glenn. But, yeah, I think it’s a bit too early to say.

Glen Lawclough, Analyst, Barron Joey: Okay. And then just going back to the cost question. I mean, guidance for cost were predicated on a 64.5 currency. If you got the 64.5 currency, where do you think costs would have fallen out across your guidance range of 85 to 90?

Shane, CFO, Stanmore: Yeah. Look, I mean, they’d probably be closer to the middle of the range. It’s a little bit hard to say definitively with some other movements in how the FX has moved over that time. So the simple average versus the weighted average, for example. But it’s fair to say that we built that guidance with targeting sort of the mid range of that FX rate.

Glen Lawclough, Analyst, Barron Joey: So most of the hit on the cost guidance at the top end is currency, you think? Or is there other things at play?

Shane, CFO, Stanmore: Yes. Generally. Generally, currency. I

Glen Lawclough, Analyst, Barron Joey: think one

Shane, CFO, Stanmore: or two other things that sort of move through that are probably the biggest driver.

Glen Lawclough, Analyst, Barron Joey: All right. And then just a final question, Marcel. I mean, obviously, the Anglo sales process, is there anything any comments you can make on appetite or where that’s at?

Marcelo, CEO, Stanmore: Of course, I can’t comment too much. I mean, they are, as we understand, focusing on the restart of Womba North. It hasn’t fully restarted yet. That’s definitely as as we understand the key focus. Obviously, assuming that the preference for them would be to still progress with a with a transaction in the future as a package more about north and a stable restart of more about north would be would be critical.

Right? So that that’s as much as as we think and heard. But yes, think it’s that there’s still work I have for them in terms of restarting and stabilizing the asset.

Glen Lawclough, Analyst, Barron Joey: All right. Thanks very much, Marcelo.

Conference Moderator: No worries. Thank you. At this time, we’re showing no further questions. I’ll hand the conference back to Marcelo for any closing remarks.

Marcelo, CEO, Stanmore: Thanks, everyone, for your questions and for joining today’s call. We are pleased to have delivered a robust quarter operationally, providing further confidence that the business remains in good shape at this stage in the cycle. Once again, I’d like to thank our employees, our contractors for their contribution and the continued discipline, particularly with their unrelenting focus on safety. We look forward to closing out the year and reconnecting with you all thereafter. Thanks all, and have a good day.

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