Earnings call transcript: Yancoal Q2 2025 sees strong cash position

Yancoal Australia Ltd (YAL) ended the second quarter of 2025 with a robust cash balance and a fully franked dividend payout, despite facing challenges such as port closures that impacted sales volumes. The company maintained its full-year production guidance and highlighted its strong competitive position in the coal market. The stock price saw a decline of 6.05% in recent trading, though InvestingPro analysis suggests the company remains undervalued with an attractive 8.39% dividend yield.

Key Takeaways

• Yancoal ended Q2 with a cash balance of 1.8 billion USD.
• The company paid a final dividend of 687 million USD.
• Port closures led to a sales volume decline of 1.4 million tonnes.
• The stock price dropped by 6.05% following the earnings announcement.
• Full-year production guidance remains unchanged.

Company Performance

Yancoal demonstrated a resilient performance in Q2 2025, maintaining a strong cash position and competitive cost structure despite operational challenges. The company reported a 12% increase in total ROM coal production compared to Q1 and a 23% increase from Q2 2024. However, sales volumes were negatively impacted by port closures, which the company expects to recover in Q3.

Financial Highlights

• Cash balance: 1.8 billion USD
• Dividend: 687 million USD (52 cents per share)
• Total ROM coal production: 17 million tonnes (12% increase from Q1)
• Attributable saleable coal production: 9.4 million tonnes
• Average realized thermal coal price: AUD 130/ton
• Average realized metallurgical coal price: AUD 197/ton

Outlook & Guidance

Yancoal remains optimistic about reaching the upper end of its production guidance range of 35-39 million tonnes for the year. The company anticipates cash operating costs to fall within the middle of the guidance range, between AUD 89 and 97 per ton. Additionally, Yancoal foresees a potential recovery in coal prices towards the end of 2025. InvestingPro subscribers can access 8 additional exclusive insights about Yancoal’s financial health and growth prospects, along with detailed analysis in the comprehensive Pro Research Report.

Executive Commentary

Kevin Hsu, CFO, highlighted the company’s strong operational performance, stating, "We have delivered the best first half operational performance of the past five years." Mark Wells, Executive GM Marketing, noted supply-side responses to lower coal prices, while Mike Wells, Executive GM Finance, emphasized the company’s strong financial position.

Risks and Challenges

• Port closures impacting sales volumes.
• Weather-related disruptions affecting operations.
• Sluggish demand in metallurgical coal markets.
• Increased domestic coal production in China affecting imports.
• Potential volatility in coal prices.

Q&A

During the earnings call, analysts inquired about the sales volume slip due to port closures and the expected recovery in Q3. Discussions also covered potential mergers and acquisitions and capital management strategies, alongside clarifications on the company’s dividend policy, which is set at 50% of free cash flow or net profit after tax.

Full transcript - Yancoal Australia Ltd (YAL) Q2 2025:

Desmond, Conference Call Operator: Good day, and thank you for standing by. Welcome to Yanco Second Quarter Production Report Conference Call. At this time, all participants are in a listen only mode. After the speakers’ presentation, there will be a question and answer session. To ask a question during the session, you need to press 11 on your telephone.

You’ll then hear an automated message, advising your hand is raised. You can also submit your questions via the webcast under the bottom of the page. Please be advised that today’s conference is being recorded. I would now like to hand the call over to your first speaker today, Mr. Brandon Fitzpatrick.

Thank you. Please go ahead.

Brandon Fitzpatrick, Investor Relations, Yancoal: Thank you, Desmond, and thank you to everyone on the call for joining this briefing on Yancoal’s second quarter production report for 2025. We have several members of Yancoal’s executive leadership team on the call to recap the quarter and participate in the question and answer session. On the call, we have Mr. Yue, our Co Vice Chairman and Acting CEO Kevin Hsu, our Chief Financial Officer Laura Zhang, Company Secretary David Bennett, EGM Operations Mark Salem, EGM Marketing Mike Wells, EGM Finance Sheriff Burrough, EGM Health, Safety and Sustainability and Mark Jacobs, EGM Environment and External Affairs. The commentary provided today is based on the quarterly production report published to the Australian Securities Exchange and the Stock Exchange of Hong Kong yesterday, the July 17.

There is no presentation pack for this call. The Yancoal website holds past presentations for any participants who require additional information on the company. I’ll hand over to our CFO, Kevin Hsu, to provide second quarter highlights. Thanks, Brandon.

Kevin Hsu, Chief Financial Officer, Yancoal: I would also like to welcome everyone joining us on today’s conference call. We have delivered the best first half operational performance of the past five years. During the second quarter, we were able to build on our strong first quarter and halfway through the year. Our long coal and attributable sellable coal volume are 15% to 16% ahead of last year. This contrasts with the past two years where we started the year slower and increased the production volume throughout the year.

We are currently ahead of the midpoint of our attributable suitable production guidance range of 35 to 39,000,000 tons with minimal disruptions over the remainder of the year where you should push toward the upper end of the guidance range. As with past quarters, we don’t include cash operating cost per tonne in the quarter reports. However, we can say that we expect the cash operating costs for the first half will see towards the middle of the guidance range of $89 to $97 per tonne when we release our first half results in August. As most participants on the call are likely aware, coal prices continued to decrease during the quarter. During such market conditions, we focus on maximizing our operational efficiency and minimizing costs to navigate the typical low in coal prices.

We finished the quarter with a cash balance of $1,800,000,000 after paying a fully frank final dividend of $687,000,000 or 52¢ per share. We also had a significant volume of sales slip from the second quarter to the third, as a result of the temporary weather related closure at the Port Of Newcastle. This massively impacted both the revenue and the cash generation we recorded in the second quarter. I’ll hand over to other members of the executive team to share further details, starting with David Bennett, our Executive GM Operations.

David Bennett, Executive GM Operations, Yancoal: Thanks, Kevin. Our total recordable injury frequency rate reduced through the quarter and was six point three two at the June. Although the rate is below the industry weighted average of 7.93, we remain committed to improving our performance through targeted safety intervention activities. During the quarter, total ROM coal production increased in line with our forecast, with production of 17,000,000 tonnes. This was 12% more than the first quarter this year and 23% more than the second quarter last year.

We produced 9,400,000 tonnes of attributable saleable coal similar to the first quarter and 15% more than the second quarter last year. Our mines operated to plan despite some weather disruptions and our prior investment in pumping and water storage capacity continues to give us the advantage to quickly resume mining at full production rates after heavy rainfall. Although our mines operated to plan, the wet weather and subsequent flooding of the Hunter River system impacted rail and port activity. The mine sites and our logistics teams worked proactively to manage production and transportation priorities. This in turn allowed us to avoid operations becoming stock bound due to restricted vessel movements at the Port Of Newcastle.

As Kevin mentioned, we are well placed to deliver a strong operational performance this year. At Molladden, the Longwall started the quarter well before hard coal conditions encountered in May and June slowed the equipment advance rate. The reduced advance rate means the Longwall move scheduled for June commenced in early July. In the open cut, Mulaban received fewer rain disruptions than the Hunter Valley mines and delivered a 4% increase in ROM and saleable coal volumes compared to the first quarter. The two Hunter Valley open cut mines both performed well, with ROM coal production up 13% compared to the first quarter.

At MTW, increased productivity across the equipment fleet and an efficient recovery from the wet weather experienced in May were major contributing factors to the strong operational performance. At HVO, adjustments to the mining schedule were implemented to manage the stockpile levels. At the June, coal product stocks remained higher than normal. However, ROM coal and saleable coal production were both running ahead of forecast. In Queensland, Yarapi delivered strong volume increases compared to the first quarter, and at Middlemount, the recovery plan developed after the first quarter delays started to deliver positive outcomes during the quarter, and production deficits were reduced.

As mentioned in the past, Middlemount is equity accounted, so its volumes sit outside the production guidance we provide. Our attributable sales volume of 8,100,000 tonnes was similar to the first quarter and 1,300,000 tonnes lower than our attributable saleable production. I’ll now hand over to Mark Salem, our Executive General Manager of Marketing, to expand on this point and provide commentary on the coal markets.

Mark Wells, Executive GM Marketing, Yancoal: Thanks, David. Our attributable sales volume of 8,100,000 tons was a typical mix of thermal and metallurgical coal products. As David mentioned, the sales volume was 1,300,000 tons lower than our saleable production. And you may recall that at the end of the first quarter, Cyclone Alfred caused delays to vessel movements along the East Coast, which resulted in the timing of some of our sales slipping from March to April. We had a similar experience in the second quarter where temporary rail network outages and closures of the Port Of Newcastle due to adverse weather systems resulted in sales slipping into the third quarter in excess about 1,400,000 tonnes slipped of Yancoal sales.

We fully expect to deliver the delayed shipments throughout the current quarter. During the second quarter, we continue to observe strong supply and benign demand conditions in the international thermal and metallurgical coal markets. Despite the Port Of Newcastle closures, which extended ships queues and impacted about two to 2,500,000 tons of exports, global thermal coal demand remains strong. However, we note there have been some cuts to global supply with Indonesian exports down 11 11% so far this year due to weather impacts and lower demand. Also, Colombian exports are down 23%, mostly in response to lower prices and from planned cuts in production.

On the demand side, the Norman Northern Hemisphere thermal coal restock for summer was a slow to start, but increasing temperatures might see demand pick up. Unfortunately, domestic supply in China has increased this year, contributing to an approximately 14% reduction in thermal coal imports through the first five months of 2025. In India, the early monsoon bolstered hydropower generation and combined with higher domestic production, the imports dropped 5% so far this year. Japan’s imports have also fallen 6% due to increased nuclear power generation and gas fired power availability. Similarly, Korea and Taiwan imports are lower due to more biomass co firing and gas power generation.

The positives were increased coal imports from by Vietnam due to new coal fired power bill and by European due to gas market uncertainty. We have also seen an increase in spot buying activity on the back of inconsistencies in renewable and nuclear generating capacities in the Asian areas. The metallurgical coal markets have also seen sluggish demand as a result of weak global economic conditions, global trade tariff concerns, and the export of excess steel supply from China. The average prices during the June for the main indices were down between 212% compared to the March. The ACI five index averaged 68 US dollars per ton, and the GC nuke index averaged a 100 US dollars per ton.

The low vol PCI index averaged a 138 US dollars per ton, and the semi soft index averaged $1.00 4 US dollars per ton, all down from the previous quarter. Our realized prices tracked the relevant indices and our average realized thermal coal price was a 130 Australian dollars per ton and our average realized metallurgical coal price was a 197 Australian dollars per ton. The overall average realized price was a 142 Australian dollars per ton compared to a $157 Australian dollars in the prior quarter. Having made all these comments, we are beginning to see supply side respond to the lower coal prices, which aligns with our view that coal industry indices are well below marginal costs on the global cost curve. We anticipate further supply side reductions from higher cost producers contributing to a potential recovery in coal price indices as was the the case with past coal’s price cycles.

I will now hand over to Mike Wells, our executive general manager of finance, to touch on how everything that has happened in the market translates to our financial position. Over to you, Mike.

Mike Wells, Executive GM Finance, Yancoal: Thanks, Mark. The key observation to make is that we remain in a strong financial position. We ended the quarter with $1,800,000,000 in the bank and no interest bearing debt. This was after distributing $687,000,000 to shareholders in April to pay the fully franked 2,024 final dividend of 52¢ per share. As Mark noted, the 1,300,000.0 tonne differential in attributable production and sales volume during the quarter is a timing issue only and the delayed sale should be delivered before the end of the current quarter.

However, this does need to be borne in mind when assessing our second quarter financial performance and the first half results we will report next month. There was also a final end of year tax payment made in June. We’ve indicated our cash operating costs per tonne for the first half are likely to be towards the middle of our guidance range when reported, and this reflects the much more consistent production profile forecast throughout the year. This is in stark contrast to the previous two years where our cash operating costs were well above the full year guidance range after the first half, mainly due to the elevated production rates through the second half to bring the production costs back into the guidance range. I will now hand back to Brendan to coordinate the question and answer session.

Brandon Fitzpatrick, Investor Relations, Yancoal: Thanks, Mark, and thanks also Kevin, David and Mark for highlighting the drivers of our second quarter performance. We will now move on to the question and answer session, starting with questions from the phone, then moving to questions submitted via the webcast. Desmond, could you please advise if there are any questions coming through on the phone line?

Desmond, Conference Call Operator: Certainly. As a reminder, if you would like to ask questions on the phone, kindly press Please ask your question.

Wayne, Analyst, CNBI: Hello. Yes. Thanks, management, for the call, and congratulations on the very strong quarter, production quarter in second quarter. And this is Wayne with CNBI. So my first question is about the sales volume because so we have roughly around 2,000,000 tons of increase in the inventory because of the logistical issue, which is a difference between the production and sales.

So shall we expect these volumes to be fully translated into sales in the third quarter? And my second question is about metallurgical coal volume. So the growth of this segment is faster than thermal. So what should we expect in the overall mix going forward? So thanks.

Brandon Fitzpatrick, Investor Relations, Yancoal: Wayne, thanks very much for the questions. I think perhaps for the first one with the sales volume and the inventory build up, Mike, could I hand over to you to revise some of those comments we shared about the position and the catch up?

Mike Wells, Executive GM Finance, Yancoal: Yeah. Thanks, Brendan, and thanks for the questions, Wayne. Yes. So as we said, the sales slipped from the second quarter to the third quarter was about 1,400,000 tonnes. And as Mark noted, we would expect those to be recovered in quarter three.

Those sales would largely be sitting on stockpiles either at the or at the port. So we’d expect them to sort of pretty much generate the typical sales price, less a bit of transportation costs, less the stake royalties. And we’d expect that to come through in the third quarter.

Brandon Fitzpatrick, Investor Relations, Yancoal: Thanks, Mike. Then Sorry, Brendan. Can I just add

Mark Wells, Executive GM Marketing, Yancoal: to that just for clarity’s sake? You know, it’s not expected that we’ll maintain our production levels for q three. So this carryover will be in addition to our normal sales profile. And so for week, therefore, you know, it’s our normal sales profile that we will expect. And this is based on the conditions that everything is going well at the ports and all the weather conditions, etcetera.

So, you know, that it’s not to say that we couldn’t expect some sales to slip from q three to q four, which is historically normally the case anyhow.

Brandon Fitzpatrick, Investor Relations, Yancoal: Thank you, Mark. And then, Wayne, second question about the met coal volumes. Perhaps we could take the opportunity to comment on the relative production split in the quarter and how it sits to the normal profile.

Mark Wells, Executive GM Marketing, Yancoal: Yeah, look, our met coal volumes are very well you know, in two aspects. But from a production aspect, the identification of our met coal is very clear and very articulate. A lot of our met coal can’t be transferred into thermal coal, And therefore, we have to sell that independently as well. And most of our met coal positions are very well sold, in terms of our contracted position. So our overall met coal position represents about 20 to 25% of our overall sales, and that will be pretty stable moving forward.

Brandon Fitzpatrick, Investor Relations, Yancoal: And as usual, that commentary refers to the all the sales that Yancoal is responsible for. Correct. There’s some differentiation between the Yancoal attributable sales, which we’ve touched on in the past.

Kevin Hsu, Chief Financial Officer, Yancoal: Yeah. Correct. Sorry. Yeah.

Mark Wells, Executive GM Marketing, Yancoal: That’s we yeah. We’re responsible for most of the sales out of the Middlemount project, even though it’s not on a tribute basis.

Brandon Fitzpatrick, Investor Relations, Yancoal: Thank you, Mark. Desmond, could we go to the next question on the line, please?

Desmond, Conference Call Operator: Certainly. One moment for the next question. Our next question comes from Lawrence Lau of BOCI. Please ask your question.

Lawrence Lau, Analyst, BOCI: Hi. Thank you for taking my question. I actually have one question. When I look at cellable core output and the warm cohort in the second quarter, I noticed that some mice actually have slower growth or decline in cellable core output compared to warm core output. I just wonder, is it because you’re slowing down the processing of core in view of some logistic problem in sales or actually some decline in processing yield?

Can you clarify? Thanks.

Brandon Fitzpatrick, Investor Relations, Yancoal: Thanks, Lawrence. Good question. Appreciate that one. David, could we turn to you to comment on how we saw the production volumes and the difference between ROM and saleable coal production in the second quarter at the various mines and across the collective portfolio?

David Bennett, Executive GM Operations, Yancoal: Yeah, thanks. Thanks, Brendan, and thank you for the questions. Firstly, certainly we do not slow down our CHPPs. Our prep plants we operate to try and match the production that is being extracted from each of the mines. Typically, disparity between run of mine coal and product coal generally relates to the yield.

In the majority of our open cuts, we mine many different seams that all basically have a different inherent yield. So the return that we get in terms of saleable production to ROM coal will vary based on the seams that we’re mining and processing at that point in time. Further to that, Hunter Valley operations through the second quarter did lose a number of ships. I think it was in the order of around six days production through the CHPP due to their load points being stocked out, to the point that we made earlier around the port delays and the like. So that actually had the effect of building ROM stocks higher.

However, we still maintain our full year guidance with regard both our ROM attributable ROM production and saleable production. And that extra coal that has been stockpiled at that particular mine will be processed and is being processed through the second half of the year. Thank you.

Lawrence Lau, Analyst, BOCI: Thank you.

Brandon Fitzpatrick, Investor Relations, Yancoal: Thanks, David. Thanks for the question. Yes, Desmond, was just going say, any more questions on the phone line?

Desmond, Conference Call Operator: Yes. Allow me to take the next questions from Glen Lawcock from Baronjoy. Please go ahead.

Glen Lawcock, Analyst, Baronjoy: Good morning. Just two questions.

: Firstly, just on the costs and the CapEx guidance for 2025. Given the current price environment, just wondering what, if anything, you’re looking to do or can do to maybe mitigate the cost and the CapEx if cost if prices stay at this lower level? And then secondly, just you make a comment in the release, strong financial position will enable you to consider opportunities that may present during the cyclical downturn. Is that mean you’re still looking to acquire during the cyclical downturn? How do you balance that versus capital management and returns?

Thanks.

Brandon Fitzpatrick, Investor Relations, Yancoal: Thanks, Glyn. Appreciate you being on the line and asking the questions. Kevin, would you like to provide a few observations on the cost and CapEx mitigation responses we have and, of course, mindful that we’re still a month out from the half year report, so somewhat limited in in terms of potential comments ahead of the result.

Kevin Hsu, Chief Financial Officer, Yancoal: Sure. First of all, as you can see, it’s a very strong first half production results. You will see more details from our interim financials, but we can assure all investors company are doing whatever we can to minimize At the same time, talking about CapEx, I think in this announcement, made this very clear. We’re currently very much in the range.

This is largely due to all these major CapEx commitment is very much just contractual. But once again, a company is doing whatever we can to optimize the profile. As for the opportunity, you just mentioned, how company balance the CapEx and also the current market. Clearly, we are in a cyclical market at very much the bottom And which means there’s a great opportunity and also at the same time, it’s not only about a $1,800,000,000 cash, you can see from our balance sheet, it’s also about the company is able to secure sufficient debt capacity at the same time maintain a very healthy, CapEx as well. That’s why I don’t think from company perspective, we will have any issues to balance between the demand for cash for the cash we have on hand for the CapEx company and also for the potential debt funding capacity.

Thanks.

David Bennett, Executive GM Operations, Yancoal: Thank you.

Desmond, Conference Call Operator: Thank you for the question. There are currently no questions from the line. Please continue.

Brandon Fitzpatrick, Investor Relations, Yancoal: Thanks, Desmond. I’m looking at the questions coming through on the webcast, and I appreciate many of these were submitted sort of ahead of or during the call, and some have been partially addressed through the Q and A we’ve just conducted. Let’s start with one coming through with regards to the coal markets, asking an outlook on the coal industry and what time range a recovery might take. Mark, you mentioned earlier we were starting to see some responses coming through in terms of a supply reaction to the current cyclical prices. What can we say about the broader outlook and timelines?

Mark Wells, Executive GM Marketing, Yancoal: Sure. Yeah. Thanks, Brendan. I I think, you know, it’s it’s been in the press recently that there’s been a few mining operations that have basically stopped because of the current pricing. And so we are now seeing some supply coming off stream in small ways that they’re not significant operations, but we are seeing people now suffering from these lower prices and the higher cost profiles, especially for newer operations.

So, you know, there’s a lot of sentiment in the marketplace at the moment that we’re basically at the bottom of the cycle and we should start to see some recovery. From my own personal point of view, I think that recovery will take still some while before we see some true supply recovery. So it probably will not we will not see something significant until the very end of this year on the back of hopefully strong winter buying. And then naturally, as you know, the weather has a

Kevin Hsu, Chief Financial Officer, Yancoal: big

Mark Wells, Executive GM Marketing, Yancoal: impact to the coal market, but we should see some recovery towards the end of the year.

Brandon Fitzpatrick, Investor Relations, Yancoal: Thank you, Mark. I’m looking at the question list. There’s another one coming through on the coal markets. There was the observation that China imports decreased by 11%, and curious to know how this influenced Yancoal and whether that required redirection of our shipments, and if there’s any comment about the coal price outlook perhaps in that API five segment of the market which relates to the Chinese to typical Chinese imports.

Mark Wells, Executive GM Marketing, Yancoal: Yeah. Sure. Yeah. Thanks. Thanks for the question.

Yeah. China China’s imports have decreased, and and China’s imports have decreased on on the back of a very strong domestic production. We, last year, China produced 4,700,000,000 tons and their current production rate annualized is is touching on 5,000,000,000 tons. If you if you look at China’s overall demand, their their coal demand is still up in terms of the demand that they require for electricity generation due to their EV requirement as well as data requirements. They’ve they’ve also, even though they’re ahead on their renewable capacity program, some of the renewable programs have not, are not consistent, and they’re still using coal as basically a a total backup mid peak load fulfillment of their energy requirements.

That said, even though their domestic production is up, they still need the better quality Australian coal, for their blending requirements and especially in the Southeast China. From a Yancoal position, we’ve got most of our business into China under under a contract position and we’re not seeing any impact or any effect, of the reduced imports impacting the delivery and the performances of those contracts. From a coal price point of view, you know, the API five does back does, is very relative, to the CCI, the China, Index, for domestic coal, and there’s a strong relativity between those two indices. So on the back of the improved production, we have seen that the API five stay relative, continue to depreciate and, the arbitrage between the API five and the GC nuke has expanded. That said, we have now seen some recovery in the China domestic prices, very small small, on

Desmond, Conference Call Operator: the

Mark Wells, Executive GM Marketing, Yancoal: on the very hot summer and the increased demand. And we have seen some stocks in China also decrease. So on the back of that, we should see some recovery in the domestic prices, which then should flow into the API five prices. But we’re we’re just waiting to have a little bit more substance behind that position at the moment.

Brandon Fitzpatrick, Investor Relations, Yancoal: Thanks, Mark. Very comprehensive. There’s a question in relation to the recent visit from Australia’s Prime Minister to China and asking for any insights into the business of coal exports from Australia to China. We typically don’t comment on the bilateral relations, but we do look at the market drivers, and I think the comments just provided by Mark Salem gave a good insight as to where we see the relative drivers in a supply and demand sense for the Chinese section of the thermal coal seaborne exports. I see a lot of questions coming through about the slip of sales from the second quarter to the third quarter and then leading into the revenue and the cash flow impacts.

Mark, perhaps if I could turn to you just to ask some quantification on the impact of that potential slip from sales and bearing in mind Mark Salem’s earlier comments about looking to catch them up, also subject to the infrastructure capacities. So I think we in your comments, you’re mentioning the the volume of sales that were lagged relative to the production. Yeah. And in the context of what we saw in terms of realized prices, giving some context for magnitude ahead of the Yeah. Given that we do have the half year results to provide the details.

Mark Wells, Executive GM Marketing, Yancoal: Yeah. Brendan, I might be best to just comment in terms of the sales and the realized prices because of those sales that have flipped from June to July will maintain their their June pricing. And because, you know, those sales are now basically under a contract position and those contractors are all those all our coal sales contracts clearly articulate, the pricing that will flow through from for those transactions. So, and in a sense, those prices are now known. They’re no they’re no longer subject to market movements and known prices, and and that will reflect the q two pricing.

And that’s why I say that those sales are now locked in. We’ve got the coal at the port. The vessels are off the queue of of you know, the the queue at Newcastle Port reached a 105 vessels in June, which, has never been, has never been, experienced before. It’s the highest queue ever and due to all the wet weather delays. So this this, situation is very unique and very unusual.

So and we had a a substantial amount of sales, about 1,400,000 tons out of New South Wales and about 300,000 tons out of Queensland because because Queensland was also mildly impacted. That slipped physical physical sales. This is not this is managed on vessel movements, physically moved from q q two to q three. But those prices are are very well established, and those contracts will will be performed. Sorry, Mike.

Mike Wells, Executive GM Finance, Yancoal: Yeah. No. And just to add to that, just to reiterate my earlier comments that, you know, because that coal is at the stockpiles either at the port or at the site, there’s not a lot of additional costs to be incurred in order to affect those sales. They’ll obviously be the state royalties that will be deducted from that. But essentially, that coal is ready to be sold, which will then convert to revenue and down the track convert to cash.

So if you sort of take the average price, it’s obviously subject to the vagaries of the actual contracts and where the delays met coal versus thermal. The average price in the quarter was AUD 142. So as a rough guide, you’re talking AUD 142 less a few costs, less the royalty, you know, by the the 1,400,000 tons would sort of be the rough calculation of the slippage.

Brandon Fitzpatrick, Investor Relations, Yancoal: Excellent. So we’ll look forward to seeing the the half year result, being able to see a little more detail there. There are some questions coming through that extend on that discussion point, change in cash balance or the cash added to the balance sheet through the second quarter. As we noted, there were several events that related specifically to the second quarter, the largest one being that payment of the final dividend from 2024. There was also a one off tax payment required to complete for the prior calendar period and the change in timing of the sales.

So several elements came through which were somewhat unique to the second quarter, but the key message there is we did end the period with that $1,800,000,000 in cash on the balance sheet, which Kevin referred to earlier, and that gives us a great financial position going forward. The extension of that is the questions coming through on possible dividend outlook, which we often receive heading into a half year or a full year results period. Kevin, you touched on capital management earlier. Would you like to reiterate some of the comments around the priorities and how board and the management team think about the opportunities going forward. Sure, thanks

Kevin Hsu, Chief Financial Officer, Yancoal: Brandon. From company’s perspective, the dividend policy is in the constitution is very consistent as 50% free cash flow or 50% NPAT, which is higher. So as a result, if we just hypothetically has a 50 of PAT happened to be higher than 50% of free cash flow, it’s most likely gonna be following the higher one subject to the border decision as always. So we just want to reiterate the policy from the company constitution perspective is very consistent. We’re not changing.

Thanks.

Brandon Fitzpatrick, Investor Relations, Yancoal: Kevin, And worth clarifying that policy operates on a calendar year basis. There is some flexibility for the Board to use their discretion between the interim and the final, but ultimately it will be the Board’s determination and we’ll be in a position to pass on the comments from the Board and the position taken at the half year results in August.

Kevin Hsu, Chief Financial Officer, Yancoal: Thanks, Brandon. That’s correct.

Brandon Fitzpatrick, Investor Relations, Yancoal: We’ve talked about the production volumes, ROM impacts. I’m looking at the questions coming through. There is a considerable overlap, not surprisingly, a lot of investors thinking about similar aspects. There are questions coming through on the other side of capital management, potential M and A scenarios and how that might proceed. Questions asking about when we’ll be able to communicate intentions for the potential use of cash, given that we’ve been holding a cash balance for some time now.

I’ll make an initial comment from the Investor Relations perspective, and then perhaps Kevin can expand. We’ve been quite clear over the last twelve months that we’re in a very strong financial position. There has been the capacity to consider both corporate initiatives and capital returns. As we already know, we’re debt free, so there’s no debt reduction required, and the company’s capacity is fairly unique at this point in time. Of course, as the coal price moves through cycles, different opportunities may present as to speculation on timing.

Well, only as when such a point is reached that there’s something definitive to say, would we then be able to come to the market and make a comment on potential growth scenarios? Know, Kevin, if you like, to hear some of the the hard points of the the corporate strategy at the broader level.

Kevin Hsu, Chief Financial Officer, Yancoal: Yes. Thanks, Brandon. We fully appreciate 1,800,000,000 is a lot of cash. If we just look at a Yanco twenty years history, normally company do not keep that much cash. So it’s clearly for a good intention, hopefully to look for value accretive opportunities and a way well, otherwise, the market when necessary.

Thanks. Thanks.

Brandon Fitzpatrick, Investor Relations, Yancoal: There’s a question coming through regarding the CEO recruitment process. What we can say in that regard is the process is underway, we are making progress, and we look forward to informing the market once we’re in a position to say something definitive, but be rest assured that there is a process and we are working towards resolution. In the meantime, as we’ve said in the past, we’ve got an incredibly strong management team, and as we can see from the operational performance through this first half and the financial position, the company is being very well managed in the interim whilst we’re going through the CEO recruitment process. I’m looking down through the question list. I’m mindful that we’re looking at some repetition of questions.

Whilst I’m looking at the questions on the website, Desmond, could I go back to you and check if we have any questions coming through on the phones?

Desmond, Conference Call Operator: Certainly. One moment for the next questions on the line. We have a question from the line of Peter Wang from CICC. Please go ahead.

Kevin Hsu, Chief Financial Officer, Yancoal: Hi. It’s Peter from CICC. I have two questions regarding the operations and financials. Could you provide an update on our current cost of levels compared to June? And, also, you just mentioned that you completed an additional tax payment related related to f I twenty twenty four.

Could you share more details on the amount of this payment? Thanks.

Brandon Fitzpatrick, Investor Relations, Yancoal: Okay. Peter, thanks very much for the questions. With regards to the coal stocks and the inventories, Matthew, from memory, to where we’ve been in past periods? I know that we typically try to match production and sales, and there’s timing issues at various points, various cycles.

Mark Wells, Executive GM Marketing, Yancoal: Yeah. I I think from a coal inventory point of view, the fact that the fact that we’ve you know, we have the sales a a a great amount of slippage of sales due to the port closures, you know, and that’s in total in the order of about 1,700,000 tons. Not all of that is is always in in total inventory and it’s, you know, an overall probably an increase of about one to 1,200,000 tons as as as increased overall, from a saleable stock point of view, at mine and port. So but, again, under the circumstances, that’s not not too bad.

Brandon Fitzpatrick, Investor Relations, Yancoal: And the second question, we Peter’s second question related to the the tax payment we’ve mentioned and what we’re able to say in terms of the the magnitude and the relevance of the prior period.

Mike Wells, Executive GM Finance, Yancoal: Yeah. I I think we defer on commenting on the actual quantity at the moment, but suffice to say, was essentially the end of the tax year payment at thirty June. So we we pay installments every month, and then in June, there’s effectively a true up payment based on what you actually your actual turnout is for the, the tax year. So that’s what the payment related to. So it was

Mark Wells, Executive GM Marketing, Yancoal: a normal course of business payment just based on

Mike Wells, Executive GM Finance, Yancoal: the timing of payments throughout the last twelve months.

Brandon Fitzpatrick, Investor Relations, Yancoal: Thanks, Mark, and thanks, Mike. Desmond, do we

Kevin Hsu, Chief Financial Officer, Yancoal: have further questions on the phone line?

Desmond, Conference Call Operator: Certainly. One moment, please. Our next question comes from the line of Eunice Wu from Millennium. Please go ahead.

Brandon Fitzpatrick, Investor Relations, Yancoal0: Hello. Good day, Brendan, and good day, Ning. So I’ve noticed that your cash balance dropped from 2,600,000,000.0 in q one to 1,800,000,000.0 over the last three months. So it looks like a cash outflow of around $150,000,000 adjusted for the dividend paid in Q1. So could you comment on what’s the plan in terms of the future cash generations for Yanco going forward, maybe in second half?

And how does this change your thinking around the cash on balance sheet versus strategic opportunities you might have or the dividend return to shareholders?

Brandon Fitzpatrick, Investor Relations, Yancoal: Thanks, Eunice. You’re correct in identifying the change in absolute value from the cash on balance sheet from March to June. The dividend was the single largest component in terms of the change, the tax payment, which we’ll be able to clarify in the first half results next month. There’s also the sales which didn’t take place, which we’ve touched on at great length in the call. So all those elements were at work.

In terms of future cash generation, I think the key message is probably the one that was mentioned in Mike’s comments earlier, we are operating our business as planned. The cash operating costs are expected to be within the guidance range when we report them next month for the first half, and we see our cash operating costs as a very competitive position relative to the industry. So maximizing the operations, having full sales volumes achieved, keeping our cost to the minimal level is the best way for the company to work through the cyclical low in the coal prices. And it is a cyclical coal industry that we’re looking at. We can see some indications of coal price recovery potentially coming through.

We are well positioned with our strong cash balance sheet to navigate the cyclical low. And these are the elements which the board and the management team will undoubtedly take into consideration as we prepare for the half year results next month, and any consideration towards capital management. So, fortunately, our scale and cost of operations puts us in a particularly strong position, and we’ll work through this cyclical low as we have in the past.

Brandon Fitzpatrick, Investor Relations, Yancoal0: Sure. Thank you, Brandon. And maybe just a very quick follow-up question. So, I wonder how you split split the CapEx between the first half and the second half. And I know that it will be, well on track, but I just want to know that how much CapEx has roughly spent in the first half of the this this year.

Brandon Fitzpatrick, Investor Relations, Yancoal: Thanks, Eunice. The the observation we make is the capital expenditure profile is fairly consistent through the four quarters of the year. Being capital expenditure equipment purchases, it is somewhat lumpy in nature. However, that said, it’s relatively even across the quarters, across the year, and as we get to the tail end of the year, we’ll look at the projects and the commitments and whether or not they’ll fall within this calendar year or slide to the next calendar year as we have sometimes seen in past periods.

Brandon Fitzpatrick, Investor Relations, Yancoal0: Sure. Much appreciated. Thank you, Brendan.

Brandon Fitzpatrick, Investor Relations, Yancoal: Thank you. Desmond, further questions on the line?

Desmond, Conference Call Operator: Yes. We do have questions. One moment, please. Our next question comes from the line of, I beg your pardon. The consent was canceled.

Please continue, Brandon.

Brandon Fitzpatrick, Investor Relations, Yancoal: Okay. Thanks, Desmond. If there are any other questions, please let me know. We can come back. I’m looking again at the questions that we see on the webcast.

A lot of these topics have now been covered. If I come down to the bottom of the list to see anything new coming through, There’s a question with regards to potential asset acquisition, and the query is are we looking at met coal, thermal coal, target size, greenfield, brownfield? The comments we’ve made in the past are quite clear. We are the second largest coal producer in Australia. Coal is the core strength of our business.

We have some of the best thermal coal assets in the industry. We’ve acknowledged that the met coal is the lesser component of our portfolio and additional met coal could be complementary. That said, we’re always looking at value accretion and opportunities that are beneficial to our shareholders. So we’re quite open minded in terms of cold product type, target size and status of operation. As Kevin mentioned earlier, that strong balance sheet, both the $1,800,000,000 in cash, but also access to debt markets gives us very good scope for potential scenarios of considerable size should they arise.

Some follow-up questions: Are there any existing operated mines able to be bought out or proportionally increased in stake? As we say in regards to external opportunities, we also continually look at internal opportunities. At times in the past we have increased ownership of assets. We would continue to consider those opportunities going forwards, but similar to external scenarios, only as and when something definitive is reached will we be able to comment specifically and bring information to the market. There’s a question coming through on the finance side.

Given our 1,800,000,000.0 in cash, is there any notable interest being earned on the cash and how it benefits the company holding the cash on the balance sheet?

Kevin Hsu, Chief Financial Officer, Yancoal: Thanks. That’s very good question. Although we are not in a position to disclose precisely how much we are earning the yield from our cash deposit, but there’s some good reference you can see historically Australian has been, you know, known for high interest, high yield country and the current RBA rate, the base cash rate is a 3.85%. Similarly, if we look at our Federal Reserve, the US dollar base rate is 4.25 to 4.5% and then as a company normally replace our cash will be earning higher than the base rate. I think probably this will give you a good indication.

Our both rates will be a lot more positive compared with the equivalent rate yield if you can see from either China or in Hong Kong. Thanks.

Brandon Fitzpatrick, Investor Relations, Yancoal: Kevin, another question on the topic of capital management. The suggestion coming through from one of the observers on the webcast of buyback would be a potential use of the current cash reserves. Could the company comment on this option, noting that we have touched on it during past conference calls?

Kevin Hsu, Chief Financial Officer, Yancoal: We can reiterate company’s position as first of all, we’re not changing our position. At the moment, the company is not looking into buyback options, given our liquidity still at a level we feel to be further improved. Thanks.

Brandon Fitzpatrick, Investor Relations, Yancoal: I see one of the questions coming through makes the observation that the Yancoal share price is down about six to 7% on trading on the ASX this morning, asking for a view on the market reaction to the quarterly activities report. My perspective as investor relations, the company had performed very well on the equity markets over the past two months, and potentially we should look past the single day’s reaction, but am mindful that the response and the reaction in the share price today comes after a strong run up in the share price, and potentially, there are some adjustments to positions being taken by participants in the share market. That said, it was a strong quarterly production report, we’re delivering to plan, and we’re in a strong financial position, so let’s wait and see what happens over the coming days. One question here. Could the company make a comment on the position of the Queensland Government’s position on royalties?

Well, royalties in Queensland changed two years ago, three years ago now. Have some of our operations in Queensland. The bulk of our production comes out of New South Wales. Consultation between the industry and governments on royalties is always beneficial. Coal industry, Yancoal as a participant in the coal industry, generates a large contribution to both state and federal governments through taxes, royalties, and the various other components of our business, and we’re always proud of the contributions we make through the various channels, both to state and national government.

There’s a specific question coming through with regards to profit generated in the quarter, Calculation being made by the participant on the call, $390,000,000 in profit by their calculation, taken to $142 per tonne, lesser an assumed cash operating cost and attributable sales. I think the observation is we’ve provided various data points through the quarterly production report as we usually do. It should provide the equity market participants with the capability to determine a view on the financial performance, and we look forward to providing the detailed financials at the half year results next month. I think I’ve exhausted all the questions on the webcast. I appreciate that I have amalgamated or modified some of the questions given the overlap.

Desmond, I’ll come back to you one last time to check if there are any further questions on the phone line.

Desmond, Conference Call Operator: Yeah, there are more questions from the line. Please continue.

Brandon Fitzpatrick, Investor Relations, Yancoal: Thank you, Jasmine. So having addressed all the questions, I’d like to thank everyone once more for taking the time to join us today. And to close the call, I’ll reiterate three messages from the company. First, we have delivered a strong operational performance over the first six months of the year, and as noted in the quarterly report, we can potentially reach the upper end of our production guidance range for the year. Second, we will likely report cash operating costs towards the middle of our guidance range in the first half results.

And as mentioned, our ability to operate the mines with comparably low cash costs is something we see as a distinct competitive advantage in the current coal market setting. And third, as I’ve mentioned numerous times through the call, we still hold 1,800,000,000 in cash. We have good access to the debt markets and this places Yancoal in a strong financial position and provides the company with the ability to consider opportunities that may present themselves through this coal price cycle. We look forward to speaking with you all again next month after we release our first half results on the August 19. Please have a good day.

Thank you, Desmond.

Desmond, Conference Call Operator: That concludes today’s conference call. Thank you for your participation. You may now disconnect your lines.

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