Whitehaven Coal Limited (WHC) Earnings Call Transcript

Ladies and gentlemen, can I acknowledge the traditional owners of the land on which we meet, the Gadigal people of the Eora Nation and pay my respects to their elders, past and present? I also acknowledge the Gomeroi people of New South Wales and the Barada Barna and Gangulu people of Central Queensland and recognize their ancient and abiding connection to the lands and waterways where we work and live. Whitehaven is committed to continuing to build strong and constructive relationships with traditional owners and we're engaging in a way that's consistent with the track record we have now established over many years of working together. Ladies and gentlemen, 1 year ago, we announced the transformational acquisition of the Daunia and Blackwater metallurgical coal mines in Queensland for an upfront consideration of USD 2.1 billion, together with a USD 1.1 billion deferred payment scheme over 3 years and up to USD 900 million of coal price contingent revenue sharing over 3 years. Six months after announcing the acquisition, we completed the transaction, successfully repositioning the company in line with our long-held strategy to increase our metallurgical coal exposure. I'm delighted to report that after the first half year of ownership, the business has delivered in line with expectations and the substantial potential we saw at the time of the acquisition has been validated. The acquisition provides benefits of diversification and scale and positions us to deliver long-term value for our shareholders, customers, communities and other stakeholders. The safe and successful transition of the Queensland mines into the Whitehaven portfolio and the subsequent sell-down of 30% of Blackwater for a total consideration of USD 1.08 billion required a great deal of hard work by Whitehaven's people and our corporate advisers. I congratulate and acknowledge our executive leadership team and everyone involved in this endeavor including those who joined the Whitehaven family in FY '24. The sale of 30% of Blackwater to Nippon Steel and JFE Steel, who are both long-term customers of Blackwater validates the acquisition and demonstrates the importance of this resource to steelmakers. The sale is expected to complete in early 2025, and the cash proceeds will strengthen Whitehaven's balance sheet and provide enhanced financial flexibility. Ladies and gentlemen, this acquisition has made a good business even better. And our confidence in the future is underpinned by a number of converging global trends. The correlation between access to energy and prosperity is unchallenged. Access to affordable and reliable energy, predominantly coal has given rise to the standards of living developed countries enjoy and that the developing world aspires to. At the same time, metallurgical coal is a critical and predominantly nonsubstitutional -- substitutable component in steelmaking and industrial processes that have shaped modern cities and societies and which remain essential to building the infrastructure of the future. While we acknowledge the direction of travel in relation to decarbonization, we can simultaneously observe that global ambitions are in some instances out of step with our capacity to deliver on them. The energy transition remains clouded by a significant uncertainty over the pace of change and the relationship between climate goals and our physical and technological capacity to deliver on these within nominated time frames. The challenges posed are immense. The demand for oil, natural gas, coal and even wood or biomass is at historic highs. So while we may see the energy mix change, the net demand for hydrocarbons will continue to grow for decades to come, driven by the inexorable forces of population growth the desire for better living standards, urbanization and new sources of demand such as data centers to give a contemporary example. In an increasingly volatile world and in light of some of the challenges I've briefly canvassed, we are seeing a recalibration of the global decarbonization push to one that places greater emphasis on energy and industrial security. As I speak to customers and policymakers both at home and abroad, it is apparent there's an increasing awareness of the risks of prematurely dismantling the architecture of our energy and industrial system before other technologies are ready to take up the slack. But the fact that the energy transition is likely to take longer and be more complex than we may have first envisaged does not mean we should stay in the past. The specter of climate change has had profound effects on government policies, the functioning of capital markets and broader public consciousness as these have changed so must companies adjust and Whitehaven is no exception. Back in 2019, we became one of the first coal companies to adopt the voluntary recommendations of the task force on climate-related financial disclosures, known as TCFD. About half a decade before the Australian government were required by law for this exercise to be undertaken. In the intervening period, we have substantially enhanced the sophistication of our sustainability strategy and our public disclosures in relation to climate change and how we consider its risks and opportunities. Our largest mines all sit within the federal government's reformed safeguard mechanism ecosystem and all are required to adopt a linear Scope 1 emissions decline rate adjusted to their site-specific emissions intensity. Our FY '30 Scope 1 emissions intensity reduction target compared with FY '23 is 32%, fully aligned to our obligations under the safeguard mechanism, which contribute to Australia's nationally determined contribution under the Paris Agreement. We have taken steps to address our Scope 2 emissions in New South Wales, 100% of our Scope 2 missions are considered 0 emissions carbon neutral through purchasing certified carbon-neutral electricity. We have also progressed to the approval application process for a solar farm, which would supply more than 1/3 of the Narrabri mine's electricity needs, the remainder of the mine's operational life. And of course, we continue to invest in local and global efforts to reduce emissions through our funding for industry research bodies in addition to our own investments in technology that offer the potential for large-scale abatement. I am very confident that your company is effectively navigating the challenges of climate change while simultaneously positioning itself to take advantage of the substantial opportunity it presents for us given our proximity to the world's fastest-growing economic region. Ladies and gentlemen, through careful capital deployment, we have sensibly funded value-enhancing growth that strengthens Whitehaven for the future while also continuing to reward shareholders. From the underlying NPAT of $740 million reported for FY '24, we returned 22% to shareholders through a $0.20 fully franked dividend being a $0.07 interim and a $0.13 final dividend. When surplus capital emerges after allowing for the deferred payments for the Queensland acquisition, we expect to be in a position to increase returns to shareholders, building on our proven track record in this area. We are pleased with the shareholder returns we have delivered in recent years, including a 555% total shareholder return or TSR for the 4 years ended 30th of June 2024 and 412% TSR for the 3 years to the 30th of June '24, positioning Whitehaven as the top TSR performer in the ASX 100 over both periods. Ladies and gentlemen, our CEO, Paul Flynn, will cover more of our FY '24 financial and operational results. But another key highlight for FY '24 was the 30% year-on-year improvement in total recordable injury frequency rate to a very low level of 3.3 and the 0 environmental enforceable actions consolidating on the significant improvement delivered in FY '23. Safety and environmental outcomes are an important component of our executive remuneration framework as is incentivizing cost-efficient production outcomes and delivery of value-creating development projects, including the Vickery development, Winchester South, Narrabri Stage 3 and the Maules Creek continuation project. Ladies and gentlemen, after receiving a first strike for our remuneration report of first year's AGM, we have worked hard to engage with shareholders and the proxy advisers of our large institutional investors to ensure we understand and consider their concerns and that we properly communicate our objectives and outcomes. It was important to address shareholder concerns and set the record straight after last year's activist campaign that included a targeted misinformation campaign about Whitehaven's remuneration framework. Our single incentive plan, or the SIP, as we call it, remains fit for purpose. It is highly aligned with shareholders and is a key enabler for the execution of Whitehaven strategy. In the Notice of Meeting, we have set out a clear response from the Board to the member's statement submitted by market forces. The member's statement, which represents 0.0017% of the shares of the company, urges shareholders to vote against their remuneration and framework because the company's approach incentivizes coal production and delivery of our value-enhancing development projects. The member's statement argues that the company's strategy is not aligned with shareholder value creation that the strategy is not taking adequate account of transition risk and that a wind-down strategy would be superior to shareholder value than our current strategy. On the contrary, we are playing an important role to help address the risks associated with the multi-decade transition to a lower-carbon world. Whitehaven's high CV thermal coal is critically important to help provide energy security through the transition and our metallurgical coal is needed for the steel production required to build the infrastructure for the transition. Our strategy is not only highly aligned with our customers' needs, it is also resulting in strong shareholder value creation. We only invest in projects that deliver an attractive internal rate of return for our shareholders, we are currently pursuing development projects that have a minimum IRR of 15% to 25%. Furthermore, our mines have a finite life, our Werris Creek mine, for example, came to the end of its operating life in FY '24 and has now transitioned to a rehabilitation site. The life of our existing operations and development projects align well within the time frames of our customers' needs and forecast demand. Shareholders can be confident in the strong alignment between management and shareholders, and that decisions made by the Board are in the best interest of shareholders over the long term. Ladies and gentlemen, the Board spends time with customers and other stakeholders from key markets to stay up to date with plans and developments that could impact their thermal and metallurgical coal needs. Our confidence in the demand outlook for our products remains strong. During the year, we welcomed a new Director on the Board, Mick McCormack, Mick, is not in there, as a Non-Executive Director. Mick, with his CEO and Board experience in the energy and infrastructure sectors, will be a great addition to the Board further strengthens the breadth and depth of skills and capability on our Board, including operational and financial skills within and outside of the coal industry. Ladies and gentlemen, I'd like to thank my fellow directors for their continued commitment, dedication and support during the past 12 months in FY '24. And in closing, on behalf of the Board and shareholders, I think Paul Flynn, the executive leadership team and the entire Whitehaven workforce for the excellent results and achievements in FY '24. I also acknowledge and thank Whitehaven shareholders for your continued support and commitment to the company and look forward to the shared journey and the rewards ahead. Thank you very much. I'll now call on Paul Flynn to give his AGM address. Paul?

Thank you, Chairman. And thank you to our shareholders who have joined us today for the Whitehaven Coal Annual General Meeting for 2024. Now, let me start by reflecting on the company's performance and the milestones achieved over the past year. The most significant that you heard in FY '24 was the completion of the Queensland metallurgical coal acquisition from BHP Mitsubishi Alliance, I'll refer to as BMA on the second of April 2024. Now, the transaction doubled the size of the business, transforming the company into a predominantly metallurgical coal revenue player without requiring you, our shareholders, to contribute new equity to the business. As a result, the business has been balanced across products, regulatory jurisdictions, infrastructure, geography and talent pools. We successfully and safely transitioned Daunia and Blackwater to Whitehaven's ownership during the year. And our Queensland operations have delivered solid results in the first 2 quarters we have reported. Productivity gains and cost improvements are beginning to be delivered and the new Queensland leadership team is focused on delivering continued implementation of these measures and will position the broader business for longer-term success. When we announced the acquisition of Blackwater and Daunia, we said we would consider a sell-down to global steel producers as strategic joint venture partners. After a highly competitive process, we executed binding agreements with Nippon Steel and JFE Steel in August of 2024 to sell a combined 30% equity stake in the Blackwater mine for a total cash consideration of USD 1.08 billion. This strategic joint venture, which includes offtake arrangements, validates Whitehaven's acquisition and the ongoing importance of Blackwater coal in the metallurgical coal market. This is a tremendous book end to the acquisition process and has transformed Whitehaven into a major metallurgical coal player, securing our financial footing with 2 highly esteemed global steel producers. As the Chairman said, proceeds from the sell-down will provide enhanced flexibility to allocate capital in line with our capital allocation framework, while meeting the deferred and contingent payments obligations to BMA. The Blackwater sale transaction is expected -- while the 2 transactions are expected to complete in Q1 of calendar 2025. Now, in addition to the acquisition, we progressed the strategic development projects and the commencement of early mining at Vickery in New South Wales. First coal at Vickery was produced in the June quarter, and we expect to produce between 1.2 million and 1.3 million tonnes per year through the early mining period. Vickery's thermal coal is the highest energy coal in our portfolio and likely to be the highest in the market at around 6,400 KKR per kilogram on a net as-received basis in addition to having a semi-soft coking coal superior to Maules Creek. This makes it an important blending coal for Whitehaven helping to ensure we maintain high-quality high-margin products in our New South Wales portfolio. The thermal coal is also very attractive to customers, customers operating low emissions power plants requiring the most energy-efficient fuel inputs. As early mining at Vickery commenced, our Werris Creek mine came to an end of its productive life. Werris Creek has now successfully transitioned into a rehabilitation site, and we are pleased to be able to redeploy most of the workforce throughout the group. I'd like to take this opportunity to thank and acknowledge the Werris Creek's significant contribution to our business and the local community over the last 20 years, underpinned at all times by a dedicated team of professionals who exemplify our STRIVE values. Lastly, we continue to make encouraging progress on our pipeline of future development opportunities. The Winchester South project received approval of its draft Environmental Authority from the Queensland government in February. While our Narrabri Stage 3 project received its federal approval in September after a particularly protracted assessment process that dates back to the EIS lodgment in October of 2020. Our Maules Creek continuation project is progressing towards the lodgement of the environmental impact statement, which we expect to occur in Q1 calendar '25. These are important milestones that reflect a great deal of hard work from our team over many years and in the context of tightening global supply, which I'll cover a little bit later, these development projects also provide us with a competitive advantage and attractive growth opportunities. As I'm sure you'll agree, FY '24 was an extremely busy year and a pivotal one for Whitehaven, marked by strategic growth initiatives delivering both immediate and long-term value for Whitehaven shareholders. Despite managing significant change across the business, our people delivered impressive safety and environmental results with a 30% reduction in TRIFR to 3.3 and no environmental enforcement actions. These results from our New South Wales operations excluded the newly acquired Queensland operations, which themselves reported 0 environmental actions in the first quarter of Whitehaven's ownership and a TRIFR of 6.6. Our 2024 sustainability report, which I commend to you, provides further details on our safety environmental management and reporting as well as outlying improved diversity and inclusion outcomes, community contributions and how we are assessing and responding to climate-related risks. Our operations produced 24.5 million tonnes of ROM coal for the year, 34% higher than FY '23. Our open-cut mines in New South Wales performed strongly, and our Narrabri mine finished the year delivering improved production rates, which was pleasing after the challenges it encountered earlier in FY '24. Importantly, we have seen a promising start to the Queensland operations in the first quarter of ownership. The Queensland business is performing in line with our expectations, and in some areas is exceeding our plans. In FY '24, the New South Wales business realized an average price of AUD 217 per tonne, while the Queensland business achieved an average realized price of AUD 271 per tonne for the fourth quarter in FY '24. These average prices reflect the robustness of seaborne thermal and metallurgical coal markets. Unit cost of production were at the high end of our guidance at AUD 114 per tonne for New South Wales and when incorporating the ownership of Queensland operations in the fourth quarter, the average cost was AUD 120 per tonne. While inflationary cost impacts, particularly in relation to labor were significant, our margins remains supported by a resilient pricing environment. In general, the Queensland coal mines have a higher cost of production, but they're also potentially higher-margin mines. The higher cost base is account of the remoteness, generally requiring a fly-in and fly-out workforce and in most cases, having a higher strip ratio but they enjoy a higher average selling price. We do see important opportunities to improve the operating costs of Daunia and Blackwater, including improvements in productivity that will allow production volumes to strengthen over time, leading to lower unit costs. The Queensland team is making solid progress in this area. And as you would have heard, if you dialed into our Q1 production report last week. Overall, for FY '24, we reported $3.8 billion in revenue and $1.4 billion in underlying EBITDA, including a fourth quarter revenue contribution from the acquired Queensland operations of $869 million and EBITDA contribution of $272 million. We reported $740 million of underlying NPAT and statutory NPAT of $355 million after $385 million of nonrecurring items, primarily related to the acquisition. In terms of total shareholder return, Whitehaven ended the year in the top-third of the ASX 100 companies, with a 23% return and as our Chairman highlighted, over a 4- and 5-year period, Whitehaven has ranked as the highest returning stock in the ASX 100. Before I turn to the outlook for FY '25 and the longer-term market dynamics, let me comment on the external drivers and impacts that shaped our performance during FY '24. Demand for hard-coking coal remained strong in FY '24 as India's demand grew and trade flows adjusted in response to ongoing Russian sanctions. Thermal coal markets were resilient, particularly in the high CV thermal market we supply. Supply dynamics in Australia improved in FY '24, reflecting favorable mining conditions and improvements in labor availability. The Platts PLV high coking price index averaged USD 287 per tonne in FY '24, which is encouraging, and the gC NEWC price for our thermal coal averaged USD 136 per tonne. While inflationary cost pressures in some areas have been moderating, high labor costs continue to impact the business despite labor availability improving. New regulatory burdens, including the safeguard mechanism costs, same job, same pay, patent bargaining, the New South Wales coal reservation policy, and of course, the introduction of the world's highest coal royalty regime by the previous Queensland government continue to contribute to cost pressures in our business and the sector more broadly and also raise barriers to new supply entering the market. Now, let's turn to the future. In the recently published World Energy outlook of the IEA outlook for 2024, under the stated policy scenario, the IEA revised its outlook for coal upwards, particularly for the coming decade. The IEA's upward revisions is principally the result of updated electricity demand projections, notably from China and India. Total coal demand is 300 million tonnes of coal equivalent or 6% higher in 2030 than in the 2023 World Energy Outlook report. With this revision, global coal demand is expected to decline at an average of 2% each year through to 2050, which is not necessarily the case in our markets, although that is a global number as our markets are growing and require our high-quality projects -- products. In recent months, Quality Insights reviewed its long-term seaborne coal supply for both end demand forecast for high CV thermal coal, and also metallurgical coal, and their findings remain unchanged. Demand for the seaborne high CV thermal coal is forecast to grow by 20% through to 2040 from 2024 to 2040. While supply falls by 33% due to limited expansion projects in the pipeline, resulting in an aggregate shortfall of around 139 million tonnes by 2040. With several large mines nearing the end of their mine life and underinvestment in development projects, volumes necessary to meet demand may no longer be available. This outlook is consistent with Whitehaven's position and our high-quality New South Wales thermal coal operations remain strategically important to our business and indeed the world, and we'll continue to support the global energy security for decades to come, particularly in Asia. A structural shortfall in the production of metallurgical coal for seaborne markets is also forecast. Commodity insights forecast, demand for seaborne metallurgical coal will grow by 22% from 2024 to 2040, while supply is expected to fall by 8%, resulting in a 74 million tonne shortfall by 2040. Commodity Insights Research was backed up by Wood Mackenzie, which also forecast demand for seaborne metallurgical coal in Asia to grow by 29% to 2050, with India's demand to grow by 110%. India and Southeast Asia are leading examples of urbanization and economic development underway in developing economies driving this demand growth and Whitehaven is well positioned to capitalize on this as a trusted supplier in the region. Metallurgical coal will also continue to play an important role in global transition to a low-carbon economy as a critical component of steelmaking. Steel is an essential element required to build renewable energy infrastructure, including wind, solar, hydro and transmission lines. Daunia and Blackwater are important contributors to the current and future supply of this critical resource. Our development pipeline also contributes to meeting future coal demand with our Winchester South development project adjacent to Daunia providing us with synergistic opportunities to respond to the expected growth in metallurgical coal. In FY '25, we are focused on building on a solid foundation to support the sustainable long-term success of our business. We have taken measures -- a measured approach to guidance in formulating our guidance, particularly with our new Queensland operations in the first year of our ownership. In New South Wales, production volumes and costs will be impacted by a number of factors, including the closure of Werris Creek, of course, and the ramp-up of Vickery, lower volumes from Tarrawonga as we mined through a higher strip ratio area and an 8-week longwall move at Narrabri. We expect between 35 million and 39.5 million tonnes of managed ROM production in FY '25 and 28 million to 31.5 million tonnes of managed coal sales. Unit costs are guided to be in the range of AUD 140 to AUD 155 per tonne. But as I said, we are laser-focused on lowering our cost -- our unit costs, including a $100 million cost reduction program in Queensland and generating higher production volumes in both Queensland and New South Wales. Our capital allocation framework will continue to guide decision-making. And as we previously stated, operating cash flows have been reprioritized in light of the acquisition. First, we'll be using cash to maintain and optimize existing operations, including supporting the transition and integration of Daunia and Blackwater into the broader Whitehaven portfolio. Second. We have adopted a conservative funding structure around the acquisition and maintain a strong cash balance for liquidity and working capital purposes. Third. We have been returning capital to shareholders through frank dividends within the targeted payout ratio of 20% to 50% of NPAT generated from Whitehaven's New South Wales operations. That is during the deferred payment period of the acquisition, we have kept the share buyback on hold and ensure the cash flow from the Queensland business are available to pay the vendor finance as it becomes due. Lastly, when the proceeds from the sell-down of Blackwater are received in early 2025, we will have additional balance sheet flexibility. We'll see net debt reduced, but we won't be paying down the $1.1 billion financing facility we put in place, and we will not be retiring early the vendor finance and we'll be maintaining a level of gearing -- we believe that maintaining a level of gearing is prudent. The Board will be well placed at the end of FY '25 to consider capital allocation opportunities, including dividends and in reinvestment in the business once the proceeds of the 30% sale of Blackwater are received. And when we can see the cash flow generated from the enlarged business over a full year of ownership. When you double your business and volumes with higher-margin tonnes and no new equity, the acquisition is expected to support strong total shareholder returns, including supporting an opportunity to significantly step up the capital returns with surplus capital -- when surplus capital becomes available. As we look forward to the opportunities ahead, I thank our Board and Directors and Whitehaven's people for their dedication and hard work in FY '24, a transformational year. I also thank our customers, suppliers, joint venture partners and shareholders for your continued support. Finally, I would like to thank our local communities and our traditional owner groups who are our valued partners. We are proud of the relationships in New South Wales and the connections we are building in Queensland, we look forward to another successful year together in FY '25. Thank you once again.

Thank you, Paul, for your annual report to shareholders. There's a lot of detailed information there to digest, but I'm sure shareholders have done that over the period leading up to this meeting. Okay, we now move to the next stage of the Annual General Meeting. And as this is a shareholders' meeting, only shareholders, their attorneys, proxies and authorized company representatives are entitled to ask questions. Shareholders will be provided with a reasonable opportunity to ask questions on each resolution as we deal with them. To ask a question, please raise your hand, and a microphone attendant will come around. Please introduce yourself when asking a question. If you have a question on a specific resolution, please ask that question when we are considering that item. Any general question should be asked when we consider the financial reports. We welcome questions from shareholders, but it is important to give everyone an opportunity to participate. Please limit the number of questions and please avoid also using the time as an opportunity to make a speech. There will be an opportunity for further engagement with the Board and management immediately following the AGM. The meeting's first item of business is to consider the company's financial report and the reports of the Directors and auditor for the year ended the 30th of June 2024. The Corporations Act requires that these reports be laid before the meeting. However, there is no requirement for the shareholders to vote on these reports. So, ladies and gentlemen, we have done that. The matter is now open for discussion. If you would like to ask a question, please raise your hand. When you receive a microphone, please introduce yourself and identify if you're a shareholder or representing another shareholder. So are there any questions?

My name is [Terry Woronov]. I am a proxy for a shareholder. I do have 2 questions, if I may. First, congratulations on the successful sell-down in Blackwater this year. But I do remember last year, the Board saying that it was also considering a sell-down in Daunia after exploring synergies with Winchester South. Is the company planning to sell down stakes in Daunia this year or will it wait until the next financial year?

Thank you for the question. There's no immediate view to selling down a shareholding in Daunia at this stage. Obviously, we're not going to close any opportunities in the future. Initially, it's been a significant amount of work that's been done, particularly by the management team and our advisers in selling the stake in Blackwater to Nippon Steel and JFE. We need to get that completed embedded down and then that is going to significantly enhance our balance sheet, obviously. And we'll take look to the future as to whether there are any other sell-downs. But at this stage, no, there are no plans, I mean, immediate plans for selling down the stake in Daunia.

My second question is, are we currently considering or looking for a joint venture partner for a full-scale Vickery mine as well? And if yes, do you prefer customers as possible JV partners or would you widen the net to commodity traders as well?

We're still in the final stages of the approval process with Vickery. It has been a protracted process. You'll recall that a number of years ago, we did receive an initial approval for 4 million or 5 million tonne operation, and then we went back and revised that given the strength of demand that there seems to be for the high-quality coal that's there. And so we expect to see the possibility, maybe early in 2025 of the final approval and getting to a point where the Board will make a decision in terms of investment. That will be determined by the availability of capital, the market circumstances and the like. Just as a general point, we do have both traders and consumers as JV partners in our existing assets, particularly Maules Creek and Narrabri. It's probably an unwritten preference, if you like, that our preference is always to do business with consumers as we have done with Nippon and JFE where we're able to tailor the offtake agreements to suit their needs. And it completely eliminates any opportunity that we might be competing against our own coal in the market. If you sold it to a trader and they traded on to someone else and all of a sudden, you're competing with your own cost. So obviously, the preference is traders at the moment. We don't have any -- there's a lot of interest in what we're going to do with Vickery, but we don't have any concrete proposals as far as JV partners are concerned.

My name is [ Rod Anderson ], and I hold a proxy. With the sell-down in Blackwater, our company appears to be on track to comfortably make its payments to BHP for the Blackwater and Daunia acquisition. Is the company still exploring plans to tap into the U.S. bond market or are we happy with our current private credit loan facility for the next few years?

The last part of your question, the answer is yes. And I think Paul alluded to that in his remarks, that's the $1.1 billion we have because I think it's tenure is 5 years, is that right? Yes, it's tenure is years and so that's got a while to run. With regard to the U.S. bond market, we're keeping all our options open there. We've worked very well in the last couple of years or Kevin Ball and his team have worked on in the last couple of years in establishing our credit rating with the key ratings agencies so that if and when we would need to -- or we would like to access that U.S. dollar bond market, we're in a position to do so. But it's -- we're not ruling anything in or out on that front. But obviously, in a debt structure for the future, it's quite likely there could be -- that could be a part of that when we finalize the private debt piece that we have in there at the moment.

My name is [ Katherine Rossiter ] and I'm a shareholder. In the larger international commitments, including from Australia in 2023 to a climate and loss and damage fund, it seems likely that fossil fuel producers will sooner or later be faced with contingent liability claims. What provision is this company making to prepare for this eventuality?

Paul, do you want to take that one?

Yes. Thank you, Chair. Thank you for the question. Well, the most important part, I think, in terms of transition over the last couple of years has been the establishment of all of our overarching national legislative framework for emissions reduction. So we have a national target all covered companies and entities are required, obviously, to comply with that. So the safeguard mechanism was an information-sharing framework in the past, if you like, a monitoring regime where it's now turned into something different to that. And so we now essentially have a price for carbon, and we are required, as we said in our earlier addresses, to reduce our emissions over time. So that's consistent with the government's stated legislative position. And our job is to make sure that we comply with that. So we are working very hard on emissions reduction with our business. As the Chairman mentioned, our Scope 2 emissions have been largely addressed and not just emissions reductions in our business from a Scope 1 perspective, but then also looking at the opportunities for offsets as well. So now there should be largely no notion of individual individuals, state-based requirements because we now have a federal framework within which everybody needs to comply. So -- and we will work very hard to make sure that we are compliant at all times with that.

Kevin Daley is my name, Mr. Chairman. I guess with respect to the safeguard mechanism, your obligation is to reduce Scope 1 emissions. I'm just wondering if you could put some detail behind how you intend to go about that together with the sort of capital expenditure requirements will be needed, particularly in terms of the $400 million to $500 million you've got earmarked for this year.

Paul, again, lead on from the last.

Sure. Happy to follow up. $400 million to $500 million that we've -- of the CapEx, that's CapEx generally, not sorry, that's not emissions reduction allocated expenditure. Yes. Yes, the broader CapEx is consistent year-on-year from where we've been last year to this new year in guidance. So there's a number of different programs going on. And they very differently, depending on the mine that we're talking about. Under the safeguard mechanism, there's -- can I say, more of the heavy lifting is done by underground mines in the earlier years than the open-cut mines are. So they have different transition pathways, principally because there's an estimation process for the open-cut emissions, whereas the underground operations, say, Narrabri, say, for instance, does actually have -- it operates within a highly regulated environment. So for safety reasons, you know exactly what the emissions are from that mine. So be as it may, underground mines do a lot more of the heavy lifting in the earlier times. So we're working on a range of different initiatives. We have CO2 in that mine, but not much methane, which is uncommon. Most underground mines have a much higher concentration of methanes. Our's is relatively light, in fact, so light, it's not able to be flared in its dilute form. So we're looking at technologies to try and concentrate that, obviously, because there is some of it there, and we'll explore that as that technology evolves because I think clearing would be a very good opportunity to reduce the impact of methane into the atmosphere. In the meantime, we have been modeling again and monitoring very closely the actual emissions from Narrabri. Narrabri's emissions actually in this year are much lower than anticipated, partly because the volumes are lower, but partly also because the history of how those estimates were formulated under the benchmark that we have for Narrabri under the safeguard mechanism. It was -- it would appear to be overestimated. So we're working hard on that front. From the open-cut perspective, the 2 mines we've acquired are part of the safety mechanism as well as is Maules Creek. And so emissions reduction efforts there take a whole range of initiatives, be that fuel, say, for instance, alternatives there, be that the progress of electrification for this large equipment in trucks, in particular, being the point of focus thus far. Autonomy, obviously, is a means by which further emissions would come down. And so Daunia, obviously is an autonomous mine. And then we're also looking at other arrangements of the OEMs. So we are largely captive to the progress of those developments through the OEM developments themselves, whether that be for different types of engines, say, for instance, LNG, say, for instance fueled engines rather than just necessarily battery-powered trucks as well. So there's obviously a big with battery-powered trucks obviously with payload, and so that is being advanced. So we're monitoring that closely with the OEMs, but it will take some for these technologies are mainstream within and readily available at a commercial price.

I'm [ Kara Kichler ] from Narrabri, Northwest New South Wales. And I'd just like to acknowledge the Gadigal people from Eora Nation and pay respects that we can come here and have these meetings, even though I'd encourage while having to have these kind of meetings on an impacted area like Narrabri. Like I said, I come from Narrabri Northwest New South Wales a community in the spotlight in the face of the climate crisis due to our relationship with Whitehaven Coal. The impacts of Whitehaven is having in our community, our health and environmental impact is evident and that we need a just transition fast. Now, Whitehaven promises job cease to come and there must be a transition. This Whitehaven plan on providing support for our communities and adjust the transition away from the industry as it comes to a close in the next decade. We are asking for preparation of rehabilitation of our land and waters and a just transition away from coal in our communities.

I'll get Paul to comment on this, but we already do provide significant support to the broader community in the Galadar and Narrabri areas and more particularly to the First Nations people there. We're very active in our engagement in that regard and have been since we started our operations up there a number of years ago. And indeed, as you rightly pointed out, we have what would be considered a relatively high percentage of our workforce, local First Nations people. With regard to transition in the future, I mean, we comply with our obligations as far as rehabilitation is concerned. And Paul alluded to the work that's just currently being done at Werris Creek. We've completed Sunnyside outside of Gunnedah. We're currently well through the rehabilitation of Rockland. And so we believe that as part of our social license to operate, we are very, very energetically pursue our responsibilities and engage with the local community and delivering on that. I'll just get Paul to add a bit to that.

Yes. Thank you. Thank you for the question. Narrabri community is thriving and which is terrific to see and as is Gunnedah. And despite the competition for -- between those 2 LGAs with us in terms of our focus, we've -- we're very proud of the impact that we've had on Narrabri in terms of its growth and the job security. And if I just walk down the main street there, I just see businesses turning up, which weren't there 10 years ago, it's really quite positive. The employment piece of that is fantastic, of course, and obviously, as Chairman has mentioned, the indigenous footprint for our business, we probably got one of the best employment engagement programs in the industry at nearly 11% across our New South Wales business and Narrabri is a big beneficiary of that. So Chairman said, from a rehabilitation perspective, we've got some of the best examples of anybody who wants to have a look at contemporary rehabilitation with the 3 sites that the Chairman has mentioned. And our economic contribution to the region is fantastic. And because now Narrabri Stage 3 is now approved, the mine life goes out to 2044, that's before we consider the North West exploration license that we have adjacent to the existing operations as well. So we think we've got a long opportunity here to ensure that -- we understand that mining is a temporary activity. We totally understand that notion. And that the land needs to be returned to a state that's productive for the next generations. We totally understand that. And I think those 3 sites that the Chairman mentioned are a testament to the quality of the rehabilitation work. The underground mine is actually even simpler because it obviously doesn't have the surface disturbance that a surface mine has. And so -- and we also have the benefit of in New South Wales, a very long-standing and well-regulated progressive rehabilitation framework here that we work to. So that you're not left with legacy rehabilitation that in the past, where a lot of it was left to the end of life of mine. That is not allowed anymore, particularly in New South Wales. It's different in Queensland, whereas New South Wales is very heavily regulated in that sense. So you need to explain the rehabilitation obligations that you have for next year and you'll be monitored and your compliance with that number is actually regulated by the New South Wales government. So we think that puts us in good stead and not just that. We understand, again, that mining is a temporary thing. But our agreement, if you like, with the community is to make sure that we leave a positive legacy behind. And that is -- that's not just the wealth creation, obviously, whilst the mine is going but the skills and development that goes into the community along the way because long after mining is not required there'll be fantastic skills there and other industries will come. And as you're seeing now, there's quite a very positive discussion with the government now about what to do with post-mining land use. And so the traditional notions of just returning it back to grazing, so, for instance, is [Technical Difficulty] but community expectations are changing now and people see the infrastructure that's left there as being an opportunity, whereas we're obligated to remove it. So we will. That's our current obligation. But I can see that we're getting lots of interest from people who are looking at even a void that's been left, as an opportunity for a further business opportunity. So -- and that's the case at Werris Creek in particular. There are plenty of inbound inquiries trying to work out what to do with that opportunity there and the infrastructure that we have there, which we will remove unless somebody wants to procure it for another purpose. So the rail loop, say, for instance, I'm referring to at Werris Creek is another great example. So I think the community expectations are changing. What was otherwise seen as a liability may actually become a productive asset for the community going forward. So we will work closely with that.

My name is David [indiscernible] I'm a shareholder. Many of your peers publish Scope 3 emissions and we skirted around that in the previous reply. That fits with COP28 and its outcomes. It talked about liabilities being associated with those things. I think it will be in the interest of the company to publish the Scope 3 emissions like your peers do, so we, shareholders and the stock market can see clearly what COP28 meant for such operations.

I think, am I right, Paul, in saying that at this stage, there's not a statutory requirement on the disclosure on Scope 3 but I think it's coming in 2027, it is coming. Obviously, to date, we are actively engaged in our market in understanding how our customers are dealing with those Scope 3 emissions and particularly in our major market in Japan, where there has been extensive investment and technology deployed to mitigate those Scope 3 emissions. But I take your point and we will be required within the next couple of years to do that. Obviously, the focus in these years to date has been to get a satisfactory level of disclosure originally through the TCFD and the accounting standards on Scope 1 and 2. And now that the safeguards mechanism is in place and everybody understands that, we'll move on to that next phase of disclosure. You wanted to add to that, Paul?

Nothing further, Chairman.

Okay.

My name is [ Tracy Carpenter ] and I have a proxy from a shareholder. I have 2 questions written by [ Dean Foley ], a Gomeroi man living on country in Gunnedah, who was unable to travel here today and I ask these questions at his request. Whitehaven Coal has and does make a big song and dance about how much it contributes to the Gomeroi community in Gunnedah saying, as you said today, 10.6% of its employees self-identify as Aboriginal or Torres Strait Islander people. Is Whitehaven aware of the issues around indigenous identity fraud where bad actors exploit indigenous identification for employment and procurement purposes? And would the Board consider implementing verification to ensure it is actually benefiting First Nations people and businesses. I have a second part of that question.

Well, I think as a general response, I think that we are aware of some of the things that happen, unfortunately. On the second part, do you want to comment on that, Paul?

No, look, I would like to think -- it's a good question. Thank you. I'd like to think that whilst there's always going to be bad actors, as you say, I'd like to think, maybe it's a little bit idealistic, that that's not the greater preponderance of the people involved in this. In fact, in our instance, when we started this probably 10, 11 years ago, the proportion that represented in our workforce was nonexistent basically. So we've made a lot of progress in a very, very short period of time that goes to show what you can do when you put your mind to it. Now there's no particular benefits that come from that by self-identifying. What I'd like to think is that we've actually created a culture in our organization where actually people are able to self-identify now. Now I think before we had indigenous folks, in our complement. But I think they felt less comfortable in self-identifying. So I'd like to think that the culture is such that those -- the numbers that we are tabling as being representative in our workforce are a product, not just as a focus to bring more indigenous people into our business and many of them moved away from the area because there were no jobs and now have moved -- been able to come back to country and have a well-paying job, that has decades in mine life that they can sustain a family and return to the place where they have their strongest connection. So I'd like to think culturally, we've allowed people to self-identify and feel comfortable in that regard. There is no particular advantage in self-identifying from our employment perspective other than where people come to us and perhaps need some support in terms of skill training, of course, but that's open to everybody. But I mean life skill training, which they may not have had the benefit of that. We have actually made services available to those people to show that they actually had support to gather the life skills necessary to perform a daily job, where you turn up 6 a.m. in the morning and you fulfill your shift and assisted them with financial management skills as well because we do pay well, we want people to manage their money appropriately and we understand pressures that come with that. So I think we've done a lot in that regard. So I know that there is this latent issue that exists. But I generally think it's a matter more for the indigenous community to manage that rather than -- we don't have resources or skills to be looking at aboriginality and working out whether someone actually does have the right to declare themselves as such. But we're pleased that people are willing and feel comfortable to do it in an environment that is safe for them to do so.

Paul, do you want to quickly outline Bob's role?

Yes. Look, we've got a growing footprint in the space. Our manager of indigenous relationships in New South Wales, Bob Sutherland has been a terrific bridge, if you like. He's a window into the more detailed aspects of the community being a local gentleman. And so it's been fantastic for us to use him to actually act as a funnel to bring people into the business, if you like, because the prequalification, he understands the community well and he knows who's related to whom more broadly, not everybody, of course. But -- so that has allowed us to understand the heritage, if you like, not that, that's a prequalification for joining the company but it is actually good that we know we have people on the ground and Bob's team who actually said, "No, no, I know this person, I know their family, and I know they moved away but they've come back and they would like to work with us." So we're replicating that model in Queensland as well. Obviously, the Barada Barna people we've known since we bought Winchester South and have a very good relationship. And the Gaangulu people, of course, we're only just building on that relationship now with the Blackwater Mine acquisition. So we've employed a similar resource up there in Queensland as well but the New South Wales resources will be enabled -- will be used in Queensland as well. And look, we're very proud of the progress we've made here. So we're very pleased to see this flourishing and with the Queensland acquisition, we want to see it grow in the same way as the New South Wales has.

Yes, still there. The second part of the question is more related to a specific incident. Does Whitehaven still employ the plant mechanic who made racists comments on Facebook about an aboriginal elder in Gunnedah? How is the company addressing internal issues of racism beyond just isolated incidents like this?

I'm not aware of the particulars of that particular matter. But if you could provide that to us, I'm happy to follow that up. And we don't tolerate that at all. Racism is a terrible scourge and as I said, I'd like to think our organization is not perfect but it's an organization which is well supportive for the people coming to work, being valued for the contribution they make on a daily basis regardless of where they come from. And -- but if you provide us those details, I'm happy to follow it up.

Hi, everyone. My name is [ Sally Hunter ], I've traveled down from Narrabri today. Tomorrow, the sentencing for the Maules Creek blasting case will be handed down. Whitehaven has been convicted of 4 offenses of a bad blast causing injury to workers in the neighboring mine 2 kilometers away. I've traveled down here today because I live near Maules Creek mine and my neighbor was affected by this blast along with the Boggabri mine workers. Whitehaven has been found guilty of this offense. I've had a quick read of the annual report, couldn't see it mentioned here. So I'm a little bit concerned that shareholders aren't aware of this case. And when this is handed down tomorrow for the sentencing, it will add to the list of about 100 other convictions and breaches and fines that are listed. Yet we repeatedly hear the CEO talk about its improved environmental performance and this is based solely on the criteria of the number of enforceable undertakings that the company has had in that year. This is a poor excuse for a criteria for legal compliance and out of step with industry practice. My understanding is that there are still a number of fume cases on foot, along with other cases against Whitehaven that will be heard in the coming months. Will the CEO openly and in full report to shareholders here today on its current environmental and worker breaches and convictions and cases that are currently on foot?

Thank you. Before I get Paul to comment. I mean the incident that you referred to happened in 2020 and it has been a matter that's been before the courts and fundamentally still is until that is finally resolved. In defense of the company, we are very proud of the improvement in our environmental controls, particularly at Maules Creek since 2020. And the record stands and to where we are today. And I know that you don't accept, if you like, the KPI of enforceable actions or undertakings. But that's the ultimate measure we use. Our reporting system does report all the way through in different levels in terms of incidents that have happened but we put enormous resource and effort towards improving the operation there, particularly since that incident in 2020. Paul?

Yes. Thank you, Chair. Just a couple of clarifications, if I could. The case that you mentioned, of course, is still an active matter. And so we are looking at that and to review what our position will be with that, there's a number of interesting aspects that, that may result in us appealing that matter. So that's -- I won't comment on the specifics of that because that is the position. In terms of how we are measured as a management team, it's not enforceable undertakings, just to be clear. That is a subset of the whole. It's enforceable actions. So any action that gives rise to enforcement activity is penalized, or the management team are penalized in the year in which it occurs. So it doesn't -- that happened in 2020. So as a result of that occurring in 2020, we take a conservative position in that regard and take the penalty in the year that it occurs. And so that changes people's remuneration outcomes as a result. The reason for doing that, we -- perhaps the regulator doesn't follow something up or deems that based on the circumstances and the better information that's been provided in the subsequent investigation, they don't follow through. And that does happen from time to time. But the reason why we take the penalty in the year in which it occurs is because we're -- the Board has taken the view, I think that's the right view, that we shouldn't be incentivizing management to fight regulators. And because the alternative view is penalize them when the outcome is declared. And we don't want that. So in 2020, the environmental performance KPIs were, that incident was registered as a deduction in that year. That's right. So it happens in the year of the event, not the year of the outcome, as I say, because I don't see any merit in incentivizing our team to fight the regulators. If we think was we have a case that we should defend then sure, fine. But I don't think it's -- we should be putting financial motivations behind fighting regulators. So that's why we do it that way. So the penalty for that was taken in that year and that's our preferred methodology for dealing with that. But as the Chairman says, substantial effort has gone into this and not just this but our operations more generally. Our safety performance has been excellent and bears very good comparison with our peers and our environmental compliance over the last 2 years, as you've seen, have been 0 enforceable actions, which is fantastic.

Thanks, Paul.

My name is [ Nick Clyde ]. I'm appearing for a proxy. So my question is actually about the tightening of New South Wales government climate policy and the reliance -- your reliance at the moment on offsets. The sustainability report that I read yesterday said that you'll align decarbonization ambition and business practices with the emissions reduction obligations set by the Australian government, which is great and appropriate, of course. But I did notice in that document, there is no such commitment to align business ambition and practices with emissions reduction obligations by the New South Wales government, which are substantial and growing. For example, New South Wales government's policy at the moment is that all sectors, including your sector, like the coal industry, need to ratchet down emissions to meet legislated targets. Mr. Flynn, in your CEO message in the sustainability report, you did make the point that site-based initiatives to decarbonize Scope 1 emissions are yet to progress to a stage where they're commercially viable and technically viable. And the plan for the minute is to quite rely on carbon credits to meet our safeguard mechanism obligations for the foreseeable future. And I guess what's happening in Narrabri underground kind of underscores that. You're projecting about 1.2 million tonnes per annum of Scope 1 emissions, which, if that was the emissions profile today, would make Narrabri the second most polluting mine in the state of New South Wales in terms of Scope 1 emissions. So it's a substantial issue. And as Penny Sharpe, the Minister here in New South Wales has said that we are not on track to meet our 2030 or 2035 target. So I just wanted to put that on the record as well. In terms of your liabilities as directors of this company, I noticed that Noel Hutley SC, in his climate change and directors' duties advised, updated in 2021, he says, "It may be prudent to rely on carbon offsets as the key pillar of a company's net zero strategy." And the New South Wales EPA kind of is also singing from the same song sheet at the moment in their draft policy, which they're going to finalize next month, I believe. They say that offsetting emissions must only be done for emissions that cannot be avoided or reduced. So sorry for the long setup to this question. Thank you for being patient, Mr. Vaile. So my suggestion to you is that your reliance on offsets is setting the company up for a hard fall because you're putting off coming to terms with what decarbonization of your sector actually requires and what it means. So the question is, would you agree that delayed investment in mitigation and reliance instead on offset credits is going to wind up creating a very steep trajectory for your company at the end of this decade when regulations, carbon budgets, the new New South Wales government Net Zero Future Act require a much steeper trajection of emissions reduction than is currently flagged in your sustainability report?

I'll hand to Paul in a second. A couple of things. We comply with all existing government regulations, whether they be federal or state. But obviously, our focus in the reporting is on the -- this focus has been on the safeguard mechanism that's a federal commitment because it's the federal government that makes the commitments internationally in the international treaties, forums, where the current standard commitment is the Paris Agreement. On -- and I'm sure Paul will comment on this. I mean the offset arrangements when we buy green electrons from AGL, is available to us now and that is an accepted practice. You're asserting, from different commentators, that may change in the future. But will it? I mean that's the basis of the system as being able to -- of a trading system of being able to buy the offsets. Paul?

Yes. Thank you. That did go on for a bit. So I didn't write them down but you've raised a number of points there. No, I don't think that will be necessary. And I think we understand your perspective. Look, as the Chairman said, our business is -- we're in the business complying with the laws of the land, be that state or federal. And to the extent that there's inconsistencies between the state and federal, then they need to work that out. But our obligation is to do that. So at the federal level, clearly, the safeguard mechanism in particular, is the one we called out. And the initiatives I mentioned earlier to the other gentleman's comments about efforts for -- to decarbonize our business, I don't think I'd probably need to repeat those again. State-based emissions reduction efforts generally are housed within your project approval. And so the conditions associated with your approval, generally, that's where your emissions reduction activities and obligations are encapsulated. And we have some at Narrabri, say for instance, is the same that motivates us to do the things I mentioned earlier. So look, there's no notion of us not complying or the country. The country needs to do what does the legislative framework sets you need to do. And so we will be -- we are putting our shoulder to the wheel in that regard. Now in the case of, as the Chairman mentioned, offsets well, obviously, both state and federal recognize the utility of offsets as a means by which emission reductions are achieved. This is a net zero 2050 objective rather than just no emissions at 2050. And so offsetting is a valid form of doing that. And obviously, with the state level that's recognized. And certainly, at the federal level with the ACCUs it's recognized as well, otherwise, you wouldn't have ACCUs if that notion wasn't valid. But generally, I think that's -- the ACCUs will be useful for us in the short to medium term. I agree with that. And the reason for that is, as I mentioned earlier, a lot of these technological changes that can manage these emissions reductions at the operational level will take some more time. And as we look at the safeguard mechanism, it's only essentially 2.5 years in its program. So as we know technology doesn't change as quickly as we would like in this regard. So I think it's a nice bridge to those technologies coming to fruition and allowing us to more directly address the emissions from our business and relying less on offsets over time. But I don't see that questioning the validity of the use of offsets where necessary.

Congratulations on a good year. Well done. My question is about cost management. If I interpreted the numbers you put up there, Mr. Chairman, for FY '25 correctly, cost of coal, I'm not quite sure exactly what that referred to. But in my quick vision of it, it was showing about a 20% increase year-on-year. Do you feel that that's entrenched, that sort of increases entrenched? Where is it likely to go after FY '25? Are there investments that might, over a period of time reduce the impact of cost increases of that description? And do those costs actually include any reference to state royalties?

I think the figures you're alluding to were on the screen during Paul's address. And there's -- we had -- it's the cost base of run-of-mine coal produced and over the gunwale of the ship at the port, okay? And so -- and those figures with the addition of the 2 new assets in Queensland across the group have increased because the cost -- I think Paul alluded this to the cost base in Queensland was higher than the cost base in New South Wales because of a lot more fly-in, fly-out workers, different structure in terms of the operations of those businesses. I mean they are operated by BHP for the BMA partnership. And so we've only just begun the process of transitioning those operations the way we do things in Whitehaven and that's a fairly significant sort of a structural change in the operations and management of those businesses. And so we're hoping to see improvements there. The cost base in New South Wales has been refined over time. And it's where they're increasing, as Paul alluded to, you then got significantly increasing diesel costs because it's a large diesel fleet in the Open Cuts. You've got the impact of labor costs at the moment and Paul alluded to a number of changes that have been made in that space that are going to impact on us. And so what we're hoping to see is that we're trying to keep our downward pressure on those costs in New South Wales and try and bring Queensland down from where they were and we believe we can in a productivity sense by implementing a lot of the standard operating procedures that we've established across our New South Wales business that Ian and his team will want to deeply integrate those into Queensland. Paul?

Yes. Thanks, Chair. I think the numbers that I highlighted there was $114 is where we ended up for the New South Wales for FY '24. That's substantially up, there's no doubt about that. If you add in the quarter that we -- of our ownership for Queensland, it went to $120 in total. Now our guidance this year is $140 to $155, quite a big range. So we've taken a conservative position in terms of how we formulated that principally because we think that's prudent. We'd rather underpromise and overdeliver as a general posture. But really, the bigger driver of that is the lack of time, if you like, that we had from the transfer of ownership of the assets to us on the 2nd of April through to when a budget gets finalized, call it, 30 June, more or less. There's very little time there to get your head around exactly what the current run rate of costs would be. So we did stagger that a little wider for that purpose. So acknowledging that's not necessarily where some shareholders would like to see it. And quite frankly, we don't think it will be at the upper end of that. As we said in the quarter just gone by, our costs are actually trending towards the bottom of that range, which is really good to see already. The cost-out initiatives we've got in place are working. And as the Chairman said, our operational team are doing a good job in doing that. There's productivity lifting that we can see already from the Queensland assets, that will bring unit costs down. So I'm encouraged by that. And we've also committed publicly to a $100 million reduction in the cost run rate by 30 June of this year. So that's not insubstantial. That's in the Queensland operations in particular. So if you divided that by saleable tonnes, you can see that's a material reduction in cost per tonne for the Queensland business. And we're encouraged by the plans that we've got in place already to deliver that. So it's hard work, getting your cost down in the business, as many of you will know. But it is important work to make sure that the business maximizes its margins. We are in a cyclical industry and we need to make sure we maximize the margins through the cycle and that's what that's all about. Royalties. Sorry, royalties. Look, royalties are a tale of 2 halves, isn't it in terms of New South Wales and Queensland. Queensland rates are terrible. New South Wales have been revised but in a sensible manner, I have to say. So the dollars per tonne just we published there for you in the quarter, we paid an aggregate on a consolidated basis of $30 per tonne in royalty. So that's quite significant. And so -- and that can be much higher with greater coal prices. And in Queensland, particularly because they have a progressive royalty system going up to a top rate of 40%. So it's tax, not like generally historically royalties. Those are the highest royalty rates in the world. So yes, just look, be ready for that because when price spikes come, you'll see royalties per tonne go up and we'd like to see that moderated. We would like to see that at a more sensible level because as investors in this space, you know that when you get those coal price spikes, you pocket quite a bit of capital to deal with the troughs when they inevitably come in a cyclical business. But if 40% of the revenue is taken at that time of the peak, then obviously, you haven't filled the tank as much as you'd like during the good times to weather the more subdued times. And so that is a real challenge that we've addressed with the previous government. Obviously, there's a new government in Queensland now. They're well aware of the impost of this. They want to see more investment in the sector. It's sort of been very quiet from a new mine investment perspective, given the royalty changes that have occurred, changing ownership of mines doesn't evidence new investments. It just the previous owner took the hit on the royalty change, right? And we just factored it into our calculation in terms of what we paid. But it does lower the returns overall and does make it more volatile and in terms of your earnings profile over time in a cyclical business. But the best thing we can do is get those costs down and make sure that those margins are sufficient because the royalty [ bite ] is what it is and we'll just have to make sure that we've got a resilient business through the cycle by getting that cost and productivity work done.

My name is [ Winnie ] and I'm a shareholder. My question is Whitehaven states on Page 24 of its new sustainability report, among other places, that Whitehaven's high-quality, high-CV thermal coal is expected to be the last to leave the market. However, in our primary market of Japan, South Korea and Taiwan, their imports are already in decline and most of the plants currently under construction in Southeast Asia are not calibrated to run off the high-CV coal Whitehaven processes and may never will be. The only nations that have significant capacity of coal-fired power in advanced stages of development are China, India and Indonesia, all major coal producers themselves and they plan to use their own domestic supply. Given these somewhat dismal prospects for thermal coal, why are we pushing ahead with 3 thermal coal projects that limit the company's access to finance, insurance and present serious reputational risks?

I can't comment on China and India is in terms of their thermal coal markets because we don't sell any thermal coal at this stage to China but we certainly do to Japan, Korea and Taiwan. And Paul and I were only in Japan last week. We spent a considerable amount of time with METI, which is the government department that sets their energy plans for the future and they're in the final stages of drafting their seventh energy plan. They're currently working under the sixth. And the seventh energy plan is focusing on decarbonization and energy security. Now the Japanese take a unique view to decarbonization. And a former colleague of ours was the Chairman of J-POWER, Kitamura-san and he put it very neatly and he said, we don't have a coal problem. We have a carbon problem. And so we need to deal with the carbon and that's what the Japanese do in terms of their Scope 3 missions. And they are still building ultra-supercritical, coal-fired power stations. There is the political issue -- the biggest political issue in Japan is still around the reintroduction of the contribution by nuclear in Japan and it's quite some time since the Fukushima disaster. And so their forecasts in the sixth energy plan are still not -- well, they're still not meeting the targets of contribution from nuclear or renewables in the sixth energy plan. That void has been taken up by ultra-supercritical, very clean, coal-fired power stations that they have and some gas and some cogen and some with the cogen with biomass. I mean we visited a relatively new coal-fired power plant in Hitachinaka City, which is just south of Fukushima and it burns coal but it also burns biomass, wood. So the indication is that, that market is going to remain strong. And of course, it remains strong for the high-quality coal because they can't burn lower-quality Indonesian type coal in these ultra-supercritical power stations. And this is where we make the assertion that our high-quality product is assisting many countries achieve their commitments under the Paris Agreement. And of course, a classic example of that is Japan. Paul, do you want to add anything to that?

I think the market at $145 feels pretty robust, I have to say, because we are in our shoulder season, so you would see generally lower demand at this time. The countries you mentioned are relevant for sure, ultra-supercritical power stations being used there, which is ideal for the coal that we produce. As the Chairman mentioned, that recent trip in Japan, the government and also lots of the end consumers were asking us about where is Vickery and when you're going to bring that on? And the reason for that is because as we're talking, mines, obviously mined coal and that is a finite resource in the particular deposits you might have. So mines roll off. And so they're worried about when the new mines are coming on to sustain what is generally a pretty young fleet of coal-fired power stations. Asia has the youngest fleet by far. And so Japan, as the Chairman mentioned, has built new coal-fired power stations. Korea has done the same. Malaysia, which you didn't mention, is an interesting entrant into this market. And they are using now the Japanese spec coal that we sell. And so we have seen them enter the market and tighten that up even further. So another source of demand for our product. So we feel pretty good about the outlook for our ability to sell the coal at a good price. So I think $145, I think you should be reasonably comfortable that in a shoulder season, that's pretty robust. Sorry, Taiwan. Yes, Taiwan is interesting. Taiwan is a good market. They actually -- we like that market a lot. They also use Japan, not in all their contracts but very close to Japan spec and have been moving up the quality curve for many, many years. So Taiwan, we like that market. It's been very good, very good people to deal with and very high-quality power stations there. So they have ultra-supercritical plants as well. Their emissions from those plants, the same as Japan, Malaysia, their gas equivalent in terms of their emissions. And so I'm using the word emissions, of course, because unlike the previous reference, it's not a pollutant. It's actually emissions issue that CO2 represents. And so it's not an air quality concern in that regard. Those power stations have very, very good air quality ratings, gas equivalent in that sense. But yes, Taiwan, very good market for us as well.

My name is [ Hugh Vaughn ], shareholder proxy today. The proposed greenfield Blackwater South mine would see Whitehaven mining coal past [ 2120 ], completely out of line with even business as usual energy demand scenarios and will clear thousands of hectares at Koala habitat. Why is Whitehaven pursuing this project in spite of its unacceptable environmental impacts and its obvious transition risks? And wouldn't we, as shareholders, be better off scrapping this project to avoid the reputational and financial risks that may harm shareholder capital?

Do you want to take that, Paul? Lots of challenges in Queensland than kind of the South. I'll let you answer that.

Yes. Look, I mean, I think what you're referring to is obviously the extra coal resources that came as part of the acquisition of Blackwater, in particular. And there's another 100 years for sure in terms of coal there. But whether or not that's something that the company is going to do, I think that's a question which will be dealt with in time. So the implication that we're committed to doing that now, I don't think that's right. So I'd correct you on that one. That would require a full approval process to go through that. And so that takes many years as everyone will understand. So no current plans in that regard. But it's obviously very valuable. So you mentioned energy demand. It's not actually energy. It's actually metallurgical coal for steelmaking. So the steelmaking market would be the greater determinant of whether or that's prospective in the future. But in the meantime, the existing approved areas have got plenty of life in there and that would be a question for later.

Okay. So it's a proposed project, that's what I was referring to. The proposed South [indiscernible] Blackwater South project. But we as a shareholder, I mean the costing for that is likely to be in the region of $1 billion or more. We as shareholders, would surely be better off just scrapping this project and seeking returns on existing...