Yancoal (ASX: YAL) shares soared as much as 9.4% on Tuesday after the company reported its December quarter update, which highlighted an outsized $2.46 billion cash position and potential to reinstate dividends.
Average realised coal price of $176 a tonne, up 3.5% quarter-on-quarter but down 10.2% year-on-year
Attributable ROM coal production of 12.7Mt, down 4% QoQ and down 5% YoY
Attributable coal sales of 10.4Mt
Cash balance up $480 million to $2.46 billion
The below speakers include CFO Kevin Su, Executive General Manager David Bennett and General Manager of Marketing James Collins.
Q4 production: “We hit the middle of our production guidance range with 36.9 million tonnes of attributable saleable coal production.”
Q4 costs: “When we report the 2024 financial results in February, we expect our cash operating costs to be around the midpoint of the $89 to $97 per tonne guidance range.”
Full year guidance: “Our full-year attributable production and sales increased by 10% and 14% respectively, with a strong second-half weighted production profile.”
Dividend policy: “We will be in a position to comment further on dividends after the board meeting in February to approve the 2024 financial results.”
M&A strategy: “We currently have financial capacity to pursue corporate initiatives and to make distributions to shareholders.”
Coal market outlook: “Geopolitical tensions created some volatility in the coal markets, but ultimately there was good supply from most exporting countries and soft demand.”
Thermal coal pricing: “Our thermal coal realized price increased 4% to A$163 per tonne. Shifting focus to metallurgical coal markets, these were stable but at lower prices than six months ago.”
Operational outlook in the current year and beyond: "In terms of the last two years of operational planning and performance on our mine sites, we've been recovering from the wet weather periods in 2021 and 2022. We've invested strongly, capital wise, in equipment. We have good strategic plans in place to set our mines up to be productive, safe, reliable and cost effective into the future."
Elaborate on the company's dividend policy and capacity: "Our policy doesn’t change. We use 50% NPAT or 50% free cash flow, whichever is higher, as the guideline for dividend distribution. At the end of the day, the dividend is a board decision ... With $2.5 billion cash in the bank and no debts, we can balance growth opportunities with shareholder returns effectively."
Coal pricing and market conditions: "Over the last few weeks, there has been a softening of the market, presumably on the back of the warmer winter in Europe as well as healthy supply. The forward curve does price in a little bit of Contango, which suggests a possible coal price recovery in the latter parts of the year."
Relationship between energy market prices and implications for Yancoal operations: "In years gone by, when gas prices rose, it might make sense to switch power generation from gas to coal. At the moment, there is a healthy supply of the lower-cost material, which has likely caused the NEWC price to soften recently."
Potential for structural shortage in the thermal coal market: "We see the demand profile for exported thermal coal reaching a higher level in a further forward timeframe than previously anticipated, while supply may deteriorate over time due to natural mine exhaustion and increased domestic use, particularly in Indonesia."
How does Yancoal compare on operating cost relative to peers: "Yancoal has always prided itself on being a low-cost producer, keeping ourselves as low on that cost curve as possible while delivering the volumes committed to in our forward estimates."
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