© 2024 Alpha Spread Limited. All Rights Reserved.
www.alphaspread.com is not operated by a broker, a dealer, or a registered investment adviser. Under no circumstances does any information posted on www.alphaspread.com represent a recommendation to buy or sell a security. The information on this site, and in its related newsletters, is not intended to be, nor does it constitute, investment advice or recommendations. The information on this site is in no way guaranteed for completeness, accuracy or in any other way. In no event shall Alpha Spread Limited be liable to any member, guest or third party for any damages of any kind arising out of the use of any content or other material published or available on www.alphaspread.com, or relating to the use of, or inability to use, www.alphaspread.com or any content, including, without limitation, any investment losses, lost profits, lost opportunity, special, incidental, indirect, consequential or punitive damages. Past performance is a poor indicator of future performance.
You don't have any saved screeners yet
Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Thank you for standing by, and welcome to the Whitehaven Coal March Quarter 2021 Production Report. [Operator Instructions] I would now like to hand the conference over to Mr. Paul Flynn, Managing Director and CEO. Please go ahead.
Good morning, everybody, and welcome. Thank you for taking the time to dial into the March 2021 quarterly production report for Whitehaven. I'll -- as usual, I'll get on to the highlights and then move through the body of our report and get on to Q&A. The quarter -- look, the quarter has been an interesting one. We've certainly got some very good results from a cap perspective, and we've got some variable updates and also revised guidance for related impacts from Narrabri's difficult period in this quarter and the previous. The highlights. Our March quarter ROM production, 5.5, was a good result, 12% up previous corresponding period. The quarter managed saleable coal production at 4.3, 6% up. In terms of total managed coal sales at 4.8, managed own coal sales 4.2, and equity coal sales of our own coal at 4 point -- 3.4. All these factors up at about 7% period-on-period. Coal stocks are healthy at 2.8 at the end of the quarter. We have reported, obviously, during the quarter that there's been some challenges from a logistical perspective, and we'll get to that a little bit later on. But strong coal production during this quarter at Maules Creek, in particular, was pleasing given that we actually have had some rate impacts across the board and more as being able to manage their way through that relatively well. Narrabri's underground mine production is impacted by continuing geological challenges from last quarter and into this and associated downtime with the wear and tear on our equipment. And given all of that, we have revised the 2021 full year production guidance with sales and unit cost also relatedly having to be revised, and I'll get to that shortly. As far as COVID goes, we are still living with that, but we have no known cases and haven't had one as yet, thankfully. But we'll continue to operate with our distancing and hygiene measures in place. From a safety perspective of 5.92, whilst that positions us relatively well to the industry as a whole, it's still not our best efforts. So we do need to continue to apply attention to improving our TRIFR rate for better results as we come into the year-end. I'll move over the page now on to the tables of results. As I've said, ROM coal production was pretty good at 12% up. And then across those other dimensions at the managed level, sales and coal production sales due to sales of purchased coal, and then now sales overall on an equity basis, about that 7% up as well. The interesting part, I think, in terms of this quarter, if you skip over to the equity coal sales and realized pricing table, which I'm sure everybody is focused on, a couple of key interesting points to come out of that. We have got a higher proportion of other thermal coal sales during the course of this quarter, and we'll get into the drivers for that. The prices, you can see, have been relatively strong across the way, but our realizations have been affected by a couple of factors, and we're trying to call that out for you a little bit further in the report. So thermal to the average for gC NEWC realizations for the period about 15% down, principally driven by 2 factors: a lag in how we realize the benefits of better pricing and a better pricing market. But we are selling more other thermal coal outside gC NEWC spec than we would have planned to. And that really is a function of Narrabri churning out fault-affected coal, which is obviously diluted coal which is a result of this traversing in this faulted area in the mine. So that is a temporary thing. And as I say, in subsequent quarters, given the lags we'll see realization is picking up over time, but this is a point in time observation can gain us some time for this particular quarter. gC NEWC as I say, average $89. That's a big improvement, up on the previous quarter, which is nice to see. But as I say, we've got 2 different dimensions there. Now the issue here is that if you're selling other thermal coal in greater proportion, it does push you into a very widespread between the 5,500 market and the 6,000, which we've been studiously trying to avoid. But if we got fault-affected coal, then we do dip into that market, which is unfortunate, given that there is some 30-odd-dollar spread between gC NEWC and the 5,500 market. So that really is the driver for those realizations. And I'm sure the key questions when we get to Q&A will be hard on that last and when we're back into normal coal quality at Narrabri in particular. And of course, there's just the general lags as we've seen in the rising market. Net coal sales are 20%. The net coal market and pricing has been relatively stable albeit at subdued levels. We have got away a few extra cargoes in this period. And so 20% is a little higher than what we've done historically, and it's high given that Maules itself with 17% during that period. So the other mines have contributed to PCI sales into India during this time. So as a result of the changes that we've seen at Narrabri, we have revised our guidance there, and to revise our sales guidance target for full year down to 17.8 to 18.3. And there is a related cost impact of our sale, as I say. And there is, as a result, I'll speak to the changes in the ROM production for Narrabri itself shortly. But over at Maules, Maules are doing really well and has had a consistent performance throughout the year, and it positions itself very well for the final quarter of the year at 3.7 versus 2.4, we're 58% up. So it's a nice solid performance, derisked a good portion of the production for the year as a result of that solid quarter-on-quarter performance. And so we're well positioned as a result. We have had logistical challenges, as you know, just with Shiploader 1 and Shiploader 2, although we've got obviously one there up and running and the remainder of the work to be done for NCIG to bring full capacity back on. It will probably be -- we're talking probably about the October/November period to see that back on toward. It might be a little bit early, but I think it's worthwhile just positioning ourselves around there. As a result of that, we have had some sale slippage and so stocks are looking good or high as a result and 2 million tonnes of the 2.8 million tonnes that we've reported, but we will see that a little slide down over the balance of this quarter. So as I say, Maules is doing well and positions itself very well for this final quarter. We'll see it push up to the upper end of its guidance for the full year. At Narrabri, I'm sure, which is the odd person out here in this instance, it is struggling through an area of difficult ground here with -- at 1.1 versus 1.5, we're 29% down on the ROM totals, which is very disappointing. I'm sure you're all concerned. Coal sales of 1.1 and managed coal sales have been the same number. It's disappointing. We are carrying 0.5 million tonnes of stock there, but it is stock which is qualitatively less than what the average of the mine normally produces just because we are traversing in these challenging areas. And the big issue here is that having cut a lot more rock and stone and conveyed it out of the mine, our gear is suffering from a lot of downtime from outages and wear and tear. And as a result, we have concluded that that key aspects of the longwall won't be able to continue on until the end of the panel. And so a mid-panel overhaul is required for certain key features of the longwall, and so that's going to require further outage. So coupled with the slow cutting time in traversing this faulted ground and the outages in terms of time that we need to conduct a mid-panel overhaul of key items, we're essentially -- there's about another -- we've got about 4 weeks lost production in all of that, hence, the need to change our loan guidance for the full year, unfortunately, to 4.5 to 4.9 now for the full year FY '21. That is most unfortunate. Additional longwall moves from 109 to 110. So that is now rescheduled into Q1 of FY '22. If we go to our open cuts, albeit on schedule for the full year, they've done pretty well. They were obviously slightly less than period-on-period results for both Tarrawonga and Werris, but they are on plan to deliver their results for the full year and have been relatively uncontroversial, I would say, during the course of this period. They had both snuck away a couple of extra PCI sales in this quarter, hence, as I say, at higher net coal percentage of 20%. So Tarrawonga and Werris have been able to do that, which is good. There was a little bit of deferral of net from last quarter into this, which bolsters that. But the target of those towers has been into India, which is, I'm sure, will be part of the Q&A session what's going on with that end of the market when we get to the Q&A piece. As I say, the logistics and weather have played a part in this quarter. Tarrawonga and Werris both have been affected by weather during the period of this quarter, but they were ahead in any event year-to-date. So they are positioned well for the full year. And as we reported, on the 23rd of March, Shipload 1 was taken off-line for some critical appears that needed to be done. That outage is now over and is back up and running. Let's say Shiploader 2 is definitely going to be later on this year. It's running well, that work, but I think the October time is the best time to think about when it might be fully operational. So the impact of these various changes, unfortunately, from a sales perspective, we're now at 17.8 to 18.3 as a consequence of all these changes, logistics impression and principally Narrabri's challenged quarter. I'll move on the development projects, and there's really nothing particular to call out during the course of the quarter for the development projects themselves. So I might just move through that given that there's nothing that has advanced through the period for that. Over on to our outlook for the markets. So say, the high CV thermal market is pretty good. And you want to stay in that market, and we've unfortunately drifted a little bit further into the 5,500 market than we would like to or coals based off pricing for that part of the market but virtually this has same dilution and faulted coal we've had at Narrabri. And you are seeing a massive divergence between the high CV market and, of course, that lower rank coals. The met coal market itself, I think, is really quite interesting with the compression of the prime hard coke market and mobile PCI and also semi-soft pricing, all within a bull's row of each other, very, very low levels from a hard coke pricing perspective. And I think this will take a little while to solve itself. So overall, coming into our guidance, just to wrap this up for everybody, the managed guidance now for the balance of the year, now we are -- we are now guiding the 20.6 to 21.4 through our total of 1 coal production for the year. Maules Creek, as I say, remains unchanged, and we'll probably do at the top end of its guidance. Narrabri, unfortunately, has been the catalyst for this revision at 4.5 and 4.9, and the Gunnedah open cuts remain unchanged at 3.9 to 4.1. Coal sale, as a result, at 17.8 to 18.3 is the refined guidance for this full year, a consequence of those Narrabri changes. As a result of having an underrepresentation of what's historically been our cheapest coal in Narrabri and the impacts of under absorption of take-or-pay and also other factors, we are now revising our guidance on unit costs slightly upwards to AUD 73 to AUD 75 in range, which is not what I'm sure everyone want to hear, but it is the fact that not being able to have the normal proportion or the expected proportion of our cheapest coal represented in our cost base. So that brings us to the end of the quarter to say good results from the open cut perspective. Another quarter, unfortunately, off the back of the previous one where Narrabri is traversing some difficult ground and the revisions to the guidance as a result. So with that, off that, I'll hand back to you, and we may as well open up the Q&A session.
[Operator Instructions] Your first question comes from Rahul Anand from Morgan Stanley Australia.
Perhaps if you start with Narrabri, please. So obviously, we struggled a bit with this one. But if we account for the 4-week outage, and you've also moved the longwall move to the next year, you're still only expecting that 800,000 tonnes of production for the last quarter. I just wanted you to help me understand that number and perhaps put that in context of the target of 7 million tonnes per annum to 8.5 million tonnes per annum that you talked about previously, once you start going into, I guess, smaller panels of the southern leases 201 and 202 because they're only about 600,000 tonnes per annum. I'll come back with a second.
Right. Rahul, I'm not quite sure I got all of that down, the 600,000 tonnes per annum. Do you just want to go in through that part, I didn't get that last? How does that rates...
Sure. Sure. So my understanding was 201 and 202 will contribute about 600,000 tonnes per annum.
Through -- please.
Yes.
Yes. Yes, okay. Yes.
So I just wanted to understand how we can get to the 7 million to 8.5 million tonnes per annum run rate for Narrabri. Even if we include that, considering for almost a full quarter of production in the fourth quarter, the lower end of guidance is suggesting only about 800,000 tonnes of production? So that's the first one. I'll come back with the second.
Thanks, Rahul. Yes. Look, I should have said I'm joined here by Ian as well so he can answer some of these questions. I've got Kevin here, of course, and Sarah as well. So let me just start off firstly by saying, look, it's a disappointing result. There's no doubt about it. But the gear is linking as a result of the extra wear and tear. It's not just 1 feature, there's a bunch of aspects to this, which are obviously been -- suffering as we've labored through not just the plan fault, but then the unexpected fault that we found in face as well. And that's really where all this requirement for maintenance work comes. And we just acknowledge that we can't get into the end of the panel when an overwall would normally occur. So some of this work has got to be done soon. And there is -- it's got to be done soon in areas where there's limited space to conduct this type of work. So it's slow work. And the cutting in this area itself, getting to the areas where they can be conducted, is also slow. And so hence the relatively modest expectations of incremental production from our total today, as you say, arriving at the lower end of the range where you calculated your additional 800,000 tonnes from. Now in terms of trying to bridge the 7 to 8.5, where you've skipped over, obviously, panel 10, and you're now concentrating now on panel 203. So if I look at 203, and if your -- I don't have the math to point to you, but if you look at 203, 204, 205, they are in correspondingly good areas of shallow ground where we've got high productivity, low costs. And as a result, strong production will come out of those areas. As you say, 201, 202, they are cut and fit. We're proposing that as cut and fit tonnes. And in a full year, they will produce, as you say, about 600,000 tonnes of that total -- that range that you just recounted. But the 203, 204, that type of area, those totals, as you mentioned, 7 to 8 open it all, but we are in deep ground as we've previously discussed our desire. Obviously, with the plan that we meant now or for stage 3 back in December was obviously to get across to the shallow ground as quickly as possible and resume cutting at rates which were consistent with where we were at 104, 105. When you go back and you look at those previous years when you're cutting at those levels, obviously, production was well up compared to what we're unfortunately doing at the moment, and costs were well down as a result. So I'll leave it there, Rahul and see if that answers a couple of the aspects of your question now. Have you got a follow up there?
Yes. So I guess 2 quick follow-ups on that then. So Panel 10, you're still expecting that you should be able to produce quite predictably and somewhat in line with past quarterly run rates, especially because you're stepping around the fault this time. That's the first. And second, the longwall step around, is that going to be delayed into Q3 then for next year?
Yes. Look, I think the -- all that we've just gone through in terms of this -- going through this difficult ground, the wear and tear on the equipment, the quality and the realization price, realization impacts of having the quality, really does speak to the reasons why we've chosen to have a step around in panel 10 to go around this faulted area. We've given the equipment a fair beating driving through these faults, and we're really keen to avoid that in panel 10. And of course, it avoids the dilution associated with traversing that type of ground. But in terms of production rates, it will be for the year, the total, we'll give our guidance at the end of the year, in the financial year. But of course, with the slippage of now the relocation moving deeper into that year, the totals for the full year will be adjusted accordingly. Ian, is there anything you wanted to add to that?
No, I think you've summed that up, and that's correct. Obviously, the push out of that move between 110A and 110B will be pushed back in line with the, I guess, the delay in 109 to 110 itself.
Okay. Perfect. Okay. One quick question, then I'll pass it on. Just on Maules Creek, coal stock is nearly 2 million tonnes there, mine performing pretty well. If I look at past performance in terms of peak coal sales, you've done 2.6 to 2.7. Is that the peak capacity of the infrastructure to get support, if we assume that the port is working fine? Could you remind me a bit on that as to what the sprint capacity is for the logistics there perhaps?
Yes. We can certainly do more than that. All the contracts that we have allow us to have surge capacity in them. So we can -- we were originally worried, obviously, when the first shipload went down as a result of the storm damage last year, but we satisfied ourselves that we could get through there with the 1 shiploader working with 2 berths. Of course, we've had the mechanical outage for Shiploader 1, which is pretty annoying. And with the balance of time remaining in the year, our view was that there is a point of compression here in terms of when you can get the ROM and convert it into sales during that time. The floods, which knocked out the line for about a week, a little bit less than a week, have been unhelpful. But that's all obviously dissipated. So we think we're fine for our guidance. And as I say, we have surge capacity in our contracts to be able to do that.
Okay. Perfect. Are you able to put a number at all as to what you think it can peak at?
No, I haven't got a number here for you. Rahul, thank you.
Your next question comes from James Redfern of Bank of America.
Just want to dig into the price realizations a bit, please. Can you please remind us what the lag is to the gC NEWC Index? And then also, I guess, given the geological issues at Narrabri, how we should think about the price realization in the coming quarters, just weighing off -- weighing up, I guess, the lag effect, and then also when you think to read through the faults and so on at Narrabri?
Thank you, James. The gC NEWC Index is really the piece of the puzzle which probably lags the least, if I can call it that. It's generally the average for the month, as you know. So to the extent that the prices have risen considerably and quickly, there's always a distortion there in terms of when you see that benefit materialize in the realizations that follows. So we call that it's the average but not the worst disease in the month and the least it would be the first time it happened at the end of the month is minimal. So in that context, if we've got a continual -- now that we've got what looks to be like a relatively steady price path at the moment, then you should be able to see that materialize in the following months. The confusion of this area is that Korean sales, say, for instance, as I'm sure we've talked about this many times, are done on an annual basis. And so to the extent that there's a lag of potentially 6 months on average, because those contracts are signed during the course of the year, not just at 1 particular point, on average, the lag is 6 months. You do need to work your way through that. To the extent that there are other sales, which are other indices, which are some of the fault-affected coal that we've taken on, those ones are relatively short lag-type situation. So there's essentially about a month lagging those. The quarterly settlement for the PCI and semi you're aware of.
Got it. And I guess maybe on Narrabri, in terms of the issues there, I mean, do you have any line of sight as to whether there will be more faults that you're seeing going forward? I mean obviously, ongoing weighting issues will always be an issue at Narrabri as the depth recovery increases. But I mean, do you have a long-cycle improvement at Narrabri in terms of the productivity? And I have a follow-up question.
Yes. Thanks, James. That's a key question here. Look, we are doing a lot of work, as you can imagine, to try and minimize the exposure to any further unknown events in the future. So not just the balance of the panel that's left before us in 109, but also in 110 as well. So I might just get Ian to describe to you what we're doing there.
Thanks, Paul. So I mean, we obviously have the mapping from the work that was done in the tailgate and main gate roads. But one of the other programs that we've been putting in, which is a development exercise working with the third-party suppliers on what we call geo-sensing technology, which is building on the oil shale gas type of work. And what we're going to do is put a drill rig, which drills long holes from where we would take 109 panel off and drill back towards where we are. We're going to do about 6 of those on that 50- or 60-meter spacing. And using that technology, we're hoping that what that will do is give us better -- or I guess, answer any of those questions about delineation issues on the existing faults that we're aware of going forward.
I would say to you that that with the material coming out of Narrabri in this next quarter, over this quarter and the stock of the holding, and the spread where it is at the Tarrawonga, my expectation, I think, is that the June quarter is going to -- the June quarter discount for the coal associated with the -- other than 6,000 kcal is going to be about the same in June. So I'm thinking that number is probably close to a 13% discount in June. And I think that will tail off as we get through into fiscal year '22 because we go back into 110A and that coal quality improves back in that time and place. So we'll just be pushing that coal through. To answer the question, I think someone else asked on that.
So just to clarify that your 13% discount to the NEWC -- the gC NEWC Index, that includes a lag effect plus issues at Narrabri.
Yes.
That and the lag effect.
Traditionally, what's happened is that the coal price hasn't jumped 32% in 1 quarter. It's sort of been going up and down steadily or more steadily than that. And the other part is that the premiums that we've been receiving for the high CV coal and the volume of other coal has typically been a constant sufficient to offset. So that's why why we've been reporting those numbers to you in the past. It is effectively adducing new stock.
Your next question comes from Paul Young of Goldman Sachs.
Paul first question is on Narrabri and again, just looking at the mine plan and, I guess, the difficulties you've had again during the quarter, can I just sort of throw something out there? I mean I know you're leading longwall 11 for a later date. How much development work have you done on 203? And have you actually looked at -- similar to what you did in, I think it was longwall -- long [ level ] you left that little section because of the dike. I'm actually leaving that northern section in 10 and just stepping around, or just stepping straight to 203. So I'm just curious about what development you've done on 203 and just sort of throwing out your thought process around trying to get into that shallow area earlier.
Yes. Thanks, Paul. That's a very good question. And you can imagine that question has occupied the minds of many people internally here for some time. Ian can comment on just the 203 development time lines. But the reality of it is that 11 was an opportunity to do that later, just given that the float is the primary consideration, which is, I suppose, the basis of your question on 203, in particular. We have looked at the various scenarios. I've been leaving behind 10A or the other -- the primary part of the panel is not really the right answer. I mean if we looked at the step around, and you said, well, should we step around, rather than stepping around, go straight to 203. That's the question which has been analyzed to death here internally, given that it is the back end of this panel, the 109, which has been giving us the struggles. Obviously, a previous question from James and Ian's answer is to ensure that in the backend of 10, which we refer to as 10b, after the step around, we don't encounter the same sort of issues. But the key challenge there is making sure that we have enough float to be able to move into the shallow ground as quickly as possible. Our determination was that we couldn't do that any quicker given that -- given the development lead time we need to develop 203 full inch. Ian?
Yes. Thanks, Paul. Yes, that's correct. We don't have the flight. I mean the sequence that we have has sufficient flow in all of our blocks. Probably the next -- well, goes out for the next 5-plus blocks. So if we were to do any of those suggestions, you've said that, that would cause us to get an interruption to longwall production. That technology that I just spoke about previously, we're going to drill the rest of the 109 block out or we're in the throes of setting up to do that now. And as soon as that's finished, we will be going down and doing the same process in 110A and B as well to best set us up for the mining of those panels.
Okay. And the next question then is, when is the quarter that your schedules based on, I guess, really looking at the profile in 110 longwell 10, when are you moving to 203?
Paul, that's at the back end of calendar 2022 now. So we're talking about November, December of '22.
Yes. Okay. So effectively, you've got another 15 months or so, 18 months of hard yards in Narrabri dealing with these geological -- geotechnical issues, I should say, before new move to '23. Okay.
Yes. Look, I think that's a reasonable assessment. We're not there all hard yards is another thing. We think by the step around 4, we've excised the primary portion of the hard area that we've experienced in 109. And in 110, 110A, obviously, yes, you recall in the equivalent location in 109, we did actually have 1 million tonne month, which is welcome and extraordinary given the circumstances we find ourselves in now. So -- and to the extent that we're able to better understand whether there's anything unexpected in 110B, we shouldn't be suffering in the same way as we are now, given that we won't be driving the equipment through rocks and stone in the meantime.
Second question is on your coal stockpile and also, again, back on your coal book and price realizations. Paul, can you maybe just -- it's obviously a complex book with 5 or 6 major customers or countries you sell to with different pricing structures and lag. So just to get it really simple, I know you've tried to say that 40%, 50% of your book is priced on a lag basis, but -- and a lot of that's the Korean tonnes. But just to put a number on it, as far as the lag is concerned, what roughly would that lag be? Would it be Q minus 1? Or a minus 3? Or would it be a 3-month lag on that 40% to 50%?
I think it's just an average of, if you want to try and land on something, you're only going to get an average of that, Paul.
That's fine. That's effectively what I'm after, is just to determine roughly what that lag is on that half of your sales.
Yes. Okay. I'll probably come back...
Is the higher prices coming in to realize that in the June quarter or September quarter?
It's not in 6 months, it's more like 3 months.
Yes. Okay. That's...
Longest is 6 months for your annual stuff, but that's only 20% of the book.
Paul, if you have a look at the annual report, where you see the breakup in the revenue between countries and jurisdictions, it's really the Korean tonnes that have a longer period. The Japanese pricing generally tends to be gC NEWC months, gC NEWC prior months, gC NEWC prior quarter and the majority of the tonnes here. But the incremental times that have come through in this past period because we're selling more of that more of the other coals has been in the Korean market, which tends to be struck as a year-long contract. So let's go away, and we'll come back later.
We'll come back with a better answer to that. Just if you're looking for something that you can simplistically go from one across the whole thing, I mean, you -- obviously, the same-store sales on a quarterly basis. And on average, there's 6 weeks, if you said, a lag there. The new caps of benchmark stuff should be no more than a month of lag. But when it rises dramatically, that's when you've got a stable price path throughout the course of the month, right? So today, you've got average of 94, but at this point it's actually only 90 on a month-to-date basis. So there's a difference there. And then as I say, the Korean tonnes, generally, that's a 12-month contract. It's, on average, a 6-month lag.
We'll do some math for you then come back.
Yes, okay. I'll phone through this afternoon. Last question, at least for now, is just on that coal stockpile of 2.8 million tonnes. Based on your view on the infrastructure and the port and the rail, what number -- Kevin, this is really a question on working capital online, what number do you think you can get that to, and when? So what's the level you want to get it to? Obviously, it's probably lowest level as possible and by which quarter?
It's a good question. It's a nice balance between product stock to enable blending and product stock to enable smooth use of logistics. So the number we work to is typically around 1 million tonnes of product. And we're on behind that supporting it. So probably somewhere between 1.5 to 1.8, I think, would be the final number that you're looking for. So somewhere in that 1.5 million tonnes to 1.8 million tonnes or 1.2 million tonnes. That's sort of a number, I think, that works really well for us across all those. And we want coal at each place. So it's -- there's a number for it.
Yes. Great. And you said SL2 at NCIG should be operational early in Q4 of this -- of calendar year '21. So do you think that 1.5 to 1.8 will be achieved sometime in the September quarter? Is that how I -- into December quarter?
I'd say first half. I would say that the schedule at Shiploader 2 is coming ahead, it's coming forward. And when projects like that are coming forward, it generally tends to be good news and keep coming that way. So we've said early quarter 4. So we'll keep you advised as that comes through. There's a couple of key points coming up in the next month or so. And again, we should be able to give you an update on that in May.
Yes. But the impact of that, Paul, to give actually more normalized stocks will happen later in the first half. It won't be the end of the first quarter because the first and the second shiploader won't be up. And then by the time it is up, then your lag time in terms of that being able to ramp that up and push that stock through at the rate we'd otherwise like to, means that you're still going to have healthy stocks at the end of the first half.
[Operator Instructions] Your next question comes from Lyndon Fagan of JPMorgan.
Look, the first one is just to try and understand a bit more of what happened in the last 3 weeks. So I guess you provided guidance on the 23rd of March, and it's only really 3 weeks ago. I'm just trying to understand a bit more about what happened to lower it again. That was the first one. I did have some follow-ups if I could.
Yes. Thanks, Lyndon. Yes, look, it's definitely been dynamic, there's no doubt about that. But it's really just the challenge of some equipment failures, which have occurred over the last 3, 4 weeks. And this is not a new thing. I mean it's been happening since we've been traversing some of this fall to ground. But the question is, there's only so many Band-Aids you can put on the equipment when -- until you get to a point where some more fundamental pieces of the equipment can't last for the duration of the panel. And that's been our conclusion. We've been monitoring this all the way along, but this last fault really has given us a difficult time with the gear, which is already impaired to some degree by virtue of having come through these large faulted areas which were known, but the extra one, which was -- which we found in the middle of the face really has caused us some difficulty, as I say. We've got some ground to go through now before we can change out some of this equipment. So it's really just a cascading nature of that. It's not 1 particular piece. It's just a number of them cascading causing related weaknesses within the longwall itself, the IFC, in particular, being stage over, all these items, which are bearing a lot of wear and tear, you just got to get to the end of it and deal with it.
Right. Okay. Yes, that makes sense. So -- and then going back to the previous discussion. So in 18 months, you get to 203 and beyond. Can we talk about what the ground is like out there? I mean are you expecting any geological challenges? Or is the base case that it's smooth sailing once you're out there?
Yes. Look, the ground there looks very good in them. That's why we're very pleased to get to there. We know it's got -- the geological feature has the same corresponding panels in that Western and Eastern flank as the mine had, but nothing too exciting. It's obviously very shallow ground. So the secondary support requirements that were -- we have at the moment aren't required anywhere near to the same level. And gas is actually very minimal there. So 2 levels in the face are very good there as well. So we're wholly expecting that area to be a return to the form that you would have seen us in year '16, '17, '18. And as we -- and I'm thinking, just looking at the diagram now, if you go back and have a look on panels 3, 4, 5, 6 on the northern side, you'll see consistent production there at high levels and at low cost.
And can you just remind us a little bit on the coal quality out there? So there's no met coal. Is the thermal coal quality any different?
Well, there's still PCI capacity in the mine. That's not until you get stage 3 that, that starts to weigh over time. So you will see us continue to produce the PCI. And coal quality is pretty consistent across the southern panels. As you get deeper, then you do start to see small increments in ash over time, but that's years away.
Okay. Great. And so just to go back to the sort of achieved price discount, it's really not until we get to this area in 18-odd months that we shouldn't be worrying about that. So we should be forecasting some sort of achieve price discounts for the next 18-odd months. Is that a fair statement?
We certainly won't be seeing the level that we've got at the moment, that's for sure, Lyndon. And the reason for that is, as I say, the step around avoids that fault-affected coal. And that's obviously a big driver of this discount that we're experiencing at the moment. So from our current realization adjustments, taking into account what Kevin said about the quarter to come and unwinding the fault-affected stockpile coal that we have on-site at the moment, we would be -- we're predicting an improvement in the discounts as a result of that, not continuation of the same across panel 10, no.
Great. And look, the final question hasn't really been discussed on the call. Just on all the projects, are you able to -- is there -- was there anything new in the quarter that we should be talking about in terms of progress? I mean obviously, no FID on anything anytime soon. But is there anything worth highlighting? Are we -- and also the pecking order, are you thinking Vickery before Winchester or vice versa?
Nothing particularly noteworthy has come out during the course of the quarter, I mean that's worth continuing across all the projects. I mean Stage 3 generally is transitioning more into a more operational sort of orientation to its evaluation now. Vickery is continuing to be refined. There's no doubt about that internally. But we are waiting for the judgment from the judge having had held the hearings. We know the EPBC deadline for approval of the project under the statutory rules is at the end of this month, April, but we're not going to be holding our breath potentially for that. Winchester South is just tracking along. But nothing noteworthy after release of the reserves last year. We are working through the feedback from the adequacy review that the Queensland government is going through, but there's nothing surprising out of that at all. That's just really a response to questions from them.
[Operator Instructions] Our next question comes from Peter O'Connor of Shaw and Partners.
Paul, in December quarter, you talked about the problems that you had. And you mentioned there was the 1 discrete area of longwall mine, which had a fault. And then you talked about the 155 million tonnes we hit in late December, which was discrete and unusual. I'm just trying to piece together what was discrete and unusual when you had the December call in January. And what's there now? So as I step back, you really need to put a plan in these comments because we're trying to struggle with where you are on a longwall block and where these features are. So I'm just trying to understand here this -- the main longwall fault area and what's discrete and different and where we are. And it seems like you might continue carrying this.
Yes. Look, I mean, the primary fault that we've known that for some time has been the feature of the conversations of the last few panels, Peter. That is known, and we've been open and transparent on that. Of course, this placement in Panel 10 is such that we feel better now to step around that. And we made that call, and everyone's been informed of that.In terms of this mid-face faulting that we found at the back end of -- in the second half of 109, yes, there's no doubt that that was surprise to us. It was not evident in the drivers going up either side of the panel, which would have been one of the sources of intel that you would have used to concern whether or not there's something, a feature there. And as Ian mentioned as well, we are drilling up from the main essentially from the take off roads up through the remaining part of 109 to further ascertain whether there's something else that we should be planning for in the balance of the panel that remains. The same work will be done, as Ian also mentioned, in 110. Particularly in 110 in total, but particularly in 110B, the second half of 110 after the step around, given that -- given what we've just been through, that would be the area of 110 that you would say would be susceptible to the same conditions.
So how acute is this faulting that it presents to the main gate, tail gate? Is this hundreds and hundreds of meters, the faulted area because...
No, no. No, it's not, Peter. But Ian, do you want to give Peter some color on that?
Yes. Thanks, Paul, and good morning, Peter. I'm sorry, a little bit of what you were talking about dropped out, Paul, so if I go over something, apologies. So depending on which fault we're talking about, Peter, I mean, sometimes it's been visible both in the tailgate and main gate, and we're able to understand what that looks like and interpreted across the block. And the original one that we talked about that was mid block in -- around that November period that we weren't aware of it that didn't show up, it went for, call it, about half the blocks of a length as we progress. But generally speaking, they go across the block, not along the block, if that helps.
So we've been through one -- we're going to step around long with 10, and we've been through one we didn't expect. And the last 3 months, we've been in what, an area of just incredibly difficult ground? I'm just trying to -- I think we're all struggling with why it's taken 3 months and it's been deeply a difficult area.
All right. So maybe I can give you. So late last year, we had the unknown fault, which took us a while to get through, and with predominantly most of the damage occurred because we were cutting stone. And Peter, you'll probably understand this, but maybe some of the other people on the call for a bit of context might help. So when we know where a fault is, whether it's an upthrow or a downthrow or we have to make the longwall go up or down, generally speaking, for about every meter of advance, you can only get it to sort of go up or down by about 100 meters. So if we know we've got a, for example, a 2.5 meter fault, we need to start at least 25-odd meters before it, ramping up to be at the right height or conversely ramping down, depending on what type of fault it is. And historically, when we've been sort of to understand the mapping of those, we do what we call the flight plans so that the wall can follow those and we navigate the faults and then we come down. And in December, we had a larger fault that we knew about, the 4.5 meter fault that we've got through, and we were ramping down that in a sort of very early January. Since then, in February, we've had another smaller fault, a 2.5 meter fault, which again mapped. And as we would expect, we'd normally be able to go over it. But to one of the earlier calls about the accelerated -- where and what sort of happened over the last sort of few weeks, is a section of that fault was greater than, I would call it, the average that we'd assumed. So we're forced to cut that drop because the longwall is not that flexible. And that's what caused the accelerated wear on, I guess, an already -- limping the longwall through to the -- to either the end or the places we plan to do that maintenance. So -- and the other thing, I guess, we noticed coming out of the fault sort of in that February period of time was the route conditions more were difficult to hold them up as we start ramping down as well and we had a number of stone -- it sustained fall and causes problems there. So significant amounts of what we call Carbofill, which is a filling material and also the polyurethane to hold it together. So there have been smaller faults post that that we've been working through that, I guess, in summary, of course, is more difficulty than we had historically experienced getting through it.
Just on your drilling, if you're drilling transverse holes through the block, if you don't have a full face fault, what will you find? So you could get the drill hole go straight through and is it a part unseen fault and you don't pick it up. So I'm just wondering, is that useful -- it's clearly better than not, but what's it going to pick up?
Well, Peter, what we're planning is, obviously, we're using the UIS long-haul drill rig. And we will do both where we think we know where structures may or may not be. We'll do floor and rig touches and also the geo-sensing technology that we're working with and developing gives us a number of feedback and -- I guess into that model that it generates, which should also help us determine whether or not those -- if there are any faults, what the magnitude of that may or may not be.
Okay. And just to be clear, the faults you gave in mid-Feb, that's the 2-week outage that you had during this quarter just gone? Or the loss of production during the quarter?
Yes, well, yes, we're coming out of that. It's caused just a fair bit of angst.
Okay. Last one for Kevin, just the cost split, given the cost guidance change, it's quite a marked impact coming from Narrabri. What is the breakdown of that hike? You talked about the take-or-pay in payments, the lack of ability to amortize that across many tonnes. How much is it just Narrabri lack of tonnes there, and how much is it take-or-pay and the other factors?
Yes, Peter -- sorry, it's a -- you understand running a longwall operation is largely a fixed cost business and the volume of tonnes have come out of it really drive the outcome. So there's 2 impacts there that come out of Narrabri's downgrade. I mean if you look at our ROM guidance, we haven't changed again [ our cost ] nor we changed Maules. So the real issue here is that we're getting less tonnes as a divisor in the Narrabri cost base, which is really just driving costs up. And then the second piece around that is that in the final quarter, the tonnes that arrived from Narrabri typically arrive later in the period. So we're going to have periods of unutilized capacity on the rail and the port through April. And then as we go and do the repairs, we'll have a couple of weeks of that. That will be April and May. And really, it's just -- it's biting that. It's -- we're not selling 1 million tonnes of Narrabri. That 1 million tonnes typically comes with around $22 worth of port and rail. Some of that's variable, but most of that's fixed. And that's what's coming to bite us. So the cost guidance going up, we were looking to hold the cost guidance we held. We were right in the middle of that. And this piece of work with Narrabri's downgrading volume is just causing us issues on the fixed cost at Narrabri and the fixed cost of take-or-pay.
I totally get that. Can I have one more? Just given the obvious feedback you're getting from us on coal and you met different shareholders, how do you manage expectations about this issue upwards? How do you pitch this to the Board? They must be getting just as frustrated as you are and we are. And what's the dialogue like in that direction?
Look, I think everyone in the company in its entirety are disappointed. There's no doubt about this more recent area. I think the -- by the same token, the management and the Board are all focused on the areas that we know to be better. And one of -- whilst it's difficult in this area 109 at the moment, there's no reason to think that we can't get a better line of sight on any potential issues in 110. The Board will understand that moving back into the shallow ground on the southern panels on the eastern side is obviously going to be a far superior operating environment in which to mine. And they've taken the necessary steps to -- and decisions to move into there as quickly as possible. I think generally, it's just a difficult thing, as you know, Peter, underground mining can be from time to time. And we look forward to getting at the back end of this panel and into 10 and then on to 203.
Paul, can I just jump in, sorry, just to clarify, too. I mean you were asking about the faults in February, which caused us some angst. But just to be clear that we're in a fault now, as we've discussed, which is what's obviously caused the -- we've had some similar issues, and that's what's, I guess, caused the accelerated deterioration in the equipment.
[Operator Instructions] Your next question is a follow-up from Paul Young of Goldman Sachs.
A few questions on Maules Creek. I mean obviously, a lot of questions on Narrabri, and rightly so. But Maules is still a cash cow that -- of the company and actually had a very good March quarter, considering it was wet. And so I had a few questions on Maules, Paul. Just on the run rate, if you look in the March quarter, sorry, and if you assume that you hit your guidance, which you're on track for, I guess, that implies you're going to have to ease off on production potentially in the December half, just to -- because of that 13 million tonne limit? And probably want to do so just on that because of the coal stocks. Can you maybe just sort of step through that?
Yes. It's a good question, Paul, and highlighting again the difference between the financial year and the ROM production year. That generally naturally occurs anyway, Paul. And the reason for that is just in terms of the timing of when you hit the Braymont Seam on when we've talked about previously. I mean there's a lot of coal comes very quickly there, and that adds a lot of volume. And -- but generally, once you're out of it, you do generally see a period of less volume or more normalized volume than that quick flurry of coal once you're outside of the premises. There's nothing really that compares to the Braymont given the size of it relative to the total reserve. So that will naturally occur in any event in the second -- in the -- what, in the first and second quarters of the new financial year.
Yes. Okay, great. And just on the difference between semi-soft and 6,000 kilocal, and it makes sense to push out as much thermal, high-quality thermal coal as possible. I know you've got the Japanese contracts on semi-soft, you probably have to deliver into. But I guess the question there is what percentage of semi-soft did Maules produce during the quarter roughly? And also what premiums are you seeing for the 6,000 kilocal at the moment in dollars per tonne terms for the ash and the energy premium?
Yes. Yes. About 17% was the answer to the question on the semi, Paul, just for Maules. So it was a little low, but overall sales at that 20%. As I mentioned, that's because there was an opportunity to get away a couple of PCI. The PCI market, the interest in the PCI coal has been actually quite strong, strangely. Not the semi-soft so much. So India, and it was the primary source of those incremental sales. There are opportunities for Tarra and also Werris to take on a little bit more during the quarter. Premiums. Premiums are looking pretty good. I mean there's a 5% energy benefit there anyway generally. And then in terms of -- depending on the particular quality dimensions of people value, you've got anywhere between, at the low end USD 3, but on the better end, USD 5 on top.
Yes. Okay, great. Last question on Maules, Paul. Any update on the Itochu minority stake?
Nothing that I'm aware of. No, Paul, sorry, nothing to report there.
Your next question comes from Stephen Wood of Eiger Capital.
Sorry to sort of come in as a slight [ nonpoet ] here, but can I just clarify, you received $76 on average per tonne in the current quarter. If we assume the current structures in the marketplace to stay exactly as they are right now, how many quarters does it take, bearing in mind the coal quality issues in Narrabri that we've just been discussing? How long does it take for us to see a material step-up in that number? I mean assuming we're going to see it in the June quarter. And then what sort of number, if the prices in the market do not change at all, bearing in mind everything we've just discussed? Where do we get to by sort of September and December on price?
Yes. Thanks, Stephen. Look, I think as Kevin has mentioned already, that on the thermal side of it, discounts are a little less, but broadly the same as what we've experienced now in the next quarter. And as we've talked about with a number of different people already this morning, that's just a product of those lags that we've mentioned to you.
So does that mean next quarter $76 as well?
No, that means 13% is Kevin's number, 13% on the average of whatever the gC NEWC is for the next quarter. It doesn't mean it's all the time.
Okay. So if we assume the price doesn't change at all from where it is now, what's that 13% -- what's the number minus 13%?
Well, if you take -- so the average, let's just assume the average for the month is, what, 94 at the moment, somewhere around that?
Yes. Yes, minus 13%?
Yes. Minus 13%.
On 4 times 0.87, so that's $82.
Yes.
All right. And so that's a jump from $76, is it?
Yes.
Okay. So that's about 8%. It's not 13%.
That's the convergence of 2 things there, of course. The realization has improved relative to what we've experienced this quarter, and the average GTU price is higher than the one we've just experienced in the quarter that's gone by.
Yes. Yes. Got that. And so no change at all, bearing in mind all the discussions that we just had on Narrabri coals. If they don't change at all, do we then squeeze up a little bit higher in the September quarter, again, because of the various lags we've talked about on the Korean coals?
Yes. Yes. And I think, Steve, the other question that's in there is that the way that spread exists, you get a -- what we get is a premium over gC NEWC for higher-quality coal, a discount to lower really incentivizes you to blend out whatever you can. So -- and that's why having coal stocks on hand at different places with better qualities from Tarrawonga or Maules Creek to blend out the Narrabri and the Werris Creek product is really important to us. And that's why you see the physical price that you see today in the market being higher than the paper price because producers are doing whatever they can to procure high-quality, high seated coal that sells out of that lower quality prospect. So there's...
So putting into a big brown paper bag everything we've just heard about the various production issues at Narrabri, it's not unreasonable to go, okay, June quarter, up 8%, the September quarter, up another 8% if nothing changes in the marketplace.
Based on that scenario that you just outlined, that's correct. I mean as we look at the next quarter, there's modest production out of Narrabri as we've just acknowledged. So there's a lower proportion of poor quality coal, and that's generally in the 13% that Kevin's already acknowledged. When you move into the next quarter, the first quarter of the new financial year, we'll be in a change up. So there'll be very little of this poor quality coal remaining to be sold. And so the quality, the average quality of production and sales during that quarter will jump up.
Right. Okay. So I think that sort of 8%, 8% scenario, certainly, putting aside for a moment all the issues we've got on the coal quality, the prices are going to step up. And reasonably significant in the next 2 quarters, assuming the marketplace stays exactly where it is right now.
You mean it's stable. Yes, that's right.
Your final question comes from Peter O'Connor of Shaw and Partners.
Just a quick clarification. There's too many thoughts going in my head at the moment. So on you've just been through one now in late March, early April. You had one in February. You had one in late November, which was the one that was out of the field, and we have the one [ we're proud ] about, which is we expected. Is that how we kept the last 9 months?
Sorry, I'll start this, call it, November was the one that was unexpected. December ended. January was one that was expected, the large one. Then there was a February one, then there's one that we're in now in March.
Okay. Got you. I strongly encourage you to plan it out next time, it will make it a lot easier.
Okay.
Thank you. There are no further questions at this time. I'll now hand back to Mr. Flynn for closing remarks.
Thank you, everyone, for the call. If there's further follow-up questions there, you know where to find us. We look forward to speaking with you, and thanks for your time today.
That does conclude our conference for today. Thank you for participating. You may now disconnect.