Coronado Global Resources Inc
ASX:CRN
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Coronado Global Resources Inc
Earnings Call Analysis
Q3-2023 Analysis
Coronado Global Resources Inc
Coronado has showcased resilience in overcoming operational challenges, particularly the adverse geological mining conditions at Buchanan, which are now resolved. The company has subsequently returned to more normalized operations and posted notable achievements: a new global benchmark for safety, and record-setting waste movement at Curragh, albeit with a temporary dragline malfunction that's nearing repair. Overall production and sales volumes have risen, with run-of-mine coal production climbing by 4% year over year to 19.3 million tonnes, and saleable production also experiencing an uptick.
Fiscal performance remains robust with over $2 billion in revenue generated, 92% attributable to metallurgical coal sales. Sales in the quarter from Australian and U.S. operations combined were marked by a 5% increase in Australia. Despite pressures, the company projects higher production and sales volumes for the upcoming quarter to be realized at more advantageous pricing points.
Coronado maintains a healthy financial position with a net cash balance of $95 million and total liquidity of $487 million. Investments of $62 million in capital expenditures reflect a commitment to growth and operational excellence. The average mining cost remains under pressure at $105.5 per tonne, partly due to inflation and extraordinary events earlier in the year. For the remainder of 2023, Coronado eyes a volume-weighted average price of approximately $161 per tonne for metallurgical coal, with current market trends suggesting higher prices for an extended period, further supporting revenue growth.
Coronado's growth strategy is well underway, notably with the Curragh underground met coal project moving forward as planned, which is aimed to significantly augment production capacity by 2025. Market outlook is conclusively strong, with especially robust demand from India expected to maintain elevated coal prices. The company is poised to capitalize on these trends, with top-tier assets prepped for long-term production.
The 'One Curragh Plan' has been instrumental in optimizing mining operations, with investments in box cuts steering the mine towards sustainable, efficient output. This strategic plan aims to ensure that production rates remain stable and responsive to geological forecasts.
The company reports considerable run-of-mine stock inventories, which are scheduled to be converted to sales in the fourth quarter. Efforts are in place to rationalize mining fleets, aligning operational capacity with production targets and reducing costs where feasible.
Coronado reaffirms its commitment to transparency and timely market updates in line with continuous disclosure requirements. The management expresses gratitude to stakeholders for their engagement and signaling readiness for follow-up inquiries, emphasizing ongoing investor relations efforts.
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Thank you for standing by, and welcome to the Coronado Global Resources Third Quarter Investor Call. [Operator Instructions] There will be a discussion of results from the CEO and CFO, followed by a question-and-answer session. [Operator Instructions]
I would now like to hand the conference over to Andrew Mooney, Vice President, Investor Relations and Communications. Please go ahead.
Thank you, operator, and thank you, everyone, for joining Coronado's third quarter investor call. Today, we released our quarterly report to the ASX and SEC in which we outlined our production and sales volumes as well as other key information related to our safety results, development projects, coal markets and financial performance. A more detailed outline of our financial position and results will be released to the market on the 9th of November with our Form 10-Q earnings release.
Today, I'm joined by our Managing Director and CEO, Douglas Thompson; and our Group CFO, Gerhard Ziems. Within our report, you will see our notice regarding forward-looking statements and reconciliations of certain U.S. GAAP financial measures. We encourage you to review these statements in conjunction with our other filings with the ASX and SEC. I also remind everyone that Coronado quotes all numbers in U.S. dollars and metric tonnes unless otherwise stated.
With that, I'll hand over to Doug.
Thanks, Andrew, and welcome to everybody who's made the time to join us today. .
As we embark on the fourth quarter, I'm pleased to report that the operational headwinds experienced during the third quarter relating to the adverse geological mining conditions at Buchanan are now safely behind us and more normal mining operations have been restored.
Additionally, the repairs to the mechanical failure on the propel unit of 1 of our 4 draglines at Curragh is nearing completion. It's a testament to our teams who have managed to pivot our mine plans and our maintenance resources to manage these unforeseen events and limit the impact, but also generate options to recover these deferred coal volumes in subsequent quarters. The business is focused on executing our revised market guidance plans and ensuring that our production levels remain above prior years.
Despite these operational headwinds, the business achieved several milestones during the quarter, including the global business set new benchmark performance in safety and set regional safety records. As the Australian business segment nears completion of the improvement plans under the One Curragh Plan, record waste movement set in -- the record waste movement set in the June quarter has been surpassed. A new waste record has been set in the September quarter. And this has been achieved albeit the failure of the dragline in mid-September. This reflects a return on investment from the One Curragh Plan, and the business will realize the returns of these investments in the 2024 business plan and beyond.
We continue the development of our organic growth plans, both in the U.S. and Australia. And these are showing good progress and performance against set time lines for these projects. Our business took another tangible step forward in our emissions reductions during the quarter. We commenced the installation works on a second ventilation air methane unit at Buchanan as part of our strategic plans to lower emissions and, thereby, we accelerate our plans to reduce submissions by 30% by 2030.
We also appointed 2 new independent nonexecutive directors to the Board. We welcomed Aimee Allen and Jan Wilson to the Board meeting in September.
Year-to-date, Coronado has generated more than $2 billion in revenue, with 92% of those revenues being generated from our metallurgical coal products. These products are mined and produced at 100% owned met coal mines. That being the Curragh complex of mines, Buchanan and the Logan complex of mines.
Independent industry experts and our own modeling is predicting tight future supply markets, thus anticipating higher for longer pricing. For this reason, Coronado continues to invest in itself, investing in organic growth to increase our sales volumes over a highly sought-after, high-quality met coal products from our already owned assets will drive enhanced and sustained return to our shareholders.
Now before I elaborate further on our results, I'll turn and provide a short summary on our safety performance. I'm always hesitant to talk about the safety results as safety is integral to our daily activities and our holistic results. We are relentlessly focused on ensuring that what we do, we do safely. So my concern is, if we pause and acknowledge great performance in this area, we may take our eye off the [ jewel ] and that being our people and their daily well-being in our operations.
I'm again pleased to advise that both Australia and U.S. reflected improvements quarter-on-quarter, and we continue to remain well below relevant industry averages. In Australia, the 12-month rolling average total reportable injury rate as of September was 2.43. This is a 41% improvement on the same time last year. And in the United States, our 12-month rolling average total recordable incident rate was 1.6. This is a 25% improvement.
Notably in the quarter, the Logan complex continued their strong safety performance, achieving 1.5 million hours or more than 1 year LTI-free. And at a Group level, the TRIR rate was 0.91, compared to 1.33 this time last year, a 32% improvement.
Putting this another way, these results reflect a record low for the United States business unit and the lowest incident rate in Australia and for the Group since early 2018. This comes from our people living our values and their relentless focus on safety. I'd like to take the opportunity to thank and congratulate our people for their strong performance and encourage them to hold their gaze on the true reward, that being our people.
In addition, during the quarter, our Curragh team continued their work on the dragline proximity awareness project. This world-first solution protects people and equipment working in proximity to draglines. Solution has generated significant interest and several of our industry peers have visited Curragh to better understand our technologically engineered solution. And we encourage them to adopt this in their operations, and invite others to continue to visit us.
Turning to our operations. We completed the third quarter showing improved performance year-on-year across waste movements, run-of-mine coal mining, sellable production. And this all came despite the unforeseen challenges in quarter 3. Year-to-date, Group run-of-mine coal production was 19.3 million tonnes. This is 4% higher than the prior year. And saleable production was 11.9, also up on the prior year.
In the third quarter itself, Group run-on-mine coal mine production was 5.9 million tonnes and saleable production was 3.7. While production rates are higher on a year-to-date basis, coal production was lower during the quarter from the Curragh complex of mines. This is due to our mine plans focused on pre-strip activities under the One Curragh Plan and then also the impact of the dragline not being able to expose coal in the failure in late September.
Additional to note in the quarter is we completed planned annual maintenance shutdowns on both our preparation plants through the quarter. Having 2 preparation plants, we've continued production, albeit at reduced rates. We continue to run 1 plant while the other was shut down. This is a benefit offered by a mine that has long life and excellent infrastructure.
So during the quarter, Curragh set new records on overburden movement, eclipsing the record set last quarter. The team moved nearly 52 million BCMs in the quarter, bringing total waste movement year-to-date to 144 million tonnes -- million BCMs. This is a 7% increase on prior year. I'll once again note that this record was set in a quarter where we did have an impact of having a dragline experiencing mechanical failure from mid-September. The repairs to the dragline continue and expected to be completed in the next 2 weeks.
To ensure we take opportunity in adversity, while we're repairing the propel unit on this dragline, we also took the opportunity to undertake maintenance that was planned to occur in 2024. The benefit from this will be reaped in the quarters to come. And while I'm talking about taking opportunity in adversity, the coal deferred into later quarters from the dragline failure will likely be sold at higher realized prices.
For the remainder of 2023, the Curragh team will focus on delivering the production plan and the costs as advised by guidance. The budget process for 2024 is currently underway, and the demonstrated systemic improvements realized in 2023 will be implemented in our plans in 2024. This will include fleet rationalization and cost reductions, as we come to the end of the overburden advance and put geometry improvement programs identified under our One Curragh Plan.
At our U.S. business segment, the Logan complex of mines continued to perform well in the quarter. And as previously noted, production was impacted by the geological conditions in the coal seams at Buchanan. And this slowed our production rates and impacted yield. This type of rock intrusion is not uncommon in underground mines. And our team at Buchanan once again proved themselves in managing this very successfully and limited the impact of the event and also knock-on impacts of the event. While the geological conditions are now back to normal, we are focused on the remainder of '23 and early '24 to make every effort to recover the deferred tunnels and, once again, potentially at higher prices.
Turning to sales volumes for the Group in September quarter. We sold -- sorry, 4.1 million tonnes. This is 3% higher than the June quarter. And sales volume from Australia and the United States operations, in Australia was 2.6 million tonnes, this is 5% higher, and respectively, 1.5% out the U.S. The sales profile from Curragh is higher in the quarter due to the higher inventory stockpiles held at the end of June. These have been partially unwinding during the quarter. The sales profile from Curragh could have actually been higher but for 3 shipments that were delayed into the December quarter due to logistic chain delays at port. This is about 130,000 tonnes.
I'll now hand over to Gerhard, who will talk us through the financial position and market outlook.
Yes. Thanks, Douglas, and hello, everybody. As Douglas stated in his remarks earlier, Coronado has generated USD 2.2 billion in revenue year-to-date, with 92% of those sales being met coal sales. Our year-to-date revenues are lower than this time last year due to a 28% decrease in the benchmark index, but still remain our second highest September year-to-date revenue result for the Group since the company's inception.
June quarter revenues were USD 780 million, broadly on par with the prior June quarter. And the Group realized met coal price year-to-date was USD 222 per tonne, which is a blend of FOB, [ FOR ] domestic pricing contracts, U.S. domestic pricing contracts. And it trades to a 78% realization on the average Australian hard coking coal index price for the 9 months to September. So this reflects an improvement over the same period in 2022 where realizations were at 71%. Notably, Curragh's met coal price realization year-to-date represents 84% of the Australian PLV benchmark price.
And as of 30 September, the company's net cash position was USD 95 million, and we maintained available liquidity of USD 487 million. Our net cash position consisted of a closing cash balance of USD 337 million cash balance and outstanding bonds totaling USD 242 million.
The decrease in the closing cash balance is primarily due to timing factors and the payment of some irregular payments in the quarter. The biggest one is really a change in the Queensland government royalty payment frequency from quarterly to monthly, resulting in a payment of 5 months royalties in the quarter. We saw an incremental USD 50 million cash outflow in the quarter. So it's a one-off that won't happen again. The Queensland government switched in this quarter.
The second one was an elevated quarterly capital expenditure of $20 million related to the investment in growth at Buchanan in the quarter. And during the quarter, Coronado spent $62 million on CapEx.
The dividend payment of $8 million and the payment of our annual insurance premiums of $20 million that in prior years have been financed, but this year we paid in full as a prepayment in order to prudently reduce our interest costs. And then lastly, payments to our Queensland [indiscernible] provider related to the June fiscal year, annual take-or-pay, [indiscernible] of $9 million.
So year-to-date, average mining cost per tonne sold for the Group were $105.5 per tonne. Higher mining costs per tonne are basically due to inflationary pressures and the impact from lower sales in the March quarter from the significant above-average weather and train derailment on the Blackwater line and the issues navigated in the recent quarter.
Now that the rock intrusions issues at Buchanan are behind us and the repairs at the Curragh dragline are near completion, the company expects fourth quarter production and sales volume to be higher, with sales volumes being realized at higher price points as we look back 3 months or a quarter. And the fourth quarter average mining cost per tonne to be lower.
And as a side note, the benchmark index in quarter 2 was $243 per tonne; and in quarter 3, it was $264 per tonne. So we have a benefit from the higher prices that we have seen in quarter 3 in the present quarter 4.
Today, Coronado reaffirms our regards FY '23 production cost and CapEx guidance. Today, we also advised the market of the completion of our North American annual contract negotiations for the financial year 2024. In 2024, Coronado anticipates a volume-weighted average price across all grades of met coal of approximately USD 161 per metric tonne FOR price, reflecting a price aligned with the High-vol A and High-vol B U.S. East Coast average index price that we have seen in June to August and forward curve pricing estimates at the time. These fixed cost tonnages -- tonnage contracts cover approximately 38% of our anticipated U.S. production and cover approximately 60% of our anticipated U.S. mine cash cost in FY '24.
So turning to coal markets. The benchmark Australian premium low vol index price for the September quarter was $264 per tonne, up 9% compared to the June quarter benchmark price of $243 per tonne. We have seen prices steadily increase since mid-September with the current Australian benchmark sitting at $350 per tonne today. The increase in pricing is primarily due to a combination of tight supply from Australia, which was impacted negatively by continued rail constraints and planned maintenance disruptions to operations at Queensland ports, and heightened demand from Indian steel mills who are restocking as the monsoon season comes to an end. And the recent price increases are despite a generally weak global economic environment, and weak still demand outlook with the exception from India.
Indian steel demand is very strong with the resumption of construction activity expected to provide higher demand for met coals during the December quarter and into 2024. The FCX forward curve is projecting the pricing to be greater than USD 330 per tonne for the remainder of 2023. And for the pricing in 2024 to average approximately $294 per tonne. So by and large, around $300 per ton. These price projections indicate a higher pricing environment for longer and the pricing environment well above the long-term average of $194 per tonne. And we anticipate the current higher and projected prices will result in higher price realizations from the sales volumes in the December quarter.
As we look more longer term, you see the [ AME ] forecast in the pack, estimates global met coal demand to more than double to nearly 700 million tonnes by 2050, led primarily by blast furnace steel production in India. India is expected to lead all countries in import demand growth due to its significant industrialization plans over the next 2 decades. India export met coal demand is forecasted to increase by, well, it's almost quadrupled, by 281% by 2050, the majority of which will need to be filled by supply growth out of Australia.
In our view, it will be difficult to see how the supply growth will materialize to mass demand given the limited approvals and incentives for new mines in the high-quality met coal regions of Australia and North America. In order to meet the projected 2050 demand levels, AME forecasted net coal production from Australia will need to increase by 140% from existing levels over that time. Structurally a lack of supply should ensure higher prices for longer, which places more emphasis on companies like us to continue operating and developing our long-term, long-life 20-plus years assets.
Our met coal remains in high demand. Our high-quality products and unique geographical diversification see us continue to support customers on all 5 continents.
I'll now hand back over to Douglas to discuss the progress of our growth and emission reduction projects. Douglas?
Thanks very much, mate. Turning to growth first. I'm pleased to report that the Curragh underground met coal project remains on target. During the September quarter, the project's environmental approval scheduled achieved all the required milestones.
Exploration drilling programs for geological and gas informations for the Phase 1 of the project is complete, and a broader coal seam permeability testing program has also been conducted. More than 40 holes were drilled and grafted and just over 1,000 -- 7,000 meters of drilling has been conducted in the quarter. The development of this project underpins Coronado's strategy to deliver saleable production of 13.5 million tonnes from Curragh complex of mines by 2025.
Growth plans at our U.S. operations to produce 7 million tonnes by 2025 are also pleasingly performing on target. At Buchanan, the capital investment into works to construct our new surface raw stockpile area is on plan and progressing well, and also the second set of skips to increase our hoisting capacity is on plan and target.
So now turning to our emissions reduction. In July 2022 at Buchanan, we commenced our first ventilation air methane abatement project, VenShaft-16. Since commissioning, the VAM unit has destroyed more than 220,000 tonnes of carbon equivalent, at a 94% efficiency. And this project alone had the Group well on target to deliver our 30% reduction in emissions by 2030.
Given the proven success of the original VAM unit, we commenced the installation of a second one at VenShaft-18. Construction works are now underway and is expected to be completed in mid-2024. The establishment of a second VAM unit is expected to substantially reduce Coronado's emissions even further. And this also establishes our company as an industry leader in the implementation and safe operation of this emission reduction technology.
At Curragh, we continue to make progress on our gas pilot project during the quarter. The project is intended to capture and beneficially use open cut waste mine gas. Our primary downstream use cases for this gas is power generation and the uses diesel substitution. Drilling works on this pilot program were completed in early July, and subsequently, the surface and production infrastructure has been procured, and we're in final stages of installation.
Also in the quarter, we ran a truck trial to measure the performance of the dual fuel. The results from this has been satisfactory, and it lays the firm steps for the conversion of 5 to 6 trucks during 2024 for the use of this gas.
Now before we move to Q&A, I wanted to address the announcement in late September regarding Sev.en Global Investments' purchase agreement to acquire EMG's 51% major stake in Coronado Global LLC. As per the media releases, 7GI and EMG, we understand that the transaction is subject to customary closing conditions, including regulatory approvals in the U.S. and in Australia. We remain committed to provide the market information as it becomes available to the company in accordance with the ASX continuous disclosure requirements.
So with this, I'll now hand over to the operator, and we'll be guided through the Q&A process.
Thank you. [Operator Instructions]
Your first question comes from Paul Young with Goldman Sachs.
The first question is on Curragh and with respect to production in the quarter, Doug. I know the dragline was down for maintenance. And also, just broadly speaking across the industry, all companies are playing catch-up on waste stripping. But I'm just curious around the fact that dragline went down for maintenance in September, and which I would have thought wouldn't have had too much of an impact on coal production. So it was more a function of the truck and shovel fleet not being able to uncover the coal inventory or just a function of actually just being behind on waste stripping, which again is a -- in broader industry issue.
Paul, as we communicated, One Curragh Plan that we've been running has had the intent to address those pre-stripping deficiencies caused by the weather and other matters. So that program has been ongoing. In the quarter, we did have a focus on pre-strip, and that's why you saw the record out of our changes that we've been making in the mine plans over the last year or so. The results of that have been coming in great results in waste movement and stripping.
Losing the dragline when we did is exactly as you said, it's timing. It's -- the dragline is intended to expose coal at the -- to the back end of the month that we would have mined. Unfortunately, we couldn't benefit from that. So that's why there's this deferral. In addition, in the quarter, we had the 2 planned shutdowns for both of our prep plants, so were the annual shutdowns. As I said, we try and use what we have to the best we can. So while one is down, we keep the other one running, so we can keep product coming. But that also had an impact to the profile in the quarter, and that was planned likewise at the pre-strip. What wasn't planned was the impact by the dragline in exposing coal.
And then obviously, in the quarter, mentioning the impact of our intrusion in the United States also impacted the Group ability to produce coal in the quarter from a time line perspective, but also deferred.
Okay. And then maybe just on waste stripping and profiles, I mean, great to see you hitting record numbers on waste movements. As far as catch-up is concerned on the waste stripping on the mine plan at Curragh, and great to see you'd be selling coal at the higher prices in the following quarters. But how far through the catch-up actually are you? Or another way to put it, how much longer will be before you sort of got on top of the way stripping at Curragh?
I'm pleased to report that the impact in the first quarter that set the plan back, we're now coming to the back end of it. So the One Curragh Plan, its intent to straighten up geometry. I think you remember from previous quarters, we spoke about the capital investments into extra box cuts, so we could straighten up the mine and give our draglines additional striking. That work is very well advanced and we're getting far better performance out of our draglines as a consequence.
And then the pre-stripping advance work is coming to an end, and that's looking ahead, the rationalization and cost reductions that we'll see in plans into the future. As we finish that work, we will rationalize our fleets that have been brought in as additional capacity.
Okay. And just the last one, on the U.S. met coal contracts. Maybe one to Gerhard around the reduction in the price. Gerhard, Is that a function of just the fact that -- and noting that a lot of the U.S. companies have downgraded guidance, also from a production standpoint, the U.S. industry seems to be struggling a little bit. But the drop in price, is that a function of just the fact that the European -- the demand from European steel mills is a little lower and just demand from U.S. steel mills is expected to be a little low?
Yes. That's basically correct. I mean if you see the disconnect between the so-called benchmark, the Australian FOB, and then the U.S. East Coast index, it's sitting at about 74%. Historically, it's closer to 90%. So the Atlantic market in which usually the U.S. ships into is very weak. The reason the benchmark, the Australian benchmark, is so high is purely India. And we are lucky that India is our biggest export destination. But that's basically it, Paul. Yes.
Your next question comes from Chris Drew with Jefferies.
Just on the unit costs and the guidance [indiscernible] probably got to do a little bit more work on the numbers. But it looks to me like you've probably got to -- need a fairly substantial turnaround in the December quarter to deliver to that cost guidance. Can you perhaps talk a little bit to how you see that unit cost playing out in December and maybe it goes a little bit to what you just said around the strip ratios and things.
Yes, Chris, it's a good question. As you know, the unit cost right now sit at 105.5, and our guidance is closer to the 101 million. So it has come down. I think one important aspect is we should have sold more in the quarter. We missed the [indiscernible] shipments, as Douglas highlighted. So the denominator is [indiscernible]. So that should help in the fourth quarter. And we are trying to put in more shipments into the fourth quarter, bring ships forward from December into earlier months, if we can.
And then we need to cut costs out as well, and we are on a good path to do it. So as Douglas said, we had fleets in there that helped us achieving record waste movements. But we started looking at the rationalization of these fleets.
And then perhaps [indiscernible] the second question is on the inventory position. Obviously, we saw that [indiscernible] that looks like it's at least partially unwound. How far through that are we now? Is there more to come in the December quarter on the inventory line? Or is that largely done there?
Yes. Not really, to be quite honest. And that's, in a way, pleasing, although that's also working capital. But we still have very large ROM stock inventories. And of course, we have product inventories. You will see that in -- when we release the 10-Q, the product inventories, of course, also driven because we couldn't sell 130,000 tonnes. But pleasingly, we had large ROM stock as well and that will be converted into sales tonnes in quarter 4.
Your next question comes from Paul Young with Goldman Sachs.
A question on Sev.en Group. I know, Doug, you mentioned it's still working through sort of regulatory, et cetera, situation. Can you maybe just talk around about this company. I know they own Blackhawk in the U.S. or that complex of mines. Has there been any discussions with Sev.en Group so far? And any thoughts around potentially the synergies between the Blackhawk complex and Logan and Buchanan?
Well, Paul, I think the first thing to note, probably the most useful is this is a shareholder transaction between EMG and 7GI. So not management. So it's a matter between them. Myself and Gerry have had meetings with Sev.en, but thinking by design, these have been introductory meetings and nothing more than that because the transaction needs to stay where it is, is between those 2 shareholders.
Your comments about Blackwater -- Blackwater, I'm sorry, Blackhawk. They clearly are a very capable operator of mines and assets already if you look at their portfolio.
Okay. Thanks, Doug. Back on to the, Gerhard, back onto the cash flow and -- in the quarter. Your comments around the Queensland royalty payments. Just to clarify that, that 5-month payment, was that a prepayment for next quarter? Or is that just a lag payment for the last 5 months?
No. It was a lag payment. So we paid -- and don't hold me to the comment, I think we paid USD 130 million royalties in the quarter, of which $80 million was just the usual payment in July for the pre, prior quarter payment. So that was based on the old rhythm, the payment usually we always made in July. But then we also made payments for July and August in that quarter as well. And that was the $50 million that we normally wouldn't have seen. From here on, it's just every month the royalty payment. So it's a one-off in that quarter. And from here on, we just pay every month the normal royalty.
Okay. Understood. And then maybe back on to Doug, on Buchanan. I know it's been such a consistent mine over the decades and especially around the geology. So the unknown rock intrusion, sounds like came as a big surprise. I know you're through that now. But any color you can provide on any sort of mapping seismic, anything you've done to sort of identify other intrusions? Or was this truly in your view, you're confident, it's a one-off?
I don't think you can ever call an intrusion a one-off, but the team have got the mine very well mapped, through a number of areas. It's a mine that's well understood, it's well drilled. So we've got very good geological information. When you're doing a primary development in setting up the longwalls, you generally have an opportunity to shore up the geology that you pick up through your drilling. And then thirdly, when we do drilling for gas, that provides a whole lot of geological information as well.
Unfortunately, when you have these kind of events, where you don't pick it up in your head gate or your tailgate or your gas drilling, and it's a [ ceiling ] type event, where [indiscernible] down out of the hanging wall, into your coal seam and narrows the seam that you're mining through, it is unforeseen. That's the style of event that occurred here.
So I strongly say that what we have in place is best practice and has served us very well in the past. Where we've picked up geological features, we've been able to plan them well. We've set up jump faces and we've gone around them and moved around them very productively with limited impact. So this really was an unforeseen.
But the team managed it well. You normally have not only delays or slowdown in your progress, right, and yield impact. You can quite often have an impact to your material handling system out of the mine. The team ensured that knock-on effects were minimized. And once we got through, we could get back to normal production rates and then some really good production rates since then as well.
Okay. And just last one, just moving on to the other underground, which is -- will soon to be developed at Curragh. I know you just said you had received environmental approvals. Do you still need any other approvals from the Queensland government? Just remind me, the first continuous miner is set to go into the end of next year, correct?
Yes. Sorry, so, no, we haven't received approval yet. Our milestones in achieving approval have progressed really well within the quarter. We've achieved all our set milestones in gaining that approval, but we haven't gained approval as yet. That will come next year, and that is on our critical path.
The procurement strategy is well worked. We've got it defined. The intent is that we put the first miner into it at the back end of next year. And then once we've done the development phase, production into 2025.
Your next question comes from Chen Jiang with Bank of America.
Just a few questions from me, please. For that 7GI transaction. It's going to be your largest and major shareholder now, I mean after the transaction. The 7GI seems like more supportive of their invested company's long-term growth strategy versus EMG. I'm wondering how should we think of your inorganic growth opportunities from here?
Look, commentary on that probably is speculation. This is a transaction between the 2 major shareholders. What I will pause to say is none of us would probably be around this phone if it wasn't for EMG. They backed Gerry and Jim in the beginning to start this business, and they've been a fantastic major shareholder to date on a whole host of fronts.
The transaction between them and then forward-looking decision-making will be decisions that will be made into the future and already speculate. So I'd rather reserve comment on that.
Maybe second question, just a follow-up on your cash cost. I understand we had this conversation multiple times in every quarterly call. So quarterly cash cost has been climbing higher quarter-over-quarter and then talking about the guidance. Do you think your cash costs have peaked in the September quarter?
Yes. So no, it has peaked. As I said before, there is an impact from the sales tonnes, the denominator. And as we will rationalize fleets, we will take the dollars out as well. So it has peaked. And yes, you are correct, the costs are very high.
And how should we think of the pace of decline in the next few quarters? Operating color.
I think that comes with the next guidance we will issue in due course, but you can expect some profound improvement.
The next question comes from Lachlan Shaw with UBS.
Morning, Doug and Gerhard. Thanks for the update. Just a quick one on clarification. So just on your realization of your Aussie met coal sales versus the index. It slipped back a little bit in the quarter. Is that just a timing related to the timing of contracts?
Yes. So you referred to the realization, right? .
Yes.
Yes, yes. If you look at the quarter -- so we, fundamentally, as we always say, we're basically selling our products on prior quarter. rule of thumb. It's not always correct, but rule of thumb, we achieved the prices of quarter. So quarter 1 this year, the prices we achieved in quarter 2, the quarter 1 price was $344 and the price in quarter 2 dropped to $243, so nearly $100 less. So therefore, the past realization in quarter 2 was very high, achieving the quarter 1, very high quarter 1 prices. Now the worst happens when prices go up. So we have seen now in quarter 3 prices going up compared to quarter 2. And therefore, you see a lower price realization. That's the main reason for that.
Okay. Understood. And then maybe just one more, if I can. So just to come back to the waste overburden removal in the quarter, great job, record volumes, hopefully, really sort of opening up more coal on a go-forward basis and then to link that into the rationalization of fleet. So is the interpretation here that that sort of stabilization and positioning of the overburden and dragline strip is now done in terms of what you need to do to get sort of to the One Curragh Plan and to sustainably hit those production run rates you've been targeting?
You've described it spot-on. The intention of the One Curragh Plan was to take the geology as it is and set the mine up by investing in box cuts, but to have a long-term sustainable stripping ratio so that as you mine it in a methodical manner, you have more consistent flow of coal out of the geology as predicted and modeled. That work, and the capital box work, has done what we've been doing, which is OpEx cost, is the pre-strip work of setting up the geometry of the pits again, getting ahead of the impact of the wet weather that's been occurred and probably decision-making before that. So we've, in large part, done that.
In the original plan, we should have been done a couple of months ago. We're getting to the completion; the weather impacts delayed the plan. And we're getting to the back end of that additional installed capacity to make these changes and set ourselves up for the future.
The fleet still will be addressed in a rational manner as we go through the plan into next year. And we'll talk about that in next year's guidance.
The next question comes from [ Jim Sue ] with [ Berengelli ].
I just wanted to confirm, you said that you expect price realizations for the Group to increase in the December quarter. I just wanted to confirm, is that your realized price or the percentage of the price that you expect to realize? And should we expect that most of the improvement should come from the U.S., or is it Australia? Thoughts on that?
Yes. I guess we have to see how that plays out. So we are just -- when I look at it, in the quarter to date, which is probably more months to date, prices are very high, now $354 per tonne. So let's just see how that plays back. But what we will see is we will benefit from the higher prices we have seen in quarter 3 compared to the lower prices in quarter 2. So in quarter 3, we have seen an average price of $264 per tonne as opposed to $243 per tonne in quarter 2. So bottom line is we will see a better cash flow in quarter 4 coming from higher volume, sales volume and then also higher prices.
Okay. Awesome. And I know you touched on this earlier, but I just wanted to confirm, do you expect the September quarter to have been the peak in the waste volume movements? And what kind of reduction should we expect going ahead in total material moved?
Yes. In our planning, September was intended to be the peak in pre-strip mining. So that's why we're calling it out. The reductions at this stage, until we finished our mine planning and that's because obviously, our mine plan is pivoted with very short notice to focus on this year, cash preservation and delivering the results the best we can, we're busy working on the plans and the impacts to next year. So I'd like to reserve, but the teams can do the work, and then we'll come back and talk about what it does to the plan next year with reductions.
Your next question comes from Chen Jiang with Bank of America.
Doug, just a follow-up on the price realization and on the coal market. Thanks for providing the color in the medical market price, et cetera. A lot of your coal are PCI. And then by looking at the PCI price index versus the premium hard coking coal, actually, the PCI price declined by 31% year-to-date versus the premium -- the Australia premium high coking coal increased by 44%. I'm just wondering if you can give any color on the PCI market and how should that -- how should we think about your PCI realization?
Yes, let me take that. It's a good question. It goes into the details and then it goes also into our price realization. It's very detailed though. So yes, you're correct. I mean the PCI, the long-term PCI relativity to the benchmark sits at about 73%, 75%. Today and over the last few weeks and months, we have seen at now 56%.
So why do we see such a low relativity of the PCI? Well, fundamentally, there is a disconnect between the benchmark and the rest of the market, including the U.S. East Coast, as I've mentioned before. The benchmark is mainly driven by the premium mid-vol products that Australia sells into India. And whenever the price goes up, you see there is a cargo of premium mid-vol product sold to some Indian steel mill at a higher price. And that's what we have seen over the last few months since August when we saw prices going back up again from the what I call it nowadays, the $230 floor price. So today, you see a benchmark price of $350 per tonne as opposed to PCI price of under $200 per ton.
In the PCI, the biggest PCI supplier in the global market is Russia. Russia owns about 30% of global PCI supplies. Russia is selling that supply -- their PCI into China, India and South Korea at heavily discounted prices. So therefore, there is a lack of demand for Australian PCI.
For us, without giving away the secrets of our marketing team, it's actually not too bad. Some of our contracts are linked to the benchmark, although PCI process, and I leave it there. I don't want to disclose more. It's not -- it doesn't worry me too much. But what you see here between the benchmark and all -- basically all other indices below the benchmark, it's really the disconnect between the booming Indian steel industry and then the essentially lack of demand from everywhere else, be it North America, be it Europe or other parts of Asia, including Japan and Korea and Taiwan.
Right. Thanks for the color, Doug. So PCI coal price disconnected with Australia premium high coking coal. I guess a lot of your coal price realization is linked to PCI, then should have a lower price realization in the next quarter then?
Yes. And that's not unique to next quarter. That was already the case this quarter. I remind everybody like the historical relativity is about 75%. Last year after the Russian innovation of Ukraine, that actually shot up to 100%, 110%. So it was a complete opposite to what it is now.
That concludes the question-and-answer section of today's call. I'll now hand back to Douglas for any closing remarks.
Thank you very much. I'd just like to take the opportunity to thank everybody for dialing in today. And if you got any follow-on questions, as always, please don't hesitate to follow up through our Investor Relations team and by Andrew directly. Thanks for your time.
That does conclude our conference for today. Thank you for participating. You may now disconnect.