Coronado Global Resources Inc
ASX:CRN
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Coronado Global Resources Inc
Earnings Call Analysis
Q4-2023 Analysis
Coronado Global Resources Inc
In the realm of U.S. coal production, the previous year was quite transformational, albeit not without its difficulties. U.S. operations witnessed a 10% quarterly reduction in both run-of-mine and saleable coal production, impacted by suboptimal geological conditions at the Buchanan mine. The adversity was characterized by a 120,000 tonne production deferment to the subsequent year. Intriguingly, while sales volumes remained constant quarter-over-quarter, a notable five shipments were deferred into 2024, primarily constrained by port limitations.
In financial terms, the year's revenue summited at USD 2.9 billion, a commendable figure albeit a decrement from the preceding year, owing partly to a 27% decrease in the benchmark index and dampened sales volumes. The last quarter in particular felt a pinch with a 5% revenue drop, an entanglement of shipping constraints and tumultuous product mixes. Additionally, a robust USD 100 million net cash position was maintained, coupled with a roughly USD 500 million liquidity cushion. All the same, mining costs per tonne sold marched upwards to USD 107.6, a testament to industry-wide inflationary pressures and a host of operational disruptions from inclement weather to mechanical failures and logistic delays.
In line with its capital strategy, the company forged ahead with several essential investments, notably in its Buchanan and Curragh operations, which are fully funded from operational cash flows, thus eschewing the need for further debt or equity financing. These investments lay the foundation for an anticipated salable production increase at Buchanan and cost reduction at Curragh, which should ultimately steer the company down a sustainable cost curve.
The executive suite remains optimistic about market prospects, citing the recent uptick in met coal prices fueled by a tight Australian supply and burgeoning demand from Indian and Asian steelmakers. This buoyancy is tempered, however, by a subpar global economic climate, reining in steel demand, and consequently, pressuring margins. Nevertheless, the forecast suggests support for met coal prices, banking on a rebounding global economy and Chinese stimulus measures that could usher in improved steel prices and margins.
Looking ahead, the company has slated February 20th for the release of its full suite of financial results, including EBITDA and net profit, along with a provision of market guidance for production costs and CapEx for 2024. This release is keenly awaited, as it will offer deeper insights into future operational expectations and financial positioning.
Product mix issues, especially an elevated proportion of PCI coal, are expected to normalize in the coming year, aligning with an abatement in shipping disruptions. Notably, the quality of PCI coal is underscored as high, attracting premium prices, and dismissing quality concerns. A normalization in coal classification, which saw some met coal get accounted for as thermal coal due to prior price effects, is also anticipated for 2024.
Efficiency initiatives, such as the systematic demobilization of superfluous pre-strip fleets, are scheduled for the first and early second quarter, underscoring the company's strategic emphasis on honing operational efficiency. These efforts are in stride with recovered pre-strip deficits and are poised to streamline cost structures further.
The Buchanan mine, despite past geological challenges with intrusions on the same panel, which had halted production, has plans for strategic progression into a new, better-understood Southern District, promising improved efficiencies with dual operating districts. This transition is projected to enhance performance across multiple facets and contribute vitally to the reduction in production costs.
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Thank you for standing by, and welcome to the Coronado Global Resources Fourth Quarter Investor Call. [Operator Instructions] [Operator Instructions]
I would now like to turn 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 fourth quarter investor call. Today, we released our quarterly report to the ASX and SEC in which we outline our production and sales volumes as well as other information related to our safety results, coal markets and financial performance. A more detailed outline of our financial position and results will be released to the market on the 20th of February with our Form 10-K and full year earnings release. We will convene another call then to outline in more depth our financial outcomes and forward plans. Today, I am joined by our Managing Director and CEO, Douglas Thompson; Group CFO, Gerhard Ziems; and our Chief Operating Officer, Jeff Bitzer.
Within our report, you will see our notice regarding forward-looking statements and reconciliations of non-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 tons unless otherwise stated.
With that, I'll hand over to Douglas.
Thanks, Andrew, and hello to everyone. Thank you for making the time to join the call today. Coronado Global Resources ended the fourth quarter of 2023 with higher ROM coal and salable coal production volumes compared to the prior quarter. The higher production rates were realized due to greater coal availability at Curragh in accordance with the mine plan, following record waste movement and despite the substantial impact to all coal producers in Queensland from the severe weather events and rainfall during the months of November and December. I feel it's appropriate that we pause and recognize the communities and families who have been so heavily impacted by the devastating weather in Queensland in late 2023. Coronado will continue to support the communities and impacted employees as needed.
These significant weather events at Curragh deferred approximately 150,000 tonnes to 2024. And 120,000 tonnes was deferred at Buchanan due to the team's slowing production in December to ensure we traverse a geotechnically challenging area safely by installing additional support. These rectification works were completed mid-December and the longwall production returned to normal. Our quarterly sales profile at Curragh was further impacted by significant delays at RG Tanna Coal Terminal in Queensland. This is due to labor issues that saw ship schedules dramatically increase up to 40 vessels. The subsequent delays impacted our sales volumes for the quarter, resulting in a deferral of 5 vessels into 2024. Despite these events, operational performance exceeded production rates required to achieve revised guidance for 2023. And cost performance was on target, but for the port constraints and results in shipping delays.
Our group run-of-mine 2023 production was 25.4 million tonnes, slightly up on 2022. And our group saleable production was 15.8 million tonnes. It must be noted inventory levels as of the 31st of December, 2023 at Curragh remained above average, with approximately 650,000 tonnes of saleable coal on stockpile due to the aforementioned late in December weather and significant port delays. The quarter 4 continued to planned milestones as we marched ahead with our plan to build Coronado to be a plus-20 million tonne producer. Notably in the quarter, we achieved the second highest annual revenue result in the company's history. We finished the quarter and year with the group's lowest total recordable incident rate since listing, a rate of 0.77.
We continue to make substantial progress on our fully funded organic growth projects, which will see Coronado produce approximately 20.5 million tonnes by 2025. Both Buchanan and Curragh have achieved substantial milestones in our plans to ensure these fully permitted assets enjoy sustained returns and reduce costs. Buchanan has completed development works in the new Southern District. The new longwall equipment is now all delivered and longwall mining has started in this new area in early January. And at Curragh, we completed another major milestone under the One Curragh Plan by recovering historic pre-strip deficits. The additional fleets and associated costs will be removed in early 2024 in accordance with the mine plan.
We've also made tangible gains in our emission reductions and rehabilitations plans. All of Coronado's fully funded organic growth plans, Buchanan's expansion works and Curragh's underground project remain on target. As we commenced 2024, we are excited by both the short-term and long-term projections for the business. At Curragh, we will realize cost and continued improvement in operational efficiency benefits from our investment over the past 2 years. Curragh will remove 3 fleets that we mobilized to site to recover the pre-strip deficit, thereby reducing costs and resultantly the cost per tonne.
With the longwall development works in the Southern District of Buchanan now complete, we'll be able to operate an additional underground district allowing for more operational flexibility and the development costs will now have longwall tonnes associated and reduce our cost per tonne. The company continues to reinvest in growth of the business via organic growth plans. Our plans for first coal subject to approvals from Curragh underground remain on target for late 2024. We'll also continue to make substantial progress at Buchanan's expansion works.
What is important to note is that all our organic growth projects are fully funded from cash generated within the business. These projects are progressing as planned and on target without the need for taking out additional debt or raising equity. These investments to grow -- these investments in growth to increase sales volumes of our highly sought-after met coal will drive enhanced returns to shareholders. Before I elaborate further on the results, I'll provide an overview of our safety performance.
I'm again pleased to advise that recordable rates in both Australia and U.S. continue to remain well below relevant industry averages. In Australia, the 12-month rolling average of total recordable incident rate frequency rate as at the 31st December was 1.83 compared to 3.92 the prior year. This is a 53% year-on-year improvement. It also marks the lowest Australian rate since May 2018. Over the last 3 years, the Australian business units' rate has improved by 81%. And in the U.S., the 12-month rolling average of total recordable incident rate as at the 31st of December was 1.44 compared to 2.42 the prior year, a 40% improvement year-on-year, the lowest U.S. rate since the mines were acquired by Coronado. And at group level, the total recordable incident rate was 0.77 compared to 1.41 the prior year. This is a 45% improvement and the group's lowest since April 2018. I congratulate our teams on their safety performance in 2023, but I'll remind all the task on improving safety is never done.
Turning to our operational performance. Coronado completed the fourth quarter with higher production volumes and stockpiles compared to the prior quarter. Group run-of-mine coal production was 6.1 million tonnes, up 3% and group saleable production was 3.9 million tonnes, up 6%. On a full year basis, the group run-of-mine coal production was 25.4 million tonnes, slightly up on the prior year. And the group salable production was 15.8 million tonnes, 1% lower than the prior year.
Turning to Australia first. Curragh's run-of-mine production for the December quarter was 3.4 million tonnes, 17% higher and salable production was 2.7, 16% higher compared to the September quarter. For the full year, Curragh's run-of-mine production was 12.8 million tonnes, 4% higher and Curragh's saleable production was slightly more than 10 million tonnes, 2% higher compared to the prior year. Coal production rates were higher at Curragh during the December quarter primarily due to the greater coal availability in accordance with our mine plan following record pre-strip waste movement year-to-date and the return on investment from the completion of planned maintenance activities at our 2 coal processing plants on this asset.
The higher December quarter production rates at Curragh were achieved despite severe impacts from heavy rain to all coal producers in the Bowen Basin. The town of Blackwater, the nearest town to Curragh received 314 mils of rain in the quarter, a record for a quarter based on statistics that is available and the level of rainfall was nearly double the 10-year rainfall average for the area. The significant rain experienced in the March quarter and the December quarter, combined with the delays early in the year following the rail derailment on the Blackwater line and the mechanical failure of one of our draglines in September, which is now fully repaired and operational, have been key contributors to the lower production volumes and higher mining costs per tonne compared to guidance.
Despite the impacts in 2023, Curragh's combined continue to execute to the mine plan, specifically relating to waste movement. Waste movement was a record for the year in 2023 with 184 million tonnes moved, BCMs, I apologize moved. Our team at Curragh will continue to implement the plan to ensure Curragh reaps the fruit from the identified productivity improvements relating to fleet rationalization, procurement initiatives and cost management activities. At our U.S. operations, the run-of-mine coal production for December quarter was 2.7 million tonnes and the saleable production was 1.2, both 10% lower compared to the previous quarter.
The full year U.S. operations run-of-mine coal production was 12.63% lower and the saleable production was 5.8, 6% lower compared to 2022. The December production for the U.S. business unit was impacted by localized poor geological conditions at the Buchanan mine, particularly to the [ 14 East Panel ]. Our team slowed production in December to ensure we traverse this area safely and production has returned to normal. The production impact in December deferred to 2024 was approximately 120,000 tonnes by these activities. The U.S. production levels are lower than the prior year due to the impacts from the geological challenges in 14 East Panel and the impacts of the rock intrusion in September that slowed production rates and impacted yield from this area. Both these events have been successfully addressed and normal operations restored within the quarter. The completion of development of the Southern District in the quarter and the longwall mining starting in January 2024 is a critical step in Buchanan's expansion plans.
Sales volumes for the group in the December quarter were 4.1. That's aligned to the September quarter. Sales volumes from Australia and the U.S. operations were 2.6 and 1.5, respectively. The sales profile for Curragh would have been higher in the December quarter, but for the impact of the heavy rain in the Bowen Basin in November-December and the sales impacts due to shipping slippages and resulting in 5 vessels moving into 2024 due to port constraints. Ship queues at RG Tanna Coal Terminal in Queensland increased substantially during the quarter from 20 vessels early October to approximately 40 vessels by late December. Vessels' waiting times at the port increased from 6 days in October to approximately 28 days by the end of December.
The extended wait times impacted Coronado's December full year sales and additionally increased our quarter 4 demurrage costs. The increased vessel queuing caused by labor and skills issues at the port and we remain keenly focused on the rectification plans that RG Tanna's management have committed to. Curragh's inventory levels at the end of the year remained above average, with approximately 650,000 tonnes of salable product on hand due to these port issues.
I'll now hand over to Gerhard who will talk us through our financial position and give us a bit of a market update.
Thanks, Douglas and hello, everybody. In 2023, we generated USD 2.9 billion in revenue with 92% of those sales coming from met coal sales. The group realized met coal price for the year was USD 216 per tonne, which let me remind you, it's a mix of FOR, FOB and U.S. domestic pricing contracts. And that equates to a 73% realization on the average Australian hard coking coal benchmark index for the year, which is aligned with prior year. And so, while our 2023 revenues are the second highest in the history of Coronado, they are lower than prior year due to a 27% decrease in the premium lower benchmark index during the year and lower sales volumes.
In the December quarter, group revenues were USD 680 million, 5% lower than the prior September quarter due to a combination of significant important constraints and product mix that Douglas already referred to. And also the sales profile for Curragh would have been materially higher in the December quarter, but for the impacts of heavy rainfall throughout in November and December and the sales slippage of 5 vessels into 2024 because of port constraints at RG Tanna. And as of 31st December last year, Curragh had 432,000 tonnes of coal stockpile at port at RG Tanna given the loading delays experienced. The mix of these tonnages is roughly 60% hard coking coal and 40% PCI. And that all will be moved into the first quarter, this quarter here. Well, look, I mean, these delays are unfortunate, but we expect performance to improve in quarter 1 this year and more normalized vessel queue by mid-2024. So, we're in contact with RG Tanna, probably weekly, I'm in contact with them weekly on this matter and they promised improvement.
Turning to cash and liquidity. Coronado continues to maintain a strong balance sheet. As of 31st December last year, we had a net cash position of nearly $100 million and we maintain nearly just under USD 500 million of liquidity. Our net cash position is comprised of closing cash balance of USD 339 million and then outstanding bonds totaling USD 242 million. And in relation to our costs, full year 2023 average mining cost per tonne sold for the group were USD 107.6 per tonne. We had higher mining costs here per tonne because of industry-wide inflationary pressures that should go away this year, but to a large extent, lower sales volumes.
So, if you look at the sales volumes, which is the denominator in the cost per tonne calculation, we have been impacted by the following 5 items here. First, our Australian business experienced significant above-average rainfall in the first quarter 2023, combined with the effects of a train derail on the Blackwater line that materially impacted production and sales. Second, the impact of adverse geological conditions at Buchanan and the mechanical failure on our Curragh dragline in the third quarter deferred production sales challenges through subsequent quarters. Third, our U.S. business experienced poor geotechnical conditions at Buchanan in December that resulted in a 10-day outage of production. And then fourth, Curragh experienced record December quarter rainfall resulting in 9 days of coal mining deferred. And then lastly, fifth, logistics delays at RG Tanna due to labor issues and large vessel queues that deferred tonnages to 2024.
I just repeat what Douglas said before, average vessel queue went up from 6 -- the delays went up from 6 days to more than 20 days now. In fact, if we go back half year, it's probably move 2 to 4 days average delay to now more than 20 days. Douglas, mentioned this, of course, earlier, but for the port issues experienced at RG Tanna, the heavy November-December rain events, we would have met the revised cost and production guidance for 2023.
So in terms of CapEx, our CapEx was at USD 228 million within our revised guidance plans. As we have previously communicated CapEx in FY '23 was primarily focused on our organic growth capital works at Buchanan and Curragh with all projects on track. At Buchanan, we have been focused on the investment in additional hoisting capacity and the new surface coal storage area to increase the month's capacity and reduce the risk of the mining stock bond due to any potential logistics train delays. At Curragh, expenditure on longer lead items for the Curragh Underground mine have been incurred in addition to expenditure on the Curragh Gas Pilot project.
We will officially release our full suite of financial results, including EBITDA and net profit position to the market on 20th February with our Form 10-K. On that date, we will also provide market guidance for production costs and CapEx in 2024. So, if you look at the coal markets now, both the Australian and U.S. met coal index prices increased in the fourth quarter. The benchmark Australian and premium low-vol index average price was $333 per tonne, up 27% compared to September quarter average price of $264 per tonne. The benchmark hard coking coal US East Coast index was on average $264 per tonne, up 17% compared to the prior September quarter, which was about USD 226 per tonne.
The increase in met coal prices, which began from mid-September is primarily due to a combination of tight supply from Australia, which was impacted negatively by supply impacts related to cyclone Jasper and reduced port throughput in Queensland overall and heightened demand from Indian and Asian steel makers who were restocking from lower inventory levels for the year. The global economic environment and weak steel demand outlook continues to put pressure on steel margins with steel makers continuing to manage lower demand through lower hot metal production and reducing demand for raw materials. And despite end-user demand weakness, we forecasted market optimism stemming from an improving global economy and the Chinese government's easing policies and expected new stimulus, particularly in infrastructure and housing will assist in improving steel prices and margins.
We expect that continued strong demand from China and India will keep met coal prices supported in quarter 1, 2024, particularly given Australian supply remains constrained by recent weather events in the Bowen Basin as well as ongoing port constraints. Also, you can refer to the latest monsoon that is expected on the coast of the Queensland coast would impact infrastructure in Queensland. The SGX forward curve as of late last week, is projecting benchmark prices of $300 per tonne in 2024 as an average. These price projections indicate a higher pricing environment for longer and pricing environment, well above the long-term average price of $197 per tonne for some time to come.
I'll now hand back to Douglas to discuss the status of our organic growth projects. Douglas?
Thanks, mate. The investment we've made in our organic growth projects and emission reduction projects will underscore higher sustained returns to shareholders over time. Our growth projects at both Buchanan and Curragh remain on target and I'll make with surety that these projects are fully funded from our existing operational cash flows without the need to raise debt or further equity from the market. During the quarter, Buchanan completed critical longwall development works in the Southern District of the mine. As I mentioned earlier, these works will allow us to operate an additional underground district, allow for more operational flexibility because we'll be mining from both the North and the South districts in the future and the new longwall equipment and short conveyor systems will drive optimal performance from this new mining district.
We will also continue to invest in the construction of the new surface raw coal storage area to increase the mine's storage capacity, allowing for our longwall equipment to run at higher capacity. The scheduled completion of the excavation works is in April 2024, with a full project completion expected in early 2025. The team also progressed with the construction of the second set of skips to increase the mine's hoisting capacity to surface. These excavation works are well progressed in about 40% and on plan. Once complete, Buchanan will produce 7 million tonnes of salable production per annum and we have identified potential upside and this plan will attempt to unlock further.
Curragh Underground project remains on schedule. During the December quarter, progress continued on the critical path requirements of environmental approvals and the procurement of the mining equipment. Both of these have progressed well in the quarter. And the project team have begun transitioning to site to prepare the final pit and highwall location for construction works and the development of key mining operating and management systems. Once this project is fully operational, it is expected that the underground will produce approximately 2 million tonnes per annum of saleable met coal at a considerably lower cost, bringing the entire Curragh complex down the cost curve. Turning to our rehabilitation efforts in 2023. Our business completed 60 hectares of seeded rehabilitation at our U.S. operations, primarily focused at the Logan surface operations. At Curragh, rehabilitation works were also well progressing with significant work completed on reshaping and top-soiling of land. But the seeding of this will be completed in early 2024, post the significant weather events.
And finally, turning to our emissions reduction initiatives. Given the proven success of the original VAM unit and the reduction of emissions at Vent Shaft 16, Coronado has commenced the installation of a second unit at Vent Shaft 18. Construction works are progressing well and are expected to be completed in mid-2024. The establishment of a second VAM unit is expected to substantially advance our aspirations to reduce our emissions by 30% by 2030. At Curragh, we continue to make progress on our emissions reduction plans via the Gas Pilot project, targeting to capture and beneficially use open cut waste mine gas from our operations with the primary downstream use being power generation or being used as a diesel substitute in our mining fleet. Gas well completions were finalized in the December quarter and surface production facility installations were also completed. Final site acceptance testing and commissioning is expected to be completed early 2024.
And with that, I'll hand over to the operator for questions.
[Operator Instructions] Your first question comes from Paul Young with Goldman Sachs.
Happy New Year. Just a few questions on the operations to begin with. Thanks. I guess with Curragh to begin with, you note the wet weather and the challenges also, at glass it is what it is and the whole industry is sort of being impacted by that as well. But I just want to dial in to the a little bit more on the waste movements, the strip ratio and the plan also around removing 3 of the fleets, Doug. Maybe just starting with that. I think you've got 16 truck and shovel fleets between Curragh North and Curragh Main. So if you're removing 3 fleets, is there sort of any indication you can give us as far as the benefits are concerned with respect to absolute cost reduction?
Paul, we obviously want to be careful. We're not going to give guidance on this call that we'll be doing at the next call. I also have the benefit of our COO, Jeff, who's with us. And Jeff, please add to any of the comments I'll make around this. Jeff is driving this plan at the moment. Stepping back, we mentioned on a few calls, we've been investing in the mine by mobilizing additional fleet to catch up on historic deficits going back to COVID period even to the Wesfarmers ownership of the asset. It was a deficit in setting the mine up to be a dragline predominant mine. We needed to open up strike length for the draglines to get them to optimal performance. And then it was also getting geometry sorted and there was a pre-strip deficit that we've been investing in and recovering.
So, additional fleet has been mobilized. We're actually 4 fleets mobilized. We've already turned 1 off at the latter part of this year. And then the other 3 will come out in the early part of the year according to the plan. And that's clearly step change events in cost. It's not only the contracted costs for those fleets that we brought in that once you turn them off, they come out. There's associated costs that go with it, maintenance, camp facilities and so on that will be coming out of the cost profile. This is part of the One Curragh Plan that was always planned to occur. So that will be the changes and it will be between both of the mines, Curragh Mine and Curragh North at capacities now no longer required and we'll be pushing volumes up on the draglines. We've already seen the productivity improvements coming out of draglines and there'll be further efficiencies.
But also now that we've got the space in the pits with the pre-strip done, we will be liberated to get productivity out of our fleets because, for example, we'll have fewer trucks running at the same haul routes, shorter haul distances, better dump stacking that the mine design and plan now can deliver for us going from '24 and beyond. So that's the big milestone at Curragh from a cost perspective. The next big step will obviously be when the underground comes online, as I mentioned, the cost production out of that is as per the material we put out with the announcement of the underground, we will be substantially cheaper and that will bring the overall cost down of the asset once again.
I'll run some numbers on that. I think if I recall your sort of 40% dragline, 60% truck shovel, what sort of percentage would this take, take 3 or 4 fleets. Would that like lift the dragline percentage from 40% to 50% to 60%?
It will take your dragline and when I say dragline, we combine dragline, cast blast, those kind of things together, they are cheaper production methods, but it will take it to about 44% and I think last year was around 37%.
I'll move off from Curragh, the asset just on the port, Doug. And can you maybe just step to the demurrage that you incurred in the quarter? Is there any sort of sense you can give us around what demurrage cost might be for the next couple of quarters, assuming that it will take some time to sort of remove that congestion and that stockpile?
Once again, I don't want to go near guidance, but Gerhard has got his fingerprints all over this on weekly management. So, Gerhard, I'll throw to you first and then I'll add to anything you have to say.
Yes. So look, Paul, no doubt this has an effect on demurrage costs, but we are in contact with RG Tanna on how we can mitigate or eliminate the additional demurrage costs at a cost by the port, not by us. So, too early to comment on it, but we are working on it.
So, Gerhard you're saying that the demurrage costs are borne by RG Tanna?
No, no. At the moment, that's very clear, its borne by the shippers, but I'm working -- we are working with RG Tanna on mitigating that impact on us. So, it's very early to comment on it. But legally, the spot contracts are structured in a way that the shippers carry the cost.
Last one for me, guys. Just the discussions with Sev.en GI, the new shareholder. Anything you can add there as far as, have you sat down, talk to a new strategy or just how they can actually assist you on the go forward, anything you can sort of provide us?
Paul, this is a deal between our shareholders and we've left it there. Our team has fulfilled their function in supporting the [ DD ] and they progress in their approvals. At this stage, EMG is the owner of the major shares. And our strategy as a team hasn't changed nor will it change with the Board from both for our plans.
Your next question comes from Chen Jiang with Bank of America.
My questions are related to the market. I understand you provided insights into the [ POB ] HCC market. I'm just wondering if you could provide some color on the widened quality spread, which reflected in your price realization, you had 60% -- I mean, 40% discount to the index. When are we going to see the quality spread going to narrow going forward? And also, sorry, what is the driver for that from your -- when you talk to your customers, is that because the discounted PCI coal from Russia, there's a surplus in the PCI market or what you have seen or heard by your customers?
So, you're pointing out the 60% realization in quarter 4. Just let me remind everybody that across the year, we realized about 73% like last year as well. And if I'm not wrong, similar range in prior years on met coal price realization. So, it's a combination of impacts and you pointed one out, but let me also point out, as I always say, when prices go up, then we suffer a little bit from price realization. So, if you look at the quarter 4 price, that was about $336 per tonne, whereas quarter 3 was only $264, so 79%. So, it's like 21% lower price. And as we always realize the prices mostly from the prior quarter. So, that's a big impact on that, much lower prices in prior quarter. And then if you go to quarter 2, it was even lower, probably 30% lower than what we have seen in quarter 4.
So when prices go up, then we always see a lower price utilization. On top of that, we have RG Tanna product mix of 60% hard coking coal and 40% PCI. So, if you had sold this [Technical Difficulty], our price realization would have been higher. And then you see the impact that you mentioned [Technical Difficulty] 52% of the premium lower benchmark historically, 70%, 73%, 75%. So, there is a little bit stemming at the moment simply because of Russia is the biggest PCI exporter in the market. And they're selling at a discount. So, there's not a lot of demand for Australian PCI that brings the realization up. We are not impacted by that [Technical Difficulty] at all. But if you look at the semi soft, that's a very poor realization that we're not impacted by it, but that sits in the 40s now. That's extremely low. But you can see that benchmark has -- is moving in a different direction to the PCI at the moment. But predominantly, as always, when prices go up, that's when our realization is impacted negatively impacted on paper. Across the year, though, we stood at 73%.
Maybe I'll follow-up, since you mentioned the PCI because by looking at how PCI coal has been performing in the last 6 months, this is the hard coking coal rally or hard coking coal continued to stay strong, but PCI coal seems like in a different market. 40% of your coal from Curragh is PCI. Would you please remind us the coal quality from U.S. and the benchmark we should be looking at? Should we compare the PCI coal with your coal from U.S.?
Yes. Look, I mean, the U.S. is actually pretty good. So, if you look at our US split and we published it, so I haven't got the numbers here on hand, but we published it, you find the numbers. We have a mix of hard coking coal and then PCI and then particularly highwall As. I think our product that we sell as PCI right now in the U.S. is extremely popular. So, it's a very long-ish. It's extremely popular in the market. It attracts very high premiums and probably has a potential to be linked in parts. It is linked to the hard coking coal in this seasonal. So that's pretty good. The other thing is on the highwall is, I was not really a big fan of highwall but it looks like they have become more popular, particularly in India. If you look at India now, I mean, 19% of U.S. exports [Technical Difficulty].
Ladies and gentlemen, this is the conference operator. We have just temporarily lost connection with Gerhard's line. We would move to the next questioner. Your next question comes from Chris Drew with Jefferies. [Operator Instructions] Pardon me, Gerhard, Your line is now live. Please go ahead.
I dropped out.
Thank you, please resume your question.
Hello. Am I online now?
Yes. Go ahead, Gerhard. Operator, can we go to the next question, please?
Your next question comes from Lachlan Shaw with UBS.
Doug, Happy New Year. Couple from me. So, maybe just to start with the issues at RG Tanna. You're saying that's expected to be resolved by mid-'24. Why the delay? And are there options -- other port options available?
Yes. Look, I think let me respond to that. Look, that is more an issue for us. RG Tanna, what they're telling us is there is now all the people in place, all the operator in place to rectify the issues. It should happen earlier. We are a little bit conservative in mid-year. I suspect there's a good chance we can fix this in the early part of quarter 2, or they can fix it in the early part of quarter 2. There are alternatives that we are discussing in November, it's premature. It would be premature to make it public. But there are alternatives where other ports are idling and the government and RG Tanna is government-owned could divert ships to other ports with capacity. We are in discussions with the government as well. Let me remind every call we don't have a ship also doesn't attract a royalty. So, there's an impact on the government as well and it's in the best interest of all to fix it. There are potential solutions out there, but it's premature to nail that down on this call.
Next one. So, just on the rainfall impacts, maybe can you talk to what you're seeing? I mean we've got tropical cyclone Kirrily sort of [ bailing ] in and potentially spinning off a fair bit more rain in coming days. How are you prepared, how much buffer is there in the system in terms of water storages, creek, river pumping all sort of stuff?
And thank you for bearing with us while we had some technical issues on the line. With regards wet weather preparedness, unfortunately, I think everybody in the Bowen Basin has had a lot of practice with us over the last couple of years. In particular, the initiatives that we've put in place is mine planning where we ensure that we've got high coal and low coal, a localized term, local term we use in the mine in the business to ensure that if we've got rain and we may have a pit that has water that comes in through the rain, we still look cold exposed on the upper bench, so we can try and get production flow and revenue flow continuing. So that's been built into the mine planning for a while.
We have, over the last couple of years increased our wet weather allowance in the plan. So, in our time usage model, we've allowed for more rain impacts and that's coming to the mine plan for 2024 again. We generally plan on a 10-year average and we've recognized the more recent year impacts, particularly around first and last quarters. From an infrastructure perspective, we've invested in building a new out-of-pit dam over the last couple of years. So that gives us additional storage capacity that we can pump water out of our working areas away from where we're conducting works and store it and then evaporate it, use it on our roads, use it in construction works. We've also upgraded all our infrastructure so we can move water around our assets far more efficiently.
We're blessed with having 2 mines, Curragh North and Curragh Main. The age of the mine enables that you've got pits that aren't operational that we can move water to and get it out of our way in a speedy manner to recommence works. And then lastly, we do have permitting to releasing to the creeks, it's highly regulated. We've ensured that we've got the best technology on our release points to ensure that when the opportunity presents we release water in a responsible manner into the river systems and get it off our sites. Drill and blast is generally one of the biggest challenges that one has in a mine plan where you set up your drilling blasts, you drill the ground and then you have rainfall that impacts. The team have planned for that as well.
Regarding your point of the cyclone that's coming towards us, the challenge for the industry is going to be wet on wet. Everything is saturated at the moment in the Bowen Basin. I think we're already at 30 mils month to date. So, more rain will be impactful at this stage. We can't measure that, but I can guarantee you we're very well prepared unfortunately, through the lessons over the last couple of years to manage these impacts.
That's great detail. Maybe a last one before I pass it on. So, just with the costs, just to come back to it, pre-strip fleet starting to demobilize, dragline share of total material move rising. If we look at FY '23 cost of $107 million and FY '22 $88 million, how close do you think you might be able to get FY '24 down back towards below $100, towards $95.90. Is that realistic? Or are we still talking in an environment where costs are generally quite sticky?
We don't want to give guidance. It wouldn't be right. Sorry, Gerhard I'll let you go, but we're not going to give guidance. As Gerhard said, we see inflationary pressures starting to release. What we pointed out is in our mine plan, we've got these step change events where costs will be taken out. Obviously, removing these fleets and associated costs is a step change event. At Buchanan, we've been investing in development with no associated tonnes in getting the Southern District set up for the long-term future of the mines with the North and the South. All of that had to get done and now the associated development -- longwall tonnes will start coming through, so we'll see a cost reduction there again. And then we have been managing our costs very diligently and that will continue through into the year to come with procurement strategies and cost-out strategies that we've identified in our budget for the year.
Gerhard, I'll throw it to you, mate.
Yes. No, look, it's exactly like this. I think the key question is, does it come below $100? Yes. I mean that's definitely possible. Just look at the last quarter, just stockpile, if we RG Tanna, if we had shipped it all, we would be probably closer -- way closer to guiding, probably $304 per tonne. And then if you take out all the geotechnical, mechanical and wet weather issues we have seen and then plus the initiatives we have put in place with the reduction of the 3 fleets, we will become way more productive. It's definitely possible to go below $100, even below the $95. The $88, into the 80s would require probably -- that's a steep task, but the low-90s is possible. But we're providing guidance, we're providing guidance next month on this.
I also call it with the investments that we've been making into the business for the long term, these fully funded capital projects that we're taking our own generated revenues and reinvesting in the business, the fruit from that will come. Like the underground, Jeff and his team have built many of these operations in the United States in the past. We've got a team that knows how to do it and they've costed it, they know what the production rate is going to look like as we launch the underground. Those initial tonnes will come at a much lower rate than our present production. So then again, in '25, that 2 million tonnes will come and bring the whole complex at Curragh down again. And then at 2026, as we've communicated previously, that's when our tonnage commitment to the power station steps down from 3 million tonnes to 2 million tonnes. That is a reduction again in cost, but also we'll get a revenue kick up. And that will be another substantial adjustment to Curragh's profile into the long term. So, we've got really exciting, well identified initiatives that will take Curragh into a long-term sustainable cost curve.
Your next question comes from Chris Drew with Jefferies.
I did drop out earlier, so apologies if you covered this when you were talking about the pricing, but I just wanted to dig back into those realizations. I guess you flagged higher PCI in the mix at Australia, in particular. I guess that is your standard spec PCI. There's nothing in the quality of that PCI that we need to sort of think about? And then secondly, can you help us out with a little bit of comment around what to expect in terms of that mix in the sort of current quarter? Should we start to expect it to normalize back towards more hard coking coal as you sort of destock some of these [indiscernible]? Or will it remain sort of more elevated PCI for a little while yet?
Yes. So, I think as I highlighted earlier in answer to the quality of our PCI, particularly out of the U.S. is so high that it is attracting a premium to the PCI indices. So, no -- we have no concerns about the quality of our PCI whatsoever. In fact, we attract a very high premium to these products. I think what I said before is what we see why now in the market is more large, market gets a lot of supply out of Russia in the PCI segment and therefore, the relativities are down. In terms of product mix, yes, it will normalize. I think as I said before, we had like at RG Tanna 433,000 tonnes of product at stock, couldn't get shipped and 60% of that is hard coking coal. So, it would have been skewed more towards hard coking coal if we had shipped it.
Lastly, when you look at the product mix in terms of thermal coal, it's still way less than 10%. But part of the number that we see in this year is also impacted by agreements that we made in 2022 stripping met coal, as you shall remember this, high quality met coal into the thermal market because of the effect of higher prices. So, there's about -- I don't want to -- but it's probably 300,000 tonnes or so of met coal that were shipped as thermal coal and that kind of bumped up with thermal coal mix. So, that will normalize as well in 2024.
Your next question comes from Glyn Lawcock with Barrenjoey.
Doug, I'm just wondering if you could just shed a little bit more color around Curragh and the 3 fleets. Just if the weather does continue to be quite wet, is there a risk that you have to hang on to those 3 fleets? And sort of what's the timing? Will we see the benefit of them disappearing more in the second half of the year? Or should you see some in the first half?
The first part of the question is the easiest. The plan is to turn them in off progressively into the first quarter. So according to the mine plan, those fleets will be turned off into the back end of the first quarter, later start of second quarter is our plan. And the intent is no. Those fleets are no longer required, demobilizing them in a systematic planned way is our goal because the pre-strip deficit has been recovered. The rain event at this stage shouldn't impact on the mine geometry of where we sit at the moment and the draglines can take on the additional volumes.
And then maybe could you just shed a little bit more color around Buchanan. I mean, we sat here a quarter ago, we talked about geotech issues and you said they were behind us. We've now experienced them again in the month of December. Is this just the particular area we're in or we're going to be moving into a new area, I think you mentioned this year? So, is that going to be different? Or is this just part and parcel now that Buchanan and the age of the mine and where we are?
No. Unfortunately, as part of underground mining, you do get intrusions. These are 2 different events, but they were on the same panel. So, 14 East is the area that the longwall has been mining through. We knew that there was an intrusion from our development works. But the extent of the intrusion as communicated that came through in September that slowed the production down. And we did that for a couple of reasons is you don't want to damage your equipment as you mine through it, so that once you restart, you can launch again. And then the second is when you're mining that much rock coming through with your material, you end up having material handling that you can bolt your conveyor belts and that if you slow all of it down, you generally carry it quickly and you can get up going a lot quicker. The plan, the team executed that plan and pleasingly, it performed well.
The geological challenges that we had in December was a fault area that we traversed and we decided to slow down and bolt that area and secure it and make sure that it's safe for the operations and did a full set of rectification works before we went on. Fortunately, East is busy cutting out at the moment and we're moving into the Southern part of the mine of the new district. I want to also point out that this Northern part of the mine and the Southern part of the mines were operating concepts on our draglines -- our longwalls will have the benefit of having 2 mining districts that we can set up and run them as efficiently as possible with separate ventilation systems, separate material handling systems so that we can get optimal performance out of both of the longwall and longwall mining districts as we move in. And the benefit we're going to reap going forward is all the development we've been doing over the last year or so in setting up the Southern District, will now have associated production tonnes coming with it and thereby reduce the cost of production.
Jeff, anything you'd like to add?
No, I think you handled that very well, Douglas. The thing, long story short, there is differences between the Northern District and the Southern District. The intrusions that we see in the Northern District we do not see in the Southern District. The belt system from the Northern District is much longer than what we see from the Southern industry. And also the face width of the longwall panels in the Northern District are about 700 feet. When we go to the Southern District, they are 1,000 feet. So, we see a lot of advantages and help as we progress into the Southern District.
So Douglas, can you just confirm then from those comments that the development work you've done in the South now, obviously, you can never be 100% certain, but it definitely looks like a lot of the issues we've just talked about present in the South?
That's correct. One can never call out everything but with the cover drilling that we've done and the development work that we've done, we know what the Southern District looks like and we're well set up.
Thank you. That concludes the question-and-answer section of today's call. I'll now hand back to Douglas for closing remarks.
Well, thank you, everybody, and apologies for some of the technical issues we had there in the middle of the call, particularly Chris for hanging on for us, so we could answer your questions. Thank you for participating today. And if you got any further questions, as always, please don't hesitate to reach out to us through our Investor Relations team. Have a good day.
That does conclude our conference for today. Thank you for participating. You may now disconnect.