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Whitehaven Coal Ltd
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Welcome to the WhiteHaven September 2020 Quarter Production Investor and Analyst Call. [Operator Instructions] Thank you again for joining us today. I'll hand over to Paul Flynn, Managing Director and CEO.
Thank you, operator. And good morning, everybody. Thanks very much for dialing into the September quarterly production report. I'll go through the highlights as I normally do, and we'll get to the Q&A, which I'm sure will be the focus of a lot of the call.Look, from our perspective, a good solid first quarter, actually, to get off the mark in delivering in this new year. So I'll go through the highlights. Strong performance on a safety perspective, as you would expect, given that we did have a strong June also. September quarterly run-of-mine coal production at 4.5 million tonnes was 4% up period-on-period, but it really was the sales that obviously with the large stocks that we had that we obviously sold a lot during this period. So total managed coal sales at 6 million tonnes, 13% up, managed own coal sales of 5.6 million tonnes, 15% up, recorded total equity coal sales of 5 million tonnes, 13% up, and our equity sales of our own coal at 4.6 million tonnes, 16% up. The managed coal production at 4.9 million tonnes was about 2% up period-on-period, and our stocks are down at 1.8 million tonnes, about half of what they were at June. As you all know, Vickery was approved during the course of this quarter. So we can talk about that a little bit later on. And we have revised the guidance range that we've given previously on cost down to $69, still the same bottom range, but the top of that is now $72. Balance sheet remains unchanged from what we reported at June. And we are in the process of just finalizing our revisions to the ICR with our lender group. Thankfully, we have no known COVID cases and operations continue to observe all the hygiene and distancing requirements, as you would expect. But thankfully, the region is pretty clean from a COVID perspective. Just on safety, again, with continued good momentum that we had in the June quarter with 4.74 as our TRIFR and well below, as you know, the industry rates, but as we continue to push new initiatives into the business, we want to see that come down even further and we're confident we can deliver that. Over the page, we've got the various tables that you'll see there. I won't repeat those numbers again other than to say, obviously, most of you will realize the rule of thumb there between the managed and the equities totals is about 80% -- totally 80%, 81%, 82% depending on which dimension you're using. And then we get, interestingly, to the equity coal sales and realized pricing table, which I'm sure there'll be some discussion on.Just to go through a few numbers there for you. Sales mix during the course of the quarter is 63% for our high CV thermal coal, 26% for our other thermal coal proportion, which was slightly up on previous quarters. But as you know, it does vary a little bit, and I'll talk a little bit more about that. Metallurgical coal sales was low as you would expect off the back of the June lockdowns in India, which deferred sales into this quarter, which I'm pleased to say that those sales have been reinitiated, but expectedly low as a result of that. Observing the prices that were through the quarter, you have the average for the quarter for gC Newc at $52, JSM, of course, $82, and the average semi-soft spot was $63. Our realized levels, we managed to approximate the average for the quarter for gC Newc at $52 being the premiums outweighing the discounts for the other thermal, which is a good result. And then the average of our semi-soft realizations basically splits the difference between the JSM and the average for the Platts price during that period. As I say, sales, we've gone through, so I won't spend too much time on that. But in this next section, I will call out a couple of interesting areas. The volumes, obviously, with the split of our coals between the high CV and the lower ranked CV coals, we did work through production from Werris Creek, which was affected by those legacy underground workings, which were now passed. And so this is really just the unwind of some higher ash stocks that we've sold during the quarter. And there was some fault-affected coal at Narrabri also, which was higher ash than gC Newc, which we also worked our way through into the Korean markets, which was positive. The met, as I say, we previously reported that we had received deferral request during the June quarter to move sales into the September quarter. And those sales have reinitiated, which is positive, but it will take a little -- a few more weeks to ramp up to those normal levels that we experienced in the past. So that is expectedly low at 11% of sales for the quarter. But we are happy we're on track to meet our sales guidance for the year. Maules Creek has had a solid start to the year, I have to say, just under 2 million tonnes produced, which is in line with the previous corresponding quarter. Saleable coal production at 2.2 was about 8% up. And sale of produced coal as we drew down those stocks at 2.45 was certainly a solid result, 15% up from the previous corresponding quarter. As I said before, our stocks overall at that 1.8 million tonnes is just slightly under the half of what we had at stock in June. So we have drawn heavily down on our stocks, as you expect, and converted that inventory and working capital into cash during the course of this quarter, which will be a recurring theme as we cover the other mines as well. If I called out, certainly just the met coal is again low for this level at 12.8% of sales volume, reflecting that same issue in terms of the Indian market being closed for a period and now slowly ramping up during the course of this quarter that we're in the second quarter. Our sales mix and production mix, as we mentioned earlier, in the June quarter when we announced -- sorry, at the end of the June quarter when we announced our results was 40:60 split half-on-half, and we are on track to deliver that for this year at Maules Creek. I think the pleasing thing about Maules Creek is certainly not just the coal production is as expected, but certainly the overload movements has stepped up nicely in accordance with the volumes we want to move for this year. Narrabri's production at 1.65, 8% down on the previous corresponding quarter. We had traversed an; area where there's a known defaulted area. So we did anticipate lower production levels during that phase and have derated our production and our budget to that level. But that was a good quarter nonetheless to get through that area and back into a normal rhythm of production now. Again, same feature sales of coal in the quarter at 2 million tonnes, 9% over the previous corresponding period as we drew down stocks. And we also saw the PCI sales, particularly as it relates to India reinitiated and will ramp up over the coming weeks to levels that we expect normally in the course of this year. The long haul changeout, just for everyone noting, end of Q3 for FY '21 and Narrabri, we're confident on target for its own production for the year. Over to the Gunnedah ops, and both our Gunnedah open mines have had a good start of the year. So Tarrawonga there 490, 14% up on previous corresponding period and Werris at 381, 166% up on the previous corresponding period. Both of them have benefited from large stocks, as we said before, in terms of their sales and coal stocks have come down, as you would expect from the June quarter. Other than that, it's been a very solid stock, nothing particularly noticeable to call out in this area other than to say as I say, Werris is past the old underground working. So that's nice. We'd be liberated from that for the balance of the life of the mine. And hopefully just deliver more consistent coal product quality without the heat affected underground areas reappearing in the future. From the development projects perspective, I'll just call out the key features of this for you. Narrabri is actually just about to lodge, it's the EIS for stage 3, so that will be a good milestone. We have launched the document from an adequacy perspective and are working with the government on its feedback, but it will go on public display shortly. Vickery, as you know, approved. We are working through the EPBC approval requirements with the federal government and simultaneously, working through the management plan related to secondary approvals with the state. Winchester South, as I mentioned before, we had conducted an additional drilling campaign there. That's now being completed. And we are analyzing the information coming out of that as we speak and on track for delivery of its reserve, first reserve, before the end of this calendar year. Getting into the market, I'm sure this will be a feature of the discussion later on with the Q&A. I think the first 2 things to say about the quarter from our perspective is the met coal has behaved as I said it would in terms of the deferrals from the Indian market starting back again in the September quarter, which is very positive. The thermal coal sales from our perspective haven't changed at all during the course of COVID. We haven't received any deferrals or changes to any buying patterns or other deferrals as we stand here today, but we have of course seen some gyrations in the price during the course of this last quarter. So we are seeing the low in terms of the cyclical low price, we've seen it recover quite quickly into the late $50s and then more recently moderating back to the $53 to $55 range. Of course, we've all seen the news in terms of not formal announcements, but certainly change in behavior from what appears to be Indian -- sorry, Chinese import restrictions holding up some coal in shipments trying to arrive at their ports of unloading. Fortunately, as everybody knows, we're not physically exposed to any of that, which is a very positive thing for the company. But we do watch that with great interest just to see whether this is bumping into their import quota restrictions, which may not be a reset for a couple of months until they click over into the new financial year or something more complex than that. However, the corporate side of things, which is for all a concern, we've given you the FX position for the company. And then as I mentioned briefly in the highlights, we are finalizing the agreement with our debt providers. I'm sure there'll be some discussion on this just on our ICR, essentially, just to give us some more flexibility over the 2 next testing periods. That will be largely finalized shortly and on terms consistent with the existing facility. In fact, no change there other than, as I say, some flexibility in those ICRs. And all we're doing here really is making sure that we are providing for unexpected eventualities. This -- if the COVID recovery takes longer and perhaps our customer economies remaining flatter for longer, we're just providing for some cover for our sales on a belts-and-braces approach here. And I do also note pleasingly, with Scott Knights, who is our EGM of Marketing Logistics, having signaled his desire to change tack in careers. We've been through an international search process and awarded that role to Jason Nunn, who was Scott's 2IC. Fantastic to see one of our internal candidates coming through the ranks. It was a role which was highly sought after. So nice to see the internal candidate taking up that role, and he'll transition to that at the end of this year when Scott concludes his time with us. Revised guidance, as I say, now at $69 to $72. Look, this is off the back of a solid first quarter. We can -- when we look at our forecast, we think we're well positioned to deliver in that range, not just because of the sales in the first quarter, but also cost reduction initiatives taking hold, which is giving us the confidence to move this range into a narrow field.So with that, for us, a good solid quarter both on all fronts. I think production, ROM, overburden and sales to start off this year. And we'll hand over to the floor for questions.
[Operator Instructions] The first question comes from Rahul Anand from Morgan Stanley.
I might start perhaps with the most topical one and come back with a second. I guess the China restrictions, I guess, if you can provide any more visibility in terms of how you view them, firstly, for the thermal and the met market, and secondly, specifically for Whitehaven? You did say thermal coal is not really your end market being China. But I mean do you have a view on whether this is a quota issue or if this is specifically a targeted issue? And then also, if it is indeed a targeted issue, how do you see the market play out and then eventually impact sort of your sales and the pricing you received? Any more color would be much appreciated. I'll come back with the second.
Yes. Thanks, Rahul. Yes. Look, it's obviously topical, but it is really this particular nuance or variation on the previous themes in terms of Aussie-China relations, is only days old, so it's probably a little early to be making a call completely on this. I mean obviously we've seen plenty of different approaches to managing the import restrictions from China in the past, be they total volume, be they qualitative focuses on things like fluorine and others in the past where you may or may not see that as necessarily being in the same basket as a physical quota restriction, but I see them more generally as being means by which they moderate the imports into the country in one form or another. Obviously, we've got some pretty large distortions at the moment between the domestic production prices and -- on the met side and also on the thermal side. And I think that weighs heavily on that market. And so there's a cost to be borne here by these types of initiatives. I mean everyone can see the reports that highlight this anywhere between 4 million tonnes and 6 million tonnes seems to be lying around in boats waiting to be unloaded there in China. So I think it is early days to make a call of one way or the other. We do know, of course, that they've imported a hell of lot of coal out of Australia in the first 9 months of the year. I mean that's a fact. And they have limits which they are bumping into. So whether or not it needs to be automatically characterized as some sort of targeted issue in the bilateral relations between the 2 countries, I think it's early days to say that. But there's no doubt that people are experiencing some physical disruptions with being able to move the volume of coal in there that they had previously anticipated. As to how that plays out for the markets is yet to be seen. From our perspective, I don't see any issue with -- there'll be no change from our perspective on the thermal side of things, in particular, given that we don't sell anything. From time to time, we have sold met in there. What would happen if more of this met that doesn't land there is redirected to other markets. I don't think necessarily it's going to change too much our business simply because our -- as you see now, our semi-soft sales are relatively modest at this point in time. If there's hard coke that needs to find a home, it's not really going to be replacing the production that we have from a semi-soft perspective. So I think its uncertainty, which is unhelpful for the market more generally, there's no doubt, Rahul. But I think we do need to let it play out a few more days to try and work out exactly what's driving this. And I'm sure the market will be, in the meantime, adjusting accordingly as we've seen the softness in the current price.
Okay. Look, the second one is on Narrabri. This known fault that was the impact on production this time, perhaps if I compare it very simplistically to the fourth quarter of FY '20. Now is this still going to be an impact into the next quarter? And does that put pressure again on guidance perhaps for this year given third quarter you've got another longwall move? And last year, in a longwall move, you only produced about 230,000 tonnes material.
Yes. Yes, I understand the question, Rahul. Not necessarily like-for-like, but I'll explain to you why I say that. I mean at this run rate we're tracking, we'll definitely -- let's assume -- let's just assume in your hypothesis here that we lose a quarter of production, then we'll -- at this run rate, we'll get to the bottom of our range in any event. In the next -- we've got 2 quarters, obviously, until we actually encounter that changeout. And because this is not a significant changeout as what we had last year, it will be shorter and you will get production out of it. You'll recall the last changeout was large, long and complex due to the chock cylinder replacement that we had there, which added a few weeks onto that. This time around, you won't be experiencing that. So as you map out these smaller faults, then we have accounted for a lower level of production during this period, that's already factored into our guidance. So we're quite comfortable with where we're at. And as I say, we've got 2 good quarters ahead of us in good ground before we get to the changeout. As I say, a simpler changeout, I think we're fine in our guidance.
And in terms of the fault issue, is that continuing into the next quarter? Or are you past that now?
We're past that now. Yes.
The next question comes from Paul Young from Goldman Sachs.
Paul, first question is on your covenants and the discussions with the bank. Two questions here. Can you give us a time line on when you think this will be concluded? Also I note that with covenant support that -- along with these discussions, you're looking at a distribution restriction or the banks are asking for that. Can you maybe expand on that? And also, are there any sort of other equity injections or initiatives on strengthening the balance sheet that the banks are sort of maybe encouraging you to do?
Yes. Thanks, Paul. Kevin is here. And then I should have mentioned earlier, Kevin is here and Ian is also on the phone as well. So I'll hand over to Kevin, given that he's in the thick of things, but we don't expect this to be -- to take too much longer to conclude, no.
Yes. No, Paul, we were working to get this lined up with the quarterly release, but some things had to come out of Europe for an ECA facility, so that's sort of costs us 24 hours. So our expectation is done this week and that's where it is. Strong support from banks, they understand what's going on in the coal market, they look at where projections are for business in '21, and they've been very strong and very solid and supportive. The question about dividend distribution, it's typical in these arrangements. If you're operating with a reduced ICR ratio, a bank wants to know that the money is being retained in the business until you come out of that regime. And any other equity conversation, I think you said, never been discussed. Not on the table. Never been raised by a bank in the process. So the approach here, Paul, was to -- 31 December, 2020 test date and the June 30, 2021 test date. It's tough to say. And so that leaves us pretty much all of calendar year '20 and calendar year '21 to navigate through this process. So I've been really pleased with the engagement with banks, and I'm not going to say I was -- I'd say I'm really pleased with the support they've provided, but not unexpected because of -- we have a pretty transparent and strong relationship with the banks and funding providers. So in good shape.
Okay. Good news, Kevin. Maybe focused on -- or continuing on balance sheet and bringing cash flow into the discussion. It looks like your inventory drawdowns sort of tracking similar trend to last year. Should we expect that by the end of December, that you've drawn down coal stocks back down to that 1 million tonne level?
It's going to depend on the timing of production, but we're certainly focused, Paul, on maintaining and strengthening cash flow out of the business. And clearly, when we built stocks in the back end of fiscal year '20, that unwind was going to take place in the first half of fiscal year '21. So our marketing team would like to have some stocks that are -- that give some flexibility to manage with ports. So we clearly won't run it down too hard, but probably a touch more from where we are today is the answer that I'd give you.
Paul, the only thing that adds to that is that, as we mentioned in the report there, there's obviously more than one working phase there at Maules Creek in particular. We do hit the Braymont again in this coming quarter. So there will be good production and then the stocks build again as you do contact that major [ seam ]. But yes, look, we think we can get our sales down. The market is fine with the quality. They love it. So I mean, there's no issue in selling it. Obviously, we're not entirely happy about the price we're selling it for, but there's no issue about moving the coal at all.
Yes. Okay. Great. I'll sneak in one more on cash flow, guys, and that's on Maules Creek. We're pretty used to now seeing September quarter run-of-mine production fall quite significantly versus June quarter. This is our third year in a row, and that's just the mine plan and the way you're managing to end the financial year. But I know you stated previously that you had to overburden or strip ratio does go up at Maules Creek slightly in FY '21. So just curious about, again, just on the cash flow theme about what percentage of overburden for the fiscal year did you actually move the September quarter considering that, obviously, if the overburden removal does fall in the next 3 quarters, that's positive to cash flow?
Look, I think if you are -- I'll just answer this more generally, if I can, Paul, because if you look at the production guidance that we've given you and your back solving for an implied total movement of overburden based on the strip ratio, then you'll see then that we're obviously stripping more, but we're producing more in this year than we did last. Last year, from our perspective, was a disappointing year as we've all discussed at length. But we are going to move more dirt this year. That's not out of step with the mine plan. It's just actually proper execution of a better formed plan than what we were using 12 months ago. So it shouldn't be an over-stripping, if you like, period in this year. It should be balanced with the strip ratio that's consistent with the life of mine plan. I think as we mentioned, we had 2 years of 7 before us, it's slightly less than 7 in this year. Strip ratio, that is, I'm referring to. And it's -- but you will get the coal that comes with it. It's not -- there's not some period of 8 or 9:1 strip ratio that we're enduring here in order to get the mine plan back into some sort of trajectory than it was before. It's just it will be consistent with the production you'll see.
Yes. I get that, Paul. Just to clarify, so that you're saying September quarter overburden removal, yes, that's not higher than what will be, we'll see in the December quarter and March quarter. So I'm just trying to get a trajectory of waste movement going forward at Maules Creek. Have we actually seen the highest for the year?
Yes. Look, Paul, we're not giving guidance quarter-on-quarter on overburden movements. I think it's just -- as I say, you'll see the Braymont again turn up again in this -- at the back end of this quarter. And that's just part of the natural sequence of things. We're running 3 different operating phases here at the mine. I think it's -- I wouldn't be worrying about -- I wouldn't be worrying so much at that level of overburden removal drawing too much cash out of the business. We've obviously gone through a period in this quarter where we've delivered on our mine plan. And as we've said, the liquidity position of the company hasn't changed now for many months. So we're managing that all within appropriate working capital management.
The next question comes from Peter O'Connor from Shaw and Partners.
Paul, Kevin, congratulations. Good quarter, good start of the year. Paul, 2 questions, I think, for Kevin. Firstly, on the ICR. When you go into discussions with the financial group about that, are you looking at the trailing ICR, I take it. So if you're looking at the change in the duration of the ICR measure or is it the coverage number that you're trying to change? And if so, where do you focus and what are the outcomes of that?
Yes. Thanks, Peter. The only changes we've made to that is that we've just changed the ratio itself. So not changed the test period. So it's still a trailing 12-month period. And as I say, the only 2 changes there is the dividend restriction to begin with and the second one was the ICR changing. But those 2 things are hand-in-hand. No change in the length, just a standard change.
So it's a trailing 12 months, Kevin?
Yes. It's a trailing 12 months. So the reason why we are...
With the reset every 6 months?
No, no. It's a trailing 12 months. So for example, if you -- when I provide the ratio statistic for December 31, 2020, it will be for calendar year 2020. When I provide the ratio statistic for June 30, 2021, it will be for the 12 months ended 2021. And clearly, what -- as Paul said to start with here, what we've done is modeled a case that assumes that for the sake of driving the numbers, that the recovery was slower than people thought or longer than people thought. It was really that providing belts-and-braces answer a bit of backup and support to what is really a period of uncertainty. That's all.
And what is the trigger for the dividends to be released, so to speak? Is that in June 30 next year if the trailing numbers are above the limit, and what is that limit that it's got to breach to do that?
You've got to not be operating under that adjusted regime. That's all it is.
Got it. So second question, Kevin, also on costs. Off that tightened guidance, which is favorable, and it's come down about $1, can you give us some sense of, in that dollar, how much is the denominator effect, the benefit of extra sales and how much is other and what are those other items that is driving that dollar average gain or improvement?
Well, I can. I'd probably say that the benefit there is we gave you a cost guidance that said at the bottom end of the range on production, we have a cost guidance at the top end of the range. And at the top end of the range of production and sales, we'd be at the bottom end of the range. What we're telling you, I think, in this tightening of the range is that we're confident that we won't be at the bottom end of the range. And so --
So the denominator effect seems to be a bigger part of that. Got it.
No, no -- I wouldn't -- I would go -- I'd say that it's probably half and half. And I would say here that what I am seeing across the business is some benefits come from a poor coal price environment, which you naturally expect. So you see a tighter cost contributions by suppliers in terms of cost reduction and looking for extensions of the contract and managing to lock in better pricing. You're seeing suppliers who look at your business and say, what can I do to help you. And that's what we're seeing in the business. Probably, it's a bit of both.
We've seen productivity lift as well. Productivity is lifted substantially. So that's certainly driving lower costs.
The next question comes from Glyn Lawcock from UBS.
Paul, 2 quick ones. Just to follow-up on the dividend. So I hope what Kevin said about while you're operating under the adjusted regime. So does that mean the dividend declaration in August next year is off the table under the current regime? So the first time conceptually, you could do it would be February '22? Just want to make sure I understand what Kevin was saying.
Yes. Look, as I said on the call, Glyn, the -- while you're operating under the regime, the banks just simply want to ensure that the money in the business stays in the business. If you're exceeding the initial ratio certificate or the initial covenant that exists in the business at that point in time, then you're back to normal operations. So for that to happen, we need to be exceeding the ICR that's set out in the original facility, and that is possible. The second question, I think, is you need to go and have a look at the Board policy on dividend payment, which says it's between 20% and 50% of net profit after tax. So again, that will be a function of where do we finish the year at.
Yes. So if the coal price picks up, profits or ICR in the June year-end with the 12-month trail, if you're above the original ICR, then it comes down to profit after that on top. So you could get a dividend potentially August next year. But it's coal price-related. Is that fine?
It is. Your answer is right. But again, that will be a Board decision next August, I think.
Yes. And then the second question, if I could, just -- Paul, you stopped providing the Maules Creek premium. It was 17% in the December quarter, it dropped down to 12% in the March quarter, which was a bit of a surprise given coal prices are falling and you would expect the premium to lift given it's a fixed premium for low ash. I wonder if you could just help me understand what the premium's done in the last quarter for Maules Creek thermal?
Yes. Sorry about that, Glyn. That's not intentional to throw you off the trail there. The premiums have been actually very good. We'll do a little bit of scurrying around to try and see if we can get that to you whilst we're through the passage [Technical Difficulty] we'll deal with that subsequently. But look, there's no material change there. There's no doubt that at the top level, I mean, obviously, you understand the fixed and variable, those 2 components of that, which we've spoken at length about. The variable component is a function of, obviously, the underlying coal price. The fixed component has definitely come down from its peak, but we're still actually seeing very good premiums. I would have said, we're not seeing the near $7 or even, in some instances, a little bit more than what we've seen in the past. You're more seeing the 4% to 5%. But off the back of a lower price, so actually percentage-wise, it's very, very healthy when you add in the energy benefit as well. So those premiums are holding up quite well in what's a pretty average market. So apologies for the upside.
That's right. So just so I'm clear, so you're saying that the ash -- the low ash premium, which is $1 per tonne premium, is under a bit of pressure. Is that what I'm hearing?
Well, it's not just ash, Glyn. It's a bunch of qualitative factors that go to our value and use calculation in terms of how our customers derive the benefit from not just the low ash but other low impurities that we sell are helpful. But that's fixed component. That one, the qualitative aspect of it. Yes, comes down. It's easy to get $6 or $7, $8 out of someone when it's $80 or $90 per tonne as your underlying base price. When you're talking about anywhere between $50 and $55, it's a little harder to maintain that same level of premium.
Okay. So a bit of a buyer's market at the moment, obviously.
Yes, yes, yes. Yes. I mean asking for an $8 premium over a $50 coal price, plus energy on top of that, that's little hard. Even as good as our marketing team is, that might be a little bit beyond them.
A challenge for the new head of marketing, obviously.
Yes, yes. Look, he's got good form. So I'm sure he'll be fine.
[Operator Instructions] The next question comes from Trent Hamilton from Hammo Capital.
Paul, just back to the China quota issue. What's your understanding of when the quota will likely be renewed? Is it soon or not until next year?
Trent, look, my understanding is it's a calendar year basis. So yes, as I mentioned before, people shouldn't think that they don't like our coal. I mean, we've been having some sort of trade tension, if I can call it that. I don't want to characterize it completely that way, but just for the sake of the discussion here for some time now. But if you look at the calendar year-to-date, I mean, there's no doubt that China has taken plenty of Aussie coal. There's no lack of liking of the quality. And so through that first 8 or 9 months had a mad rush towards the quota. And they bumped into it early in the year, and still there's a couple of good months to go and winter coming. So it will be interesting to see how this plays out. As mentioned earlier, there's a massive distortion between the domestic price for met and also thermal versus what you can achieve in the seaborne market. And I'm sure there's plenty of people making representations inside China saying, why they have to buy domestically at that level, when I can just dip into the seaborne trade and save a stuff of bunch of money. Let's just see how that plays out. But the calendar basis is the answer to the original part of the question.
The next question comes from Peter O'Connor from Shaw and Partners.
Just 2 follow-ups. The fault at Narrabri, the displacement and the conditions that you experienced this time, are they changing for the better or worse over the last couple of panels? And how do you see that going to the next panel?
Yes. Look, it was as predicted. Nothing's materially changing there, Peter. The guys are getting pretty good at navigating through that particular fault, given that they've been through a greater displacement in the last panel than they did in this one. But it just does, obviously, we do slow down. There's wear and tear in the machinery. We've got to slow down. You cannot run through it hard when you've got a lot of rock across the face. And there are maintenance-related consequences of traversing that rather than stepping around. So it's just we derate the production through that period, that's right that we do. The bigger issue is more just the qualitative aspects so that we get higher ash coal out of there as you would expect. And it doesn't all wash out. So we do have to get rid of some of it into that secondary market as we've commented.
Okay. And secondly, Paul, from a big picture, the IEA put out a report just the other day and they got a whole bunch of scenarios which you can wrap around and get any outcome that you really want. But key to that was the COVID impact and the impact on demand for coal. How do you see that in the context of the view, which you've put to us quite well and quite consistently over the last little while? Does that change how you see the outlook?
Look, I note that -- I haven't read the full length of it, I've certainly been through the summary, but I haven't been through the full length of the report. But look, I think it's -- I wouldn't be placing too much stock on their predictions in terms of how COVID recovery plays out. Because as we all know, there's so many variables involved there. And economies will come out at different paces. As we mentioned before and you will well understand, our markets have done pretty well generally, but for India, India is having a tough time, of course. So I reckon our markets will be on the front end of a recovery phase. And fortunately, for us, I reckon that will all be consistently coming out of that. That's an expectation rather than a prediction. But there could be secondary and tertiary sort of breakouts here, which may slow it down prior to the vaccine. But every day, we go further down this journey, we are a day closer to vaccines being available across these markets. So I think that's a positive thing. All these economies have suffered pretty terribly as we know, ours included. And I suspect all economies or all governments of all economies will be wanting to reignite their economies. And whenever they do that, that stimulus requires energy and steel. And so -- and when most of the economies around the world are engaging in some sort of stimulus in one fashion or another, that's going to be quite an unprecedented turn and demand for energy and steel. And so in some scenarios, which WEO doesn't really go into, but in some scenarios, as you can imagine quite a significant tightening for an extended period of time as economies or governments around the world try to rectify the damages being caused by COVID. So in that scenario, I would say, that's -- there's actually going to be an extended period of positive momentum generated admittedly off a COVID-induced low base.
[Operator Instructions] The next question comes from Paul Young from Goldman Sachs.
Paul and Kevin, question on growth CapEx, your guidance for the full year is $50 million to $60 million on your development projects. I think if I read in -- on Page 5, the fine print there, you spent about only $7 million in the September quarter. So tracking well below that. Is that -- I guess, have you deferred even further study work and spend? Or is that just a timing thing with respect to Vickery engineering picking up in the June half of next year?
Peter, as you would expect we're examining all avenues of capital management here. And so we are constraining heavily any CapEx that can be deferred into next year or further. We are doing the work necessary to preserve all the approval pathways. We see that as being fundamental here. But we are squeezing it hard as you would expect us to do. So I think the $7 million -- there are a couple things there where actually a little lumpy even in $7 million, which we don't expect to repeat in the subsequent quarters of this year. So I would actually say that that's probably on the upside. If you multiply that by 4 for your numbers from the projects, I think that's high.
Okay. All right. So that's -- yes. So lumpiness would be an example, would be like land purchases, correct?
Yes, correct. Yes, that's right. That's right. Yes, we're drilling campaigns. Like Winchester, that doesn't happen every quarter. We're only planning one for the year.
Yes. Okay. Understood. Okay Paul, that's great.
Yes. And sorry, I'll just add there, Glyn, sorry. The team scurried around. The number was 15% on an equity basis for the premiums.
The next question comes from Peter O'Connor from Shaw and Partners.
Kevin, just following from the last question. When you discussed with the banks the ICR changes and dividends are obviously part of that, were other items of discretionary capital, including growth capital part of that? And is that tightness that you've just talked about driven by internal Board focus and your focus? Or is it part of the requirements of trying to have true discretionary spend?
Yes. No, no. Peter, you're jumping at shadows. There's no requirement from banks. Banks haven't made any comments at all about what we'll do with the capital. Over the years, they've taken a view that -- and this is the discussions we have, they've taken a view that Whitehaven has been true to its word over the years, the debt's been in place and leaves Whitehaven to manage the business.
And for the last question at $50 million to $60 million guidance, it sounds like sub-30 is where it's going to come out based on current run rates?
I think we would update CapEx when we get to the half year. I think the better time for that, Peter, is that we update at the half year. What Paul said is right, we've got the thumbscrews on this thing. And the better time for that is at the half year. We'll see what the run home looks like for the second half. We'll see where we are with the EIS for Winchester South and the EIS for Narrabri South. And our expectations are that we're well within that guidance at the moment.
And Paul, Vickery equity sell down, is that any sooner or later than what you gave us guidance on last quarterly call?
Yes. No change. No change, Peter. I mean it's just not front of mind for the people with whom you'd like to engage. I mean they've got so much on their plate at the moment. We've got to be respectful of that. But we're just keeping everybody informed of the processes that we're going through from the secondary approval perspective because they're all interested in that. So that's where our effort is at the moment. I don't see any change in that.
[Operator Instructions] The next question comes from Tony Mitchell from Ord Minnett.
Paul, you might have covered this before, but can you just give us some color on the -- finalizing the new debt covenant?
Yes. Yes. Thanks, Tony. I think as Kevin said, I mean, we're very close to finalizing. It's just a bit unfortunate timing-wise and there's some different time zones involved in doing that. So it's -- we had planned to get it out by 9:00 this morning when we pushed the numbers out, but it might be another day or so. But no more than that. This week it will get sorted is our expectation.
Right. And will there be a marked difference with what you've got now?
Apart for the covenants and the dividend changes, there's no changes at all for the underlying terms of the existing arrangements.
Correct.
We have no further question at this time. I'll now hand it back for any additional closing remarks.
Thanks, everyone, for dialing in. If there's any further follow-up that you require, you know where to find us, Sarah, myself and others. So again, thanks very much for your time, and we look forward to catching up with you in the follow-up to the quarter's interactions.
That concludes the Whitehaven's September 2020 quarter production investor and analyst call. Thank you once again for joining us today. You may all disconnect.