Whitehaven Coal Ltd

ASX:WHC

Earnings Call Transcript 2020-Q2

[Operator]

Welcome, everybody, to the Whitehaven Coal December 2019 Quarter Production Call. [Operator Instructions] Thank you for joining us today. I'll now hand over to our presenter, Paul Flynn. Please go ahead, Paul.

[Paul J. Flynn, MD, CEO & Director]

Good morning, everyone, and thank you for joining us for Whitehaven's December 2019 quarterly production report. Hope everyone's had a good break and managed to avoid the smoke and haze and if not, everyone was safe and sound. Look, I'll run through the quarterly updates as we do, and then let's get to Q&A. And the context, obviously, this quarter is that we have revised our guidance back on the 5th of December that everybody knows. So this quarter is an essential -- is essentially a confirmation, if you like, of the news that we tabled back on the 5th of December. So I'll move through this quickly, and I'm sure there's lots of discussion of what's ensued about how we've progressed since that time that we provided that guidance and what the second half is looking like. So firstly to the highlights. Look, our safety performance, a TRIFR of 5.72, which certainly had been a decent, decent result. I mean, key for this past quarter, as everybody knows, Narrabri has been out of action for most of the quarter, but the longwall change-out has gone well, and we'll talk about that in more detail, and we're back into production. In-pit dumping has started in a modest way at Maules Creek. Again, that's something we can speak to a little bit later on. The December quarter's production of 3.1 million tonnes coal production is obviously considerably down with Narrabri out of action for most of the quarter at 58% down period-on-period. We'll talk about that. And then December's quarterly saleable coal production, certainly down at 44%. The sales were knocked down to the same degree. Obviously, we've been drawing down on stocks, and that will be part of our discussion a little bit later. And then the long-running saga obviously of this outstanding piece of Narrabri, which is up for grabs, we have concluded that now in our favor. And so you will have seen that we've announced that we've concluded the sale of -- or the purchase of the 7.5% from EDF Trading, and we'll talk also about that in a short moment. So onto the quarterly report. In safety, of course, 5.72 is a good result, but we -- as you know, we always want to continue to push our safety message even harder, and we'll talk a little bit about that just in terms of structural changes we're making to the leadership because that does play into our desire to get out the 5 zone. The 5 zone's good, but we've been in the 5 zone for a little while, and we need to -- we need to continue to reemphasize our push to get lower into our TRIFR curve. And as good as those results are, there's more work to be done. I'm over the page just in the totals. So as I said, 3.1 for managed ROM coal production for the quarter, admittedly down, obviously on the previous corresponding quarter. No doubt the main contributor to that is not just the revisions to guidance, but obviously, Narrabri just not being -- going through an important change-out for longwall panel 8 to panel 9. ROM coal production, as I mentioned, the same number period-on-period. And then you've got the managed sales of coal produced, 3.5 versus 5, so 30% down. We have obviously purchased coal, which has been sold during the course of the period, and that goes to, obviously, the revised guidance that we've given and also our drive to ensure that customers are not experiencing too much of a disruption from the lower production and, at the same time, managing our exposure to demurrage and other aspects of our infrastructure arrangements. Coal stocks are down, as you would imagine, having drawn significantly from them. Back in December of '18, you had 3.3 million. And just for those who recall, June was 3.3 million also, actually. We carried these stocks into this year. So we had the benefit of being able to draw them down and sell. And at the end of September, we had 2 million tonnes on the ground also. So we have drawn those down significantly. Consequently, the equity totals are there for you in the table below. And then, as we have done in the past, we've tallied up both the indices for the period and our realizations against those indices for essentially the 3 products that we've been selling, being the high CV thermal, our other thermal and our metallurgical coal sales. So you can see the various averages for the indices through the period. I'll just call a couple of features out of this for you. The first one I'll focus on just momentarily is just the mix. We have had during the quarter a temporary bump in our other thermal. So our lower than high CV thermal coal, and that really is attributable just to the tail end of longwall panel 8 where we had some out-of-seam dilution at Narrabri, was causing the coal quality to elevate in ash during the back end of that --the back end of the production of longwall panel 8. And because the overall total of coal sales were lower, that does represent a temporary distortion in terms of proportion that the lower CV coals represent of the total. And that, the cascading impact of that, you can see now to the bottom of the page there, where it says thermal coal to gC Newc by comparison. Our overall realizations of price against the gC Newc index is minus 2%. And that, as you can see, that's gone -- that's against the trend as it's been quarter-on-quarter, solely because of this out-of-seam dilution effect at Narrabri's production, again, distorted temporarily solely because of the lower sales and production in this particular quarter. As you can see, the semi-soft sales, our realized prices essentially split the difference between the JSM quarter and the average for semi-soft spot sales during the same period. So as I mentioned before, we've obviously drawn down on stocks quite heavily in order to get to a sales total of 4.5 million tonnes, 17% below the period-on-period sales. But again, Narrabri's obviously, through its change-out, played a significant part in that. Coal trading has actually added to our margins during the course of the period, so that has been a positive contributor, and we'll speak more about that when we get to the half year results. So globalCoal Newcastle Index averaged for the period of $67. And so that's obviously found what we think is a floor around that price. It's certainly vacillated between the $65 and $67 for some time. And in more recent times, we've seen that move ahead to about $74, as we are today. But I think we are at a little hiatus in terms of you've got people lining up already for, for settlements of the Japanese price in April. And we are seeing some recovery in the high coke pricing as well, which we hope will draw further into the semi-soft market, although we're not seeing too much evidence of that. Again, we've achieved an average of $87 for our coking coal sales during the quarter. So over to Maules Creek. At Maules Creek, as I noted before, on the 5th of December, we reported a revision to our guidance there with a couple of key drivers in that message, obviously, with -- struggling with manning, to man -- to draw into the community and into our workforce the number of people necessary to keep all of our equipment fully manned. And we'll talk about that shortly. And then, of course, with this extended period of drought, severe drought, we have experienced significant numbers of stoppages as a result of regional dust events as we spoke about at the time of that revised guidance. Now these are events which are bringing over our site -- not produced by us, but bring over our site a little elevated dust and particulate matter, which exceeds the threshold that we're able to operate within. And so that's caused numerous stoppages. In fact, it caused some 30 stoppages over 2 months, leading up to the revision of our guidance that we had to factor that in, a continuation of some of this into the second half. Now that's an unusual thing to say, given that we sit here today talking about these sorts of events when there is actually rain outside our window, but we need rain at our sites, obviously, not in the city, in order to be able to minimize the impacts of these regional dust events. But overall, Maules Creek, the 2.2 versus 4 for the previous corresponding period is 44% down. But we are making very good progress on the manning of our fleet. So we have a program in place to drive a short-term recovery of manning levels. And as far as our forecast goes for that recovery plan, which is embedded in the revisions to our guidance that we gave on the 5th of December, we are exceeding the progress that we had planned in terms of the number of people at our hauling trucks between now and 30 June. So that is very positive to see.As I mentioned briefly, in-pit dumping has occurred, and you will see this about to transition the cost profile but also with the haulage profile for overburden over the next couple of years. That's positive to see. We are pushing very hard into that southern domain. For those who recall, there's that little triangular corner at the southern end of our pit, which is the most significant in-pit dumping opportunity for us in the short term. We are driving hard into that area to ensure that we can open that up as soon as possible. Implementation of AHS continues to roll ahead as we planned. There's nothing unusual to report there, but we are looking to the next quarter in order to start the first week rolling out in autonomous form. So over to Narrabri now. Narrabri total tonnes, as you can see, 233,000 tonnes is not a lot of tonnes, obviously, for the quarter, impacted of course, in that slightly bumpy end to longwall panel 8 where we did find an unplanned intrusion. We have seen dilution in the tail end of longwall panel 8 which causes lower production. And then, of course, there's the arduous process of bolting up and putting on mesh as you complete a panel, obviously, which produces less tonnes, and then we swung heavily the change-out for the period. So the change-out's gone very well, so the chock cylinder upgrade has gone well. And as many as you'll know, we chose to also replace the drift belt at the same time. And we've been able to commission the wall backing at panel 9 ahead of schedule, so we can finish it where we planned to be. And thus far, things are looking pretty good. The goaf has formed as we've been advancing. That is a little early, which is also very positive to see. So when blasts and risks such as that have now diminished as you commence the new panel, so we're looking forward to certainly hitting our straps and continuing to ramp up into our forecast production. We have got a big second half as you can all acknowledge from the numbers that we tabled, and there's certainly nothing we see today that says we won't be able to proceed on that basis. Coal quality has resumed, as you will typically see at the top of our panels at Narrabri. At Gunnedah ops, 657,000 tonnes versus 1.1 million tonnes the previous corresponding period. This is in accordance with our plan. Both Tarra and Werris had a slower half in the first half; there's no doubt about that, so this quarterly is indicative of that, whereas typically, as you know, when we hit those seams at the bottom of the Werris pit, always it has a bigger half. And Tarrawonga, we are in the process of addressing the old area of elevated strip ratio in the hill, as for those of you who have visited Tarrawonga will know, and so there's a lot more dirt being moved at the moment in this quarter, which will swing back and reverse and moderate in the second half, but they're both on course with their plan. And of course, the rollout of our new fleet at Tarra will see us producing around the 3 million tonne annualized run rate at the end of this financial year. From a logistics perspective, there's nothing particularly to note there. Of course, the drought is having a severe effect on other users of the rail. So as you all know, we do have a big second half, and we do want to take advantage of surge capacity in the line to be able to rail at the levels that we want to in order to meet our second half targets. And there's nothing that we can see that says we're not going to be able to do that. The water update is important. This has been a particularly focus for us for the last 15, 18 months. And during the course of this past 12 months, we've been doing a lot of work in essentially transitioning Maules Creek as the most important piece of that puzzle away from its dependency on the river, which has been dry since December of '18. So we're over a year into that now since the river stopped running; transitioning away from dependency on the river to other water sources, which has been quite successful. It does involve, this work, a heavy interaction with the regulators as you can imagine, but we've been able to navigate our way through that successfully during the course of the year. And in this last quarter, further approvals have arrived also in time to allow us to continue to supply Maules Creek with the water it needs necessary for its current level of production. There is more work to be done here. And so this will be an ongoing exercise for us for the next 6 to 12 months. We're thankful for the moisture that looks like it's going to appear over the next 4 or 5 days out at the mine sites. But we do feel this is necessary work that we need to continue to ensure that we have essentially a waterproofed position for Maules Creek in particular. Now I will go to this new section in here. This is not a recurring section, but it's just what we talk about, just how we're going about preparing ourselves for the future. Now it's not just the existing mines, obviously, and the management of them that we're responsible for, but we obviously have the agreements, which is to start coming. And so to that end, we have brought about some changes in our management structure, and we've drawn out and created 2 new roles that haven't had this importance in common in our management structure in the past. And that's really a function of the company maturing and readying itself for that next stage of growth. Those 2 new levels that you've seen in the announcement, the creation of a role, we do now have an EGM for People & Culture, and Leigh Martin has joined us and is on the ground. And this is her first week, which is -- very pleased to have her with us. And we have created a role and a search is currently underway for an Executive General Manager, Health, Safety and the Environment. Again, 2 roles, which were previously under our COO, which we've now pulled out and elevated and we'll invest in further to ensure our business can manage the growth going forward. That recruitment process is ongoing. With the retirement of Brian Cole, who remains with us in business, Brian's transitioning more to a consulting role and remains responsible for the approval of Vickery, we have hired and in other 2 weeks' time Mark Stevens will join our ranks out of our Brisbane office to take responsibility for our project delivery area. So this is a change from our previous structure, whereby you've got Vickery, Winchester South and Stage 3 at Narrabri, 3 very large projects, will all come under Mark's responsibility, and will drive consistency of approach and across these 3 major projects and any other major projects we undertake from time to time which will find its way into his scope. Now that did cause some change, of course, for the previous COO configuration of that role. And Jamie Frankcombe, as many of you know, has left our business. We are very fortunate that we've been joined by Quentin Granger in an interim capacity for the EGM operations, who joins us here on the call today, as does Kevin Ball, our CFO, as you know, and of course, Sarah McNally. But Quentin's been doing a great job on the ground, and we expect to have him here with us whilst the recruitment process for the EGM operations role is fulfilled. If you want to, if you're curious about the details, the credentials of each of these new additions to our team, you can go to our website and there's a link there. Onto the Vickery project, well frustratingly, the government hasn't coughed up its whole of government report as yet, and that is annoying for us, although we're told it's very close to hand. There have been some early indications of our venues, that there are no particular issues that they are grappling with, it's just administratively tidying up the report for its ventilation in the public, but we are expecting that soon. And we're certainly expecting that. And then the consequent IPC hearing to be called and then the determination, we've estimated within -- or by 30 June, essentially. But there's nothing particular that the Department of Planning is raising with us that's new, different or concerning from that -- from the whole of government report preparation. It's really just a matter of them handing it over.Winchester South, there's been a flurry of activity during the course of the period, but it's all been about not just optimization of the mine plan, but then also organizing the various pieces of the infrastructure puzzle necessary in this new area. The most important piece of that being, obviously, water, and then electricity, both of which have important interrelationships with our neighbors around, who have been very cooperative with us, I have to say. So there has been - there's been good progress made on securing water supply and also looking at a pathway for electricity supply on the site. There has been a delay in the publication of the JORC reserve for Winchester South. We really would like to have that a little earlier, but we are working closely on -- and the central question here is, how much of the Fort Cooper Coal Measures do we put into the reserve. If you wanted to publish a reserve based on the existing Rangal's coal measures, you could have done that already by some time. So the Leichardt and Vermont section of our overall coal resources, they're very well understood, but the Fort Cooper Coal Measures, we're certainly looking to put as much of that as we can into the reserve, and that is the final piece of this puzzle necessary to table -- to take our reserve. Our Narrabri underground stage 3 project continues afoot. And there's nothing particularly to bring to your attention from this, other than the fact that as you all know, it's a life extension of the project, but an important one, which does require a significant investment from a capital perspective that we talked about on our Investor Day. So there is a life extension now to 2045, which will be great for the Narrabri investment. In terms of markets, I think we are into a relatively quiet period of the market. I think let's see what happens with trade tensions now that there would appear to be some trade deal having been tabled. I think again, Chinese New Year will be interesting also, just to see that get out of the way and see what the Chinese market does when it comes back into full swing. I think we've seen, as we've noted, spot energy prices change for the better for the sellers of LNG. I think it was unsustainably low in the past, so I think that's logical that, that has moderated. And then let's see what happens with the April settlement for Japanese thermal coal. But otherwise, we are seeing strong demand. And every coal tonne that we can get out of the ground, we've got a buyer for it. As you have noted back there at Maules Creek, despite the overall 2% -- minus 2% realizations for our thermal coal product, we have at Maules Creek realized a 17% premium over and above the benchmark for our sales at Maules Creek. So that brings us to the end, other than to note again that we have concluded the sale of the EDF piece of Narrabri. We are, as we noted in this release today, still subject to preemptives against us from our remaining joint venturers. But our expectation isn't that they're particularly interested in acquiring their respective piece of that 7.5% And our view is that we're likely to end up with the 77.5% total. But for the purposes of helping you assess what the implication of that would be if they were to exercise their pieces, we would have the 75.7% as noted in the release. So with that, we have tabulated the guidance there once again for you. We are happy to continue with that guidance. That's been the basis of which we'll run through the second half of the year. And with that, I might hand over to Rachel, the operator, for an opening up for question and answers. Thank you.

[Operator]

[Operator Instructions] Your first question comes from Kaan Peker from Jefferies.

[Kaan Peker, Equity Analyst]

Just quickly though, the first one on Winchester South. So just wondering if you could share a little bit more information or if you have further information around coal quality, washability, yields, et cetera. And the second one is more around trying to get an understanding of surge capacity on rail. So is there a certain quantum or opportunities that you have an understanding of?

[Paul J. Flynn, MD, CEO & Director]

Thanks, Kaan. Yes, look, for resources, for the Vermont and Leichardt seams, you should -- I mean, there's plenty of representative mines in that region, mining those seams. And the coal quality work that we've done certainly highlights that our presentation of those seams, if you like, on our lease, are consistent with what you're seeing our neighbors produce. So the coal quality is good, and the recoveries are consistent with what we're seeing other mines do. Now those will range from about 75% to 80%, say, recovery for the launching of those 2 seams. But the question here, as I mentioned earlier, and as -- and I know lots of people have talked about this, is Winchester South is a very interesting project because the Fort Cooper coal measures are only a meter or 2 below the bottom of our Vermont seams. And that's really the closest to anybody's minable section that anybody has a presentation of those seams. So it's incumbent upon us to have a good look at this because it's nothing to get at it. Now the Fort Cooper seams are -- everybody knows have some very nice coking qualities in them, but they -- but everybody knows also that it's a very low yielding -- very low-yielding coal measure. And most people don't attack it because there's usually a big gap between their bottom seam that's mineable, and where their representation of the Fort Coopers present themselves. We're unique in having it only a meter or 2 below our bottom seams. So we must look at it because it's obviously very cheap to get at it. And even if it is low yielding, it will add to the reserves of the project. So we're very keen to make sure we take the time to study this properly. And we want to put as much of that into the project as we can. So we'll take the time to do that, but they are typically very low-yielding, Kaan, and it's just how much of that do you want to take, given how cheap it is to mine versus the low-yielding outcome and what's the blending benefit of bringing some of those coking properties into those 2 seams above. That's the puzzle that we're solving currently. Surge capacity on the rail. Look, we're not concerned about that because, unfortunately, for the agricultural users of the line, they're not taking up their respective pathways on the line, so we're not seeing any blockages at all here. Our contracted position for the second half is a lot lower, like in terms of our fixed contractor position than what we were going to use, but we have surge capacity in those contracts to allow us to take the available paths as when they're there. So we're not concerned -- we're not concerned that we won't be able to get that capacity in the second half unless there's some dramatic change around the agricultural prospects, which is not going to happen quickly. And so yes, that part, we don't see a blockage there in the system at all for us. We've just got to produce the tonnes in what, as you know, is going to be a weighty second half.

[Operator]

Your next question comes from Paul Young from Goldman Sachs.

[Paul Young, Equity Analyst]

First question is with regards to Maules Creek. Paul, your guidance for the full year, although it's unchanged, it actually implies that the June half will be effectively a record half for that operation. I mean even when you're looking at, I guess, the lower end of the implied run-of-mine guidance range. So I'm just curious about the fact that if you were -- the labor impact puts you behind an overburden removal during the quarter. Could you step us through how you actually man that -- the operation back up and actually achieve that, effectively a record half, based on the fact you're actually behind in your stripping?

[Paul J. Flynn, MD, CEO & Director]

Yes. Thanks, Paul. Yes, look, there's no doubt that that's a solid second half that we've got to deliver. I mean you've certainly seen us in the past deliver some pretty big and lumpy outcomes when you hit some of the bigger seams, such as the Braymont as we've discussed in the past. I know if you flip over to the big total that we put at the back of our announcement, the quarter-on-quarter analysis in terms of what the individual mines have done, not necessarily a record, if you like, but it's going to be close there, too, if you add up those quarters. We have done it in the past, and we'll do it again. The key, as you mentioned, is really the labor initiatives. And when we gave -- when we formulated the guidance, we obviously set out a recruitment pathway in terms of how quickly we could put people on the ground in seats here with a decent level of proficiency to be able to operate the trucks and excavators at a rate to get us to where we need to go. And generally, we're slightly ahead of that, which is good. So we are seeing a positive impact of new leadership on site, a different approach to recruitment, new -- well, a refined approach in terms of the people that we're using for the recruitment drive as well. And so that is delivering results at this early stage. So we need to continue on that pathway in order to deliver the tonnes, no doubt about it. But we certainly have run at that rate when you go back and reflect on those previous quarters in the past. We can do it. So Quentin, is there anything more you wanted to add on the people side of things at Maules Creek?

[Quentin P. Granger, Executive General Manager]

No, Paul, other than the fact that certainly, our revised labor strategy seems to be hitting its straps at the moment. The numbers I've had a look at just in this last week would tend to indicate that January is also going to be a positive month from a labor recruitment perspective. So the way we're going right now, we've got a high level of confidence that we can deliver on H2.

[Paul Young, Equity Analyst]

Yes. Great. Maybe just a bit further information for everyone. I mean how many people are you looking to hire? Where are you sort of -- how many people have you hired? Where are they coming from? And what sort of rates or salaries or bonus structures are you having to throw out there to incentivize this new labor to join Maules?

[Paul J. Flynn, MD, CEO & Director]

I think we've been -- Paul, in our previous conversations, we've mentioned that there is some 50 to 60 people that we were looking for in order to achieve the total that we wanted. Look, part of this is -- it's not all about money, so we don't want to talk about rates and things. It's not all about -- that's about the whole proposition that we're -- we represent as a site at Maules Creek. And so part of that change, and I think the improvement that we're seeing also has been about the change in leadership and the different cultural settings that that's bringing. And so I think that it's not just about rate. I think if we relied solely on rates, that would be a challenge. There's a couple of streams to this. You obviously got to get people on site in the short term. But I think the site has drifted away from their investment in the cleanskin program to bring local people onto -- into the mining sector. And because they're looking for -- essentially, the management team is looking for obviously immediate results, which we all are, don't get me wrong, we all want that, but by the same token, you have to be able to do 2 things at once: get those people on the ground to deliver an outcome now; but also continue to fuel the complement our workforce -- the local complement of our workforce over time. Narrabri has done this very successfully. And as far as our operators goes, it's fully manned, and they've done that by investing in local people over time, people who want to be in that area. As we know, Maules Creek was assembled by people from broadly outside the area in the initial phase. And then, in more recent times, the local recruitment process has drifted away. We have reinvigorated that because that has to be the longer-term solution here.

[Quentin P. Granger, Executive General Manager]

And I think in the numbers, again, that I'm seeing, it's quite encouraging to see the number of sort of new starters within our business. And of course, we understand that, that required an investment in the training requirements, and we've been able to beef that up in the short term to get us over this hump in training that will, of course, come about through that strategy. I think the other thing that we're doing is we're not ruling out other alternatives. And so we're looking at everything else under the sun in terms of what else can we do to attract people into our operation there. So we're not just restraining ourselves to the cleanskin employment process. And we've been quite successful in the last 1.5 months in terms of attracting some other people into Maules as a result of that.

[Paul Young, Equity Analyst]

Yes. Great. And just a last question on Maules, just with the update you've given on the water strategy. Those measures, those bullet points you've outlined in the quarterly, is there any major cost impact involved? I presume that's in your cost guidance, but can you maybe just quantify that? And also, let's hope it does rain, but Paul, if it doesn't rain, how long can you run Maules Creek? With your allocation at the moment, can you run to -- I guess, the question, can you -- when would you actually have to start curtailing production if it doesn't rain?

[Paul J. Flynn, MD, CEO & Director]

Yes. Thanks, Paul. And I think that's about -- 3 questions requires a meeting generally. Might have to give the reins over to somebody else in a sec here, mate. But look, water costs, we haven't called those out separately. They are in our guidance. There's no doubt that's been factored in already. I think for the half year, I think it will be -- we'll go back, and we will -- we're not obviously spending our CapEx at the moment in line with what our guidance has been at the beginning of the year, so that's not happening. Vickery has been obviously delayed and so any CapEx associated, that's been delayed also. But we might just actually refresh our CapEx at the half year numbers. And we'll call out the amount of money we've spent on water because it is important. It's not particularly material from an OpEx perspective, but actually, we bought some property, as you mentioned, we've made some pipelines, as we mentioned, and so these are things that are not without some costs. So perhaps we'll table that up for everybody as part of the half year as a review of CapEx. Kevin is nodding. As far as water security goes, look, we've got a reasonable basis at the moment to continue to operate. Our view is not -- our view is we're not just trying to buy time here waiting for rain. Our view is that we do need to secure Maules Creek's water resources without rain. Now that's a big ask. And we've done pretty well thus far, and we continue to work on this. It does mean we do need the right support and responsible administrative processes from the government to be able to achieve this. Thus far, I have to say they have been responsive to the needs of the people that -- not just us, but everybody else is making applications to put a new bore down or deepen their bore or whatever it is they're doing, and thus far, the government has been responsive to this. But they do -- our outlook does entail more regulatory interaction here and more regulatory outcomes that we're dependent upon. So we're fine for water security, Paul, to answer your question, but to be any change there, we would make a statement about that.

[Operator]

Your next question comes from Peter O'Connor from Shaw and Partners.

[Peter O'Connor, Senior Analyst of Metals and Mining]

Two questions, Paul. Firstly, on Maules Creek, you talked last quarter about the ash premium, the dollar value as opposed to the percentage price that it runs at. And you talked about its quarterly, and it can be adjusted quarterly or yearly. Just wondering where you're at in that repricing cycle? Does Maules step down now in a new calendar year or is it a fiscal year basis, those premiums? So how should we think about that change in the next quarter or 2 ahead?

[Paul J. Flynn, MD, CEO & Director]

Yes. And your second question, Peter?

[Peter O'Connor, Senior Analyst of Metals and Mining]

Is the comments you made about Narrabri. Paul, you used 2 scary words, "unplanned intrusion." What exactly was that? Was it a floor roll? Or what was it, a major intrusion? It's nothing you'd like to hear on coal mining coal.

[Paul J. Flynn, MD, CEO & Director]

Yes. Look, it's actually -- I'll answer that one firstly. It was just a really localized fault, in fact, Peter. So it wasn't a big thing but at -- and it's certainly wasn't something that we drilled out. It was quite localized. But unfortunately, it did sully up the quality there, just at the back -- the stub end, if you like, of panel 8. And that's now passed. Unfortunately, as you know, a lot of the ash here is -- it's elevated, obviously, when you go through these faulted areas as we're cutting a bit of stone. So it wasn't intrusion as such. It was actually a fault. But it is a localized thing, and it's now passed, so.In terms of the premiums, that is important. We haven't actually changed any or have to change any of our premiums at these priced premiums yet. The 17% that you see realized is actually reflective of those premiums holding. They are not set on an annual basis per se. They are set on a contract by contract basis, depending on which -- what the duration of that contract is. Now, this is obviously a quality product. And when you think of the attributes associated with it, for which we demand that premium, don't vary just because the underlying price of the tonne may vary. And so we are holding onto these -- holding onto these premiums as long as we can. In fact, as demand turns, and we've seen a little bit more demand turning in more recent times, that gives you the opportunity to actually continue to move those premiums upwards. So we're not giving any guidance on reductions. We think we'll hold those and, in fact, can improve those over time, Peter.

[Peter O'Connor, Senior Analyst of Metals and Mining]

So just to the benefits on the call for modeling, when you say the duration of contracts stay extendable, are we talking multiple years, and thus, we should be using those premiums on ash for an extended period and maybe looking into it?

[Paul J. Flynn, MD, CEO & Director]

Look, it's -- we have different variations. As many customers as we have, we have different terms for their contracts. So I mean you can essentially treat most of those as evergreen anyway. So look, Maules Creek coal, thankfully, sells itself. There's no problems about selling Maules Creek coal. And the premiums are a very strong indication of why that's the case.

[Operator]

[Operator Instructions] Your next question comes from Rahul Anand from Morgan Stanley.

[Rahul Anand, Equity Analyst]

I've just got one question, but it's got a few subparts within it for Maules, so I apologize in advance. Braymont, have we hit it now? I mean you did talk about some modest in-pit dumping. Does that imply that we're there now? I ask the question not particularly with regards to ROM coal production, but also in terms of yield and also met and thermal coal splits going forward. That's the first part of the question. And then the second part of the question is given current market dynamics, do you expect to continue your skew towards thermal as opposed to met? Or once you've hit the right targets, you do expect to go to that 40%, 50%?

[Paul J. Flynn, MD, CEO & Director]

Yes, thanks. Thanks for that, Rahul, I'll try and answer that before I hand over some of that to Quentin. The Braymont, I don't believe we're into the Braymont now, but it is -- it does actually pop up again in our mining sequence later on in the second half. Quentin is nodding his head there.

[Quentin P. Granger, Executive General Manager]

That's correct.

[Paul J. Flynn, MD, CEO & Director]

In-pit dumping has been modest. The proportion of dumping that we've been able to access there is relatively modest as we always said it would be in the first half of this year. It's the second half where we're going to access a little bit more of that. Overall, Quentin, I think we're talking about perhaps 15% to 20% of volume in the second half?

[Quentin P. Granger, Executive General Manager]

Yes. I mean it's been tight leading up to the end of December. But as we open up the bottom of the pit and remove more of those coal seams down the bottom, we open up more areas, certainly in box cut 3 area. So we certainly anticipate to see more of that eventuating in the second half.

[Paul J. Flynn, MD, CEO & Director]

And Rahul, your question on market dynamics. You can see the spot price for semi-soft as much as we can and obviously, the gC Newc price and adding, on top of that, our premiums. Currently, as we sit here today, we're not chasing incremental sales in semi-soft. As you would imagine, the economics of that don't -- aren't compelling. But in terms of long-term strategy, we still believe that Maules can get to 50%. There's no view that, that changes or no variables that we can take into account at the moment which causes us to believe we should change that. I think with the recent improvement in hard coke pricing, clearly, that's recovered quite [indiscernible] off its lower reaches in the last 2 quarters. I think you'll start to see that drag the semi-soft number up, which will bring it back into contention. But as it currently stands, we're not chasing that incremental spot sale. It's easier and better for us, more productive, to sell at $74, say, today plus our premium on top for the thermal.

[Rahul Anand, Equity Analyst]

Okay. So just one follow-up there re Braymont. I mean is there a delay then in hitting Braymont? Or is that per plan? Because I thought it was going to be hit in the third quarter. I may have not kept on top of it, sorry.

[Quentin P. Granger, Executive General Manager]

No, Rahul, that's definitely as per plan. The intention is to get down to the bottom of the pit as quickly as we possibly can so that we can improve on our in-pit dumping. And to do that, you're chasing coals down the bottom of the pit and not advancing overburden and coal mining in advance. So that's very much the plan for the second half of this year.

[Operator]

Your next question comes from Kaan Peker from Jefferies.

[Kaan Peker, Equity Analyst]

Just a follow-up for me. Just on the water conditions. So we've heard that there's been some sporadic rain around sort of the Tamworth region. I know it's not exactly where Maules is, but -- and there has been some water inflows to some of the key dams like Chaffey and Keepit. Has there been any impact on sort of that Namoi River area? And what does it mean for Maules Creek? Yes, could you please maybe give a little bit of explanation on it?

[Paul J. Flynn, MD, CEO & Director]

Yes. Thanks, Kaan. Yes, look, it's -- and Sarah just popped up on our screen at the moment here in our boardroom the BoM synoptic chart which shows rain falling in that region. Look, we are expecting over the next 3 to 4 days some pretty good rains there, which is nice to be able to see that. But as I said earlier, we're not relying on that as being a return to average rainfall. We've got to be able to shore up Maules Creek's water continuity to be able to run when good rain is happening and when it doesn't. So that's the only responsible thing to do here. Out of this rain, there's no doubt we will capture some good flows both into our dams. And then they will obviously be recharged into the aquifers from which we are drawing currently with our bore, which is great for all concerned. And when rain falls in the area, everybody feels a little bit better about the world, there's no doubt. And so look, I think this will be positive all round. But our view is despite the immediate relief that we're -- is forecast for this next week or so, we're going to continue with our plans, so we'll be fine under all scenarios.

[Operator]

Your next question comes from Lyndon Fagan from JP Morgan. Lyndon, we can't hear you at the moment. You may have muted your phone.

[Lyndon Fagan, Analyst]

Can you hear me now?

[Paul J. Flynn, MD, CEO & Director]

Yes. Go.

[Lyndon Fagan, Analyst]

Look, the first question, Paul, is just on achieved pricing for thermal. When do you expect that to return to the sort of premiums that we saw for the group overall? Is it a gradual kind of return to that? Or is it more related to destocking some of the inventory affected? I guess there's not too much of it at Narrabri by that intrusion. I've got another question after that.

[Paul J. Flynn, MD, CEO & Director]

Yes, okay. Yes, we can deal with that one quickly, Lyndon, because we zeroed out the stocks at Narrabri. It's all gone. All that higher ash material, that's gone. So you should expect that to revert to our traditional premium pathway that's in that chart from this new quarter onwards.

[Lyndon Fagan, Analyst]

Okay. Great. And then the second question was really just about trying to understand the labor issue at Maules a bit better. So there's obviously 50 to 60 people that left the business. You mentioned it's not all about money, and there's now a different cultural setting coming through. But I guess I'm just trying to understand what the root cause of all of that was and trying to get a view on, I guess, how easy it is to resolve.

[Paul J. Flynn, MD, CEO & Director]

Look, it's -- Lyndon, it's one of those things where it's hard to actually pull or to allocate from an attribution perspective what gave rise to this and what gave rise to that. The reality of it is Maules Creek, it was, as I mentioned before, a workforce that was assembled initially from outside the region. We got it up and running quickly. There were no jobs available at the time when we did that. So we got all these people who were looking for a job and couldn't find one close to their home. They came to Boggabri, Gunnedah and Narrabri, and they stayed for a few years. Those jobs turned up back again in places closer to home, those from outside the region who didn't put their roots down have migrated back to where they came from. And essentially, look, my view is that management on-site didn't respond quickly enough to that trend. And they were caught a little bit napping, I think, just in terms of the investment in the local hires because they don't give you the immediate impact that you want from a skilled hire recruitment, and everyone would understand why that's the case. You take a taxi driver and you turn them into a truck driver, it takes a few months to get them up the curve so that they become a productive member of the team. And so it takes some time. So I understand at a level as to why they're pursuing the sugar hit of hiring only skilled workers, but that means you're getting them from outside the region only. And at a time when jobs are available closer to home, you're going to be battling with that one. So you've just got to balance these particular issues with each other. And I think -- look, culturally, I think there was a requirement for some change there. I won't go into the nuances of that, in particular, all I can say is that the new leadership there is doing a very good job in resetting the culture. I certainly can see it when I'm out there. Quentin, I'm sure you can make your own observations about what's going on there, but it certainly feels a lot better and people are a lot more enthusiastic about the prospects going forward now that they see the change that's been brought about.

[Quentin P. Granger, Executive General Manager]

Even the change that I've been seeing in the last 6 weeks I've been with the organization has been quite, quite phenomenal. So it's -- yes, it's a breath of fresh air as far as Maules Creek is concerned. And the management team out there are certainly changing direction and steering the ship in a far more better direction, let's put it that way.

[Operator]

Your next question comes from Sam Webb from Crédit Suisse.

[Sam Webb, Associate]

Look, just 2 quick ones, please, if I can. Just on dust. You just spoke to the 30-odd stoppages before your release, earlier in December. Just trying to get a sense of the conditions now. I mean is that still running at that kind of rates? Are you still seeing stoppages today? Just trying to get a sense of what it's like at site at the moment. And the second question, worth a shot, just wondering. A lot of moving parts this half. Would you be prepared to give us a net debt figure at the end of December?

[Paul J. Flynn, MD, CEO & Director]

All right. On what figure?

[Quentin P. Granger, Executive General Manager]

Net debt.

[Paul J. Flynn, MD, CEO & Director]

Well, you'll get that shortly, Sam. So we've got results coming out shortly, mate, so just hold your horses, and the half year results will be with you in all their glory. As far as dust stoppages go, look, there's 2 things. I'm glad you asked that question because I forgot to mention it a little bit earlier. Obviously, the stoppages, which were significant stoppages that we have experienced over those couple of months leading up to October, November, our announcement on the 5th, fortunately, we've been experiencing less stoppages. We budget for a bunch in the forecast. And fortunately, to date, since that time, we have been experiencing less regional dust events. Now on top of that, and the important piece of that, I suppose, is what have we done about that? We have been in dialogue with the government about what to do in circumstances where this is not of our making. And what do we need to do? Or what can we do in the event that they're a cloud dust, and let's assume it's smoke in this instance because Mount Kaputar has had some recurring fires in it which has been blowing over Maules Creek, what can we do? Now we have been able to find a path through that, that allows us to continue to operate some of our equipment during these times. So the stoppages that we contemplated as part of the forecast, even when they occur, are less onerous now because of this new arrangement that we put in place when we've got elevated dust in the region that's not of our making. So there is some relief there, Sam, through all that, which is good. And the events themselves are not occurring as frequently as what they were. Now the key driver for that was the fire in Mount Kaputar because not only was dust blowing from South Australia, in fact, unfortunately, it was topsoil turning up over our place from South Australia, but the immediate fire in our vicinity was adding to those particulate levels, which was sending that -- our online monitoring through the roof. The government has acknowledged that, that is not solely a factor which needs to cause us to stop in all circumstances. Of course, there are some safety-related considerations. If visibility is low, you need to stop anyway regardless of who made the dust. But it's less bad than what we contemplated in the forecast.

[Operator]

We have no further questions at this time. I'll now hand back to Paul for any additional or closing remarks.

[Paul J. Flynn, MD, CEO & Director]

Well, thank you, everyone, for taking the time. It probably took a little bit more time today than we probably planned. But it's been a good quality discussion. If there are any areas which we didn't get to touch on today, then you know where to find us. And we're more than happy to talk about any of these issues further. So thanks very much. Appreciate you all taking the time. And of course, happy new year to you all.

[Operator]

Thank you, Paul. That concludes the Whitehaven Coal December 2019 Quarter Production Call. Thank you once again for joining us today. You may all disconnect.