Whitehaven Coal Ltd

ASX:WHC

Earnings Call Transcript 2019-Q4

[Operator]

Welcome to the June quarterly report investor briefing. [Operator Instructions] I'll hand over to our first speaker, Managing Director and CEO, Paul Flynn. Please go ahead.

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

Good morning, everybody, and thank you all for dialing in and participating in the June quarter production report release. As usual, I'll go through the highlights for the quarter. Talk a little bit about the business and the year, given this is the year-end as well, and we'll move into Q&A as we customarily do. I'm joined here also by our official cohort of Jamie, Kevin and Ian.So firstly, the highlights. Safety performance has been very solid, this quarter in particular, and we'll talk about that a little further but nice result to finish the year with a TRIFR at 6.16. Strong finish to the year, production-wise also, with ROM tonnes, so particularly good given that safety and tonnes have come at the right direction, which is good, 7.3 million tonnes ROM coal for the quarter. The ROM level 25% up on the previous corresponding quarter. June quarter salable production of 5.2 million tonnes, 9% up. June quarter coal sales at 5.3 million tonnes, 12% up period-on-period.ROM coal production for the year's total finished in at 23.2 million tonnes, exceeding our revised guidance. Coal sales, including purchased coal, of 21.6 million tonnes was about the same as the previous corresponding period. ROM totals were very good at Maules Creek at 11.7 million tonnes. If you recall, we finished just under 11 million tonnes last year, so that's a good result.Narrabri has done very well in this quarter, recovering nicely from a period of some disruption in the third quarter and totaling out at 1.9 million tonnes for the quarter and 6.4 million tonnes for the year. And as you've all would have seen in previous announcements, Winchester South has been declared a Coordinated Project under the Queensland Government approvals processes.On to our managed tonnes, just the totals there. Just to call those out again, 7.3 million tonnes versus 5.8 million tonnes. That's the managed ROM coal production. 23.2 million versus just under 23 million for last year. The managed saleable coal production at 5.2 million tonnes versus 4.7 million tonnes for the previous corresponding period. And the totals for the year at the managed level at 19.8 million tonnes versus 20.8 million tonnes. Our managed total sales at 5.33 million tonnes for the year versus 4.7 million tonnes for the quarter period-on-period, and those totals just on the year-to-date basis being 21.6 million tonnes versus 22 million tonnes for last year period-on-period.The total following, as you know, they are tabulated for you at the equity basis for those same outcomes. So I won't repeat those now.Look, from a safety perspective, as I mentioned, our results have been good. It's particularly heartening to see that those -- our renewed and refreshed approach to our safety messaging and leadership training across the business has yielded a very good quarter outcome, particularly wherein production has been very strong also during that quarter. So as we've always said, it's -- we can't have more tonnes without better safety, and I think this quarter demonstrates to our workforce that you can do both very well.Particularly important observation, given the tragic circumstances of a number of fatalities in our industry, in resources more generally, in recent times, that it is something that we all need to take a good look at and refresh and renew our approach as required. And certainly, that's what we are doing as a company with our reinforced messages in safety right across the business that, as I say, delivered good results, consistent with better production outcomes.As we've included in the past, we've tabulated our guidance there just in terms of drawn all into one place in that table so you can see it, the year-end guidance as it was. ROM tonnes, we did exceed our guidance at Maules and Narrabri and the Gunnedah Open Cuts slightly. Saleable coal production was lower, but we are carrying big stocks into the year given the late surge of coal production during the course of the year and this part quarter in particular. And costs -- obviously, we'll be clear on that, with the full year's results due out in a month's time, but we feel confident that we're in the right space to deliver there as well.Over the page, I am now on coal sales and pricing. Equity coal sales for the June quarter, including purchased coal, 4.3 million tonnes, 12% above the period-on-period. Coal sales, including those purchased coals, were 5.3 million tonnes, 12% up on the previous corresponding period.For the year, our equity coal sales ended up being 17.6 million tonnes, including that purchased coal total. And at the managed level, obviously, at 21.6 million tonnes, again, including purchased coal.The globalCoal index did soften during this quarter as everyone will have observed by now to about $80 average for the quarter versus a yearly total of USD 99 and change for the year which is a solid outcome. In terms of our price, we've achieved USD 84 for our thermal coal sales, 5% above the average for the period. And for the year, about $100 in sale, as I say, which is about $1 greater than the average for that same period.Now June quarter benchmark prices for met coal. Benchmark price being $208 although I note the spot price is a little bit off this already, and then you've got the semi-soft at $129 and the PCI at $141.Maules Creek did encouragingly achieve a solid premium in this last quarter, 12% over the Newc average, and then 9% for the year when looked in total.I won't go through the table on individual realized prices themselves, but that's a useful thing if you look at the trends over time period-on-period. It's quite a good analysis now that shows consistency of results over a period.Over to the individual mines themselves. Maules Creek has done well. So we finished the year strongly, and 11.7 million tonnes, as I say, ROM -- at a ROM managed level is a good outcome. That does say is we have solid stock position for the year, which will certainly carry into this new year and will be sold and washed -- washed and sold, I should say, in the right order, quickly in this next quarter and the following.ROM coal production at 3.8 million tonnes was a solid outcome, no doubt about it. Saleable coal production at 2.5 million tonnes is less because of that late surge on coal that's now on stock rather than actually being processed at the year-end. ROM stocks were actually solid in the previous period as well. So we're carrying a good bank of stocks right through the business as a whole actually moving into this year.Metallurgical coal sales, as we reported in the previous quarters, have been relatively subdued, not chasing the incremental sale based on the spot met prices, but the year-end finished out in a reasonable fashion at 400,000 tonnes for Maules Creek, 17% of the sales. For the year's total, we're at 2.34 million tonnes, representing 25% of total sales across Maules Creek, which is good.Over on Narrabri. We have to say, we've had a strong quarter in Narrabri, which is very positive. It did exceed our revised guidance for the year and certainly has made good inroads to stabilize the production there over this last quarter in particular and continues into this year. The totals you'll see are quite encouraging, the ROM production for the quarter. 1.875 million tonnes is certainly a very solid result and substantially up in the previous corresponding period. Saleable coal production at 1.2 million tonnes and sales themselves, 1.25 million tonnes, both up on previous corresponding periods. The total of 6.44 million tonnes, certainly a very good result. And very pleasing to see Narrabri returning to some significant form and consistent production since we had the series of weighting events back in the back end of January this year.The project for the replacement of the new hydraulic chuck cylinders is on track and is scheduled for replacement of those cylinders during the change-out in November and December. Certainly looking forward to have that because that will give us greater capacity to manage weighting events into the future which is very positive.Gunnedah Open Cuts have done reliably well, now producing their 5 million tonnes in round numbers for the year, 1.66 million tonnes ROM coal production for the quarter itself. Saleable coal production at 1.46 million tonnes, and coal sales at 1.3 million tonnes for the period. And the year's totals for saleable coal production at just under 5 million tonnes and coal sales, similarly, just under 5 million tonnes.Tarrawonga doing 660,000 tonnes for the quarter, certainly, a solid result. Yearly total ROM production at just under 2.2 million tonnes is certainly a solid result. A little bit less than the previous year, but in line with our -- certainly our internal plans for that. Saleable coal production are about the same number in terms of just under the 2.2 million tonnes for each and sales themselves.The expansion project to go to 3 million tonnes is on track. Equipment is -- will arrive over this -- is arriving and will continue to arrive. And you'll start to see in terms of the uplift to the 3 million tonnes rate in the second half of FY '20.With a tear in the eye, I suppose, we mark the last quarter of production for Rocglen, which is quite a moment at 270,000 tonnes ROM for the quarter. For the year at 880,000 tonnes, which is good and certainly delivered on its plan and has delivered on its plan reliably during the life of its production. So we are going to move now into rehabilitation phase with a small team of people from the existing mining crew who will work on that over the next 12 to 24 months to deliver what we hope to be a very good example of rehabilitation in our local community.Werris Creek has done well as -- again, as everybody will know, it does have a heavy last quarter. It certainly did that at nearly 700,000 tonnes of ROM for the quarter and the total at 1.7 million tonnes, although that is lower than the previous corresponding year, but we do think that's probably a consistent rate for us to continue to run at as we mine our remaining years of the Werris Creek mine's life, but a good result overall.Sunnyside, our rehab project here opportunistically reopens, as you know, to finish off the rehab here and extract the remaining coal, has had a solid year there. Saleable coal production at 132,000 tonnes and coal sales of 126,000 tonnes. And total production at ROM level for the year being 300,000 tonnes. Saleable coal production, because of those stocks that we carried in, at 417,000 tonnes for the year.Now Vickery, there's a bit of verbiage here, but I won't go into each individual bit of it because everybody has been monitoring the history of it. Suffice to say, we are now in this phase where as you -- I know a number of Vickery watchers will observe that the IPC has handed down its report to the Department of Planning, which was really to capture all of -- of a lot of issues or a lot of matters that's firstly the Department of Planning's preliminary issues report referred to them for their thought and examination. And then the aggregation, if you like, of the feedback that came through submissions and also individual representations through the 2 public hearings that occurred early in the year. And so that report really is, as I say, an aggregation of all of those matters plus a few extra things that the IPC would like to have addressed themselves which is directed to DPE. Department of Planning then says, well, let's divide up the responsibilities for getting these issues down and so we are working with the DPE on the matters that we can attribute to.The process going forward is that once we've been able to answer those questions satisfactorily, DPE will then write a whole report -- whole of government report to IPC for their consideration. But based on what we know and the turnaround time and obviously the delays already in this process that -- which are outside our control, we are expecting now approval to be certainly into the early part of next year, which is unfortunate but beyond our control. And we'll just work through this process with the Department of Planning to make sure that all the matters in the IPC report are attended to and that the project is capable of being approved in that early 2020 calendar year.Just as a procedural matter, we -- everybody knows that Vickery is approved at the 4.5 million tonnes case. Its 5-year anniversary of that original consent is due shortly in a number of months, and we obviously need to do a number of things to make sure that we held that project consent in good standing, the physical works of which we have now completed in order to do that. It's just as a matter of noting.Winchester South, over the page, as I say, has been declared a Coordinated Project, which is a very positive thing for us. The Queensland Government is certainly very focused on this project coming to fruition as are we, and the draft terms of reference for the EIS have been published for public input as well. We continue to work feverishly up there. We -- you know we've been drilling out large diameter coal on-site for the purposes of defining the coal quality and washability test. And that work is ongoing. The drilling itself has completed but the results are going through the labs and are looking encouraging, I have to say, which is very positive. We will have a third drilling campaign which is scheduled for the balance of this year, which is all about defining to our satisfaction our understanding of the geological structures in the area and so on for detailed mine planning. And as we said in the past, we would like to declare our inaugural JORC Reserve later in this calendar year.And on to the outlook. Look, I think there's a number of factors in the market at the moment, and I'm sure this will be the subject to some discussion when we get to the Q&A part of the call, a number of factors, which, of course, certainly softening in thermal coal pricing, we can see a number of issues there being trade-related matters between -- the most notable obviously being the United States and China seem to be contributing to some uncertainty in that regard. General slowdown economies around the world. We're certainly seeing that.Timing-wise, perhaps a little unfortunate that the gas industry seems to be producing more gas at a time when people are slowing down a little bit. So we are seeing the surplus of gas appearing in the marketplace. And then for those jurisdictions that can switch, and there are a few, but not too many, but there are some weigh for cheap gas. They are moving, they are weighting to a little bit more gas than what they'd otherwise use in the past. Absolutely less coal during those times opportunistically. We do think this will balance, given that we think the gas is well below breakeven pricing, and so we think that will balance back and moderate in the future. But I think the convergence of all these facts and swing plays in and out of the market such as the United States, and Colombia contributing to some, limited coal sales in Asia in more recent times having moderated, we'll see a more balanced outcome in quarters to come.So with that, look, we think we've rounded out a solid year, production-wise. We're very pleased with those outcomes given the good year and what's -- obviously, we're a month away from financial results, and I think we've given during the course of the half year results and the quarters our average pricing enough for the people to appreciate where those financial results will be pointing. That should be a very good and solid outcome for the company, once again, for the year.So with that, I might just hand over now to you, moderator, and we'll move on to the Q&A part of the call.

[Operator]

[Operator Instructions] Your first question comes from [ Matt Greene ].

[Unknown Analyst]

A couple for me, if I may. Firstly just on your higher coal stocks at the end of the quarter, what was really sort of driving that? Were you sort of -- is this a conscious decision not to place those tonnes into the market? Have you sort of struggled to place it all the rail constrained? And just trying to get a feel for what your total inventory capacity is at Maules and Narrabri.And then the second is just on your percentage of met coal. What was driving that decision, especially given in a quarter the -- from what I understand, I think your JV exposed about 5% JSM. So the metallurgical premium to spot, I mean what was driving the lower percentage of met coal sales?

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

Thanks for the questions, [ Matt ]. I don't think we've met before. But just to try and round out a few of the answers to those questions, the production splits, if you like, in terms of the weighting of production volume during the course of the year is really just a mine planning issue. There's nothing sales related that you should infer from the fact that tonnes have turned up in this last quarter. I mean this is -- there has been -- there are couple of mines which in our portfolio, which do this naturally by virtue of when the seams that have the bigger proportion of the reserve present themselves in the mine plan during the course of the financial year. And that's the bigger driver here rather than any commentary or concerns on our part on sales. There's no -- you can see the premiums on Maules Creek given the size of it and its relevance to the size of our business as a whole. There's no lack of appetite for customers to get their hands on Maules Creek coal in particular given those premiums that we've been achieving. So that's certainly not in our mind at all, it's just a timing-related matter. And that will unwind very quickly, as I mentioned, in the first and second quarter as those stocks are converted into product tonnes and sold into the market. So nothing unusual there -- at work there.In terms of the met mix, and I'll get Jamie to speak to the total inventory capacity. I'm sure you've got that, that I have [indiscernible] here, but in terms of the met mix in particular, as we said over the course of this year, and it's been a little while in this frame, I have to say, that with the hard coke prices hanging up as high as they have, we know the semi-soft market always is more subdued during that time. And just for us, we've been less inclined economically to chase a spot-based sale of semi-soft when we're already receiving significant premiums on the thermal product. And so that's just an economic choice that we've been making along the way.Where sensible and large and respectable customers that we'd like to have a long-term relationship with are procuring on a JSM basis, we have actually been doing that. And so I think you just mentioned 5% on JSM. I'm not quite sure where that number comes from. And I'm pretty sure that's wrong if you're talking about 5% of our total met sales being JSM-based. I'm pretty sure that's not right, but we can talk about that subsequent to this with some decent numbers. But it's really just about an economic choice of chasing -- if you look -- if they are new sales in the -- or new sales opportunities in the marketplace and they're spot-based, which most of them are when they're not regular customers, our choice has been to sell it as thermal with the premium attached to it. And that's just a function of the spread between gC Newc plus our premiums versus spot sale, say, for instance, flat-based.

[Jamie R. Frankcombe, Chief Operating Officer]

Okay. With respect to inventory levels, if you look at what capacity is now at Narrabri, around about 700,000 tonnes is what we could hold between our product stockpiles and ROM stockpiles. And stockpile levels at the end of the financial year were in that order.At Maules Creek, yes, notionally on the product stockpile, we can hold up to 600,000 tonnes. We typically there run at that level. A little bit below that, I guess, is the maximum we'd like to get to. So around about 500,000 product, and ROM, about the same level. But at the end of financial year, we're in the order of 800,000 tonnes total stocks between the ROM and the product stockpile levels.

[Operator]

Your next question comes from Paul McTaggart from Citigroup.

[Paul Joseph McTaggart, Metals and Mining Analyst]

Look, there's a couple of things I wanted to ask about. Just firstly, I mean you've got a good premium for the thermal coal products out of Maules, 12%. One implication, you must have been getting less than benchmark at Narrabri, which kind of surprised me a little bit. So I just wanted to understand that.And secondly on -- going back to the semi-soft issue or the pricing issue for your met coal portion. So the realized pricing in the quarter was a bigger discount against benchmark to semi-soft, so I just wanted to understand whether you are having issue pricing that coal and hence kind of the bigger discount level. And you mentioned or you've said in the release that at Maules in the quarter, 17% of sales was met coal, but that's of sales. Of what portion would it have been of product coal, salable product, as opposed to actual sales?

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

Okay, Paul. I'll try to tabulate all those down and see how we go with answering those. Look, there's certainly -- there's no doubt 12% is a decent result for Maules Creek, and the table that we've -- which shows you the realized pricing for the period, obviously, as you know, is an aggregate of all the coal -- all the sold products that we have. So in the thermal -- the thermal bucket, say for instance, we've got the achieved price there over the quarter of $84, yearly total $100 for the year.Now your question about Narrabri is a good one. But the point that I'd say is that inherently, inherently, Narrabri does a gC Newc product and it gets a gC Newc price plus a smaller premium than what Maules. It doesn't have the energy that Maules Creek has. So it does attract -- but it does attract a premium because of its low ash properties. However, during the last quarter and a little bit, we have experienced, because of roof falls and things, so if you think about going back to the end of January where we had a succession of those roof falls, what typically occurs there is the product quality drifts off because of rock and other things turning up obviously in the product screen. And then the most obvious part of that is obviously traversing that faulted zone. And the displacement there was between 5 and 6 meters. So at points in time, as you're traversing that zone, you've got a significant part of the wall actually in stone. And again, that causes, certainly, product dilution during that period. So your question's a valid one that during this time when we've been having -- we've been traversing this area, the quality at Narrabri does drift off. But when you're back in the zone as we are today and had been for the last month or so, product quality drops back up to -- pulls back up to where you would like it to be. Typically, you're in the -- at its lowest, 0.8%, normally up to 10% ash. And at those levels, you certainly can ensure your gC Newc price plus a smaller premium than Maules. And hopefully that sorts that one out.Semi-soft pricing. Semi-soft pricing, there's a bit of timing in this as well just in terms of when our sales turn up relative to what the average of the period was. Don't forget that in our semi-soft average here, we do have -- so in June quarter, $107 versus $119 for the year. That is the aggregate of both our PCI sales and our semi-soft sales. And there are a range of pricing basis that we do average together in order to disclose that outcome.So as a general rule, our discounts -- we had been attracting a 5% discount from the JSM, which we've said before for our semi-soft sales. There's no change in that at all. So in fact, I think it actually might compress even smaller than that over time just trying to negotiate that away with each successive renewal of those contracts. But 5% should be where you should think about the semi-soft sales themselves. But the PCI is priced on a different basis. So it is an aggregate, and that -- and the timing of that also plays into what the realized outcome is relative to the average of those product types and indices for a given period.

[Paul Joseph McTaggart, Metals and Mining Analyst]

Okay. I'm clear on the semi-soft. So we should think about a 5% discount. But by implication, you're getting a bigger discount for PCI products, am I correct?

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

Yes, that's -- and that's right, Paul. There's no -- don't forget that we're not -- this is not low-vol PCI, this is high-vol PCI. And so there is -- you shouldn't be referring to, say for instance, in our report there, we pointed obviously the PCI for the period of $141, that's the low-vol PCI price, not a high-vol PCI price there.

[Paul Joseph McTaggart, Metals and Mining Analyst]

Okay. All right. So the discount against the low-vol benchmark must have expanded, I guess?

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

Discount against low-vol, what benchmark? Low-vol PCI benchmark?

[Paul Joseph McTaggart, Metals and Mining Analyst]

Yes. Yes.

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

Well, it's not priced off that. It's not priced off that. It's an aggregate -- it's a negotiated outcome without any particular index that we can refer to that we're happy to sell. We refer obviously to the JSM price for the semi-soft, and there's also obviously our best alternative, if you like, of using this coal is obviously a thermal-based plus premium-type outcome, and we navigate towards settling in between those 2 data points.

[Operator]

[Operator Instructions] Your next question comes from Peter O'Connor from Shaw and Partners.

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

Firstly on Werris Creek, you made comments during your presentation about the current quarter was a likely rate consistent with the remainder of the rate over the life of the mine. Could you just clarify? Do you mean just for the June quarter rate going forward or for the whole year that quarter represents what the quarterly rate should be?

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

Yes. No, it's -- the statement I was making -- sorry, Peter, if I've not been clear on that. The statement I made is at the yearly total, that the 1.7 million tonnes, 1.8 million tonnes per annum is where we've been running. We think that's probably indicative of the rate at which we should run this mine for the balance of its remaining life. And you'll be familiar, at least, at a level with Werris Creek. It's like a bowl, it's a discrete deposit. So we're at the bottom of that. And as we climb up the other side of this bowl, you'll imagine that you become a little bit more space constrained as you come out the other side of this bowl. And so with that space constraint, we do feel that trying to run it at, say, 2 million tonnes or even greater run rate is actually a little challenging with the size of the equipment that we've got in an aperture that is actually slowly closing in size towards the life of mine. So our view is that the 1.7 million tonnes, 1.8 million tonnes is a better run rate to run this mine efficiently for the remainder of its life.

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

That's great. Just on to Narrabri. In the commentary, I think it's the last paragraph of the commentary on Narrabri. It says the roadway development, that talks about the cut and flit panel on the southern side of the mains. Are we starting to head in that southern area? Or are we still about the south mains going out towards the boundary. I just wanted to clarify where you meant that was going.

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

Yes. Yes. Okay. Yes, no problem. Yes. Well, I might hand it over to Jamie, he can explain that to you. It's within the mining -- the existing mining lease footprint.

[Jamie R. Frankcombe, Chief Operating Officer]

Yes. But that cut and flit and roadway development is south of the existing mains. So that's a specific project we started now probably some 18 months or more ago at the -- if you can recall, a mine plan at the bottom of the drift on the southern side of the mains to test out the cut and flit technology to ultimately prove up higher rates of advancement in terms of the development rates. And it certainly achieved that and it's productive in that it's also developing a couple of longwall blocks for us on that southern side of the mains. But it's a technique that we'll want to utilize when we start developing the longer longwall blocks, which are part of the future of Narrabri South of the existing mains.

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

So how much room you have between where that mains are and the boundary? I just -- I guess, what sort of -- how many pillars you'd put in with this cut and flit just in starting terms? It's handy development, I agree.

[Jamie R. Frankcombe, Chief Operating Officer]

It's -- in terms of length of those blocks, they're about 800 meters to 1 kilometer long at best. It's where the -- the seam essentially -- well, it doesn't outcrop, but I guess the seam washes out, if you like, or the limit of the coal seam as you head back towards the bottom of the drift. They're shorter by nature of where the coal seam disappears, but by the third...

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

So this outcrop were heading towards?

[Jamie R. Frankcombe, Chief Operating Officer]

Correct. Yes. And by the third block across from native -- in the order of 8 or 10 kilometers long.

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

I mean you'll see, Peter, if you go back to all our presentations on Narrabri, there is that map that we put up. And if you look on the southern panel size, so the southern part of the mains on the eastern side, there are 2 short panels, which is where we've been testing this technique and essentially capturing a little bit more coal obviously that's in that area which otherwise wouldn't be anywhere near the size of the panels that we have on the southern side within the existing approved mining lease.But as Jamie is saying, that there is -- this a technique that we see which will be advantageous to developing the long panels for the life of mine extension that Narrabri Stage 3 represents. So that's a significant. And the cutting rates that we've been able to develop in that benign ground, it's quite shallow there as you know at the bottom of the drift, that's been very, very encouraging.And the other part of this is there is a risk management to mention to this as well. If for some unknown reason, and we don't think this is a problem, but if for some unknown reason, approval to go into that southern domain into our exploration license doesn't materialize in the time frame that we have remaining for production in the north -- the remaining northern panels, which is out to 2024, if for some reason, we don't think it is. But if there is, then we can quickly move into these 2 pre-prepared panels and continue production whilst whatever legal is working its way through the approval of the large Stage 3 development of Narrabri. So there are a few purposes.

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

That makes complete sense. So just on that, how is the process going for the southern lease approvals? Where are we -- we've had an -- it sounds like it's a multiyear time frame. Where are we sitting now and how do you see that time frame or that pathway helping out?

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

Where we are at the moment, Peter, the studies are being done. I guess we've submitted I guess the various applications. Still very early in the process in terms of the approval for that Stage 3 area, but we're through the gateway process, and we're at the stage where [ CEs ] are being provided to us by the Department of Planning. But essentially, we expect that EIS, in terms of kick-off of that process, submission is probably in the order of 12 to 16 months away.

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

Okay. Got it. I guess going back to the existing blocks, since asked, given you're at process going through the fault just recently. Lessons learned...

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

Look, some of us have to get in some point, Peter. Keep going.

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

Yes, so lessons learned from going through the fault versus not going through the fault. What do you think is the next one? I know you've talked about the drilling you've done and the thoughts you've got about the blocks ahead. Do you continue to go through it? If so, do you have a quarter in mind when we'd be expecting that dilution again and the lower sort of netbacks around the steam coal portion?

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

Yes. Drills driving through the fault was very successful as opposed to stepping around. I mean we achieved production rates on a weekly basis in excess of what we were forecasting. So that will certainly be the plan that we'll take forward into 109. Timing-wise, driving through the fault in 109, it's in the order of that 12 months away, in that range. Or probably a little bit less. The longwall change out, November, December. So we'll hit the fault, yes, in about 12 months' time.

[Operator]

Your next question comes from Glyn Lawcock from UBS.

[Glyn Lawcock]

Couple of questions but something very quick. Just quickly on the Vickery time line and the slippage. What is the issue? Is it the staffing issue within Department of Planning? Or just how they prioritize project? Just -- is there anything you can do or is it just simply you -- you're at hostage to their time line?And then second one, just 12% premium for Maules for the quarter. Generally, it's been around about 9%. Is it just a good quarter or just the premium expanded in percentage terms as the gC Newc price comes off so it's more a $1 per tonne premium rather than percentage?And then a quick final one. Just on Rocglen and Sunnyside as you close them down, when we get guidance for CapEx for next year, will that include the closure costs? Or will that just be a cash flow through the -- off the balance sheet provision? Just wondering, and what sort of number we could expect for closure?

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

Yes. Okay. Thanks, Glyn. I'll try and knock those off. Look, in terms of the -- our estimation of time required to receive the determination from the IPC, it's a little -- it is our estimation. So firstly, let me confirm. And I do say that estimation. The IPC does appear to be busy, and one might suspect that they perhaps are resource constrained, I think, will not be an unfair observation. It would -- from our perspective, at least. They are currently 12 to 14 weeks behind where they were supposed to be anyway. And so our view is that this may continue and they should make provision for that. There's nothing we can do to expedite this other than respond to their report in an expeditious fashion. And we are doing that, working very closely with the Department of Planning and the various components of the agencies, and is now a bigger cluster, that are -- that we have intersection with on the project itself. But I do note, in their defense, they are betting down a new process. It's not just mining projects, of course, as you would realize that goes through this thing. And we've just got to work through it. Don't like it but just got to work through it.As far as the premiums go, you are right. The 12% looks pretty good. And I think we might have mentioned this a couple of times in the past, in fact, that there are generally there's 2 components to our premium that we charge. One is an energy-based one, which is a percentage, and the other part of that is actually a fixed dollar sum that goes on top, which is the ash component. And so that fixed component obviously looks greater as a proportion of the total as prices have come off a little bit. So there's an element of that in there. But in -- as a general statement, our premiums in absolute dollar terms are larger than they have been. So we continue to push that premium up in absolute dollar terms as more and more customers trial and appreciate the quality of Maules Creek and what will be Vickery as well.On your third limb of your question, Rocglen and Sunnyside. Yes, we certainly can -- we can build that into guidance. But I mean these are generally cash flow related matters. There's no significant CapEx required in any of these projects at all. I mean they're just rehabilitation. There's obviously -- there's a tail of limited number of people and equipment that are left at each of these sites. Once the remaining coal is extracted from Sunnyside, there's a little bit more that comes out in this new year, but that will quickly move into rehab as well. And they're not significant dollars in absolute terms here, Glyn. So I wouldn't be concerned about anything material in that nature. But I'm sure we can give some more color with the full year around what that looks like. But it's not material.

[Operator]

Your next question comes from Lyndon Fagan from JPMorgan.

[Lyndon Fagan, Analyst]

Look, first one from me is just on Maules. In terms of the met coal fraction, 25% for the year, 17% in the quarter. Can you maybe give us a feel over the next few years of how that would look assuming it made sense to wash coal and sell it as met coal? Obviously in the past, you've talked about getting up to as high as 50%. So just trying to think about forecasting that mine?

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

Yes. Thanks, Lyndon. Look, I think at 25%, that's a reasonable, reasonable platform from -- to think about where we're going in this new year. I think the aspiration for 50% is still relevant. That was a life of mine target that we set ourselves there. And obviously, we're only at the end of the fourth year in a 45-year life of mine asset. So we think that's still relevant.But as we've commented on, and we've had plenty of discussion on with you and others, is that whilst you hard coke prices hang up there the way it is, there's always softness in the semi-soft price. And we're very fortunate that we have these premiums on the thermal. So there's JSM contracts and we continue to pursue those, as we were discussing with the previous questions that came out on this topic, we're continuing to pursue JSM-based contracts for semi-soft. And most of those customers who have trialed it in more recent times, including now some of the Indian steelmakers, confirm they like the quality. So we're certainly seeing more upside for the further JSM-based sales of Maules Creek semi-soft. But I think 25% is a reasonable basis for you to think about next year.

[Lyndon Fagan, Analyst]

Okay. Great. And then just back on the projects. Just really quickly. What is it now looking like first production days at Vickery and potentially Winchester, if you can put a number out there? There's been a few changes recently. Just boiling it all down to when you might achieve first production? Are you able to call out a year or even a half of that year?

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

Yes. Look, I think from what we've said in the past there, there's just relatively modest delay there. They're annoying because -- any delay is annoying at a level, especially when it's outside your control. But I think the best way to answer this question, not just for Vickery, but also for Winchester South, is we can spell that out in the presentation for the full year results. We have a slide there that talks about indicative time lines for exactly the types of things you're talking about construction, starting based on what we know and then first coal and then a ramp-up over time. So I think that's the best place to deal with that because it's -- there are a few moving parts there, and I think -- if we put it all on a phase that you can see, I think that will be a better outcome for everybody.

[Lyndon Fagan, Analyst]

And I guess marrying into that, how are you thinking about the balance sheet in managing both the projects. I'm just trying to work out as well in terms of dividend payments whether you retain certain level of cash to fund those projects now or whether they've been pushed out sufficiently to allow you to generate enough cash in the future to fund them?

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

Yes. Look, no change from what we said in the past. We feel comfortable that given the sequential nature of these 2 projects that are likely geared the status and the cash generation that we would expect that we can manage all that quite comfortably within the confines of our existing cash flow and funding facilities.And then we've also said that, just to reiterate this, we think during the construction phase of these projects, we would revert back to a dividend-paying ratio within our -- within the bounds of our policy, the 20% to 50%. Obviously, we've been paying in more recent times significantly higher than that with the special dividends that we've paid. We will continue to do that until meaningful outflows associated with construction start. So no change in that. So if anything, if anything, the silver lining in delays in that regard is that there'll be -- we'll continue to pay those high dividend payout ratios until such time the construction starts and starts to see meaningful capital outflows.

[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]

Thanks, moderator. Thank you, everybody, for taking the time again. Thanks for the discussion and rounding out a decent year for us. Certainly, the financial results will be out in about 4 weeks, I think it's the 15th, Ian. So I look forward to presenting those and continue this discussion about what's been a very good year for the company. So thanks very much. Bye.