Whitehaven Coal Ltd

ASX:WHC

Earnings Call Transcript 2021-Q4

[Operator]

Ladies and gentlemen, thank you for standing by, and welcome to the Whitehaven Coal June Quarter Production Report Conference Call. [Operator Instructions] I must advise you that this conference is being recorded today. I'd now like to hand the conference over to your host, Paul Flynn, MD and CEO of Whitehaven Coal. Thank you. Please go ahead, Paul.

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

Good morning, and thank you very much, everybody, for taking the time to participate in the June '21 quarter production report for Whitehaven. I hope you're all safe and well from your various locations and some of you outside the state I'm sure that's doing -- coming a little bit more friendly than those of us who were here in New South Wales. Look, I'm thinking that this quarterly report won't be particularly long in the sense that given the amount of time we've been discussing the progress of operations with you over the last 6 months, these numbers are probably not too far from your expectations already. So I'll just go through the highlights as usual, then we'll head on to the individual mines and get to Q&A. In terms of highlights for the quarter, the June quarter ROM production of 5.4 million tonnes is certainly a solid result. We'll get into the details of that. The June quarter managed saleable coal production of 3.8. Our quarter total managed sales of 5.4. Our managed owned sales at 4. And then the equity equity cut at about a 3.7 and 3.2, respectively. The managed ROM in total for the group was 20.6 million tonnes for the year. Maules Creek had a very good year in is the year in format at 12.7. The managed tonnes for sales at 19.8, including the 2 million tonnes of purchased coal with our equity tonnes being at 14.4. Healthy stocks at the end of the year at 3.3 million tonnes. From a COVID perspective, we haven't had any cases, I think, since the start of COVID, which is great to be able to report to you. But given the circumstances, we are continuing to operate under the business and hygiene requirements that we've seen in recent times and in fact have reinitiated a further suite of measures, which we probably haven't seen for 6 months now, but they have been really installed. And then, of course, guidance and so on, we'll give you in a month's time when we come to the full year results. From a safety perspective, our TRIFR for the year at 5.86 is actually a little worse than what it was last year, which was unfortunate. We had a bunch of sites there on 0 TRIFR as well which have had a number of small instances, which affects that to some degree. That's not great, but we certainly are seeing good numbers together at CHPP and Rocglen, our rehabilitation operations doing 3,000 days with that instance. So that's fantastic news. But again, further effort required in this regard. The managed totals and equity totals are set out across the page for you. Again it's, as I say, we manage ROM at 5.4, obviously, somewhat to conclude what was seen from the previous corresponding period of 8.2. The year-on-year total, as you can see, are quite consistent with where we've been in the previous year. So the balance for the year almost line haul. Managed coal production at 3.8 versus 6.2. Again, this is a function of the difference in the June quarter of the last year. The total themselves 7% down 16.9 versus 18.1. Purchased coal -- I'm sorry, managed sales have produced over 4 million tonnes of 5.2, similarly effective in the same way, but again, the total 2% difference there between [ 5.77 ] versus [ 7.5 ]. Purchased coal during the period in total 2 million tonnes versus 2.4 million, 16% down and total managed coal sales of 4.5 versus 5.7 for the quarter and 19.8 versus 19.9, 1% different for the full year. Moving over to -- I won't go through the equity coal production for you. But moving over to a table, which I know everyone likes to look at quarter-on-quarter analysis of our realized pricing and indices for the period. When we look at our total coal sales -- equity coal sales, sorry, of 3.7 versus 4 for the last quarter, say 2 million tonnes has been relatively consistently spread over the course of the whole financial year. Our high CV tonnes in terms of portions of 61%, up from 53% over the last quarter. The other thermal sales were about line haul at 27. And then of course, the difference being spread between the lower contribution from metallurgical coal sales during this quarter. Pricing at $109 is obviously a step up on the $89 that we saw in the previous corresponding quarter. Semisoft is flat basically on a quarterly basis, but the spot price has improved, and we suspect this lag index shall benefit in the next quarter. Overall, from our achieved tonnes, we've got 94 for the thermal coal versus 76 from our previous quarter. Met coal 103 versus 92. So in terms of realizations, the thermal for that total of all our thermal coal across the board being our premium quality products and also the new CV, there's a 14% discount versus the 15 that we reported in the previous corresponding period. And mettalurgical coal sales relative to the [indiscernible] is 10% up, but relative to spot price is about 5% down, which is about where it normally is. I'm moving over to the commentary here just on Page 3. For everybody who gained the sales numbers, I won't go through again what has seen that. Clearly, the market is typified by a pretty strong underlying demand of the $109 at the gC NEWC average for the view, up 23% on March. So the $89 there that we quoted. So very good underlying demand. We can certainly see that our customers have -- are definitely pressuring the market for more supply. There have been some disruptions, as you know, at various individual mines and then also from an infrastructure perspective through Newcastle as well. Although we hope to see that normalize in the relatively short term. So a significant rise is obviously end of the period in coal prices, but our average in terms of our realizations for the June quarter of $94 versus an index average of $109 is reflective of a couple of different things. So tie try to break it out for you here in explaining what the differences are. About 50% of our thermal coal book is priced on prior periods. So this is allowing effectively our long-term contracts generally. So you'll see the benefit of that lag come through in the subsequent quarter. So it really is just a timing element in that sense. We do have 20% of our thermal coal sales are priced at some gC NEWC level. This is affected by the full [indiscernible] coal we've been talking about at Narrabri from the [indiscernible] we would certainly want to see that normalize over the coming quarters. Individual coal sales at 12% is pretty modest, and I think we're all accustomed to the idea that the $79 isn't looking particularly exciting for us, hasn't been for some time. and it's far fair for us to use our high-quality herbal and gain the premium by selling it into the federal market itself. Again, all the summary business probably not new news to you given we've all been watching the market dynamics and enjoying the benefits of the tight market. On to the sites themselves. Maules Creek. Maules Creek has rounded out the year in good form. So 3.7 versus 4.1 for the ROM coal production for the quarter. The saleable terms were about the same at 4% from 2.6% versus 2.7% for the quarter. Sales of our produced coal is at 2.6% versus 2.3%, 4% up and healthy stocks here at the end of the period for 2.3%, which bodes well in this good price environment to turn that into cash in the coming quarters. So overall, a pretty solid result for Maules Creek creating a straps and demonstrating the capacity of this mine to deliver very closely this year, too, it's approved limit, which is very good to see. So the mine definitely running in good form, and we continue to see positive opportunities for improvement there as we go through the year. The sales volumes for the quarter, 2.6% for Maules itself for FY '21, [ 99.6% ] in total. So new jumps above our previous corresponding period of 22% better than the previous corresponding period. But overall, a very good result and keen to see that continue to run. As I mentioned, the coal stocks are at good levels and unwinding that into this new year, we'll certainly see good cash generation at good prices. And there just a note, obviously running out of Maules Creek at 1.1 million tonnes during June, so which is very good for us to be able to demonstrate the capacity of the line to achieve the sorts of volumes that we'd like to send down there from Maules Creek in particular. On to Narrabri. In terms of Narrabri, as everybody understands, understandably modest at 350,000 tonnes period-on-period. Obviously, a big change of 2.6% in the previous period. But I think there's -- this is not new news from anyone's perspective in terms of how Narrabri's performance has been going. But a lot of the repairs have been done during the course of this labored last few months oil production at Narrabri. And it's nice to say that we're on the back end of the difficult areas now and moving into more normalized production as we speak. Very positively, we did drill out the back end of $109, and there's no further structure identified here, which would be the cause of any concern for us now. So our focus really now is just completing this panel over this quarter and moving on to our change-out in early in the second quarter. In terms of the sales, just to go through the metrics, that thermal coal production at 300,000 tonnes, obviously, sitting below where we've been in the past and the managed sales volume for the quarter of 600,000 tonnes a day, low in the full year, 4.5 reflects the sale of coal production, and obviously offset partially by the drawdown of stocks in the period. Next, long wall change out. As I said, early Q2 FY '22, which we're keen to obviously move into that when the opportunity for full overhauls will be done during the course of that 7-week period and moving to 1 10 under a more normalized operating scenario. From the Gunnedah open cuts perspective, the numbers of the [indiscernible] came out 800,000 tonnes line ball pretty much with what it did last year for a total of 2.25 versus 2.35 for the full year. Solid coal production of 470,000 tonnes versus 600,000 in the previous , 1.9 versus 2 for the previous corresponding period. Stock is about the same as where we were last year, 400,000 versus 429,000. Overall, [indiscernible] had a reasonable year. It has been weather-affected to the extent both Werris Creek and Tarrawonga certainly experienced a higher -- well higher than average rainfalls during the course of both the March and the June quarter. But despite that, have turned into a solid performance for the year. Werris Creek numbers, 600 versus 69 [indiscernible] 74 versus 6 92. So 6 5 7, 17% difference. Total coal production at 415,000 tonnes versus 472,000 for the quarter, rounding out the year at 1.7 versus 1.4, 22% up. And coal stocks there at just 400,000 tonnes versus about 550,000 for the previous corresponding period. Again, operations here have been pretty solid during the course of the year as the open cut mines have been able to run well during this period. But again, we have been weather affected in this -- in the last 2 quarters, which down a little bit. But despite that I think the operations at open cuts have been doing nicely as we've been obviously resolving the challenges of Narrabri in the background. From a logistics perspective, I think everybody understands there have been some constraints obviously through the system of this year, which has not been ideal. Repair work on SL2 is proceeding ahead of plan than we are actually anticipating that we would see this operational early in the September quarter. So in September, I should say. So that's looking very good. Early in the quarter is maybe a little bit -- I know the testing is going on currently, but let's see how that goes. And at which way we're going to have definitely testing capacity back in the system in September. Weather again made a bit of a role view just on the logistics front as well. Weather we experienced in site certainly has manifest itself in some high seas, which, as you already know, shuts the port down periodically. Knowing that did happen quite a bit in the last couple of months of the year. In fact, as everyone is trying to get their tonnes through the port infrastructure, which was not what we want at the time but it is what it is. Overall, the guidance and the actual outcomes are there for you, the only missing piece of that puzzle, as you can see there is obviously costs. And our cost guidance remains at 74%, as we mentioned in our previous discussions. I'll just go to development projects. Narrabri is moving forward in its assessment process. There's nothing particularly noteworthy that we should draw to you your attention there. There is, of course, a process now by which the whole number of quarters produced prior to any entry into the IPC system. We think that we will be going to the IPC, although we haven't been formally notified of that by the government. But all our responses submissions have gone in, and we look forward to receiving the whole government report in due course. Hickory Course has had an interesting development during the course of the last quarter with the injunction against the minister having been defeated but with the court acknowledging the existence of a duty or care that the minister owes to the applicants in this case. So what that means is that the minister can approve the project and our expectations are that still that, that will be the case. But in doing so, the minister will need to evidence the consideration of the duty that the court has acknowledged. At the same time, the minister also has registered their intent to appeal this decision. So we look forward to seeing the basis of that appeal table and pursued through the quarter. Of course, this is not just about Victory, that any project that had a greenhouse gas footprint is obviously going to be impacted by this. So the government is definitely minded to want to solve for this one. From a Winchester South perspective, nothing particularly noteworthy during the course of the quarter other than to say that we pretty much pushed our part in terms of the adequacy assessment that the Queensland government has performed. And so we are waiting now in -- we expect within the next month to actually enter the period of public exhibition for the project, which would be very welcome. Now over to the part, which I'm sure which is going to be the subject to some of you in terms of how the market is going, the market. The market continues to be very strong. I think we've seen, I suppose, energy in all forms, coal, obviously, gas and oil, all improving during the course of the last 6 months in particular. And so the market certainly feels very strong and tight. Hard quality coal, very hard to get your hands on, the 5,500 market, the [ 85 ] certainly has improved significantly during the period. And those numbers are looking much better with change to reinforce the notion that obviously, the whole coal complex is tight. But that's what happens when you have no new supply and demand on mix. So that's -- we see the benefit of that. And month that were about $142, I think, on the thermal coal price, which is going to translate nicely, certainly into cash generation for this quarter. Our [indiscernible] coal sales importantly have certainly improved. And you've seen a big change there in taking from approximately $110 for quite some time through $200 now in the June quarter. So we are looking to see a backward-looking index for the JSM quarter [indiscernible] price when next settled reflecting a better position than the $93, which we currently use at. Obviously, at that level, everybody would understand that we're not particularly motivated to well still too much coal of $93 [indiscernible] $140-plus for selling that high-quality thermal. So with that, obviously, guidance for '22 will come out in a month's time when we discuss the full year financials. You've got the information that we're giving you today, those numbers say the physicals should be well understood. And I might hand back now to the operator to open up the Q&A session.

[Operator]

[Operator Instructions] Our first question comes from the line of Rahul Anand at Morgan Stanley.

[Rahul Anand, Equity Analyst]

Paul and team, can I please ask 2 questions? The first one is around washing. Just wanted to understand, you've obviously had some delays in the salable coal side driven by more tonnes being washed this time. Would we see the washing levels come off or become lesser in the future as the coal quality at Narrabri improves? That's the first question. Or are we at normalized levels of washing as we stand? And then the second question is around the longwall move at Narrabri. It seems to be a quarter later than before from 1Q to 2Q now. Just if you could provide an update on that mine and how things are going and what's led to that delay.

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

Thanks, Rahul. Can I just qualify the first line back question. So the washing percentage, is that a Narrabri-related question that you were asking? Or is that washing more generally across the business?

[Rahul Anand, Equity Analyst]

More generally across the business because my thinking was perhaps you're washing a bit more to offset some of the poor quality at Narrabri and whether that hangs once the quality improves there.

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

Yes. Thanks, Rahul. I can certainly get to those 2 pieces of that question. And just to remind everyone that I have the rest of the team here. Ian's on the phone, Kevin's on the phone and Sarah, of course, is here as well. So I'll move that around as required. In terms of washing across the business role, you're absolutely right. We are washing more -- we're washing more as a business, as you know, particularly at Maules Creek where we put in place a 3-product strategy. And when you have a big wash plant and you've been paying good premiums for a washed thermal product, then you should use that capacity. And so that's -- we're definitely doing that. So there's a little bit of that in that sense. But as you can see, even though, as I mentioned, the 5,500 market has improved quite considerably off the lows that it was a year ago and we're certainly back in September now. And so everyone's motivated to put as much coal as they can into the high end of the market and therefore, washing more. But that bottom-end market actually is actually quite healthy now. So I think you may see people start to wash a little bit less. In our instance, that's not the case though. We will definitely continue to wash a little bit more. So there's a small deal. In fact, that goes along with that proportionately across the business. But it does lock in those better prices. And even though 5,500 coal sort of is around about the, call it, mid-80s at the moment, which is pretty good. 140 sounds a whole lot better if you can wash it further to something at the higher end of the market. So we will continue to do that. And as you point out as a group, as Narrabri has produced quite a bit of full affected coal in the area, we are using, obviously, our [indiscernible] stock across our business to move that out of the lower end of the market into the mid or up, if it's possible into the mid CV market as required. In terms of longwall moves, yes, it has moved. It definitely has moved in line with the revisions to guidance. Obviously, that implies a slower production rate through that faulted area. So definitely, by into that, of course, the longwall moves out to the right. And so that definitely has happened, but that was already implied in the guidance that we've given you on this and these numbers are just really confirm that. So yes, that's not obviously what we would have liked, but that is what it is. And we are cutting in a much more orderly fashion now outside of both the faulted area and the known area that dark area was there as well. And the equipment is performing better, although obviously, we're looking forward to getting to the end of the panel given that this point has been wrestling with us a little bit. I don't know, Ian, if there's anything else that you wanted to add to that in terms of how Narrabri is currently operating.

[Ian Humphris, Executive General Manager – Operations]

Yes. Thanks, Paul. And I might go back to the first point about washing and just add a little bit more context to what we experienced at Maules Creek. So we were in the lower seams, which is new to us getting to the bottom of the pit to accelerating pit dumping. And we found that the lower seams there was a positive upside there. They were slightly thicker than we anticipated. But the interburdens between the seams didn't present as we had expected. So we opted to take, I guess, the bottom 3 seams effectively as one, and that requires some more washing to remove that partings out of there. Building on the Narrabri question. So yes, we were out of the fault that we've talked about and the dike affected zone. We've undertaken all of the major maintenance known to us. And now we anticipate completing the rest of this bulk under normal conditions.

[Rahul Anand, Equity Analyst]

Just one follow-up there from me, Ian, if I can. In terms of the interburden that you just talked about at Maules, is that something that's expected to continue? Or do you expect the interburden to become smaller as you progress through that seam or through the bottom end of the mine?

[Ian Humphris, Executive General Manager – Operations]

We think it's probably more localized in the southwest corner of the pit that we've seen and working on. We are doing further drilling to better understand the bottom seams. But I think that, I guess, upside and the thinning of the interburdens there is probably more local in those seams in that Southwest corner.

[Operator]

Our next question comes from Paul Young at Goldman Sachs.

[Paul Young, Equity Analyst]

Paul, Kevin and Ian, first of all, I've got a few questions on inventory and cash flow. Paul, you've ended the quarter with a similar sort of inventory level that you did this time last year. And last year, we didn't have any infrastructure constraints that I can remember, and you managed to unwind your inventory by a couple of million tonnes over the September quarter. Now that the later 2 doesn't start up, I think you said until fully until beginning of September. So I just want to ask that question again around how quickly you think you can draw down your inventory by that couple of million tons and unwind that working cap?

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

Yes. Thanks, Paul. Look, it's definitely healthy stock. So we're in the process as much as we can. I think with the second shipload up and running, I think we'll definitely see definitely see us being able to accelerate the drawdown of our stocks. We obviously convert as much as we can of that into cash. But we're also producing it at solid levels as well. Now in the short term, of course, we -- in this quarter, we will start the wind down for the change-out period. So even though the change out falls now into early Q2, you do wind down, as you know, with a bolt-up process towards the end of this panel. So as production through there will be an opportunity to swing the trains into Maules Creek, so for instance, and keep up that healthy run rate that we've had in shipping that you saw and I quoted there in the June month itself. So we want to pull that down as soon as we can. But the stock levels really are, as I say, a function of a lot of coal coming out in that last quarter. You can see just the smaller mines have done the same. Maules has had a very healthy period as well, although not only not large like it did in the previous corresponding year in terms of production through the quarter, particularly in the last month. So I won't put an exact time on it in terms of the full drawdown but we want to pull that down and converting the cash as quickly as we can whilst we got a healthy price.

[Paul Young, Equity Analyst]

Okay. All right. And then moving on to pricing. Well, I know you called out Thai power has been aggressive in the market on cargoes. I'm curious about just the -- I guess, the terms that you can sell to Taiwan on like what's the pricing lag on selling high-quality coal in Taiwan. And then also Korea, I mean, Koreans were aggressive in the market at the lows in September quarter of last year, locking in 6-month, 12-month contracts. Can you now go out to the Koreans and what comes around and goes around lock in higher prices for 6 months with the Koreans at the moment?

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

Yes, look, we haven't called out that one, but I have to say that, that sort of behavior is pretty consistent across the market. Everybody is looking for more coal. So it was not just Thai power and the Taiwanese, definitely the Koreans are doing it, so there's healthy tendering there. I can only imagine -- I can only say to you that they thought this would moderate 6 to 9 months ago. And so the activity was lower during the COVID period, as you can imagine. And then that seems to have turned quite dramatically. We're also getting requests to bring cargoes forward from our Japanese customers as well. So that's certainly indicating that everybody is a little short and that more coal is required. But I think that's consistent with general activity lifting at the same time. So prices are healthy. And as I mentioned [indiscernible] you can all see that number. That's certainly looking a lot healthier than what it was. The Korean markets in between that and obviously the gC NEWC. So we're keen to lock that in as soon as we can. The Korean market generally -- I'll let the individual discrete cargoes, they generally use a year in tenure those sales. So it won't be 6 months, as you mentioned, to the extent that we lost some tonnes in there. Unless they're discrete cargoes, which some of the tenders are at the moment where they've got short-term issues, they're general year in duration.

[Paul Young, Equity Analyst]

Okay. Thanks, Paul. Last question for me, just a high level one. How is the discussion going leading into the August results with respect to the balance sheet metrics versus capital returns into the future and also growth CapEx? I'm just really curious about is a discussion being had around announcing new balance sheet metrics, more conservative balance sheet metrics with the August results?

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

Yes. Thanks, Paul. I mean that discussion is live, as you can imagine that being the case. Obviously, the outlook is pretty good in terms of cash generation for the business. And I think as we reported consistently throughout the course of the last the last 18 months, in fact, our balance sheet has been largely at stake during this whole COVID period. And and certainly going through into calendar '20, we anticipate being able to delever significantly during that period, and we certainly weren't able to do that. And then, of course, the occurrence of that, the challenges at Narrabri also curtailed our ability to delever for the period. Having said that, you're quite right to point out that conversation must be quite up now given that now production is returning to normal and that we've got a healthy market here in which to sell our coal into. So I won't really front run the discussion that management is having with the Board. But I agree with you, conservative is good. We're looking to put ourselves in a position where, as I say, we would have otherwise delevered significantly during this last period, even on reasonable coal prices but COVID put paid to that. We want to make sure that we get back on that trajectory and get the debt down.

[Operator]

[Operator Instructions] Our next question comes from Paul McTaggart at Citigroup.

[Paul Joseph McTaggart, Director and Metals & Mining Analyst]

So look, I just wanted to circle back to that issue around the washing at Maules. So in the quarter, obviously, the interburden, those washing yields to be low. I think the loss was about 35%. Over the course of the year, it was 25%. So how should we think as you prove on the production that's only localized, should we be getting back to 25% for the year ahead? I mean, historically, your yield loss was lower than that. How should we think about your loss for Maules going forward?

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

Thanks, Paul. We should be using that 25% [indiscernible] to revert back to that. As is, we think it's a localized impact in that southwestern corner of the lease. And that obviously is adjacent to what the aircraft in that area, so that seems to seem to come together. We put in to get to the feature there on that side of the pit. So 25% should be fine, I think, overall, from a Maules Creek perspective.

[Paul Joseph McTaggart, Director and Metals & Mining Analyst]

And is that assuming that my recollection from the old days was that the expectation with yield losses would be lower than that. And that 25%, is that assuming a decent portion of net sales opportunity?

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

Yes, not not so much at coal. So I might -- I did make the comment earlier about the 3 product strategy at Maules Creek. That was the catalyst for washing more. When the market -- after we tested the market strongly with Maules Creek coal and the convergence of the semi-soft pricing being relatively flat in for the last couple of years. We picked over into a period we said, look, we have washing capacity. Let's use more of that washing capacity to lock in the premium from the thermal side in particular. So at that time, when you would saw broadly adapt about 20%, it actually was, it's pent up to 25% in order to utilize more of that capacity and in an effort to lock those premiums into the thermal product rather than selling a variety of products which have different yield outcomes.

[Operator]

Our next question comes from the line of Peter O'Connor from Shaw and Partners.

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

Paul, Kevin and Ian, a couple of questions. Firstly, with regards to the last question on stocking. Can you remind us, Paul or Kevin, how much surplus capacity you have in the rail and the port system, firstly. Secondly, Vickery. Can the minister approve Vickery whilst they're appealing last week's update? And thirdly, Narrabri. Why several weeks for the change there? I think I know the answer, but I just wanted to articulate why. How many weeks did you actually produce coal? Were you down if that's a better way to put it during the quarter? And when will we get results for gC NEWC in by long [indiscernible] and out [indiscernible]

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

I think that's 4 questions.

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

It's about 6 actually, but I've got more to come too.

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

Okay. Yes. In general, 3 questions in 1 meeting. Okay. Yes, go port capacity, it's actually port capacity is okay. Once we get back up with the SL2, we're definitely going back and calls there. The commentary I made there before was really saving in terms of the rating that we quoted there in June. Someone might be typing on the computer, I think, in the background. And so we think that there's no constraints in order to be able to draw down the stock the way we look at it. So if you're annualizing that, that's that's Maules. So that was potentially going to be 12 Maules. That's no problem at all given that we'd actually run ROM tonnes was 12.7 for the year. Obviously, the sale of the piece at which you rail obviously, is after the yield adjustment has been made as we just talked about. So we're not worried about that in that regard, Peter. So we'll be able to push that through absent any other nuances. The ag sector is obviously in our area of the line is the major draw on the line other than us, and that seems quite manageable at the moment. So that's not giving us headaches. Appealing, what to do during the period of appeal? We think it's very positive the government simple their intent here to move it. There has to be fuel. They think this is a pretty entirely outcome from their perspective. And as I've said before, I think it's a strange outcome this judgment in the sense that the notion that every previous EPBC decision prior to this stage enlightening us as to the institute [indiscernible] was made regard -- without regard to the impacts of any components project on future generations. So I think that's not a suggestion which really, I think, has any merit. So the government team minded to deal. They can approve the project in the meantime. And because that appeal process will take some time to unfold. And of course, the appeal the appeal is for something between the government and the applicants to deal with. We're just a joint party in the previous discussion. So we think the minister says they can deal with it in the meantime. So that's what we're looking forward to do. We see change out, I don't think that's particularly different from what we've done in the past. Did you have a particular dimension to that question you want to expand on, Peter?

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

I figure that it was just doing more major maintenance or taking it out to the surface to do maintenance ahead of what could be another challenging block. And certainly bids seem a little bit longer than normal. And given the maintenance you've got underground is perfect. I was just you're doubling up and just be 100% sure you get through long term, okay. And if it's a particularly longer, it's fine.

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

Yes. No, it's not particularly no -- There's nothing particularly noteworthy. The maintenance that we did during the course of panel, which was annoying, most of which doesn't have a particular benefit for the next panel. We will make sure that we do a complete overhaul of everything in those 7 weeks that we enter the panel with a fully restored -- back to operating capability longwall. We don't want to just assume that whatever we've done is going to [indiscernible] at the next panel. So we will be taking the time to do that overhaul completely. Would you essentially feeling that you've mentioned, Ian, I think to you on that.

[Ian Humphris, Executive General Manager – Operations]

Okay. Thanks for that Peter. How are you? Yes, so I envisage we're currently in drilling about 1 10 now. and we'd anticipate that we would have those results and a handle on that block early September. Then we are scheduled to go in and do 1 10 after that. And I would imagine there'd probably be 2 months of work there to drill that out and do the necessary interpretation.

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

You did lessons learned for the drilling you've done for long mine. Does it give you the confidence this [indiscernible] you're sensing that you go full gas will you get there?

[Ian Humphris, Executive General Manager – Operations]

Well, I mean, we are doing more drilling. We are drilling from the installation phase all the way up to the takeoff phase. There'll be at least 7 holes with whatever extra holes we need to do there. So between that and the other work we've done from analysis of our gas drilling holes, et cetera, we have a strong degree of confidence that we will know what structures exist in that block.

[Operator]

[Operator Instructions] We have further questions from the line of Peter O'Connor of Shaw and Partners.

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

Ian and Paul, you nudging the 13 million tonne limit at Maules Creek, how do you deal with that ahead of an approval change? Clearly, you're close, how do you dial that back and keep the troops fully engaged?

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

Thanks, Pete. Look, I think we mentioned this more than once or twice that this is -- there is a particular challenge for us. There's high-quality problem to have, of course with the mine now performing at a level where we can start knocking on the door going to the upper limit. To remind you, Jeff, I know you know Peter the benefit that obviously 13 tonne limit is set on a calendar basis, not the financial. So there is a little bit of juggling to deal with that if you've had a bigger half versus the second. Hence, our desire to want to move on and ask for some more tonnes. Now as we talked about before, that's related to AHS in terms of how much we ask for over and above the 13. But we do think one by the other, you need to have a little bit more capacity here for exactly, as you mentioned, Peter, that there are times when you do want to be in a position where you want you're winding back. And so as the mine continues to perform, we want to make sure we've got some headroom available to us to be able to manage that better. But it's not, as I say, a problem that we're steering at right now, but it is something that we want to deal with going forward. We want to wrap that up with our view of the AHS.

[Operator]

Thank you. We have no further questions. So I'll hand back to Paul for closing comments. Thank you.

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

Thanks, everybody, again, for your attention here for the quarterly report. If there's any further questions that any of you have that you wanted to direct to us, you know where to find us all, but look forward to contacting you and speak to you over the coming weeks. And of course, we've got our full results coming out in a month's time, which we'll be speaking to you formally again. Thanks all for your time this morning.

[Operator]

Thank you. Ladies and gentlemen, that does conclude the call today. Thank you all for joining. You may now disconnect.