Chairman's and CEO highlights
Chairman and CEO’s report
Welcome to Bathurst’s 2020 Annual Report. Our diversified asset base created over the last few years has provided us with resilience, which has been tested this year.
Against the backdrop of the challenges FY20 has brought, being able to prove that we have a reliable and repeatable business is no small feat.
FY20: A year of resilience
Leading into FY20, we were prepared for a reduction in export earnings due to market factors impacting coal pricing, and expected our domestic earnings to be consistent apart from planned changes to production levels. For the most part, we have seen this come to fruition.
The demand for our product has remained relatively stable despite the impacts of the COVID-19 pandemic, highlighting the pivotal role that coal continues to play in the global economy. Our domestic earnings were as anticipated. The pandemic did impact our export segment, extending the period of lower pricing and impacting planned shipments. The shutdown of our export mine for just over four weeks during the New Zealand Government’s COVID-19 Alert Level 4 – Lockdown (“lockdown”) which restricted which entities could operate, also had its effects. Despite this the export segment still achieved a strong profit.
Operating our domestic mines during the lockdown and resuming operations at our export mine required a fast and effective response to rapidly evolving conditions. A business continuity pandemic plan to ensure heightened safety measures was rolled out in a systematic manner, leaning on the well-established health and safety protocols already across the business.
Overall the adaptability of our business to meet the challenges brought by the pandemic underscores the strength of our people, processes, and key relationships.
The value of our domestic segment
Our export segment since acquisition in 2017 has been the big cash earner, reaping the benefit of high market pricing for coking coal. This year earnings from our domestic segment were equal to export. Whilst we had signalled lower export pricing for FY20, no-one could have foreseen COVID-19. The importance of our domestic business and a diversified portfolio has been vividly highlighted.
The strength of our customer relationships
Although our domestic mines could operate during the lockdown, there were obvious impacts on the logistics of our operations and supply chain which could only be resolved through close co-operation with our customers. And being able to shift supply from clients that could not operate to those who could was also a win-win.
The temporary shutdown of our export mine had obvious implications for continuity of supply. Likewise our overseas buyers faced COVID-19 related impacts. The value of goodwill with our long-term export customers cannot be overstated.
Like other businesses that sell a commodity that is traded on a daily index, we are susceptible to volatility in the pricing received for our coal that we sell offshore.
Hedging was first put in place to mitigate this in early 2018 not long after we acquired the Stockton mine, the benefits of which have been fully realised this year during the period of lower pricing.
Thinking long term
We have long time frames when it comes to obtaining regulatory approvals, so we need to think ahead. The resource development role at GM level reflects the increased focus in this space, recognising the investment required, balanced against expectations of future returns.
We continue to view offshore coking coal projects as fundamental to our long-term strategy. Progress is being made with our Canadian joint venture and we are always looking for that next opportunity.
With our operations spread across the country, working smarter is essential.
The roll out of an intranet across Bathurst and BT Mining was a key achievement this year, serving as a central source of information to help ensure consistency and clarity across the two companies.
Other key projects that are already adding value include a business wide phone and conferencing platform, an automated invoice processing software solution, and a move to paperless workstreams.
Matching operational plans with customer needs
Being a mining business, we understand the need to look forward, managing our life of mine plans against secure revenue streams. Reflecting this approach, a new five-year contract to supply the major South Island dairy sites has been signed which is valued at over $100m.
The quality of our mining operations was confirmed with the placing of three entries as finalists in the New Zealand Minerals Sector Awards 2020.
We have two finalists in the environment management category; one regarding the elimination of historic acid mine drainage at our Canterbury mine, the other covering mine management practices to enhance indigenous bird populations at the Stockton mine.
Our finalist in the health and safety category details the company wide medical assessment health programme. This gave us a better understanding of the key health risks of our people and how we could better support them to be fit for work.
Sustainability, environment and society
Essential to our success is our commitment to sustainability and social performance.
We are in our third year of measuring and reporting progress
in this area against 10 material topics, including factors such
as freshwater and biodiversity, and energy and emissions.
This demonstrates our support for the transition to a net
zero carbon economy by 2050, balanced with supporting economic prosperity during the transition.
We continue to provide social and economic benefits to the communities in which we live and work, which includes support of local community programmes and activities. In terms of workplace health and safety, our focus is increasingly on ensuring our people are fit for work, while continuing to improve on standard indicators such as lost time injuries.
Supreme Court hearing
Being granted leave to appeal in the Supreme Court of New Zealand the Court of Appeal’s judgment which upheld the case brought against Bathurst by L&M Coal Holdings Ltd (“L&M”), was a welcome development. We presented our position on the 8 and 9 October 2020 and we now await the Supreme Court’s judgment which is expected in early 2021.
The recognition of the performance payment payable to L&M had a significant impact on the FY20 financial results. Despite this, we believe our core underlying business remains sound, and we have been and continue to assess a full range of options to meet this debt, should we be unsuccessful in the Supreme Court. More information can be found in note 1 of the financial statements.
Positioned to meet the challenges ahead
This year we have proven that our business is positioned to prosper even in the face of exceptional circumstances. Whilst the longer-term impacts of the pandemic and the timeline for a return to economic growth are still yet to be fully understood, we believe we are well set to face the ongoing uncertainty, and play our part in the road to recovery.
Chief Executive Officer