Financials and operations
Our export business
EBITDA* $42.6m (FY19: $67.4m) (equity share)
As signalled to the market early on, we were expecting a
reduction in export earnings this year due to global market
factors that were having a downward pressure on pricing. With
the advent of the COVID-19 pandemic, the expected recovery
did not eventuate. This saw our average price received drop
from NZD $212/tonne in FY19 to NZD $163/tonne in FY20.
Despite this, given our low cost base and hedging put in place
for this exact type of scenario, we still achieved a 32 percent
operating profit margin.
* EBITDA is a non GAAP reporting measure and represents net profit/(loss) before net finance costs (including interest), tax, depreciation, amortisation, impairment,
fair value movements on derivatives and deferred consideration, and movements in rehab provisioning.
Our relationships with most of our export customers span over
many years, including two for more than 40 years. For many of
them, our product is a valued and unique ingredient in achieving
the precise coal blend they require.
As a result, our product is not easily substituted, being a small
but key component in the blend for a range of properties. The
long-term aspect of the relationships with our clients, also
provides a much better chance of navigating the logistical
aspects of the disruptions from the COVID-19 pandemic – or any
other event that may cause similar disruptions in the future.
This means that we are potentially less exposed to fluctuations
in demand – and that we can better focus our energies on derisking
our business from fluctuations in pricing, which is outside
The FY20 coking coal market
The HCC index pricing for coking coal dropped from a peak of
USD $236/tonne (“t”) in FY19, to a low of USD $109/t towards the
end of FY20.
A slowdown in the Indian auto industry market and construction
demand in Japan, combined with uncertainty surrounding import
controls and economic growth in China and other macro factors
caused the initial downward pressure on pricing levels earlier in
the year, with an average benchmark of USD $150/t over the first
half of FY20.
The impact of the COVID-19 pandemic, particularly in China
which continues to be a key influencer on global pricing, saw the
benchmark price drop to an average USD $136/t in the second
half of FY20. This reflects a temporary drop in demand for coal
as countries implemented various pandemic related restrictions
to slow the spread of the disease, which had associated
The global pandemic continues to play a meaningful role in
determining the outlook for coking coal prices. While near-term
prices are skewed to the downside, over the long term coal
prices are expected to rally with the need for blast furnace steel
production in a post-COVID world.
We are continuing to look at ways to increase the diversity of our
export sales, trialling new markets in Japan and India, with the
majority of FY21 sales under contract.
We will continue to monitor the situation as it develops over
time. In the short term, we have marginally reduced production
levels to ensure the mine’s ongoing profitability, and will continue
to utilise hedging and cost-cutting strategies.
For many of our customers, our product is a valued and unique
ingredient in achieving the exact coal blend they require.