YACAF (YACAF) Q2 2026 Earnings Report, Transcript and Summary

Good day, and thank you for standing by. Welcome to Yancoal First Half 2026 Financial Results. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Brendan Fitzpatrick, Investor Relations Manager. Please go ahead.

Thank you, Maggie, and thank you to everyone for joining this briefing on Yancoal's first half 2026 financial results. We have several members of Yancoal's executive leadership team to recap the first half performance and participate in the question-and-answer session. Commentary provided today is based on the first half 2026 financial results and associated announcements published to the Australian Securities Exchange and the stock exchange of Hong Kong yesterday, the 19th of August. Slides 2 and 3 contain notices and disclaimers relevant to today's presentation and the forward-looking statements it contains. Please make yourself familiar with the content of these 2 slides. Throughout the presentation, we use Australian dollars unless otherwise stated. Sharif Burra, our Chief Executive Officer, will provide the introductory remarks for the first half results.

Thank you, Brendan. And welcome to everyone on the call. Those of you familiar with our presentation format may notice we've shuffled a few of the slides. [Technical Difficulty] Thank you, and apologies, everyone. Keeping our workforce safe is always our first priority, which is why we've already taken action to tackle the recent deterioration in the TRIFR statistics. We've implemented targeted safety intervention activities to correct the safety statistic trend. And pleasingly, we have seen improvements in July. Earlier this year, we published our AASB S2 sustainability report. We since commenced work on a climate transition plan to strengthen our climate resilience and support the Yancoal P4 Sustainability Strategy. We're developing our Scope 3 data collection and calculation methodology to ensure we're ready for mandatory disclosure obligations next year. Our P4 report provides an annual update on sustainability activities, including progress to deliver the company's P4 Sustainability Strategy. The 2025 P4 Report is available on the Yancoal website. During the first half of the year, we delivered another great operational performance. ROM coal production was 32.5 million tonnes, and our attributable saleable coal production was 19.8 million tonnes. This was a first half production record for Yancoal. We're on track to deliver in the upper half of our production guidance and set a new annual production record this year. Our cash operating costs were $96 per tonne. Given the widely discussed impact on diesel price resulting from the events in the Middle East as well as broader inflationary factors, our people have done an exceptional job to keep cash costs under control. Our overall realized selling price for the half year increased to $154 per tonne giving the implied cash operating margin of $42 per tonne after government royalties. The record production and higher realized price lifted revenue by 13% to just over $3 billion. And our operating EBITDA increased 29% to $767 million at a 24% margin. The operating profit before tax increased 42% to $328 million, but our statutory profit before tax was $56 million. This was due to the impact of nonoperating items on our profit, which Kevin will explain shortly. The company retains a strong balance sheet with $2.1 billion of cash and no external debt at the end of June. This was after distributing the 2025 final dividend and paying the USD 40 million deposit for Kestrel. Yancoal's portfolio of quality assets and financial discipline has allowed us to acquire an 80% interest in the Kestrel Coal Mine while continuing to return cash to shareholders. The Board has elected to distribute $92.4 million to shareholders at a $0.07 per share fully franked interim dividend. I'll now hand over to Kevin Su, our CFO, to talk through the first half profit.

Thank you, Sharif. We added a slide to the presentation so we can help investors understand the nonoperating or accounting-driven items behind the profit we have reported in the first half. If you look at the light blue columns on the left and the right side of the chart, you can see the operating profit and the profit before tax, we reported in the first half last year. In most periods, these are similar with only minor accounting factors creating the difference between them. However, this was not the case for this reporting period due to $272 million of nonoperating items. We had a higher production and higher realized prices, which lifted operating profit by 42% to $328 million, as Sharif just mentioned. However, after we account for the nonoperating items for the profit before tax, it's reduced to $56 million, and the profit after tax is $17 million. There are a few things to appreciate about these nonoperating items. These are all noncash items, except for the $20 million contingent royalty expense. So there is a very little impact on our cash flow and cash balance. The largest item is the $188 million hedge reversal loss. This is a noncash exchange rate translation loss on our previous U.S. denominated loans. The hedge reserve balance has now been fully recycled and reduced to 0. This item will only occur in the future if we apply similar accounting hedges to future U.S. dollar-denominated debt. The second largest item is a $49 million noncash impairment on the group's equity accounted investment in Middlemount. We hope this puts in context the profit before tax and the profit after tax we reported this half and why the underlying operation remains robust. I'll hand over to David Bennett, our AGM operations to talk about operational performance.

Thank you, Kevin. Slide 8 summarizes the operational drivers behind our half year performance. As Sharif mentioned, we delivered a record first half performance, almost 20 million tonnes of attributable saleable coal production. Our cash operating costs increased just 3% to $96 per ton. The daily effort of everyone at all of our mines to keep costs contained along with higher production, limited the increase in cost per tonne. Mark Salem will provide more detailed commentary on our coal sales and the coal markets. Turning to Slide 9. We see total ROM coal production on a 100% basis was 32.5 million tonnes. In prior years, we tended to have production weighted to the second half. Last year, we established a somewhat more consistent production profile across the 2 halves of the year and are looking to further improve that balance in 2026. This year, we prioritized overburden removal in the first quarter to optimize coal mining over the remaining 3 quarters. Even with this scheduling approach, the 67.3 million tonnes mined over the 12 months to the end of June was close to record performance. Attributable saleable coal production was 19.8 million tonnes, up 5% compared to the first half last year. As I just mentioned, even having prioritized overburden removal in the first quarter, we were only just short of our best 6 months performance in the past few years. We have great operational momentum heading into the second half and are aiming for the top half of the production guidance range. Last year, we set 2 separate world records with our Liebherr R9800 excavators. At Moolarben, we set a world record for total material movement with 17.6 million bcm and at MTW, a second excavator set a world record for total material movement in a month of 1.75 million bcm. Based on the first half output, HVO's R9800 excavator could potentially move around 17.9 million bcm this year and exceed the world record set at Moolarben in 2025. These performances demonstrate Yancoal's capability to operate at the highest industry levels. Sharing knowledge and best practices between our mines is improving our performance across all operations. Slide 12 includes data we have used in the past. The charts display our 3 largest mines in the context of other Australian thermal coal mines. Total cash costs are shown on an energy adjusted basis to counter the influence of coal quality on the operating margin. We updated the slide to show the same data set 7, 8 months apart. May 2026 compared against December 2024. The scattering of mines on the chart and the industry averages have not changed materially. The key takeaway is the large-scale, low-cost mines have a competitive advantage. This is why we focus on maintaining our assets and operating them as we do. Slide 13 shows our cash operating costs. As Sharif said, our cash operating costs were $96 per tonne in the first half. We continue to work extremely hard to keep our cash costs in check and to offset inflationary pressures, such as recently elevated diesel prices. The increase in the raw material category to $36 per tonne is mostly related to the higher diesel price increased production, mine plan optimization as well as equipment reliability and utilization, all contributed to combating cost inflationary elements. As we have said in the past, we see our ability in keeping costs flat over the past few years as a great outcome relative to the sector, and this leads to the next slide. Turning to Slide 14. We demonstrate why keeping cash operating costs low is crucial. Our implied operating cash margin in the first half was $42 per ton. This chart shows the expansion and contraction of margins we have experienced over the past 5 years. The margin, while lower in recent years, remained strong. Combined with our scale of production, this drives the financial performance, which Mike Wells will cover shortly. I will now hand over to Mark Salem, our EGM of Marketing and Logistics to cover the coal markets.

Thank you, David. Starting with the product mix on Slide 15. 84% of our sales were thermal coal with the balance in metallurgical coal. This product split varies a little between periods, dependent upon operational performance, which cost seems in production at the time, customer requirements and market optimization strategies. The 19.8 million tonnes of attributable sales matched attributable production, and this maintained our inventory levels. On the way to delivering this sales volume, Moolarben achieved a record figure for coal railings in June with around 2.1 million tonnes railed to the port. This was the first time the 2 million tonne threshold had been achieved by any mine that ships product out of Newcastle. It was a great collective effort by the site the logistics team and the marketing teams as well as our own rail provider. Turning to Slide 16, we show our market split. We contrast both sales revenue and sales volume splits for the first half of 2026 against the first half of 2025. We continually optimize the revenue contribution of our various coal products to specific markets. China is a significant offtake partner, both on a volume and revenue basis. Customers in China tend to take a higher portion of our relatively lower energy content thermal coal whereas our Japanese customers purchased a significant portion of our higher calorific value thermal coal, low-vol PCI and semi-soft coking coal. Accordingly, it contributes the largest portion of the revenue we receive. In Australian dollar terms, our overall realized price was $154 per tonne, up 3% from the first half of last year. This year, volatile energy markets have caused end users, traders and speculators to wait geopolitical risk factors against supply and demand fundamentals. In these market conditions, security of energy supply is increasingly important for many nations. The market conditions have also resulted in gas to coal switching across Japan, South Korea and Taiwan. At the same time, we see reduced supply from Indonesia, South Africa and Russia, with exports from these countries down 2% to 11% over the first 7 months of the year compared to the same period last year. We promised our thermal coal against the Argus/ McCloskey API5 and globalCOAL Newcastle indices. Our realized price in U.S. dollar terms sits between the indices as shown in the chart. In Australian dollar terms, our realized thermal coal price was $143 per tonne for the first half up 3%. The typical lag between price indices and our realized price means we have yet to fully capture the benefit of recent spot market prices. Turning to metallurgical coal markets. We observed a strengthening steel market and stable demand for metallurgical coal. It appears there has been a shift from demand-driven pricing to cost-based pricing with the marginal cost of supply now setting spot prices. In Australian dollar terms, our realized metallurgical price was $216 per tonne for the first half, up 4%. There are various groups providing forecast for international thermal coal markets. A theme we have observed over recent years is the ongoing revision of when coal demand will peak. Delays to projected coal dates for existing coal fire power generation combined with new facilities coming online, drive the evolving demand profile. Since we last included this slide, we have seen a substantial uplift from the first half of 2025 in the short term and from 2028, the estimates mirrored 2025 assumptions estimating peak demand in 2029. One can conclude that this ever-changing profile indicates coal still has a significant role to play. On Slide 20, we look at projections for seaborne supply over the next 10 years. Approval and financing challenges for new mines compound natural reserve depletion in the coming years. Many energy market participants now recognize coal still has a meaningful and ongoing role in the global energy mix, and there is potential for a supply shortfall in coming years. Compared with 12 months ago, less coal supply is forecast from the main export countries. This forecast is one that aligns with increased concern about the security of supply we are observing. In the seaborne metallurgical coal markets, demand from mature regions like Europe and Northern Asia are likely to decline over the next 15 years. However, this is quickly being outpaced by growing demand from emerging economies like India and Southeast Asia, leading to a growth in total demand. In the seaborne metallurgical coal market, some supply growth is required over the next 15 years to meet this demand. Unless the additional supply entering the market has a total cash cost profile lower than the existing supply, it seems unlikely this situation should lift metallurgical coal prices in the forward years. I will now hand over to Mike Wells, our EGM Finance, to cover our financial performance. Thank you.

Thank you, Mark. Starting with the key numbers on Slide 23. The combination of higher sales volumes and realized prices lifted revenue, operating EBITDA and operating profit compared to the first half of 2025. The profit before tax and profit after tax includes the nonoperating factors, which Kevin previously explained. The other element worth addressing is the 29% increase in operating EBITDA compared to just a 2% decline in the operating cash inflow. The primary driver is timing differences on net cash receipts from customers and payments to suppliers prior to the 30 June accounting date relative to the same time last year. Overall, we retained a strong financial position with $2.1 billion of cash at 30 June, about half of which we expect to use as part of the cash settlement of the Kestrel transaction. The 2 charts on Slide 24 demonstrate the correlation between average realized price, revenue, operating EBITDA and operating EBITDA margin. The other element is the production profile, which, as David mentioned earlier, had a second half weighting in prior years but has been more consistent since 2025. Looking at Slide 25, the operating EBITDA and operating cash flow profiles are well correlated, noting that the operating cash flows also include net interest and tax payments. However, there can be one-offs, such as the large tax payment in the first half of 2023. I will now hand back to Kevin to cover the financial position and dividends.

Thanks, Mike. Looking at Slide 26, we can see the net cash position Yancoal has carried over the past few years. In April, we've announced the acquisition of an 80% interest of the Kestrel Coal Mine for upfront consideration of USD 1.85 billion with a further potential USD 550 million of contingent payments. We anticipate completion of the transaction at the start of October or perhaps earlier. At that time, we expect around half of the June cash balance will be utilized to partially fund the acquisition. We will take on debt to fund a remainder of the acquisition with gearing of approximately 15% to 18% on a pro rata basis. Turning to Slide 27. We look at how Yancoal has rewarded its shareholders during the past 5 years. The directors have allocated $92.4 million to pay a fully-franked interim dividend of $0.07 per share. The dividend reflects our confidence in the underlying earnings, cash generation, liquidity position and the long-term financial strength of Yancoal. Maintaining dividends to shareholders while also completing the Kestrel transaction, demonstrates our capacity to fund growth and reward shareholders simultaneously. It is our disciplined approach to capital management over recent years that enables us to do both concurrently. Slide 28 has our operational guidance for 2026. We are looking to carry forward our operational momentum into the second half and deliver attributable saleable product in the upper half of our 36.5 million to 40.5 million tons guidance range. Our guidance range for cash operating costs is $90 to $98 per ton and after allowing for higher diesel price this year, we expect the costs will be in the upper half of the range. With first half capital spend of $254 million, we have revised our capital expenditure guidance range down by $150 million to $600 million to $750 million. The reduction is mostly timing due to expenditure deferrals to 2027. We continue to balance production, product quality, efficiency metrics, cash costs and capital expenditure to maximize our performance. I'll now hand over and back to Brendan to coordinate the Q&A session.

Thank you, Kevin, Sharif, David, Mark and Mark. As usual, we have included appendices and additional information for reference at the end of the presentation pack. We will now take questions from the phone line and written questions submitted via the webcast. Maggie, could you please start the process for questions from the phone line.

Yes. [Operator Instructions]

Thank you, Maggie. I do see some written questions via the webcast. I'll start with those and return to you shortly to see what is coming through the phone line. One of the first questions came in all direct to you. It's asking, what is the exact structure of the U.S. dollar-denominated loans responsible for the $188 million noncash translation loss -- and will that currency exposure be permanently unwound or restructured once the Kestrel acquisition closes?

Thanks. This is a very good question. Actually, for investors who is familiar with Yancoal accounts, $188 million hedge reserve recycling was actually booked and disclosed in the previous financial statements. And this is the very last piece in Yancoal's hedge reserve accounts, and that's why we made a statement the hedge reserve balance now is 0. This is basically due to Yancoal adopted hedge mechanism called accounting natural hedge. In other words, using U.S. dollar cash, our revenue generated in U.S. dollar cash to hedge our U.S. dollar loan exposure. As such, when the loan is repaid, then the booking rate difference will be kept in the hedge reserve accounts and will be recycled back into P&L when the loan maturity date expires. And that's exactly what happened for the current $188 million hedge loss. For now, there's no debt outstanding in Yancoal book. And as just mentioned, hedge reserve now down to 0. In the future, if Yancoal take up new loan this might potentially happen, but can go either way, depends on the spot rate when the loan is repaid, but this will be for the future acquisition and the future loan exposure. I hope I explained the question.

Thank you, Kevin. But just for context, can you recollect, have there been inferences in the past where there was a positive nonoperating hedge reversal that we reported?

In Yancoal's history, we do have incidents, the hedge reserves become positive. However, given the current balance what you have seen, they all largely inherited from loan facilities 5 to 10 years ago. And back then, we were talking about a loan started when the Aussie dollar rates either AUD 0.95 or even close to parity. As such, the unfortunate accounting translation tend to be at a loss position, but if today, we take up a loan, the booking rates for the loan inception going to be at AUD 0.70 or AUD 0.71. Then if we look at the market fair value, if we believe the current level is market fair value, then the potential movement for the hedge reserves can be a lot more moderate.

That's good context. Appreciate that. Another question coming through from Jacob at Barrenjoey. Recognizes the strong result in the cost control, which appears to be outperforming peers in the coal industry. Question is, what the diesel cost assumption or what is the diesel cost assumption in our guidance? And how does that compare to spot diesel prices we are currently experiencing? And can we provide some cost sensitivity to diesel price for example, dollars per tonne unit costs relative to a $0.10 per liter move in the diesel price? I'll turn to perhaps Mike Wells. This might be something that falls within your area of expertise to provide some comments. Can you provide some insight into the influence of diesel costs on our guidance and the sensitivity of the diesel price exposure, Mike?

Yes. Thanks, Brendan. David mentioned it in the comments on the way through where he referenced the fact that in the first half, there was a $4 increase in the raw material costs in our actual reported numbers and the majority of that increase was attributable to the increase in diesel price in the first half. Obviously, the price is moderated since then. So we see less of an influence in the second year. But as noted, we would still expect the increase in the first half to elevate our full year forecast. In terms of the forecast -- just in terms of the forecasting, we use forecasting from various external sources in terms of what the market is expecting in the second half and so our guidance is framed around using sort of external market forecast for the diesel price over the remainder of the year.

Thanks, Mike. And can I confirm that last year, for the full year, diesel was approximately $7 per ton of direct costs within our reported $92 per ton?

Yes, that's right, Brendan.

And at the start of this year, when we originally set the guidance, we had effectively a similar diesel price assumption?

Yes, correct.

And therefore, if people look at diesel prices in the market, they should be able to work backwards to get some sensitivity from diesel price movements and the increase in costs we accommodated in the first half?

Yes.

Yes. Look, thanks, Brendan. It's Sharif here. The only other comment I would make is that our open cut mines proportionately use a lot more diesel in our underground mines. So you need to take into consideration the production profile of underground performance, which is largely electrified versus the open cut where diesel usage amongst the heavy earth-moving machinery is proportionately higher on that front.

Thanks, Sharif. Good observation. Maggie, I'll come back to you to see if there's any questions on the phone line?

I see no further questions at the moment. [Operator Instructions]

Okay. I'll come back again to check if any questions come through. In the meantime, question from Younes at Millennium. He is asking about the dividend policy. Makes the observation with AUD 22 million dividend for the interim results. It appears to be lower than 50% of free cash flow numbers. What can investors expect for the full year after the nonoperating costs we've incurred? And I'll add an additional component also bearing in mind the Kestrel transaction completion that we're working through. Who would like to take the initial comment?

I will talk about the dividend first. Yancoal's dividend policy has been quite consistent. We normally take the higher between 50% of NPAT with 50% free cash flow. And I noticed the comment was made about this is lower than the 50% free cash flow. I just want to explain actually why we do have our internal calculation to make sure we reflect the most accurate free cash flow from our operational accounts. And then the current dividend payment of about $0.07 per share is driven by better cash flow from that perspective. So we are very consistently following our dividend policy.

Thanks, Kevin. It is correct to say that the 50% reference we use typically is on a full year basis. So the interim is only partway through to the full year and the final dividend subject to Board discretion would ultimately determine the payout ratio for the full year.

That's correct. This is a very good point. When Yancoal management team proposed to the Board and the Board make decision, we not only look at the half year number, we only look at it from the full year perspective, what will be the most sensible driver to decide the dividend in the current year, as you would notice, we have a lot of nonoperating items. As a result, we tend to take free cash flow as the right benchmark. Thanks, Brendan, that's a good remark there.

Thank you. The next question from John at Easton Value. Since the deal to acquire Kestrel, have we been able to get a closer look at the mines operations? What can we provide in terms of commentary with regards to consistency of production compared to the past, the cost, the coal quality and demand from clients in relation to the coal products, looking to get an understanding of the Kestrel Mine ahead of integration into the Yancoal portfolio later this year?

Yes. Thanks, Brendan. Look, we're really excited about being able to bring a very good quality asset into the Yancoal family. The mine is well run, has good management, good operational practices. And we are looking the Yancoal as has been mentioned previously in the start of October, if not quicker. I think from what we've seen and our integration teams have been working diligently in terms of making sure we're ready to welcome cash flow into Yancoal. I think what I would say is we welcome a strong asset with good production performance coming into Yancoal.

Thanks, Sharif. And a follow-up question. The acquisition completion, what's the latest commentary on potential completion time line?

Yes. As I've said, we're aiming for the start of October, if not sooner.

Thanks very much. Another question from John at Easton Value. Are the management anticipating a stronger second half given hopes of resolution in Iran have not materialized, and we see a very low level of storage build of gas in Europe, suggesting that an even average Northern Hemisphere winter could result in strong demand for coal and gas prices getting pushed higher globally. Mark Salem, can you provide a view on what we're anticipating for the second half, bearing in mind that we don't explicitly give price outlook?

Sure. Yes. Look, I think in answer to that question, we have seen some gas to coal switching as I mentioned, happening in Japan, Korea and Taiwan. And we have also seen the market kind of rebalance itself from the issues in Hormuz. The volatility we're not seeing as drastic as we used to see it. So it would take a substantial shortfall of energy and that potential gas shortage in Europe would take away a lot of the Colombian South African coals out of the Asian market. And that in itself will then create a little bit of impetus to the GC Newc. So the theory is correct if that was to happen. But you'll see the increase in the European indices appreciate quicker before the GC Newc reacts depending what happens in Asia.

Thank you, Mark. It's very helpful I don't see any questions coming through on the phone lines. I'll continue with the webcast. Another question from Jacob at Barrenjoey. A broad question. Regulatory environment in New South Wales somewhat improved, at least for brownfield expansion in our view. Given the importance of coal mining in local employment, Ashton, Mt Arthur, Magoua, et cetera, all coming off in the next few years and thousands of jobs to be lost permanently. In regard to the HVO extension project, which is going through IPC. Is that still on track for IPC determination this quarter and federal approvals in the fourth quarter? I think the HVO element is probably the most interesting in that question. And Mark Jacobs fits no doubt, best placed to provide a comment on what's occurred at HBO with the IPC process. Mark, could I hand over to you for an update on what we've seen to date?

Thank you, Brendan. You're correct that the project is going through the IPC process. There was a public hearing held on the 16th, 17th and 22nd of July. Based on historical processes, we expect the IPC will likely make its decision by mid-September. That's the normal kind of cycle that the IPC will make its decision within. And we obviously are not going to speculate on the nature of that decision. We need to wait for the IPC to run through this process. But it is perhaps worthwhile also adding that both the New South Wales Premier and the New South Wales Resources Minister have made public statements reinforcing the importance of HVO to both the region and to the local economy.

Thanks, Mark. With that likely or potential IPC process in mid-September, are there subsequent steps or processes that are relevant for external observers?

The important one, as noted in the question, is the federal approval, which will -- is like -- we expect that to follow a relatively hot on the heels of the state government approval. It's a separate and parallel process. And then there are the conventional updates to management plans, all of which are business as usual activities and within HVO's control.

Thank you, Mark. Another question of financial nature. With the capital expenditure, we've made the observation $150 million reduction in the guidance range, primarily due to deferral of capital expenditure. Will the escalated spending drive up cash operating costs once Kestrel is integrated and perhaps more broadly, how is it the timing of the capital expenditure being determined?

This is Kevin. The deferral of $150 million CapEx into 2027 was just simply due to timing of some internal CapEx projects. There's nothing really special linked to all these deferrals. And then this is going to be just naturally become part of the 2027 budget for the CapEx. And then we will adjust our guidance accordingly. We don't feel this will have any implication with the Kestrel as the Kestrel will be separately assessed and then we'll be posting the acquisition, we will reassess the whole Yancoal Group CapEx and issue guidance accordingly with Kestrel to be part of Yancoal.

Thanks, Kevin. A question on the coal markets from Bennett, IPFM. Have you seen sustained demand coming from Japan, Korea, as you noted in your quarterly results? Could you provide any insight on supply coming from Indonesia? Mark, could we turn back to you for what we've seen in terms of demand out of Northern Asia and how that relates to the buyout of Indonesia?

Sure. Yes. Yes. Thanks, Brendan. Look, demand from Japan and South Korea, in particular, as well as Taiwan, it's been very solid. And I think we'll see overall -- the numbers are slightly above year-to-date, slightly above last year. So I think overall, for the whole year, we will see an increase in demand in those markets compared to last year's results. As I said, that's -- a lot of that's got to do with the coal to gas -- sorry, gas to coal conversion and just the need for more secure energy supply and coal being the likely candidate. What also is happening in Indonesia is very interesting at the moment. There was a lot of talk at the beginning of the year about the Indonesians applying quotas to exports. Those quotas were predominantly in their lower-grade materials, not their higher-grade materials, their higher grade materials award the higher prices. So the government was keen to maintain the royalty that's attracted and that higher-grade coal goes to Japan, Korea and Taiwan. So the Indonesian impact really hasn't had a big result in those markets. We are seeing a little bit in some of the Koreans that take the mid- to high ash, and we're definitely seeing it in China with China imports of Indonesian coal significantly down year-on-year. The impact there is the quotas were cut to 600 million tonnes. There's a recent report that's saying they could be up to 700 million tonnes. And there was also an increase in how much producers have to allocate to the domestic market as well. So the Indonesian policy structure is one market that we're watching very closely. And it's always at the 11th hour before they'll make any firm policy decisions in that regard. I hope that answers the question.

Thanks, Mark. I think it should do. For all the participants, I have just about exhausted the webcast questions, and I do not see any phone line questions coming through. So a final reminder to add a question to the phone or the webcast if you have one. I'll read the final question I have. And if I haven't heard further, we'll move to the closing remarks. The last question that I have at this time from Mark Patterson at Bell Potter. Looking at the first half, and API5 starting the year at $108 per tonne and finishing at $135, how do we see the split between first quarter and second quarter EBITDA of $767 million? And they're asking if they can try and understand the run rate between first quarter, second quarter and undoubtedly heading into the second half?

I will just give a quick response here. In our quarterly production report, we didn't disclose every quarter financial performance. That's why this EBITDA number is the first 6 months instead of 2 quarters. That's the reason why you couldn't see the run rate. We fully appreciate that. Because we haven't disclosed it. I will be very cautious to give any number. But I think from -- if you look at our price, we have several slides with the coal price movement. You can see clearly the coal price is moving reflecting the recent trend due to the latest energy crisis from Iran-U.S. conflicts. And for that reason, we naturally can say the financial performance of EBITDA going to be consistent with the realized coal price. And you will see the EBITDA for Q2 will definitely be a lot stronger than Q1 as a trend.

Thanks, Kevin. I think you're referring there to Slide 17 from earlier in the pack, where you can see those indices have been plotted and rising and our realized prices, while moving upwards have yet to perhaps capture that full benefit, which is typically the case, the general reference we make is about a 3-month lag between indices realized price. This is all the questions that I can see on the webcast. I do not see any questions on the phone lines. Maggie, could you please confirm no phone line questions.

Yes, I confirm there's no phone line questions.

In that case, I will now say that we have concluded the question-and-answer session. And I'll ask Sharif, if you could please provide the closing remarks.

Thanks, Brendan. 2026 is shaping up as another great year for Yancoal. We delivered a first half production record, with strong EBITDA margin and cash flows and are on track to beat the annual production record we set last year. Our people are leading the way in the industry, setting world records with our excavators and breaking records with our coal railings. We're excited about completing the Kestrel acquisition in the next month or 2. It is a high-quality, long-life metallurgical coal mine operated by a great team of people. We anticipate it will complement our existing portfolio and further enhance our financial strength. Asset quality and financial discipline put us in a position to acquire Kestrel but not at the expense of maintaining dividends to shareholders. After the transaction, our remaining cash balance and net debt position will still afford us the capacity for a balanced allocation of capital. We're optimistic we'll deliver a strong operational performance in the second half and deliver the best possible outcome with our executives and people. We look forward to giving you our next update on the 20th of October, after we release our third quarter production report. Thank you to everyone who joined us on the call, and have a great day.

Thank you, Sharif. Thank you, Maggie. Could you please conclude the call?

Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.