Bathurst Resources : Quarterly update 31 December 2021

CEO'S COMMENTS

December 21 quarter

Key highlights

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• Unaudited H1 EBITDA1 result $40.0m, up $13.3m (50%) from H1FY21.
• Export segment continues benefiting from strong pricing levels, with H1 EBITDA up $23.1m (374%) from H1FY21.
• EBITDA guidance increased to a range of $103.5m - $110.1m.
• Consolidated cash increased to $41.8m.

personalThe December quarter has again been boosted by high pricing levels in the hard coking coal ("HCC") benchmark that our export coal sales are priced against, with an uplift in the pricing outlook informing our

forecast for H2. However, like the rest of the world we are seeing a gradual rise in inflation from COVID elated supply chain disruptions. This coupled with sharp increases in fuel prices as global demand outstrips supply, as well as operational challenges at the Stockton mine from a severe flooding event in July, means the increase in profit margin is being squeezed, which is reflected in our updated EBITDA guidance. Further information is provided on page 5 and 6 of this release.

We have continued to progress action points from the engagement survey. A new people development and performance framework is being rolled out across salaried staff in February. Our values and example behaviours are taking shape, with the design suite of educational material for our people close to being

Forfinalised.

Community transmission of COVID has been largely avoided in New Zealand up to this point, however with the recent emergence of the Omicron variant in the country, community transmission is inevitable. The impact of this on the availability and wellbeing of our workforce is an obvious risk to being able to achieve our guidance. A key focus of our management team has been assessing how we can balance the pursuit of business continuity as well as keeping our workforce safe, recognising that most of our operational staff are not able to work from home.

All sites have completed risk assessments identifying their critical staff. A company-wide reporting tool has been developed to enable real-time access to data on employees impacted by COVID. We are also working through what additional support we can provide our staff if they are impacted by COVID, in addition to government provided support.

1 EBITDA is a non-GAAP reporting measure and reflects earnings before net finance costs (including interest), tax, depreciation, amortisation,

impairment, non-cash fair value movements on deferred consideration and rehabilitation provisions.

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HEALTH, SAFETY AND ENVIRONMENT

There were no lost time injuries during Q2. An alternative duties injury that occurred in June of the previous financial year has been reviewed due to additional medical treatment being required (knee surgery) and is now reclassified as a lost time injury.

Full reviews were completed of COVID management risk assessments at each site. These reviews were triggered by the introduction of the New Zealand COVID Protection Framework (the 'traffic light' framework). Sites have also completed an additional skills assessment of critical statutory and production roles to minimise business interruption during a large COVID outbreak and any associated absenteeism.

A workforce education programme on the benefits of COVID vaccines was provided to complement the New Zealand vaccine roll out. As part of providing support to our local communities, company personnel have been volunteering at community COVID vaccine clinics.

PERFORMANCE METRICS

							Prior period
	Export		NID2	SID	2	BRL equity	equity
December quarter	100%		100%	100%		share	share
Production (kt)	237		207	72		360	382
Sales (kt)	293		174	81		384	388
Overburden (Bcm '000)	1,122		1,414	518		2,166	3,831
Coal sales revenue ($'000)	73,576	3	23,446	12,905		75,969	52,957
Production costs ($'000)	(41,492)		(13,887)	(9,496)		(45,492)	(38,368)
December YTD
Production (kt)	475		358	119		661	711
Sales (kt)	563		345	131		721	733
Overburden (Bcm '000)	1,964		2,648	1,027		4,024	7,257
Coal sales revenue ($'000)	112,051	3	45,873	20,706		129,857	97,788
Production costs ($'000)	(74,296)		(32,498)	(17,132)		(86,548)	(72,226)

Production costs are the equivalent to cost of sales which is shown in the income statement in Bathurst's half year and full year statutory accounts. Cost of sales are costs directly attributable to the production of coal and include all operating cash and non-cash costs.

2 North Island domestic and South Island domestic.

3 Includes realised FX and coal price hedging expense. $26.3m YTD.

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CONSOLIDATED CASH MOVEMENTS

		Q1	Q2	H1FY22	H1FY21
	Opening cash	20.2m	19.9m	20.2m	26.0m
Operating	EBITDA	12.6	27.4	40.0	26.7
Working capital	(3.5)	4.3	0.8	1.7
Canterbury rehabilitation	(0.9)	(1.2)	(2.1)	-
Corporation tax paid	-	-	-	(6.5)

	Investing	Deferred consideration	(0.2)	(1.4)	(1.6)	(2.9)
	Mining development including capitalised stripping	(2.6)	(2.1)	(4.7)	(10.7)
			Crown Mountain (environmental assessment application)	(0.2)	(0.2)	(0.4)	(0.4)
			Property, plant and equipment net of disposals	(1.7)	(1.9)	(3.6)	(2.5)
	Financing		Finance lease repayments	(2.5)	(2.0)	(4.5)	(5.3)
		Financing costs	(0.1)	-	(0.1)	-
			Interest payment on AUD convertible bonds	(0.5)	-	(0.5)	(0.3)
			Borrowings repayments	(0.7)	(1.0)	(1.7)	(4.1)
			Closing cash	19.9m	41.8m	41.8m	21.7m

Consolidated EBITDA

Refer to the following page for commentary.

Canterbury rehabilitation

The mine was closed at the end of June 2021, with rehabilitation due to be complete at the end of FY22.

Corporation tax paid

For cash management purposes, tax payments have been deferred to March/April 2022.

Deferred consideration

Key payments consist of royalties owed on Takitimu mine sales, and the final payment relating to the BT Mining acquisition which was paid in Q2.

Crown Mountain

Funds paid were on a proportional project equity ownership basis and were used to progress the environmental application.

Mining development including capitalised stripping

Spend has decreased from the prior year comparative period due to the Rotowaro mine's strip ratio decreasing as the mine moves into the mature end of its Waipuna West pit.

Borrowing repayments

A partial repayment of funding received in advance from customers for stripping activities for the Waipuna West pit (Rotowaro mine).

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H1 CONSOLIDATED EBITDA V PRIOR YEAR

EXPORT $29.3m

Up $23.1m from H1FY21 ($6.2m).

Revenue has benefited from:

• The average benchmark price was USD $287/tonne H1FY22 versus USD $113/tonne H1FY21. Export sales are a mix of being priced against the spot price or a prior 3 month average (t minus 1).
• FX had a negative impact on the conversion of sales from USD to NZD year-on-year ("YOY"), as did the sales mix, with a higher percentage of thermal sales replacing semi-hard to align with production.
• Sales volumes increased 33kt, taking advantage of the improved pricing environment.

Costs have increased due to:

• Purchased coal which is added to the mine's coal blend to meet contract specifications. It is priced against the USD benchmark so the cost fluctuates in line with revenue.
• Fuel pricing which moved from an average $0.69/litre to $1.11/litre.
• Profit share for employees which is pegged to uplifts in sales revenue.
• Operational inefficiencies from increased rainfall causing more downtime, and the mine closure in July due to a local flooding event.

NID including BT corporate overheads $11.5m

Down -$3.2m from H1FY21 ($14.7m).

Revenue has benefited from:

• Increased sales volumes to a steel producing customer.
• The average price per tonne also rose due to standard annual increases, as well as escalation clauses that allow for producer price index increases.

Costs have increased due to:

• The mines moving closer to the end of their mine life, with costs net of capitalised stripping naturally increasing as there is a certain level of fixed costs incurred, relevant to production and overburden stripping volumes.
• Fuel has moved from an average cost of $0.65/litre to $1.05/litre.
• Labour costs have increased in line with contractual CPI adjustments, with some being backdated due to prolonged union negotiations.
• Repairs and maintenance costs at Rotowaro have stayed relatively consistent notwithstanding reduced production and overburden stripping levels. This is partly a function of deferred work from FY21 moving into FY22, and partly where the machines are at in their life cycle.
• Prior year costs also benefited from a wage subsidy from the New Zealand government as part of their COVID response.

SID including BRL corporate overheads -$0.7m

Down -$6.6m from H1FY21 ($5.9m).

BRL corporate -$2.4m YOY

• Overhead salary costs increased from short term performance incentives paid in H1FY22. These were not paid in the prior financial year.
• Legal fees incurred in defending BRL against claims bought by L&M are also higher (refer final page of this release).

SID operations -$3.9m YOY

• The Canterbury mine ceased operating at the end of June 2021.
• Net freight revenue has decreased as margins have been eroded by the hike in fuel costs and government levies. Discussions are underway to pass these direct cost increases onto customers.

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FY22 GUIDANCE INCREASED TO $103M - $110M

					BRL equity
	Metric	Export	NID1	SID1	share
Sales	kt	1,085	701	261	1,422
EBITDA	NZD	$113.5m	$41.8m	$2.5m	$103.5m
		to	to	to	to
		$121.5m	$43.2m	$3.0m	$110.1m

Key export guidance assumptions

Forecast export sales pricing for the low end of the range is indicatively based on an average of 74% of the Hard Coking Coal Premium Low Vol ("HCC") benchmark of USD $375 (Q3) and USD $320 (Q4), at $0.68 NZD:USD across all sales types including thermal coal sales.

Export market commentary

USD/tonne	Monthly USD export pricing2
480
380
280
180

80

Nov Dec Jan Feb Mar April	May	June	July	Aug	Sep	Oct	Nov	Dec	Jan Feb Mar Apr May Jun
2020 2020	2021	2021	2021	2021	2021	2021	2021	2021	2021	2021	2021	2021	2022 2022 2022 2022 2022 2022
				Actual					Guidance			Forward curve

• After reaching record highs through late September to early November with the HCC spot price exceeding US$400/t, the price fell over US$80/t late November on global market uncertainties and falling demand from China as the Chinese government increased production limits at steel mills.
• Ongoing coal supply issues in Australia due to heavy rainfall and worker availability impacted by COVID have resulted in the price climbing again through late December and into January. Previous records set late last year have been exceeded with the spot price hitting USD $444/t in late January.
• It is expected that high pricing levels may last into Q2 of CY 2022 before prices return to lower levels with the end of the rainy season and reduction in Covid cases. However continued demand and uncertainty could keep pricing buoyant.
• China currently remains on the side lines in the lead up to the lunar new year holidays. Curbs on steel production are expected to remain in place until after the Winter Olympics in February with the Chinese Government wanting to reduce pollution over this time.

1 EBITDA includes corporate overheads for BT Mining in NID, Bathurst in SID.

2 Actual USD monthly export pricing based on a monthly average of the S&P Global Platts Premium Low Vol benchmark daily spot pricing. Forward curve is based on the 25 January 2022 S&P Global Platts Premium Hard Coking Coal Australia FOB derivative assessment.