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CEO's Statement

This year’s exceptional financial and production results are attributable to our people and their commitment to drive our business forward.

 

Together, they have implemented our operational and corporate strategies to deliver the robust financial rebound we promised shareholders during our acquisition of Coal & Allied.

Supported by our leadership team, the Board and our majority shareholders, we have set a new standard of success for our business and defined Yancoal as consistently exceeding market expectations.

SAFETY

In a year of continued growth and financial achievement, I am encouraged by the significant improvement in our safety performance.

Yancoal’s operations reported a Total Recordable Injury Frequency Rate (“TRIFR”) of 7.74 for 2018, down from 10.43 in the year prior. Such a result highlights the success of the roll-out of our Critical Controls safety training and education program, as well as the importance of instituting safety as a core value of the Yancoal Way.

TRIFR for the combined Watagan Mining Company Pty Ltd (“Watagan”) assets of Austar and Ashton, managed by Yancoal, was also significantly improved on the year prior - with a 2018 total of 23.04, down from 34.72 in 2017.

By understanding our individual responsibility for the safety of ourselves and those working alongside us, we can continue to work towards our ambitious goal of achieving zero harm at our operations.

There are no shortcuts when it comes to safety and we continue to look for new ways of working to always protect our people.

OPERATIONS

2018 was our first full year of attributable production from Mount Thorley Warkworth and Hunter Valley Operations following their acquisition in September 2017.

Yancoal’s operations produced a record 50.0 million tonnes saleable coal for 2018 (100% basis), up 59% on the year prior; with the Moolarben complex achieving a new annual total saleable coal production record of 16.5 million tonnes, up 33% on the year prior.

The Mount Thorley Warkworth and Hunter Valley Operations mines produced annual totals of 12.1 million tonnes and 13.3 million tonnes respectively.

These three tier-one assets led an increase in total attributable coal sales of 68% on the year prior, with Yancoal achieving total sales of 37.1 million tonnes in 2018, up from 22.1 million tonnes in 2017.

Supported by increased market demand and our tier-one production performance, Yancoal’s thermal coal sales were up 88% on the prior year, achieving a 2018 total of 29.9 million tonnes, including purchased coal, compared with 15.9 million tonnes in 2017.

We experienced similar positive sales growth across metallurgical coal, as global demand and prices remained strong for the majority of the year. Yancoal achieved total metallurgical coal sales of 7.2 million tonnes, up 16% on the 2017 total of 6.2 million tonnes.

Our ability to optimise our portfolio and implement new operating efficiencies across each of the tier one assets enabled us to achieve a new Yancoal total production record of 50 million tonnes of saleable coal.

Yancoal’s capacity to blend its coals across the New South Wales operations provided the flexibility required to meet market needs, while maximising price and sales opportunities on the spot market.

In Queensland, Yancoal also maintained the flexibility required to adjust its washing of product coal at the Yarrabee open cut mine; this allowed it to strategically target increasing market demand for PCI coals throughout 2018.

Yancoal continued to implement cost reduction strategies across each of its mines, restructuring the Mount Thorley Warkworth operation to introduce significant fleet efficiencies to improve maintenance times and overall haul rates.

Similar efficiencies continue to be developed for implementation at the Hunter Valley Operations joint venture with JV partner Glencore, with both companies aligned in continuing to pursue synergies wherever possible.

As coal remains a critical source for global baseload energy, Yancoal is well-positioned to meet increasing demand for high quality product in both established and developing markets.

FUTURE GROWTH

While this has been a year of exceptional production gains, we are not resting on our success. Yancoal continues to pursue its long-term strategy for organic growth, with a commitment to progressing projects across each of its operations; most notably our tier-one assets.

Moolarben, Mount Thorley Warkworth and Hunter Valley Operations provide the pathway for our future and we are carefully considering all options for potential growth via both extension and expansion.

In an evolving regulatory and approvals environment, we are taking the time required to appropriately navigate the changing political landscape.

Key projects include further extensions of the Moolarben open cut pits, and the conceptual underground mine at Mount Thorley Warkworth which completed exploration drilling for the prefeasibility on the target seams at the end of 2018.

STAKEHOLDER FOCUS

Consistency of behaviour establishes confidence among shareholders and partners. We are using the success of 2018 as a benchmark for all operational teams. The emphasis is on the controllable production, cost and expenditure targets, as these underpin our ability to continue delivering shareholder returns.

Our people have the ability, ambition and focus to push Yancoal further and to do so safely, efficiently and without peer.

Reinhold Schmidt

Chief Executive Officer