Earnings call: IGO Limited faces challenges, remains cash flow positive

In a recent earnings call, IGO Limited (ASX: IGO) CEO Ivan Vella outlined the company's performance amid challenges in the nickel and lithium sectors.

Despite operational issues at the Nova mine and transitioning the Cosmos mine into care and maintenance, the company's nickel operations continue to generate positive cash flow. The lithium business also saw progress, with the sale of 200,000 tonnes of spodumene SC6 from Greenbushes stockpiles.

CFO Kathleen Bozanic reported an underlying EBITDA loss of AUD15 million for the quarter, but the company maintains a strong liquidity position with nearly AUD1 billion in reserves. The company is focused on safety and optimizing the Greenbushes asset, with plans for a major shutdown at the Kwinana refinery in September and a comprehensive exploration business review underway.

Key Takeaways

• IGO Limited reported an underlying EBITDA loss of AUD15 million for the quarter.
• The company's nickel operations at Nova and Forrestania remain cash flow positive despite market challenges.
• IGO Limited sold 200,000 tonnes of spodumene SC6 from Greenbushes stockpiles.
• The company is reviewing its exploration business to prioritize project exposure and portfolio.
• A major shutdown at the Kwinana lithium refinery is planned for September.
• Safety remains a top priority, with a commitment to continuous improvement following a serious incident at the Forrestania site.
• The company's liquidity is robust, with a balance sheet just under AUD1 billion.

Company Outlook

• IGO Limited is optimistic about the future, focusing on growth and optimization of the Kwinana refinery.
• The company aims to maximize production to meet the increasing demand for lithium.
• Expansion plans for Greenbushes include the construction of CGP3 and the study of CGP4, with potential future underground mining methods.
• The decision on Train 2 at Kwinana will depend on the performance of Train 1 and the feasibility study, with the possibility of both trains being used together.

Bearish Highlights

• The company faced an EBITDA loss of AUD63 million at Kwinana due to operational difficulties.
• A serious safety incident occurred at the Forrestania site, underscoring the need for improved safety measures.
• The Cosmos mine has been transitioned into care and maintenance due to operational issues.

Bullish Highlights

• Despite challenges, IGO Limited's nickel operations continue to generate positive cash flow.
• The sale of spodumene from Greenbushes is expected to benefit the operations team.
• IGO Limited has a strong balance sheet with a steady cash balance of AUD276 million.

Misses

• The underlying EBITDA loss reflects the difficulties faced in the lithium refining process.
• Shipping and port constraints could affect the timeline for clearing lithium stockpiles.

Q&A Highlights

• CEO Ivan Vella is confident in the company's plans to improve and is focused on safety as a top priority.
• The company is working with JV partners to optimize the Greenbushes asset and address operational difficulties at Kwinana.
• IGO Limited is seeking new customers to expand its customer base and is engaged in ongoing qualification processes and contract discussions.
• There is a considerable amount of cash in both TLEA and Talison, with dividends from TLEA having resumed.
• The company is reviewing the budget and operating plan for the calendar year '24.

IGO Limited's management remains committed to navigating through the industry's challenges while maintaining a focus on safety, cash flow generation, and strategic planning for future growth. The company's financial position appears resilient, with a strong liquidity profile and ongoing efforts to optimize its operations and asset portfolio.

InvestingPro Insights

IGO Limited's recent financial performance and strategic outlook can be further contextualized with real-time data and insights from InvestingPro. The company's current market capitalization stands at 391.01 million USD, reflecting its valuation in the marketplace. With a Price/Earnings (P/E) ratio of 30.41, IGO Limited trades at a multiple that suggests investors are expecting future earnings growth. However, when adjusted for the last twelve months as of Q1 2024, the P/E ratio increases significantly to 68.91, indicating a premium valuation compared to historical earnings.

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Full transcript - None (IPGDF) Q3 2024:

Ivan Vella: Thank you, Ashley. Good morning, everyone, and welcome to our March Quarterly Results Call. Kath Bozanic, CFO is joining me again for this call and now, we look forward to stepping you through our results for the quarter. Obviously, been a challenging quarter with a number of issues in the nickel and lithium businesses. Before I get into that, though, I wanted to talk a little bit on safety and reflect on our safety performance through this period. And while we are seeing some positive trends in our leading indicators and very good engagement from our leaders across the business, the rate of injuries and incidents continues and remains about stable its prior quarter, but it's far from acceptable level that we're all aiming for. And this is, of course, both mine and the broader leadership team's highest priority, something we're focusing heavily on. I'm confident that the work program that we've got underway is and will make a difference. And clearly, reducing harm to our people is the most important work we've got to do. That really takes us through a strong engagement with our teams growing across the operations. And in the quarter, we actually took some time out with some safety reset, safety starts to talk about that, and everyone's role in identifying and consulting the hazards that are across our business. As I noted in our half year results call in February, we had a very serious incident, where a contract exploration crew at Forrestania were involved in a vehicle rollover. One of the individuals involved in that was seriously injured and is continuing his recovery. Quite a challenging road ahead. And I think that is a start to mining right across our business of just how we feel safety is and the work that we need to do every day and every shift to keep improving. Moving on to the lithium business, and I'll start there. Look, it was a difficult quarter, I think well signposted for IGO. Our balance sheet remains in a great position, and that's despite recording our first quarterly EBITDA loss for a long time, many years now since that happened. And that result was driven predominantly on the performance of the lithium business, reflecting both the roll-through and the lower prices that we saw through the quarter, but also the sales volumes that we signposted with the lower nominations from the joint venture partners. On a positive note, though, I'm very pleased to announce that we've just confirmed an agreement by the Windfield joint venture to sell 200,000 tonnes of spodumene SC6 from the stockpiles of Greenbushes to our partner TLC. And that volume is over and above their offtake volume and that sale will be booked through the June quarter. That sale will largely clear the inventories in sight and will give us a good runway to make sure the Greenbushes is operating in full production through the rest of this calendar year. Digging into Greenbushes a bit further, we announced, obviously, production for the March quarter was going to be lower than the mine's capacity, as the Talison team worked to manage their inventory build against the production demand from the JV partners. Production was 280,000 tonnes, 22% lower than the prior quarter, and sales were reduced even more than that. As a result, the lower production -- cash production costs were marginally higher at AUD386 per tonne. And our sales revenue of AUD286 million, obviously, substantially lower than the previous quarter, attributed both in part to the volumes, but more significantly to lower realized prices, which dropped to around $1,000 a tonne as compared to $3,000 in the prior quarter. As you also know, the new monthly pricing mechanism took effect through this quarter. The other point I wanted to mention around Greenbushes was our capital program. Work continues on the build of CGP3. I was down there a few weeks ago with Matt having a look at that. While they had some delays with some of the piling early on, it's progressing well now. We saw the steel coming out of the ground, and they've really got to (ph) rhythm up, so I'm pleased to see that's getting full attention from the team there. We went through the mine services area that's completely commissioned and they're just finding out the bugs, but they're all up and running using that for the mine and the completion of the first couple of hundred rooms, the accommodation is done. There's more work coming and we expect that facility to be done around mid-year. Turning to Kwinana, I was also down there a couple of weeks ago and it was great to sit down with the team and look at their detailed plans for the rest of 2024. What we did see though was a continued ramp-up improvement of the performance, obviously, still well below nameplate and our expectations, but they are producing very consistently now. The growth battery grade products 96% of the product is hitting that target. Very low levels of impurity in the material as well, which is well sought after by our customers. So the quality of the product is hitting the mark and that's very important. It is obviously all about the ramp-up in volumes now. And we spent some time looking at their plans and I was very encouraged by both the level of thought and work that had gone into that. But also the team, I mean, the leadership team there were well aligned, were teaming well, really thinking through how they need to support each other through what's going to be a challenging year. But I expect we'll deliver a step change in their production output. Moving on to our nickel business. I'll start with Cosmos and as we announced in January, we transitioned Cosmos into care and maintenance. That's been a difficult process for our people, as you can imagine, significant impacts on people, who had signed up there to be part of a new mine for the new future. And so we manage that with a lot of care and attention, and I give a lot of credit to the leadership team in the way that they've gone about that work. They've really been very sensitive and thoughtful about the impact on individuals. They've also put a lot of focus onto the assets, of course, and brought the mine to -- effectively to a stop, ramping down the assets and putting those in storage on-site and off-site as needed to make sure that everything's kept in good shape. And obviously, we're in the process of milling the available ore for producing concentrate. We produce or process 127,000 tonnes of ore into concentrate during the quarter and shipping commenced in April. There's a further 161,000 tonnes of ore available to be processed at the end of March, and we expect that as it's produced to be sold most -- certainly mostly by the end of June this year. The total costs that Cosmos in the quarter were AUD61 million, some of which has been capitalized in the Train, but much of it is now being expensed going forward. We expect the June quarter to benefit from the revenue that's flowing through from our product sales and offset some of the remaining costs as we ramp down in the care and maintenance. Turning to Slide 8. Moving into Nova. The quarterly result there was impacted by a number of challenges. The weather, which I think we saw right across that part of Western Australia impacted our operation as well. But more significantly, there were a number of operational issues coming out of the scheduled shutdown in March. We saw a big impact on mill availability and of course, that flowed through into our copper, nickel production and of course, indirectly to our costs. Copper and nickel production were 10% and 16% lower, respectively, quarter-on-quarter, and driving the cash costs up 21% to just over AUD5 a pound. Nova revenue was marginally lower due to the production and sales and the average realized price was in line with price border of around AUD25,000 a tonne. Nova's free cash was lower quarter-on-quarter, again attributable to the lower sales and timing. And despite the continued weakness in the nickel market and obviously, lower production, we're still generating positive cash flows and year-to-date total is just over AUD200 billion. Move on to Forrestania. And as you know, that mine is coming to its end of life. We're starting to see more and more of that variability in those challenges, with the ore body as we get through the final sections of it. We achieved marginally lower quarter-on-quarter production and cash costs were also lower, which was good to see. They did experience some challenges with their trucking our product to get it out to our customers. That was both a function of the weather that we saw, but also some road access constraints that impacted revenues through the quarter. But we expect that to improve through the June quarter coming up as we clear most of that backlog of inventory. Importantly, Forrestania has continued to generate some free cash during the quarter, thanks to our hedge position which is priced at AUD32,000 a tonne. Recognizing obviously we've got a fairly short mine life left at Forrestania, we're well into our work on planning and starting that ramp down in the care and maintenance and thinking through the rehabilitation plans that will follow that, so that we can have an orderly and responsible transition for that operation. Moving on to Slide 10 and exploration, I don't want to go into the detail of the individual work programs. We've got some more of that in that quality report. But I did want to mention that we are -- we've commenced a comprehensive exploration business review, working through that closely with the team to help us prioritize our project exposure and portfolio, capital employed into this space. We've got absolutely stellar capability in this space, amazing technical skills and I think real capability right through the pipeline and lifecycle of exploration, it's a unique capability in the industry in Australia and we have an amazing portfolio of 10 similar belt scale positions across very prospective grounds in the country. So we need to make the very best of that, realize or not waste any of that opportunity, but equally look hard at how we're translating that to value through our business, and so that review is progressing and we'll provide an update the next quarterly on that work and the outcomes. I'll come back and wrap up with a few summary comments in a little bit, but first of all, let me hand over to Kath to run through some of the financial highlights before.

Kathleen Bozanic: Thanks, Ivan. Now move just to Slide 13, where we summarize our financial results for the quarter. Of note, we've seen a decline in IGO's share of profit from TLEA, which was a loss of AUD10 million for the quarter. This reflects lower lithium prices and sales volume at Greenbushes and an EBITDA loss at Kwinana as expected for an asset in ramp-up. The EBITDA loss at Kwinana of AUD63 million for the March quarter was significantly lower than the loss recorded in the December quarter, primarily due to materially lower non-cash NRV adjustments, as well as higher revenue generated by hydroxide sales. Non-cash adjustments accounted for just over [indiscernible] results. The Group recorded an underlying EBITDA loss of AUD15 million for the quarter, meaning the loss recorded by a business excluding lithium was AUD5 million. The predominant driver here was the lost impact from Cosmos. Group underlying free cash flow was AUD79 million for the quarter, and we reconciled our cash position on the next slide. You'll note our cash balance, say, was steady over the quarter at AUD276 million, despite several notable movements, including the interim dividend payment of AUD83 million and a AUD72 million cash outflow relating to Cosmos. Key inflows included AUD106 million income tax refund, a AUD25 million dividend received from TLEA, and AUD52 million received from our operating nickel business. Importantly, our Nova and Forrestania operations continue to generate underlying free cash flow, despite challenging market conditions in the sector. Our balance sheet remains strong, with liquidity at just over -- just under AUD1 billion. It not only provide us optionality, but also provides a strong platform for growth and to withstand current market headwinds. And over to you, Ivan.

Ivan Vella: Okay. Thanks, Kath. Maybe just a quick sort of wrap-up and summary, and then we'll open up for some questions. First thing on safety, and I mean the five priorities I've set out here, I've talked about really since my first quarterly call back in January. Safety is clearly the highest priority for us. We've made some progress, but there's plenty more to do. I'm confident we've got the right work in front of us, the right program, and the right engagement from our leaders, but there is still plenty to do. In terms of our results, look, it was a challenging period for IGO on multiple fronts. The most significant, of course, that was in prices and lower production compounded in the same period. That said, the additional 200,000 tonnes of sale I just mentioned will definitely unconstrain the operations team at Greenbushes, and allowing the focus of full production rates, and that's very healthy outcome for the rest of the year. We are focusing on working closely with our JV partners to optimize the Greenbushes asset. I've talked about that previously as well. There's plenty to do. It's a fantastic ore body. It's got a very long life, lots of opportunity, and I think bringing our collective strengths will help unlock that. Kwinana, look, that's been a real challenge in this business for some time. I was very encouraged coming in on my last visit and discussions, working through their detailed plans, their agenda and their plans for 2024 is hard. I won't make light of it. And I think as I've learned more about this industry, I see that across the industry, anyone working in the lithium hydroxide refining process has got plenty to think about. What I see though, and seeing that's very clear on those challenges, they've got the right actions in place. They know where they need to focus on their risks, and they're managing that better and better each month, which is great to see. Notwithstanding some of the operational difficulties at Nova and Forrestania, some out of their control, some in the businesses are generating cash and we've got planning to manage those and optimize their cash flow safely and sustainably through the end of the mine life for each asset. And I've talked a bit about exploration. Look, I don't want to state the potential and the opportunity there. It's very significant. I realize there's been some frustration with the results, from the expressed (ph) investment that we've made so far, but this is not something that we want to shy away from. We want to make sure it's targeted and managed group thoughtfully, but don't underestimate the capability and the dedication that our team has. And I'm convinced their work programs are going to lead to some great success. It's a key part of our strategy, and as we work through our refresh, that will come through. I'll share more of that in the coming months once we complete that through the next quarter. Moving on to Slide 17. Look, I think there's a lot to be excited about IGO at the moment, coming out of a difficult quarter. But look at the level of commitment and dedication to our purpose and focus across the broader business living our values. Fantastic to see the energy from the team. IGO is in a great position. We have a fantastic platform, our financial strength and our balance sheet, cash generation, exposure to the world's best lithium asset and our nickel business remains cash-positive. Our people and culture, which I talked about previously continues to shine through and then, most importantly, our purpose and clarity of where we're taking the business as we refresh the strategy stands us out in a very unique setting. So lots to be positive about to build on. Thanks for listening so far. I'll hand back to the operator now to walk through your questions.

Operator: Thank you. [Operator Instructions] Your first question comes from Hugo Nicolaci with Goldman Sachs. Please go ahead.

Hugo Nicolaci: Good morning, Ivan and Kath. Thanks for the update this morning. Just a couple of questions on the lithium business, please. Just firstly on Greenbushes. For the additional sales volume, any indication from Tianqi whether that's for the ramp-up of their own energy plant or more of a reflection of broader market conditions and how they're seeing the market? And then, just to clarify, is the 180-day payment terms on that volume subject to any provisional pricing? Thanks.

Ivan Vella: Yeah. Hi, Hugo. Thanks. Look, I can't really comment on TLC's intention for the product specifically. It's probably a question for them. So, I love that and just great news, they're pulling their product through and I'm sure they've probably got a number of different pathways there. In terms of the pricing, the 180-day payment terms are sort of recognizing the value of getting those tonnes out and obviously the reduced storage costs and so on. So it's a one-off in terms of that sale. Otherwise, the pricing mechanism from Talison remains the same.

Hugo Nicolaci: Thanks for that. And just as a follow-up on Kwinana for Train 1 and then the shut in September. Any color there on what's being rectified or equipment costs and how meaningful of an uplift you're expecting in utilization as a result?

Ivan Vella: Yeah. Look, I don't want to give numbers, I don't want to jinx the team. And I said that when I first started this role, until I can see that a physical -- a model of the physical asset in digital sense, where we've got basis to do that kind of forecast work, I don't want to start putting numbers out. They have got a great plan, and it's aggressive. I'm sure they're going to push themselves to the limit. I think what's encouraging is step back from the numbers per se is the depth of understanding of what's bottlenecking or holding up production in that continuous flow and the actions they're taking to remediate that. And what I saw was a really deep understanding in the behavior of people at the back end of the plant, where we've had the problems. The improvement will come in two parts. There will be initially improvement that comes through to the big shutdown that's planned in August, September, just through better asset reliability and better operating control of the asset. And they've got, again, very specific work programs in place to improve there. And that should deliver step-by-step improvement month-on-month. We've seen that, obviously, in the last quarter, and the April result was an improvement again. So we're just getting more and more confident that they're getting in control and their understanding of the assets' behavior is better. And then, of course, we have this one significant shutdown, where they have a number of big pieces of work plans to install changes to the asset to remove some of the things that bottlenecks are holding it up. All in all, so I'm not prepared to give you specific numbers at this point, but in the difficult position, they are working well on that digital model as well that's coming together. They've got a CISCAD plant model built up. They're busy connecting that into the underlying systems. And in my next visit, I'm hoping to actually see some of that working in progress, but I'll have to come back to you once I've gone through that and then get to some specific numbers.

Hugo Nicolaci: Okay. Thanks for that, Ivan. Maybe just one quick follow-up, if I could. Train 2, just confirming that the installed equipment there, that's already in place. Have you had issues with any of the corresponding same equipment in Train 1 that have been significant or not expecting any issues with the previously installed Train 2 equipment?

Ivan Vella: Look, most of it's the front end that's been installed. And I think the issues they did have with normal conditioning issues, nothing material and nothing that would give us concern with what's been put in place. The bulk of the issues have been in the back end of the plant, which was not built. That said, of course, the study that's underway of the work that's underway is taking the learnings from Train 1 and contemplating what's the best part for that should we decide to make that extra capital invested.

Hugo Nicolaci: Thanks, Ivan. I'll pass it on.

Ivan Vella: Thanks, Hugo.

Operator: Your next question comes from Rahul Anand with Morgan Stanley. Please go ahead.

Rahul Anand: Good day, Ivan and team. Thanks for the call. Look, I've got two on the lithium business as well to follow up from Hugo's questions. Look, first one is on Kwinana. You've talked about the major shutdown in September. I guess you're saying you don't want to talk around numbers, but the time we had attended the side trip, there was still a target in place to achieve capacity utilization in line with the nameplate eventually. Can I perhaps test you on whether that remains your target still post however long it takes for these rectification works to happen? And then secondly on Kwinana, in terms of Train 2, is it fair that despite the FEED study continuing, you probably want to wait to see Train 1 completely ironed out and running at a decent run rate before you give the green light for Train 2. That's my question on Kwinana. I'll come back with a question on Greenbushes. Thanks.

Ivan Vella: Okay. Thanks, Rahul. The nominal nameplate from an engineering point of view stands. Until we've done that work on that model to really understand it, simulate it, I think it's difficult to be making up a number. So we'll clearly chase that engineering outcome and then once we know more, we can adjust it if need be. I think I mentioned in previous call that there is of course a scenario where it may be that you need the two trains together and some buffer or some redundancy between the two of them to actually get the optimum outcome and that would then imply some reduction from the total nameplate of both trains to achieve that. Again, I'm speculating because it's too early to tell, those things that the team are looking through in their engineering and feasibility study currently. The target this year is not impacted by either of those things. They're working through the current bottlenecks and where the performance is impacted. And remember, of course, the tonnes we produce for the year is the cumulative view and we expect to see a good step up after that shutdown in September. So the last quarter is where we're going to see then obviously a more material output based on the success of those changes. The second part of your question around the confidence and the trigger for anything on Train 2. Yeah, well, clearly, we need to know that we've got pathway to an economic and valuable asset for invest -- the capital. We need to understand what the return it would be. Accordingly, how far you've got to be along the way to prove that, I think, again, is open to some debate still. That's why I'm so hesitant to put out numbers at this point until we've seen that digital model, so we can see a level of confidence in our ability to forecast performance month-on-month. I just don't think it's worth getting into what that line looks like. But you're quite right that we will -- there will be a close link between the performance of Train 1 and any decision on Train 2. So that stands its question of what that threshold looks like, but I still can't tell you.

Rahul Anand: Okay. That's fair enough. Look, second one's on Greenbushes, obviously, pleasing to see the mine return to full production for the rest of the calendar year. I wanted to check whether there's been any further color that you can add in terms of the mine plan and sort of the Tianqi plan for the medium term that we were talking about last quarter as well. And we were somewhat expecting an update this quarter. It may still come in June, but all I wanted to test was perhaps future expansions beyond CGP3. Is it fair to say that the mine's footprint and capital requirements could be constraining factors? And you probably want to look at the underground options and it might be a cost or a capital-light strategy over a capital-heavy, higher operating cost strategy in the medium term, especially given strip ratios and where they need to be if you're going to mine on those sorts of rates?

Ivan Vella: There's a lot in that question. [indiscernible]

Rahul Anand: Sorry about that.

Ivan Vella: You've got -- yeah, you've got something lost (ph) in Tianqi. Look, first of all, let's talk about expansion. So the CGP3 is progressing. That's moving along well. We've done mid-next year, Q3 next year. So that's step one. There's been no sort of change to that schedule or delay that slow or anything. I mean, it's just running at full pace. It's incredibly value accretive and makes a lot of sense. Behind that is CGP4. And what we said last quarter is, look, that still remains in study mode. Once we see that, we can look at that. Clearly, that needs to be done in a way that's cognizant of the mine's ability to support it and how that's optimized. And then that brings you, obviously, to how are you expanding that ore body over time. And I think we begin to signal that it's likely that underground mining methods will be appropriate to supplement the surface mining, that we've been doing so far. Exactly how and when is not determined yet. It's not something I can get into, but that's the work we need to do. And having a plant built, without having thought through the mine and capacity to feed that tailings management, etc., just doesn't make sense. So all of that's going to come into that decision as we look forward. And I'm sure you take all that for granted. I think I'd stand back, though, and say, look, while we both know that every miner's got some sweet spot at the rate they can run at, equally when you have the cost position and the ore quality or material quality that we get from Greenbushes, then we want to maximize that. We want to maximize production and we want to meet the significant growing demand we see in this market. So there's a clear incentive to bring the very best and highest margin tonnes into the world as quickly as possible ahead of other investments that might be out there in the industry. That's certainly the way I look at it. But we need to make sure that the final step with CGP4 is done on the basis of not just the plan, capital expectations, but also the mine and related infrastructure as well.

Rahul Anand: Understood. Look, that's all my questions. Thank you very much. I'll pass it on.

Ivan Vella: Thanks, Rahul.

Operator: Your next question comes from Jon Bishop with Jarden Group Australia. Please go ahead.

Jon Bishop: Thanks for taking my questions. I'll try and keep it to two. Just around your nickel strategy. Obviously, you've taken, obviously, a big haircut on the Western Areas acquisitions and you've had to put Cosmos on care and maintenance. I did notice a nickel junior the other day announcing a joint venture partnership, with the Japanese consortium on a nickel laterite admittedly, but I guess I'm interested to understand, given that sort of geopolitical bent, are you seeing any emergence of ex-China interest in those assets?

Ivan Vella: Jon, really (ph) excellent question. I'm not personally, I can't really comment more broadly, but I guess my reflection on the nickel industry, if I just broaden out, your question is that China obviously has got an interest, because of their standard steel production, and that's significant in terms of demand. They'll continue to pursue the lowest cost nickel units they can get, and they've got lots of expansion opportunities in their other locations around the world. So I'm not sure. If you think about incentive to operate here, it's hard to imagine that we'd see a big shift from their other options.

Jon Bishop: Yeah. Okay. I guess I was just flushing out to see whether you started any sort of sale process, but I'll park that there. Probably the other question I have for you is just around the reserves and resources at Talison that you announced with your December quarterly results. And then obviously Albemarle (NYSE:ALB) has announced independently. There was some disparity between those numbers. I guess, it probably ties into Rahul's question around underground and CGP4 decision-making. I think the market had an understanding that CGP4 was predicated on a continuation of open pit and then obviously underground would be part of a longer-term strategy. Is that something you're able to sort of definitively call out at this point, or is it still part of your optimization work?

Ivan Vella: No, that's still work to do, I mean, I think when the underground comes in, it should be optimized on the cost, of course. And we don't build a plant for five years, obviously, they're going to run for a long time. So we got to think about it in the near term and well beyond that. And the differentiation between the Albemarle report and of course, what we release from Talison is just different reporting standards, which I'm sure the market, some -- across some other businesses as well. The difference between JORC (ph) and SEC regulations in terms of how reserves and resources are reported.

Jon Bishop: Right. Thank you very much for taking my questions.

Operator: Your next question comes from Tim Hoff with Canaccord. Please go ahead.

Tim Hoff: Thanks. I might dive straight into that one. I guess, the differences between Albemarle and your reporting, you've noted that it was a conservative differentials between the two and that's why we see what we see in terms of that mine plan that was put out. Can you dive into what specifically is conservative about it? I mean, obviously, we have no TRP, there's no underground. But you're not advising to an underground either. Can you dig a little bit more into what those differences are?

Ivan Vella: Tim, I couldn't hear you super well on that, but sounds like you're looking to break down or reconcile the differences between the two reports, which is not something I think is a great plan to do on a call now. We can catch up and go through that if you like, but there are different standards of reporting in terms of certainty around the resource. And there's differences in price assumptions, there is difference in cost. There's a number of different factors that ultimately roll back into those two different outcomes, which I now reported to versus what Talison reported to. So I don't know, what you -- what are you chasing with that question.

Tim Hoff: Just if you can outline what the difference is between the conservative nature, but we'll move on. Just looking at the Windfield accounts, there's a large differential of about AUD3.5 billion between the non-current assets of TLEA, the Tianqi Lithium Energy Australia JV and Windfield. Can you give a bit of information about what that might be? Is it just the cost of Kwinana that's on the balance sheet? Or is it additional assets or goodwill being held on the balance sheet of the Tianqi Lithium Energy Australia JV?

Kathleen Bozanic: Look, honestly, I couldn't tell you off the top of my head because I don't see sets of accounts in front of me. It might be better if we do that one offline. I don't want to mislead you with some incorrect information on that one.

Tim Hoff: Okay. We didn't have too many hits there on those ones. Perhaps…

Kathleen Bozanic: Sorry. I wish I could.

Tim Hoff: [Multiple Speakers] was that. No, it's all right. We'll follow up. And then perhaps lastly, if I may, the sprint rate of logistics at Greenbushes, obviously, 200,000 tonnes is a great outcome for the operation. What's likely to be cleared out within a quarter?

Ivan Vella: Look, we'd like to get all of it on the ship. I mean, probably, I can't speak to the shipping and port constraints, but I mean, there's an [Technical Difficulty]. If you could do one big shipload, that's what [Technical Difficulty] we could bring a big cap size down. And so they take in one go, so it's not like there's any delay or it's purely as fast as we can do ships in an hour.

Tim Hoff: Excellent. Thanks very much, guys. I'll hand it on.

Ivan Vella: Thanks, Tim.

Operator: Your next question comes from Levi Spry with UBS. Please go ahead.

Levi Spry: Yeah. Good day, Ivan and team. Maybe just following on there a little bit. So, stockpiles and sales for this quarter, can you confirm what the stockpile was at the end of the quarter? And I think previously you've said sales would be 20% below production. Is that still what we work on for this quarter?

Ivan Vella: Well, [Technical Difficulty] stockpile March 30 (ph), roughly, so [Technical Difficulty] like that. So we love to clear that, give or take a bit of working inventory. And look, sales were 180, if you remember.

Kathleen Bozanic: [Technical Difficulty]

Ivan Vella: No, [Technical Difficulty] with this.

Kathleen Bozanic: I think you’ve seen uplift, it's going to be -- you just meant to add the 300,000.

Levi Spry: On nominations for this quarter.

Kathleen Bozanic: Yeah. So nominations for this quarter were fairly full. So you actually...

Ivan Vella: [Technical Difficulty] Yeah, those for the last quarter, Levi. Now, so we saw nominations, obviously, across the half being lower, we said it's about 20%, but the bulk of that was effectively impacting the first quarter of this calendar year. And so when you think about the oil tanker (ph) that was booked already for this second quarter or June quarter, plus 200,000 tonnes, that's been running flat out.

Levi Spry: Okay. Thanks. And I'll follow that up and then just on the 200,000 tonnes, can you talk -- can you explain to us a little bit around the nomination process for that? And I guess, we -- the 180 day payment terms, you talked about recognizing the value of getting that out, but also, the -- I guess, in the mining option on the pricing mechanism, so spot price is AUD1,200. I assume this is going to be sold at the March average price? Yeah. How do we think about that in the cycles of prices going forward up and down?

Ivan Vella: Yeah. So, look, this is our total nominations in both JV partners put them in for the half earlier this year and they stand and they will nominate for Q3 in a little while. Well, that -- so that process is unchanged at this point. This 200,000 tonnes is in addition to that support out in the inventory, which obviously got a lot of benefits. You're right. In terms of pricing, they'll draw that much. Also in mines [Technical Difficulty] pricing in terms of the order that they place and [Technical Difficulty] most of this book is that attractive for them in a differential sort of spot price today, for sure, potentially, but the spot price today is certainly not to 200,000 tonnes. So I am also not sure that's necessarily comparable on that basis.

Levi Spry: Yeah. Okay. Thank you. And maybe I'll sneak one in just on CPG3. So you confirm the timing September '25, I think the CapEx has gone a little bit slower there than maybe is -- how is the rate of spend, I guess, going on the project?

Ivan Vella: Yeah. Look, it's moving and you've got to separate out only purchases and different rates of activity when you're doing piling versus all the stick bill that's underway now. So it's difficult to say, well, based on the standard credit and capital (ph) trafficking, I'm looking at actual progress and while they have some delays in the piling, they're definitely moving the pace now and I think running too scheduled, albeit taking into account that delay. We're still not expecting this to play into a significant overall delay in the project though, which is why we're still talking about that third quarter next year.

Levi Spry: Okay. Thank you. Thanks, Ivan.

Operator: Your next question comes from Robert Stein with Macquarie. Please go ahead.

Robert Stein: Hi, team. Thanks for the opportunity. Just a quick one on the Kwinana profitability. So obviously with the negative EBITDA result impacted by the NRV, can you give us an indication of what that would have been without that NRV? And then secondly, can you talk to potential utilization rates? I know that you said that you don't want to comment on absolute production, but can you just talk to how you're expecting the sort of utilization rate to grow post that shut that you're going to have in the September quarter? Are we expecting a pretty sharp increase or are we going to expect it to be very long and protracted? Thanks.

Kathleen Bozanic: I'll add to the first part of that, Robert. The profitability there is about a quarter of that, or just over a quarter of that is in its NRV adjustment. So that will enable you to calculate how much was the run rate for the quarter. Hopefully that answers your question.

Ivan Vella: And then, Robert, on the utilization, yeah, we set a decent step in -- after that [Technical Difficulty] September, not getting the specifics, but the -- you can look at the run rates and average on the production you've seen the last few months, they were sitting just over 20% through April, which is great, having less of those zero days. We didn't have outages, which is promising. And as I said, we'll continue through -- plan to continue through that shutdown with steady, operational and reliability improvements and then have obviously step up based on the asset changes coming out of the shutdown.

Robert Stein: So, Ivan, just a follow-up there. So we're expecting this to be an availability, utilization or rate improvement following the September shut, or all three?

Ivan Vella: It's both. I'll try and give you some specifics just to try and make it look a little bit more tangible. One of the issues they identified was the amount of lithium hydroxide, that's recirculating effectively. So producing hydroxide, but not extracting and crystallizing it, pulling it out. And so that's effectively rates, which they've identified some of the issues which they can reduce that issue. They're also going to do things which will affect availability or improve availability. In other words, reduce the unplanned outages that they've seen through the asset. So it's definitely a combination of both. I mean, sorry, [Technical Difficulty] I shouldn't make -- sorry to jump in again. And I'm still learning as I go on these assets and the refining process, but no surprises and I think this is the case for any sort of heavy processing. The stability of the plant is also key in production rate overall. And when they have a lot of outages, you never actually get any rhythm up. And what we saw through April was a starter to get extended periods without those outages. And that in itself helps the overall stability of the plant and the production rate as well. And so that's a huge part of the focus now to [Technical Difficulty] sort of shutdown because the learning that they're doing through that and the stability they achieve will obviously then be amplified when they make some of the asset mediations or modifications in the shutdown.

Robert Stein: Thank you very much for that added color.

Operator: Your next question comes from Kaan Peker with RBC. Please go ahead.

Kaan Peker: Okay. Kath, two questions for me. The first one is on Greenbushes. Can you maybe provide some further detail on that approvals process for TLC, how that works and why April 29. And given that prices have increased this quarter and TLC has taken up beyond their allocation, does that mean that they won't take up allocation next quarter and maybe some timing around that? Thanks. For the...

Ivan Vella: Okay. Maybe just to head off the last point first to look at this unrelated to the [Technical Difficulty] nominations process, they'll go through that normal exercise. And we certainly don't expect [Technical Difficulty] in detail but we certainly don't expect there to be then a short nomination in Q3 to offset that. This is above and beyond [Technical Difficulty] a great signal from TLC pulling that through. It's been welcomed by all three JV partners. The decision-making process ultimately goes through the Windfield Board. The TLC made the request that was then considered by the two JV partners, TLEA and Albemarle, and it went through quite a bit of analysis and process and ultimately, a decision to accept that order on those terms. They said it's well received, but making sure that this was lined up with the rest of the plans for the business.

Kaan Peker: Sure. Thanks. And maybe the second one is on Nova. Can you provide a bit more detail around Nova? It just seems like we've pushed out sort of that high-grade stove. So last few quarters, and now there's like a mid-additional mill shutdown. When should we see Nova grades get back and sort of the operation throughput get back to what it was doing sometime early last year?

Ivan Vella: Thanks, Kaan. Good question and good to talk about people for a minute. So your observation is spot on. You're close -- very close to detail. And they are basically moving into some of those high-grade stoves, as we speak. They had an issue with a borrower (ph) that was in the wrong spot. They had to move a few days ago, and that opened up a new sequence. So we're looking forward to seeing that come through from this -- through this quarter.

Kaan Peker: It's likely 2025?

Ivan Vella: No, I mean, we will see, we'll see that great start now, basically. So from beginning of May, that is going to start feeding in the mill.

Kaan Peker: And the mill's up and running [Multiple Speakers]?

Ivan Vella: Yeah, mill's running. In fact, it's running at high rates. It seems certainly they had a bunch of challenges last quarter, and they're frustrated. And I think it's never easy. For us, we're sitting back here looking from a distance and you go -- can we go faster? But they had a lot of challenges to work through. And I give them a lot of credit for the way they manage that work. It's frustrating that they're now in a place where they've set themselves up for what will be a very strong quarter ahead. That's certainly their plan. And it all comes down to pushing that mill. So, it's higher rates than it would usually be running.

Kaan Peker: Sure. Thank you.

Operator: Your next question comes from Mitch Ryan with Jefferies. Please go ahead.

Mitch Ryan: Good morning, Ivan and Kath. So, dividends from the TLEA were paused in the December quarter, ending finalization of calendar year '24 budget and operating plan. Now, given the AUD25 million dividend during the quarter, can we assume that that budget and operating plan have been finalized? And can we get any color on what that looks like?

Kathleen Bozanic: Just to clarify, you're asking about what potential dividends could look like going forward.

Mitch Ryan: No. The calendar year '24 budget and operating plan sitting inside TLEA.

Kathleen Bozanic: Okay. There, it's been continuing to be reviewed and it should be signed off in the coming weeks is my understanding.

Mitch Ryan: Okay. So the dividend resumed prior to that being finalized.

Kathleen Bozanic: Yes, it did.

Mitch Ryan: Okay. And then just with the election from TLEA to take the additional 200,000 tonnes, are there any logistic constraints in trucking that to port, given that will be a step up relative to prior operating rates?

Ivan Vella: It's a great question, Mitch. I'm not sure, the specifics. I mean, look, obviously, they've moved the volumes at scale before. I can't comment on that port constraints and the rate tracking (ph) to get into it. We're pushing the team of Talison to get those come down as soon as possible, everyone's got that common motivation. I guess, we can get you some more specifics, if that's helpful. But where -- our aim is to have all those tonnes cleared this quarter.

Mitch Ryan: Okay. Thank you for taking my questions.

Operator: Your next question comes from Daniel Morgan with Barrenjoey. Please go ahead.

Daniel Morgan: Hi, Ivan and team. Sorry to come back to this, but it just seems incredibly opportunistic that it was decided yesterday that TLEA can take 200,000 tonnes of spodumene at March prices, and with 180-day payment terms. You do have a great asset, but there is market concern that under your ownership structure, Tianqi can shave revenue or cash flow from you in good times and bad. How do you comfort shareholders about this structure and that it will work for IGO shareholders through the cycle? Thank you.

Ivan Vella: Well, look, I think we had a lot of comments, speculations about how the JV functioned over the last few months, which we're trying to work through, provide more transparency on capital structure and the decision-making. I see this as a tremendous positive. I mean, they had a fairly somber and negative view looking into 2024 and put in a long nomination. Obviously, that had an impact on production. And we had a long conversation about that over that ground again, they've taken a view now to pull these tonnes out. Again, I can't comment on the specific decision-making, but I think that's healthy. The timing, of course, it's favorable in the sense that we are seeing some rise in the lithium price and they'll be taking these that are at that low end. But the sense of suspicion around them, around TLC's decision, though, I know that's very reasonable. Albemarle is, obviously, party to this as well, and they equally stand back with around half of the asset and a party to these decisions, and they're encouraging and welcoming this sale and clearing these tonnes. If I look at your question from another perspective, the opportunity that I see is, of course, thinking about the nominations process when we're in a slower period of market demand. Because what we don't want to do is impact the way we run the mine. We want to optimize that, optimize its costs and its performance. And that's the sort of thing that I'm interested in spending more time talking about with the partners, trying to solve for that, improve the way that we then plan to optimize that operation. But beyond that, I think we're talking about the swings of normal supply and demand through a pretty difficult change in the market environment. The lithium price came off massively over the last nine months and there's been a bunch of adjustments through the whole industry because of that.

Daniel Morgan: Thank you. And maybe further to this, just on the operational plan. I mean, if I'm reading correctly from the presentation and releases, this will enable Greenbushes to return to full production. Is that what you'd envisage at the exit of the June '24 quarter? Thank you.

Ivan Vella: Yeah. That's right. And obviously gives us some real flexibility there. I'm running it right now. But we can't crystal ball what the back end of the year looks like. The point is we don't have a full inventory stockpile at this point once this is cleared. And so the worst case, we've still got that buffer if we needed it. But we're not seeing any indications that [Technical Difficulty] we're even going to need that right now. It's about just getting that mine running at full rate and driving the cost back down.

Daniel Morgan: Okay. Thank you so much for your perspective.

Ivan Vella: Thanks, Daniel.

Operator: Your next question comes from Kate McCutcheon with Citi. Please go ahead.

Kate McCutcheon: Hi. Good morning, Ivan and Kath. Just following on from Mitch's question, their assumption of TLEA's dividends from the last lot of disclosures, I think there was still a few hundred million of cash sitting in the TLEA accounts. You got AUD25 million of the dividend this quarter. Does that resumption mean that -- did you say that you're still working through the budgeting process or is there more clarity on Kwinana? And do we assume dividends resume from here out, interim dividend pay?

Ivan Vella: Let me comment, perhaps you can build on. I mean, look, yeah, without being sitting on the numbers we shared at the half of cash position at both TLEA and also at Talison, and those -- the cash for Talison has grown into before you could calculate. We won't mention numbers, but it's material bundle of cash there. The budgets are done with the (ph) final sign-offs and I think we've got a view of what the year looks like. In terms of the dividend flow, that's still a decision to come, but there is still a considerable amount of cash that's accrued in both entities. And as much as we want to have confidence that we can cover any expenses in both cases, we also don't want to leave cash sitting there. So the sort of process that we're used to, I expect will -- we look to reinstitute it in due course.

Kathleen Bozanic: Yeah. I've got nothing to add to that. That's just as Ivan indicated, the cash has grown at Greenbushes, somewhat, and in terms of the debt profile, it remains (ph) fairly consistent.

Kate McCutcheon: Yeah. Got it. Yes. My question was on the TLEA account. So, I mean, you can back out how much cash is sitting in there in it.

Ivan Vella: Yeah. Sorry, Kate. [Multiple Speakers] Yeah.

Kate McCutcheon: Yeah.

Ivan Vella: They're kind of linked (ph) right. So, the cash generation is obviously coming from Greenbushes. Kwinana is still, obviously, a cash drawer at this point. And as long as we've got cover for that based on our production plans at Kwinana, that obviously gives us a view of what we can then release as it flows out of power.

Kate McCutcheon: Okay. Thank you. And then Cosmos, I haven't quite appreciated the cash still to go into that asset, both the quarter past, well, the March quarter and the quarter to come. Is the end of this FY the end of that chunky spend on Cosmos? And how should we think about any care and maintenance expenditure going forward?

Kathleen Bozanic: So we made the decision on Cosmos at the end of January. So if you think about cash that we paid, it was actually paying for December and January. And we went into a period of random debt and (ph) it was an organized situation. So that's a reflection of the tale of that move. In respect to the next quarter, you need to think about, we continue to mine, and finish mining this month. We'll still continue to process until end of May, in order to realize the value from the stockpiles, as well as there'll be a number of -- there'll be some redundancy that's happening there. So that's the tale that we've got, while we move into care and maintenance, we've guided the care and maintenance will be between AUD12 million and AUD15 million per annum going forward. I think it's safe that that'll commence somewhere in the June month, so you could forecast that from the next quarter -- into the next quarter.

Kate McCutcheon: Okay. Thank you, Kath.

Operator: The next question comes from Matthew Frydman with MST Financial. Please go ahead.

Matthew Frydman: Sure. Thanks, morning, Ivan and team. I had a question on Kwinana and you cited in the release the ongoing qualification processes and contract discussions. I'm just interested to understand what's driving that. I mean, Kwinana has been producing battery grade for two years now. My understanding was that you have long-term offtake customers in place. So, yeah, just trying to understand what qualification is still taking place? Is that seeking new customers, new contracts? And just trying to understand, I guess, what the JV is seeking in terms of those new contracts, is it additional volumes, new geographies, yeah, what's driving that ongoing process? Thanks.

Ivan Vella: Matthew, thanks. Good question. So they're just new customers. Obviously, we've had a couple that I think TLC mentioned in their results call, which [indiscernible] already qualifying more customers and that just gives us more pathways, and more options as the production grows.

Matthew Frydman: Okay. Thanks. Have any of the pre-existing offtake contracts that you guys have previously cited? Have any of them expired or been terminated for any reason? It's purely just trying to build out the customer base on top of some of those that you've already highlighted.

Ivan Vella: No. It's building it out. Yes, building it out on top of those there's still current, albeit probably delayed, in terms of the expected on-take, but they're still there and they're taking product now.

Matthew Frydman: I understand. And if I could just ask another quick follow-up in terms of the process around the additional 200 kilo tonne sale, obviously, we've covered a lot of ground there, but TLC were the ones that requested the volumes and obviously have been given the sale. Does that imply that IGO could also unilaterally request to take an additional cargo above any nominations in the quarter in the future? Is that something you would never look to do, I guess, particularly, if you see similarly favorable pricing terms, or if you were interested in picking up a shortfall in the allocations, would that be a possible outcome?

Ivan Vella: Yeah. Not under the current agreement. So at a Windfield level, the way that structured, the Talison business sells to those two or take partners, Albemarle and TLEA, and that flows on back-to-back to TLC. So, yeah, not under the current terms.

Matthew Frydman: Okay. I understand. And, sorry, can you also remind me under the terms of those sort of sale agreements, is the buyer -- does the buyer have to use that material internally or are they allowed to toll treat it or sell it externally to a third party? Is that within the scope of the agreement?

Ivan Vella: They can and do toll treat it. The process for their needs, I guess, is effectively the -- what the agreement requires, so.

Matthew Frydman: Okay, and thanks.

Ivan Vella: And we see both Albemarle and TLC doing that.

Matthew Frydman: Okay. Thanks for that clarity, Ivan. Cheers.

Ivan Vella: Thanks, Matthew.

Operator: Your next question comes from Lyndon Fagan with JP Morgan. Please go ahead.

Lyndon Fagan: Good morning, everyone. Ivan, just going back to that technical report, are you able to bridge the gap as to why the strip ratio has gone up and the grades have gone down relative to the previous technical reports? Just trying to understand that [Multiple Speakers]

Ivan Vella: The overall mine or just current performance?

Lyndon Fagan: No, this is the total mine plan at Greenbushes that was released to market. Just trying to reconcile why there was such a big change.

Ivan Vella: I can't top my head. I'm happy to get back to you on that, if that's helpful. But [Multiple Speakers]

Lyndon Fagan: Okay.

Ivan Vella: [indiscernible]

Lyndon Fagan: No worries. And then just to be crystal clear, so Greenbushes is now back at running at nameplate. There's no intention to throttle back sales relative to production. That's how we need to frame it going forward, is that right?

Ivan Vella: Correct.

Lyndon Fagan: Great. That was all I had. Thanks.

Ivan Vella: Brilliant. Thanks, Lyndon.

Operator: That concludes our question-and-answer session. I'll now hand back to Mr. Vella for closing remarks.

Ivan Vella: Great. Thanks, Ashley. Look, we're right on time, so I want to take a little while, thanks for your time. Great questions. Obviously, some new news around the 200,000 tonnes. I think that's fabulous for the business and a great sign for Greenbushes for the rest of the year. There's plenty of work to do there as you've all noticed, as we look to grow and optimize that business. And the other key highlight, I guess we're talking about is the forward plan on now, the Kwinana refinery. It's really great to see the clarity of the team's got the way they're looking at that. Thanks again. I look forward to talking to you all again at the next quarterly, if not before. Thanks for joining.

Operator: That does conclude our conference for today. Thank you for participating. You may now disconnect.

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