Pilbara Minerals Ltd (PILBF) Q3 2024 Earnings Name Transcript

Pilbara Minerals Ltd (OTCPK:PILBF) Q3 2024 Outcomes Convention Name April 18, 2024 7:00 PM ET

Firm Contributors

Dale Henderson – MD, CEO & Director
Vince De Carolis – COO
Luke Bortoli – CFO

Convention Name Contributors

Kaan Peker – Royal Financial institution of Canada
Rahul Anand – Morgan Stanley
Hugo Nicolaci – Goldman Sachs
Kate McCutcheon – CICT
Rob Stein – Macquarie

Operator

Good day, and thanks for standing by. Welcome to Pilbara Minerals, March 2024 Quarterly Actions Report. [Operator Instructions] Please be suggested that in the present day’s convention is being recorded. I might now like handy the convention over to your first speaker in the present day, Dale Henderson, Managing Director and CEO. Please go forward.

Dale Henderson

Thanks, Maggie, and a heat welcome to those that have joined us on the decision in the present day, particularly to our long-term shareholders to your ongoing assist. I might like to start by acknowledging the standard house owners on the land on which our companies function, that are folks of the Noongar Nation in Perth, the place we’re endeavor a name from in the present day. And Yamal and Gary are folks the place our operations are positioned within the Pilbara. We pay our respects to the elders previous and current.

With reference to introductions, the audio system becoming a member of me on the decision in the present day are Luke Bortoli, our CFO; and Vince De Carolis, our Chief Working Officer. Additionally within the room, I’ve plenty of the staff supporting the decision. For the decision in the present day, now we have 45 minutes, and we’ll step by means of a brief presentation adopted by Q&A for the remaining time. We are going to goal to present our feedback temporary.

Nonetheless, we’ll provide some expanded commentary on the partnering feasibility examine we introduced throughout the quarter. We are going to then transfer to analyst questions and we’ll put aside 5 minutes on the finish for webcast questions. Because it pertains to the March quarter, effectively, the March quarter was considered one of stable working efficiency and on-track undertaking supply. Through the quarter, now we have seen an uptick in pricing from current lows noticed by means of December and January.

This uptick is reassuring, nonetheless, our technique stays unchanged to prudently put money into increasing our manufacturing platform to place the enterprise with: one, a decrease unit value profile put up enlargement; and two, yield the advantages of upper produced volumes and higher-priced environments with this expanded capability in retailer. Now, though we’re increasing, we retain our centered strategy on, one, value, persevering with our pursuit of value down by means of operational efficiencies, improved lithium recoveries and smart capital investments for additional OpEx reductions.

And, secondly, steadiness sheet, prudent administration of the steadiness sheet, which we touched on within the half yr replace. These 2 focus areas, value and steadiness sheet are enterprise as normal for Pilbara. Steady enchancment is our DNA and ongoing value reductions as an output of our steady enchancment tradition. Now, shifting to Slide 2.

The pillars of our technique are prioritized to generate essentially the most fast worth creation for our shareholders and repair of our imaginative and prescient, which is to be a pacesetter within the provision of sustainable battery supplies merchandise. Now, the March quarter made regular progress in opposition to every of the planks of the technique. Shifting to Slide 3. Now, for the quarterly highlights. Because it pertains to manufacturing, the manufacturing outcomes have been on plan for the yr, volumes and unit value. 179,000 tonnes which are produced at a unit value of USD 440 per ton or AUD 675 solely per tonne, which is an enchancment on the primary half value of solely AUD 691per tonne, so trending effectively.

Though it was 1 / 4 of two halves, which Vince will converse to in his part. Because it pertains to the operations, the month of March was a key spotlight with nameplate manufacturing for the P680-primary rejection circuit. This era demonstrated peak manufacturing with 80,000 tonnes produced throughout the mixed operation. I might be aware that the month of March had no shutdowns, excessive head grade and better recoveries. Nonetheless, it serves to show the dash functionality of the operation and the brand new capability now we have put in and it additionally add the incremental profit in corresponding unit value discount with this stronger volumetric output.

Effectively performed to all of the staff on this milestone, particularly, the Pilbara Minerals operations and initiatives staff who’ve been working tirelessly throughout the course of the yr to carry ahead this end result. Because it pertains to gross sales, they have been in keeping with manufacturing with shipments comparatively evenly spaced throughout the quarter. And a associated space, Pilbara Ports Authority introduced yesterday, this week that Pilbara Minerals alongside Mineral Assets basis clients for Lumsden Level.

Lumsden Level will present a typical use at outload facility utilizing shared bulk outload services at Port Hedland. These services will finally are anticipated to offer a unit value discount in comparison with the present outload strategies of Pilbara consumer assist.

Congratulations to the Hedland Ports Authority on this subsequent step. We’re delighted to assist this vital asset growth at Port Hedland.

Shifting to development. The undertaking staff continued to ship very effectively, and I am happy to say that each our main mine enlargement initiatives stay on schedule and price range. Because it pertains to offtake, in step with our gross sales technique for securing medium-term provide gross sales while presuming long-term optionality, the corporate executed a sequence of 3-year commitments with 3 main chemical conversion clients and all have world provide chain relationships. This included 2 settlement extensions signed with Shanshan and Ganfeng and a brand new settlement with Yahua.

Yahua joins Pilbara Minerals steady of Tier 1 clients who’re in our view amongst the very best within the enterprise. Because it pertains to partnering, we’re happy to broaden our relationship with Ganfeng by the graduation of a joint feasibility examine for a possible downstream three way partnership.

I will elaborate on that shortly. Thanks and effectively performed to the business staff for touchdown the suite of offtake updates and this vital partnering settlement with Ganfeng. Pilbara foundations are additional bolstered by means of these agreements. With that, I will now go the decision over to Vince for an replace on the operation of occasions.

Vince De Carolis

Thanks, Dale. Beginning on Slide 5 with security. As you’ll be able to see, security efficiency is regular with a modest enhance in TRIFR from 3.53 within the prior quarter to three.73 for the March quarter. Our security program initiatives proceed to realize traction, empowering workers to actively take part in making a protected working setting. Shifting on to Slide 6. We had a stable operational quarter with manufacturing and prices in keeping with expectation.

As Dale talked about, we did have some points with antagonistic climate and ore provide challenges within the first half of the quarter, however we have labored laborious to resolve these and had an excellent second half of the quarter. This was supported by attaining nameplate manufacturing capability from the P680 main injection facility within the interval. Mining efficiency was delivered to plan for volumes attaining 9.3 million tonnes.

And I be aware that this can be a 16% carry in volumetric motion for a similar quarter in FY ’23.On spodumene manufacturing, it was once more in keeping with our expectations and a report for the quarter at 179,000 dry metric tonnes, which is forward of quarter 2 at 175,969 dry metric tonnes. Nonetheless, it was a story of two halves with the primary half of the quarter impacted by climate occasions and ore provide challenges that are actually resolved. Within the latter half of the quarter and particularly, the month of March, we set a brand new month-to-month manufacturing report with over 80,000 tonnes of spodumene produced, demonstrating nameplate efficiency for the P680 main discount facility.

This peak efficiency was underpinned by steady operation of the P680 expanded manufacturing capability and no shutdowns deliberate, increased ore lithium head grade and better lithium recoveries attributable to operational enhancements, together with the cell ore sources. I wish to emphasize that this was a peak efficiency month that demonstrates what could be achieved with no shutdowns. Nonetheless, this shouldn’t be construed as an annualized run charge. Recoveries have been beneath goal for the quarter at 65.3%, however largely in keeping with the earlier quarter of 65.9%.

As talked about earlier, this can be a results of all provide challenges that impacted feed mineralogy. This was resolved within the later phases of the quarter, and we are actually seeing improved plant performances, inclusive of restoration of above 70% for the month of March. We proceed to work on methods to enhance our restoration, similar to ore sorting, and we anticipate these to enhance in quarter 4 and into FY ’25.Shifting on to prices.

Our prices for the quarter was AUD 675 per tonne versus AUD 635 per tonne for the earlier quarter. Unit prices have been barely increased than quarter 2 primarily as a result of pre-investment spend for P680. Nonetheless, we’ll see the advantage of this funding into This fall because the elevated manufacturing charges circulation by means of the entire quarter. The feed mineralogy famous earlier, which impacted manufacturing within the first half of the quarter.

The funding into the cell oil orders, which have been strategically introduced in to check ore sorting, practice our workforce forward of the first P680 ore Soa commissioning and in addition present supplemental ore. The cell ore sorters are actually absolutely commissioned and can help in our June quarter manufacturing profile. These cell ore form of elevated our unit value for the quarter by $50 per dry metric ton. If we excluded these ore types of the underlying unit working prices for the quarter would have been $625 per dry metric tonnes.

In parallel and supporting our ramp-up actions, we proceed to implement operational productiveness enhancements that may lead to additional unit value discount over time. A few of these key initiatives are discount in our mining fleet enabled by productiveness enhancements, our HME technique Part 1, which is buying our personal fleet and lowering hiring prices and our optimized shutdown technique to say just a few. Thanks. And now I will hand again over to Dale.

Dale Henderson

Thanks very a lot, Vince. Then turning to Slide 8 for the P680 and crystal ore standing replace. I have never been on website final week. It was nice to see the progress on the bottom. The P680 crushing additionally [indiscernible] on monitor for schedule and value. As famous within the deck for the quarter, updates included structural capital piping and ENI works commenced and supply and set up of scale and mechanical gear continued.

Ramp-up is scheduled for the September quarter. Now, I am significantly excited by this undertaking. That is the world’s largest lithium ore sorter. It’s scaled to take complete ore feed and stands to materially enhance the working efficiency over time from our belongings. As a facet be aware, the check work in pursuit of this know-how deployment threat again to 2018 with testing and development of the undertaking persevering with by means of the final downturn. The ore sorter is a well-proven know-how. Nonetheless, the appliance for this use at this scale is main for our trade.

All of us look ahead to seeing this undertaking come to life. Now, the subsequent leg of enlargement is the P1000 Mission so, turning to Web page 9 of the deck. As you’ll be able to see from the photograph, the progress is effectively underway, and this undertaking too stays on monitor for schedule and value. Progress for the quarter included bulk [indiscernible] in engineering, concrete development and underground providers work. The primary consignment of metal and module items have been accomplished, having been shipped to WA and a reminder that first ore is focused for the March quarter of economic yr ’25.Now, shifting to Slide 11 as we transfer to chemical substances.

On Slide 11, a reminder of our totally different lithium product pathways that now we have with elevated stage of processing involving extra value-adding, shifting from left to proper with a spodumene think about the left and battery-grade merchandise on the correct pertains to battery grade merchandise three way partnership with POSCO is their first foray on this regard. So, now shifting to Slide 12 for an replace on our POSCO three way partnership. I am happy to say that our commissioning and ramp-up schedule was maintained by the POSCO Pilbara Minerals JV in South Korea.

As famous a small quantity of uncertified lithium hydroxide was produced within the quarter as a part of the commissioning strategy of the primary practice. The JV will progress ramp-up over the approaching 18 months. In the meantime, development of Prepare 2 progressed as deliberate, and the JV is on schedule to commissioning within the second half of calendar yr ’24.The JV additionally commenced the product certification course of. That is anticipated to happen throughout the subsequent 12 months.

Now, turning to Slide 13. Through the quarter, we introduced the end result of the downstream partnering course of with an settlement with Ganfeng for a joint feasibility examine for a 32,000-tonne downstream lithium conversion plan. As a reminder, the goal of the partnering course of was to discover partnerships that offered an accretive profit to Pilbara Minerals shareholders by means of extracting extra worth alongside the provision chain while additionally making a extra resilient enterprise by means of deeper provide chain integration.

As mentioned in earlier calls, the trade is rising and evolving quickly. This consists of new government-driven subsidy regimes, main commitments downstream and evolving provide chain is rising. As such, this presents a stage of uncertainty on the place the successful provide chain hubs will finally reside and who will occupy them.

This set of situations presents each a problem and a possibility. With this backdrop in thoughts, the partnering course of by means of a large internet to discover the complete world alternative set on the time. Potential companions within the course of embody OEMs, battery makers, cathode producers and lithium chemical converters to which now we have chosen Ganfeng. The examine pathway agreed with Ganfeng combines our respective strengths to unravel this Rubik’s dice of alternative. Each events acknowledge one another’s respective energy as 2 large-scale trade operators and the benefit of mixing our skills on this shared goal.

Key strengths of this match are many, however I will spotlight for business alignment, sturdy fee alignment, as introduced with each events with the goal of maximizing undertaking economics, experience, Ganfeng. Pedigree is likely one of the world’s main lithium chemical converters, having constructed and working 7 lithium chemical crops.

In addition they have chemical conversion mental property and, in fact, expertise changing Pilbara Minerals product. Thirdly, provide chain integration, Ganfeng’s world attain and Tier 1 buyer base is a vital benefit. And fourth, each corporations are aligned and out pursue the ESG efficiency.

Lastly, Pilbara and Ganfeng have established a robust relationship over the previous 5 years working collectively. Because the JV proceeds, we have agreed on a spread of ideas, which the events intend to present impact to. This consists of 50-50 JV, our possession, provision of 300,000 tonnes of spodumene focus at market costs and a willingness to discover IRA advantages through undertaking fairness sell-down that required. This examine first strategy offers Pilbara Minerals with the choice however not the duty to proceed with the lithium chemical substances three way partnership. We see this as a prudent strategy to make sure Pilbara Minerals solely proceed with the three way partnership.

If the funding case is sufficiently compelling this strategy with Pilbara Minerals staged and incremental strategy to downstream publicity is what we undertook with the three way partnership companion with our earlier three way partnership companion with POSCO. So, we’re constant on this stage and incremental strategy, and we look ahead to progressing the examine with Ganfeng. We anticipate to finish the examine within the March quarter ’25.Now, with that, I’ll now go to Luke to take us by means of the financials.

Luke Bortoli

Thanks, Dale, and good morning to these on the decision. Please flip to Slide 15 of the presentation for a abstract of the group’s key monetary metrics for the quarter ended 31 March ’24, relative to the prior quarter ending 31 December ’23.From an operational perspective, the group delivered in keeping with its plan for the quarter when it comes to manufacturing quantity and unit value efficiency. We reported manufacturing quantity of 179,000 tonnes, 2% increased than the prior interval and gross sales quantity of 165,000 tonnes, 3% above the prior interval.

Common estimated realized worth was USD 804 a tonne within the March quarter, declining by nearly 30% in comparison with the September quarter. As Dale talked about, pleasingly, costs stabilized in January, elevated in February and elevated once more in March month. Our BMX pre-auction sale of 5,000 tonnes in March month at USD 1,106 per tonne, SC 5.5, demonstrated the advance in costs within the interval. Group income within the March quarter was $192 million.

This represented a 27% discount on prior quarter, pushed nearly fully by the 28% lower in common realized worth, partly offset by the three% enhance in gross sales quantity talked about earlier.Taking a look at unit value, unit working prices on an FOB foundation elevated by 6% in March quarter to $675 per tonne. This enhance was largely pushed by the beforehand disclosed deliberate funding in production-related prices to assist the P680 enlargement, together with the usage of cell ore sorters. This funding has occurred earlier than P680 volumes have come on stream at a capability for a full quarter interval, as talked about by Vince.

Additionally, as talked about by Vince, March month was a report for the operation and demonstrated what’s succesful at P680 per capability. March month recorded at 80,000 tonnes of manufacturing quantity at a unit working value, FOB of lower than $625 per tonne. On a CIF foundation, ended working prices decreased 2% to $789 per tonne, primarily attributable to a lower in royalty prices from decrease gross sales income. We additionally be aware that the distinction between manufacturing and gross sales quantity in each the December and March quarters merely displays cargo timing slightly than an intention to construct up inventories.

Extra particularly, from the start of the December quarter to the top of the March quarter, there was an approximate 27,000 tonne enhance in spodumene focus stock with roughly 26,000 tonnes bought throughout the primary 2 weeks of April, offsetting that quantity. Lastly, the group’s money steadiness at 31 March was $1.8 billion and stays sturdy.

I will converse extra about this later within the presentation.

Turning now to Slide 16. This slide outlines our March year-to-date FY ’24 operational and monetary efficiency relative to the prior corresponding interval of the 9 months to 31 March ’23.Manufacturing quantity within the March year-to-date FY ’24 interval elevated 9% relative to the PCP at 499,000 tonnes. This metric is starting to mirror the extra manufacturing capability offered by the P680 enlargement undertaking, significantly within the March month. Gross sales quantity elevated by an equal charge of 9% to 471,000 tonnes, enabled by increased manufacturing quantity capability.

Income for the March year-to-date FY ’24 interval was simply shy AUD 1 billion at AUD 950 million. March year-to-date income is 7% decrease than the PCP, nearly fully reflecting the truth that the prior interval included near all-time excessive costs as watchmen focus with worth of 73% decrease within the March year-to-date interval. At a unit value stage, unit working prices FOB was 13% increased at AUD 685 per tonne due primarily to pre-investment to assist P680, as talked about earlier.

Importantly, unit working prices at FOB of AUD 675 per tonne in March quarter is decrease than the year-to-date interval at AUD 685 per tonne, and the half yr interval ended 31 December ’23 at AUD 691 per tonne, demonstrating the pattern of improved unit working value efficiency throughout FY ’24. Turning now to Slide 17. This slide reveals a waterfall chart illustration of our March quarter money circulation assertion. As talked about earlier, the group’s money steadiness as of 31 March ’24 was AUD 1.8 billion and stays very sturdy.

The group continues to intently handle working prices and rationalize different nonessential capital funding to keep up the aggressive benefit that our steadiness sheet energy offers versus our friends. In March quarter, money decreased by AUD 362 million. A key driver of the decline in money was unfavourable buyer settlements or closing worth changes on shipments made previous to 31 December ’23 or the beginning of the March quarter interval. You’ll recall that December quarter shipments have been back-ended, so, there was the next than normal variety of shipments the place closing worth changes have been captured within the following March quarter.

Along with that, March quarter was uncommon, and it was impacted by sharply declining costs which have since stabilized. These closing worth changes realized over the March quarter quantities to AUD 218 million, largely offsetting the AUD 225 million of receipts from clients for March quarter gross sales. Money margin from operations measured as receipts from clients much less funds for working prices was unfavourable AUD 146 million.

Nonetheless, as soon as adjusted for closing worth changes of earlier quarter shipments of AUD 218 million, money margin from operations was constructive AUD 72 million. This constructive AUD 72 million demonstrates the constructive money era capability of the operation even at decrease estimated realized costs of roughly US AUD 800 a tonne as seen within the March quarter. If costs stay steady over time, the affect of ultimate worth changes for buyer settlement quantity is negligible.

In March quarter, we noticed costs stabilize and we then noticed the alternative pattern the place costs have risen. When it comes to investing money flows, there was AUD 170 million of money outflows in March quarter for property, plant gear and mine properties. This included gross capital expenditure of AUD 110 million on the P680 and P1000 enlargement initiatives, AUD 31 million of capitalized mine growth prices, AUD 29 million of latest undertaking enhancements and AUD 19 million of sustaining capital spend. This capital spend is in keeping with our steerage.

As talked about at half yr outcomes, the group’s near-term technique stays squarely centered on P680 and P1000 enlargement whereas in search of to scale back unit prices by means of that enlargement in addition to the deferral of nonessential capital expenditure. It will support in preserving our steadiness sheet energy place whereas increasing manufacturing quantity. By specializing in this technique, the group will capitalize on enhancing market costs with the advantage of increased manufacturing quantity capability and proving functionality to function at that increased capability.

We consider this may additional place the corporate forward of our friends. And to that finish, we’re happy that within the second half of the March quarter. The operation achieves full nameplate capability on P680, as Vince talked about. I will now hand it again to Dale.

Dale Henderson

Thanks very a lot, Luke. Now, to complete simply with just a few temporary feedback in the marketplace. Turning to Slide 19 We had the staff that up to date the information from street movement and benchmark right here for EVs and lithium demand. For my feedback, I will step by means of 4 elements, calls for, provide, pricing and Pilbara Minerals insights. So, beginning with demand. Through the quarter, there was plenty of noteworthy information factors are reinforcing the course of the trade, referring to just a few of those because it pertains to EV gross sales.

Highway movement have launched preliminary numbers for quarter 1 for calendar yr ’24 of $3.2 million in gross sales globally, which represented a 23% year-on-year enhance. Because it pertains to China, EV gross sales are the quarter 1 numbers for calendar yr ’24 on 8 million items, representing a 34% year-on-year enhance. Because it pertains to provide chain funding, plenty of bulletins, I will not undergo every of those, however [indiscernible] JSWL and F Code.

Simply calling out considered one of these North pole, sixteenth of January secured USD 5 billion mortgage per giga batteries expansions, one other one right here, LG can, seventh of February, U.S. $18.6 billion cathode provide cope with GM. So, extra bulletins, which spotlight the build-out of the trade. Because it pertains to authorities funding and coverage assist, U.S. authorities, China and German authorities made bulletins, these dates 4th of March, 3 April, 2nd of February, respectively.

I will simply name out considered one of these, the German authorities organising a EUR 1 billion fund for crucial uncooked supplies investments. So once more, constructive indicators of the funding going into the trade to construct out the trade. Shifting to produce feedback. Through the quarter, we famous there have been plenty of provide curtailments occurring or flagged. These included plenty of updates throughout plenty of the Australian provide sources and, in fact, most notably a core lithium.

Because it pertains to China, there have been some curtailments famous calling out some shutdowns in January as famous by SMM on the sixteenth of January and in addition another curtailments in relation to environmental inspections, once more, through an SMM announcement on the twenty fifth of February. So, a sequence of provide curtailments, partly pushed by the decrease pricing that we noticed by means of December and January. Because it pertains to pricing, and as we have coated, now we have seen an uptick of late now on a quarter-to-quarter foundation, shifting from December to March quarter, a median decline throughout all metrics. Nonetheless, once you have a look at the previous 60 days as much as mid-April, the will increase are feeling materials.

So simply referring to these during the last form of 60 days to the sixteenth of April, we have seen a 27% enhance for spodumene focus throughout a 27% enhance in common of the 5 PRAs. Because it pertains to Chinese language home carbonate, the final 60 days has been a 14% enhance, using the SMM sources and seaborne hydroxide previous 60 days, a 6% enhance treatment of quick market. So, these numbers clearly underlie the upwards motion that we have been discussing. Lastly, because it pertains to Pilbara Minerals Insights, as you have heard, with plenty of assist factors right here of the brand new offtakes, clearly, that we mentioned, a robust indicator of demand and the place the market is heading.

Because it pertains to our offtake compliance for the notice of doubt. There’s completely no subject there. And, moreover, we’re getting pushed for extra provide. So once more, our perception and to the trade may be very constructive when it comes to demand for our product and the course of the trade. So, given the calls for, provide and Pilbara’s insights, we stay of the view the emergence of the lithium trade stays effectively underway with a protracted runway hit.

We stay centered on delivering our technique to maximise and understand the worth creation alternative for our shareholders. The Pilbara presents care of our distinctive place that Pilbara presents being a Tier 1 asset, Tier 1 location, demonstrated working monitor report of know-how, low-cost place and powerful steadiness sheet. Now, with that, I will hand again to Maggie, and we will transfer to Q&A.

Query-and-Reply Session

Operator

We are going to now conduct the Q&A session. [Operator Instructions] Our first query comes from Kaan Peker from Royal Financial institution of Canada.

Kaan Peker

Sure, 2 questions from me. The exit run charge for March fairly spectacular at 80,000 and unit prices as effectively. Simply questioning what that throughput charge was for the month? And have you ever continued to see increased grades and recoveries in April. I will observe up in a second.

Dale Henderson

Thanks for the query. By way of our Hedland operation, our tonnages per hour charges went round 380 tonne an hour, and we proceed to enhance on that. So, that is from low 300s previous to the first discount enlargement. So, that is been going very strongly. And when it comes to recoveries, sure, we proceed to be trending in April above 70%. So, we’re seeing the continued sturdy efficiency.

Kaan Peker

And, secondly, for cell ore sorters, have been they a part of the unique ramp up? And perhaps when you can discuss across the efficiency of that and the way lengthy they’re meant to be operational?

Dale Henderson

Sure. Good query. So, the cell ore sorters, a part of the technique for us was to carry them on-line to check and practice our workforce, on condition that the P680, are crushing ore sorting goes to be the biggest facility that is been seen in our trade. So, that was considered one of our methods to carry them on-line. When it comes to how lengthy we wish to have them on for, we’re nonetheless working by means of the budgeting course of for that. And basically, as quickly because the P680 crushing and ore sorting commissions, which is arising into the subsequent quarter, we’ll decommission the cell ore sorters.

So, as we work by means of the budgeting course of, we predict that is in all probability going to be within the first quarter of the subsequent monetary yr.

Operator

Our subsequent query comes from Rahul Anand of Morgan Stanley.

Rahul Anand

My first query is simply round inventories. You talked a bit in regards to the two missed shipments this quarter. So, on my estimates, you are sitting at about 73,000 tonnes of stock, which is now roughly 6 weeks of your manufacturing for this yr. Admittedly, clearly, manufacturing is rising. So, you in all probability have a normalized quantity arising. However what I needed to know maybe was, the place is the normalized stage of stock for you?

And the place does stock develop into a headwind? And are you holding again on any of the gross sales given the market for the time being? I will come again with a follow-up.

Luke Bortoli

Thanks, Rahul, for the query. It is Luke right here. I will reply a part of that query after which go to Dale. So, you might be appropriate in that finish stock. On the finish of March was round about 70,000 tonnes. The 2 shipments that occurred in early April weren’t a lot missed shipments, that is simply the part timing of shipments, and that the steadiness of stock again by 30,000 tonnes to circa 50,000 tonnes.

At that 60,000-tonne stage, when you look again to our historical past, that’s form of roughly the place our stock steadiness sits by means of time. I will simply go to Dale in respect to the technique round stock.

Dale Henderson

Sure. Thanks, Luke and thanks, Rahul to your query. As I discussed on prior calls, we’re not pursuing any completed items stockpile technique. The goal is to maneuver the product on to our clients as effectively and as quickly as we will. And a part of the rationale for that.

There’s actually 2 elements.

Firstly, we’re a really large producer now and the logistics round making certain that the passing of the product works hand in glove with our clients is a key factor that we work by means of as a part of organising the manufacturing profile for the yr. So, that is one ingredient. The second ingredient is, in fact, the motion in pricing, the lithium trade has a historical past of shifting sharply in all instructions, which might be laborious to foretell.

So, we do not suppose it is a sound technique to be taking part in any form of stockpiling recreation for the aim of making an attempt to understand the profit, significantly given the disruption that they will trigger for our vital clients. And for that motive, [Indiscernible] used to maneuver the inventory on.

Rahul Anand

And look, when it comes to the follow-up, I simply needed to ask a follow-up to Kaan’s query, if I could, round recoveries. When it comes to your medium-term targets, are they nonetheless at about 75% restoration for five.2% grade and 65% to 70% for six% spot you imply? Or has there been any motion in that? Clearly, protecting in thoughts the affect on prices pushed by recoveries?

Dale Henderson

Sure, I’d take that, Rahul, and Vince might wish to add to it. Sure, I can affirm that the long-run recoveries that we’re concentrating on are 75% as communicated within the earlier FIDs that we have performed. Because it pertains to the very form of close to time period, this, in fact, has been a ramp-up yr and subsequent yr, and there is additionally a ramp-up right here care of the P1000. So, inevitably, there’s a little bit of affect by means of integration of circuits and optimization, et cetera, et cetera. Nonetheless, because it pertains to incremental enhancements, it has been honest to say the staff are progressing plenty of fronts, that are fairly thrilling, which is able to finally play by means of to making sure the 75% attained.

And, hopefully, past that, these embody issues like on-line analyzers, that are coming with the circuits, that are approaching on-line, each the [indiscernible] and with the P1000 undertaking. There’s all metrology work that Vince and the staff have been doing to higher perceive the proper restoration set factors as a perform of non mineralogy and the ore physique, froth cameras, different on-line analyzers, you title it. The operations mission is ongoing restoration enchancment.

So, I like the concept we transfer past 75% finally. However you might be very a lot in our websites. Vince, do you’ve got something?

Rahul Anand

And simply that 75% at 5.2% spot? Or is that for six% spot that you simply’re speaking about, sorry?

Dale Henderson

The 75% was on a 5.7% primarily based on the final main, if I did.

Rahul Anand

So, that is nonetheless the goal, and also you’re trying to even higher within the medium time period, if doable?

Dale Henderson

Sure, sure. Sure, that is proper.

Operator

Our subsequent query comes from Hugo Nicolaci of Goldman Sachs.

Hugo Nicolaci

Simply first one for me, Dale, I simply needed to get a greater sense round a number of the offtake agreements that we signed. Simply needed to substantiate that, I assume, the brand new form of medium-term contracts are extra akin to take-or-pay agreements. However then simply going again to a number of the legacy longer-term offtake agreements. I simply needed to get a greater sense of how a lot up or downward flex in any given yr that your clients have when it comes to desirous to take volumes there?

Dale Henderson

So, the extensions that we have performed to these offtakes successfully on the identical phrases or higher because it pertains to flex on volumes, you may know from these bulletins. So, we have in-built some choices at Pilbara’s election. And, sure, so I believe we’re in a reasonably, pretty good to do it throughout these clients at just about all instances, they have been in search of extra product. Additionally, from our perspective, we had a superb drawback of organising our gross sales e book profile optimally for Pilbara therefore, we constructed into these agreements, some choices at our election.

Hugo Nicolaci

Sure, simply clarifying that one. I assume, exterior of the choices that you must add one other 50,000 tonnes or 100,000 tonnes a yr. Of the unique 100,000 can the shoppers say that we received a 90,000 tonnes, not 100,000 or 110,000 tonnes, not 100,000? Is there any flex on these?

Dale Henderson

No, not in that course. They have an obligation to take and we arrange these gross sales schedules at first of the yr, together with the time every of the very best timing, et cetera, et cetera. Therefore, that earlier remark to row we handle stock.

Hugo Nicolaci

After which only one extra, if I may, simply on the POSCO JV. Simply noting you have produced first volumes there. I am simply desirous to know when do you begin that certification interval? Is it from first volumes? Or do it’s essential produce a bit extra quantity this quarter earlier than you’ll be able to kick that one off?

Dale Henderson

We perceive from the POSCO staff that the method has basically commenced and that certification course of may be very a lot depending on that exact buyer. However as talked about within the launch, they anticipate the method to be accomplished inside 12 months.

Operator

Our subsequent query comes from Kate McCutcheon of CICT.

Kate McCutcheon

Your pre-auction quantity that you simply did was performed at 5.5%. And I do know it is a small quantity. However on condition that the December supply, ought to we anticipate the remainder of the yr to proceed to common that 5.2% produce product grades? Or ought to we anticipate for the again finish of the yr to carry to that 5.5%? Or is it only a discrete higher-grade parcel that was performed for the public sale?

Dale Henderson

The goal is 5.2% sometimes, and that is predicated on maximizing the economics for shareholders as now we have the next restoration at that decrease grade. And we do not see any motive to alter that at this level, that 5.5%. We in-built some parameters round that such that we may ship a barely decrease spec if we selected to. So, though the headline was 5.5%, now we have provision in there to scale down somewhat bit on a linear foundation.

Kate McCutcheon

After which year-to-date CapEx, $656 million-ish monitoring beneath your revised steerage vary. Ought to I believe it will have been This fall weighted or the most important quarter of the yr arising? Or will a few of it shuffle into subsequent midway?

Luke Bortoli

That is proper Kate. Sure, you must take into consideration a rise in This fall.

Operator

Our subsequent query comes from Rob Stein of Macquarie.

Rob Stein

Two questions or one strategic query for me on capital allocation. If I have a look at the money place within the quarter, it was a fairly bleak quarter, however you continue to broke even and added somewhat bit of money to the hopper. Are we wanting ahead to the top of the half and anticipating outsized capital return to work down a few of that money steadiness, noting that you have about 1 to 1.1 billion a month much less to spend? After which, secondly, how ought to we take into consideration the capital necessities for the Ganfeng JV and additional downstream investments going ahead?

Dale Henderson

Because it pertains to the strategy to capital administration, no change in the best way we’re occupied with that from earlier messaging. As a common remark, we’re taking a conservative strategy and making certain that we retained a really sturdy and wholesome steadiness sheet on condition that the market has form of gone by means of a downward pricing interval. And given the volatility of the trade, we wish to be sure that we have got a really sturdy steadiness sheet to hold on supporting the build-out of the enterprise in assist of our technique. So, I might say, unlikely, the Board would take a view round capital distribution.

That being stated, nonetheless, it is very pricing dependent. And as we have seen traditionally, very sturdy. We had some sturdy actions in pricing, which rapidly interprets to very, very sturdy returns rapidly.

And we have got on the with the job with distributions again to shareholders. So, look, if that happens, fortunately get the dividends rolling once more. Second query was set capital necessities?

Rob Stein

Capital necessities to downstream.

Dale Henderson

Sure. Sure, thanks. There will likely be a while off. So, step one for us is to progress the feasibility examine, which is all about location evaluation, number of course of, et cetera, these issues will finally begin to put some form round capital necessities. We have to actually work by means of that examine, which is due March quarter subsequent yr. And from that time for there’s in all probability doubtless one other step of examine, which might finally progress the form of that.

So, any capital, main capital necessities are fairly a while off in that regard.

Operator

Thanks for all of the questions. This concludes the Q&A session. I might now like handy the convention again to Dale for closing remarks.

Dale Henderson

Thanks very a lot, Maggie, and thanks for everybody who dialed in in the present day. For any questions we did not get to, please ship these by means of, and thanks all for dialing in March quarter as been fairly stable quarter when it comes to working efficiency and undertaking supply, we stay centered on delivering on our technique and constructing out by means of this a part of the cycle to benefit from the improbable alternative to Permits enterprise current for this development market in lithium. Thanks all for dialing in and look ahead to our subsequent name sooner or later. Thanks.

Operator

Thanks. This concludes in the present day’s convention name. Thanks all for collaborating. Have a terrific day, everybody.