IGO Limited

Thank you for standing by and welcome to the IGO Limited FY22 full year results webcast. All participants are in a listen only mode. There will be a presentation followed by a question and answer session. If you wish to ask a question via the phones, you will need to press the star key followed by the number one on your telephone keypad. If you wish to ask a question via the webcast, please type your question into the ask a question box. I would now like to hand the conference over to Mr. Peter Bradford, Managing Director and CEO. Please go ahead.

Thank you, Rachel. Good morning, everyone, and thank you for joining our call this morning as we present IGO's audited financial statements and results for the 2022 financial year, which we released to the ASX this morning. Joining me on the call today from Sydney is Scott Steinkrug, our Chief Financial Officer, who will be available to answer questions during the Q&A session at the end of the call. Slide two highlights our cautionary statement and disclaimer. Of note, small currency amounts in the presentation today are in Australian dollars unless otherwise noted. Moving to slide three. To begin, I wanted to talk to Sustainability and some of the work programs we are progressing across the business to continue to be a leader in sustainability practices and reporting. Our focus on safety and wellbeing has resulted in a reduced incident severity over the past few years and our culture of care has enabled us to better manage the impacts of COVID-19. I am proud of the way in which our people have demonstrated adaptability and collaboration during this time. We progressed our carbon reduction initiatives through the commitment to expanded solar and energy storage capacity at NOVA. Our internal carbon price implemented 12 months ago has generated approximately $3.7 million of internal funding that we will apply to our carbon reduction and offset initiatives. It has been particularly gratifying to see the engagement and ingenuity of our people and partner organisations to our carbon reduction initiatives. It is great to see the continued external validation we receive from key sustainability indexes on the quality and transparency of our sustainability reporting. I note that we released our 2022 sustainability report today. Moving to slide four. We're also incredibly proud of what we have achieved for the year. Operationally, we met or bettered production and cost guidance at both Nova and Greenbushes and delivered the first battery-grade lithium hydroxide production from Kwinona. Financially, we generated record revenue and underlying EBITDA, which was underpinned by record financial performance from Nova and a maiden profit contribution from the lithium joint venture. In parallel, we continue to transform the business through the strategic acquisition of Western areas while also progressing our exploration portfolio toward discovery. And finally, we successfully delivered for our stakeholders, delivering improved outcomes for shareholders, a stronger culture and value proposition for our people and proactive caring engagement with our host communities and traditional owners. Moving to slide five, where we set out our financial results for the 2022 financial year. Strong commodity prices combined with consistent operating performance generated higher revenue from continuing operations of $903 million and higher underlying EBITDA of $717 million when compared to the prior year. Net profit after tax at $331 million was lower year on year due to the absence of the one-off gain recorded in the 2021 financial year relating to the divestment of Tropicana. On a normalised basis, net profit after tax more than doubled year on year. Similarly, underlying free cash flow was lower in the 2022 financial year due to tax payments during the year totalling $199 million, of which $140 million related directly to the gain on sale of Tropicana last year. The acquisition of Western Areas was funded via a new $900 million debt facility and approximately of existing cash, resulting in a year-end net debt position of $533 million. Moving to slide six, where we illustrate the continued improvement in financial metrics over recent years. These results position IGO well for the future and reflect the transformation of our portfolio and our disciplined financial management. I wanted to point out here that reported revenue for the 2022 financial year does not reflect revenue generated within the lithium joint venture, as we report this contribution at the EBITDA level. Moving to slide seven, where we provide a waterfall to reconcile the year-on-year change in the group cash position. In particular, I draw your attention to the record free cash flow generation for FY22 from Nova, which was primarily attributable to higher commodity prices. Also, the first dividend received from the lithium joint venture, TLEA, of $71 million. Also, the debt drawdown and cash payment with respect to the Western Areas acquisition, which settled in June 2022. And finally, the taxes paid, as mentioned earlier, arising primarily from our taxable gain on the divestment of Tropicana during the 2021 financial year. Moving to slide eight. where we reconciled the net profit after tax variance between the 2021 and 2022 financial years. On note, we highlight the $254 million positive impact to net profit after tax, resulting from higher metals prices at Nova and the maiden net profit contribution from the lithium joint venture, TLEA, of $177 million. I also note that the 2021 financial year net profit after tax results included the gain on sale of our interest in Tropicana, which when combined with the absence of Tropicana earnings in FY22 led to the $432 million negative variance when compared year on year. Moving to slide nine. where I'm pleased to report that the Board has declared a $0.05 per share fully franked final dividend for FY22, which is consistent with our shareholder returns policy, which targets cash returns to shareholders equivalent to 15% to 25% of underlying free cash flow. This final dividend, which will be paid on 30 September, brings total FY22 dividends to $0.10 per share, which is consistent with the dividend paid in FY21, is at the top end of our payout formula and represents $76 million of returns to shareholders for the full year. Moving to slide 10, where I will take the opportunity to speak very briefly to each of the core assets within our portfolio, which we did discuss in greater detail during the June quarter conference call. I will start with NOVA, where once again our team has delivered another great result with nickel production and cash costs within or better than guidance, resulting in $631 million of underlying EBITDA and $574 million of underlying free cash flow for the year. Looking ahead, our priorities at NOVA are to continue to optimise the operation, particularly our metallurgical recovery, advance our decarbonisation programs, and progress the Silverknife feasibility study. Moving to slide 11. As announced within our June quarter results, we are revising the strategy and development plan for COSMOS to enable a number of work programs to be completed before producing first concentrate in mid-2022. The key work programs that need to be completed are the shaft infrastructure that was always central to complete around mid-2023, additional underground development and the expansion of the processing plant, all of which will contribute to a stronger production profile and lower cash costs when concentrate production does commence. This change to the development plan will result in additional pre-production development costs and we expect to update on this with the September quarter result in October. In parallel, we are progressing the scoping study into Mount Goode and commence our next phase of work to understand the downstream nickel sulphate opportunity. Moving to slide 12. Having acquired Forestania at the end of June, its contribution to the IGO financial results commenced as at 1 July. The integration process is progressing well and in parallel we are progressing plans to optimise the operation and understand the potential for additional nickel and lithium opportunities on the broader tenement package. Turning to slide 13, Greenbushes delivered a highly successful year with record production and financial results which included EBITDA of $1.35 billion on a 100% basis. The production results benefited from the first full year of production from Chemical Break Plant 2 and a maiden production contribution from the Tailings Retreatment Plan. This, together with very strong spodumene prices, gave great financial results. Already the team at Greenbushes are focused on the next stage of growth with the construction of chemical grade plant three commenced, which was approved back in March 2022. Moving to slide 14, at the Kwinana Refinery, the team's focus for the year was on quality and getting the recipe to make battery grade product right. Having achieved this in May 2022, the focus is now on quantity and progressing the ramp-up of Kwinana Train 1. In parallel, early works for the recommencement of construction of Train 2 has commenced and we expect a decision to proceed with construction in late 2022. Moving to slide 15, materials under investment in exploration by our industry has resulted in a shortage of projects to provide the metals critical to global decarbonisation through electrification. Consequently, exploration is a key plank in our continued growth strategy with an objective to unlock transformative value for shareholders through the discovery of our next clean energy metals project. following the western areas transaction we have increased our exploration commitment in fy 23 to 75 million dollars with a greater portion of our budget going to brownfields exploration in close proximity to our operating activities at nova and forestania our greenfields exploration focus is on exploration for nickel and copper our fraser range patterson and kimberly projects with initial investments being made across the coming year in our lithium and rare earth experiments. Turning to slide 16, the 2022 financial year was an outstanding year across the business, with strong financial and operating results delivered alongside the ongoing transformation of our clean energy metals portfolio. NOVA continues its track record of operational and financial delivery. We enhanced our legal business through the acquisition of Western Areas. Our lithium business generated outstanding financial results and delivered its first dividend to IGO. We maintained our focus on shareholder returns and have declared a $0.05 final fully franked dividend for FY22. We have advanced our decarbonisation programs and remain committed to leading sustainability practices and reporting. And finally, our people remain engaged with our purpose and have continued to make a difference. We also continue to strengthen the team. And to that end, it was great to welcome Trace Allaud to our board yesterday, bringing our board gender balance to 50-50. Thank you, everyone, for joining us on the call this morning. We will now open up for questions. Thank you, operator.

Thank you. If you wish to ask a question via the phones, you'll need to press star then one on your telephone keypad. If you wish to ask a question via the webcast, please submit a question via the ask a question box. We'll be addressing questions via the phones first and then back to the webcast. Your first question comes from Hayden Bedstow with Macquarie. Please go ahead.