IGO Limited

Thank you for standing by and welcome to the IGO Limited FY23 results webcast. All participants are in a listen-only mode. To ask a question via the phones, you will need to press the star key followed by the number one on your telephone keypad. To ask a question via the webcast, please type your question into the ask a question box and click submit. I would now like to hand the conference over to Matt Ducey, Acting Chief Executive Officer. Please go ahead.

Thank you, Travis. Good morning, everyone. Thank you for joining the call this morning as we provide a summary of IGO's audited financial results for FY23. Joining me on the call today is Kat Bosnich, our Chief Financial Officer, who will be available to answer questions during the Q&A session. Also note that we released both our annual and sustainability reports this morning, as well as our FY23 mineral resource fall reserve and expiration updates. Slide 2 highlights our cautionary statement and disclaimer of note all currency amounts in this presentation today are in Australian dollars unless otherwise noted. Moving to slide 3. Before we move to the financials, I want to discuss the important work we are doing to build a more sustainable business and making a positive impact on future generations. I encourage you to refer to our NICE sustainability report issued today. The report provides a snapshot across the multiple facets of sustainability throughout our business, including safety and wellbeing, our response to climate change, environment, business integrity, our financial contributions, traditional owners and communities, and our people. RGO has a proud history in the work we do in sustainability, and this year is no exception, with some highlights including we have maintained a strong engagement with our communities who support our ability to do what we do. In FY23, we made community financial contributions of nearly $800,000 to a range of organisations and our people contributed 370 hours of voluntary work across our community. We continue to strengthen our relationships with traditional owners, including finalisation of our Reconciliation Action Plan. which reaffirms our commitment and vision for reconciliation. For FY23, we spent over 8 million with Aboriginal and Torres Strait owned or managed businesses. We look forward to ways we can continue to deepen our engagement, support and partner with traditional owners in FY24. We continue to pursue our response to climate change and decarbonisation of our business as we target to be net zero by 2035. Our internal decarbonisation fund generated $8.3 million during FY23, with nearly $16 million currently available to fund carbon reduction and offset projects and programs. Our people are key enablers for everything we do. We have an amazing team and a great culture. It's something that we are deeply proud of. We understand the importance of diversity and we continue to work on increasing female and Aboriginal representation in our workforce. Most importantly of us all is our engagement and pride that our people have in working with IGO. An area that we have to and will improve is on safety. It's disappointing to have recorded an increase in our TRIFA over FY23. While it's reassuring to have seen a decrease in severity of injuries and harm to our people, We should do better and we can do better. The board and management are responding by further boosting resources, training and active leadership to drive better outcomes over FY24. Turning to slide four, which provides a high level financial and operating summary for the year. We delivered an outstanding set of financial results with record underlying EBITDA, record MPAT, record underlying free cash flow. This result was made possible by the strength of our lithium business. Our interest in the lithium joint venture, TLEA, which was acquired in 2021 for $1.9 billion, has in FY23 generated over $1.1 billion in dividends back to IGO. This is an exceptional result. Operationally, Greenbushes was a standout in FY23. delivering record spodumene production, benefiting from strong commodity pricing, while NOVA also delivered strong margins and free cash flow. The ramp-up at our Kwinana lithium hydroxide refinery was delayed, however we expected to see improved performance over the coming year as rectification work continues. At Cosmos Nickel Project, while project development progressed over the year, we have commenced a review to understand the risk value. As previously flagged, we have recorded an impairment on the assets acquired from Western areas which predominantly reflects challenges at Cosmos. I'll discuss this further shortly. Our strong financial performance has put our balance sheet in a fantastic position with a net cash position of $415 million and enabled us to declare record dividends for FY23. come to in a moment. Moving to slide five where I'll lay out our financial results in detail. As you can see here, all financial metrics have improved substantially compared to FY22. Revenue lifted year on year to just over $1 billion thanks to the first contribution from Forestania as well as strong commodity prices. Underlying EBITDA of almost $2 billion rose significantly, driven by an outstanding contribution from the in-business, specifically green bushes. Net profit after tax for the year was $549 million, another record, and an excellent result despite the impact of the non-profit. has now been finalised at pre-tax of $968 million. On an underlying basis, this excludes this impairment. Net profit after tax exceeded $1.5 billion. Underlying free cash flow was nearly $1.1 billion a year, a year-on-year increase of more than three times. This has enabled IDEO to repay $540 million in debt over the year and finish the year strongly with $775 million cash available. Moving to slide six. On this slide, we set out IDEO's performance across key financial metrics over the last five years, demonstrating the transformational growth that has been delivered to the business over this period of time. As noted, today's result represents records across all key financial metrics. IGO is in an outstanding position to move forward in FY24 and beyond. Moving to slide 7, where we reconcile the year-on-year change in the group cash position. I draw your attention to the record dividends received from TLEA of over $1.1 billion. the strong free cash flow generation from NOVA and solid contribution from Forestania, and the accelerated debt repayment of $540 million. I also note the $53 million received from the sale of investments, which reflects our divestment of our hold in MINCOR resources during the year. Moving to slide eight. We have reconciled the underlying net profit after tax periods between 2022 and 2023 financial years. Of note, we highlighted the $1.4 billion positive contribution to net profit after tax from TLAO joint venture, resulting from strong lithium prices and production at Greenbushes. As shown, underlying net pat for the year was $1.3 reduced to $549 million on a statutory basis with the application of the $968 million impairment on the Western Area's assets and other minor adjustments. Turning to slide 9, we recently announced the new capital management policy which has been approved by the board. The new framework showed On this side, it's designed to provide shareholders parity and transparency of RGO's capital management strategy and seeks to strike a balance between returns to shareholders, balance sheet strength and flexibility to fund growth. Under this new capital management policy, the target range for shareholders' return has increased to between 20% and 40% of underlying free cash flow when liquidity is less than $1 billion. When liquidity exceeds $1 billion, the board will use its discretion to consider paying above 40% threshold. Moving to slide 10. In line with the updated policy and reflecting the exceptional cash generation over FY23, I'm pleased to report the board has declared a 44 cent per share final dividend plus a 16 cent per share special dividend for FY23. Both are fully franked. The dividend will be payable on 28 September 2023. This final dividend and special dividend brings total FY23 dividends to $0.74 per share, including the $0.14 per share interim dividend that was paid in March of this year. This represents a greater than seven-fold increase in year-on-year dividend payments and a total of $560 million returned to shareholders in FY23. We are committed to returning excess capital to shareholders in line with our capital management policy. Turning to slide 11, I take the opportunity to speak briefly to each of the core assets within our portfolio. noting that this was discussed in detail at our June quarterly conference call just a few weeks ago. FY23 saw strong performance at Greenbushes, with total spodumene production of 1.49 million tonnes, up 31% year-on-year, while cash production costs were $244 per tonne. Combined with the elevated spodumene prices we enjoyed during FY23, Greenbushes delivered a record EBITDA of $9.5 billion on a 100% basis, up sevenfold from FY22, representing an EBITDA margin of over 90%. As we move into FY24, our focus is on progressing the construction of CGP3, reaching a final investment decision on CGP4, and continuing to realise the potential of this world-class asset. Moving to slide 12 and on to the Kwinana refinery. Performance for train 1 at Kwinana has been disappointing. However, we remain confident that the required engineering and rectifications are being implemented to enable improved performance over FY24. We are committed to successfully completing rectification works and achieving a 50% of nameplate capacity by the end of this calendar year. In parallel, front-end engineering design will progress on train two with expected completion in early calendar year 2024. This speed work is required to de-risk train two. A final investment decision will only be made once this work has been completed. Moving to slide 13 and turning to NOVA and the forest area operations. Nova and Forestania both made a solid contribution over FY23 with group nickel production of 34,846 tonnes and group nickel cash costs of $5.63 per pound. Combined, underlying free cash flow for the financial year was $587 million with an EBITDA margin of 56%. This is a strong result. Looking ahead, our priorities are ongoing optimisation programs of both operations to improve productivity and reduce costs while continuing to unlock value through production blending opportunities. Moving to slide 14 and onto COSMOS where we continue to progress project development during the year. Key deliverables include completion of paste plant, aerodrome and development of the underground chambers for material handling infrastructure. Further, I'm pleased to say that progress processing plant and shaft are also approaching completion, bringing total capital expenditure for the financial year to $338 billion. As announced previously, we have encountered several challenges during the development of Cosmos. We are currently working through a project review on the current life of mine, capital cost estimates and schedule. We expect the review will be completed during the December quarter and will provide an update to the market accordingly. Moving to slide 15 and onto our overview of our exploration activities. We are committed to being a supplier of metals critical for the clean energy transition and exploration is a key part in this strategy. Investment in exploration discoveries is essential if we are to source enough critical minerals to enable the decarbonisation of the economy. In FY24, we've allocated $65 to $75 million to exploration across RGO's portfolio, which is focused on unlocking high-quality nickel, copper and lithium discoveries. We believe we have a fantastic opportunity to deliver significant value through discovery and from this commitment. Turning to slide 16 for concluding remarks. The 2023 financial year was an exceptional year across our business with record financial results as we continued to pursue our clean energy strategy. Greenbush has continued to perform strongly and as we continue to expand production and further optimise this world-class asset. Production ramp-up at Kwinana Train 1 is anticipated to improve over FY24 with a financial investment engineering and design. We are dedicated to unlocking value at the Cosmos project. The project review is currently underway without problems expected by December. We have maintained our focus on shareholder return and disciplined capital management. Exceptional cash flows generated over the last 12 months has enabled the declaration of a $0.44 final fully franked dividend and a $0.16 per share special fully franked dividend. Moving into FY24, we are clear on what we need to do. We need to deliver on our internal growth projects coupled with safe and reliable delivery from our operating assets. Before concluding this call, I would like to express my gratitude to the IGO, TLEA and Taliesin teams. You are making a difference. Thank you everyone for joining us on this call this morning and we'll now open up for questions. Thank you.

Thank you. To ask a question via the phones, please press star 1 and wait for your name to be announced. To ask a question via the webcast, please type your question into the ask a question box and click submit. The first phone question today comes from Levi Spry from UBS. Please go ahead.