IGO Limited

Thank you for standing by and welcome to the IGO Limited 2023 December quarter 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 Ivan Vela, Managing Director and Chief Executive Officer. Please go ahead.

Thank you, Operator. Good morning, everyone, and welcome to our December quarterly Operating and Financial Results call. Joining me today on the call is Matt Dusky, our Acting Chief Development Officer, and Kath Bozonich, our Chief Financial Officer. I'm delighted to have joined IGO and want to thank everyone who has made me feel so welcome since I joined in mid-December. I'm just into my sixth working week in the business and just starting to get to know this business and the team more deeply. And I have been incredibly impressed in the way our people are working together to deliver the strategy and purpose that they and everyone before them at IGO has worked so hard to build. This is my first results call with IGO and a very difficult day with the announcement on Cosmos. I'll come back to this in a moment. First, I wanted to share some broader reflections on the business. I want to start with my first impressions and why I'm so excited about what we can achieve together at IGO. For me, I can summarise this in three points. First is our purpose and strategy. It's very well thought through and it's underpinned by the global energy transition, which is absolutely critical to our future. And as I settle into this business, we will complete a complete refresh of the strategy, but we have a really solid core to build on. The second point is the fantastic ambition and culture underpinned by the IGO values. These not only attracted me to IGO in the first place, but were reinforced as soon as I started. IGO has been bold, it has been fearless and it has been innovative. All of the core values shine through when you engage with our people and the culture which helps people bring their best to work each day through having fun, enjoying each other's company and being part of something that really is making a difference. I've heard endless times over the last six weeks how much people say they love working at IGO and they love their jobs. It's an absolute testament to the investment in this business, which has made developing a unique and special culture and something that people really want to be part of. The third point, of course, is the outstanding asset base, the partners and the optionality as we look to take full advantage of the clean energy transition. Firstly, and most importantly, that world-class resource at Greenbushes. It's an absolute standout, and I'll talk more to that soon. Our partnership with Tianqi Lithium is another huge advantage. We have an excellent nickel business at Nova, an incredibly strong balance sheet, which provides us with immense optionality and power to move forward. But let's be clear, I've also observed there are some growing pains, brought about through a series of transactions and some very tough lessons that we're learning through Cosmos. In all of this, though, there's nothing we can't address and learn from as we develop the next chapters of this business. I still have much to learn about this business, but I'm pleased I've managed to visit all of the operations, including our JV operations before Christmas. And last week I was in China meeting with the Tianqi Lithium executive leadership. I got a chance to visit one of their new lithium carbonate processing operations, And what I've seen so far across this range really excites me. I have absolute conviction that IGO has an exceptional platform to work from and deliver the products critical to the clean energy transition. There are, of course, market headwinds at the moment and this is compounded by the nature of the lithium market. Recent volatility in commodities has been incredibly challenging for our sector and there's a lot of uncertainty and there's a lot of opinions. But having worked in the mining industry for many years, I know that this is the time when we'll see the true quality of our assets. For me, IGO is positioned so well with the lowest cost, long life, world class Greenbushes lithium asset. This cornerstone gives us the strength and resilience to look forward and realise the full potential of our presence in this dynamic industry sector. Shortly, Matt will take you through some of the specific operational results. But first, I wanted to talk about a few important items that we've released today and earlier this week. Of course, first, we've just announced a very, very difficult decision to transition Cosmos into care and maintenance. While the review of the operation identified a number of opportunities and potential for optimisation, the rapid deterioration of the nickel price over the last six months has meant it would not be prudent for us to continue with the project at this time. I really want to acknowledge the team on site. To their full credit, they have given this project everything they had and delivered some fantastic outcomes. There's a huge list of achievements and most notably for me, improving their safety performance through this period and the mill ramp up was absolutely outstanding. But on reflection, this project was not set up for success and it's being developed through a very difficult time in the market. Notably, the movement in the nickel price has been rapid. The rapidly increasing support from Indonesia at least catching the market by surprise, both in their ability to deploy their capital efficiently and the speed in which they've ramped up their mining and processing activity. Our priorities at COSMOS are firstly to provide all the assistance we can to those of our team who will be impacted by this decision. Times like this are very tough for our people and we're working hard to redeploy as many of our people as possible. We believe there is value in COSMOS and therefore we're laser focused on preserving this opportunity through a safe and robust care and maintenance program. so that we can bring it back online should the market conditions justify it. We'll share more details of the care and maintenance plan in future releases. Importantly though, our remaining nickel businesses, Nova and Forrestania, continue to generate positive cash flows. Within our lithium business, I want to start by commenting on Greenbushes, which as I've said is an outstanding asset and one which will deliver strong margins throughout the cycle. The scale of the operation, the cost profile and the untapped upside through resource expansion are second to none. And we are privileged to have exposure to an asset of this quality. We're also in a unique and enviable position of having partners who are among the leading lithium industry players in the world. We're delighted to work with both of them and continue to learn from their unique insights in the market. As announced on Monday, we've agreed several changes at Greenbushes. These changes, including a shift in the pricing mechanism, provide greater certainty on spodumene concentrate sales and our production volumes over the short term. As our partners work to manage their inventories and working capital through this volatile period, Taliesin is managing production of green bushes over the second half of FY24, and we've just adjusted our guidance to reflect that. While the partners have taken a conservative view on the market over the short term, Our collective commitment to growing this asset, in particular CGP3, remains unchanged. We'll continue to work with them to ensure that we deliver the best outcome for IGO's shareholders. At Kwinana, the ramp-up has continued to be challenging. What's clear to me, having been on site before Christmas, is that the team have done an outstanding job wrestling through a long list of design and engineering challenges that they were faced with. Looking ahead, my focus is on working with the Kwinana team to continue progressing a bottom-up plan to get a handle on the remaining issues impacting the steady operation of the refinery. To date, we have not had the ability to forecast with any certainty. There are still a number of changes that we need to make in the refinery, and these are being allowed for in their capital programs. We remain committed to ramping up this asset, and I have seen some green shoots in recent weeks. We believe in the integrated value chain tied with green bushes, and we do not underestimate the relevance of the outstanding quality of the SC6 concentrate from Greenbushes. As I said before, I was recently in China working with our partner Tianqi, and I was deeply impressed by their understanding of the market, their technical expertise in downstream refining, and the constructive dialogue that we had about how we can work together in the future to build our success at TLEA. We visited one of their lithium carbonate refineries, just been constructed and I was incredibly impressed with their technical skills and their project execution capability. In summary, I'm incredibly excited about the opportunity to lead IGO into this next phase. Our purpose and strategy is exceptionally well thought through and tied to the global energy transition. Our lithium business has green bushes as its cornerstone, a world-class asset with huge potential. and we are partnered with two of the biggest lithium players globally. We have multiple options for organic growth, including through exploration. We have a strong balance sheet, which we will be disciplined and measured with, which also gives us the optionality and the power to move forward. And lastly, and most importantly, we have a team at IGO whose passion, expertise and alignment with our purpose, strategy and values gives me great confidence in what we can achieve together. Safety is absolutely fundamental to stable and high performing operations. Throughout my career, I've been dedicated to delivering sustainable improvement in health and safety on all of the operations I've worked. As I've looked at IGO's focus in this area, I've been very pleased to observe a program of work that has been underway over the last 12 months and is delivering tangible results. The leading indicators show a considerable step up in the proactive actions and leadership engagement that are and will continue to be critical to delivering improved safety across our business. The TRIFA performance has improved over the quarter, reducing to 12 from 12.7, and that's happened even as the hours at Cosmos started to reduce back. I come from an environment where a TRIFA of 12 is still very high, and I'm deeply committed to supporting our team to reduce this. I was spending a lot of time personally in the operations focusing on this and supporting our leaders. Thank you. I'll now turn it over to Matt for an overview of operations through the December quarter.

Thanks, Ivan. To begin the operation portion of the presentation, I'll start with an overview of the lithium business. Moving to slide five. The recent market conditions have been a challenge for the entire sector as we work through this volatility. However, as Ivan has mentioned, we are in a uniquely positioned with a 25% interest in the world's best hard rock lithium assets. Greenbushes is the definition of world-class asset with an exceptional low cost base, which is generating strong margins throughout the cycle. As announced in the prior quarter, JV partners at Greenbushes, being Albemarle and TLEA, have been in discussions regarding pricing and offtake nominations arrangements at Taliesin. As we announced on Monday, the Winfield Board has agreed to amend the pricing mechanism, which will be applied to the SE6 spodumene concentrate. This will be reset monthly based on the average of the previous month using the existing four price reporting agencies including Fast Markets, Asian Metals, Benchmark Minerals Intelligence and S&P Platts. There's a 5% volume discount FOB Australia. The new mechanism is effective from 1st of January 2024 and we'll see this shift from a lagging quarterly price mechanism to a timelier pass-through of price. Additionally, the joint venture partners at Greenbushes have indicated their spodumene sales volume for the second half-24, which are expected to be approximately 20% lower than forecast production for this period. As a result of this, Taliesin is working through balancing stockpiles with production shipments. Production is expected to be marginally reduced with IGO's FY24 Greenbushes production guidance being revised downwards to 1.3 to 1.4 million tonnes for FY24 from 1.4 to 1.5 million tonnes. IGO expects the production and sales impact to be more skewed towards the March quarter, with June quarterly volumes more in line with previous forecasts. It's also important to note the JV partners remain committed to key growth projects, including the construction of CGP3, which remains on schedule and budget. Taliesin is finalising the CY24 budgets and capital review, after which IGO will provide any associated updates to cash costs and capital guidance alongside its half-year reporting in February 2024. This will coincide with the approval of the CY24 budget. Greenbushes is a world-class asset, and the JV partners are committed to unlocking the long-term growth and potential of this operation for all shareholders. Turning to slide six, which covers the quarterly results for Greenbushes. After record production in the September quarter, lower feed grades and process ore due to two major shutdowns drove a softer quarter production quarter-on-quarter, The lower production followed record output in first quarter 24, which resulted in a higher cash cost this quarter of $357 per tonne. Sales revenue was lower in December quarter, as expected, with lower sales volumes and lower price. On a 100% basis, EBITDA for the quarter fell to $1.1 billion. However, I note that the EBITDA margins continue to remain exceptional for greenbushes at over 85%. The realised spodumene price for the December quarter, including both chemical and technical grade product, was $3,016 US FOB per tonne, which compares to $3,740 US FOB per tonne received in the September quarter. Moving to slide 7, where I'll provide an update on the Kwinana lithium hydroxide refinery. Performance continued to be challenged at Kwinana. Production for the December quarter of 617 tonnes was below our expectation. We have seen positive improvement at Kwinana, which is a credit to the team. However, due to reliability challenges, we did not achieve consistent operations of 50% of nameplate during this quarter. Clearly, this is a challenging asset with sub-optimal engineering and construction driving difficulties in reliability and throughput. Having said this, the team has been making solid progress and we remain committed to supporting TLEA as we continue to improve performance from train one. Turning to slide nine and starting with Cosmos. As Ivan mentioned, we've announced today the transition of Cosmos into care and maintenance. This decision comes off the back of the project review, which identified a reduction in expected mine life, delays in getting the mine to full capacity and further escalation in capital and operating costs. Coupled with a deterioration in the nickel price since the review commenced, transitioning to care and maintenance is a difficult but necessary decision. This decision comes despite the great work the team have achieved on site. including the commissioning and ramp up of the processing plant in a timeframe well ahead of expectations. The plan at Cosmos now involves us preparing for care and maintenance, which is targeted by the end of May, with a priority on our people and safely preserving the asset. This will include a number of key work streams. The most important of these is how we support our people, which will be impacted by this decision. In terms of operations, complete commissioning of the processing plant and continue processing existing ore on the ROMs. Carrier maintenance will be diligent and carefully managed to provide us with the option to restart should market conditions improve. Turning to NOVA operation on slide 11. NOVA recorded a strong production quarter for all metals as compared to the prior quarter, with nickel production 7% stronger quarter on quarter despite some short-term operational issues while costs were in line with the prior quarter. Nova's financial results were impacted by lower nickel pricing with realised nickel pricing falling 8% quarter on quarter. It is important to note the EBITDA margins remain robust at approximately 50% and the quality of the Nova asset means it will continue to generate strong free cash flow through this low commodity price cycle. Looking ahead at NOVA, metal production is highly dependent on the sequencing of high-grade stopes. There has been some scheduled slip in the mining sequence which has high-grade stopes deferred into late FY24 and early FY25. As a result, and given where we are tracking against our guidance, we have amended FY24 production guidance to 21,000 tonnes to 22,000 tonnes of nickel metal and a C1 cash cost of $3.90 to $4.30 per pound of payable nickel. Turning to slide 11. At Forestania, the planned move to campaign milling resulted in lower milled tonnes and feed grade, which impacted production rates. As a result, production was down 15% to 2,007 tonnes of nickel and cash costs were 3% higher quarter on quarter at $12.03 per pound payable. Nickel revenue of $60 million was down quarter on quarter, driven by lower sale volumes, while cash flows remained positive, given the nickel hedging position that was put in place six months ago. We are continuing to assess options for efficiency and cost optimisation at Forestania as the operation transitions towards the end of the mine life. I'd like to highlight the safe, successful and strong finish to the end of the mine closure at Fine Fox at Forestania, which is a credit to the team on site. While FY24 production guidance remains unchanged at Forestania, cash costs are trending higher as we accelerate production of low-grade material and cost escalation with some areas of the business. As such, we are amending cash cost guidance to $10.50 to $11.50 per pound noting that forest only production is hedged at Australian $32,000 per tonne of nickel to December 2024. Turning to slide 14 where I provide a brief update on exploration activities for the December quarter. Exploration work is ongoing across our portfolio of prospect projects with several exciting developments. Activities are mentioned of mention that occurred this quarter include the receipt of assay results from the first dog-legged hole confirming the presence of high-grade nickel sulphides. A second hole was also completed this quarter with assay results pending. Further diamond drilling continued at the south iron cap prospect at Forestania targeting the main lithium-bearing pegmatite zone for a total of nine holes. Further drilling will continue in the March quarter. And finally, at a copper wolf project in partnership with Buxton Resources, a site visit was undertaken by an independent expert confirming the presence of a large mineralised porphyry copper moly mineralised system, which is very encouraging results for the team. Now I'd like to hand over to Kath to discuss the financial results for the quarter.