Liontown Resources Limited

Good morning and good afternoon, listeners. Thanks for joining our first full quarterly production update for Liontown. With me on this presentation is John Latto, our Chief Commercial Officer, and Grant Donald, our Chief Commercial Officer, but also acting for Adam Schmitz, who's taking a well-earned break and will be back with us early in the new year. This full quarter of production from Kathleen Battick confirms we are well on track to achieving our ambition of becoming an established world-class producer of lithium. This quarter demonstrates a continuation of what really matters and what's within our control. We've done our open pit mining and our underground mining and they're proceeding smoothly. and we're recording both record output but record production productivity. And the ramp-up performance in the plant, as you'll see when we go through this presentation, is going in line and in some areas exceeding our expectations. Now, both of those things have to come together for us to deliver the production we need, and more importantly in today's world, the unit cost outcomes we need. If we can just go to the first slide, please. Look, I wanted to start with the strategy slide because I think it's important to reinforce that our focus is very much on all of these three horizons, but in different intensities. Clearly, the focus is getting the ramp up and getting it right. And we're putting a lot of effort, as you can see from today's report, the focus that we're pulling to make sure that Kathleen Valley is at its full potential. But we're also working quietly in the background around our downstream aspirations, both with Sumitomo and LG. And then ultimately, you know, we've got Grant Donald here on the call today, but Grant and his small team is focused on what Liontown to its full potential also looks like. And the importance here is this strategy remains unchanged and it endures the cycles. We're tacking both the short and long-term view because we're here for the long-term. We'll go to the next slide, please. Our ESG performance for the quarter. We start with safety. Our record, our lost time injury frequency rate is 0.66 and our TRIFA is just 4.6. As most of you know, the focus on safety is also enduring and we have to keep our vigilance and we're new operations. We've got new employees. We've got new ways of working and systems and processes that people need to understand. And I think it's a testament to management that given everything that's developing and the speed of which we're ramping up, we're maintaining our focus and intensity on the safety and the health of our employees. I think this week the area recorded temperatures well over 40 for the whole week. So it's pretty tough conditions to work within. And then we go to the ESG. We're getting renewable power of in excess of 80%, 82. And I think that's important to put into context. Our ambition when we did the DFS was that we would get 60% penetration. Well, we've exceeded that. And we're working very closely with Zenith, our partner, to ensure that that actually increases and improves. Our female participation is 23%, which is in line with industry benchmarks. And we're hoping to continually improve that by attracting high caliber females to our organization. And this is a very special and personal event for me, which was signing up an agreement with a Jawa business, which you see in the picture there, and to do all our light vehicle maintenance. This is a homegrown, genuine partnership between an Aboriginal business and ourselves, and we're very proud of this, and there's more to come. Next slide, please. So this is the highlights for December. And I said to the team when we were constructing the slide, I'm very proud, and the team should be very proud of this slide. You know, our mining's, you know, we're having record production both for the quarter and for the year. So we're very happy with the way things are going in the mining sector. The underground mining is going exceptionally well. A testament to the team there and the planning they've done, but also to Burncut, our contractor, that's done some great work there. And I'm not taking anything from Iron Mine. Our contractor in the open pit, they're doing a great job as well with the team there. And we're on track to do our first stope by the end of the quarter 2021. On the processing side, we've processed nearly 620,000 tonnes of material from the quarter, and we've given the listeners the specs and run rates and details on that in the appendix, which is an annualised rate of 2.4 million tonnes per annum. Our guidance for this year is 2.3, but in pockets, we've gone and hit our 3 million tonne rate. So we know the plant has that capacity. We're seeing an average availability for the quarter of 89%, which again is a fantastic effort for a plant that's only been running for five months. And we recorded 92% in December, which is very close to our target. And importantly, the Lithia recovery of 55% for the quarter and 59% for December. I think all of you are aware that the holy grail for the lithium hard rock producers is recovery. There is a close relationship between recovery, grade and and flow sheet design in which to deliver this outcome. This is the ambition for us. This is the focus area for us for the coming months in order to get to where our target should be, and we've got a slide on that. I've spoken about production, you know, 88,000 tonnes for the quarter. I mean, that's an outstanding effort, again, for a plant that's been running for five months. And Grant and the team are doing a great job on the sales front. And he'll talk a little bit about that in a minute. And then finally, operating cash flow. Again, in ramp up, we've been able to generate a positive operating cash flow from the operating activities. Next slide, please. Just on the mining side, in my highlights, but here are the specifics. In the open pit, the Romstock piles are building. We'll talk a little bit about the Romstock piles when John gets to his section. 2.6 million tonnes moved for the quarter. For me, the... The CDO mobilising from the lens that we've uncovered, and we're still in that lens, is quite a feat. It's exactly where we thought it would be. It's exactly the grade and chemistry that we expected. So there's been a great bit of work done there in understanding what we're mining. And we've demobilised an excavator and truck fleet as part of the cost optimisation work that we did earlier in the, or later in the year, last year. In the underground, I'll just summarise by saying, you know, we're moving development metres. You can see the trend there. That's coming along nicely. And we've got the ground conditions we expect. I mean, I was in the underground just before Christmas with the Burn Cup leadership team, and it was exceptional what we could see underground. And the production stopping activities are on track for quarterfall FY25. And the productivity from the jumbos, which is the key metric that everyone looks at, is still well over the 300 metres per jumbo per month. And we're mobilising the third jumbo early in 26 in line again with the revised mine plan that we issued in November. Go to the next slide, please. I'll now hand over to Grant, who will take you through the plant performance.

Thanks, Tony. Our ramp-up continues to meet or exceed expectations across plant availability, milled tons, and recoveries continue to move higher, demonstrating our progressive improvements. The sag mill availability remains high, as you can see from the top right chart, enabling strong mill throughput with over 600,000 tons processed during the quarter, equivalent to an annualized run rate, as Tony mentioned, of 2.4 million tons, just ahead of our run rate, which we guided to in November of 2.3. Our recoveries continue to show progressive improvements, averaging 55% during the quarter, which is 10 percentage points higher than the last quarter, or 23% higher. The bottom left chart shows the progressive improvements over month by month, showing December averaging 59%, which already exceeds some of our peers after only five months of operation. We still have further to go on this journey with identified actions and a program of work in place to continue advancing towards our 70% target by Q3 26, which is the March quarter. The combination of throughput and recoveries culminated in production of 88.7 thousand dry metric tons during the quarter at a weighted average grade of 5.2% lithium oxide. We can go to the next slide. Strong production allowed us to push tons sold to customers since the commencement of production to over 100,000 wet metric tons. Those tons went to a combination of our offtake partners and to spot customers. A particularly strong December saw us produce 36.4 thousand dry metric tons, which enabled total shipments of 81.3 thousand dry metric tons during the quarter. Four shipments to customers were made during the quarter, including our inaugural cargo to LG energy solution on the largest vessel loaded so far at 33,000 wet metric tons, which is a personal best for the company, and we're looking to beat that this month. This quarter also saw us initiate production and shipment of tantalum, which we're looking to turn into a regular flow of production and deliveries to customers this quarter. In another milestone for Liontown, we also called commercial production under our offtake with Tesla, effective from the start of this calendar year. We continue to see robust inbound interest from customers looking to establish regular Spodumene purchases from well-known names with an established track record, many of which the callers would be familiar with. The demand for spodumene, even against a relatively weak backdrop for chemicals, remains robust, demonstrating the embedded optionality of buying spodumene in the face of uncertainty in the continued evolution of battery chemistries. With our forward offtake expected to commence in July 2025, the forward demand outlook for Liontown product remains strong, meaning we expect to have a tight forward sales book for the remainder of FY25 and beyond. With that, I'll hand over to John Lattel.

If you could go to the next page, please. Thank you. Thanks, Grant. So Tony and Grant have covered off on their production and sales data in the top half of this slide. I will now talk to the financial metrics that you can see in front of you. Firstly, from the heading on the page, you can see that we returned net cash flow from operating activities of $16.7 million for the quarter, as Tony mentioned, and you can see that number in the 5B quarterly cash flow statement that we have also released today. At this point, it's important to remember that we are in ramp-up and we are following the accounting standards and we are capitalising our commissioning costs at the Kathleen Valley Processing Plant such that we have a new margin when we look at revenue less our operating costs. We will continue to adopt this approach until we declare commercial production at the Kathleen Valley Processing Plant, which is expected to occur in the current half year period. If we had declared commercial production, these capitalised commissioning costs would flow through to the profit and loss statement in the normal manner. We did have $5.3 million of cash commissioning costs in the quarter. And therefore, if we had declared commercial production at the processing plant, we would have recognised these costs as cash outflows from operating activities and returned an adjusted positive cash flow from operating activities for the quarter of $11.5 million. That is a strong result for our first full quarter of operations when the company is still in ramp up. We returned revenue for the quarter of AUD 89.8 million from sales of 81,341 tonnes of spodumene concentrate from four shipments during the quarter, as Grant mentioned. You can see that we've reported both a unit operating cost of AUD $1,000 per tonne for the December quarter on an SC6 basis and an all-in sustaining cost of AUD $1,170 per tonne also on an SC6 basis. There are a couple of points I'd like to make here. Firstly, this equates to a cost per tonne of USD $652 a tonne for unit operating cost and USD $763 per tonne for all-in sustaining cost on SC6 basis. It is pleasing to see that our average USD realised price per tonne on an SC6 basis was $806 a tonne for the quarter, which was higher than both our unit operating cost and our all-in sustaining cost. My final point here is that we have included our capitalised commissioning costs in both the unit operating cost and our all-in sustaining cost numbers so that you can get a true sense of how we're performing. Finally, in relation to our cash balance, at the end of the December quarter, we had a strong cash balance of $193 million. There are a couple of things I'd like to note here. In addition to the $193 million cash balance, we had another shipment of $12 million of product before the end of the year with those funds being received in January 2025. We also had 25,000 tonnes, dry metric tonnes of saleable concentrate on hand. We also have built and paid for the mining of significant ore stockpiles as planned. And at the end of the quarter, we had 1.3 million tonnes of stockpiled ore. In addition to that, we also have $25 million of cash on deposit with Export Finance Australia associated with a guarantee required under the power purchase agreement with Zenith. This has been cash backed for some time and we are working with the various parties concerned to have those funds returned to us and replaced with an alternative form of security. If you could turn over to page 10, please. So I'll now go into a little bit more detail regarding our cash flows in the cash flow waterfall that you see in front of you. And I'll move from left to right across the waterfall. So firstly, we start obviously with our opening cash balance of $263.1 million at the beginning of the quarter. We then have cash inflow from the sale of our spodumene concentrate of $91.2 million for the quarter. The next bar in the waterfall shows our operating costs for the corner, which were approximately $79 billion. And that's essentially our open pit costs, both our contractor costs and our owner costs, our processing and maintenance costs, our site administration costs and our corporate costs. And in the next bar, you see that we had interest receipts of $4.8 million. It's those numbers that give us our positive cash flow from operating activities of $16.7 million, which then, as the water pool then shows in the call-out box, you can see how that adjusts to $11.5 million positive cash flow if we were to adjust for the cash commissioning costs that I spoke about previously. Now, those cash commissioning costs you can see are in the next bar, which is the cash flows from investing activities. So I'll now move on to the next bar, which is project costs. Project costs for the quarter were $45 million, and they are essentially payments for the construction of the Kathleen Valley operation that we paid during the quarter. And these were payments, this $45 million was payments for items such as the paste plant, final payments to our structural and mechanical piping contractor, Monodelphus, mod squad payments and payments for spares and other items like that. I will stop there and make a couple of comments here. So last quarter we said that we had around $65 million of project costs to pay for and that this would be wrapped up in the December quarter. What we now see is that this amount is actually approximately $10 million lower as some of the project provisions that we had were ultimately higher than we required and combined with our continued strong contract management. But it will take longer for the project tile to be paid out as we finalise things like final insurance premiums, commissioning of the paste plant, finalisation of the construction training fund levy and release of project retentions. But what this essentially means is that we have a lower project spend and it stays with us for longer. It's a good outcome. The next component of the waterfall is other capital of $28 million for the quarter, and the majority of this spend is underground dams. general sustaining capital. We are in a development-intensive phase of the underground now, and I expect that the quarterly cost for capitalised underground spend will not be as high in FY26 and FY27 as we have seen in the current quarter. The reason for this is that in FY25 we have expended the capital requirement to establish access to the top of the ore body, being, you know, vent rise, decline, et cetera, in advance of stoping, which will commence around April 25th. Finally, the last bar of the waterfall, we have the lease and higher purchase costs, which includes the lease payments we have for our right of use assets, with the largest of those being payments for the power station. And this brings us back to our strong cash position that we see at the end of the quarter of 192 million. And having said that, I'll turn back to Tony.