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.

Thanks, John. And thanks, Grant. If we can go to the next slide, please. I do want to wrap up before we open up for Q&A. And in saying that, I think with the listeners, the safety continues to be a priority and ESG remains at the forefront. And as I mentioned in my opening piece, this is an enduring and continual focus for the company and all mining companies for that matter. Our spodumene production and ship for the quarter of 81,341, sorry, our shipping for the quarter of 81,000 tonnes on a dry metric tonne basis was strong and tantalite sales have commenced. Our revenues of $90 million approximately with a positive net cash flow of $16.7 million. Again, a great result for the first full quarter of production. And importantly, we've got $193 million of cash. And John elaborated on some of the other funding amounts that are coming in, especially the receivable that we shipped in December but haven't received the funding in January. On the ramp-up side... This continues to be a focus and a strong outcome. It's meeting an exceeding plan, but I do want to say to the listeners that As I sort of alluded to, recovery is the main focus here for us, and we continue to push this and push it hard. And we're optimising and testing things as we go. In fact, in the end of December and in January, we put through the plant some of the transition material from the mining. And this transition material is material that is high in contamination, but it's still very good grade. Now, typically this product would have been put through our oil sorters, which we then stopped as part of the optimisation work. And we're seeing whether we can either blend it through the high grade or the clean oil, or we can run it as a discrete product. So we've done some test work in January to understand the performance of this product through the plant. The key operating metrics, again, are a strong outcome. Our all-in sustaining costs and our unit operating costs. Our productivity per jumbo of 317. And our plant performance, both the mill availability, which is now pretty well on target to what we expect in normal operation, and after five months, and our recovery of 59% in December, and we're continuing in January, notwithstanding the trials that we've done with the transition material. And finally, just to finalise this presentation, we maintain our guidance that we provided the market in November, but also noting that we've deferred $5 million of capital from H1 into H2. So in summary, strong delivery, solid financial position, and a robust foundation for the future value creation. That summarizes our position at the moment. Thank you.

And now I'll open up for Q&A. Thank you, Tony. If you have not yet submitted your text question or joined the live audio queue, please do so now. I will introduce each caller by name and ask you to go ahead. You will then hear a beep indicating your microphone is live. Our first question comes from Levi Spry from UBS. Levi, please go ahead after the beep.

Yeah, g'day, Tony and team. Happy New Year to everyone. Thanks, Levi. A couple of questions from me. So maybe just starting on the market, there was a story going around a few days ago about... I think it was SQM potentially realizing a price in a $900 range. Can you give us a bit of insight into what you're seeing from customers since we've come back from Christmas? I imagine, and just, I guess, remind us when your next ship is set to sail.

Yeah, look... Yeah, look, Grant did a piece on the market outlook. Just to reiterate that, we are seeing strong inbound interest in Spodumene, no question. I won't comment on the specific auction that SQM did, but we also heard one that Albemarle did. There was some press on that yesterday. I mean, that's very positive. And as Grant mentioned, there is a deficit in spodumy in the market, notwithstanding where the chemical prices are. And we presented a graph from Wood Mac yesterday. in our AGM that showed there's a continual deficit in spodumene into the future. So our next shipment's in this month. I think it's arriving to Geraldton either today or tomorrow. And it'll be our largest shipment so far. So again, we're seeing very strong demand

Okay, great. Yeah, thanks. And just this idea of optimising the business, the asset, the oil body for the concentrate grade, can you just talk me through that? So 5.2% now, but all the metrics that you're reporting are on a 6% basis, so production and costs. Is there any... Why wouldn't this just be a 5.2% increase mine assuming you get the delta in the additional volume but reduced realised price and it evens itself out can you just sort of talk us through that and how you're thinking about or how you're optimising for that I guess

Yeah, that's a good question. Look, I think we touched on it a little bit in our November update, but also in the course of this discussion. We're trialling the transition material to see what impact that has on recovery. For us, we are continuing to optimise the circuit to understand What grade? We know the relationship between grade, mind grade, and recovery. The better the grade, the better the recovery. And we're seeing some of our competitors at times increase their mind grade to get a better recovery. So all those trade-offs... We've only been in operation five months and we're trying to zero in on what is that optimal range for con grade. Is it 5.2? Is it somewhere between 5.2 and 5.5, right? You know, we have produced 6% con, but I think we're coming to the realisation that somewhere between the 5.2 and the 5.5 could be optimal, but we're still working that through.

And Levi, just as Grant here, I mean, we use a 6% basis just because it's what the industry standard is, not because that's necessarily the target.

Yes. Yeah, got it. Thanks. Thank you. And maybe just to sneak one in, so just thinking about... You've given us cost guidance for the second half, but you're obviously still in ramp up and the recovery is the key piece there. And the underground hasn't come in yet. So when will you be in a position to update us on, I guess, more steady state sort of cost base together with that underground mining costs piece when you're fully ramped up and running only on underground ore from... Start of it by 27, I think, is the guidance.

Well, we've provided guidance for the rest of the half in November. In July, we'll provide guidance for FY26. So I think between now and then, your best target is the guidance we've given you, right? And then we'll give the market the view of what the underground will look like as part of our FY26 guidance. And we're starting stoping, as we mentioned, in quarter four of this financial year. So we'll quickly realise, and we've got a fairly good handle on what our operating costs are underground, given what we've seen so far.

Our next question is from Hugo Nicolaki from Goldman Sachs. Hugo, please go ahead after the beep.

Oh, hey, Tony. John Grant. Happy New Year, and thanks for the update. Congrats on, obviously, the ongoing ramp-up performance improvements you've seen to date. First question, just appreciate you're still in ramp-up and you're looking to optimise some of your costs going forward, but just given the run rates you've been able to achieve in the quarter... Are you able to give us a bit more of a go-forward breakdown of where you're seeing things like processing costs and costs of the open pit?

Yeah, I think, and I'll let John step in here. For me, the open pit mining, I mean, we'll conclude the open pit by the end of this year, early next year. So we're at sort of peak production now. So there's nothing untoward there. And in terms of processing costs, as I mentioned, our tons through the mill is pretty well at our guidance level now. We've gone 2.3 million and we're sort of doing just over 2.4. So we're pretty well there now and we'll call commercial production, as John mentioned, in this half at some point. So, look, I think, Hugo, to answer your question, we're not that far away from what we consider to be steady state.

Got it. All right. Yeah, thanks, Tony. I appreciate it. And then we already, previous question touched on the possible upside around spot pricing at the moment. I guess just looking for an update, though, around where you're at with conversations with either the banks or LG in terms of the optionality on that extra $100 million of indebtedness capacity. And if, you know, I'm not saying necessarily to use it, but, you know, if you did, what sort of timing that you would have access to potential possible additional funding there?

Look, Hugo, I think the word to note is optionality. And we do have a fair bit of optionality that we could pull if we felt the need. But at the moment, the focus has been very much on delivering what we've got and which we're doing. So there's a facility there that we could exploit if we have to. But at the moment, we're not focused on it.

Thank you. Our next question comes from Reg Spencer from Canaccord. Reg, please go ahead after the beep.

Thanks, Tony and team. Congrats on a pretty good quarter from a production stance. I just had a quick question on the capital. If I could just clarify that you've got 11 million Aussie of construction cab techs yet to spend over, say, the next six months, whatever that period might be. Can you tell me what your sustaining CapEx budget is for the next six months and then what you expect that to be once you achieve steady state in the underground?

Tony, do you want me to turn it on? Yeah, take it on, John.

So, Reg, you're right. Our cash outflow that remains for the project is $11 million of cash. the door, that is true. In relation to if you're talking about our capex spend being our underground development spend, I mean you can see I think in this particular quarter it was circa $28 million which you know you can extrapolate that as you see fit but broadly this is the capital intensive year and we you know we do expect to see a decent drop off in the capitalised underground development spend as we look forward to FY26 and 27. I certainly don't expect it to remain at, you know, current levels.

Yeah, okay. Yeah, got that. So that underground, the $28 million in underground capital you mentioned, that's, yeah, okay, development of the underground and not necessarily operating capital when you're in the underground.

So that is the underground development cost. That's correct. That's the capitalised piece. So that's essentially the creation of the underground asset. In addition to that, we obviously do have some sustaining capex as well.

Yeah. And the operating... Are you able to... Development will be in the operating cost?

Because that'll be... Yeah, got it. Thanks, Tony. Sorry, just apologies for harping on about it. And just on that actual sustaining capital number, are you in a position to provide some... I'd post this to where you expect that to be once you're at steady state.

We provided you some guidance in our November update, Reg, which showed that we broke the sustaining capital down into what we feel is what ongoing PPE, sustaining capital, plant and equipment, and then what is the sustaining capital for the mine. And I think if you use that figure, that should be a good proxy

Thank you. Our next question comes from Stuart Howe from Bell Potter Securities. Stuart, please go ahead after the beep.

Hello, Tony. Congratulations on a really good quarter. Just a couple of questions. Firstly, on the Romstock files, you talk about the clean and all sort of product. Could you just remind us that all sort of product, how does that work? Has that been sorted? Is that ready to process? What's the differences between the two products in terms of how you treat them in grades?

Yeah, so the all-sorted product is already mined and stockpiled. So we've got clean oil and we've got OSP material. So it's all ready, that money has been sunk and it's ready to use. The reason it's been put to one side is, as I mentioned in my presentation, Stu, it's to do with grade and contamination issues. So how much of the host rock has diluted the clean all? And it can range from 15% to 30% dilution, right? So, um, What we did, our initial thoughts was we would all sort that material and then put a cleaner product and bring the contamination down to the clean all spec and then put it through the plant and blend it in, no problem. But we've also considered now, well, why don't we just put it through the plant as is? as a discrete product and batch treat it, which is some of the test work we've done in late December, early January, and see what result that has on product grade and recoveries. So we're still trying to optimise that, but that's the intention. We can either bleed it in as we go, because it doesn't impact the plant materially, or we can batch treat it. So that's what we're optimising at the moment.

Yeah, I just want to confirm that it hadn't already been all sorted and still needs further processing or, as you say, blending in. And then secondly for me, just on recent FX weakness or Aussie dollar weakness, I'm just wondering, can you extract the full benefit of that through your current off-take contracts?

Yes. Go ahead, Grant.

Yeah, Tony, as I was just going to say, the industry standard is to sell on US dollars, so we get the full benefit of that. Obviously, there is a relationship between US dollar strength and commodity prices, but at the moment, that has been definitely a tailwind for us.

And I think it's important, the conversions that we've done for you in our presentations was based on the quarterly average of FX, which is 65%. We know the spot price is lower than that today and has been for a few weeks now. So that's even further upside.

And just a quick final one, if I may. The underground mining obviously is going very well. That first stoping scheduled for mid-2025, what are the, I guess, key milestones there to get to that first stoping? Your development rate's now about 7.3 kilometres. Do you just have to continue doing what you're doing? Is there anything else you should look out for?

Yeah, there are a couple of enablers, I'd call them. Our ventilation work. in order to facilitate the stoping. And we're well on track with the ventilation work. In our quarterly report, you'll see some of the pictures of the raised boring that's been underway. So that's well on track to be in place before we start stoping. The second enabler is the paste fill. And whilst we won't need a first stoping, not for a while, the paste fill plant is done. It's built. We just now will commission it when we're ready to start stoping. So they're the two big enablers, I think, for steady state production stoping.

I think, Tony, just to add this grant here, we've also done the work already to open up various headings, right? And it's really the decision we made around the new mine plan to defer the stoping until April was really driven by making sure that when the gear arrives on site, it's 100% productive from day one and there's not gaps in its weight. So, you know, we could have started stoping in November, but it's not, you know, it's not the most efficient way of doing it. So we're making sure we've got enough headings open so that equipment is fully utilised on site from day one.

Yep. Our next question is from Glyn Lawcock from Baron Joey. Please go ahead after the beep.

Hi, Tony, it's Glenn. Happy New Year to you and welcome back from France. I'm not back yet. I just wanted to clarify... Oh, you're still back. All right, we'll keep enjoying it then. Just a point of clarification, the Realize price, is that a SIF price or an FOB price that you quote, the 806 for the December quarter?

It's a SIF price.

OK, so... Your oil and sustaining cost of 763 excludes freight. You mentioned it doesn't include sea freight. What's the sea freight running at at the moment?

Yeah, good question, Glenn. I'll make two comments, one of which you didn't ask, but I'll use the opportunity to reinforce it. The 806 is also the 30,000 tonnes of provisionally priced product in there. Unfortunately, 31 December 2024 was probably the weakest pricing point in the market so far. And that has been flowed through as a mark to market adjustment, which we don't expect to realize. But the question you did ask on freight, I mean, it depends on the size of the vessel. But as you can see in some of the narrative we've been sharing, we are focused on trying to parcel our own shipments to customers on larger vessels. And that's allowing us to pull the freight down from the kind of $29 to $30 a ton down as low as $19 a ton. So the focus is very much on efficiency.

Okay, so you really should be comparing sort of $783 to $793 versus the $806. And then the $806 has a provisional pricing hit in it as well. Yep, that's fair. And then just to clarify again, all your offtake is linked to chemical indices as well. So, you know, it looks like depending on the chemical indices you use for the December quarter, you've got anywhere around 8.5% give or take as a linkage. I know there's a provisional pricing adjustment in there as well. Is that fair? Is that the way to think about it?

Look, yeah, I mean, it's mathematical, so it's fair. Obviously, you know, the first this quarter here has had a different mixture to what you expect going forward. There's been more spot activity in this quarter than there will be going forward. But you're right, the long term offtakes are all referenced against a chemical at this point. However, as Tony talked about, there is strong inbound demand and I think the market is shifting away from that at the moment and we'll see how that tracks.

So you may do what Pilbara did and move everything to linkage to the spodumene indices then? Is that possible within your contract limitations?

Yeah, I mean, look, a contract's a contract until you negotiate otherwise. But, Luke, the focus at this point is to make sure we're driving our costs down and being efficient. But, of course, we don't leave any stone unturned.

Our next question is from Hayden Berstow from Argonaut. Hayden, please go ahead after the beep.

Yeah, thanks. Well done on a good quarter, guys. Just a couple of questions for me. Just on the product, Are you out of any pressure to push that product grade higher, or is the current customers you're selling to relaxed about it? And then the follow-on from that, is Tesla and Ford more restrictive on what the minimum sort of product grades are likely to be? Or do you think over through this process of getting to target recoveries, you can worry about the product grade later?

Yeah, thanks, Hayden. Look, I mean, fundamentally, the contract, this specification is on contract, so there's no issue there. It's in line with many of our peers. I mean, others produce a very similar product. In fact, there's people who produce it below this and sell it successfully. So there's no issue for us. And at the moment, the industry uses a linear price adjustment, so there's no penalty for doing so. So if you can improve overall lithium recoveries and produce more

Okay, great. I'll leave it there. Thanks.

Our next question is from Melanie Burton from Renuters. Please go ahead after the beep.

Hi. Hi. I hope you can hear me okay.

Yes, we can.

My question is, yes, thank you. At the inauguration this morning, We have seen the US administration confirm they're going to roll back their Biden era EV subsidies. I'm wondering, do you see any impact on your customer base or on the market in general?

The way I listened to the speech quite extensively last night, my time, and the emphasis was on removing the subsidy, but I think the President mentioned that he wanted the consumer to have choice. So that boils down to ensuring that consumers The EV suppliers can provide a competitive product from a price perspective, but also a competitive product from a performance perspective. And we're confident they can, given what we see coming out of China and other places. So therefore, you know, longer term, I just don't think it'll be an issue on demand.

Wonderful, thank you.

It's Grant here. I think it's also important to keep in context, you know, the relative size of markets, right? So China last year grew 40% year on year. It accounted for 11 million out of 17 million EV sales. So, you know, that's about 65% of the market. The comparable number for North America is 1.8 million. So it's growing at about 9%. One of the key things is the driver of demand in China continues to be towards that transition to EVs. And what the Chinese manufacturers have identified quite astutely is that the rest of the world at the moment is about 1.3 million units. And it's growing at about 20%, 27% year on year. And within two years, that'll put them higher than North America as a market. And that is the target that they are chasing at the moment. having been locked out of the North American market.

Yes, great. Thanks for that additional context.

Our next question comes from Sam Cannellano from Wilson Advisory. Sam, please go ahead after the beep.

Yeah, good afternoon, Tony, Grant and John. Look, hopefully a fairly simple high-level question.

Obviously, we had a few detailed questions today, but you guys provided a pretty detailed operational update and guidance back in November. So my sort of simple question is, apart from the $5 million slipping into next year on the project spend, has anything happened between the end of November operationally to make you... You've obviously stuck with the guidance, but to make you think, yeah, there might be a few changes from what we said in November? Yeah.

No, we're holding firm to our guidance. Other than that deferral of $5 million, which was moved from the first half to the second half, we're on target. Sam?

Yep. Great. That's what I expected. Thank you.

Our next question is a text question from Adrian Rouseau. The question is, does the net operational cash figure of of 16.7 million include costs like freight, royalties, et cetera. If so, you are making money at a spot price far lower than market anticipated. Why do you think that LTR is doing far better than most anticipated?

Thanks, Adrian. John, do you want to answer the first part of that question?

Yes, certainly, Tony. So, yes, all of the operational costs are captured in the cash flow from operating activities. That's a fair comment, and I'll hand over to you to answer the second part.

So, well, why are we doing better than the others or anticipated? I think... Look, for us, we've said all along that we've put a lot of effort into the design of the plant. We've put a lot of effort into how we plan and how we execute. And I think we're starting to see the fruits of that. And, I mean, it's a tough gig starting up an operation and a development company. And we're now beyond that. We're now into production well and truly. And we'll see further benefits come through as the good team that we've got continues to optimise and improve.

Our next question is a text question from Prentice Saunders from Pendle Group. What are the steps in the process towards improved recoveries? Which elements of the recovery are the most challenging?

Thanks, Brenton. There's a fair bit in this question. What we've established in the five months that we've operated is it starts at the mine. So the grade that you deliver into the plant is very critical. As I mentioned earlier, better grade, better recovery. The contamination or hygiene is super critical. So we need to produce product that has that low contamination of less than 5% in our case. Then as you move into the plant, what we're finding is the second area of opportunity is grind size. What do we grind the product to, to otherwise maximise flotation? So we've got a design grind size that we've now hit and we're starting to see the improvements in recovery. The third element is minimising the slimes production, so grinding too fine and therefore not being able to recover it, right? So we've got to minimise the amount of slimes that we lose and therefore lose lithium. And then finally, there's the whole science of flotation. The mass pool, we're targeting about 15% to 18% mass pool. And, you know, an overall flotation recovery of 90%, but an overall plant recovery of, as we've said, targeting over 70%. So there's a few bits and pieces. On the whole flotation area, I can go into reagent selection, froth heights, and all the other bits and pieces. But simply put, they're the major areas that we are focusing on, starting from the mine right through to the plant.

Our next question is a text question from Daniel Marinescu. When will you start paying back debt and interest?

Now, I can respond to this, but I'll let John do that.

Yeah, certainly. It's a good question. So obviously, I think as everyone's aware, we've got two debt structures at the moment, one with Ford and one with LG. So if I tackle LG first, the LG interest will be capitalised for the first two years, and essentially the There'll be no debt repayment as such under that. LG may elect to convert. If they don't elect to convert, it will be repaid in one bullet payment at the end of the tenor, which is at the expiration of its five-year period. That's the LG debt. In relation to the Ford debt, we are currently capitalising the interest, but in terms of debt repayments, that will commence at the end of the quarter following the declaration of supply commencement under that offtake, which I think, Grant, we've given some guidance to the market, is likely to be the September quarter this year at the earliest.

Our next question comes from Paul Krasnoff. Regarding dividends, Tony and Tim, how likely and when and how much?

Paul, thank you for that question. That surname is quite a famous surname. Dividends, I think my chairman asks me about dividends every day. We have – I think we need to put things in perspective. We've done a capital allocation strategy, which the board has now sanctioned, and the focus – is very much on debt repayments and where we can and growth. So at this stage, it's too early to call the dividend piece, but believe me, it's not too far away in terms of our thinking, given our chairman's very keen on it.

Our next question is a text question from Mark Heenan. 246 tons of tantalite concentrate produced. Have you had any off-take customers lined up? Can you provide a price guide?

Yes, we do.

We have made shipments under an off-take agreement. So yes, we do have customers taking the product. In terms of pricing, Luke, there is an index for tantalum, which is available. overall price realisation. It is for a different quality of product. So there is some upgrading and processing required. So we wouldn't realise all of that. But in terms of the top line number, that's effectively what the industry use for payments.

Our next question is a text question from Alan Peeth. When will the shareholders be free from the shortage in our great company? Or do we have to wait until they finish manipulating the SP?

Alan, thank you for the question. Look, I think shorting is part of the market. I'm not sure we'll ever be free. But look, the best way to deal with the shorting is to deliver on the outcomes. And that's where our focus is. Whether the investors decide to short or not is a separate decision they have to make based on the performance of the company. So we'll continue to deliver. We'll continue to do what we say. And the shorting will take its own path.

Our next question is a text question from Scott Geek. Is Liontown looking to develop downstream processing of lithium? Is this what is the timeline for this?

I'll let Grant answer that.

Yeah. Yes. So, I mean, as Tony touched on in his opening slide, you know, on the strategy side, we do continue to do work with both LG and Sonotomo on a downstream project, one focused around Japan and the other in another location in Japan. Asia. That work has its own timeline, but at the moment, both projects are in the pre-feasibility stage, if you like, trying to put together some initial numbers in order to make an investment decision as to whether to continue them or not. Clearly, what is going to come out of that is that and therefore we will need to see an improvement in price expectations for refining to be built and funded.

Thank you. There are no further questions.

Well, again, thank you to the listeners for listening. for being with us today. And I'll just summarise by saying we will continue to operate as best we can and deliver what we say. So thank you, everybody. Thanks to John and Grant as well.