Liontown Resources Limited

Welcome to Liontown's half-year results. Following the formal presentation, there will be a Q&A session for the investor, analyst and media. Participants can ask both text and live audio questions during today's call. To ask a text question, select the messaging icon. Type your question in the box towards the top of the screen and press the send button. To ask a live audio question, press the request to speak button at the top of the broadcast window. The broadcast window will be replaced by an audio question interface. Press Join Queue and if prompted, select Allow in the pop-up to grant access to your microphone. If you have any issues asking a web question today, a backup phone line is available. Dial-in details can be found on the Request to Speak page or on the homepage under Asking Audio Questions. To view documents relevant to today's meeting, including more detailed instructions on how to use the platform, select the Documents icon. A list of all available documents will appear. When selecting the document, it will open within the Lumi platform. You will still be able to listen to the meeting while viewing documents. Text questions can be submitted at any time, and the audio queue is now open. I will now hand over to Mr. Tony Ottaviano.

Thanks, Billy, and good morning or afternoon to listeners. Thank you for joining us today. Joining me, Tony Ottaviano, the Managing Director, is John Laddow, our Chief Financial Officer, and Adam Smith, our Chief Operating Officer. Today's presentation is really a build from our 21st of January presentation on our physical, quarterly and cash flow results. We have now presented today our half-year financial results. So if we move along to our next few slides, there's the important information. We'll get to the first slide, please. The next one, please. Okay, just summarising, we should start with our safety and ESG performance. And again, I'm very pleased to announce some very good results. We know the journey for safety is never complete and we're vigilant and In fact, my message to our staff today on these results started with a safety measure that we need to be vigilant in how we focus on the wellbeing of our employees, our contractors, and all our other supporters and partners. In terms of our ESG, we've fully halved. We delivered over 80% renewable power from our hybrid power station. and we continue to optimise the performance of that hybrid power station as we build our power consumption, our power draw from the plant. Our female participation in our workforce is in a strong 23%, and we continue to focus on that. We had International Women's Day only last week. Also very, very pleasing for me personally is we've awarded two significant Jawaal contracts over this period. One being one of the largest Aboriginal contracts in the gold fields with our ROM loading contract. So I'm very, very pleased to be able to announce that today. And we achieved three significant environmental approvals over that period as well. If we go to the next slide, please. I'm just summarising the key operational and financial metrics for simply five months of operation, which I'm very pleased to announce. We produced almost 117,000 tonnes of concentrate and shipped 92,000 tonnes of concentrate. Our lithium recovery for the period was 52%, but in December we achieved 59%. And I'm pleased to announce today that we've gone even better over the next few months, which Adam, our Chief Operating Officer, will allude to in his section. We've built some strategic stockpiles ahead of our transition to underground mining of 1.3 million tonnes. On the financial side, I'm pleased to announce we're now earning revenue in $100 million, which is a nice round number for the period, and we realised a price of $8.11 for that half. On the second quarter operating cash flow, again, as we mentioned on our 21st of January announcement, we're very pleased to announce that we did get a positive operating cash flow for that period. Again, a greater result given we're in ramp up. We've got a strong cash balance of $193 million. at the end of December 31st, and our unit operating cost is US$652. And I think it's important to note for the analysts and for the media on this call that this operating cost is based on a 6% concentrate. So when you do your benchmarking, please normalise for concentrate grade. The second element I will note is the exchange rate we used for that is at 65 cents. Okay, next one, please. Operational performance, I'll now kick over to Adam Smith.

Good morning, everyone. I think, as Tony has highlighted, we've only been running five months, and I think the key metrics sort of speak for themselves on the screen. Big ones for me are obviously the plant availability and recovery. What we're achieving, and this is not boasting, but more just a quietly confident view on the world, what we're achieving or have achieved with our team and our plant on site the first five months is what many operations have are operating at after five years, so with 92% availability and sort of 59% recovery. That performance has continued through January and February with similar numbers recorded in January. That recovery has stepped up to 64% average in February. So we're well on our way to that 70% target that we put there in front of ourselves. And we actually had nine shifts. during February that exceeded 70%. So it's not a pipe dream. It's actually real. And the team on site is working out of their skin to make this happen. In terms of ramp-up and production, the annualised run rate there at 2.4, we're actually exceeding that already in the coming months. Underground is performing exceptionally well with our partner Burncut, and we're very much getting ready to start stoping and paste-filling underground. All the key equipments and contracts and everything that needs to facilitate that underground works is in place or will be in place to start stoping and paste-filling in April and May. So we're well on track there. to meet that goal of having that underground wall coming out from underground. And I guess the big point there, re-commercial production being declared in January, just reflects the performance of the plant and the operation in general over the last sort of five, six months of operation.

And I think it's important just to build on that commercial production declaration. We base that, as you should, on data. data analysis, and then what information we were able to glean. So we wanted to be very deliberate and cautious around calling commercial production, and given the data was very, very positive, we had the confidence to call it.

Next slide, please. So just building on those earlier comments, geology-wise, I think we've had excellent reconciliation out of the pit. From a tonnes perspective versus a grade control model, we're talking like 99%. In terms of metal, about 88%. So we've got a lot of confidence in what we're doing in the pit in terms of mining and reconciliation. That's continuing and flowing through to underground. We've got our second program of underground grade control drilling underway now to stay ahead of the underground sloping that's just about to commence. The pit continues to perform. Contractor IMC, like Burncut, is performing exceptionally well on the pit, along with our team driving that team. We expect to be finished the open pit as scheduled by the end of the year. The stripping ratio has come down as we've worked through the large ore zone that we've just finished mining, and all cleanliness remains a massive priority, and it's something that, like every other lithium operation, I think, in the state, we've learned a little bit about over the years. last 12 months, and we continue to focus on that. Underground, look, no surprises in underground. Burncut doing an exceptional job. We're targeting stoking to start, as I said, next month, with Pacefill and final commissioning of the Pacefill plant targeted for late May. That $100 million plant is ready and waiting for commissioning. The process plant, as I say, continues to be in a ramp-up phase, but the team and, I guess, the support team off-site continues to push that plant as hard as we can. We're not just sitting back, though, and accepting what we've got. There is a small sustaining work happening, and we're targeting everything to do with recovery that we can improve on and specifically operability. So there's a fair bit of work happening there to really set ourselves up for the next phase of success.

And Adam's going to slide. Okay, so I'll now hand over to John who will go through our financial results.

Okay, thanks, Tony. In front of you on page 10 of the presentation, you'll see the Liontown profit and loss statement for the six months ended 31 December 24. As Tony mentioned, we recorded a loss for the period of $15.2 million. I'm going to walk through a couple of points to explain some of the key items in the P&L. We commenced production at the Kathleen Valley operation on the 31st of July of 24, and in the five months to December 24 generated sales of $100 million, as Tony mentioned, from the sale of 92,172 DMT of spodumene concentrate. You can see in the profit and loss statement in front of you that we had a nil gross profit for the period, and that really is just an accounting construct. We were in ramp-up and pre-commercial production at the Kathleen Valley Processing Plant for the period to 31 December 24. And whilst we're in the pre-commercial phase, we are required to recognise our revenue in the P&L for the period, and that's exactly what we've done. In relation to our operating costs for the same period, we have used a nil margin approach, which sees us recognise sufficient operating costs to offset our revenue with any excess operating costs being capitalised to assets under construction as a commissioning cost. To arrive at a new margin outcome for the period ended 31 December 24, we capitalised $39.3 million in commissioning costs for the period. Importantly, the Liontown Board, as Adam mentioned, approved the declaration of commercial production at the Kathleen Valley Processing Plant with effect on 1 January 25. Our board have approved the declaration of commercial production at a processing plant because we are producing commercial quantities of concentrate and the plant is performing as intended with availability, throughput and recovery all performing strongly and production actually tracking ahead of forecast at 31 December 24th. As a result of the declaration of commercial production at the plant from the 1st of January, there will be no further capitalisation of commissioning costs in the profit and loss statement going forwards, and all operating costs, including depreciation on the plant, will flow through the profit and loss statement in the normal manner. The rest of the items in the P&L are pretty standard, but I will touch on two of them. Firstly, the fair value movement on the financial instruments for the period of $43.7 million. This relates to the convertible notes issued to LG Energy Solution on 2 July 2014. Because LG Energy Solution can convert their debt into shares in Liontown from the 2nd of January 2025 onwards at $1.80 per share, this is effectively an option for LG Energy Solution, and that option has value, and we have to get that option externally valued as a result. When the convertible notes were issued on the 2nd of July of 24, this option was valued at approximately $68 million, and that was effectively taken off the face value of the debt owing to LG Energy's solution, and these were both shown as current liabilities. At 31 December 24, the value of that conversion option has now decreased to $25 million, which creates a gain in the profit and loss statement, The value of the conversion option has decreased primarily because of the decrease in the company's share price between the 2nd of July and the 31st of December and the expiration of time, meaning that there's less life in the option. The last item I'll touch on in the profit and loss statement is the foreign currency loss of 30.4 million. This has been driven by the significant devaluation of the AUD-USD exchange rate across the period from 67.15 cents on the 2nd of July to 62.17 cents on the 31st of December, meaning that the Australian dollar value of the US dollar debt increases. Of course, we do have a natural hedge here, and that is that our revenue is denominated in US dollars. So if I can go to the next page, please. On this slide, you can see that we returned a prima facie EBITDA of $66 million for the period ended 31 December 24. However, we do need to acknowledge that we are in pre-commercial production and ramping up the plant during this period, and as a result, we capitalise $39 million of commissioning costs as discussed. In steady state, these costs would typically be considered operating costs, and taking this into account, our adjusted EBITDA for our first half year of production was $27 million. It's a good result for the first five months of production in a challenging price environment for spodumene concentrate and lithium chemicals. This slide then provides a reconciliation of EBITDA to the $15.2 million loss that we made for the period. I have spoken about many of these items that are displayed on the chart, but what I haven't spoken about yet is depreciation and amortisation. So depreciation and amortisation charges for the period were $88 million. And in reality, this bar really should just be called amortisation as there was very little depreciation. And the amortisation all related to our open pit mining at the Kathleen Corners open pit. It was, in essence, amortisation of the capitalised pre-strip costs and amortisation of the capitalised deferred waste costs. These charges are necessarily high because the open pit has a relatively short three-year life, and the amortisation of these costs only commenced in February 24 with the declaration of commercial production at the open pit. So if I could move on to the next slide, please. So in front of you now we have Liontown's balance sheet at 31 December 24, and there's just a couple of things I'd like to point out. Firstly, as Tony mentioned, we've got a strong cash position of $193 million at 31 December 24. You can see in the balance sheet the substantial growth in inventories that we've had, where in six months our inventories have grown by $107 million to approximately $130 million at 31 December 24. $94 million of this inventory balance at 31 December 24 relates to ore stocks, where we have built a stockpile of ore, and that's both clean ore and ore sorting product, or OSP, of 1.3 million tonnes, to assist with our transition to underground operations. So I'm going to pause here for a moment and note that we have a working capital deficit at 31 December 24, and by that I mean an excess of current liabilities over current assets. But I want to stress here that this is a technical working capital deficit only. What I mean by that is it is caused by us having to classify the debt owing to LG Energy Solution as a current liability. We have to do this because LG Energy Solution have the option of converting their debt into equity in the company from the 2nd of January 2025 onwards, and therefore we don't have the unconditional right to defer settlement of that obligation for 12 months, which is the necessary requirement for this debt to be classified as a non-current liability. What I really want to stress is that even if LG Energy Solution were to convert this debt, it would have absolutely no impact on our cash balances, and that is why it is a technical working capability Our property plant and equipment balance increased by $119 million during the period, and that was predominantly driven by material items such as capitalised underground development costs of $65 million, capitalised commissioning costs at the plant of $39 million, construction costs for the paste plant of around $30 million, with these costs being offset by depreciation and amortisation charges for the period. Touching briefly on our debt, our current interest-bearing liabilities include the debt host-owned LG Energy solution of $345 million, the value of the conversion option that I spoke about previously of $25 million, and a small amount of debt due to Ford within the next 12 months of approximately $15 million. Our non-current debt relates primarily to the debt and capitalised interest owed to Ford of $312 million. We also have non-current lease liabilities of 139 million, and they primarily relate to the right of use asset that we have for the hybrid power station on site. So if I could get you to move to the next slide, we have a brief slide on working capital. So the point of this slide is really to demonstrate that we have spent $94 million on building a 1.3 million tonne stockpile of clean ore and OSP, which we will draw down on as we transition to underground operations. In addition to that, we had 25 wet metric tonnes of concentrate on hand, as well as $20 million of receivables, half of which relate to product sales for which we have not received the cash at 31 December. So if I could get you to move on to slide 14, please. We now have our cash flow statement. Now, this slide is really self-explanatory, and I don't propose to go through each bar in the waterfall other than to note a few things. Again, I'll note our strong cash balance of $193 million in 31 December. And as Tony mentioned, we had positive cash flow from operating activities of $16.7 million in the December quarter whilst we were still ramping up the processing plant. Finally, I would note that there are payments for investing activities of $253 million outflow for the half, and these were all related to property, plant and equipment for items such as payments for construction of the processing plant, commissioning costs associated with ramping up the plant, underground development expenditure and general sustaining capital costs. So I'll now get you to move on to page 15, please. And what we're really providing here is a summary of the debt that we have. So firstly, we see the $300 million debt that we have with Ford plus capitalised interest. That's Australian dollar debt. And secondly, we see the US dollar denominated $250 million of debt that we have with LG Energy Solution associated with the convertible notes that were issued in July 24. The key point here is that both components of this debt is low cost and low government, and it's from our offtake partners. And having said that, I'll hand back to Tony. Thank you, John.

Very comprehensive overview. Again, I just want to reinforce this. this debt structure. It's not to be treated or conceived as a typical project finance facility. We do have the benefit of the low covenants and the low interest facilities. If we go to the next slide, please. This slide, I think what I'd like to convey is it may be a little early for Liontown. to be thinking around capital allocation. But again, we want to demonstrate to the market that we want to be ahead of the game and not catching up. So as a board, as a company, we've put our mind and we've had our capital allocation approach approved by our board so that we are confident as our return start, our cash flow starts building, how we manage our overall capital in managing this business. And there are three conventional pillars to this. There's clearly we want to support the business and continue to have efficient and productive operation. So the sustaining capital element of it is the foundation. But then the other elements to it are growth. And we've mentioned in our strategy we want Kathleen Valley to its full potential. And Adam's already spoken about some of the – incremental improvement projects that we're building now, but also we're screening because we want to lift our eyes above the horizon and screen for potential opportunities given the current market. We want to be strong in our debt management, and we've put a slide in there to demonstrate to you how this debt looks and then how we're going to approach its management. And then there's the shareholder returns. So the dividends, the share buybacks, and growth and debt management. All those three things contribute to a competing set of priorities that the board will manage with the management team. Next one, please.

I'll now hand over to Adam. Thanks, Tony. I think just to sort of build on what Tony was saying in the previous slide, we're very focused on being very resilient in this tough market. And the three key pillars that underpin that are continued business optimisation. We've already realised savings. These are real savings, $31 million to the end of December. That's in areas of both operating costs, labour. capital deferrals and there are no risk deferral. In other words, we can turn them back on as the situation demands. So we're definitely focused on saving money. As I mentioned earlier, and I realise this is a half yearly call, but certainly that focus on lithium recovery hasn't stopped at 31st of December. We are very laser focused on recovery and that's why I've highlighted that that recovery improvement continues to be a focus and it continues to improve. The 70% target that we put ourselves for FY26 is not aspirational. It's within reach, and we are chasing it. And there's a lot of time, effort, and what little money we have allocated for sustaining works is going on recovery improvements. In terms of the transition to underground, our underground team has been basically getting ready for the season for some time. Getting underground has, and with over 7,000 metres of development to date, it's all about getting into stoping and that transition from the open pit to stoping and to underground mining. And to enable that enormous amount of work, time, effort, preparation has had to go in so that we're ready to go. On a recent Demers inspection, they compliment us on how clean and tidy and just... organised our underground looks, and that's a real credit to our site team, and it also gives me a bit of confidence as to where we're going next, which is actually making ore out of that underground, not just pushing metres in. So we're very, very focused on that underground ramp-up, and everything we can do to enable that underground ramp-up is front and centre in our minds. We've obviously got the ROM inventory of over 1.3 million tonnes that John mentioned. A lot of that is transitionary, so we actually cover ourselves from when the open fit finishes and when we move to the moved to underground ore, and probably about half of that is OSP or sorting potential material. And we've already got initiatives underway to prove up how to process that, what we can process as direct feed, what needs sorting, and how we can best treat that material because it's a real part of our inventory. Thanks, Adam.

I'll just maybe add two more points to that last section. Firstly, the guidance we provided the market in November included three months of underground production. So we've built in what we believe are the operating costs of underground mining in that guidance already. The second point that I'll add, especially around this OSP material, I mentioned in our 21st of January announcement that we'd started trials in the plant that how to process this ore sorting material, which basically is contact ore and ore that is high dilution material. And for us, this is a very important part of our overall mix. And how the plant processes this, whether we blend it, whether we throw it in completely as is, or whether we all sort it or a combination of all three, is what we've been doing in January and February in testing the plant. And given how well the plant has gone and has given Adam and his team confidence that we can push this harder.

Yeah, I think that's a fair comment, Tony. I think it's a key focus of where we're going to, and the team has done an exceptional job on site in treating that all.

Okay. Next slide, please. Market update. Next, please. I think having just come back from Bank of Montreal conference, For Liontown and for what we can see in the market, the demand growth profile thematic continues to be strong. And there's nothing that gives us the impression that this will not continue. In fact, we're seeing elements of the demand profile exceed forecast estimations. And the one I want to draw out is energy storage systems. if we look at this and seeing what the growth we've experienced over the last 12 months and what has been projected, we see this as a tremendous growth engine for demand of lithium units. And just to give you a bit of colour, I don't know how many people have seen the recent cattle prospectus, but they're projecting a significant increase in battery shipments for stationary batteries. And if they're accurate in their forecast by the end of the decade, they believe that market will be as big as, in terms of lithium carbon equivalents, to the EV market today. That's how strong they believe this market will grow. Now, whilst there's strong demand, I know people view the supply side. But for us, when we look at the supply projects that are planning or were planning to come on in the next 18 months, we internally have doubts whether these projects will come to fruition. Given the current pricing in the market. So I might ask Grant if you, our chief commercial officer who's in the room, who might want to add anything more to this.

Yeah, look, I mean, maybe going a little bit future facing, which is EV sales and demand so far this year. I mean, we've seen pretty strong numbers come out in February, usually a weak point given Chinese New Year. But this year it fell a little bit earlier and we've seen 50% growth year on year in EV sales globally, but driven obviously a large portion of that in China. We've seen strong growth in North America despite the retro around tariffs, et cetera. We've seen 20% growth year on year in February. And we've seen, as Tony talked about, fairly large energy storage system awards in the Middle East go to a couple of Chinese players, which, you know, 20 gigawatt hours per project, which is very significant demand and roughly equivalent to what Kathleen Valley produces in a year. So, you know, I think we continue to see signs of positive demand, and now it's really around where does the supply come from to meet this demand.

Thanks, Grant. Next slide, please. Just to then now summarise, on the left-hand side you see our strategy. and ensuring that we bring it to its full potential. So we delivered the project on time and completed it in 19 months. We achieved strong EBITDA sales for the first six months and we delivered a positive operating cash flow for the December quarter. We continue to experience strong operational ramp-up to the point where we've called commercial production for the plant. strong balance sheet and strategic inventory build that will set us up for the transition to full underground operations. And we're working through, as we speak, our planning and our assessment of our next year's budget, which will provide guidance to the market in July as per required. And as we've already alluded to in the presentation, we expect to meet Okay, next slide, please. Okay, well, that brings the presentation to an end. I love this picture. It just demonstrates to the investors and the shareholders that if you look at it, it's got three-quarters of this drive is ore, is pigmatite. And the consistency of the ground conditions, the cleanliness of the rock support and the meshing, I think more to come. Okay, well, I'll hand over now to 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 Hugo Nicolaki from Goldman Sachs. Please go ahead after the beep.

Go ahead, Hugo. Hi, Tony, Adam. John Grant. Thanks for the update. Hope all well. First question just relates to the declaration of commercial production. Can you just confirm, is that just an accounting declaration or does that apply to your commercial offtake contracts as well, i.e. do you now need to start delivering to Ford and repaying that debt?

No, it's purely an accounting declaration as it relates to the plant. We've already called commercial production, as you know, on the LG and Tesla contract, and we're planning to do that for the Ford contract in July, as previously announced.

Got it. Thanks. That's clear, Tony. And then maybe one for John as well. Just have discussions progressed on potential for new debt capacity with potential lenders to maybe help improve that liquidity piece through the underground ramp-up.

Yeah, good question. I mean, I think we've made it pretty clear that we do have the capacity to secure an additional $100 million of Australian debt. You know, absolutely, we continue to look at what the best option might be for Liontown. So, you know, we are talking to a whole range of groups at the moment.

Are there any particular sticking points on just getting a new debt facility in place and not drawing it down? I mean, Dylan does want to see kind of more progress on the underground first or anything you can sort of talk to there.

No, not in particular. I mean, for us, the focus has been very much getting the ramp up and getting into steady state delivering. We've got a strong cash balance. We haven't made it a number one priority, Hugo. We'll continue to monitor how the market moves, especially pricing, given the impact that has on our overall cash balance. And it's a work in progress, really.

Got it. That's clear. And then just a cheeky third one, if I may. Adam, I think you mentioned the PACE plant spend was now about $100 million. If I go back to the EPC contract from May last year, I think the plant was supposed to cost $71 million. Any major changes there to call out and then maybe any broader commentary on how you're seeing costs at the moment?

That just reflects the overall cost. So the EPC contract, I think, was $70-odd million, but there's an owner's component to that. There's a whole bunch of other costs that ratchet into the overall cost of that plan. And that's all being paid for and behind us, Hugo.

There's no tail there. Yeah, it's finished in November.

Yeah, so there's no secret lots of money set elsewhere. That is the cost, and we've actually allowed for it, budgeted for it, spent it. And I think, yeah, commissioning is in 14th of May, if I remember it.

Thank you. Our next question is an audio question from Levi Spray from UBS. Levi, please go ahead.

Hello, Tony and Gene. Thanks for your time. Maybe a couple of quick, simple ones. John, DNA going forward. How do we think about that as you work through the open pit?

Yeah, that's an interesting question, Levi. What we sort of see looking forward is obviously the, you know, the amortisation of the capitalised pre-strip and the amortisation of the capitalised deferred waste. You know, clearly that's going to come to an end relatively shortly, but in its place now with the declaration of commercial production, we'll obviously start recognising the depreciation of the plant. And clearly as we ramp up the underground infrastructure In addition, we'll see, you know, amortisation of capitalised underground development spend coming forward. But I think it's fair to say that, you know, for FY25, you know, we will see, you know, you've seen what it is for the half. It will be, you know, slightly less than that for the full year. You know, there'll be the same amount again, perhaps slightly less. As we look across to FY26, probably, you know, similar, but we will see a drop-off Going forward, you know, obviously as all of the open pit stuff is fully amortised, we expect to see a really decent drop-off in amortisation depreciation charges, you know, from FY27 onwards.

Okay, thanks, mate. I'll try and go like that. And just operationally, Adam, I think you said recovery averaged 64% for February. Is that correct? And can you just give us a couple of other numbers that go with that? So was that on similar grades to last quarter?

Yeah, that's right. Yeah. There's a couple of bits to unpack there. That's on similar concentrate grade makes as in the December quarter, somewhere between 5% and 5.5%. That 64% also included, from memory, it was a three- or four-day trial processing that OSP material, which has lower recoveries and grades associated with it, based on that last trial. and still room to move there, but that factors all of that in, and it included those sort of standout shifts where we had over 70% recovery. So the messaging there, I guess, as I said earlier, was to try and highlight that whilst December was an excellent month, January backed that up and February continues to improve. And there's one other point that I would add, Levi.

When you are comparing us, is head grade or the feed grade into the mill is very important that you look at that when you look at recoveries. Because we know the relationship between head grade and recoveries. The better the grade, the better the recoveries. And we're achieving these, I think, great recovery results at a fairly modest head grade of 1.2, 1.25. All right.

Thank you. Our next question comes from Kate McCutcheon from Citi. Please go ahead.

Hi, Kate.

Hi, morning. Hi, Tony and John. I was going to ask about the capital return slide which you talked to. What was the catalyst to present that strategy now Or what gives you confidence that it's not premature given pricing has been pretty sticky. You've just declared commercial production. There's a lot going on. Just trying to understand the catalyst for bringing up dividends, et cetera, now.

Well, Kate, without sounding overconfident, we wanted to be confident. We want to be ahead of the curve. We want to demonstrate to the market that we are maturing as a company and mature, well-run companies have a capital allocation strategy. And we wanted to put it out there to tell the market that we're thinking in the right way. And as we increase our cash flow, improve our performances, that we will put money to work in the right way.

Okay, got it. And then following on from the liquidity piece, if spot pricing stays at these 840 to 870 levels, how are you thinking about the liquidity available? If pricing was to hold here for 18 to 24 months, would additional liquidity be needed in the form of that debt or other options? I know you have a more optimistic view on lithium prices to me and you did just allude that you wanted to look at acquisitions or screen for opportunities, I think you said, but as a bookend, just trying to understand that. your confidence in the balance sheet here or how we should think about it if the pricing doesn't bounce back.

There's a couple of points I'll make there. If the current spot price, both for spodumene, hydroxide and for carbonate, was to continue for another two years, Kate, I think you'd be asking that question to a lot of lithium producers. because we all know that it's completely unsustainable that this continues at these levels. When you look at the non-integrated refineries in China, no one is making margin, positive margin, no one. So it's a bit of a hypothetical for the next two years. But in the short to medium term, As I think we mentioned earlier on in the conversation, we are monitoring our cash balance. We've got a cost optimisation underway. We continue to prosecute that. We've got more levers to pull in order to preserve cash. On the funding side, we've got the $100 million Aussie facility option available to us that we can push in alongside LG. We will, when the time is right, commence discussions with others around that and potentially look at other options such as a revolver with the commercial banks. So, you know, we'll progressively look at this. But at the moment, we're in a strong position with our cash balance.

Thank you. Our next question is from Glyn Lawcock from Baron Joey. Please go ahead.

Hi, Tony. Hi. Thanks. I just want to – well done on holding the guidance. That's great. But if I just play it out for the guidance, it's probably if you include interest plus your capital – sorry, your corporate charge, which is excluded outside of your guidance, it's about a $100 million burn for the half, including also your $60 million of preferred capital that you've got. So you probably 40 million burn operationally and another 60 because of your capital lag. Is that about right? And the market seems to be looking at your net debt going up by about 100 million over this six month period.

I'll have to check the numbers. I mean, you skid maths. I don't know if it's right or not. I have to work it through.

I mean, there's a lot in that question, Glenn, to answer straight away. I'd probably have to take that one.

Well, maybe I can ask it a different way.

Yeah. Yeah.

That's fine. Maybe I'll ask it a different way. If you just assume the market is right, the brokers have all got their numbers right, and you do end up with cash now below $100 million by June, when do you put this facility in place, the extra $100 million, given that? Are you comfortable having your cash balance now down below $100 if you're going to be burning $50.5 million pre any lag in CapEx? And then maybe, Tony, can you also expand upon what are the levers that you can pull to to stem the bleed. And, you know, everyone's in the same boat. I totally agree with that. But right now, no one sees any upside short term. So we're just trying to understand what you can do to make sure you get through this.

Okay. Look, I think the safe way to say, to answer the first part of your question is we don't assume what the analysts are saying is our cash balance at the end of June is what you say it is. So that's the first thing. And secondly, in relation to other levers, well, we're five months or now seven months into operation. We're starting to understand our wear rates in our plant. We're starting to understand the consumption of key consumables like reagents and all the other components. that we use for processing. We've stabilised our workforce. There will be mining coming to an end and underground mining starting. So we're bringing all that together and we're looking at other options. You know, we're starting out Paceville. We've just secured our cement at a very good price. So we'll start factoring all those things in. And if we have to push further operating levers, we're confident we can't.

Okay. That's fine. And maybe just a very quick one to finish on. Just the admin charge of $20 million roughly for the half. It's been there the last three halves. Now, is that sort of what it now takes to run the corporate center, about $40 million, or can you pull that down quite a lot from here?

Yeah, thanks, Glenn. We do expect it to drop. Obviously, we've got the ongoing impact of the business optimization program, and now we have had a couple of one-off costs that we don't expect to repeat. So we do expect it to come back. I'd say perhaps we'd probably look at it coming in more around 35, something like that. So no, I don't expect it to continue at the current level.

And just to build on that, for example, when you're setting up a business, you know, things like installing the enterprise reporting system, ERP, that's a one-off cost that's in our corporate cost but will tailor off and disappear. So as John said, we're expecting that to drop.

Thank you. Our next question is a text question from Hayden Berser from Argonaut. When does the underground ore get fed through the plant?

It's a good question. We've actually got a trial scheduled for this month of about six days. We're putting about 60,000 tonnes of first parcel through and that will actually help us with the Q4 and the planning. So what we've been doing first is prioritising the ore sorting potential material and the other ore. But now we have a decent parcel of underground ore that's just primarily development ore. So let's be very clear, it's not stoking ore, it's development ore. And that's grading around about 1.5%. So it's good quality, well-represented ore, and we're going to do a decent trial through the plant to see what that looks like.

And just to build on that, some of that always comes from this photo. And secondly, we're very excited about processing this underground ore from sort of three aspects. First, the ore hygiene. It's going to be a lot cleaner. Secondly, fragmentation. We're getting very good fragmentation. And thirdly, grade. It's bloody good grade.

Our next question is an audio question from Adam Baker from Macquarie. Please go ahead after the beep.

Thanks, Tony and team. Maybe that's a good segue into my next question, just around the grades from the underground material. You're pretty close to your first maiden stope. Just wondering, you know, what sort of underground grades we can expect for these early stage stopes?

That's a good question. Off the top of my head, they're all around 1.4, north of 1.4. Okay, thank you. Under 1.5, coming out of the development or so.

Okay. As we fall into that, like, you know, once these higher underground grades start feeding through the processing plant, you've obviously got your recovery target of 70%. Can you just give some indication how you think recoveries will go with the grades that will presumably ramp up once the underground material starts coming through? Yeah.

It's a good question. I think we're still learning the plant as a team, and especially the site team have made some real step changes, the MET team, over the last two months, and really starting to understand the levers that we pull in that plant to change the outputs. What we're finding, and Tony's already alluded to it, that the number one parameter that we chase is all-cleanliness. And the all-cleanliness is probably more important even to plant performance than the grade. So getting that all clean and managing that cleanliness of the ore and what we then add to it in terms of OSP or otherwise is probably the number one lever. We put an enormous amount of effort into grind, grind size and the float circuit. And we have a number of improvement projects that have already been initiated around grind, grind size, grind improvements, regrind. So we're not as, I guess, laser-focused on grade, I guess, as you're sort of alluding to. We're more focused on anything north of, say, 1.2, 1.3 that is good clean oil and that we can consistently feed to the plant. And that's one of the most pleasing things we've seen with the plant performance over the last few months is that availability gap. I think it is as it sits today. And that availability is what is enabling the team to trial different things within the plan to either tailor the grade or focus on recovery, which is the primary goal.

I suppose I would add to what Adam has said, Adam, the following. We've given you a target and a timeline to hit that target for recovery. I mentioned earlier on in my presentation that we're delivering good recoveries at a 1.2, 1.3, and I ask you to look at our competitors and see what recoveries they got at that sort of grade. So we're very, very comfortable that the plant is doing what we thought it would do, right, especially at those lower grades. So as we get better grades from the mine underground, insofacto. It won't perform any worse. It won't perform any worse. We're hoping it performs better. But until we do it, I'm not putting any numbers out.

Our next question is an audio question from Levi Spry from UBS. Please go ahead.

Hey, Levi. John's still working through the question.

I got cut off from my last one about the recovery. So really I want to ask about the ISP material and how I think about it for FY26. So if half of the 1.3 million tonnes stockpile is clean ore, how do we think about the buckets for the other half of that OSP material? Is that upside to potential production for next year or is it something you work through over the next couple of years? Just can you talk us through what you've learned with these trials to date?

Well, what we're learning in these trials is we're trying to ascertain how much of the OSP material How do we process this OSP through the plant? Do we treat it as a discrete product? So one week we do just 100% clean and the other week we do 100% OSP? Or do you blend it in on a mixture, 50-50 or 20%, 80%? And then how much of that OSP do we actually want to all sort? to give an even cleaner blend, to act as blending power to improve the OSP and lift its overall percentage. So these are the sorts of things, because we've got that much confidence in the plant, we want to play with those levers. So we want to process that OSP material. That is a given for the next 18 months or 12 months because we've paid the mining costs. It's sitting there, so we want to utilise it. And we can. So that's the sort of thinking, Levi. And we need to do a bit more work. And once we bring out our guidance in July, we should have a better handle on this. Okay.

Thank you. Our next question is a text question. Several private investors have raised, do we foresee issues with the tariffs both coming with what is happening in the USA? Okay. Do we see issues with our dealings with the U.S. off-tech partners, Ford and Tesla, on this front?

Okay, I'll answer that. The whole tariff debate and tariff issues that are unfolding in the present time, for us we're monitoring, but our contracts are long-term. And that's where we're looking. So whatever situations are occurring now, we're not letting it influence our overall strategy. We're in a strong position. We're a tier one jurisdiction. We have a good long-term relationship with the US. So that's what we're backing.

Our next question is a text question. Several online have asked, when can Liontown expect to pay dividends?

Well, that's a very good question. The capital allocation framework is one step towards understanding how we best deploy the capital. I won't give you a date right today because it factors on a number of things, mainly the price. So until we get very confident in our outlook in terms of pricing and the plant where we want it to get, I'm not going to put a number on it. But as a significant shareholder personally and the management team and the board collectively own 18% of this company, you know, it's very much a live opportunity that we look at as well as growing the company.

Our next question is from Melville Leslie. Congratulations to all staff and management on their efforts and achievements under the duress of Shorters, and thank you for the efforts on our behalf. Do we have any feedback from our largest private holders as her intentions towards our company of champions?

Thank you. In terms of our largest shareholder, we keep a very open dialogue with her management team. As I've previously mentioned on a number of occasions, having Australia's wealthiest person on our register is a positive, and we see it that way as a board and company. So during presentations like this and our quarterly announcements, we will present to them like we do most investors and shareholders around our results and performance, and they've been very positive and cooperative.

Thank you. That is all the time we have the questions for. I will now pass back to Tony for closing remarks.

Thank you, Billy. And thank you for the listeners and thank you to the investors and analysts for the great questions. I hope you've got an appreciation. We're working hard here to deliver. a great result in a very tough environment. We're optimistic. We're energetic. We won't let the macro conditions deter us from what we can control, and we will relentlessly continue to pursue the key leaders to drive a better business. So thanks, everyone.