Liontown Resources Limited

Good morning and welcome to the Liontown Resource March quarter results call. Following the formal presentation, there will be a Q&A session for 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 will be replaced by the 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 question via the web, 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 selected, the documents will open within the Lumi platform. You will still be able to listen to the meeting while viewing the 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.

Thank you, Billy. Good morning, everyone. Appreciate you making the call between the Easter and Anzac Day holiday. I'm proud to say today that we have got an excellent suite of results to disclose to the market. With me today, helping me present these results are John Latto, our CFO, and Adam Smith, our Chief Operating Officer. So, Billy, without too much more time, can we go into the slide, please? So the first slide is the disclaimer or the important information, followed by the summary slide. And if we start with the summary slide, Again, it starts with safety, and you will see from the highlight side we've had another strong quarter of safety. And this safety is usually a precursor to good performance. Good safety almost always aligns with good performance. So that underpins, you know, the plant improved performance, and we're seeing that through our confidence that, as we previously alluded to, We've been trialling a lot of the high-contamination, lower-grade material through the plant because the plant can take it and it's performing very, very well. And when we get to the section in the plant that Adam will present, you'll see that for yourself. So we've reinitiated the oil sorting and we've done also some underground trials which have given us very good results. We're continuing to successfully ramp up and, as we mentioned in our half-year results, we called commercial production in the processing plant and we've commenced underground production on schedule. We're increasing our sales volumes, which is lowering our operating costs, which has resulted in a net positive operating cash flow. That's two quarters in a row that we've been able to deliver net cash flow from operating activities. a quarter. And then finally, you know, from our inception, we've produced over 200,000 tonnes of spodumene at a 5.2% grade. Again, that's after eight months of operation. So, Billy, if we move to the next slide. We've got our ESG performance. Both our lost time injury frequency rate and our TRIFA have gone up slightly as a result of two things, in part mainly because we've seen a drop-off in the amount of total working hours as part of our construction demobilisation. But as operations normalise, we will see that come back into the zone we need it to be. The other point that I wanted to mention is the renewable power. We've had over 80% penetration in the quarter, and that's very encouraging because it keeps our cost of power down to a very attractive level. And on the right-hand side, I want to draw your attention to this photo. This is a joal company called MPH run by... A very, very impressive young man in Troy. He's second from your left. And I've personally visited this operation. NPH will do all our maintenance on all our light vehicles. It's one of the largest contracts awarded to Aboriginal corporation in the gold fields. Next slide, please, Billy. So just the highlights, I'll just draw your attention to a couple of key points. Firstly, concentrate production. We've increased that by a further 12% from the previous quarter. Again, a very good performance. The second thing I wanted to draw your attention to is the net cash from operating activities. What makes this even more pleasing to the team is that this quarter we didn't have the benefit of capitalised commissioning costs and we've incurred a full quarter of royalties. So that's a particularly strong performance. In comparison to our competitors... The second one I want to draw your attention to is lithium recovery. And this is a very important, it's a noticeable increase, 10%. And we've also mentioned in previous disclosures that during this quarter we've had, during the underground trials, recoveries of over 70% and producing concentrate over 1,700 tonne a day. So it's very encouraging of what we can look forward to as part of the underground operations when we get going 100% underground. And we see the underground as a point of competitive advantage. The other point to note on this lithium recovery, it's done on an average mine grade or lithium grade to the plant of 1.3%. The normal view is the higher the feed grade, the better recovery. The plant is performing where we can feed to it a lower-grade product but still get very strong recoveries. The next two points I want to draw your attention to is the cash on hand. There's $173 million in the bank at the end of March, but even better, we've got 23,000 tonnes of concentrate at the port ready to put on a ship. And finally, operating costs. The points I want to draw out here is this operating cost is done on a 6% basis. And please, I ask the analyst to normalise the competitor's cost to a 6% standard and then compare us. On a US basis, it's $512 a tonne FOB. On an Aussie dollar basis, it's 18% lower than the previous quarter. And if we do it on a 5.2% basis to compare ourselves, it's $708 a tonne Aussie. Next slide, please. I'll now hand over the production side of the quarterly report to our Chief Operating Officer, Alan Smiths.

Thanks, Tony. I think another strong quarter for the open pit with just under 2.5 million tonnes of ore mined or ore and waste mined from the pit. Of that, sort of 550,000 was ore and a stripping ratio of just over 3%. Great control drilling was finished in the quarter. It's very, very important to finalise the wireframes and the ongoing extraction of the remaining part of the pit. The pit is on schedule to be finished in sort of January, February of next year, and I'll talk more about that later in terms of the transition from open pit to underground. and we have over a million tonnes, at 1.3 million tonnes of ore now, ore and OSP material on the ROM pad, and that's composed of about 800,000 tonnes of OSP and just over 400 of clean ore. The picture at the bottom of the page, I think, sums it up, and you can see the various fingers of ore on the ROM pad, and there's a large stockpile to the right of that picture as well of further ore. We'll just go to the next slide. I can just add a couple of points on this one.

It's okay. Okay. I think the analysts and the investors who have registered their interest on our site visit coming up in June will see firsthand how well organised this ROM pad is, and you can see it from the aerial photograph. The other point that I want to stress, again, we've gone to great lengths to explain this, is this strategic stockpile. 1.3 million tonnes and an investment of $103 million. So the operating costs, because there's a lot of accounting adjustments created through inventory and non-cash items, this is an investment where the capital and the cash has been sunk. And we can draw from this stockpile going forward, which will then wash through our operating costs because that's how the accounting treatment works, but it doesn't impact our cash balance. It's an investment that we've already sunk. Thanks, Tony.

In terms of underground, another strong quarter at 1,850 metres of development, 53,000 tonnes of clean ore and just over 100,000 tonnes of waste. That clean ore was development ore with stoping starting in April quarter. Jumbo productivity, again, another strong quarter at just over 300 metres of jumbo. We expect that to fall backwards a bit in the current quarter now that stoping has happened and there's a lot more interaction going on underground. Key infrastructure projects, the heart and soul of an underground mine, were progressed during the month, during the quarter, with the accessway raise bores completed, underground re-tick completed. Underground paste plant is ready to commission fully in May. Plus we ran that plant, probably 60% of the plant ran for the entire quarter, producing dry stack tiles material, which were used in our tiles dam upgrades. So that's really, really positive that that, That part of the plant is fully staffed, fully manned and fully operational. Raise boring activities continue through the quarter for the ventilation and the first raise bore is expected to be finished in the first week of May and we expect the first fan to be installed in the June quarter.

The only other points I'd add to that great summary is this photo of the pigment type drive. I mean, you can see from this picture, it's 100% ore. This isn't narrow vein gold mining. That entire drive is ore that we will capture as part of our stoping sequence. The other point we make is, you know, when people present slides such as How does it track against our plan? Well, this quarter we're ahead of plan, 160 metres ahead of plan. So, you know, the team on site are doing a very good job in managing the preparation and what we need to stay ahead of in order to deliver the production.

Next slide, please, Billy. Thank you. In terms of the plant performance, I think you can summarise it best in terms of strong availability at 91% for the quarter and continued improvement in recovery. So we've stepped up from 58% in the December quarter to 64% in the March quarter, and that's with 600,000 tonnes or just under of ore being processed during the quarter. We had a record production month in March, so recovery in March averaged 68%, and we had days in March, probably three or four days, that averaged over 70%. And that's including underground ore trials, that's including OSP ore trials and ore blends, and I'll talk a little bit more about that in preceding slides. In terms of where we're going to now, there's a number of key initiatives that are underway. One of those is looking at regrinding a fraction of our tail stream and there's measurable recovery associated with that. We expect to have that in and running in July, so that's been progressed very, very hard in the quarter. distribution online. We'll actually have cameras in pipes that are measuring the particle sizes. We've got a complete new lining system coming for the sag mill. That's a 26-week lead. That's already been designed and made, and we have a proprietary control system going in the mill, all focused on controlling the grind, if you like, better. And then there's flotation circuit improvements that are underway focused on course and fine recovery. So you can see there's a real focus on, yes, we're doing okay with recovery, but there's a push to get to that 70%. And the really encouraging thing that Tony touched on a little bit earlier is was that when we feed it that sort of 1.5 underground dirt, my God, we get some amazing recoveries. And we got 70 plus percent without any optimisation. So there's a lot of room to move there when you combine it with the other initiatives that we're following up on.

And the only other point that I would add to that summary is that these improvements that we've identified, these optimisation initiatives, you know, We've got a pathway to 70. These initiatives are to reinforce that pathway to 70, make it sustainable and strong, but also go beyond, well beyond 70.

Okay, next slide. Thanks, Billy. In terms of that underground transition, the big focus of that underground transition, as Tony alluded to earlier in the presentation, is that stockpiling of that 1.3 million tonnes of ore. That supports the 15-month ramp-up of the underground. It's been a real focus of ours to establish that that can be reclaimed and give the underground chance to ramp up to the run rate that we've got in our plans. Key activities in the March quarter, which I've touched on, was treatment of OSP. For the benefit of the audience, OSP is basically diluted or contaminated ore that ranges between 5% and 30% contamination, and that contamination is the host rock, which we call gabbro, and that is rich in iron, calcium and other bits and pieces that impact on how we can process that OSP material and blends of that so that we maximise our recovery and maintain grades above the 5%. We also did some trials in March of straight underground ore. And as I alluded, we got massive step up in recovery with very little optimisation. So we jumped to 70% in the first day of those trials. which is very, very encouraging. There was a couple of little issues picked up, which we've already got projects underway to rectify, mainly around steel. And we also did a lot of work in terms of blends of the OSP with clean ore. And we've recommenced sorting as a result of that, as Tony has alluded to. So our future blend for the next 15 months will include a combination of underground ore as it comes out of the pit, of the underground, sorted material and blended straight OSP. So we've got a very clear strategy of what we're doing with that 1.3 million tonnes.

And I want to re-emphasise, we alluded to in the previous quarter that we are testing various blending strategies through this plant. What we're finding is the plant is resilient. We can throw at the plant higher percentages of this gabbro than others are experiencing. It's a real competitive advantage. So we're going to try and push that as much as we can. So, therefore, this OSP material, which typically open pit mines, 30% of what they mine is categorised as OSP. So we can blend this through our plants and with a combination of some material which is all sorted, and the plant can take it, which is a huge benefit.

Yeah. So initial trialling is sort of indicating we can process this stuff at least twice what the plant was designed for. So there's still a scope to go on there.

Now, with this product and increasing the amount of gabbro in the blend, You know, we're hoping that our trajectory for the recovery continues to increase. But, you know, depending on how this goes and how much the plant does, that could taper a bit.

Okay. Next slide, please. In terms of sales, I think... 93,005 shipments at 5.2 shipped for the quarter, with the biggest shipment being 36,000 tonnes shipped in January on the basis of 96,000 tonnes produced at 5.1. There was also sales of tantalum at 221 triometric tonnes at about 5% grade. at Argus spot prices. The tantalite is probably one of our bigger other optimised areas in the plant. And there's a big focus and a project just kicked off on how to improve tantalum recovery full stop.

Okay. Thank you, Adam. And now we'll hand over to John Ladder and he'll go through the operational, well, mainly the financial metrics.

Okay, thanks, Billy. If we could turn to the next page, please. Okay, so on the top of page 13, it shows a summary of some of the key metrics. And as Tony has mentioned, the March quarter saw a 12% increase in production to 95,709 dry metric tonnes and a 15% increase in sales to 93,940 DMT. Grade shift was consistent quarter on quarter at 5.2% and there was a small increase in the average realised price we achieved on an SC6E basis from USD $806 per tonne sold in the December 24 quarter to USD $815 per tonne sold in the March 25 quarter. Looking at some key financial metrics now, we see that revenue for the quarter was $104 million AUD, which was a 17% increase from the $89 million in revenue reported for the previous quarter. Our cash balance remains strong at $173 million at the end of March. Overall, our cash balance decreased $20 million or approximately 10% quarter on quarter, with the majority of that decrease being driven by expenditure on underground activities without the benefit yet of the material underground production which will come in future periods. In terms of our cost metrics, we have unit operating costs in AUD terms. They reduced by 18% from $1,000 per DMT of SC6E sold in the December 24 quarter to $816 per DMT sold in the March 25 quarter. AISC reduced 8% in AUD terms from $1,170 per DMT SC6E in the December 24 quarter to $1,081 per DMT SC6E in the March 25 quarter. You will note that the 18% quarter-on-quarter decrease in unit operating costs was greater than the 8% quarter-on-quarter decrease in AISC. This differential relates to sustaining capital, and this occurred because we bought forward a TSF raise that was initially planned for FY26 into FY25. And this was driven by some underground schedule changes, which changed the timing of paceful requirements, which meant that some more material reported to tailings. as a result of the November strategy review and delaying first doping. Correct. The key factor driving the reduction in unit operating cost metric and the AISC metric for the March 25 quarter was the 15% increase in tons sold in the March quarter, where tons sold increased from 81,341 DMT in the December 24 quarter to 93,940 DMT in the March 25 quarter. In addition, our gross mining costs were 7% lower in the December quarter as we had 8% less material moved from the open pit, driven by a scheduled reduction in our open pit mining fleet as part of a new mining plan that we announced to the market back in November 24. We have noted in the presentation and the ASX announcement released today that we expect to trend towards the upper end of our cost guidance. At an AISC of AUD $1,081 per DMT SC6E sold for the March quarter, we're actually under our guidance range at the moment, which is between $11.70 per tonne of SC6E and $12.90 per tonne of SC6E sold. But there are a couple of factors that will push us higher in Q4, and these include the introduction of ore sorting in April 25, which Tony has spoken to, Also in Q4, we will draw down on our stockpiles as we ramp up our underground activities. So we expect to see a charge to our AISC rather than our credit to our AISC and our unit operating costs that we've seen to date. Lastly, we also have an underspend in our forecast sustaining capital projects for the year to date, and we have forecast a catch-up of that underspend in Q4. We also have a capitalised deferred waste charge for Q4 as the strip ratio in the open pit increases for the quarter as we mine down to our next ore zone.

So, Billy, if I could turn the page, please. We've just finished, sorry, the business optimisation initiatives. As we alluded to the market back in November, we identified about $100 million. We're on track to deliver them. We've $60 million already realised. So that's the first point. And the second point I'd like to add, just to further reinforce on the guidance. Now, we've introduced all sorting. The plant is performing that well. I can't reassure the market more about its performance. And therefore, we want to throw in some of that OSP material while we can, but that has an accounting impact where while we draw from the stockpile, there's a charge on the operating costs. So that's why we've given the market that guidance.

Thanks, Tony. Bill, if you could move across to the next page, please. I'll now briefly talk about the cash flow waterfall in front of you. So the cash flow waterfall shows in chart form the same information that is in the Appendix 5B cash flow statement that we have released today. It's a pretty straightforward waterfall, and I won't talk to all of the components, but I will make the following comments. Firstly, we generated positive cash flow from operating activities, as Tony has mentioned, of $14 million for the quarter. And again, I'd just like to put that in a bit of context. We previously announced that we declared commercial production from the Kaplan Valley processing plant with effect from the 1st of January 25. As a result, this means that this is the first quarter since we commenced production where we have not capitalised any of our operating costs associated with ramping up the processing plant and all operating costs are now reporting to cash flow from operating activities. In addition, this is the first quarter in which we have paid royalties and this cash flow is also shown as part of our operating costs for the quarter. To put the royalty outflow in context, we made our first sale in September 24, and funds from that sale were received in October 24, along with further sales receipts received in the December quarter. It is the receipt of revenues that crystallises the royalty obligation. And royalties linked to the December quarter are paid in January 25. And so for this current quarter, we also included circa $6 million of cash outflow associated with royalty payments as part of our payments for operating activities. Taking all this into account, we reported a positive cash flow from operating activities for the quarter of $14 million, a strong result. The only other component of the waterfall I will touch on is the cash flows for investing activities, which showed an outflow of $27 million for the quarter, and the majority of this related to development expenditure associated with the underground. The waterfall chart shows that we closed the quarter with a strong cash balance of $173 million. But just a couple of comments to add. on the 31st of March, 25, worth approximately $12 million, for which we received the funds in April. We also had concentrate on hand of approximately 23,000 tonnes at the end of the quarter, and we also have $25 million on deposit with Export Finance Australia associated with a guarantee required under our power purchase agreement with the Senate. This has been cashed back for quite some time, and we continue to work with the various parties concerned to have those funds returned to us and replaced with alternative security. This $25 million does not form part of the $173 million closing cash on hand that we've reported for 31 March 25. Having said that, I'll turn back to Tony. Thank you, John.

Comprehensive as ever. Now, if we move to the next slide, Billy, let's talk about the market. Okay. So... I want to spend a little bit of time on this. I think you've seen from the various other lithium producers that have delivered their quarterly results, we're all in agreement, and the various forecasters are seeing this as well, that the demand signals are strong. and they will continue to be strong. There are sectors of the battery market that are outperforming. Stationary batteries is one of those. And if we look at recent results from BYD and CATL, profit margins are strong for the end users of our product. And if you look at the views of the world, Wood Mac versus CATL, and we got this from their recent report, prospectus where they've listed on the Hong Kong Exchange, their view as a battery producer is far, far stronger than the forecasters. So they're seeing an 83% increase on EV demand over the next five years, but they're seeing an even stronger increase in stationary batteries. So what is happening here? Why aren't we seeing a corresponding increase in the price of raw materials? And the fundamental reason, as we see it here in Liontown, is the length of the battery value chain. There is inventory scattered throughout the value chain, and it's that inventory that buffers. So if you have a demand increase, a demand signal, it will take time to work through the inventory that's contained in the battery value chain. So you have inventory at the car manufacturers. You have inventory in the battery producers. You have inventory at the PCAM and so on at the refineries. And until that works through, we won't see an impact to the price directly. But the positive angle is the demand signal is strong. Now, on supply, I can tell you that at the current prices, The incentive signal is non-existent. It will disincentivise, and it has disincentivised, exploration, brownfields expansions and new projects. And we know, having done this ourselves, it will take years for new greenfields capacity to come on, even if they started today. So at some point, this will correct and correct strongly. Because you cannot suppress the raw material supply as it's currently being done for as long as they anticipate without a material impact. And we're seeing that. And we know a number of players right across the battery value chain, the refiners, the pecan producers, they're not making money. So we're encouraged about the short to medium term in terms of demand signals, but we see a turnaround coming because at these prices we won't see new supply. So that brings our presentation to an end. Thank you, everyone. And now we'll open up to Q&A.

Thank you, Tony. If you have not yet submitted your text questions 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 is from John Bishop, Jardin Group Australia. John, please go ahead after the beep.

Good morning, guys. Thanks very much for taking my questions. Firstly, congratulations on the continued impressive ramp-up. I think technically the performance of the operation is very commendable and obviously bearing out the results. So well done. Well done to the team in that regard. Obviously, LinkedIn prices at the moment aren't doing you guys much by way of favour. So I guess my first question is, is around um obviously the the guidance you've indicated that at the top end of the cost range um for the for the fiscal year for the the june half which worked out at current exchange around 825 bucks us per ton sc6 equivalent obviously fast markets are now printing with a seven handle and your oil and systemic costs is, you know, obviously impacted a little bit by stockpile movements and accounting treatments, but it also doesn't fully factor in the underground or the freight element. So a very long-winded question, but what sort of additional elements are you looking to manage that cost and, I guess, ensure that you can maintain operating free cash flow?

Thanks, Vish. I'll take that and let the team chime. Firstly, I want to sort of head off the issue of underground costs. Our guidance already factors in three months of underground production, so that's the first thing. So there's some amount of underground production costs built into that. The second point that I'd like to make is currently we're incurring the costs of open pit and the costs of underground together. But once this year finishes, this calendar year finishes, the operating costs associated with the open pit will disappear. So I'm not sure the market has taken that into account, that we'll be just solely underground mining after the end of this calendar year. Now, in terms of where we are in our cost structures, we believe that Now that we're building an operating database and operating know-how, we will continue to look for efficiencies and productivity improvements. And we've got a number of initiatives underway or will be underway in the new financial year in order to deliver those operational benefits. We did a first pass in November. when we released our strategic review. And this is an ongoing exercise. So we believe we've got more room to move. You know, one, for example, is reagents. Reagents form 20 to 25% of our processing costs. And we've got a number of alternatives that we're currently testing to reduce those costs. There's better purchasing. We will go through, because a lot of our contracts were signed at the peak of the market, and there's an opportunity now to renegotiate a lot of the consumables and input costs. So they're just two examples, Bish, of further operational improvements and efficiency we can derive.

Okay, can I just add something to that just around the all-in cost then? I mean, I know we're still pending guidance for fiscal 26, so I respect that's a work in progress, but are you able to give us some steer or an update as to what you think the capital number looks like through fiscal 26 to establish a steady state underground operation?

Well, the main cost of an underground operation is the upfront development, and we're sinking that capex now, right, so that once we get into operations, we've got the headings and the drives open. So a lot of that investment, Bish, is already happening. So whilst next year, we've already alluded to the market, it's a transition year and the operating costs will trend higher, We believe on a capex for our development, it will be sustained, and potentially in the future it is come off as we get into that higher margin zone in your body, which is thicker, and therefore the development's already being done.

Our next question comes from Kate McCutcheon from Citibank. Kate, please go ahead.

Hi. Hi, morning, Tony and team. Just the processing physicals, just explain how they've been restated. So previously December quarter was 620,000 tonnes milled and now that's 555, so you've lost 10% of tonnes. What is driving that big reconciliation difference there and has that been resolved?

Yes, so a couple of points there. Yes, it has been resolved. What we typically do in the normal course of events is routine reconciliations and amass balances across the plant from ship to ROM pad. And in the course of that full reconciliation, once we started, once we called commercial production the 1st of January as part of our half-year results, we did the flyovers and the surveys and checked and balances. We found that there were some bits of the instrumentation in the plant, weightometers and conveyors, that were giving us an overhaul on production. And we've corrected for that. And there's no impact on sold tons. They are what they are. We've reported it. But on the mill feed, given the weightometer discrepancies, and on the concentrate conveyor into the shed, there were some anomalies on the weightometers, and we've corrected for that.

Okay. Got it. So fixed now. And then just thinking about the cash position into the FYI, You've noticed that the stockpiles cost $103 million to build per se, so there's an adjustment to cash when that's fed. Can you give us some colour around how much of the stockpiles do you expect to feed over the next three, six, nine months or what that profile looks like to help us correctly model that P&L versus cash adjustment?

Yeah, sure, Kate. So we do expect to see a pretty significant drawdown in stockpiles across the June quarter, you know, circa, a sort of, you know, 500,000 tonnes, something like that. And then broadly speaking, we sort of expect to see that stabilise Sorry, that will take you to FY25. And then there's a smaller drawdown as we move into FY26. So, you know, when I say smaller, it's, you know, circa 100,000 tonnes or something like that. That's for the first half of FY26. We do continue to draw down the stockpile across FY26, but we still retain a decent stockpile balance at FY26. at 30 June 26. But we'll give all that as part of our guidance.

Thank you. Our next question comes from Adam Baker from Macquarie. Adam, please go ahead.

Morning to Tony, John and Adam. Just on Kathleen Corner open pit, it's gone very well for you guys. Good to hear that it's going till February next year. Just wondering how many tonnes are left to be extracted from the pit, please. More tons. Yeah, no problem. So I can reach out after the call. And just maybe on sustaining CapEx, you know, two-half FY25 guidance between $55 and $63 million. Just wondering how much there was in the 3Q. You know, you've got the $6 million royalties, but just sustaining CapEx as a line item itself, does around $19 million sound about right?

For the third quarter, the March 25 quarter? Yes. No, it's lower than that, Adam. So I... So a bit of catch-up in the four-piece. Yeah, and John's alluded to it. Yeah, we do. There is definitely... So we've had sort of an underspend on our capex, and, you know, we have forecast like a catch-up, but let's see how much of that eventuates.

OK, then. Thank you.

Our next question comes from Hayden Bairstow from Argonaut. Hayden, please go ahead.

Good morning, guys. Tony, it's a question on the underground. I mean, the reserve grade's lower than what you sort of talked about in this development grade that you've delivered already, and you just started stoping. I mean, can you give us any guidance on the early sort of grade profile of the underground as you go through this ramp-up phase? Or can you focus on higher-grade areas?

Initial grades, I think 1.4 to 1.6 in that range.

Some of the upper zones... How long do you sustain that for?

That's pretty much all of, I think, FY26, the underground ore is similar. Yep.

Yeah, OK. And then just on the discussion around sort of the CapEx catch-up, I mean, what... What are we spending on in the fourth quarter that you haven't... that you sort of pushed out that's material or... As you sort of alluded to, is it likely that CapEx guidance, if anything, you'll fall short of it, there'll be a bit more in 26?

There's basically two components there, Hayden. There's the sustained CapEx in the plant, which we've traditionally seen an underspend to date, so we've brought some of that forward. But the other piece is, as we mentioned, we are moving out of the ore zone, our strip ratio increases, and so we've got some capitalised deferred waste as well. Thank you.

Our next question comes from Glyn Lawcock from Baron Joey. Glyn, please go ahead.

Morning, Tony and team. Just firstly, could you make any comments around how the blast went in your first stope? I mean, there's obviously been lots of concerns around how it may go, whether it'll fracture. You obviously talked to us about having the thin layer around the outside, which will give you some benefits. How has that actually physically gone?

That's a very good question, Glenn. And both Adam and myself spent the weekend, last weekend on site, so that we could go and have a look at the first stope and the blast, and we were very, very happy. It was clean brakes, exactly how we predicted it. The team's got some more fine-tuning and optimisation, but the fragmentation, I'll let Adam speak on it, but it was almost like... I think we're calling it sugar.

Sugar.

Yeah.

Yeah, really, really, really good fragmentation. Very clean brakes. They're looking at revising some of the way they drill underground in terms of the overdrill. They're looking at how they... how much of a skin they leave. But certainly recovery from the stope was excellent and there's a lot of learnings from that stope. So that initial stope was about 12,000 tonnes, to put it in perspective. It was a fairly small one from what we're going to see going forwards. But, yeah, very, very encouraging.

And the other point that we would make is, again, this is the differentiation between narrow vein mining of gold versus what we're doing. That one stope, that 12,000... coming up in the next financial year where they're close to 80,000 tonnes. So this is an opportunity for this mine to really get economies of scale. And we'll be doing a little piece on this as part of our next presentation coming out of the Macquarie Conference and going into diggers.

Okay. Okay. Thanks, Tony. And then if I could just follow up. If I just look at the cash flow statement for the quarter, $94 million roughly spent, excluding the money on CapEx, and there's obviously a little bit of sustaining in that. But if I take the $94 million and divide by your SC6 volume, I actually get closer to $1,200 a ton, not the $1,100. Is that because you're capitalizing some costs that are not coming through? So on a true cash basis, it's actually higher than what you're reporting?

Glenn, perhaps I'll give you a call after this. That's a tricky question. I can certainly assure you that our AISC is calculated correctly. If there is differences to cash flow, obviously you've got the differences between cash and accrual. Yeah. And drawdowns of stocks. Yeah.

Or building stockpiles impacts it. So there's an inventory component. So I wouldn't use your skid maths as indicative for me.

Thank you. Our next question comes from Levi Spry from UBS. Levi, please go ahead.

G'day, team. Thanks for your time. So I guess as we think about heading into FY26 guidance, can you just talk through some of the things you're thinking about? Recoveries are obviously trending well, but it's at a 5.2%. So is that the starting point?

Yeah, I think where we've got to, Levi, is, as you recall, we've been looking at what is the optimal concentrate grade that we'll probably target on an ongoing basis, and 5.2 to 5.3 is the range, in line with our competitors. Now, in terms of other things... OK, thank you. But in terms of other things we're foreshadowing in FY26, we continue to look at ways of ensuring that the wrap-up of the underground occurs more efficiently and effectively. So that's an ongoing improvement. The plant, I've already touched on a few parts of the plant that we're looking at improving. So there's better reagents, more cost-effective reagents. All those will be factored in as part of the FY26. But again, I sort of stress that it is a transition year.

Yep, got it. Okay, thank you. And then I think some of the previous questions are sort of dancing around the cash flow waterfall. So we're trying to work out what that might look like this quarter and then obviously next year. So can you just talk to me about what is the cash flow from investing activities waterfall there? So underground development, sustaining project, what that could look like this quarter? And I guess the lease stuff, we assume that repeats. What about the items like interest and stuff?

Perhaps if I just take a step back, Levi. I mean, I suppose what your question, your question really is about our cash balance, I'm assuming. You know, we've taken a pretty prudent view in relation to the current pricing environment and our internal models we've allowed for spot to continue for quite some time. And our models show that, you know, even with those assumptions incorporated, We'll get to 30 June. We'll still have a healthy cash balance and beyond as we progress into FY26. Obviously, if the current pricing continues for years, then us, as with every other lithium producer, we'll have to revisit it. But as we sit here Today, we have allowed for current spot pricing to continue for an extended period of time and we remain comfortable.

Yeah. The other point that I'll say in terms of what is the next quarter in terms of sustaining capital. So that $27 million cash burn that we had in that category, John's already alluded to that there's potentially some sustaining capital that we've brought forward and there's some catch-up to be done. So there may be a little bit extra there, but nothing material.

Thank you. Our next question comes from Milan Tomic from JP Morgan. Please go ahead.

Yeah, hi, Tim. Thanks for the call. I just had a question on the interest payments. I saw that there were only $1.2 million for the quarter. Your debt's about circa $800 million. It applies to a very low interest rate. Are you just able to provide a bit more clarity on what those interest payments are going to be moving forward? Is there a catch-up payment that we should account for in a future date or...?

Yeah, sure. Thanks for the question. I mean, at the moment, all of our interest payments, sorry, all of our interest payments are capitalised. So we don't have any cash outflow associated with interest payments, either under our debt with Ford or our debt with LG. So, you know, and in terms of cash interest payments going forwards, basically the commencement of interest payments under the forward debt facility will commence when the offtake commences. So, you know, that is, I think, in the September 25 quarter. And in terms of interest payments across FY26, you know, they're relatively modest. We sort of expect sort of, you know, in terms of cash interest payments, $4 million a quarter, something of that range. But that $1 million, isn't that an inflow? That's interest. $1 million? Yeah. It would be an inflow. It's a net inflow, isn't it?

Yeah.

On our accounts. Yeah.

Interest on our accounts. Yeah. Thanks very much. I'll leave it there. No worries.

Our next question comes from Anthony Bridge from Platts. Anthony, please go ahead.

Yes, hello. Just regarding the Anthony Albanese, talking about the critical mineral strategic reserve, just wondering whether you think lithium should be included in that, because they haven't announced details of that yet, and whether you think it's a general good idea, whether it could promote investment as AMET has. What are your thoughts?

Yeah, thanks for the question. Look, you can appreciate we've been focused on our quarterly and presenting, and it got announced today, so we're not across the detail and exactly what the Prime Minister has presented and disclosed to the Australian people. So give us a little bit of time to review that and then we'll have a position.

That's okay. Just regarding your operations, the things that are impacting your operations, I think Dale from PLS the other day talked about tariff-related uncertainty could affect the financing and development of new lithium projects. Just wondering whether you suspect that may be the case as well, and if so, give us some flesh on that.

Look, put tariffs to one side. The price itself... And given that you guys reported, that's a big enough disincentive for future projects. So I think we need to worry about that first rather than everything else.

Thank you. Our next question is a text question from Brad Johnson, a private shareholder. What is your take on the demand side for lithium over the next 12 months?

Hi, Brad. Thanks for being a shareholder. Appreciate your support. Look, as far as we're concerned, and we've already alluded to that in my market slide, we're very, very strong on demand for the next 12 months and for the next decade, actually. And it's not just our perspective. We've got an in-house view, but what we see in the market, the biggest battery producer in the world showing a very strong forecast for battery demand in the next... five to ten years. And even if cattle's view was halved, it's still a tremendous growth path. And as I said, it will take time for it to ultimately flow through a very long supply chain to get to the raw materials, given how much inventory it contains at each part of the supply chain. So you need to wash that through first before you see an impact on price of raw materials.

Thank you. Our next question is a text question from Anthony Barrett from Platts. The CEO of PLS said tariff-related uncertainties may create headwinds for fundings and development for the new lithium supplies. Do you agree with this?

I think, Billy, we've heard from Mr Platts

Next question is an audio question from John Bishop. John, please go ahead.

Thanks for taking my follow-up. Just a couple of questions, probably embedded. You quoted in the press recently in Western Australia about accessing the WA State Government lithium support package.

Are you able to comment as to where that's at? Yes. Apologies.

We are having some technical difficulties. Tony, can you hear me?

Yes, we can, Billy. But I didn't get Bish's second question.

No worries at all. John, could you please go ahead and repeat your question?

Okay. Can you hear me? Yep. Loud and clear, Bish. That signalled out right on. You were...

I wish. It's not a great day either over here. Not a good day for Roto. Look, you were quoted in the press recently talking, being flagged as potentially accessing the WA State Government critical minerals or lithium support package. Are you able to comment on where that process is at, please?

Yes, I am. We've had a really positive engagement with the government on this and we're working towards concluding those discussions and we'll make an announcement on that in due course. Okay.

Can I just have a quick follow-up to that? Just regarding your forward payments which start next fiscal year, are you also having discussions with Ford around potentially deferring the principal repayment?

Look, I'm probably not at liberty to announce very confidential discussions, but we're in constant dialogue with all our customers around a whole range of things. So Ford is not unique, but we are talking to all our customers about the current situation.

Thank you. That is the last question we have time for today. I will pass back to Tony for some closing remarks.

Thank you, Billy. Thank you to the people that have dialled in, to the great questions. For those that will follow up, we'll do that. Leanne Kite will follow up and provide you those responses. Again, in summary, I think... We are doing our very best to ramp up the plant and get it to a stable situation. We've done that. We're now moving our focus to the underground. We want to make the underground a winner. We do believe the underground will give us a competitive advantage longer term, especially around ore hygiene and fragmentation. And the grades that we're seeing in the underground, as Adam has already pointed to, work very well through the plant. So I want to move all this OSP material, all this low-grade, high-contamination material, throw it through the plant because it can take it, and then move ourselves into 100% underground material and let this plant fly. So thank you, everyone, for listening, and we'll sign off from here.

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