Igo Ltd

Good morning everyone and thank you for joining us on the call today for a discussion of our operating and financial results for the March quarter, which we released to the market on Friday afternoon. With me on the call today is Matt Ducey, our Chief Operating Officer, who will be available during the Q&A session at the end of the call. I note that Scott Steinkrug, our CFO, is on leave and will not join us on the call today. Slides two and three highlight our cautionary statement and disclaimer and our competent person's statement. Of note, all currency amounts in the presentation today are in Australian dollars unless otherwise noted. Moving to slide four. As always, the safety and wellbeing of our people comes first. We are therefore pleased that our focus on continuous improvement in this area has continued to result in improved lag and lead indicators as shown on the slide. Our care for people was reflected in very strong responses to the safety-related questions in our recent engagement survey, which once again also reflected high levels of engagement by our people across the business. We are proud of this outcome and the strong culture that we have co-created with our people at IGO. We are also proud of the way our people have responded to the high COVID caseload environment which has emerged in Western Australia over the quarter. While this period has not been without its challenges, our people have demonstrated outstanding adaptability and resilience as together we have managed increased restrictions and higher absenteeism due to the pandemic. Pleasingly, our systems and risk management procedures have proved effective and we have not experienced any material disruption to our operations. Moving to slide five. We are also proud of our commitment to sustainability, both in performance and transparent reporting. It was therefore great to see IGO being included in the S&P Global Sustainability Yearbook for 2022. This was IGO's second consecutive year as a member of the yearbook, which in 2022 assessed the ESG scores of over 7,500 companies globally. Of these, only the top 15% are recognised as members and IDEO was the only Australian company to be recognised in the mining and metals category in 2022. A fantastic achievement. Moving to slide six and to some key highlights from the quarter. Firstly, and as mentioned previously, we kept our people safe and engaged, both of which reflect the strong culture we continue to build at IGO. At NOVA, strong nickel prices and consistent operational performance drove excellent financial results and margins. Strong spodumene prices and a solid quarter of production of green bushes resulted in a significant uplift in the financial results for the lithium joint venture. At Kwinana, trial production of the lithium hydroxide facility proceeded towards production of first battery grade product. Together, the strong performance of our nickel and lithium businesses resulted in materially improved financial results for IGO for the quarter, highlighted by stronger margins and higher net profit after tax. Finally, post-quarter end, we negotiated a revised scheme of arrangement with Western Areas and now expect to complete the transaction in June. Moving to slide 7 where we summarise our key financial results for the quarter. Nickel and lithium realised prices were sharply higher for the quarter. In the case of lithium this is driven by continuing strong demand from the battery sector and for nickel was precipitated by supply concerns arising from the conflict in Ukraine. Materially higher prices have resulted in a sharp increase in group sales revenue, up 31% quarter-on-quarter to $245 million, and underlying EBITDA, which is up 89% to $233 million. I note that the underlying EBITDA result includes IGO's share of net profit after tax attributable to our investment in the lithium joint venture. Net profit after tax for the quarter increased to $133 million. Of note, we made a cash tax payment of $171 million during the quarter, which is primarily attributable to the taxable gain on the sale of our interest in Tropicana last May. This payment drove the lower quarter-on-quarter net cash and free cash flow results. We also paid $38 million in respect of our fully franked interim dividend during the quarter. We finished the quarter with a strong balance sheet with closing cash of $440 million and no debt. Moving to slide 8 where we reconcile net profit after tax for the quarter. I note the contributions made by NOVA and most significantly the lithium joint venture which contributed an additional $43 million and $52 million respectively to the overall net profit after tax result for the quarter. There was also an $11 million positive variance in the value of our listed investment portfolio. Moving to slide 9 and a reconciliation of cash flow. As shown, stronger free cash generation at NOVA partly offset fully correct dividend and income tax payments that I mentioned earlier. Moving to slide 10 for a discussion on NOVA performance for the quarter. Moving to slide 11. NOVA delivered a solid quarter with no material impact to operations as a result of COVID. As guided, lower planned grades resulted in marginally lower production for all metals quarter on quarter, resulting in nickel and copper production of 6,290 tonnes and 2,760 tonnes respectively for the quarter. For the reasons discussed earlier, realised nickel prices for the quarter were materially higher at AU$37,600 per tonne, up 38% quarter on quarter. Cash costs of $1.86 per payable pound were marginally higher quarter on quarter, with key drivers being lower production volumes, which were offset by continued high by-product credit pricing. Moving to slide 12, where, on the left-hand chart, we set out the last four quarters of production and costs for NOVA. Importantly, and thanks to the continued focus from our site team at NOVA, production remains on track to meet full-year production guidance, while cash costs are expected to end the year better than our guided range of $2 to $2.40 per pound. On the right-hand chart, I note that we built some working capital during the course of the quarter, largely due to the timing of shipments, and we expect this to unwind in the June quarter. Turning to slide 13, for a brief update on the Silver Knight development project, where early in the quarter we released an initial mineral resource estimate for Silver Knight, which was informed by historical drilling results. As part of the current work program, further infill drilling will be undertaken to inform an updated resource and reserve, as well as supporting the feasibility study into the development of silvanite as a secondary ore feed source for NOVA. In addition, the team have identified several high priority exploration targets in close proximity to the silvanite deposit, which will be tested during the June quarter. Turning now to slide 14 for an update on the lithium joint venture with Tianqi Lithium Corporation. Moving to slide 15, the lithium joint venture delivered a stronger quarter with higher realised spodumene prices delivering stronger financial performance. The chemical grade spodumene transfer price for the quarter was US$1,770 per tonne up from US$592 per tonne for the six months to December 2021. I do note, however, that the average realised price for the quarter was marginally lower than this due to December spodumene shipments being booked in January and different pricing for technical grade spodumene. The same chemical grade spodumene transfer price will apply to the June quarter. The transfer price is then expected to reset from 1 July 2022 for the six-month period July to December 2022, and this will be informed by the benchmark price for the June quarter. Using April benchmark prices as a guide, we expect the transfer price to be materially higher again for this coming six-month period. ICO's share of the lithium joint venture net profit after tax for the quarter was just over $60 million, up from just shy of $9 million for the prior quarter. Moving to slide 16 where we illustrate the various elements that make up the lithium joint venture net profit after tax result for the quarter. Of note is the significantly higher contribution by Greenbushes in the quarter to IGO's account of $75 million, which was partially offset by IGO's share of commissioning expenditure at Kwinana of $7 million and IGO's amortisation costs for the lithium joint venture investment of $7 million. The contribution from Kwinana is expected to increase once battery grade lithium hydroxide is being produced at or near commercial quantities and sold into the continuing strong battery supply chain market. Moving to slide 17 for more detail on the Greenbushes mine. Quarter on quarter spodumene production was higher despite a period of production downtime in February when a nearby bushfire resulted in a loss of power to the site. No doubt we all remember the ferocity of these bushfires as reported widely in the media. The impact to people and property and the threat that the fire posed for a number of communities in the Bridgetown Greenbushes area. We note the contribution that the Greenbushes team made to support those fighting the fire and to support the community following the fire. On a 100% basis, production for the quarter was 270,000 tonnes of spodumene concentrate, bringing year-to-date production to just shy of 800,000 tonnes. IGEO expects the June quarter to benefit from an increased contribution from the recently commissioned tailings retreatment plant and CGP2, both of which continue to ramp up to full production. This quarter we have reported a cost of goods sold with and without state government royalties. This is to provide the market with better visibility on the consistent performance by the site team with respect to their controllable costs. As shown, costs of goods sold for the quarter, excluding royalties, were $235 per tonne, which is in line with the prior quarter and within our full-year guidance. IGO expects cost of goods sold, excluding royalties, to be within guidance for the full year. By comparison, materially higher benchmark prices upon which royalties are calculated has driven a higher cost of goods sold result, inclusive of royalties, of $476 per tonne. The higher realised spodumene prices resulted in higher EBITDA, up nearly 250% quarter on quarter. Moving to slide 18, where we illustrate the installed production capacity at Greenbushes. Construction of the Tony's recruitment plant was successfully completed in the quarter and commenced commissioning and ramp up. Maintenance production in the quarter was just over 15,000 tonnes of spodumene concentrate. We expect the tailings and treatment plant to ramp up toward full capacity over the coming quarters, resulting in total nominal production capacity at green bushes increasing to 1.55 million tonnes per annum. At CGP1, higher feed grade and improved recovery performance generated a stronger result. The Greenbushes team have also made considerable improvements in recoveries at CGP2, which continues to ramp up to full production. Turning to slide 19. Following completion of front-end engineering design study or seed study by Lycopodium during the quarter, the joint venture approved the construction of CTP3, the third chemical grade plant. Based on the seed study, CGP3 construction is expected to be completed by early 2025 at a remaining capital expenditure estimated at $507 million. However, with continuing cost pressures in the construction sector in Western Australia, IDEO expects that this could potentially be in the range $500 to $550 million. Once commissioned and ramped up, CGP3 is expected to increase nominal production capacity at Greenbushes by an additional 520,000 tonnes per annum by early 2025. Moving to slide 20. At the Kwanana lithium hydroxide refinery, trial production is continuing. The Kwanana with a high level of assistance and support from Tianqi engineers from China, have made solid progress towards the production of first battery-grade lithium hydroxide. IGO's observation is that the team are very close to delivering battery-grade quality products and that there are no fatal flaws that would prohibit this from happening. In parallel, the Kwinana team have progressed various work streams towards their commitment to the recommencement of the construction of Train 2. This decision is expected sometime during the second half of the calendar year. Moving to slide 21 and a brief summary of some select exploration activity for the quarter. Moving to slide 22, in the near-murder environment, and excluding the work being done at Silver Knight, which I discussed earlier, our primary focus has been on the Chimera target. Chimera remains prospective for large-scale nickel, copper, cobalt sulphide accumulation and despite recent testing of an EM conductor not bearing fruit, the majority of the interpreted extent of the anomaly remains to be tested. This will be our focus in coming quarters in addition to further testing of the Alara and Orion targets. Elsewhere on the Fraser Range the team will be testing multiple targets over the coming quarter as set out on the slide. Moving to slide 23 and to a brief update on the proposed acquisition of western areas. Moving to slide 24. As announced in December 2021, IGO and Western Areas agreed to a scheme of arrangement whereby IGO was to acquire Western Areas for $3.36 cash per share. As a result of significant nickel market volatility following the announcement of the initial scheme, IGO and Western Areas agreed to increase the scheme consideration to $3.87 per share. We note that the independent expert has concluded that the scheme consideration of $3.87 is not fair but reasonable and is therefore on balance in the best interests of scheme shareholders. We also note that the Western Areas Board of Directors have recommended the scheme to Western Areas shareholders on the basis that the IGO offer is within the board's own view of value on a risk-adjusted basis. Following review by ASIC and the first court hearing, the scheme booklet is in the process of being mailed to Western Area's shareholders and we expect that subject to Western Area's shareholder approval at the scheme meeting scheduled for the 1st of June that the scheme will complete on 20th of June 2022. The transaction rationale and structure remains the same and IGO is funding the transaction via new debt facilities and existing cash reserves. Moving to slide 25 and a short summary of today's presentation before we move to Q&A. Moving to slide 26, IGO has delivered another safe and strong quarterly result. In large part this is attributable to our people who have shown great resilience and flexibility in managing COVID resulting in no material impact from COVID to our operations. Our people remain highly engaged, motivated and proud to work at IGO. NOVA has continued to deliver with higher nickel prices driving improved margins and free cash flow. Our investment in the lithium joint venture also benefited from materially higher prices, resulting in sufficient cash flow to fully fund planned expansions and return a dividend to IGO in the near term. At Greenbushes, the production rate continues to increase. The tailings retreatment plant is in ramp up and we have committed to the construction of CGP3. At Kwinana we continue to commission Train 1 towards first battery grade lithium hydroxide production and we expect to commit to the recommencement of construction of Train 2 later this year. Subject to shareholder and other approvals, the Western Areas transaction is now expected to complete in June. This transaction is on strategy, will expand our nickel portfolio and is expected to provide a pathway to future production of battery grade nickel sulphate. Finally, we have continued to deliver strong financial performance with higher net profit after tax of $133 million for the quarter, while also maintaining a strong balance sheet with $440 million net cash. Thank you for joining us on the call this morning. We will now hand back to the operator for questions. Thank you, operator.

Thank you. If you wish to ask a question via the phones, you will need to press the Start key followed by the number 1 on your telephone keypad. If you wish to ask a question via the webcast, please type your question into the Ask a Question box. We will be addressing questions via the teleconference first, and if time allows us, we will address some of the questions received via the webcast. Your first question comes from Daniel Morgan from Baron Joey. Please go ahead.

Hi, Peter and Tim. First question, can you just help me understand what is the dominant driver of the lower price at Greenbush than the 1770 price? Is it technical grade price or is it the lag that you highlighted just now on the call from December? Thank you.

I don't have the exact split with me at the moment. A portion is attributable to that shipment which was expected to go out late December but actually went out late January, so therefore was booked at the old pricing but included in revenue for the March quarter, and then some is due to the marginally lower technical grade pricing this quarter relative to chemical grade pricing. Customarily, in the past, we've seen that there's a premium paid for technical grade, and in time, we expect that to revert.

What is the outlook just on that technical grade price? What is the outlook in the near term for that? Are you able to argue for and receive a price commensurate with the battery grade or chemical grade product? Thank you.

There's much less of a market for the technical grade than there is the chemical grade and therefore much less transparency on pricing. Ultimately the pricing is driven by the existing contracts that Greenbush's stakeholders have with the off-takers of that technical grade product. Of course, over time, if we continue to see persistent chemical-grade prices relative to technical-grade prices, then there would be a motivation in our mind at IGO to potentially discontinue production of chemical-grade swajimine concentrate in the future. Technical-grade swajimine concentrate in the future.

Okay, thank you. You sold less than produced at Greenbushes in this quarter. Does that unwind the following quarter, or is it a working capital build as the business scales?

It's a working capital build, and similar to what you see at Nova, that sort of waxes and wanes from one quarter to the next, and over the course, everything levels out.

Okay, and last question, just the tailings retreatment plant. It ran pretty well in March at about 60% of capacity. When do you think that might be at 100% during this quarter?

Thank you. We've allowed for a couple of quarters for that to hit its strats, and that provides time to... bed the plant down, get the system for extracting the tailings from the tailings dam and into the plant working well, get the plant working well and to get the crew trained up to the same level of competence as what we've historically seen on the technical grade plant and CGP1. As you can imagine, with the significant ramp of expansion at Greenbushes with CGP2 commencing commissioning last year and TRP commencing commissioning this year, some of the skilled resources are being spread thin and there's a training element over the next couple of quarters to bring the overall crew up to the same level.

Thank you very much, Peter. Cheers.

Thank you. Your next question comes from Matt Green from Credit Suisse. Please go ahead.

Hi, good morning, Peter and Matt. Just to follow on from Dan's question there, Peter, just the chemical grade pricing, I guess you're restructuring that contract in September this year. How are your discussions going there with your JV partners? And are we going to see any sort of changes potentially to the structuring around the technical grade?

First off with the transfer pricing formula for the chemical grade, we will see those happening in the coming months and to date there's been no formal process on that. And then on the technical grade, pricing structure is based on orders that the two off-takers, TLEA and Albemarle, make for the technical grade product based on the contracts that they have with their customers and that dialogue between the buyer and the seller sets the price. There's no benchmark price that's referred to for the purposes of setting the technical grade price.

Okay, that's helpful. Thank you. And then just on costs, look, congratulations on the unit costs across both. My question is just on green bushes on the strike cost, so ignoring the royalties there. Just trying to understand how you achieved this. I mean, material moved was up about 25% quarter-on-quarter. Spot sales were down slightly. And, you know, we've been hearing from everyone just how much consumables have increased. So, can you just provide a little bit more context as to what you're seeing there, green bushes on the crossroads?

So largely that cost will drive with production rain part, you'll see greater efficiencies coming out of that operation, hence why inflational pressures are not necessarily seen at greenbushes compared to other operations.

And then over the medium term, we will see a build in mining material movements and on a cost-per-tonne basis that could provide some upward pressure.

Okay, that's helpful. And just lastly for me, on the hydroxide plant, not much colour there. I appreciate, Gideon, you said no fatal flaws, but what is challenging the timeline there? So can you provide a little bit more colour there?

I would describe it as we're like 97% there and we know we can make battery grade product because we are making it and the reality is we are getting some marginal contamination in the drying and packaging stage. So we're just working through some mechanical changes there to stop that contamination. and then we would expect to be able to bag battery grade product as well as make it at the crystalliser. Thank you. And one thing to appreciate here is the very high levels of purity and with contamination, for instance, from the likes of magnetics, we're talking about a quality benchmark which is 100 parts per billion. So the level of contamination that's required to fit that to the wrong side of the performance metric is not very much.

And we know that we produced that battery grade in the circuit prior to the drying circuit. So that's where the introduction of iron is coming into the circuit.

Thank you. Your next question comes from Peter O'Connor from Shaw and Partners. Please go ahead.

Good morning, Pete. Good morning, Matt. Just to reiterate, great on costs given the inflationary pressure of the West and also nice to have a tailwind. Pete, just to the JV and cash flow, you indicated in your commentary that you're expecting returns in the second half of this calendar year. Could you just remind us of the process and structure of suites and dividend payments for both green bushes and also the... Yeah, sure.

So in April Greenbush has moved to a monthly sweep of dividend to the shareholders. So from an IGO perspective, Greenbush's dividend is going up to TLEA on a monthly basis. and we would expect that at an IGO level we would see a dividend flow from TLEA most likely in the early September quarter and with a And although contractually, under the shareholders agreement at TLEA, we are expecting quarterly dividend flow, with a monthly dividend flow from Green Gushes, there could be good logic for TNG and IGO to consider a monthly dividend from TLEA up to the shareholders.

Okay, and thinking ahead, with the refinery, is that the seamless process when you do start printing cash there? When you do start generating a profit and delivering product from the hydroxide plant, what's the sweep arrangement for cash there?

It's exactly the same. When we think about Kwinana holistically, it's 100% embedded in TLEA, so we would see it as just part of that TLEA dividend structure.

Okay, to the hydroxide plant, Pete, you said you're at 97% of the process to get there. When you do achieve a product and start shipping a product which is commercial, do you then have to go through a qualification for that product? Is that another step?

Yeah, there's a period of qualification with each of the off-takers and variably that's between four and six months. And once they finish their qualification, we're then obligated to deliver into the contracts. And until that point where we're delivering into contracts, we would expect there would be product available to sell into the spot market.

So how should we think about the financial contribution from hydroxide over the next one quarter, two quarters, three quarters? Will there be any reasonable income coming through?

It's in commissioning and trial production, Peter, and it's too early for us to give guidance at this stage because the risk is that we could be wrong to either the upside or the downside. And so we would prefer to just hunker down, get the work done, deliver what we're saying we'll do, and then the financial results and the cash flow would be an outcome of that.

Thank you, Pete.

Thank you. Your next question comes from Tim Hoff from Canaccord. Please go ahead.

Hi, Pete and Tim. I was just wondering around the chemical grade part three, can you take us through the two and a half year timeframe? It just seems like that's a fairly long development schedule for a brownfields operation. And can you perhaps take us through what that capital profile might look like over that period?

So the overall capital profile is similar to what you would expect for this sort of project. There's effectively an S-curve of cash flow and the peak cash flow point or cash outflow point from recollection, and I'm shooting from the hip here, Tim, is about the midpoint of the project. From the timing point of view, we have built some cushion in there, recognising the fact that we are in an overheated construction market here in Western Australia and that the people you need to do work may not be available the instant you need them. There's some cushion provided in the estimate from that, but we fully expect that we'll take up all of the construction time that we've allowed for through to early 2025.

And just in terms of, I guess, the Western Area's acquisition, you've got your debt facility there that's going to be used to finance that, and you've got $400 million in... of additional capacity. Do you anticipate drawing any of that additional $400 million?

The $400 million revolver that we have at the moment will be replaced effectively by the new term facility and revolver. So going forward, the full debt facilities will be that $900 million. Okay. So to answer your question, we won't be drawing down any of the existing $400 million revolts because that will disappear.

Okay. And then perhaps finally, can you remind us what the off-state agreements are at Kwinana with that material? Just noting there was a few questions put to Chianchi around its supply chain and whether it had connections into Russian military supply chains, of which they said they weren't connected. but I guess it just highlights some of the opaqueness in dealing with global partners.

Yeah, sure. We've got four contracted off-takers for train one. Three of those are South Korean companies and one is a European company, Northvolt. And I don't believe there's any connectivity back to Russia through any of those companies.

Fantastic.

Thank you very much. And all of those off-takers are listed on prior presentations of ours.

Thank you. Your next question comes from Mitch Ryan from Jefferies. Please go ahead.

Good morning, Peter and Tim. My first question is with regards to Kornana. Obviously, as you said, train one is at 97% but didn't quite meet its guidance at first production in the March quarter, I guess. I just wanted to understand how we should be thinking about the ramp-up profile beyond that. I know you said you're very close to producing first battery grade hydroxide, but what does the ramp-up profile look like? And is there anything that you're seeing currently that is changing how you're thinking about that?

Like through this period we've been able to flex various parts of the plant because we do have some storage capacity between stages. So we know for example we recently ran the calciner at pretty much full capacity in the last run and through that filled up the storage bin between the circuits and we've been doing a similar thing through the through the dissolution and impurity removal stages. So all of these we are testing, and the expectation will be that once we deliver the battery grade product, the very next milestone will be continuous operation at about 50 per cent of the capacity, which we'll expect to hit quite quickly, and then to move up beyond that progressively.

And my second question relates to obviously you've given us an update on CGP3, but do you have a current thinking on the timing of CGP4? Is there an ability to accelerate that, I guess, given the quantum of build time that you've outlined as part of that?

Yes, certainly. At this stage, I characterise that it's on the plan, it's permitted, but we have not got a mapped out board process to approve CGP4, and that will be something that we'll start start to backfill in the coming quarters and the aim continues to be to have that completed by 2027. So we would expect a commitment to that project sometime during the CGP3 build.

Okay, thank you. That's it for me.

Thank you. Your next question comes from Khan Pekka from Royal Bank of Canada. Please go ahead.

Hi, Peter and Matt in the team. First question is on realised price. Circling back to Dan's question, but at Greenbushes, how much of the sales were booked under last quarter's pricing? I mean, in terms of thousand tonnes or percentage. Do you have an idea?

Yeah, I don't have that at my fingertips. And if Scott was here, he would likely have it available. But from an overall financial performance point of view, the split between the technical grade and the amount of material sold at the previous benchmark price doesn't really change the outcome for the quarter.

If we go off that logic, if technical grade is similar pricing to chemical, it suggests that 10% to 15% of this quarter's sales were done on the previous quarter's pricing.

Is that...? Yeah, I just don't have the number in front of me at the moment. Quite happy to circle back with you on that, but I don't think it moves the dial from a value... perspective going forward?

Sure. It's just probably providing more transparency around the pricing.

If you're looking for transparency on the technical grade pricing, I think the June quarter results would have less noise. There'd only be the one moving part and people would be able to calculate what the technical grade price is with the June quarter results. I'm not at liberty to talk to the contractor price for that technical grade product that's privileged to Albemarle and TLEA.

Yeah, understood. Thank you. And the second one is, again, on cost control. Great job at Nova. I mean, if you break out by-product credits, still mining and processing costs, you know, they really haven't escalated much. But maybe if you can provide some clarity around that, that'd be great.

Thanks. Yeah, look, I can talk to that. What we see is some of our continuous improvements still come through. So, for example, this quarter we're shifting shutdown intervals from... from 10 weeks to 12 weeks. So some of those initiatives that we continue to push through the business ensure that we can keep a handle on cost and ultimately come in close to where we expected at the start of the financial year.

But it doesn't mean there's not cost pressures. And over the course of the last 24 months, we've seen fuel go from $0.73 a litre to $1.32 per litre today. We've seen freight costs for our... for our concentrate from a road transport point of view increased by circa 15%. We've seen concentrate shipping costs increased by circa 60%. So there are lots of cost pressures. So the job that Matt and the team at Nova are doing to corral those with productivity improvements and cost reductions in other areas is just an outstanding job.

Yeah, definitely agree. And just I'll sneak a third one in if that's okay. Just with Kwanana, post-accreditation, just wondering what the off-take contracts look like. I mean, fixed volume or variable price? Is there sort of time periods? Any sort of... Yeah, it's for the contracts.

Each of the contracts has a different nature. Excuse me. It's not COVID. I did do a rat test this morning. Each of the contracts is different, and each uses a different benchmark price as a reference point for pricing, and each of them are refreshed to benchmark at least one time per year.

Thank you very much.

Thank you. Your next question comes from Lyndon Fagan from JP Morgan. Please go ahead.

Thanks very much. So just back on the technical grade product, how often does that contract reset? Is it a six-monthly contract or is it something else?

It's done on an order basis and it's approximately every six months.

So should we expect a similar pricing period from a modelling perspective over a six month period similar to how we think about chemical grade?

I would say if you're modelling something then then June quarter will be unchanged and then there would be a reset based on those contract negotiations for the second half of the coming year.

You mentioned technical sold at a discount to chemical this period. How long would that likely persist?

In the technical grade it's all about supply and demand of the material and so the price of it will respond over time and customarily the technical grade does sell for a higher price than the chemical grade and that's been our observation for past periods prior to the March quarter.

And have you got a rule of thumb? how we should think about that from a modeling point of view over time. Is it a 20% premium? Is it something different?

No, we're not in a position to speculate on that, Lyndon.

Okay. And another bit of admin. So you're reporting a free on board realized price. Can I confirm that all of your sales are done on a free on board basis? Or are there some CFR sales?

I'd have to come back to you on that, Lyndon.

Right, OK. And then just a final one, I guess. I mean, it was a pretty busy period from an M&A point of view. You almost bought a copper mine off Glencore and obviously a big bump in the Western Areas bid. I mean, maybe just from a high-level perspective, can you maybe give us an update... of your vision around how you'd like this portfolio to look. So I guess what I'm getting at is there's a lot of cash flow coming through from the lithium joint venture over the coming years. How should the market expect that to be distributed versus reinvested into building a bigger company?

Yep, sure. So like... We routinely talk about our aspiration, which is to grow a company that is globally relevant in the clean energy metal space. We routinely talk to a diversified portfolio of clean energy metals, which would include lithium, nickel, copper, cobalt, and we currently produce all of those from through the Lithium Joint Venture and from NOVA. And we talk to our aspiration to be connected to customers through both upstream mining operations and downstream processing operations to produce finished products ready for use by end users in the battery supply chain. So that's the strategic framework there. And at the same time, we recognise the needs of shareholders and the discipline that's demonstrated with regular cash returns to shareholders. So from a capital allocation perspective, we have a balanced approach with a balance amount of free cash flow generation which is returned to shareholders as cash returns and at the same time a continuing investment in exploration to find the mines of the future and serve to invest in continuing growth of the business. whether it be through expansion activities of the existing assets, like we're doing at Greenbushes and Kwinana, or whether it be M&A to bring new assets into the business.

Great. And just a final one. So, again, on costs, fantastic results. I think one of the only companies to report lower costs quarter on quarter. But, again, I just don't quite understand the explanation at Greenbushes Given how much more material movement there was versus last quarter, how was it that there was actually a lower unit cost?

You've got marginally higher production on a dollar per tonne produced basis that has some impact. Other than that, the costs are relatively static, quarter on quarter.

Okay. Thanks very much.

Thank you. Your next question comes from Justin Raja from UBS. Please go ahead.

G'day. That might actually be me. It's Levi here. G'day, Peter. Good morning.

Hi, Levi.

I might come back to you on the average realised spodumene price later on, but just at TNG, can you just talk us through, I guess, the ion in the lithium hydroxide? How long have you been working on getting that out? And have the, I guess, have the specs of those four customers changed over time? And do they have different specs? Like, are you producing the same product for all of them?

The spec hasn't changed. We've been working towards that spec for some time. The little bit of contamination that we are getting in that very final stage in some of the early commissioning and trial production work we were doing, that was masked. as we were flushing some of that contamination from other parts of the circuit out. And it was only at the point where we cleaned up everything else that we realised that there was that last residual bit of recontamination in the drying and bagging phase. And so there's been a focus on that over the last probably three, four weeks, four weeks I'd say.

There's two elements to that in terms of both introduction of iron into the circuit, somewhere in that drying slash bagging phase, but also in terms of throughput as well. So as we ramp up throughput through that circuit, we'll look at reducing that level of iron in that component of the circuit. Along with that, we're looking at some slight engineering change engineering change, changing some of the screw feeders, et cetera, from 300 series to 400 series stainless steel. So we'll be able to better remove the iron through magnetic separation.

Okay. Yeah. Thanks for the greater detail. So maybe changing a bit of the kit out to higher quality and magnets is still the removal method, is it? Or the only removal, just for the layman?

Yeah. So it's about increasing throughput as a dilution and then also about changing out some of that kit so that we can actually remove the impurities that are introduced.

Yeah, cool. Okay, thank you. And changing pace a little bit back to Silver Knight. I don't think we've really talked about that at all in NOVA. can you just talk to the next steps there when, you know, what the timelines look like, when it could be going through the plant and when you can really test the, it looks like you're drilling some of those nearby targets this quarter, but when you test the deets, so production and the deets. Yep, thanks.

So in terms of the timeline, majority of the technical work will get done by the end of this calendar year. Currently, we're doing the resource drilling. We've got all the met samples in process as well at the moment. That will determine the blend that will feed into NOVA. Critical part of the environmental permitting expectation is to have that environmental permit done by mid-calendar year next year. In terms of drilling, first phase of drilling is really focused on resource extensions at Silver Knight. Then we'll go into the resource definitions and then start to drill test some of those targets through the quarter, including some of those deeper targets.

And mining, realistically, is it a two- to three-year job?

Yeah, production profile largely dictated by blend feed going into NOVA. And what we're working through now is the NOVA life of mine as well to find out the optimal feed and blend scenario for silver nine.

Okay, cool. Thanks, Matt. Thanks, Peter. Thanks, Eli.

Thank you. Once again, if you wish to ask a question, please press star 1 on your telephone and wait for your name to be announced. Your next question is a follow-up from Peter O'Connor from Shore & Partners. Please go ahead.

Just circling back to Lyndon's question, which is fascinating about where you're headed from a corporate perspective. So you're clearly opportunistic, which is great, and your discipline is also noted. If we're trying to think about what piques your interest and makes you go to a data route, Why did Cobar come up? Why not Max or Sierra Gorda? I guess I actually figured. Is there a logic or some sort of analogy with Cobar? Rather, I think you may understand what's, get this layer going in your corporate team and make sure you do good.

Good question Peter. We haven't said what assets we may or may not have looked at and generally most of the assets we do look at, that's kept confidential and it's only because there was a leak of information around Cobar that the market was generally aware of the fact that we were looking at it. But we routinely look at all types of assets across that space, nickel, cobalt, lithium, copper in Australia and globally with a focus on assets where we see potential for mine lives in excess of 10 years or longer and where we see the ability or the optionality turn those assets into assets that are in the bottom half of the cost curve.

Can I just segue back to NOVA? And the plant that's been talked about in previous calls, the sulfate plant. You've mentioned in your prepared remarks about Western areas steering you back in that direction. Could you just join the dots up there and explain how that would work in the timeline and what we should expect?

So this is a program of work that we will commit to once the Western Areas transaction is completed and in readiness or in preparation for that we are assembling the team and putting in place all of the processes that you know we'll need to to to start that work and and i expect that by the time we get to september quarter recording we'll be talking about some of that early stage activity around the nickel sulfate project thanks thank you there are no further questions from the phone line and there are no further questions registered by the webcast

I'd now like to hand the conference back over to Mr Bradford for closing remarks.

Yeah, great. Thanks, everyone, once again. We appreciate your participation throughout the presentation and the Q&A session and your continuing support for what we're doing here at IGO. Stay safe and have a great day.