Igo Ltd

Thank you for standing by and welcome to the IGO Limited FY22 full year results webcast. All participants are in a listen only mode. There will be a presentation followed by a question and answer session. If you wish to ask a question via the phones, you will need to press the star key followed by the number one on your telephone keypad. If you wish to ask a question via the webcast, please type your question into the ask a question box. I would now like to hand the conference over to Mr. Peter Bradford, Managing Director and CEO. Please go ahead.

Thank you, Rachel. Good morning, everyone, and thank you for joining our call this morning as we present IGO's audited financial statements and results for the 2022 financial year, which we released to the ASX this morning. Joining me on the call today from Sydney is Scott Steinkrug, our Chief Financial Officer, who will be available to answer questions during the Q&A session at the end of the call. Slide two highlights our cautionary statement and disclaimer. Of note, small currency amounts in the presentation today are in Australian dollars unless otherwise noted. Moving to slide three. To begin, I wanted to talk to Sustainability and some of the work programs we are progressing across the business to continue to be a leader in sustainability practices and reporting. Our focus on safety and wellbeing has resulted in a reduced incident severity over the past few years and our culture of care has enabled us to better manage the impacts of COVID-19. I am proud of the way in which our people have demonstrated adaptability and collaboration during this time. We progressed our carbon reduction initiatives through the commitment to expanded solar and energy storage capacity at NOVA. Our internal carbon price implemented 12 months ago has generated approximately $3.7 million of internal funding that we will apply to our carbon reduction and offset initiatives. It has been particularly gratifying to see the engagement and ingenuity of our people and partner organisations to our carbon reduction initiatives. It is great to see the continued external validation we receive from key sustainability indexes on the quality and transparency of our sustainability reporting. I note that we released our 2022 sustainability report today. Moving to slide four. We're also incredibly proud of what we have achieved for the year. Operationally, we met or bettered production and cost guidance at both Nova and Greenbushes and delivered the first battery-grade lithium hydroxide production from Kwinona. Financially, we generated record revenue and underlying EBITDA, which was underpinned by record financial performance from Nova and a maiden profit contribution from the lithium joint venture. In parallel, we continue to transform the business through the strategic acquisition of Western areas while also progressing our exploration portfolio toward discovery. And finally, we successfully delivered for our stakeholders, delivering improved outcomes for shareholders, a stronger culture and value proposition for our people and proactive caring engagement with our host communities and traditional owners. Moving to slide five, where we set out our financial results for the 2022 financial year. Strong commodity prices combined with consistent operating performance generated higher revenue from continuing operations of $903 million and higher underlying EBITDA of $717 million when compared to the prior year. Net profit after tax at $331 million was lower year on year due to the absence of the one-off gain recorded in the 2021 financial year relating to the divestment of Tropicana. On a normalised basis, net profit after tax more than doubled year on year. Similarly, underlying free cash flow was lower in the 2022 financial year due to tax payments during the year totalling $199 million, of which $140 million related directly to the gain on sale of Tropicana last year. The acquisition of Western Areas was funded via a new $900 million debt facility and approximately of existing cash, resulting in a year-end net debt position of $533 million. Moving to slide six, where we illustrate the continued improvement in financial metrics over recent years. These results position IGO well for the future and reflect the transformation of our portfolio and our disciplined financial management. I wanted to point out here that reported revenue for the 2022 financial year does not reflect revenue generated within the lithium joint venture, as we report this contribution at the EBITDA level. Moving to slide seven, where we provide a waterfall to reconcile the year-on-year change in the group cash position. In particular, I draw your attention to the record free cash flow generation for FY22 from Nova, which was primarily attributable to higher commodity prices. Also, the first dividend received from the lithium joint venture, TLEA, of $71 million. Also, the debt drawdown and cash payment with respect to the Western Areas acquisition, which settled in June 2022. And finally, the taxes paid, as mentioned earlier, arising primarily from our taxable gain on the divestment of Tropicana during the 2021 financial year. Moving to slide eight. where we reconciled the net profit after tax variance between the 2021 and 2022 financial years. On note, we highlight the $254 million positive impact to net profit after tax, resulting from higher metals prices at Nova and the maiden net profit contribution from the lithium joint venture, TLEA, of $177 million. I also note that the 2021 financial year net profit after tax results included the gain on sale of our interest in Tropicana, which when combined with the absence of Tropicana earnings in FY22 led to the $432 million negative variance when compared year on year. Moving to slide nine. where I'm pleased to report that the Board has declared a $0.05 per share fully franked final dividend for FY22, which is consistent with our shareholder returns policy, which targets cash returns to shareholders equivalent to 15% to 25% of underlying free cash flow. This final dividend, which will be paid on 30 September, brings total FY22 dividends to $0.10 per share, which is consistent with the dividend paid in FY21, is at the top end of our payout formula and represents $76 million of returns to shareholders for the full year. Moving to slide 10, where I will take the opportunity to speak very briefly to each of the core assets within our portfolio, which we did discuss in greater detail during the June quarter conference call. I will start with NOVA, where once again our team has delivered another great result with nickel production and cash costs within or better than guidance, resulting in $631 million of underlying EBITDA and $574 million of underlying free cash flow for the year. Looking ahead, our priorities at NOVA are to continue to optimise the operation, particularly our metallurgical recovery, advance our decarbonisation programs, and progress the Silverknife feasibility study. Moving to slide 11. As announced within our June quarter results, we are revising the strategy and development plan for COSMOS to enable a number of work programs to be completed before producing first concentrate in mid-2022. The key work programs that need to be completed are the shaft infrastructure that was always central to complete around mid-2023, additional underground development and the expansion of the processing plant, all of which will contribute to a stronger production profile and lower cash costs when concentrate production does commence. This change to the development plan will result in additional pre-production development costs and we expect to update on this with the September quarter result in October. In parallel, we are progressing the scoping study into Mount Goode and commence our next phase of work to understand the downstream nickel sulfate opportunity. Moving to slide 12, having acquired Forestania at the end of June, its contribution to the IGO financial results commenced as at the 1st of July. The integration process is progressing well and in parallel we are progressing plans to optimise the operation and understand the potential for additional nickel and lithium opportunities on the broader tenement package. Turning to slide 13, Greenbushes delivered a highly successful year with record production and financial results which included EBITDA of $1.35 billion on a 100% basis. The production results benefited from the first full year of production from Chemical Break Plant 2 and a maiden production contribution from the Tailings Retreatment Plan. This, together with very strong spodumene prices, gave great financial results. Already the team at Greenbushes are focused on the next stage of growth with the construction of chemical grade plant three commenced, which was approved back in March 2022. Moving to slide 14, at the Kwinana Refinery, the team's focus for the year was on quality and getting the recipe to make battery grade product right. Having achieved this in May 2022, the focus is now on quantity and progressing the ramp-up of Kwinana Train 1. In parallel, early works for the recommencement of construction of Train 2 has commenced and we expect a decision to proceed with construction in late 2022. Moving to slide 15, materials under investment in exploration by our industry has resulted in a shortage of projects to provide the metals critical to global decarbonisation through electrification. Consequently, exploration is a key plank in our continued growth strategy with an objective to unlock transformative value for shareholders through the discovery of our next clean energy metals project. following the western areas transaction we have increased our exploration commitment in fy 23 to 75 million dollars with a greater portion of our budget going to brownfields exploration in close proximity to our operating activities at nova and forestania our greenfields exploration focus is on exploration for nickel and copper our fraser range patterson and kimberly projects with initial investments being made across the coming year in our lithium and rare earth experiments. Turning to slide 16, the 2022 financial year was an outstanding year across the business, with strong financial and operating results delivered alongside the ongoing transformation of our clean energy metals portfolio. NOVA continues its track record of operational and financial delivery. We enhanced our legal business through the acquisition of Western Areas. Our lithium business generated outstanding financial results and delivered its first dividend to IGO. We maintained our focus on shareholder returns and have declared a $0.05 final fully franked dividend for FY22. We have advanced our decarbonisation programs and remain committed to leading sustainability practices and reporting. And finally, our people remain engaged with our purpose and have continued to make a difference. We also continue to strengthen the team. And to that end, it was great to welcome Trace Allaud to our board yesterday, bringing our board gender balance to 50-50. Thank you, everyone, for joining us on the call this morning. We will now open up for questions. Thank you, operator.

Thank you. If you wish to ask a question via the phones, you'll need to press star then one on your telephone keypad. If you wish to ask a question via the webcast, please submit a question via the ask a question box. We'll be addressing questions via the phones first and then back to the webcast. Your first question comes from Hayden Bedstow with Macquarie. Please go ahead.

Good morning, Pete. Just a question on Kwinana. Just keen to get sort of an update on how that's going. Obviously, we saw it all at the Investor Day in late July, early August, just the progression on the battery grade sort of ramp up and how that's going, particularly given you need to make the decision on train two later this year. Thanks.

Yep, Sean. Now, all of the work programs that you saw and heard about on the ground at Kornana are continuing and we'll provide a fulsome update with our September quarter results.

And just on the expiration portfolio, Peter, there's obviously a huge portfolio here now. I mean, you sort of outlined the five key priorities there. I mean, what are we thinking about in terms of an ongoing spend on this portfolio sort of beyond this year? Is it going to be particularly success required or is there a number of sort of the next phase of priorities that will see similar sort of spend going forward?

A lot of our investment today has been to mature the portfolio that we did have, recognising that the vast majority of the portfolio going back a few years was very greenfields in nature. The work we've done has given us the understanding of the geology, the geophysics, the geochemistry and through that across all of these We're now very much in a target definition and testing stage. You will likely see some significant rationalisation of the portfolio over the next couple of years as we drill test the targets previously identified. From a spend point of view, we would like to think that our spend matures and that in the coming years, a greater majority of the spend is going into resource drill out on the discoveries that we've made.

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

Thanks, Nathan.

The next question comes from Levi Spry with UBS. Please go ahead.

Hi, Levi.

Good morning, Peter. How are you? Just two questions. First one, Spodumene, Spodumene Pricing, so obviously key value driver here. Can you just talk us through what your expectations are for the second half and what does happen in September with the renegotiation of the contract? How do we think about your second half pricing, I guess?

Yeah, so at this stage, we've got no further... At this stage, we've got no further news to update the market on what that may or may not look like. The guidance for people would be to roll the existing formula forward. Given we're spotting prices continue to trade, I think that that creates an excellent scenario for the spodumene pricing for the second half of the year. So we think about the strong financial results for green bushes that were just reported for FY22. We'll have that on steroids for FY23.

Yes, that's what we're looking forward to. Is there anything else you can share on expectations around pricing, maybe what what Tianqi's saying or what other feedback from the industry is?

I unfortunately can't, Levi. I can't confirm or deny anything that might be happening.

All right. Well, I'll try another different one then. The Inflation Reduction Act. You've been talking a lot about strategic supply for some of your commodities for a long time. Is this the first time that you can actually get paid more for some of that production? So specifically now I'm thinking about hydroxide and maybe nickel or nickel downstream. Is that, you know, has there been any discussions along those lines? What are your views on it?

We've maintained for some time that if you make a superior quality product in a jurisdiction where you can demonstrate that it's being made safely, ethically and sustainably, that you will get a... And you can demonstrate that through traceability from raw materials to in-product, that you would be able to get a... a price premium. And I think some of the movements we're starting to see with the Inflation Reduction Act and others, it's starting to provide some substance to that theme that we have been talking to for some time. And I think it really puts Australia in a very unique position from a clean energy metals perspective.

Nice one. Thank you. Thanks, Peter.

Thanks, mate.

The next question comes from Peter O'Connor with Shore and Partners. Please go ahead.

Hi, Pete. Two questions. Hi, Peter. What do you mean? If the bookends were firstly what you've got, that's a left-hand bookend now with Chiankui and the other bookend is where you'll end up, is where you'll end up ever going to be fully spot? Is that on the radar or on the agenda or is that just an untenable situation to go fully spot?

I just don't want to provide any conjecture around what that may or may not be, Peter. Given where spodumene prices are, maybe it's a scenario where you need to be careful what you wish for, and if you take a view on whether spodumene prices might be at the top of the cycle, then a formula with a lag gives a, say, stronger price for longer. But none of us has the crystal ball that can tell us where we are in that cycle and in fact whether there's more opportunity in front of us. So back to what I said at the start, Pete, there's really no clarity or granularity I can give you on what that pricing formula may look like going forward.

Okay. But in terms of the cash flow and capital management, I just had a few thoughts on capital management I want to run by you. So firstly, when is your next update? You used to do it bi-annually. Is that still the case?

Yeah, sure. So it's end of June 24. So we provide an update June 21 and we said it would be three years after that. And in terms of... And just to sort of provide some clarity there, Pete, you know, our Our formula, our payout ratio is 15% to 25% of underlying free cash flow and for FY22 we've paid out right at the top end of that at 25%. What we've said previously is that whenever liquidity, which is basically cash and available available debt facilities is above $500 million, then the board will use the discretion to adopt a higher payout ratio. So if you run this through your model, you will see that we're likely to be in that scenario coming in at FY23, and I would expect at that time one of the decisions in front of the board will be what dividend to distribute above the standard payout formula.

So is that net debt available or net cash available greater than $500, sorry?

It'll be cash available, plus any saleable equities that we may have, plus any undrawn debt facilities. That's broadly our definition of equity.

Okay, and that's greater than $500. Thanks. In terms of shaping the policy going forward, given you will be getting large dividends from the joint venture, is there any thought about parceling those and parceling them straight through to shareholders with a franking attached? Or will it always go through a formulaic whole-of-company IGO process? Can you have two paths, a lithium pass-through plus an IGO either?

We'll probably always take a... And I'm shooting from the hip here because ultimately it will be a board decision. But my sense is that we'll adopt a whole of company strategy. And in setting dividends, we'll always be looking at what the capital needs are for the company. And part of our discussion this year was the review we did of the capital programs embedded across the lithium business with expansions at Greenbushes and Kwinana, but also the development project that we have at Cosmos. And we'll always be looking at those cash needs to build and grow the business in parallel to the decision making on returns to shareholders.

An extension franking. The franking you'll generate going forward is extraordinary. So thoughts on that, given there'll an enormous mismatch between franking balance bill versus the dividends paid out?

Yeah. Peter, I might just comment on that one. So you're right. We've virtually extinguished all of our carry forward tax losses. So we're in a taxpaying position, so we will be building our franking account balance. At the end of June, we had a balance of about $150 million of franking credits. Keep in mind, Greenbushes, they are also a taxpayer, so they'll be delivering franks dividends through TLEA and when they pass on to us, those franking credits, they give rise to lower tax payments for IGO. They don't actually pass through to our franking account. So there's subtle differences.

Okay. So it's a tax offset, not a pass through. Great. My last question. Gearing, do you change your gearing targets going forward based on the amount of cash you're looking to generate?

We keep a view of what our long-term gearing is and we will look to maintain that and we've always considered a number about 2 as being something that 2.25 is something that we don't want to exceed. It's a long-term number. We see ourselves gearing down below that fairly quickly and as I said that just remains a long-term number for us.

Thanks, Peter. Green with Credit Suisse. Please go ahead.

Hi, good morning, Peter. Look, I guess a few questions on the spodumene pricing, but I'll try to ask it in a slightly different way. You mentioned on the, I think it was the strategy day or the Qanana side visit, that the ATO takes fast markets to calculate its royalties as it better represents the spot market, the spot time in the markets. And they deemed that Asian metals was more laggard in this sense. You know, your current transfer pricing model uses both of these agencies. So do you think the ATO is going to be supportive of you continuing to use Asian metal if it deems it is a drag potentially on your transfer pricing?

Yeah, I think just sort of recollecting the conversation we did have, it was really around the pricing mechanism that the state government uses to calculate royalties from greenbushes. and they do that as a mechanism to provide some comfort for the state government versus the transfer pricing model that we do use. The state government uses a basket of three prices, which is PLATS, fast markets and benchmark minerals. which is slightly different to the pricing formula that's used for the transfer price by the shareholders, which is fast markets, benchmark minerals and Asian metals. As you are probably aware, across all of those reference prices, the one that leads the pack is generally Platts and the one that lags is generally Asian metals. A more perfect formula from a transfer pricing formula perspective going forward would probably be to sample all reference prices and incorporate all of them into a transfer pricing. That doesn't indicate that that's where we get to in a discussion with the shareholders on a renewed transfer price going forward, but that's an indication of what a more perfect model would look like. Thanks, Matt. Any other questions?

Thanks, Peter. I guess with your hydroxide offtake, you're using the same agencies as the state government, I guess, replacing the Asian metal with plaques. Do you see a situation here where you're going to have to lean towards Platts, benchmark minerals and fast market.

I don't have any further clarity to provide other than what I just described on that one. With lithium hydroxide, it's a little bit different. We've got no sales from one shareholder to another, and therefore all of the pricing is on an arm's-length basis to a third party, and that's a contracted price that's agreed on a contracted basis with the third parties.

Okay. Thanks, Peter. And just on the contract, the nickel concentrate blending strategy, and I appreciate we'll hear more on this soon, but is your focus just on Forrestania and Nova blending, or are you also considering COSMOS as part of this strategy?

At this stage, the focus is more around Nova and Forrestania, but as we get closer to production at COSMOS, we'll do the work there to understand whether that provides another layer of opportunity Longer term, of course, our aim is to go downstream, build a nickel sulphate plant, and at that point, we'll have the ultimate blending strategy, putting any materials, any feedstock materials that we have into our own facility.

Okay, understood. Thanks. My last question is just on Mount Goode, on the scraping study. But if you do go explore your own construction of your own plant there to process the oxide material, are you looking to produce an MHP or an MHP intermediary product? And I guess as part of the scoping study, are you also considering toll treating that material with third parties?

Yeah, the nature of the scoping study is to do all of the trade-off analysis and understand what are all of the options for developing a project, and then to narrow those options down to the recommendation for the more detailed work that's being done in a feasibility study. So all of those options would be under consideration during the scoping study stage, and it would be far too early for us to comment on what would be the preferred outcome.

Understood. Thanks very much, Peter. That's all from me. Thanks, Matt.

The next question comes from Rahul Anand with Morgan Stanley. Please go ahead.

Hi, Rahul. Hi, Peter. Hi, how are you? Thanks for the opportunity. Look, I perhaps wanted to revisit the capital allocation framework, Peter. As you correctly point out, next year seems to be a strong year for cash flows, both free cash flow and net cash balances. I guess if we move away from the question of dividends for a second, How are you thinking about potentially doing buybacks, potentially off-market, I guess, because you're going to have plenty of franking credits? And then I guess my second question connected to that one would also be, how do you see yourself now in terms of your inorganic growth side? I mean, do you think you've done what you need to, or do you still think if opportunities come past, you want to keep some of your powder dry and perhaps look at opportunities into next year as well again.

Yep, sure. Yeah, all good questions, Rob. On the capital allocation, I broadly, my language every now and again slips into dividend, but we have a more holistic view than that. It's all about cash returns to shareholders and that can be via dividends or via share buybacks. And certainly that would be a... a tool in the toolkit going forward but of course we'd only do that in circumstances where it made sense to do that rather than return cash to shareholders via a fully frank dividend. So we would continue to assess both options in the future and whatever option we used would be based on what delivered the best outcome for shareholders and the business. On the second question, on the organic growth, over the last couple of years, we've transformed the business and we've bolted on a lithium business unit to what we're doing. We've got a lot of brownfields growth within that, building the third chemical grade plant at Greenbushes. After that's finished, we'll be building the fourth chemical grade plant at Kwinana. We expect to start building the second train later this year. And going forward, we would envisage a third and a fourth train. And then within the nickel business, we are busy developing Cosmos and doing a couple of studies around Mount Goode and the nickel sulphate. So we've got a lot of digestion to do from a brownfields development within the group. constructive around looking for opportunities. I've described myself and the business as serial lookers and will continue to look but will always be very disciplined on what we may transact on and the fact that we are busy within the business. doesn't create a sense of urgency for us to do anything, and therefore we can afford to be a lot more disciplined and a lot more prudent about what we may or may not do. Does that answer the question?

Yeah, so for the second one, I was... Sorry, I'll go ahead. For the second one, I was just going to perhaps touch on again the Silver Knights opportunity. Any sort of progress there that you can update us on and how you're thinking about that opportunity. Any other metrics or updates there?

Yeah, we're doing the work. It's a lot of metallurgical work and then all of the environmental baseline studies and permitting that we need to do for a new mine development in Western Australia. And in parallel, we're doing some drill testing around Silver Knight to understand whether there's any extensions. And you would recollect that in the June quarter result, we did highlight that we had a number of circa 20 metre intersections with visible nickel and copper mineralisation in close proximity to silver knight. And the work there to continue to test that is continuing. and we would look to provide a more fulsome update on what that looks like going forward. I have characterised over the course of the last couple of months that the results we're getting, you would argue they're material to Silverknife, but they're not yet material to the IGO business.

Okay, understood. Perfect. Thank you, Peter. I'll pass it on.

Thank you. Yeah, hi, Nathan. London from JP Morgan. Please go ahead.

Hi, Peter. Thanks for the call. The first question was just to try and revisit the opportunity to toll trade some green bushes spodumene and turn it into hydroxide whilst Kwinana is not really producing any material volume. I know I sort of brought this up at the site visit, but is there anything more you can say about that opportunity or whether it is even an opportunity for the JV.

Rather than talk to what might be there, I think we're better off better off leaving that question. And if we are able to do something in the future, we'll talk about that with a certainty of having done it. And it's certainly an opportunity that IGL will be constructive around. And then it would be a matter of reaching the same conclusion with our joint venture partner.

Okay, thanks. And then the other question was just to push a little bit more on Quinana and where we're up to. You mentioned on site that 90% of product in the last 10 days had been on spec. I'm wondering if you could update as to whether we're still seeing 90% of product on spec and what sort of volume that's associated with?

Like I said earlier, Lyndon, all of the work programs that we talked about were on site. We're progressing all of those and we're better off talking to where we are on Kornada in the ordinary course when we get to the September quarter results in October. Otherwise, we may need to start doing monthly reports from an ASX point of view.

No worries, Peter. I'll see if I'm third time lucky. So the final question I had was on green bushes. Really just a long-term question. So by far and away the most valuable asset in the company. I'm wondering if you're able to talk to the long-term optionality. There was a discussion about going underground. There was also not really any discussion about expansions beyond CGP4, obviously it's an amazing all-body. I'd like to get a bit more of a flavour about the exploration potential or whether there is in fact some opportunity to grow this asset beyond the projects that have already been put out there. Is there anything more you can say about that or is it It just is what it is in terms of CGP4 and that's it.

It's a great question, Lyndon. Now from a strategic point of view we do see additional potential below the depths of the current planned pit and there's an ongoing body of work to do the drilling to confirm that and in part convert inferred resources into measured and indicated so we can incorporated into a larger pit plan, but also doing the work to identify extensions below that and understand the opportunity for further extensions, perhaps underground extensions below the depth of a maximum pit. And if you roll all that together as an opportunity, then very quickly, from a strategic point of view, you start thinking about, well, how do we extract value quicker? And one of the challenges of greenbushes will always be the relatively small footprint we have there and the access to land that we would need to build more infrastructure. And I think one of the real opportunities going forward would be better understand what the maximum potential of those existing process plants is and what the opportunity is to take those well beyond nameplate as has been achieved with chemical grade plant number one. Chemical grade plant number one, it operates at a level far above nameplate and if we were to achieve that same level of performance from chemical grade plant two, three and four, it would be similar to having another concentrator on the site. That may be a more realistic opportunity than building a fifth chemical grade concentrator. But all of those are in front of us, and certainly from a strategic point of view, those would be some of the things that we would be focused on throughout our participation in the Green Bushes Joint Venture.

Thanks very much, Peter.

The next question comes from Daniel Morgan with Bear and Joey. Please go ahead.

Hi, Peter. Just on the Western Areas assets, now that you've taken control, Forrestania, can you talk about the synergies you're expecting from the concentrate potential blending with Nova? Can you blend, get a payability uplift? Weird question, but Is there any potential benefit to the resource or reserve or mining at Forestania from blending?

Yeah, sure. So there's a number of work programs that we have underway then to understand some of those synergies across operations. And an obvious one with Forestania is what can be done to maximize recovery and therefore both from an ore body point of view but also metallurgically by being able to blend out some of the high arsenic at Spotted Quoll with lower arsenic material from elsewhere. So we are in the process of doing the work to understand that opportunity and would expect to talk to that in coming quarters. In parallel, we're having the discussions with all of our partner organisations, whether they be contractors or suppliers, to understand what synergies we may be able to deliver across the multiple operations where we're working together with our partners.

Thanks very much.

The next question comes from Carm Pecker with the Royal Bank of Canada. Please go ahead.

Good morning, Peter and team. Two quick questions. I think prior to the acquisition, Western Areas was talking about signing offtake for Cosmos beyond what's agreed with Glencore. Just wondering if there was any progress on that or has the offtake approach changed with IGA's ownership?

We're continuing on with some of the work programs that Western Area has previously started, but also providing a sort of holistic overlay on that to think about the whole company concentrate package and how we deal with that strategically with our off-take partners. And I would expect that... between now and the December quarter results, we would have an update for the market because that's certainly the timeline that we need to get those discussions finalised.

Sure. Thank you. And also just following up on Matt's question prior about blending, I just wanted to see what benefit would arrive from blending a high FEMGO with a low FEMGO, and if that was the case, wouldn't COSMOS just be a standalone concentrate to be sold?

Yeah, as I said before, we're doing the work to understand that opportunity and to understand what benefit may be achieved from a payability point of view by blending across initially Forestania and NOVA and then ultimately across the three sites. But longer term, and here I'm talking to maybe mid-2026, we would be focused on what's the right blend of feed into our own downstream processing facility. And given the nature of what that facility would be, we would expect that it would be much less sensitive to a wider bandwidth of material types. It would be much less sensitive to iron MgO ratio, much less sensitive to arsenic concentration, which would then create a competitive advantage for us to compete with some of those off-spec materials in the market.

Thank you. Just a final one, just on lithium JV. I wonder if you can talk through or maybe give an update. At the site visit, you mentioned monthly cash being distributed back to partners of the lithium JV. Over the last month on, have you seen a larger pickup in cash flow being distributed back to IGO or JV partners?

Yeah, sure. So the framework that we have there is an agreed quarterly distribution from Greenbushes up to the Lithium Joint Venture Company. But in practice, that's actually happening every month at the moment. And then the framework at the Lithium Daily Company, TLEA, is a quarterly dividend distribution up to IGO. And we get to have a dialogue around whether that should be a more frequent distribution, and I'm really not able to talk to what distributions we've had in July, August, and we'll provide an update to the market on those movements with the September quarter results.

Sure. Thank you very much.

Thanks, Matt.

Thank you. The next question is from Matthew Friedman with MST Financial. Please go ahead.

Thanks. Morning, Peter and team. Firstly, just wanted to follow on from your comments on downstream processing. At the strategy day, you floated the concept, I guess, of an integrated process to produce cathode materials. Yesterday, we had one of your peers or perhaps one of your competitors also floating the idea of an integrated Australian battery production. So I guess wondering if you can provide the expected timing of that study. Am I right to say it's due late FY23? What's the scope being considered? Is it simply a desktop study, desktop concept study, or is it more involved? Are you really assessing the economics of all these points in the value chain that you've highlighted? And then also what other moving parts are feeding into that study in terms of assessing other upstream resources or perhaps your project partners on that study as well?

Yeah, sure. So as we talked about on the strategy day, we see a natural evolution where a nickel sulphate downstream project actually incorporates a pre-cam facility adjacent to it because that reduces overall capital and operating costs. We put in effect a nickel in solution across the fence into the pre-cam facility. So we are doing the work to understand The merits of both of those at the same time, it will be correct to characterize that work on the nickel sulfate portion at the moment is running ahead of the work on the other one, but we expect that that will catch up quite quickly and the aim is to deliver a feasibility study which would support a financial investment decision on both of those by mid-2024.

Got it. Okay, that's very helpful. Thanks, Peter. And then just following on quickly from Khan's question on off-takes, you talked about wanting to resolve the Cosmos off-take situation between now and the December quarter result. Is it fair to extend that to the portion of Nova concentrate and also Forestania concentrate that you will have available around that time?

Yeah. I may not have said it, but my thinking when I was answering the question was it would be a broader update on all of our offtakes because we have a couple of milestones coming up for Nova and Forestania, as well as the need to deliver certainty on COSMOS. So we'll be providing a broad update, plus or minus by the time we get to our December quarter results.

Got it. Thanks, Peter. You may have said it, but I may be the one that missed it.

I would have to check the transcript to see what I said. We won't drive the commercial conversations with the counterparties around a date, around the December quarter results. If we need more time, we'll take the extra time at that point to do it. But plus or minus, that's about when we should be getting there.

So does that mean that in the interim you'd be happy to accept spot sales outside of existing off-takes or would you expect that any incremental volumes would just be delivered into the existing off-takes?

Too early to comment on that. I have anecdotally heard about quite high spot sales in recent times, 82% spot sales have been quoted to me on a payability point of view. So it's an outcome we would look at, but the plan is to get the off-pay logged up and to have that committed from 1st of January.

Got it. Yeah, it's always nice to be able to, I guess, reference spot indexes with your pricing. Maybe just finally on Forestania, you mentioned there briefly in your slide around lithium exploration. Wondering if you can expand on that a bit. Is that currently just a little bit of neurology given that you're down the road from Mount Holland or are there any high priority targets there that you've outlined, you know, any outcropping pegmatites that are ready for you guys to go and put a drill into?

Too early to talk to that, but there's more substance than a pipe dream or any sort of close ology, and we look forward to updating people on some of those targets that are on the existing concession package in upcoming quarters.

Got it. Thanks very much, Peter.

Thanks, Matt.

Next question comes from Peter O'Connor with Shore and Partners. Please go ahead.

Pete, two more on the nickel business. Firstly, Nova and the life of mine. I'm thinking about this from the context of your new director. She would have done DD ahead of joining the board, and I'm glad I would have come up with a question to you saying, Pete, Nova's only got a short life. What are you going to do beyond Silver Knight and Nova? And is there a gap there before you turn any more production in the Fraser range into production? And then I've got a second one.

Given the likely depth of a discovery in the ANOVA, I would expect it's fair to say that there would be a hiatus in any activity that's required to bring any new discovery that's made from this point on into an operation. Just the amount of time it would need to do the discovery The resource assessment of that new discovery, the time it would take to do the feasibility studies and the permitting, it just about guarantees that we would need a, there would be a hiatus in activity.

So a care and maintenance scenario for a potential extended period if necessary.

Yeah. And that's correct.

Okay. My second one on nickel as well, but nickel supply more broadly, and let's stick with And having met with BHP last week, the CEO and he talked about the nickel business and indicating that they wanted to partly grow the nickel business by reducing the units they buy from people like yourself. In the timeframe of the next smelter campaign shut and the change to the way they look at metallurgy and chemistry, do you have enough time by mid this decade or mid-late this decade to evolve your own downstream nickel processing to fill that hole or will you be selling materials spot as you just indicated from the previous question?

I think the timeframe we're talking to for our own downstream facility subject to completing the feasibility study and reaching a financial investment decision would be circa mid-2026 and if there was a need to place offtake in the lead up to the commissioning of that and it's still a robust market outside of Australia.

So to be clear, FID FY26, or that's first material FY26?

FID by mid-2024, leading to a construction completion by mid-2026. Perfect.

Thanks, Pete.

Thank you. We have run short on time and come to the end of the Q&A session. I'll now hand back for closing remarks.

Thanks, Rachel. Thanks, everyone. for your participation today through our presentation and Q&A session and we look forward to engaging with you again very soon when we present our September quarter results in October. Thank you and have a safe day.