Igo Ltd

Good morning, everyone. Thank you for joining this call this morning as we present our June quarterly operating and financial results. Joining me on the call today is our Chief Financial Officer, Cass Bosnidge. Slide 2 highlights our cautionary statement and disclaimer. Of note, all currency amounts are in Australian dollars unless otherwise noted. I also note that our quarter and full year results are unordered. and we'll be reporting our audited full year financial results on the 31st of August. Turning to slide three, I want to start this morning's call with a comment on safety. Over the course of the last 12 months, we have experienced too many incidents of harm to our people. The board and management teams have responded to ensure that our people are engaged with our safety programs and driven a review of our risk assessment safety systems and training to help minimise the likelihood and severity of safety incidents. We have boosted resources both on site and from corporate support and continue to closely examine ways in which we can drive better outcomes. It's pleasing that we have recorded reductions in our total reportable injury frequency rate over the course of FY23 with the majority of these being low severity incidents, but we still have a way to go. Turning to slide four, we'll outline some of the key highlights for the June quarter. Financially, the strength of our lithium business has continued to drive excellent financial results. Another record for both underlying earning and free cash flow was delivered in the June quarter. This has enabled us to build exceptional balance sheet strength. Operationally, Greenbushes was a highlight, delivering record spodumene production in the quarter, resulting in exceeding full-year production guidance. This performance combined with strong spodumene pricing delivered another record dividend from TLEA. At Kwinana, the ramp-up of Train 1 experienced ongoing technical challenges. which resulted in lower than expected quarterly production. In our nickel business, Nova and Forestania both finished FY23 strongly, while development of the Cosmos project also made material progress. I note the impairment that we announced two weeks ago. We acknowledge this disappointment, and I'll discuss this later on in this presentation. Finally, as always, sustainability has been a focus over the quarter. A key highlight here was the commissioning of expanded solar farm and battery energy storage system, ANOVA. Turning to slide five, we'll provide an overview of our June quarter financial results, as well as unaudited full-year financial results for FY23. Key highlights to note here include a 16% increase in IGO's share of TLEA net profit, up to $522 million, for the quarter, which drove a corresponding 19% increase in underlying EBITDA to $636 million. This brings IGO's underlying EBITDA for FY23 to just over $2 billion. This is nearly a three-fold increase compared to our FY22 result. Underlying free cash flow of $381 million for the June quarter was again enhanced by strong dividends from TLEA. As a result, the balance sheet is in great shape with cash at bank of $775 million and a net cash position of $415 million following the repayment of a $90 million of our debt facility. I note we have not reported a group MPAT result in this quarter. as this result will be impacted by the impairment charge which we announced two weeks ago. This impairment value is yet to be finalised and as such will provide unaudited NPAT with the full year results at the end of August. Turning to slide six, where we reconcile cash. As with the last quarter, the big driver in cash upticks was the record quarterly dividend received from TLEA. Other points to note include strong cash generation from NOVA of $118 million, a cash outflow of $5 million from Forestania, which was driven by restricted sales for the quarter, $53 million received from the sale of investments related to our divestment of our holdings in Incorp, and $90 million scheduled debt repayment relating to the group's debt facility. Turning to slide seven, Alongside our quality results disclosure this morning, we have also released details of our updated capital management policy. As our business has transformed over recent years, we understand that shareholders need clarity and transparency with respect to how IGA will seek to balance the reliable and consistent return of capital to shareholders while maintaining our strong balance sheet and ability to respond to potential growth opportunities. IGO's shareholder return policy has been updated with a target range of between 20% and 40% of underlying free cash flow when liquidity is less than $1 billion. When liquidity exceeds $1 billion, there is board discretion to pay in excess of 40% threshold. We'll announce our final dividend for FY23 with our full year results on 31 August. Turning to slide 8, we will jump to a discussion of our lithium business. This is held by our joint venture interest in Tianqi Lithium Energy Australia, referred to as TLEA. Turning to slide 9, as noted in the highlights, the strong financial performance of our lithium joint venture has continued, driven by strong production performance at Greenbushes and favourable pricing. IGO's share of TLEA's net profit after tax was up 16% quarter-and-quarter to $522 million, bringing a four-year result to just over $1.6 billion. The quarterly dividend received from TLEA for the June quarter was $423 million, up 32% versus the prior quarter. For FY23, IGO has received just shy of $1.2 billion in dividends from TLEA. This is an exceptional result. Turning to slide 10 and on to Greenbushes. The June quarter performance saw 11% stronger production compared to the March quarter as a result of higher feed grades into CGP1 and CGP2. This was a result, a record quarter, for green bushes. Four-year spodumene concentrate production of 1.49 million tonnes was above our four-year guidance. Sales, which was impacted by shipment delays in the March quarter, recovered strongly in the June quarter, resulting in a strong uplift of sales revenue, up 23% to $3.5 billion, and EBITDA up 24% to $3.2 billion on a 100% basis. Unit costs excluding royalties of $304 per tonne for the June quarter were marginally higher, reflecting ongoing inflationary pressures in the sector, while the full-year cost result of $279 per tonne finished just above the top end of our guidance. We've also introduced a new cost reporting metric in SAGE quarterly report to improve clarity on production costs will report cash costs of production going forward, which will include mining, processing, crushing, site admin and deferred stripping, and utilise production rather than sales as a unit of measure. The realised budgetary price for the June quarter, including both chemical and technical grade products, was US$5,431 per tonne for the quarter. I note that the chemical grade spodumene pricing for the current quarter has reset at US$3,739 per tonne, which reflects the lower prevailing benchmark pricing we witnessed in the March and June quarter. Turning to slide 11, the graph on the left illustrates the production growth at Greenbushes over the recent two years. Production growth to the current to the current 1.5 million tonnes per annum run rate has been enabled by the commissioning of CGP2 and a tarlings retreatment project. The next step up in the production profile is expected when we commission CGP3 in 2025. As noted last quarter, a review of the capital cost estimate for CGP3 has been underway in order to address the impacts of cost escalation and challenges related to engineering and design particularly of pilings. While the final cost estimate is subject to further update and require approval from the Taliesin Board, IGO currently expects the total remaining capital to be between $550 and $605 million. This equates to an approximate uplift of $180 million versus the original guidance after $125 million of expenditure was incurred in FY23. In the meantime, other capital work programs continue to focus on the mine service area, power supply, tailings dam floor and accommodation village during the quarter. Turning to slide 12 and onto the update on Koonamah lithium hydroxide facility. The ramp up of train one continued to be challenged with only 142 tonnes of lithium hydroxide produced during the quarter, which was well below expectation. The team faced a number of technical challenges and plant delays coming out of the shutdown in May to rectify several key bottlenecks. The plant has now been stabilised and has returned to approximately 20% of nameplate capacity. We'll continue to work through engineering and rectification work on train one. Turning to slide 13, we'll provide guidance for FY24 for our lithium business. Bodomene concentrate production from greenbushes is expected to be in line with FY23 performance and has been guided between 1.4 to 1.5 million tonnes on a 100% basis. Cash costs of production are guided at between $280 and $330 per tonne. Costs are expected to be marginally higher than FY23 due to ongoing impacts of inflation which will be partially offset by improved mining costs. FY24 capex at green bossages is guided to be between $850 and $950 million, representing a sizeable uplift versus the FY23 spend of $513 million. This increase in capex reflects a significant level of expansionary activities on site, with many key projects running concurrently to deliver the increased mining and processing rates into the future. Of note, majority of the capital guided can be attributed to five key projects, including CGP3 construction, the third stripping as we invest in the cutback to open up the Kapanga Zone, the permanent accommodation village to de-bottleneck operations from workforce constraints, continuation of construction of Tailing Storage Facility 4, and other additional supporting infrastructure for the site. This is a sizable investment at Greenbushes. and will enable future growth to that 2.5 million tonne production and beyond. At Kwinana, we're not in a position to provide production guidance at this point, as we continue to work through rectification and ramp-up production. CapEx at Kwinana, FY24, is guided at 35 to 45 million, the vast majority of this which required on train 1. Turning to slide 14, we will move to our discussion on the nickel business unit. Turning to slide 14, we will start with the NOVA operation. Quarterly production performance was stronger for all metals. Nickel production finished FY23 marginally below the bottom end of guidance, while copper and cobalt production finished within guidance. This stronger quarter was aided by higher mill throughput with power issues experienced in the March quarter now mostly resolved. With higher metal production, cash cost performance also improved. June quarter cash costs of $2.60 per payable pound were 31% lower quarter on quarter and full year cash costs finished at $3.54 per pound within guidance. For the full year, NOVA generated $460 million in underlying EBITDA, with EBITDA margins over the full year at over 62%. Turning to slide 16. At Forestania, improved processing capacity and performance delivered a stronger quarter-on-quarter production result and a 16% improvement in cost. Production and costs both finished FY23 within guidance. Of note, sale revenues were remarkably lower as a result of lower nickel prices, while free cash was also lower due to limited trucking availability and poor weather resulting in road closures. We expect it to improve over the coming quarter. Turning to slide 17 and onto COSMOS, where we continue to progress project development during the quarter. Key deliverables included completion of the PACE plant and development of underground chambers for the material handling infrastructure. In addition, as at 30 June 2023, the processing plant and shaft were approximately 85% complete, while the headframe pictured to the right was also nearing completion at the end of the quarter. Capital expenditure for the quarter was $98 million, with a total of spend over FY2023 of $338 million. Turning to slide 18, where I talk through the impairment we recorded against the Western Areas assets and the Cosmos Project review currently underway. As announced two weeks ago, we will be recording a non-cash pre-tax impairment of between $880 and $918 million on the assets acquired from Western Areas in 2022. Subject to finalisation and audit, this impairment charge will be recorded in our full year results due out at the end of August. This impairment is disappointing and reflects higher cabinets and operating costs, challenges to the mine production schedule and delays in development at COSMOS. A comprehensive independent review of the COSMOS project is underway, with the review team given a broad mandate better address the risk and opportunity to the current life of mine plan, capital cost estimates and schedule. We expect this review to be completed during the December quarter at which point we'll provide an update to the market. Turning to slide 19 where we'll set out our FY24 guidance for our nickel business. Starting with NOVA, FY24 production is guided between 21,500 and 23,500 tonnes of nickel. This is in line with FY23 production levels that, as you remember, was impacted by the fire in December. Year on year, the Nova Mine Plan is forecasting lower mule tonnes and grade. Copper and cobalt production are also expected to be marginally lower than FY23 production. Cash cost guidance of between $3.40 and $3.90 per payable pound of nickel marginally higher year-on-year, reflecting lower unit production and our expectation that some inflationary pressures will persist into FY24. At Forestania, we're guided to lower year-on-year production with nickel production between 7,500 and 9,000 tonnes for FY24. This reflects the conclusion of mining from the Fighting Fox mine expected in December, which will result in lower mined and milled tons. Cash costs are expected to be in line with FY23 performance between $9.50 and $10.50 per table pound. Capital development at both Nova and Forestania expected to be higher year on year. As noted earlier, we're also in the process of completing a review of COSMOS. We are not in a position to provide guidance at this point. Moving to slide 20, we will provide a brief update on exploration activities during the quarter. Moving to slide 21, exploration activities continue across our portfolio. In FY24, we have allocated an exploration budget of $65 million to $75 million. This budget is driven by a bottom-up assessment of high-quality opportunities to unlock value across our portfolio. Activities of noting during the quarter include, at the Fraser Range project, we have ongoing programs of work at both Silver Knight and others near NOVA targets, where we have continually encountered disseminated nickel sulphides in drilling. And in the Paterson, we have diamond-drilled two key copper targets, Nifty East and Rainbow West, with assay results pending. Turning to slide 22 and to a summary of today's results. Turning to slide 23. To summarise the quarter, we have continued to deliver outstanding financial performance with another quarter record underlying EBITDA result and strong free cash flow generation. Our balance sheet is in great shape with a net cash position of $415 million. Greenbush has driven much of its performance with FY23 production exceeding guidance, which combined with strong pricing has generated exceptional dividend flows back to IGO. We continue to invest heavily into production growth at Greenbushes with a focus on construction of CGP3. Nova and Forestania has also delivered during what has been a challenging year for both projects. Development at Cosmos continues while we conduct in parallel an independent review designed to deliver optimal value on the asset. And as advised, we'll be working over the coming weeks to finalise our full year audit results, including the impairment. And we look forward to engaging again on the 31st of August. Thank you for joining us on the call this morning. And we'll now hand it across back to the operator for questions.

Thank you. 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. We ask that you please limit your questions to one per person with one follow-up. If you wish to ask a question via the webcast, please type your question into the Ask a Question box. Your first phone question comes from Raoul Arnand with Morgan Stanley Australia. Please go ahead.

Hi, team. Good morning. For my question, I had one on the write down. I know there's a review underway, but you've talked about potentially the differences in the spot and consensus nickel price forecasts. And you've also talked of cost inflation in terms of the Cosmos project. Can you perhaps shed a bit more light on whether you're using spot or consensus forecast for that write down figure? And then what's the nature of the write-down in terms of the OPEX? How should we think about that? Please. Thanks.

Hi, Raoul. I'll answer that. We're using consensus nickel for the impairment pricing. So that'll answer the first part of your question. In respect of the impairment, there were numerous contributions to that. It escalated capital and operating costs. challenges in the mine schedule and challenges in the development schedule. In terms of giving you an idea of the split of that, it's a bit hard to do that because they all contribute to differing levels. Not one of them was more than any of the others.

Right. Okay. And in terms of just the combined, I mean, you've talked about the synergies or the positive gains you've made out of blending the products as well from the Western areas assets and IGO assets. Can you provide an order of magnitude of what level of write down that part of the synergies have seen?

The devil's in the detail. So at this point, no, we'll be providing more information around the impairment as part of our annual report. but I can let you know that that was factored into our impairment calculations.

It's fair to say most of that value that we come from, it comes from Nova and Forestania. We haven't realised that value yet for COSMOS.

Sure, thanks. Just to close off that impairment point, I know it's only one question, apologies. Square off, you're only using reserves in this calc, right? I mean, any sort of upside in terms of your resource expansion and conversion into reserve is still not captured here.

Correct. We're working on expanding our drill programs and there is some opportunities at depth and laterally, which we'll be working on over the course of the next six, 12 months.

It's important to know that this impairment is driven by accounting standards. So what we're working through with all of it and part of that with an independent review is also assessing those opportunities so that we can clearly articulate the value proposition for COSMOS.

Understood. Thanks a lot for the detail. I'll pass it on.

Thank you. Your next question comes from Hugo Nicolacchi with Goldman Sachs. Please go ahead.

Morning Matt and team and thanks for the update this morning. Maybe just one around Kwinana. I'm just hoping you provide a bit more colour around the technical challenges for the restart following the plant maintenance in the quarter and then maybe just how the plant's been performing through July following the modifications. Thanks.

Yeah fair to say that we were disappointed with the quarterly results out of with that small production. There's a number of reasons on that, and it's not fair to point to one of those reasons in terms of that production profile. We have stabilised the plant now, and we're back up to around about 20% of nameplate. So we're consistently at about 20%. We continue to work through some of the rectifications, including the performance at the lithium hydroxide back end which we shut down and we still haven't got there out of that shut.

Great, thanks for that. Is there any particular part that's still underperforming? Is it still the dry circuit that's not up to nameplate capacity and what's holding that back? Or just any detail you can provide as to which parts of the plant that are still kind of holding you back there?

Look, it's fair to say that as we work through ramping the project, ramping and then you also notice that we've pulled back in calendar year 23 to that 50% target. It's fair to say there's a list of things associated with de-bottlenecking. One of the key de-bottlenecking areas is in that back end, around that dryer, around the material handling. That is a constraint, but there is other constraints. to work through as we ramp up Kwinana.

Great, thanks. I'm just rounding out the Kwinana piece. You comment in the release that the feed costs on Train 2 are the only capex you'll incur in FY24, but feed completing in early calendar 24. How do we interpret that around the timing that you're currently expecting a potential FID on Train 2 at this stage then?

So in the process of committing to an engineering group on the feed, we expect feed to be completed, be pushed out slightly, so it'll get completed early in FY, early in calendar year 24. And then obviously after completion of feed, then it's got to go through approval process to reach a capital decision. So that's why we haven't guided any sort of decision because ultimately that will come through a board approval and once that decision is made, then we'll inform the market.

Great. Thanks, Matt. Pass it on.

Question from Levi with UBS.

Please go ahead.

Hi, Levi. G'day, Matt. Thanks for the call. Probably want to talk about green bushes and capital, please. So the new capital guidance, can you just break it down and sort of walk us through that a little bit? You mentioned $180 million increase on the CPG3. So does that get you to full production? What else is in there? Talk through the stripping. What is the sustaining number? And I guess what is the read-through here for CPG4?

Yeah, okay. So a few questions in there and I'll try and get through those. So as we guided in the quarter, we're looking at a cost increase on CGP3, about $180 million. That's That's an estimate. So it hasn't been approved by the board at Taliesin and still looking at locking what exactly CGP3 cost would be. You saw that FY24, we're going to $880 to about $950 for FY24. If I break that down, there's a number of key projects. So like CGP3 accounts for around about 30%, 35% of that. Deferred stripping would be another 15% to 20%. The permanent camp village is about 10% to 15%. Tailing stamp floor is about another 10% to 15%. And then you've got enabling capital, et cetera, including some offices and et cetera. So a lot of the capital that you've seen in FY24 is really about positioning green bushes as we continue to expand and grow and realise that value proposition that we have at green bushes. CGP4, if I'm at the last question, working through studies on CGP4, with the idea that that should go to the Taliesin board sometime early in calendar year 24 for approvals.

Okay, thanks Matt. Thank you.

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

Thanks for that. Just on COSMOS, are you able to give idea of when we should expect first production?

Look we're going through the independent review at the moment Lyndon and as we've guided into in the quarterly report we're anticipating to be able to give some more flavour in the December quarter until then when we've withdrawn guidance and won't comment on it we need to finish this review.

I guess the other way of looking at it, if you spent 98 million of capex in the fourth quarter, should we expect that rate of spend to continue or is there any dramatic change in demobilising the construction project?

Again, there's fluctuations in capex during any project. So I think that we're not guiding on capex for the next quarter or two. We need to go through this independent review. Sorry, I can't give you more than that at this point.

No worries. I'll try my luck on another asset. So just at Nova, what's driving the lower milled tonne? So I realise the lower grade is the function of the mine plan, but what's driving the lower throughput there and does that continue in subsequent years?

Yeah, lower throughput is largely driven by just mining schedule. So you see grain drop off, but you also see some of the higher volume stoats also drop off. So it's just scheduling, mining scheduling. Stabilises around about this level.

So this is the kind of new run rate going forward. Is that... how we think about it.

Yeah, it's fair to say, except when you get right to the back end.

Right, and is there anything on Silver Knight worth commenting on?

No, not in terms of materiality to Nova or extension of life of mine. Silver Knight really is about the exploration opportunities around it.

Yeah, no worries. Okay, thanks. I'll turn it on, turn it over, I mean.

Thank you. Your next question comes from Kyle with RBC. Go ahead.

Good morning, Matt and Cass. One question on the TLA dividend. Just wondering, you know, the previous dividend was impacted by that essential transaction. Is that now not proceeding? Has all the funds allocated to that now being distributed this quarter?

Yeah, so there is that central metals, no acquisition there. That just becomes part of the pool that comes through that we do the cash sweeps through TLEA. So that's been lifted from any restriction as we do cash sweeps through TLEA.

Okay, thanks. And the second one, just maybe the quantum or the EBITDA loss for Kwinana. A bit more detail around that. Is that essentially due to the technical challenges that you previously flagged?

Yeah, and a reduction of sales during the quarter, which you will have seen.

So there's no more detail around it? It's just the technical challenges?

Yeah, and reduced revenue coming through, obviously.

Yeah, small volumes of revenue coming through. We've still got significant inventories at Kwinana that we're looking, and that's part of the qualification. Once we reach that qualification, then we'll also sell that inventory that sits in the warehouse.

Last one on Cosmos. I know it's been talked about, and there is a review going on, but it seems like the shaft and the headframes progressing, the underground development rates are actually okay. So what's actually changed? Is it more the plant?

As we sort of said in the quarterly, we've had some challenges with the mining schedule underground and it's been a little bit more difficult with geotech, which we've had delays in AM6, which I think we spoke about last quarter. There's schedule slippages. There's cost escalation on both the capex and operating costs. I hope that answers your question.

It does. Thanks. I'll pass it on. I appreciate it.

Thank you. Your next question comes from Mitch with Jeffery. Please go ahead.

Good morning. Thank you very much for taking my question. I just wanted to turn to the battery materials facility. And in light of what you've seen both at Cosmos and more specifically at Quinana with regards to capital blowouts, the first question is how much capital have you sort of allocated to it within the feasibility study? And then secondly, how much of it is dependent on Cosmos or feed to be successful?

Yep, I'll answer that. So we're still continuing to advance that. advance the study um this quarter this quarter was quite quite lumpy in the expenditure because we were doing all the pilot test work um pilot tests were essentially running and we'll continue that during this quarter this quarter coming where we're running pilot continuous um associated with this process flow sheet it's all part of the de-risking program We're doing that before we're jumping into any sort of engineering. So we're doing our test work at a more advanced level than where our engineering is. Expenditure, I can't... I mean, the expenditure's in the $20 million to $30 million over the total feasibility, so I can't remember what's... That sort of magnitude in terms of investment... to provide that optionality, continue to engage with the third party as part of that, bringing in that PCAM capacity. The relationship to COSMOS, one of the key drivers of the integrated battery metal facility is looking at some of these disseminated deposits that we have in COSMOS as well, like Mount Hood, and that's a key enabler for it to come through.

Thank you.

Thank you. Your next question comes from Matthew Friedman with MST Financial. Please go ahead.

Sure. Thanks. Morning, Matt and Kath. Yeah, look, I mean, my question is a bit of a broader philosophical one, so it might be challenging to answer succinctly, but just wondering if you can try and articulate I guess what lessons have been learned as a business from the disappointments of the Western areas acquisition? I mean, if I look at IGO exiting FY23, it's obviously very well capitalized. You've got strong cash generation looking forward from green bushes. And we know that there's lots of assets on the market. You know, other assets will come up for sale over time, whether it's base metals or lithium. So I guess, you know, how did your target criteria and your risk profile change for acquisitions? You know, firstly, from the learnings of that failure, And secondly, in terms of your internal investment opportunities, how does your investment criteria for internal projects change? So you just talked about the battery materials facility. How can you back as a business your assessment of the value of that project when the assessment of the value of the Western Area assets, which obviously you should have known very, very well or certainly much, much closer to your existing business, you know, your assessment of value there was so far off. So I guess, yeah, holistically, you're wondering in your view what the process values were and how they've been fixed going forward.

Thanks.

Yeah. Thanks, Matt. Appreciate the question. Yeah, look, you know, I kind of look at it as it is a setback. You know, we acknowledge that it's disappointing. But the value for what we've got to do is take those learnings and actually... ourselves that we actually could become better at it now the specific learnings I won't get into those specific learnings etc but there is learnings even as an organization we've got to take those learnings and and do better and in parallel to that is we've got to work to deliver cosmos value and that's what we're doing in terms of internal investment internal investment into Kwinana. What we're doing with the study is providing that optionality and also what we're doing with that study is ultimately trying to ensure that we de-risk it as much as possible so that if the decision was made, then we would feel comfortable with that decision. So it doesn't change anything we're doing at this point in time. If anything, it strengthens us so that when some of these other decisions come, that we are making a much even better decision going forward. Now, I didn't get into a lot of details there, Matt, but I hope it gave a little bit of context.

Yeah, no, that's helpful. Thanks, Matt. And I know it's a pretty, I guess it's a philosophical question, as I said. Maybe, is there anything, I guess, a bit more objective that you can outline? So, for example, you know, any sort of changes in how you view hurdle rates for internal or external investments or, you know, I guess how you, how you look at commodity price risk or, you know, kind of any of those other factors that, that may be fed into that Western areas acquisition that, that were shortcomings, you know, anything from a objective or quantitative sense that you, that you can do differently going forward.

Look, I, I, I don't think it's the right environment at the moment to get into sort of that detail. We do want to share and we will want to share those learnings very specifically because it's an opportunity for us to reflect on those. So I just don't think it's the right time for us to go into that detail. But more than happy to have that sort of conversation at the right time.

Okay, got it. Thanks very much, Matt.

Thank you. Your next question comes from Hayden Bairstow with Macquarie. Please go ahead.

Yeah, morning, guys. Just back on Greenbushes, Matt, just keen to understand, I mean, obviously you went to the CapEx on Levi's question, but just sort of what's left from here and sort of where the decision-making processes are. I mean, I'd imagine the amount of money this thing makes, it's all going to go ahead almost regardless of the CapEx, and it certainly seems that way given what Albemarle's committing to downstream. So... Just keen to get an understanding of where you think CapEx revisions might actually change any of the decision-making plans here in terms of moving to CGP4 and then ultimately sort of two, two and a half million tonnes.

Yeah, okay. Thanks, Hayden. So even as a business for all shareholders at Greenbush, it's just such a logical decision for us all to invest capital into that project to unlock continued value. What you're seeing is ultimately CGP is a lumpy capital. When the decision gets made on CGP4, that would also be a lumpy capital. Into capital, some of the other enabling features like the mine services area, what we're doing with the village, what we're doing with the power reticulation, what we're doing with tailings, all of those sort of things are ultimately enabling capital to ramp up. And then from a Taliesin perspective, one of our challenges is that when the capital project becomes approved, then it gets approved very simply. And they're working off different financial years as part of budgeting approvals, et cetera. So there is a little level of complexity that we've got to work through with various shareholders and stakeholders.

Yeah, okay, great. And just on Kwinana, can you just confirm, is there still that final time with Synergy at some point later this year, and that's sort of really the starting point of getting this thing ramped up?

There is a part of that with Synergy on power, and that's when we look at they're also going to have to do a shutdown in that Kwinana area, and that's where we'll time the October shutdown, or roughly October. constraint on production. The constraint on production, the ramp-ups or individual things associated with de-bottlenecking specific areas of the plant.

Okay, great. Thanks for that, Matt.

Thank you. Your next question comes from Tom Hayes with CLSA. Please go ahead.

Thanks for that. Look, I've just got one question on Kwinana. I'm just wondering if you can give us an update how you're thinking about Trains 3 and 4, given the challenges that we're still having. Has there been any sort of commentary or change of thinking from your joint venture partner on whether they should be constructed in Australia in the future? Thank you.

Yeah, so Trains 3 and 4... looking at completing PFS studies, but what we're wanting to do is sequence these. So we don't want to get into a whole lot of details on train three and four until train two, and then we'll take train two, and then train two will be version two, train three and short four will be different versions, et cetera. So what we won't do is rush into those decisions and make sure that we actually sequence trains, different trains at Kwanada, so that we're taking learnings and improving. We're so grateful that we train two, for example, have stopped. Otherwise, we would be facing the same sort of issues with train one times by two.

Thank you. I'll leave it there.

Thank you. Your next question comes from John Bishop with Jarden Group Australia. Please go ahead.

G'day, Matt and Kath. Thanks for taking the question. Just on Kwinana again, is there any sort of view, obviously putting train three and four to one side, any view from the TLEA joint venture to look at introducing a third party into that part of the business in terms of providing some specialisation? Obviously, you've had a number of problems with train one at the moment and train two is being sort of pushed out as a consequence. Is there a view to... maybe look at third-party intellectual property and introducing that into the joint venture at all?

None at the moment, John. And we've got to remember that Train 2 is a legacy. Sorry, Train 1 is legacy. So, I mean, that was built at a specific time under a different engineering group without the rigour and the studies, without seed. I mean, they were building and designing this plant, Train 1, at the same time. So although we face challenges on train one and we acknowledge that, there's no human train two, and when we make the financial decision on train two, the challenges on train two would not be like train one.

Okay, and then in terms of the engineering of train two, I think I've sort of asked this question before, but given you've got a fair amount already constructed equipment Is there an ability to manifestly change that flow sheet to work symbiotically with Train 1?

Yeah, there is. So remember, Train 2 has major pieces of equipment installed. It doesn't have everything else. And except for the back end around the dryer, we are comfortable with every piece of other major piece of equipment installed. So... It's all about the subsidiary equipment around bag houses and belts and conveyors and piping, et cetera, tanks. So envision that that won't change. There's no need to change it. If anything, we'll take those learnings out of train one and apply that to train two.

Right. Thank you.

Thank you. Your next question comes from Lyndon Fagan with JP Morgan. So please go ahead. Pardon me, Lyndon. Your line is now live. Please go ahead.

Oh, sorry. Just another follow-up on Kwinana. Can I ask the question why even do Train 2? I guess what gives you the confidence that the project would even be economic given the problems with Train 1? why not maybe look at toll trading or some other option to monetise a downstream opportunity while Train 1 is finding its feet? I don't see why there's any rush jumping into Train 2 at all, to be honest. I'd be keen to explore that. Thanks.

Okay. So, Linda, so Train 2, you know, what Claire don't articulate is we won't have the same issues on Train 1 as Train 2. We have yet to make a financial investment decision on Train 2. What we're doing is doing all the feed work and truly all the feed and a true assessment of what that capital to complete on Train 2 is. And then ultimately that will be part of our investment decision on whether we go or not go. I would... You mean... And that will largely be driven by both risk opportunities and also the financial return you'll drive out of train two. And that will all come together as part of the end process on C. If, for some reason, that project was marginal, then your argument would stack up. But we don't believe that at any point in time.

Is there a way of thinking about competition for capital? I mean... When it comes to the lithium strategy, why not, if it's going to cost you another half a billion or a billion for train two, why not put that towards an upstream opportunity to get more mine supply as opposed to going downstream where it's pretty tough going?

Yeah, that will all be part of the decision at the time once we have resolution on what all that value proposition is and the level of confidence on that value proposition.

Lyndon, we are continually looking at the deployment of capital and where best to deploy it because there are competing projects and competing priorities. So that's part of our standard investment criteria process, determining where the best bang for our buck is for our shareholders.

Great. Thanks for that.

Thank you. Your next question comes from Raoul Arnand with Morgan Stanley Australia. Please go ahead.

Thanks for allowing me back on. Look, I just wanted to follow up quickly on NOVA. Just following on from that throughput point, my understanding was that the additional mill capacity was built basically to be able to maintain production through lower production periods or lower grade periods. Is that not the strategy anymore? I mean, are you looking to keep throughput at this level till pretty much end of mine life or a fair bit later? Is that how we should be thinking about this now? Because as I said, I thought the expansion for the mill was to offset grade impacts. Thanks.

Yeah, thanks for that. And that expansion of the mill has offset great impacts. Remember that we've seen as great as decline consistently. At a point, you become mine-constrained. So it's about mine-constrained. Mine-constrained is limited to a number of stoves, turnover stoves, areas that you can mine, et cetera.

Okay, so how should we think about what the mine capacity is then versus that bottleneck?

Yeah, so that's why you're seeing about 21,000 to 23,000 tonnes of nickel.

Got you. Okay, so the mine is basically able to do about 1.6 million tonnes per annum. Yeah, it will be a little bit less. Right, right. Okay, and then are you able to also provide any sort of understanding on nickel recovery impacts as the grades move lower from your current levels and in the future?

Look, that's all accounted for in that production profile that we've guided to that $21, $23 plus the cash costs on the payable.

Yeah. Okay. All right. That was the one from me. I'll pass it on.

Thank you. Your next question is a webcast question from Michael Dadamo with Canaccord. Can you step up through transfer pricing and how Kiwana buys spod and sells hydroxide? What sets the price for hydroxide and has this margin squeeze occurred because you sell at the price of Chinese hydroxide?

That's a long question. I'll just keep it very short, and then if we need to jump on a call, Michael, we can talk through it in detail. But basically, spodumene, 50% spodumene going to Albemarle, 50% going to TLEA. TLEA on sales product that it doesn't use to TLC. That spodumene pricing is done at a four times benchmark. It has a lag for the last quarter to the current quarter. Quinana lithium hydroxide. At the moment, we haven't qualified product at Quinana. We're close to qualifying product. Qualification of product is when we also feel comfortable too with performance of the plant. Once that qualification is complete, then it's under contract to the customer and that is that they have pricing mechanisms built into that contract. But happy to go into detail with you on that one.

Thank you. That's all the time we have for our question and answer session. I'll now hand the conference back to Mr Ducey for closing remarks.

Thank you, Operator, and thanks everyone for the call today. I look forward to talking with everyone this week.