Igo Ltd

Thank you Darcy. Good morning everyone and welcome to our September Quarterly Operating and Financial Result Call. Joining me on the call today is Kath Bosnich, our Chief Financial Officer. Slide 2 highlights our cautionary statement and disclaimer of note all currency amounts in Australian dollars unless noted otherwise. Turning to slide 3, to begin this call this morning, I would like to note the improvement in safety performance recorded over recent quarters. We are continuing to ensure we have the right safety culture, we are focused on critical risks, we strengthen our safety systems and ensuring people have the right skills and training to do their jobs safely. Our people are our priority and will continue to drive a culture that supports their safety, wellbeing and engagement. I'm positive that the results we will continue to see include improvements slide four and to a high-level summary of quarterly results. Financially, we delivered another record quarter of free cash flow, principally driven primarily by continued strong cash generation from our lithium business. This enabled us to make a final dividend payment of $454 million during the quarter, while continuing to build a strong balance sheet position. Operationally, Greenbushes was a key highlight, delivering another record quarter of spodumene production and lower cash costs, while continuing to advance the numerous growth projects. Our nickel business experienced a softer quarter. We had always expected the quarter to be lower. However, this was coupled with some operational challenges, delivering lower than expected production, which flowed through to higher cost. Our review of the COSMOS project is progressing well. It was also pleasing to see the exploration success we had in the West Kimberleys with the discovery of massive sulphide at the Dockleg nickel, copper and cobalt prospect. On sustainability, a key highlight was RGO's membership of the United Nations Global Compact, symbolising our commitment to responsibility and sustainable business conduct. Turning to slide 5 will provide an overview of our September quarterly financial results. Revenue, which I remind you only reflects quarterly revenue from our nickel business, rose marginally to $248 million. IDEO's share of TLEA net profit was lower quarter on quarter at $328 million, reflecting lower lithium prices realised in the quarter. Our underlying EBITDA result was $362 million per quarter, which is lower than the June quarter result due to lower lithium prices already mentioned. Despite this softer earning result, underlying free cash flow of $530 million per quarter was a record for IGO and reflects the lagging nature of dividends versus earnings within the TLEA business. Cash at the end of the quarter rose to $840 $444 million, despite paying a dividend of $454 million. We've seen some near-term volatility in the lithium sector, which is likely to have an impact on Greenbush's sale in December quarter. I'll talk to this later in the slides. Turning to slide six, where we reconcile cash quarter on quarter. As with the last quarter, the big driver was cash uplift with a record quarterly dividend received from TLEA of $578 million. Other points to note here include the $454 million in dividends paid to IGO shareholders during the quarter, $98 million invested at Cosmos, which I'll discuss later, and a continued free cash generation from our nickel assets at Nova and Forestania of $88 million and $30 million, respectively. Turning to slide seven, where we display the quarter-on-quarter movement in net profit after tax. As you can see, the key driver in NETPAT improvement over quarter was the absence of the impairment recorded at the prior quarter result. You can also see the lower contribution from the Frostania and the Lithium business offset somewhat by some favourable tax adjustment driven by accounting of TLEA's profits and dividends. NETPAT for the quarter was $392 million. Turning to slide eight, we will move on to a discussion on the lithium business. This is held by our joint venture interest in Tianqi Lithium Energy Australia, referred to as TLEA. Turning to slide nine. As mentioned earlier, our lithium joint venture has continued to drive strong financial returns to RGO, with record dividend flows from TLEA of $578 million for the quarter. up 37% from the previous quarter. This brings the total dividends received from TLEA to above $1.8 billion, which is the equivalent of the investment we made to acquire our interest in TLEA just over two years ago in 2021. IDEO's share of TLEA's net profit after tax was $328 million for the quarter, which was lower than the prior quarter as a result of lower lithium prices. Turning to slide 10 and on to green bushes. Higher feed grades and improved recoveries at green bushes drove 5% stronger production compared to the June quarter. Industry-leading cash production costs at $260 per tonne were lower quarter on quarter as a result of the improved unit production and lower mining cost. The total revenue was down this quarter due to lower realised botulinum pricing flowing into lower EBITDA for the quarter. However, I note that the EBITDA margins continue to remain strong at over 90%. The realized spot demand price for the September quarter including both chemical and technical grade product was $3,740 US dollars FOB Australia per tonne. This compares to $5,431 US dollars per tonne received in the June quarter. Turning to slide 11. The graph on the left demonstrates the continued growth and optimisation that Greenbushes has delivered in recent years. Future production growth will be supported by CGP3, which is expected to be commissioned in 2025. Over the quarter, structural, concrete and bulk earthworks advance with the completion of electrical and instrumental design and contractor mobilisation occurring post quarter end. Simultaneously, other capital work programs continued with a focus on the paving storage facility fall, mine service area, power supply and accommodation villages during the quarter. Before moving to Kwinana, I want to briefly comment on the lithium market conditions generally and the likely impact they will have on sales at Greenbushes in the December quarter. In recent months, we witnessed softening of lithium prices, a distortion in the spodumene versus chemical price dynamic, and some supply chain congestion, especially out of China, driven by sentiment-driven buying and destocking. IGO believes this volatility is near-term, and the long-term structural dynamics supported by strong demand and constraints on supply will continue to play out. This volatility has had an impact on Greenbushes, in which TLEA has elected to take a lower allocation of spodumene concentrate than they are entitled to from the Greenbushes during the December quarter. This lower election reflects lower volume requirements of our partner TLC. This will flow through as a likely deferral of sales in which IGO expects to report approximately 25% lower sales in the December quarter from green bushes. Shareholders are currently working through mechanisms to manage any unallocated volumes should market conditions remain challenged and requests for products are below forecast production going into CY24. We are confident that guidance is not impacted as shareholders work through solutions to manage this excess volume over the short term, given recent market volatility. Moving to slide 12, we'll provide an update on Kwinana Lithium Hydroxide Refinery. At train 1, we While we achieved improved production of 607 tonnes for the quarter, performance remained below expectation with multiple blockages and material handling issues resulting in additional downtime to allow for remediation work. I do note that Train 1 did operate at nearly 40% nameplate capacity for several consistent day runs, indicating we are progressively de-bottlenecking the facility. We're currently in a major shut and expected to be ramping up production as a team continues to work towards achieving 50% nameplate by the end of December. Train 2 is also progressing. This quarter we advanced the review and confirmation of the front end engineering and design contracts. Feed completion will follow in mid-Hell in the year 2024. Turning to slide 13, we'll move to a discussion on our nickel business. I'll start with Nova operation on slide 14. Quarterly production was down across all metals this quarter, although a reduction in production was planned for the quarter. Notice operational performance was challenged by production sequencing moving towards lower grade stoking blocks combined with several operational issues including paste fill and nickel reconciliation. While with lower nickel production, cash cost performance was unfavourably impacted. September quarterly cash costs were $4.18 per pound compared to $2.60 per pound in the prior quarter. Revenue and sales were also down this quarter, resulting from lower nickel prices. It's important to note, however, that the quality of the earnings and EBITDA margins remain extremely strong at 57%. Turning to slide 15. At Forestania, we transitioned to campaign milling during the quarter, which combined with a seismicity at Spotted Quoll resulted in lower milled tonnes, lower feed grade and lower production rates. As a result, cash costs were higher quarter on quarter at $11.64 per pound. Also impacted by the introduction of a new contract haulage rates during the quarter. Sales revenue was markedly higher at $86 million, up 93% quarter on quarter as a result of improved trucking and road availability. This flowed through to a recovery in free cash flow generation of $30 million for the quarter, compared to a cash outflow of $5 million last quarter. We are continuing to assess opportunities for optimisation and cost-improvement at Forestania as the operation transitions towards end-of-life opportunities. Turning to slide 16 and on to COSMOS where we continue to make solid progress on key work streams while the project review is ongoing. Notably, works during the quarter included the advancement of early commissioning activities for the processing plant with the completion of all works expected in the coming weeks. Further, I'm pleased to say that we've commenced commissioning of the processing facility and expect first concentrate shortly. The shaft proper was completed during the quarter with a focus on installation of shaft hoisting and loading structures over the coming quarters. Simultaneously, the head frame and winder scopes are nearing completion, with the scopes for underground crushing all silos and on the lift of the tailing storage facility both successfully completed during the quarter. Capital expenditure for the quarter was $106 million, with expenditure split roughly evenly between mine development and project infrastructure capital. The project review, which we announced a few months ago, is nearing completion and we expect to update the market before the end of December. Turning to slide 17 will provide a brief update on exploration activities for the quarter. Exploration activities continue across our portfolio with several interesting developments made as we progress on our journey to discovery. Activities of note which occurred during September quarter include successful drilling at the West Kimberley Prospect with massive sulphides intersected at the Dogleg Nickel Copper Prospect. Further drilling is expected this quarter to test additional conductors. Diamond drilling also commenced at Iron Cap Prospect at Forestania, with two drill holes intersecting spodumene-bearing pegmatites up to 30 metres in downhole thickness. Further drilling will continue in the December quarter. And finally, our partners Buxton announced some positive drilling success at the Copper Wolf Prospect project in Nevada, in which IGO holds an earning right for up to 70% of the project. While at an early stage, the team are encouraged by evidence of a large copper moly mineralised system at the project. Turning to slide 19 before wrapping up the call, I'll provide a brief summary of our September quarterly results. Slide 20, in summary. We are pleased to achieve further reduction in our TRIFA safety metrics over the quarter and continue to record sustainable improvements over the last year. We have delivered exceptional free cash generation with record quarterly free cash flow of $530 million and record dividends received from TLEA, bringing total dividends received from TLEA to over $1.8 billion. This has translated into strong cash generation and a net cash position of $440 million, despite a record IGA dividend payment of $554 million made during the quarter. Exceptional Greenbushes production, with a record of over 400,000 tonnes of spodumene concentrate produced this quarter, driving lower cash costs while continuing to focus on expansion production at Greenbushes. While we note the ongoing volatility in the liquor market, there is a likely deferral of sales by 25% for the December quarter. All shareholders are working through solutions to deal with the shortfall in elected volumes. Nova and Forestania had a softer quarter with some operational challenges. FY24 guidance remains unchanged. While at Cosmos, we have continued to progress project development While the project review is continuing, we'll update the market on how it comes in due course. Thank you for joining the call this morning and we'll now hand 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. If you wish to ask a question via the webcast, please type your question into the ask a question box. In the interest of time, we ask that participants please limit to one question and one follow-up each. Your first question comes from Hugo Nicolasi from Goldman Sachs. Please go ahead.

Oh, morning, Matt and team. Thanks for the update this morning. Just one on green bushes in the Spodumene market, please. I mean, you've highlighted that TLEAs like to not take their full entitlement in December and project partners maybe not taking their full entitlements in March. Can you give us some more colour on how much of that is the weaker outlook and the ramp-ups of Kwinana and Kemerton, or is it a way for the JV to maybe force a renegotiation on that pricing mechanism because they're buying Greenbush's volumes above current spot pricing? Thanks.

Yeah, thanks, Suga. So what we talk to is... TLEA is elected not to take its full entitlement for the December quarter. And as a result of that, we'll see lower sales going out in the December quarter, about 25% less than production. What that means is the shareholders are working through what we do with the shortfall in nominations. We've remained confident that it won't actually impact any production going forward. It's just about a mechanism to deal with that shortfall volumes that we're dealing with at the moment. This is largely driven by China and the volatility that we're seeing in the market.

Right, thanks. Maybe just clarify on that one then. I mean, is there anything in place that allows the JV to renegotiate that pricing mechanism so that maybe offtake volumes can increase in the second half next year, i.e., can the pricing mechanism fall to the point where it's still economic for JV partners to be taking volumes rather than paying, you know, a 20%, 40% premium to current spot spot demand prices?

Right. There is multiple mechanisms that we're working through. The easiest mechanism in the short term is just to stockpile that material. So we're working through those additional mechanisms which are within the Winfield Joint Venture structure to deal with that short-term volume variance.

Alright, thanks Matt. I've used my questions. I'll jump back in the queue. Thanks. No problem. Thanks Ian.

Thank you. Your next question comes from Raul Linand from Morgan Stanley, Australia. Please go ahead.

Hi, team. Good morning. Thanks for the call. I will firstly perhaps ask to follow up on the back of Hugo's question and then ask one on NOVA, if that's okay. For the follow-up, just following on from that discussion, I wanted to understand in terms of the contract volumes, how do they work? I mean, are these set... at the start of every quarter? Or are they set at the start of every month or every year? And I mean, what type of flex do you have within these contracts in terms of changing the allocations like what we're seeing at the moment? I'm just trying to understand whether, you know, like Hugo was saying, you definitely need a change in the pricing formula to be forward looking for these volumes to move. Or, you know, is there any sort of contractual binding term which gets you to offload these volumes. So that's the first follow up. I'll come back with a question on NOVA, thanks.

Yeah, so there's a few things there. So there is different mechanisms within the Winfield joint venture. Some of that I can't talk to in detail. but essentially at a broader level, there's multiple mechanisms along the path of when shareholders elect to take volumes, and that's based on long-term plans, medium-term plans and short-term plans. Ultimately, there's a final catch where on a quarterly basis, there can be adjustments to volumes on elections. And that's where, under that scenario, TLEA has elected not to take full volumes for the December quarter. For the December quarter.

So I just wanted to understand, just as a, you know, just an example here, you're obviously talking about 25% weaker volume. So is that the flex in the contract, roughly, that that's the minimum that they need to take? Or is that number being arrived at based on the demand that's existing? What happens if the demand is down by 50%? Do we see volumes come off by that much or is there a minimum guarantee in the contract? That's what I'm trying to understand.

Yeah, there is flex for shareholders to elect on a quarterly basis the volumes that they would prefer to take over that quarter.

Understood. Okay, look, just one on NOVA. You've briefly talked about nickel reconciliation issues as well, contributing to the weaker performance. Have you done some work around the magnitude of the issue? Obviously, NOVA's had that past where reconciliation issues at the start of mine life were seen, but then the asset was drilled out pretty much in close spacing to the end of mine life. And it would have seemed since then that this issue had been put to bed. I'm just trying to understand, is there risk here that this continues till the time this mine finishes?

Yeah, that's a good question. So, like you said, we did have some reconciliation issues as we started to bed down Nova at the start. however we address those. This has come out as a little bit of surprise and the team are working through those reconciliation issues where we think the issue is at the mill side. So it's something to do with how we're assaying mill feed into the mill rather than a resource and the team are currently working through that reconciliation. What I do know is for this question, Last quarter, or this last month, we've not seen the same sort of reconciliations flowing through, so I don't think it's an enduring issue.

Okay, so just to confirm, this month you had that issue basically being addressed and you're getting proper assays around the mill now?

Yeah, we're not seeing this issue carrying forward at this point in time.

Understood. Okay, perfect. Thank you. I'll pass it on.

Thank you. Your next question comes from Kate McCutcheon from Citi. Please go ahead. Hi, morning, Matt.

On Taliesin, just how do you intend to manage the lower sales next quarter and potentially weaker 2H production, which you've flagged? It seems like for this quarter, production at the mine and the mill will continue as planned, and it's just the concentrate stockpiles that you're building. Is that correct? And then if 2H production is cut out, which you flagged, how would that perhaps work at the mining level?

Yeah, okay. Yeah, so how we've talked to that is what we'll do is we'll end up building volumes at Greenbushes and that's the result of there'll be a disconnect between production and sales for the December quarter of that 25%. So there's option, there's flex to build inventory on site. to manage some of that short-term volatility that we're seeing currently in the market, given shareholders' preferences. Ultimately, there's a strong intent by all shareholders to work through other mechanisms to ensure that those volumes continue to flow without any impact to Greenbush's operation.

Yeah, okay. So at the moment, the plan is to run the mine as planned. Great.

So we'll continue production through this quarter, continue to build inventory and work through other mechanisms to ensure that we can continue to deal with volumes. As you know, Greenbushes is a world-class asset producing at $262 or $263 a tonne. Product is highly sought after.

Yep.

Thank you. Your next question comes from Levi Spry from UBS. Please go ahead.

Good day, Matt. Thanks for the call. Yeah, so just to sort of clarify this at Greenbush, so is this about the repricing event or is this partly about weaker demand?

Look, it's about getting the right mechanisms in place to ensure that those volumes continue to flow under commercial terms. And there's multiple mechanisms in there to do that.

Physically, how much can you continue to stockpile?

Good question. The Taliesin team is still working through that. What we do know is we're potentially trying to look for additional storage, but there's no impact to this December quarter. We have enough capacity to take that 25% volume.

And if my memory was probably wrong, but I thought if TLC didn't take volumes, it was within your, you had an option to sell it to a third party. Is that still the case or not? Look at my wise cost.

That was, yeah, that's still the case. And that's good.

Okay. Okay. I'll come back. Thanks.

Thanks, Matt.

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

Hi there. Sorry to blow over the point here, but you've said multiple times there's a range of mechanisms. Can you potentially outline what that whole range of mechanisms are? What's on the table here? What could be the spectrum that we need to start thinking about?

Yeah, that's relatively difficult for me to get into that detail. into that detail of all of those mechanisms as part of that process within the Winfield joint venture. Ultimately, the variance comes back down to what happens on a quarterly basis where shareholders are provided with the option of finalising volumes on a quarter. Okay.

Thank you. I'll pass it on. Sorry, Mitch.

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

Thanks very much, guys. I might switch just quickly to the Quinana Refinery. It's been underperforming, I think, versus expectations of the acquisition and over the last few years. At what point is a determination to be made on whether you need to write down what's being spent on this asset?

I'll talk broadly about operating performance and I'll hand across to Kath to talk about how you consider any asset valuations. You are right. It has underperformed. What's important to note is that we've still got a program at work to lift that performance and what we're dealing with is small capital items as we work through some of the rectifications. Well, the biggest constraint has been is time. If it's pushed out time, we're not pushing out any sort of major capital expenditure programs. We're currently in a shut at the moment. We'll come out of that shut early November. We'll continue to ramp up and the team remains confident we'll reach 50% of nameplate by the end of this calendar year as we work through and continue to build up nameplate through the next calendar year. Cass, do you want to make a comment on?

Yeah, so obviously testing happens. or testing for triggers happens and then testing of impairments and right counts happen at each half. It was done at June, obviously, because that went into our full year results, and the team will retest at December. At this point in time, they've not advised us that there's any indication at this point.

Okay, excellent. And if I might just stay on refining quickly and indulge in another question, What is IGO's competitive advantage when it comes to establishing a nickel refinery in Western Australia?

Our competitive advantage there is that one, we'll have feed. Two, we'll have the right partners around us. Three, we'll have the process in terms of the technology on the process. Ultimately, to reach a financial investment decision on that, we'll all have to feel comfortable that the returns are there and that we've significantly derished it from both the capital ramp-up and commissioning.

Excellent. Thank you. We'll be interested to see how it goes with the capital pressures we're seeing. I'll pass it on.

Thank you. Your next question comes from Khan Peker from RBC. Please go ahead.

Hi, Matt and Kath. Just on Qanar, I know you're following along with Tim's question, but what's the likelihood that there'll be a pause on train one if the December fixes don't work? And are there implications for train two, i.e. will it be paused as well? Thanks.

Yeah, okay, so implications on Train 1, if we don't get to 50, I ultimately would have to reassess what we do as part of that continued rectification program. So I don't actually see, you know, I'm still seeing it's likely that we'll get to that 50%. So we really haven't really addressed that if it doesn't. There's a couple of things that would go into the October shut that we have to get right. There's mainly associated with sodium sulphate, which is the waste stream. At the moment the waste stream is a bottleneck, therefore we can't push the lithium hydroxide, which is including installation of a secondary centrifuge. At this point, we're really main confident on that 50%. In terms of Train 2, we continue to work through the front-end engineering and design. What we state very clearly is we won't make a capital decision until we are complete at all. The front-end engineering design and feel that we've got the right engineering solutions in place for Train 2 to both reach nameplate and ultimately ensure that the commissioning time is significantly less than what we've seen on train one.

Sure, thanks. And my second one is on the nickel assets, including I suppose downstream. But given where nickel sulphate prices or premiums are and the nickel price, what's the likelihood of proceeding with the downstream processing? And just wondering what you know, if all options are on the table for Cosmos and Forrestania, such as care and maintenance.

Yeah. So on nickel sulfate premiums per se, yeah, we understand that nickel sulfate premiums are trading at a discount in some markets. In other markets, they're still attracting a premium. We have made the conscientious decision that we're not going down the sulfate route. We're going, and that's part of that partnership in terms of elimination of a step, driving cost advantage, driving improvements in recoveries by going straight to a pre-camp. We see nickel sulfate as just another nickel intermediate in this battery supply chain route and producing some intermediates in these battery supply chain routes is potentially a higher risk In terms of COSMOS, we remain committed to COSMOS. In terms of the value, it's unlikely that we'll see any care and maintenance, but we'll come out with our reset plan in December. Forestania still makes a good margin. We've got to ensure that we really drive costs as we continue to work through the rest of the life of mine plant.

Sure. Thanks, Matt. I'll circle back. Thanks.

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

Sure. Thanks. Morning, Matt and Kath. And apologies because I'm going to take it back to Greenbushes. But clearly one of the motivating factors behind not electing to take the full allocation was the price. So firstly, can you talk us through, I guess, what would need to happen from here? if the jv did decide to change the pricing mechanism it's obviously happened before but remind us of how often these shareholder meetings occur where these sorts of issues are discussed and i guess what the potential timing from there could potentially be and then secondly i guess purely from an igo perspective because i understand you can't necessarily talk to what the jv as a whole might want but would igo like to see the mechanism change to something maybe that's closer to spot or even forward-looking pricing rather than backward-looking Would you prefer to keep the status quo or are you largely indifferent given that Greenbush is, as you say, the lowest cost producer in the market?

In terms of that first question, I can't really get into that detail. All I can say is the shareholders negotiating outcomes to deal with the short-term variance in volume uptake. There's a strong intent by all shareholders to ensure that production continues of this world-class asset as an important part of their feedstock into their integrated businesses. And there's other mechanisms in that. Now, talking to an IGO perspective, and this is IGO perspective, this is my perspective, which is easier to talk to. Ultimately, as this market builds out, we're looking through what is the best way to ensure price transparency. And the industry as a whole has to work through that. We're immature. This industry is immature. We're seeing a lot of volatility. As the industry builds our alternate supply chain, especially outside of China, we'll see less and less volatility. But ultimately, as an industry, we'll need pricing mechanisms to ensure that it has the greatest price transparency on a spot basis. And we're happy to explore some of that in due course with consideration of multiple things associated with the joint venture.

Okay, got it, Matt. Do you think a structure exists currently to support that or is that longer dated? Would that require, Mark, in your view, or you think that the current price reporting agencies are sufficient but maybe just the mechanism needs to change?

You mentioned that pricing agencies, there's variance between the agencies, there's variance associated with the lag on that. There's a variance in terms of understanding the volumes that are going through those pricing agencies. So it's not perfect by any means.

Got it. Thanks for your views there. Much appreciated.

Thank you. Your next question comes from Daniel Morgan from Baron Joey. Please go ahead.

Hi Matt and Tim and sorry to bring it back to the green bushes pricing mechanism but if we take a step back lithium demand is going to be up call it 30% year-on-year this year and green bushes will be responsible for adding you know probably 10% volume to the market so you know the market is growing faster than what you're adding into it and the newer volume is higher cost than the green bushes doesn't it make no sense for green bushes to take the foot off the gas on volume expansions particularly when operations are humming so well as outlined in the quarter in terms of volume?

I think you nailed it in terms of the shareholders' point of views collectively.

Okay, thank you very much. And then my second question is on Kwinana, what is it happening there like behind the scenes that you are across and your team is across that gives you confidence that this thing is going to come together? and actually work. What are some of the tangible improvements happening through the quarter that gives you the confidence that this thing is worth sticking with? Can you bring out some of the qualitative issues?

Yeah, so I was down last week as part of the review of the shot. We got some team capacity down there in terms of reviewing. We're also bringing and ensuring that we have the right expertise by a number of groups of consultants helping us work through that. Like I said, it's about a program at work. As we continue to do some of the rectification on the shut, we remain confident we'll get to that 50% in December. And then longer term, we'll continue to look at ramping that up Has it been challenged? You know, I think these are complex refinery settings. So they do have a level of complexity associated with train one that's been compounded because of poor engineering from day one.

Is it worth just shutting the whole thing down and doing complete rectifications for a period of time where... You know, it just seems like you have these maintenance shuts that come in and you try to tie in these improvements and then, you know, we haven't seen huge improvements in volume. Like, is it worth taking it down for a period of time and, you know, really working on all the rectifications or what am I missing?

Yeah, and that has been some of the discussions that we have been having. However, we're working through that program of work as we work through and we'll continue to do this October shut. we'll get to that 50% and then we'll look through what we need to do to get to the next step up of production at Kwinana.

Okay, thank you so much Matt and Sam.

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

Good morning, thanks for taking my questions. Just again on the pricing side of things for green bushes, I guess the one question that doesn't seem to reconcile with your commentary around potentially having to dial back production is clearly the EBITDA margin. And if you've got third party rights to look at selling the allocated offtake, why wouldn't you guys be looking at, you know, a BMX auction style and achieving the headline benchmark prices, which are still you know, $1,900 a tonne at the moment and give you a pretty healthy margin of sort of 80%, 85%?

Yeah, I think, John, because one of these mechanisms are part of the conversations with shareholders at the moment. At the moment, we don't have to trigger that because we've got stockpiling capacity at Greenbushes. But there is multiple mechanisms in place or can be put in place to ensure that we continue to drive production at Greenbushes.

But surely dollars today are better than stockpiling for what appears to be potentially a softer outlook in the short term?

Potentially just from an IGO perspective, but you'd have to take in consideration of all the other shareholders' perspectives as well.

Okay. And just on that question, are you able to sort of give some colour as to Albemarle's view here? Because, I mean, corporately, they've obviously taken a potentially longer-term view on outlook for spodumene prices and lithium markets in general in some of their corporate behaviours. What's their sort of attitude in these joint venture discussions around stockpiling?

John, you know my answer to this one, so, you know, I can't talk to what Albemarle's views are.

I'm happy to talk about what my views are or IDOs. Fair enough. Okay. Bigger battle?

Good try.

Okay. And then just to round out quite clearly, the inference to take from all of this is there's not going to be an obvious interruption to timelines on CGP4 and FID therein?

No interruptions to any growth plans.

Okay, thanks.

Thank you. Your next question comes from Matt Chalmers from B of A Securities. Please go ahead.

G'day, Matt and Kath. Thanks for the call. So, look, just a brief one from my side. I know it's been covered in a lot of detail. It's just around, you know, we mentioned that the production or the volume requirements coming from TLC is lower going into the coming quarters. I just wanted to know, potentially from a different angle, if the same could be said from the volumes being requested by Albemarle, or was that, are you just really focusing on TLEA and TLC's requirements?

Yeah, I have to, so what I can say on that one is in the December, the volume variance that we're talking about in the December quarter is associated with TLEA.

Got it. Okay, thank you.

Thank you. Your next question comes from Robert Stein from CLSA. Please go ahead.

Hi, guys. Sorry. Just a quick one on, I guess, the risk to IGO shareholders going forward in the context of your quite big partner's ability to withhold supply and manage the price in that respect. You say there's no interruptions to growth plans, but if the growth plans do sort of go ahead in terms of the capital portion of those, what's the risk going ahead on sort of volume nominations from the increased volumes if demand is weaker? And maybe to put it another way, what sort of rights do you have to be able to ensure that the volumes are effectively taken up?

Yeah. To answer that question, I'll just take a step backwards a little bit in terms of what we are, from all shareholders' perspective, this is a real near-term leap for volatility. From a medium and longer term, all shareholders are anticipating that there's still going to be strong demand fundamentally strong demand and there's challenging in bringing production and there's such a disconnect between the demand and supply that everything we do at Greenbushes should be continued. And you also have to remember it is also in context that Greenbushes is the world's best hard rock, spodumene mine, producing at $260 a tonne. and making significant free cash margins for all shareholders from that operation. So there's, under any scenario, even if you're looking under different shareholders' perspectives, capital investment in terms of growth at Greenbush still remains a priority for all of them.

Sure, but if you're buying it, obviously, at a price much higher than spot, then, you know, that cost economics doesn't, you know, particularly hold up in terms of the purchaser and the downstream partner. But then also, if you've got larger volumes elsewhere, you know, Brian operations and the like, there's a supply management angle that needs to play out. So I'm sort of interested in how much sway you have in a downside scenario to be able to influence an outcome.

Yeah, again, we're looking at very short term. So we're looking at our pricing mechanisms are three months, prior quarter to the current quarter. So we are dealing with a short term, if the pricing benchmarks are right and they do catch up to the current. And we're just looking at a quarter where we're looking at MAG. So we're not dealing with fundamental long-term challenges. We're just dealing with a short-term challenge in terms of this shortfall of nominations associated with the December quarter and short-term variance associated with some volatility in the market.

Okay, thank you very much.

Thank you. Your next question is a webcast question from P. Ting Leng. Are there any penalties for your JV partners from electing to take less than their allocated production from green bushes?

Yeah, I won't get into that whole process. Fair to say that I just have that quarterly right to adjust that volumes.

Thank you. Your next question is a follow-up from Hugo Nicolasi from Goldman Sachs. Please go ahead.

Hi Matt, two questions for me, and again, sorry to belabor the point on the pricing. Look, I appreciate you can't talk on behalf of the other shareholders in the lithium JV, so maybe from an IGO perspective, what level of inventories are you seeing for lithium chemicals in China at the moment that might limit spot spodumene demand, and what demand would you expect for spot spodumene volumes if the JV agreed to sell the excess volumes into the current market? Thanks.

Yeah, okay, so I'll talk to an ideal perspective. From our perspective, again, we're looking at this short-term volatility, and the short-term volatility is largely China-centric, largely driven by sentiment-driven buying and de-stocking. That happens in China. It can be cyclical. It can actually just be sentiment-driven. Fundamentally, demand's strong out of China. What we're dealing with is short-term volatility. From an IGP, yeah, sorry? Sorry, you go. Yeah, sorry, what was the second part of that question? You go.

If you were to sell spot spodumene volumes today, what level of demand you'd expect into the fourth quarter? I guess just noting that one of your peers last week highlighted they expected that demand to be strong into the end of the year.

Yeah, I still expect demand to be strong. It's just about what mechanism you would use.

I think we'll park that one up for now. Maybe just another clarification on Kwinana. Good to see that some of that product is now qualified and being sold but can you maybe just give us a bit more colour into the issues outside of the waste being a bottleneck. Is it issues with conveyors, dryers, pumps, pipes, any colour there that you can provide in terms of the train one issues would be great and then secondly any additional around why they're trying to feed contractor and completion has flipped another quarter, thanks.

In terms of current constraints, some of the current constraints to get to that 50% are being rectified as we speak in the October shut. That includes some relining of the belts in the dryer. That includes putting a heat exchanger on some of the circuit at the backend. that includes the additional centrifuge on the glybosol sodium sulphate, includes additional summer pump changes, also looking at the filter presses, the waste. So they're just additional smaller things that we do to get to that 50%. That list continue. Once we get to the 50%, we'll find out where the next constraints are, and we have an understanding of those constraints already, and we'll continue to do some rectification. But it's not like a major piece of equipment, so it's not like we have to change X. The major pieces of equipment are performing well and we don't think that they will be the constraints. It's these additional material handling circuits and some of these smaller pieces of engineering equipment that are part of this rectification process.

Great, and then just on the train to feed contractor being pushed back a quarter and the resulting feed completion slipping into mid next year?

Yeah, it was just taking us a little bit longer to ensure that we had the right contractor or consultancy engineering house on board and they have the right teams in place. So sourcing that right team, making sure that team's available to do that work is what some of that lag time is. What we've made very clear is that we will consultancy engineering houses in place and we'll also have the right contract structures in place, even if it does take us a little bit longer.

Thanks, Matt.

Thank you. Your next question is a follow-up from Levi Spry from UBS. Please go ahead.

G'day, yeah, thanks for taking all the questions. Maybe a sneaky one on Cosmos. So the spend was still pretty elevated there. What's the update on the rate and spend, I guess, to guide us there? I know you've said the big update comes later this month, but what can we expect in terms of outflows this quarter?

I don't have the fact for that one.

Yeah, we were due to actually be spending quite a bit more this quarter, so that's actually down from what was the original plan as we've been reviewing things. And therefore, I think that you could easily estimate that the spend is similar or marginally less the next quarter as we continue to review things and reset the project to achieve our optimal outcomes.

Okay, thanks, Kath. And just one more on green bushes. So what's the timing of the next steps? So agreeing on the mechanism and the volumes, like, do we set at the end of the quarter? Like, how do we think about, you know, whether you can sell some of your own third-party material next quarter to prevent even greater stockpiles building?

We would expect to be reporting the quarterly next quarter.

Okay, not till then. Okay. Thank you.

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

Hi, Mitch. Do you have a question, Mitch?

Easiest question of the day.

Thank you. Your next question comes from Khan Pekar from RBC. Please go ahead.

Thanks for taking my follow-up, Matt and Jess. Maybe just following up on Levi's question, can we just get a bit more understanding around that process? So I assume that when the allocation is finalised for the quarter and if there's a shortfall, then the shareholders can bid for that allocation or the allocated volume, and then you can sell on that additional volume at spot? Is that how it works?

It's part of a conversation and a discussion happening with shareholders to deal with that shortfall and where that shortfall goes, whether it goes back to a shareholder or goes to market or how we deal with those short-term volumes. We're dealing with a short, this is a near-term challenge, so the idea is that the shareholders are working through all that at the moment.

Okay, but there's nothing further you can discuss on the process?

No, it's a conversation, it's a discussion. What I can say is the shareholders are working through to deal with to ensure that Greenwich generate a significant free cash flow margin for all shareholders and also important product for their integrated businesses.

Sure, thanks. And just the last one, on the TLEA dividend for this quarter, was some of that due to the essential transaction? I think a couple of quarters ago, the dividend was less because there was some capital being allocated for that transaction. Obviously, that didn't go ahead. Is that dividend part of it?

Yeah, there is a small portion of that that is that. There was money held back for essential and that flowed through this quarter.

Sure, okay. Pass it on. Thanks.

Thank you. Unfortunately, we have run out of time for today's webcast. I'll now hand the conference back to Mr Ducey for closing remarks.

Thanks, Darcy, and thank you, everyone, for joining the call.