Ladies and gentlemen, thank you for standing by. My name is Krista, and I will be your conference operator today. At this time, I would like to welcome everyone to the Elevra Lithium September quarterly results webcast. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question, please press star then the number one on your telephone keypad. To withdraw your question, again, press star then one. Thank you. I would now like to turn the conference over to Lucas Dow, Managing Director and Chief Executive Officer. Lucas, please begin.
Welcome, and thank you for joining Elevra Lithium September 2026 quarterly update. I am joined today by Christian Cortes, Chief Financial Officer, Sylvain Collard, Chief Operating Officer and President, Canada, and Andrew Barber, Chief Development and Investor Relations Officer. As a reminder, any dollar amounts quoted today are in USD, and unit costs and revenues are reported on an FOB basis. The September quarter was a strong start to FY27. At NAL, we delivered record ore mines, a record for mill throughput, and the second highest concentrate production in the operation's history. We sold 58,134 tonnes of spodumene concentrate, 71% more than the last quarter, which led to a 137% increase in revenue to $74 million. Unit operating costs fell 14% - $780 per tonne sold, and we finished the quarter with $319 million in cash. Beyond the strong operational performance, the NAL expansion moved into execution.
We signed two binding offtake agreements, and we further simplified the portfolio by selling our interest in Ewoyaa. While we generally had a strong operational quarter, our safety performance was below our expectations. There were six recordable injuries in the September 2026 quarter compared to four total recordable injuries in the previous two quarters.
This drove an increase in our total recordable injury frequency rate, which has resulted in an enhanced focus across the whole company to improve our safety performance. Across the organization, our team worked 20% more hours than last quarter, largely because of the growing activity around the NAL expansion, and that makes consistent safety standards even more important. In reviewing the incidents, we determined that the appropriate response is to reinforce the fundamentals. More coaching, more visible leadership in the field, consistent application of critical risk controls, and renewed emphasis on the tools available to every person.
I would also like to acknowledge Sylvain and his leadership team at NAL for their commitment to getting this right. Turning now to production. In mining, we moved just over 466,000 tonnes of ore, 25% higher than the June quarter, and a quarterly record as mining moved into areas hosting thicker veins. This increase in ore mined and ore uncovered provided continued flexibility for the quarter's operations and allowed us to adequately prepare for potential impacts associated with weather during the North American winter season. In the mill, we processed just under 365,000 tonnes of ore, which was another quarterly record. The mill continues to operate with a sustained high level of performance and achieved a third consecutive quarter where utilization topped 90% despite a planned maintenance shutdown also being undertaken in the quarter.
Maintaining a high level of mill utilization, good sorting performance on the ROM pad and crushing circuit, and a modest increase in the mill feed grade helped hold recovery steady at 70% and translated into 54,907 tonnes of spodumene concentrate being produced at an average grade of 5.1%. On costs, unit operating cost was $780 per tonne sold, improved by 14% from $907 last quarter. Two key things drove it. First, volume. Production costs fell 2% while we mined 25% more ore and held concentrate production, which gave us volume leverage across the operation. Second, ore processing costs fell 14% on better crusher performance, stronger plant reliability, and operating efficiencies. A stronger US dollar against the Canadian dollar also lowered our reported costs by about $9 per tonne sold.
Capital expenditure at NAL was $9 million, covering planned sustaining capital projects and early work on the expansion, which we will cover in more detail shortly. On the commercial side, we sold 58,134 tonnes of spodumene concentrate, up 71% on the June quarter. The average realized price was $1,276 per tonne FOB, which is $1,524 per tonne on an SC6 equivalent basis. On a per tonne basis, our average realized pricing increased by 39% compared to the June quarter, and we generated $74 million in revenue. After concluding sales with lagged pricing in the previous quarter, we moved to selling cargoes priced based on prevailing prices, either at the time of sale or with the final price determined after the shipment arrives at its destination.
As a result of this change, our sales in September quarter were priced on a provisional basis as final pricing for the two shipments dispatched during the period will be determined during the December quarter. Accordingly, the reported price may alter once the sale is finalized. While lithium prices have been volatile, the physical market for spodumene concentrate remains tight. Based on the conversations we are having with customers, both current and prospective, the recent softness in pricing looks to be sentiment driven and not a reflection of the physical market, where we continue to see strong demand for concentrate produced at NAL. This is also reflected in our progress against the commercial strategy we outlined with our FY26 annual results, and we were pleased to announce two binding offtake agreements recently.
In August, we finalized our supply agreement with Mangrove Lithium for the supply of up to 144,000 tonnes per year for Mangrove's proposed lithium chemical conversion facility in Canada. Then on October 8, we signed a binding agreement with LG Energy Solution to supply a base volume of 240,000 tonnes of spodumene concentrate over a three-year period. Supply under that contract is expected to begin this calendar year, and we view LGES as an incredible buyer for a meaningful portion of NAL's production volumes. We see these two agreements being consistent with our goal of improving our customer offtake terms to deliver greater commercial certainty and better financial outcomes for Elevra. Turning now to our strategic initiatives. In September, we published a pre-feasibility study for the staged NAL expansion.
Through further engineering and evaluation of the opportunity, we see a pathway to increasing average annual concentrate production to 373,000 tonnes per year on a post-expansion basis. Compared to the previous scoping study released in May, this is a 10% uplift due to the impact of improved mill feed grades when incorporating the expected benefits of ore sorting. Life of mine average C1 operating costs are projected to fall to $630 per tonne as the benefit of increased production flows through the cost structure. The important item for this quarter is that the expansion project has moved into execution following the late June groundbreaking. Detailed engineering is underway. We have issued procurement packages for long lead items, and we have mobilized teams at site to dismantle NAL's legacy carbonate plant to make room for the mechanical upgrades in the mill.
The PFS confirmed that the upfront CapEx of expansion remains unchanged from prior estimates, and the expansion remains on schedule, on budget, and fully funded through the strategic financing package we announced in May. As part of the financing package, shareholders approved the issuance of the upfront tranche of the convertible notes to Canada Growth Fund at the July 16 extraordinary general meeting, and consequently, we issued $46 million of convertible notes in August. At Moblan, our focus is permitting, which remains the critical path. Fieldwork continued through the quarter to document baseline conditions to support permitting requirements. We have also commenced a scoping study building on the 2024 definitive feasibility study to incorporate the project's expanded resource base and evaluate optimal plant sizing and stage development options. The scoping study is expected to be completed in the second quarter of FY27.
In the U.S., we continue to advance permitting and community engagement for the Carolina Lithium Project. The North Carolina Division of Air Quality issued a draft air permit for public comment, and a public hearing was held in October. We also hosted an open community meeting at our Cherryville office to give an update and take questions. We have also continued to focus our portfolio on North America. In October, we completed the sale of our interest in the Ewoyaa Project to Huayou Cobalt for approximately $71 million in cash before fees and taxes. The sale simplifies our structure, removes the complexity of Ewoyaa's joint venture and offtake agreements, and eliminates future capital commitments to project.
In Western Australia, we completed the sale of our rights over the Tabba Tabba Tenement to Wildcat Resources for a total consideration of AU$16 million, whilst keeping a contingent royalty on any mineral resource Wildcat announces on the acquired tenement. We received AU$5 million as an upfront payment, combined with AU$8 million in Wildcat shares. We have since sold the Wildcat shares for a total of AU$9 million. The third payment of AU$3 million remains outstanding. We also announced a non-binding term sheet to expand the Morella joint venture in which we hold 49%.
Under the proposal, Morella can earn 51% of four exploration projects by funding AU$300,000 of exploration within two years. These deliberate and considered steps reduce the cost of maintaining standalone exploration capability and let us focus capital and management time on our North American projects. We will be holding our annual general meeting on the 19th of November.
As we previously foreshadowed, we announced our planned board transition, which will take effect at the close of the meeting. Allan Buckler and Jorge Beristain have voluntarily resigned as Non-Executive Directors, which will reduce the board size from 8- 6. The nomination and remuneration committee reviewed the board's composition and confirmed that the board remains well-structured with a majority of independent directors, and we would like to thank Allan and Jorge for their contributions over the years. Finally, our financial position. We ended the September quarter with $319 million in cash, up from $255 million at the end of June. That increase reflects the $46 million we received from the issue of the convertible notes, together with $34 million in cash generated from operations at NAL as sales, volumes, and prices both rose.
The proceeds from the Ewoyaa sale, approximately $71 million in cash before fees and taxes, were received in October, and as such, are not included in the September cash balance. NAL capital expenditure for the quarter was $9 million, and we expect this quarterly spend to increase as we progress throughout the year as we ramp up spending on the NAL expansion and Moblan starting development work. As we outlined in our FY26 results, we expect to incur between $120 million and $140 million in total capital expenditure in FY27, with $100- $120 million allocated to the NAL expansion and Moblan studies. Between the cash on hand at the end of September, the proceeds from the sale of our Ewoyaa interests, and the remaining capital available through the convertible notes with CGF, we continue to see our near-term growth projects being fully funded.
To sum up, the September quarter was a strong operational and commercial start to FY27, with safety the clear area for improvement. We remain confident in the outlook for lithium and in the pathway we have set for Elevra.
Thank you. If you would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, again, press star one . Your first question comes from Max Yerrill with BMO Capital Markets. Please go ahead.
Hey, guys. Thanks for taking my question. The operating cost this quarter showed a nice little improvement quarter-over-quarter, and it is trending now below the FY 2027 guide you gave two months back. Do you expect the cost to tick up as you progress through some of the pre-stripping for the expansion? Or does that FY 2027 guide feel on the more conservative side now? Thanks.
Thanks, Max. As we outlined in the commentary, obviously the strong production quarter has helped in terms of driving those unit costs down. From a stripping perspective, the strip ratio is sitting around about 9. We forecasted for the full year it will sit around 10. So there is some additional stripping that will occur at the back end of the year, Max.
Okay, great. Thank you. I will turn it back over to the queue.
Your next question comes from the line of Austin Yun with Macquarie. Please go ahead.
Morning, Lucas and team. Can you get more color on the provisional pricing? I understand you comment on that in the December quarter. Just keen to understand what is the time lag. When you finalize the pricing adjustment, would you take the point when the product is delivered, or would you be taking the amount of the average? I am just conscious that the market has been very volatile, so these adjustments could be sensitive. Thank you.
Thanks, Austin. We anticipated that we would get a few questions around this, so Christian will take some time to walk you precisely through that, Austin.
Hi, Austin. Thanks for the question. There are a couple of things to clarify there. Firstly, the QP or the timing of when the final price gets settled is effectively the month post-arrival at discharging port. Once it arrives to discharging port, the calculation of that final price is the average of the month in which we are pricing. So we have had two shipments being dispatched from our end during the quarter. They occurred during July and late August. You obviously have a couple of months time in the water. Once they arrive, they effectively get offloaded. The month after they arrive, we are effectively pricing them out.
Thank you, Christian. Thank you.
Your next question.
Sorry, Austin. The only other point I'd add is that that's quite a standard methodology applied across the sector as well. So it's not unique to Elevra, which, I mean, you're probably aware, but just want to share that for the remainder of the audience.
Your next question comes from Levi Spry with UBS. Please go ahead.
Yeah, good day, Lucas team. Maybe just a little bit more time on that. So is it literally 60 days sale and then the average of the month after that? So kind of 90 days.
Yeah. Let's take an example of what occurred during the quarter, Levi, just to be more specific. The first cargo left in July. It arrived to discharging port in September. The price that will be set for that cargo will be the average price of October. The second shipment was late August. I would suspect, giving that the boat is still in the water, that the price that will be applied to that boat will be the average of November. So it is always one month after arrival, the average of that month in this specific arrangement. From time to time, we may deviate from pricing effectively one month after arrival to at loading. But the key element that we have effectively communicated previously is we were moving away from lagging prices, prolonged periods of time
where the prices were reflected 6 months prior to us entering into the period in which we were shipping. So that is a key deviation from what we had in the previous agreements.
Yeah, got it. Thanks for the extra color. So just a little bit more detail. Do we assume they are sort of 20,000 ton ships, so 2.5 a quarter?
Yeah. So we shipped 58,000 tons in that quarter, Levi.
For the two. Okay, so 30 each is a standard run rate. Yep. Okay. Nothing is happening with discounts or anything like that?
No, just to be specific, every cargo that we are shipping is linked to spodumene prices. These two cargoes are going through Mitsubishi. It is an agent. There will be obviously a commission paid on what we report as FOB.
Got it. Okay, thank you. Just on the, on the CapEx-
That has been reflected. Sorry, just to confirm. The numbers that we have already published include what we would have expect to receive FOB if we had priced and crystallized the prices at the end of September. So I am just giving you additional color there. We have always published when we have this arrangement of going through agents. We publish our FOB prices net of those commissions.
Yep, got it. Thank you. The CapEx profile, it ramps up through the remainder of the next nine months. Is that how we should think about it?
That is right, Levi. We are on track. Savannah and the crew are doing a good job. I was there a couple of weeks back. Demolition works, some of the installs already occurred. Longer lead items have been placed as well, so we are on track.
Good. Okay. Thank you.
Thanks, Levi.
Thank you. We will now turn to web questions.
Thank you. First question is in regards to the LG Energy offtake agreement that has been announced. Can you provide any further details on that, and specifically if there is a floor price and how that would compare against the Mangrove Lithium offtake agreement that you have?
Yeah. So, obviously the nature of these offtake agreements, depending on the counterparty, are covered with confidentiality provisions and those elements. So there are restrictions on what we can describe. Suffice to say that the strategy that we outlined as part of our FY26 results around commercial strategy is what we have been implementing, and we are certainly pleased with the offtake agreement that we struck with LG Energy Solution.
Thanks. There are no further questions.
And we do have one phone question. That question comes from Glyn Lawcock with Barrenjoey. Please go ahead.
Morning, Lucas. Thanks for taking my question. It is probably just back to Christian a little bit more on just pricing. So just so we are very clear, is it the end of the quarter, let us say Platts was at 1,665, that is an FOB Australia price. And you have reported, I think, something like 1,524 on an SC6. So is that you have just taken the price at the end of the quarter, adjusted for freight to what you would get FOB plus adjusted for any commission? Is that what you have done so far? And then we just have to wait for October to finish and November to finish the price.
Hi, Glyn. Yes, that is correct. That is what we effectively do when we have variable pricing at reporting periods. Exactly what you described.
So what would that adjustment be then? If you say it is, let us just make it simple, it is 1,600 FOB Australia. What would that equate to FOB where you think about it in Canada? What is the freight differential Canada to China versus Australia, China that you play with?
Yeah, in terms of freight rates, currently we all are experiencing higher freight rates. I am not particularly following what the freight rates are going from Western Australia to China. But I would say on a yearly average, rates going from Canada to China are around $75 at the moment. They have been higher than that. You could play around, I guess, as an estimate, the rates you can expect to see from Canada are somewhere between $75 and $100, given the cargoes that we are managing. That would effectively be part of that conversion that you are describing, Glyn.
Yeah. It is probably about an extra $50 odd.
Yeah, it is about $50-$60. Glyn, we will typically say around $50-$60 incrementally.
Yeah. If I take the Platts price or whatever index price you use on the end of September quarter, take off the freight differential, take off what we estimate for your commission to your marketing agency, then that gets you your FOB, and then we adjust it after that.
Yeah.
Okay, great. Then maybe just. You are only selling a couple of cargoes at a time and obviously got it contracted. But just your take on the market. I read your release with interest and it is a volatile, very. I do not know if you call it illiquid or liquid, but it is very small and there is a lot of money flowing through it. Is that just what you think is happening? It is just a sentiment issue that has pushed us down here? Do you have a sense of any feedback you have got from the customers you do deal with?
Well, look, I guess firstly, from customer interactions, Lucas touched on this during his delivery of the report. Nothing has fundamentally changed from what we see. There is ample interest from parties asking whether we have available product for spot. When we talk about potentials of multi-year agreements, nothing has changed. Hence why our belief is that at the level that we are, there is still a strong interest, and it does not seem to be a buildup of inventory. Now, when you start reading through, I guess, the news flow, as you start speaking to people who are active in the market, there is negative sentiments.
My take on this, Clint, is the numbers that are coming out of China on the battery production seem to be less than what people were estimating, and that is driving concerns potentially around higher inventory sitting in the value chain at the end product level. Obviously, we have all seen the report from SMM that came out a couple of months ago that created some of this concern and uncertainty as to whether we actually knew how much product was sitting in the system. I think overall, that has plagued GFEX with negative sentiment. Unfortunately, given that a lot of the practices today are linked to GFEX, that is putting pressure on spot prices as well. If I have to sum this up, I do not believe that the supply side of things is causing what we are seeing on rapid price decline.
I think that it is this negative view that potentially 2027 is going to be not as aggressive growth as some people were expecting.
You would agree or disagree with that last comment, Christian?
Well, to be honest, I do not have a great deal of visibility on the supply chain myself. I would think if there is, at that level of visibility, a view that the numbers may not be as encouraging as people were expecting, I guess I would have to accept that. Now, to my breadth of knowledge, what I followed more closely is the supply side, because there is greater transparency and visibility over what producers are putting out there. You have announcements that are obviously disclosed by the market to the market. I think that there is an element of downside on the supply side that is not currently being built up when you look at the models.
I guess we will have to allow for a month or two to see what the actual numbers look like as the rest of the peers report and provide guidance for the remaining of the calendar year, as well as getting a better feel of what guidance is going to come out from the larger battery producers. I think it is a bit too early for me to tell you whether I agree or disagree. I am actively and attentively following as much as I can.
No, I appreciate that. Maybe just a final question then. If you look at your expectations for 2027 demand, have you been changing them much at all recently?
Demand?
Personal views.
No.
Yeah, the demand.
Our demand is solid in the sense of the two offtakers that we're working with have already firmed up effectively the volumes, and they're taking as much as we can offer them at this point in time. There could be an option to put more volume into those two customers, but our preference is to basically hold the line for the time being. We could always introduce a third offtaker next year, but we want to see how this plays out a little bit longer since, at the very least, for the next eight months, we're fully sold.
All right. That's great. Appreciate all the color. Thanks again.
Thanks, Clint.
Thank you. Andrew, I'll turn it back to you for web questions.
Thank you. Lucas, could you please outline the key decision points for CapEx of the expansion project and consider these relative to the position at the time?
Yeah. As I mentioned, we've actually moved into execution. I mean, the reason that we are so positive and encouraged by the NAL expansion project is what it'll do for our unit operating costs. It'll drop in the order of around 150 bucks. It costs 160 bucks a ton, USD, off our unit operating costs. Effectively, it'll drive us down the cost curve. The incremental volume we're bringing to the market is not material. We're not going to see the market move from deficit or surplus on the back of the NAL expansion. In short, the decision's been taken. We're in execution. The project's fully funded as a consequence of the work that we did with the strategic financing package back in May. It's all full steam ahead for NAL with the expansion.
Thanks. There are no further questions.
Thank you. Lucas Dow, I would like to turn it to you for closing comments.
Thank you. Once again, thanks, everyone, for dialing in and also for the questions. We certainly appreciate it. We look forward to engaging with you again shortly. Thank you and have a great day.
Ladies and gentlemen, this does conclude today's conference call. Thank you for your participation, and you may now disconnect.