Thank you for standing by, and welcome to the IGO Limited FY 22 Full Year Results Webcast. All participants are in a listen-only mode. There'll be a presentation followed by a question-and-answer session. If you wish to ask a question via the phones, you will need to press the star key followed by the number one on your telephone keypad. If you wish to ask a question via the webcast, please type your question into the ask a question box. I would now like to hand the conference over to Mr. Peter Bradford, Managing Director and CEO. Please go ahead.
Thank you, Rachel. Good morning, everyone, and thank you for joining our call this morning as we present IGO's audited financial statements and results for the 2022 financial year, which we released to the ASX this morning. Joining me on the call today from Sydney is Scott Steinkrug, our Chief Financial Officer, who will be available to answer questions during the Q&A session at the end of the call. Slide two highlights our cautionary statement and disclaimer. Of note, all currency amounts in the presentation today are in Australian dollars, unless otherwise noted. Moving to slide three. To begin, I wanted to talk to sustainability and some of the work programs we are progressing across the business to continue to be a leader in sustainability practices and reporting.
Our focus on safety and well-being has resulted in a reduced incident severity over the past few years, and our culture of care has enabled us to better manage the impacts of COVID-19. I am proud of the way in which our people have demonstrated adaptability and collaboration during this time. In parallel, we progressed our carbon reduction initiatives through the commitment to expanded solar and energy storage capacity at Nova. Our internal carbon price, implemented 12 months ago, has generated approximately AUD 3.7 million of internal funding that we will apply to our carbon reduction and offset initiatives. It has been particularly gratifying to see the engagement and ingenuity of our people and partner organizations to our carbon reduction initiatives. We're pleased to see the continued external validation we receive from key sustainability indexes on the quality and transparency of our sustainability reporting.
I note that we released our 2022 sustainability report today. Moving to slide four. We're also incredibly proud of what we have achieved for the year. Operationally, we met or bettered production and cost guidance at both Nova and Greenbushes and delivered the first battery-grade lithium hydroxide production from Kwinana. Financially, we generated record revenue and underlying EBITDA, which was underpinned by record financial performance from Nova and a maiden profit contribution from the lithium joint venture. In parallel, we continued to transform the business through the strategic acquisition of Western Areas while also progressing our exploration portfolio toward discovery. Finally, we successfully delivered for our stakeholders, delivering improved outcomes for shareholders, a stronger culture and value proposition for our people, and proactive caring engagement with our host communities and traditional owners.
Moving to slide five, where we set out our financial results for the 2022 financial year. Strong commodity prices, combined with consistent operating performance, generated higher revenue from continuing operations of AUD 903 million and higher underlying EBITDA of AUD 717 million when compared to the prior year. Net profit after tax at AUD 331 million was lower year on year due to the absence of the one-off gain recorded in the 2021 financial year relating to the divestment of Tropicana. On a normalized basis, net profit after tax more than doubled year on year.
Similarly, underlying free cash flow was lower in the 2022 financial year due to tax payments during the year, totaling AUD 199 million, of which AUD 140 million related directly to the gain on sale of Tropicana last year. The acquisition of Western Areas was funded by a new AUD 900 million debt facility and approximately AUD 263 million of existing cash, resulting in a year-end net debt position of AUD 533 million. Moving to slide six, where we illustrate the continued improvement in financial metrics over recent years. These results position IGO well for the future and reflect the transformation of our portfolio and our disciplined financial management.
I wanted to point out here the reported revenue for the 2022 financial year does not reflect revenue generated within the lithium joint venture as we report this contribution at the EBITDA level. Moving to slide seven, where we provide a waterfall to reconcile the year-on-year change in the group cash position. In particular, I draw your attention to the record free cash flow generation for FY 2022 from Nova, which was primarily attributable to higher commodity prices. Also, the first dividend received from the lithium joint venture, TLEA, of AUD 71 million. Also, the debt drawdown and cash payment with respect to the Western Areas acquisition, which settled in June 2022. Finally, the taxes paid, as mentioned earlier, arising primarily from our taxable gain on the divestment of Tropicana during the 2021 financial year.
Moving to slide eight, where we reconcile the net profit after tax variance between the 2021 and 2022 financial years. Of note, we highlight the AUD 254 million positive impact to net profit after tax, resulting from higher metals prices at Nova and the maiden net profit contribution from the lithium joint venture, TLEA, of AUD 177 million. I also note that the 2021 financial year net profit after tax result included the gain on sale of our interest in Tropicana, which when combined with the absence of Tropicana earnings in FY 2022, led to the AUD 432 million negative variance when compared year-over-year.
Moving to slide nine, where I'm pleased to report that the board has declared a AUD 0.05 Per share, fully franked, final dividend for FY 2022, which is consistent with our shareholder returns policy, which targets cash returns to shareholders equivalent to 15%-25% of underlying free cash flow. This final dividend, which will be paid on the September 30th, brings total FY 2022 dividends to AUD 0.10 Per share, which is consistent with the dividend paid in FY 2021, is at the top end of our payout formula and represents AUD 76 million of returns to shareholders for the full year. Moving to slide ten, where I will take the opportunity to speak very briefly to each of the core assets within our portfolio, which we did discuss in greater detail during the June quarter conference call.
I will start with Nova, where once again, our team has delivered another great result with nickel production and cash costs within or better than guidance, resulting in AUD 631 million of underlying EBITDA and AUD 574 million of underlying free cash flow for the year. Looking ahead, our priorities at Nova are to continue to optimize the operation, particularly our metallurgical recovery, advance our decarbonization programs, and progress the sulphide feasibility study. Moving to slide 11. As announced within our June quarter results, we are revising the strategy and development plan for Cosmos to enable a number of work programs to be completed before producing first concentrate in mid-2022.
The key work programs that need to be completed are the shaft infrastructure that was always central to complete around mid 2023, additional underground development and the expansion of the processing plant, all of which will contribute to a stronger production profile and lower cash costs when concentrate production does commence. This change to the development plan will result in additional pre-production development costs, and we expect to update the market on this with the September quarter result in October. In parallel, we are progressing the scoping study into Mt Goode and commence our next phase of work to understand the downstream nickel sulfate opportunity. Moving to slide 12. Having acquired Forrestania at the end of June, its contribution to the IGO financial results commenced as at the first of July.
The integration process is progressing well, and in parallel, we are progressing plans to optimize the operation and understand the potential for additional nickel and lithium opportunities on the broader tenement package. Coming to slide 13. Greenbushes delivered a highly successful year with record production and financial results, which included EBITDA of AUD 1.35 billion on a 100% basis. The production results benefited from the first full year of production from chemical grade plant two and a maiden production contribution from the tailings retreatment plant. This, together with very strong spodumene prices, drove great financial results. Already the team at Greenbushes are focused on the next stage of growth with the construction of chemical grade plant three, commenced, which was approved back in March 2022. Moving to slide 14.
At the Kwinana Refinery, the team's focus for the year was on quality and getting the recipe to make battery-grade product right. Having achieved this in May 2022, the focus is now on quantity and progressing the ramp up of Kwinana Train 1. In parallel, early works for the recommencement of construction of train two has commenced, and we expect a decision to proceed with construction in late 2022. Moving to slide 15. Serial underinvestment in exploration via our industry has resulted in a shortage of projects to provide the metals critical to global decarbonization through electrification. Consequently, exploration is a key plank in our continued growth strategy, with an objective to unlock transformative value for shareholders through the discovery of our next clean energy metals project.
Following the Western Areas transaction, we have increased our exploration commitment in FY 2023 to AUD 75 million, with a greater portion of our budget going to brownfields exploration in close proximity to our operating activities at Nova and Forrestania. Our greenfields exploration focus is on exploration for nickel and copper on our Fraser Range, Paterson, and Kimberley projects, with initial investments being made across the coming year in our lithium and rare earth elements. Turning to slide 16, the 2022 financial year was an outstanding year across the business, with strong financial and operating results delivered alongside the ongoing transformation of our clean energy metals portfolio. Nova continued its track record of operational and financial delivery. We enhanced our nickel business through the acquisition of Western Areas. Our lithium business generated outstanding financial results and delivered its first dividend to IGO.
We maintained our focus on shareholder returns and have declared a AUD 0.05 final fully franked dividend for FY 2022. We have advanced our decarbonization programs and remain committed to leading sustainability practices and reporting. Finally, our people remain engaged with our purpose and have continued to make a difference. We also continue to strengthen the team, and to that end, it was great to welcome Tracey Arlaud to our board yesterday, bringing our board gender balance to 50/50. Thank you everyone for joining on the call this morning. We will now open up for questions. Thank you, operator.
Thank you. If you wish to ask a question via the phones, you'll need to press star, then one on your telephone keypad. If you wish to ask a question via the webcast, please submit a question via the Ask a Question box. We will be addressing questions via the phones first and then back to the webcast. Your first question comes from Hayden Bairstow with Macquarie. Please go ahead.
Good morning, Pete. Just a question on Kwinana. Just keen to get a sort of an update on how that's going. Obviously we saw it all at the investor day in late July, early August. Just the progression on the battery grade sort of ramp up and how that's going. Particularly given you need to make a decision on train two later this year. Thanks.
Yep, sure. Now all of the work programs that you saw and heard about on the ground at Kwinana are continuing and we'll provide a fulsome update with our September quarter results.
Just on the exploration portfolio, Peter. I mean, it's obviously a huge portfolio here now. I mean, you sort of outlined the five key priorities there. I mean, what are we thinking about in terms of an ongoing spend on this portfolio sort of beyond this year? Is it gonna be particularly success-driven, or is there a number of sort of the next phase of priorities that will see similar sort of spend going forward?
Yeah. A lot of our investment to date has been to mature the portfolio that we did have. Recognizing that the vast majority of the portfolio going back a few years was very greenfields in nature. The work we've done has given us the understanding of the geology, the geophysics, the geochemistry, and through that, across all of these belt-scale portfolios, we're now very much in a target definition and a testing stage. You will likely see some significant rationalization of the portfolio over the next couple of years as we drill test the targets previously identified.
From a spend point of view, we would like to think that our spend matures and that in the coming years, a greater majority of the spend is going into resource drill out on the discoveries that we made.
Okay, great. I'll leave it there. Thanks, Pete.
Thanks, Hayden.
Your next question comes from Levi Spry with UBS. Please go ahead.
Hi, Levi.
Good morning. Good morning, Pete. How are you? Just two questions. First one, spodumene pricing. Obviously key value driver here. Can you just talk us through what your expectations are for the second half and what does happen in September with the renegotiation of the contract? How do we think about your second half pricing, I guess?
Yeah. At this stage.
If that makes sense.
At this stage, we've got no further news to update the market on what that may or may not look like. The guidance for people would be to roll the existing formula forward. Given where spodumene prices continue to trade, I think that creates an export scenario for the spodumene pricing for the second half of the year. If we think about the strong financial results for Greenbushes that we just reported for FY 2022, we'll have that on steroids for FY 2023.
Yep. Yeah, that's what we're looking forward to. Is there anything else you can share on expectations around pricing? Maybe what Tianqi's saying or what other, you know, other feedback from the industry is?
I unfortunately can't, Levi. I can't confirm or deny anything that might be happening.
All right. Well, I'll try another different one then. The Inflation Reduction Act. You've been talking a lot about strategic supply with for some of your commodities for a long time. Is this the first time that you can actually get paid more for some of that production? Specifically now I'm thinking about hydroxide and maybe nickel or nickel downstream. Is that, you know, has there been any discussions along those lines? What are your views on it?
I mean, we've maintained for some time that, you know, if you make a superior quality product in a jurisdiction where you can demonstrate that it's being made safely, ethically and sustainably, that you will get a price premium. You can demonstrate that through traceability from raw materials to end product, that you would be able to get a price premium. I think some of the movements we're starting to see with the Inflation Reduction Act and others, you know, is starting to provide some substance to that theme that we have been talking about for some time. I think it really puts Australia in a very unique position from a clean energy metals perspective.
Nice one. Thank you. Thanks, Peter.
Thanks, mate.
Your next question comes from Peter O'Connor with Shaw and Partners. Please go ahead.
Hi, Pete. Two questions.
Hey, Peter.
Back to Levi's.
Yeah.
Spodumene. Just if the bookends were firstly what you've got at the left-hand bookends now with Tianqi and the other bookend is where you'll end up ever going to be fully spot? Is that on the radar or on the agenda, or is that just an untenable situation to go fully spot?
Yeah, I just don't wanna make any sort of provide any conjecture around what that may or may not be, Peter. Given where spodumene prices are, that may be it's a scenario where you need to be careful what you wish for. If you take a view on whether spodumene prices might be at the top of the cycle, then a formula where the lag gives us a stronger price for longer. None of us have the crystal ball that can tell us where we are in that cycle for spodumene, and in fact whether there's more opportunity in front of us.
Back to what I said at the start, Pete, you know, there's really no clarity or granularity I can give you on what that pricing formula may look like going forward.
Okay. In terms of the cash flow and capital management, I just had a few thoughts on capital management I wanna run by you. Firstly, when is your next update? You used to do it biannually. Is that still the case?
Yeah, sure. It's end of June 2024. We provide an update June 2021, and we said it would be three years after that.
June 2024. Okay.
Yeah.
In terms of
Yeah.
Sorry.
Just to sort of provide some clarity there, Pete, you know, our formula, our payout ratio is 15%-25% of underlying free cash flow. For FY 2022, we've paid out at right at the top end of that at 25%. What we've said previously is that whenever liquidity, which is basically cash and available debt facilities, is above AUD 500 million, then the board will use the discretion to adopt a higher payout ratio. You know, if you run this through your model, you'll see that we're likely to be in that scenario coming into FY 2023.
I would expect at that time, you know, one of the decisions in front of the board will be what dividend to distribute above the standard payout formula.
Is that net debt available or net cash available of greater than AUD 500? Sorry.
It'll be cash available, plus any saleable equities that we may have, plus any undrawn debt facilities. That's broadly our definition of liquidity.
Okay. That's greater than 500. Thanks. Okay. Just in terms of shaping the policy going forward, given you will be getting large dividends from the joint venture, is there any thought about parceling those and passing them straight through to shareholders with the franking attached? Or will it always go through a formulaic whole of company IGO process, i.e., can you have two parts, lithium pass through plus a IGO other?
We'll probably always take, and I'm shooting from the hip here, because ultimately it'll be a board decision. My sense is that we'll adopt a whole of company strategy. In setting dividend, we'll always be looking at what the capital needs are for the company. Part of that on our discussion this year was, you know, the review we did of the capital programs embedded across the lithium business with expansions at Greenbushes and Kwinana, but also the development project that we have at Cosmos. We'll always be looking at those cash needs to build and grow the business in parallel to the decision-making on returns to shareholders.
Okay. The extension franking. The franking you'll generate going forward is extraordinary. Thoughts on that, given there'll be potentially an enormous mismatch between franking balance built with the dividends paid out.
Yeah. Pete, I might just comment on that one. You're right. We virtually extinguished all of our carry-forward tax losses, so we're in a tax-free position, so we will be building our franking account balance. At the end of June, we had a balance of about AUD 150 million franking credits. Keep in mind, Greenbushes, they are also a taxpayer, so they'll be delivering the franked dividends through to TLEA. When they pass on to us, those franking credits, they give rise to lower tax payments for IGO. They don't actually pass through to our franking account. So there's some difference there.
Okay. It's tax offset, not a pass through. Great. My last question. Gearing.
Yep.
Do you change your gearing targets going forward based on the amount of cash you're looking at generating?
Look, I'll start. We keep a view of what our long-term gearing is, and look, we will look to maintain that, and we've always considered a number of about two as being something that two-2.25 is something that we don't want to exceed. It's a long-term number, and we see ourselves gearing down below that fairly quickly. As I said, that just remains a long-term number for us.
Thanks.
That's it. Thanks, Peter.
Saul Kavonic with Credit Suisse. Please go ahead.
Hi, there.
Hi. Good morning, Peter. Look, I guess a few questions on the spodumene pricing, but I'll try to ask it a slightly different way. You mentioned on the, I think it was the strategy day or the Kwinana site visit, that the ATO takes Fastmarkets to calculate its royalties, as it better represents the spot market, the spot ton in the market. They deemed that Asian Metal was more laggard in this sense. You know, your current transfer pricing model uses both of these agencies. Do you think the ATO is gonna be supportive of you continuing to use Asian Metal if it deems it is a drag potentially on your transfer pricing?
Yeah. Yeah, I think just sort of recollecting the conversation we did have, it was really around the pricing mechanism that the state government uses to calculate royalties from Greenbushes. They do that as a mechanism to provide some comfort for the state government versus the transfer pricing model that we do use. The state government uses a basket of three prices, which is Platts, Fastmarkets, and Benchmark Minerals, which is slightly different to the pricing formula that's used for the transfer price by the shareholders, which is Fastmarkets, Benchmark Minerals and Asian Metal.
As you are probably aware, across all of those reference prices, the one that leads the pack is generally Platts, and the one that lags the pack is generally Asian Metal. Like a more perfect formula from a transfer pricing formula perspective going forward would probably be to sample all reference prices and incorporate all of them into a transfer pricing. That doesn't indicate that that's where we get to in a discussion with the shareholders on a renewed transfer price going forward, but that's an indication of what a more perfect model would look like. Thanks, mate. Any other questions?
Yeah. Thanks for that, Peter. I guess with your hydroxide off-take, you're using the same agencies as the state government, I guess, so, you know, replacing Asian Metal with Platts. Do you see a situation here where your spodumene is gonna have to lean towards Platts, Benchmark Minerals and Fastmarkets?
Like, I don't have any further clarity to provide other than what I just described on that one. With lithium hydroxide, it's a little bit different. We've got no sales from one shareholder to another, and therefore all of the pricing is on an arm's length basis to a third party. That's a contracted price that's agreed on a contracted basis with the third parties.
Okay. Thanks, Peter.
Thanks, mate.
Just on the nickel concentrate, lending strategy, and I appreciate we'll hear more on this soon, but is your focus just on Forrestania and Nova blending, or you also considering Cosmos as part of this strategy?
At this stage, the focus is more around Nova and Forrestania. As we get closer to production at Cosmos, we'll do the work there to understand whether that provides another layer of opportunity.
Okay. Thanks a lot.
Longer term, of course, our aim is to go downstream, build a nickel sulfate plant. At that point, we'll have the ultimate blending strategy, putting any materials, any feedstock materials that we have into our own facility.
Yeah. Okay. Understood. Thanks. My last question, just on Mt Goode, on the scoping study. If you do go explore your own, you know, construction of your own plant there to process the oxide material, are you looking to produce an MHP or an MSP intermediary product? I guess as part of the scoping study, are you also considering toll treating that material with third parties?
Yeah. The nature of a scoping study is to do all of the trade-off analysis and understand what are all of the options for developing a project, and then to narrow those options down to the recommendation for the more detailed work that's being done in a feasibility study. All of those options would be under consideration during the scoping study stage, and it'll be far too early for us to comment on what would be the preferred outcome.
Understood. Thanks very much, Peter. That's all from me.
Thanks, man.
Your next question comes from Rahul Anand with Morgan Stanley. Please go ahead.
Hi, Rahul.
Hi, Peter.
Hi, how are you?
Okay.
Thanks for the opportunity. Look, I perhaps wanted to revisit the capital allocation framework, Peter. As you correctly point out, next year seems to be a strong year for cash flows, both free cash flow and net cash balances. I guess if we move away from the question of dividends for a second, how are you thinking about potentially doing buybacks, potentially off market, I guess, because you're gonna have plenty of franking credits. I guess my second question connected to that one would also be how do you see yourself now in terms of your inorganic growth side?
I mean, do you think you've done what you need to, or do you still think if opportunities come past, you can, you know, you wanna keep some of your powder dry and perhaps look at opportunities into next year as well again?
Yeah, sure. Yeah, all good questions, Rahul. On the capital allocation, you know, broadly, my language every now and again slips into dividend, but you know, our. We have a more holistic view than that. It's all about cash returns to shareholders, and that can be via dividends or via share buybacks. Certainly that would be a tool in the toolkit going forward. But of course, we'd only do that in circumstances where it made sense to do that rather than return cash to shareholders via a fully franked dividend. We would continue to assess both options in the future. Whatever option we used would be based on what delivered the best outcome for shareholders and the business.
On the second question on inorganic growth. Over the last couple of years, we've transformed the business and we've bolted on, you know, a lithium business unit to what we're doing. We've got a lot of brownfields growth within that, building the third chemical grade plant at Greenbushes. After that's finished, we'll be building the fourth chemical grade plant at Kwinana. We expect to start building the second train later this year. Going forward, we would envisage a third and a fourth train. Then, within the nickel business, we are busy developing Cosmos and doing a couple of studies around Mt Goode and the nickel sulfate.
You know, we've got a lot of digestion to do from a brownfields development within the group. We're also constructive around looking for opportunities. I've described myself and the business as serial lookers, and we'll continue to look, but we'll always be very disciplined on what we may transact on. The fact that we are busy within the business doesn't create a sense of urgency for us to do anything. Therefore, we can afford to be a lot more disciplined and a lot more prudent about what we may or may not do. Hope that answers the question.
Yeah.
Thanks.
Sorry, I'll go ahead. For the second one, I was just gonna perhaps touch on again the Silver Knight opportunity. Any sort of progress there that you can update us on and how you're thinking about that opportunity? Any other metrics or updates there?
Yeah, we're doing the work. So a lot of metallurgical work and then all of the environmental baseline studies and permitting that we need to do for a new mine development in Western Australia. In parallel, we're doing some drill testing around Silver Knight to understand whether there's any extensions. You would recollect that in the June quarter result, we did highlight that we've had a number of surface 20-m intersections with visible nickel and copper mineralization in close proximity to Silver Knight. The work there to continue to test that is continuing. We would look to provide a more fulsome update on what that looks like going forward.
I have characterized over the course of the last couple of months that, you know, it's the results we're getting, you would argue they're material to Silver Knight, but they're not yet material to the IGO business.
Okay. Understood. Perfect. Thank you, Peter. I'll pass it on.
Thank you. Yeah. Hi, Lyndon.
Lyndon from JP Morgan, please go ahead.
Oh, hi, Peter. Thanks for the call. The first question was just to try and revisit the opportunity to toll trade some Greenbushes spodumene, and turn it into hydroxide while Kwinana's not really producing any material volume. I know I sort of brought this up at the site visit, but is there anything more you can say about that opportunity or whether it is even an opportunity for the JV?
Yeah, sure. I guess, you know, rather than talk to what might be there, you know, I think we're better off leaving that question, and if we are able to do something in the future, we'll talk about that with the certainty of having done it. It's certainly an opportunity that IGO will be constructive around, and then it would be a matter of reaching the same conclusion with our joint venture partner.
Okay, thanks. The other question was just to push a little bit more on Kwinana and where we're up to. You mentioned on site that 90% of product in the last 10 days had been on spec. I'm wondering if you could update as to whether we're still seeing 90% of product on spec and what sort of volume that's associated with.
Yeah. Like I said earlier, Lyndon, you know, all of the work programs that we talked about were on site. We're progressing all of those and, you know, we're better off talking to where we are on Kwinana in the ordinary course when we get to the September quarter results, in October. Otherwise, you know, we may need to start producing monthly reports from an ASX point of view.
No, no worries, Peter. I'll see if I'm third time lucky. The final question I had was on Greenbushes. Really just a long-term question. By far and away, the most valuable asset in the company. I'm wondering if you're able to talk to the long-term optionality. You know, there was a discussion about going underground. There was also not really any discussion about expansions beyond CGP 4. You know, obviously it's an amazing ore body. I'd like to get a bit more of a flavor about the, you know, exploration potential or, you know, whether there is, in fact, some opportunity to grow this asset beyond the projects that have already sort of been put out there.
Is there anything more you can say about that, or is it just what it is in terms of CGP 4, and that's it?
No, no. It's a great question, Lyndon. You know, from a strategic point of view, we do see additional potential below the depths of the current planned pit, and there's an ongoing body of work to do the drilling to confirm that and in part convert inferred resources into measured and indicated, so we can incorporate it into a larger pit plan. Also doing the work to identify extensions below that and understand the opportunity for further extensions, perhaps underground extensions below the depth of a maximum pit.
If you roll all that together as an opportunity, then very quickly from a strategic point of view, you start thinking about, "Well, how do we extract value quicker?" One of the challenges at Greenbushes will always be the relatively small footprint we have there and the access to land that we would need to build more infrastructure. I think one of the real opportunities going forward would be to better understand what the maximum potential of those existing process plants is, and what the opportunity is to take those well beyond nameplate, as has been achieved with a chemical grade plant number one.
Chemical grade plant number one, you know, it operates at a level far above our nameplate. If we were to achieve that same level of performance from chemical grade plant two, three, and four, it would be similar to having another concentrator on the site. That may be a more realistic opportunity than building a fifth chemical grade concentrator. All of those are in front of us. Certainly from a strategic point of view, those would be some of the things that, you know, we would be focused on through our participation in the Greenbushes joint venture.
Thanks very much, Peter.
Thanks, Lyndon.
The next question comes from Daniel Morgan with Barrenjoey. Please go ahead.
Hi, Peter.
Hi, Dan.
Just on the Western Areas assets, now that you've taken control, Forrestania, can you talk about the synergies you're expecting, you know, from the concentrate potential blending with Nova? You know, can you blend, get a payability uplift? Weird question, but is there any potential benefit to the resource or reserve or mining at Forrestania from blending?
Yeah, sure. There's a number of work programs that we have underway, Dan, to understand some of those synergies across operations. You know, an obvious one with Forrestania is what can be done to maximize recovery, and therefore, both from an ore body point of view, but also metallurgically, by being able to blend out some of the high arsenic at Spotted Quoll with lower arsenic material from elsewhere.
We are in the process of doing the work to understand that opportunity and would expect to talk to that in coming quarters. In parallel, we're having the discussions with you know, all of our partner organizations, whether they be contractors or suppliers, to understand what synergies we may be able to deliver across the multiple operations, where we're working together with our partners.
Thanks very much.
The next question comes from Kaan Peker with Royal Bank of Canada. Please go ahead.
Good morning, Peter and team. Two quick questions. I think prior to the acquisition, Western Areas was talking about signing offtake for Cosmos, beyond what's agreed with Glencore. Just wondering if there was any progress on that, or has the offtake approach changed with IGO's ownership?
Well, yeah. We're continuing on with some of the work programs that Western Areas previously started, but also providing a sort of holistic overlay on that to think about the whole of company concentrate package and how we deal with that strategically with our offtake partners. You know, I would expect that, you know, between now and the December quarter results, we would have an update for the market because that's certainly the timeline that we need to get those discussions finalized.
Sure. Thank you. Also just following up on Matt's question prior about blending. I just wanted to see what benefit would arise from blending a high Fe:MgO with a low Fe:MgO. If that was the case, wouldn't Cosmos just be a stand-alone concentrate to be sold?
As I said before, you know, we're doing the work to understand that opportunity and to understand, you know, what benefit may be achieved from a payability point of view by blending across, initially, Forrestania and Nova, and then ultimately across the three sites for longer term. Here I'm talking to maybe mid-2026, you know, we would be focused on what's the right blend to feed into our own, downstream, processing facility. Given the nature of what that facility would be, we would expect that it would be much, less sensitive to a wider bandwidth of, material types.
It would be much less sensitive to Fe:MgO ratio, much less sensitive to arsenic concentration, which would then create a competitive advantage for us to compete with some of those off-spec materials in the market.
Well, thank you. Just a final one, just on the lithium JV. Wondering if you can sort of talk through or maybe give an update. I think at the site visit you mentioned monthly cash being distributed back to partners of the lithium JV. Over the last month, have you seen a larger pickup in cash flow being distributed back to IGO or JV partners?
Yeah, sure. The framework that we have there is an agreed quarterly distribution from Greenbushes up to the lithium joint venture company. But in practice, that's actually happening every month at the moment. And then the framework at the lithium JV company, TLEA, is a quarterly dividend distribution up to IGO. We're yet to have a dialogue around whether that should be a more frequent distribution. I'm really not able to talk to what distributions we've had in July, August, and we'll provide an update to the market on those movements with the September quarter results.
Cool. Thank you very much.
Thanks, mate.
Thank you. The next question is from Matthew Frydman with MST Financial. Please go ahead.
Thanks. Morning, Peter and team. Firstly, just wanted to follow on from your comments on downstream processing. At the strategy day, you floated the concept, I guess, of an integrated process to produce cathode materials. Yesterday, we had one of your peers, or perhaps one of your competitors, also floating the idea of an integrated Australian battery production. I guess wondering if you can provide the expected timing of that study. Am I right to say it's due late FY 2023? You know, what's the scope being considered? Is it simply a desktop study, desktop concept study, or is it more involved? You know, are you really assessing the economics of all these points in the value chain that you've highlighted?
What other moving parts are feeding into that study in terms of, you know, assessing other upstream resources or perhaps your project partners on that study as well?
Yeah, sure. As we talked about on the strategy day, you know, we see a natural evolution where a nickel sulfate downstream project actually incorporates a pCAM facility adjacent to it, because that reduces overall capital and operating costs. We put the CAM in effect nickel in solution across the fence into the pCAM facility. We are doing the work to understand the merits of both of those at the same time. It would be correct to characterize the work on the nickel sulfate portion at the moment is running ahead of the work on the other one.
We expect that will catch up quite quickly, and the aim is to deliver a feasibility study, which would support a financial investment decision on both of those by mid-2024.
Got it. Okay, that's very helpful. Thanks, Peter. Just following on quickly from Kaan's question on offtakes. You talked about wanting to resolve the Cosmos offtake situation between now and the December quarter result. Is it fair to extend that to the portion of Nova concentrate and also Forrestania concentrate that you will have available around that time?
Yeah. I may not have said it, but my thinking when I was answering the question was it would be a broader update on all of our offtakes because we have a couple of milestones coming up for Nova and Forrestania, as well as the need to deliver certainty on Cosmos. We'll be providing a broad update plus or minus by the time we get to our December quarter results.
Got it. Thanks, Peter. You may have said it, but I may be the one that missed it.
Yeah.
Okay.
I would have to check the transcript to see what I said. We won't drive the commercial discussions with the counterparties around, you know, a date around the December quarter results. You know, if we need more time, we'll take the extra time at that point to do it. You know, plus minus, that's about when we should be getting there.
Does that mean that in the interim you'd be happy to accept spot sales outside of existing offtakes, or would you expect that any incremental volumes would just be delivered into the existing offtakes?
Too early to comment on that. I have anecdotally heard of quite spot high spot sales in recent times. 82% spot sales have been quoted to me on a payability point of view. It's an outcome we would look at, but the best plan is to get the offtake locked up and to have that committed from January 1st.
Got it.
For, um-
Yeah.
Nova and Forrestania.
Yeah. It's always nice to be able to, I guess, reference spot indexes with your pricing. Maybe just finally on Forrestania. You mentioned there briefly in your slide around lithium exploration. Wondering if you can expand on that a bit. Is that currently just a little bit of geology given that you're down the road from Mt Holland or are there any high priority targets there that you've outlined? You know, any outcropping pegmatites that are ready for you guys to go and put a drill into?
Too early to talk to that. You know, there's more substance than a pipe dream or any sort of geology. We look forward to updating people on some of those targets that are on the existing concession package, you know, in upcoming quarters.
Got it. Thanks very much, Peter.
Thanks, mate.
Next question comes from Peter O'Connor with Shaw and Partners. Please go ahead.
Pete, two more on the nickel business. Firstly, Nova and the life of mine. I'm thinking about this from the context of your new director. She would have done DD ahead of joining the board, and Matt would have come up with a question to you saying, "Pete, Nova's only got a short life. What are you gonna do beyond Silver Knight and Nova? And is there a gap there before you turn any more production in the Fraser Range into production?" I've got a second one.
Yeah. Given the likely depth of a discovery near Nova, I would expect it's fair to say that there would be a hiatus in any activity that's required to bring any new discovery that's made from this point on into an operation. Just the amount of time it would need to do the resource assessment of that new discovery, the time it would take to do the feasibility studies and the permitting, it just about guarantees that there would be a hiatus in activity.
A care and maintenance scenario for a potential extended period if necessary.
Yeah.
Okay.
That's correct.
Okay. My second one on nickel as well, but nickel supply more broadly and holistically in WA. Having met with BHP last week, with their CEO, and he talked about the nickel business and indicating that they wanted to partly grow the nickel business by reducing the units they buy from people like yourself. In the timeframe of the next smelter campaign shut and the change to the way they look at metallurgy and chemistry. Do you have enough time by mid this decade or mid, late this decade to evolve your own downstream nickel processing to fill that hole? Or you'll be selling materials spot as you just indicated from the previous question?
Like, the timeframe we're talking about for our own downstream facility, you know, subject to completing the feasibility study and reaching a financial investment decision, would be circa mid-2026. If there was a need to place offtake in the lead-up to the commissioning of that, and there's still a robust market outside Western Australia.
To be clear, FID FY 2026 or that's first material FY 2026?
FID by mid-2024.
I'm sorry.
Leading to a-
Yep.
Construction completion by mid 2026.
Perfect. Thanks, Pete.
Thank you.
Thanks.
We've run short on time and come to the end of the Q&A session. I'll now hand back for closing remarks.
Thanks, Rachel. Thanks, everyone, for your participation today through our presentation and Q&A session. We look forward to engaging with you again very soon, when we present our September quarter results in October. Thank you, and have a safe day.