Thank you for standing by, and welcome to the IGO Ltd September 2022 quarter webcast. All participants are in a listen-only mode. There'll be a presentation followed by a Q&A 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. Matt Dusci, Acting Chief Executive Officer. Please go ahead.
Thanks, operator. Good morning, everyone. Thank you for joining our September quarterly call. As an introduction, my name is Matt Dusci, Acting CEO of IGO. Joining me on the call today is our executive leadership team, including Kath Bozanic, who's recently joined the team as our CFO. Also on the call this morning is our Non-Executive Chair, Mike Nossal. Mike will make some introduction comments. Mike, I hand across to you.
Thanks, Matt, and welcome everybody. As you're no doubt aware, it was with great sadness that we announced the sudden passing of our Managing Director and CEO, Peter Bradford, two weeks ago. On behalf of the board and the broader IGO family, I wanted to start this call by extending our deepest sympathy to Peter's family and friends at this very difficult time. Peter's innovative and strong leadership over many years has transformed IGO into the company it is today. His passion for the mining sector, generosity, warmth, and humility was truly inspiring, as was his strong belief that our industry has a critical role to play in the global transition to a clean energy future. Importantly, Peter always brought people along with him and developed strong relationships at all levels of the company through genuine care for others.
For those of us who are fortunate to know and work with Peter, the news of his passing was devastating. He is dearly missed. While our immediate priority has been to provide all the support and care we can for his family and everyone at IGO, we've also moved quickly to ensure business continuity. On that front, we benefited from Peter's ability to build a strong team around him. Matt Dusci, who most of you know already, was appointed as Acting CEO while the board conducts a formal search process for a permanent CEO. Matt's been pivotal to IGO's recent transformation and is committed to delivering on our strategy and purpose. He's well supported by the executive leadership team, as evidenced by our recently appointed CFO, Kath Bozanic, who joins us here today.
As well as the broader IGO leadership group and the board has every confidence that the team will continue to deliver for all stakeholders. While the last two weeks have been difficult, all of us have been buoyed by the huge number of people across the industry who've reached out to offer their condolences and support. Not surprising, given the high regard in which Peter was held, but greatly appreciated, and I thank all of you on behalf of the IGO family. I'll now hand the call back to Matt and the team for the quarterly results presentation.
Thanks, Mike. I would also like to pass on my condolences to Peter's family and friends. Also thank everyone who has reached out to the IGO family over the past two weeks. The support we have received highlights the enormous impact that Peter has had across the entire industry, both locally and globally. The IGO family has lost a dear friend, leader, and mentor. It has been difficult for us as Peter passed away. I'd like to acknowledge the collective strength and resilience of the IGO team has shown during this time. This is a testament to our culture, and our support for each other. We all miss him. I know Peter would have been immensely proud, and we are determined to deliver on Peter's vision to make a difference. Moving to slide three.
I'll start by commenting on safety and our focus on improving safety outcomes for our people. Recent safety performance has been disappointing. With our TRIFR moving higher since the start of the year. While the severity of injuries we experience in the business are generally minor, we acknowledge that our performance is not good enough. We need to minimize harm and create a safer workplace for our people. We are in the process of harmonizing our safety systems and processes across the Forrestania and Cosmos sites. In addition to our current safety programs of work, we are looking at complementing this with additional resources, in-field supervision, and workplace-focused safety risk workshops to ensure our people have the support they require. Moving to slide four. We are again proud to have delivered another excellent set of operating and financial results for the September quarter.
This has included record sales, revenue, and EBITDA for the group. Record quarterly spodumene production at Greenbushes, coupled with strong realized lithium prices. Consistent delivery from our nickel operations at Nova and Forrestania. Announcement of our project revised development plan at Cosmos. We're also proud to publish our 2022 sustainability report in August. This is our eighth consecutive report. On governance, we have continued to evolve and renew the board with the appointments of Tracey Lord and Justin Osborne into non-executive directors. It's great to have them as part of the team. I would also like to acknowledge the contribution of Peter Bilbe, who will retire from IGO's board at the upcoming annual general meeting. Thank you, Peter, for your contributions over the past eight years. Moving to slide five, where we'll summarize our key financial results for the quarter.
As mentioned, the key driver during the quarter was a significant increase in earnings from the lithium business. IGO share of net profit from TLEA, which we will report as the EBITDA line, almost tripled quarter-over-quarter to AUD 286 million. This result, combined with earnings from our nickel business, generated a record quarterly group underlying EBITDA result of AUD 398 million. Net profit after tax rose to AUD 253 million for the quarter, while underlying free cash flow of AUD 194 million was lower quarter-over-quarter. This is attributed primarily to our AUD 59 million investment in the development of the Cosmos project.
Strong cash generation by the business over the quarter enabled IGO to make a partial repayment of AUD 220 million of the amortizing debt facility, leading to a closing net debt position of AUD 396 million. Moving to slide six. The graph shows the reconciliation of net profit after tax for the quarter. The key drivers to the significant increase in net PAT quarter on quarter were the increase in lithium business earnings, the absence of acquisition costs recorded in June quarter related to the Western Areas transaction, and an increase in mark-to-market valuation of our investments. This was offset by lower earnings from Nova and higher D&A and tax charges. Moving to slide seven, which shows the reconciliation of cash flow.
Cash generation within the nickel business was strong, with Nova and Forrestania contributing AUD 227 million in aggregate, offset by AUD 59 million spent on development at Cosmos. The second quarterly dividend from TLEA of AUD 106 million was also received. Other outflows to note include AUD 38 million payment of the FY 2022 final fully franked dividend of AUD 0.05 and the repayment of AUD 220 million of our net debt facility. Closing cash balance at the 30th of September was AUD 284 million. Turning to slide eight, I'll talk about our lithium business. IGO's lithium assets are held by our joint venture interest in Tianqi Lithium Energy Australia, referred to as TLEA. Moving to slide nine. It's pleasing to report the strong financial performance of TLEA for the quarter.
As noted earlier, IGO's share of TLEA's net profit rose nearly threefold in the September quarter to AUD 286 million. While the AUD 106 million received by way of a quarterly dividend was also significantly higher than the prior quarter. This strong financial performance is primarily driven by improving production and higher spodumene prices, which reset on the 1st July 2022, generating strong margins and dividend flows from Greenbushes. With Peter Bradford's passing resulting in vacancy on the TLEA board, we have today announced that IGO's Non-Executive Chair, Mike Nossal, has joined the TLEA board on an interim basis. I've also joined the board of Windfield Holdings, the joint venture company which owns Greenbushes, and remain active in the operating sub-committees which provides oversight to the operation and the numerous growth projects being executed by the Talison team.
I would also like to extend my thanks to our partners, Tianqi, Albemarle and Talison, for the support over the last recent weeks. It's greatly appreciated. Moving to slide 10 and to a discussion on the quarterly performance of Greenbushes. Spodumene production at Greenbushes this quarter was 361,000 tons. This is 7% higher quarter-on-quarter, with increased plant throughput and improved recovery performance. Given the increased operational performance, the team commenced lowering spod grade. The cost of goods sold, excluding royalties, was AUD 253 per tonne within guidance and consistent with the previous quarter. The significant step-up in revenue and EBITDA was predominantly price related, with chemical grade pricing reset on the 1st July 2022 to $4,187 per tonne.
As first foreshadowed last quarter, our realized price of $3,729 per tonne was impacted by a delayed June shipment that was realized in July at the previous price of $1,770 per tonne. The average price also incorporates technical grade pricing, which continued to lag chemical grade prices. For reference, technical grade production remains at approximately 10% of the chemical grade production. As discussed during our full year results call, the spodumene pricing transfer pricing mechanism, which determines the price at which spodumene concentrate from Greenbushes is transferred to its shareholders, is currently being reviewed by the Greenbushes board. While discussions have well progressed, no decision has yet been ratified by the board. We expect to update the market on this shortly. Moving to slide 11.
At Greenbushes, the team is continuing to study and execute programs of work to maximize and optimize this world-class asset. During the quarter, excellent progress was made on the expansion of mining and processing operations. Early works are advancing well on the construction of CGP3, which will add an additional 5,000 tons per annum of processing capacity at Greenbushes. Construction is expected to be complete in early 2025, with commissioning to commence thereafter. The tendering process for the new mining contractor, contract for the expanded operations is ongoing. On the right-hand side of the graph, we've displayed the growth profile at Greenbushes over the coming few years.
Over the next 5 years, Greenbushes will expand processing capacity by 1 million tons per annum with the addition of CGP3 and CGP4, while mining volumes will average to an average of about 9.5 million tons per annum over the estimated 21 years life of mine. Turning to slide 12. At Kwinana, the team has continued to progress with commissioning and rectification on train 1 during the quarter. Key activities include batching of the acid roast kiln and calciner, continued debottlenecking of the flow sheet, improved reliability and run times, and increased battery grade conversion. Team remains focused on continued commissioning and ramp up. During the quarter, Tianqi China has embedded a large team of technical and operating personnel from their operations in China as part of the ramp up process.
Trial production increased quarter-on-quarter to 195 tons, while the product qualification process with offtake customers continues. EBITDA of AUD 21.2 million for the quarter relates primarily to the sales of lithium hydroxide to SKI, delivered by toll treatment tolling arrangements in place with TLC, whereby TLC's conversion facilities in China have delivered product on behalf of TLEA. In parallel, progress continues on train two to enable the TLEA board to make a final investment decision on train two over the coming quarters. This has included continuing engineering, design, tendering, EPC contract negotiation, and resourcing the owner's team, as well as some early works on site. Turning now to slide 13 and a review of our nickel business. Moving to slide 14.
The September quarter has been the first full quarter IGO has owned the Cosmos and Forrestania assets following the completion of the Western Areas acquisition in late June. Our expanded portfolio provides IGO with significant opportunities to grow our nickel business organically with our current key strategic items listed on the slide. First and foremost, our focus is on completing the integration of the Forrestania and Cosmos assets into the IGO business. This is progressing to plan, and I'd like to thank everyone who has worked on making this process happen. We have multiple opportunities to increase values through optimizing and synergies. At Cosmos, our focus is on delivering a safe and sustainable project which maximizes value. We've now mapped out a clear plan to deliver this project over the next 12 months.
We are currently negotiating new offtake arrangements for 50% of the Nova nickel concentrate and 100% of the Forrestania concentrate volumes, which will now become available in the March quarter. This is a new, unique opportunity for IGO, which will deliver value both at our operational and commercial level. We expect to provide an update on this in the December quarterly results. Our nickel downstream study is progressing with Wyloo Metals. The aim is to reach a financial investment decision on this in mid-2024. We have strong interest in partnerships as we look at linking our technologies in the production of nickel sulfate with pre-CAM. Finally, we're working on various studies with the objective of expanding our nickel resources and reserves base. Silver Knight is the most progressed of these studies, while New Morning and Mt Goode have recently commenced.
Moving to slide 15. The Nova team has delivered another strong quarter of operating and financial performance. Production of all metals was generally in line quarter-on-quarter, while costs were higher at $3.04 per pound. The increase in cash costs relates primarily to lower copper by-product pricing over the quarter, which has driven lower by-product credits. The prevailing copper price of $5.12 per pound compares to our assumed price when setting guidance of $5.65 per pound and accounts for $0.62 of the total variance quarter-on-quarter. Sales revenue and underlying EBITDA were lower by 27% and 37% respectively, driven by lower realized nickel prices, consistent with the lower spot prices and absence of hedging gains we enjoyed during the quarter. EBITDA margins at Nova remain strong at 65%. Moving to slide 16.
At Forrestania, production of 3,199 tons of nickel was 11% higher than the prior quarter, with higher mill grades, greater ore availability, and success of the SCAPS magnetic sorting program. Higher production drove costs lower, offset by increased cash production costs related to mining contractor rates. Cash costs of $8.70 per pound compared favorably with the prior quarter result of $9.24 per pound. Moving to slide 17. Our project development team has been busy over the quarter at Cosmos. I don't intend to speak in any detail. However, broadly, development activity is progressing well, with high levels of activities on the process plant, paste plant, shaft and supporting infrastructure. In addition, a total of 1,427 m of underground development was completed. Total construction and mine development CapEx was AUD 59 million for the quarter.
Moving to slide 18. The other key work stream has been delivering a revised project development strategy for the Cosmos Project. This has included expansion of the processing plant from 750,000 tons per annum to 1.1 million tons per annum. Upgrading and improvement of the shaft and infrastructure. Committing to advance AM6 with additional development, which will open up multiple mine areas and all sources. Generally right sizing and strengthening site infrastructure. With the detailed work behind the plan now complete, IGO expects to progress plant and first concentrate to be completed during the first quarter of FY 2024. The shaft headframe and underground material handling systems are expected to be completed around the end of CY 2023, with all hoisting from this point. Moving to slide 19. IGO has also updated the capital cost estimate to the revised project plan.
Total project cost to 13th of June, 2022, prior to IGO ownership was AUD 302 million. The remaining cost to complete the project is estimated between AUD 493 million and AUD 523 million. This estimate includes all project development activities up until commercial production, plus the expected cost to complete the shaft and associated infrastructure after commercial declaration. Of this remaining cost to complete, IGO expects to spend between AUD 400 million and AUD 425 million during the current financial year. On the right-hand side of this, on the side of this slide, we've provided some context to the capital estimate, showing a bridge from the implied total project cost as detailed in the independent expert report published in April this year to the midpoint of the revised total estimate range of AUD 810 million.
The cost differential is being driven by three key drivers. AUD 150 million relates to IGO's optimization initiative designed to deliver a more robust mining and processing operation. Items within this category include the cost to expand the processing plant, accelerated mining to bring forward development of AM5 and AM6 ore bodies. AUD 140 million relates to timing. Effectively, items previously classified in sustaining capital or operating expenditure, which has now been brought forward into the project capital cost estimate. 95 million related to rectification omissions and escalation. These items are costs not included in the IER's assessment of the project. These capture incomplete engineering, scope work omissions, along with capital escalation. On slide 20, we provide a more detailed project delivery schedule showing key deliveries over the coming quarters.
As previously noted, process plant and first concentrate production will be in first quarter FY 2024. First ore hoist from the shaft in the following quarter, second quarter FY 2024. Moving to slide 21 and a high-level review of our exploration for the quarter. Moving to slide 22. In the Nova environment, the team has been busy, very busy at Silver Knight with drilling, identifying sulfide mineralization at Silver Knight South, outside the existing resource. More work is required here, with further drilling underway in the current quarter at Silver Knight South, as well as Firehawk and Red Queen targets. The team has also been diamond drilling at the Premier and Orion targets during the quarter. The geology intersected at Premier was consistent with previous drilling and disseminated nickel copper sulfides observed.
At Orion, drilling encountered major intrusions, however, they do not appear to be as prospective as previously intersected in the Orion intrusions. Moving to slide 23. At the Paterson Project, the project team continues to work on generating quality data sets to help inform future work programs, with several geochem and geophysical programs completed across various joint venture projects. The most interesting results from the quarter came from the Encounter joint venture, where diamond drilling intersected quartz carbonate vein with variable copper sulfide content at EV01 and ET01. Aircore drilling was also completed across several targets on the Cyprium joint venture tenure. Moving to slide 24. Before I move to a summary of the call, I just wanted to highlight the recent release of our 2022 sustainability report.
Our eighth consecutive report detailing our performance in key areas of environment, people and culture, community, governance, and business integrity. We are proud of our achievements in these areas and the recognition we continue to receive for the quality and transparency of our reporting. At a project level, the second solar farm at Nova, which will expand our renewable generation storage and further reduce our carbon emissions, is near completion. We're also actively seeking carbon reduction initiatives in several other areas in line with our conviction to deliver a clean energy future. Moving to slide 25. Before we move to Q&A, just like to summarize the quarter in which we continue to deliver.
Highlights to note include record quarterly sales and underlying EBITDA, record spodumene production at Greenbushes, our nickel business, which is tracking within guidance, announcement of the Cosmos revised development plan, a stronger balance sheet with strong free cash flows enabling us to reduce debt and a continued focus on ensuring our people are safe and supported. Although it has been a difficult couple of weeks, IGO has a great culture, a great team, and a great future. Collectively, we are committed to making a difference and continuing Peter's legacy. Thank you for joining us on the call, and we'll hand it back to the operator now 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 would like to ask a question via the webcast, please type your question into the ask a question box. Your first question comes from Mitch Ryan from Jefferies. Please go ahead.
Good morning, guys. Good morning. Thank you very much for taking my call. My first question relates to Kwinana and the hydroxide sales there. Just wondering if you could provide any color on either the volume or the grade that was of that product.
Yeah. If we hear you right, you're chasing the value and the grade of that product?
Yes, that's correct.
Yeah. That we have that value and the grade of that product is within battery specs.
Oh, sorry, it was battery spec. Okay, thank you. Staying on Kwinana, with regards to you've called out the dryer issue is continuing. Do you have a pathway to or a time to rectification and, or sort of as a second part of that, is there a cost or time to replace the piece of kit that seems to be not working at this point in time?
Yeah. Okay. There's a couple of elements to that. We talked about the dryer being one of the bottlenecks, and that still remains one of the bottlenecks. We're working through this quarter on continued rectification on areas throughout the plant. The team has a really good understanding of what they need to do. At the moment, we've got about 12-15 people from China, headed up by the COO from TLEA of China, also on-site, and they're developing that program of works. We'll expect this quarter to see an increase in production. The next key step for the dryer will be a rectification of the material handling system around the dryer, and that's associated with feeder systems, chutes, et cetera.
The idea is to plan for that rectification work at the next shut, and they're in the process of scheduling that next shut.
Okay. Thank you. That's my two questions. I'll pass it on for now. Thank you.
Thanks, Mitch.
Thank you. Your next question comes from Lyndon Fagan from JP Morgan. Please go ahead.
Hi, Lyndon.
Hi. Thanks for the call. First question I had was just on the dividend received from the lithium joint venture. It looks quite low relative to your share of profit. Just wondering if you can talk through why there's that difference.
Yeah, I will. You know, I'll hand it across to Kat in a sec. Largely the dividend was in line, and it's largely driven by payment terms. I don't know if you have anything else, Kath.
Yeah. It was in line with our expectations as Matt's indicated, and you need to take into consideration the payment terms with our customers and also our investment in CapEx, including the timing of that investment. We expect that the higher spodumene prices will be reflected in our December quarter dividend. You're just seeing a bit of a lag there in terms of when the cash is coming through to us.
Is it a timing issue, or are you holding onto the cash to invest in, say, Kwinana phase II?
Predominantly timing.
Timing.
Yeah. It's predominantly timing. We've got slightly longer payment terms there, and we've got a higher debtors balance at the end of the quarter comparable to some of the other ways that things get paid.
Okay, thanks. Just to clarify, you called out the toll treating for Kwinana. Do you mind just talking through exactly what's going on there? Are you toll treating your share of spodumene that would otherwise be going through Kwinana and that's what the EBITDA is from, as opposed to any hydroxide sales directly from Kwinana?
Yeah. That toll treatment was the production of lithium hydroxide out of the TLC China facility to ensure that we meet contractual terms with SKI and Pick.
Is there any opportunity to ramp up that toll treating to, I guess, opportunistically, make some money?
That's toll treatment out of China, and that resides with TLEA.
Okay. And look, just one more from me. I'm wondering if you can talk through the grade profile a bit at Greenbushes. It just seems to be still coming through at an elevated level, which is great to see. How much longer is that likely to be the case?
Like this quarter, you've seen grade C go down. That's ultimately from stockpiling. They have a lot of flexibility at Greenbushes with mining sequences, et cetera, at the moment. Largely that was to do with ramp up and run times and recovery. As we've got CGP2, throughput at CGP2 is improved, CGP recovery is improved, et cetera. We'll bring back grade to more in line with forecasting.
All right. Thanks very much. I'll switch it over.
Thanks, Lyndon.
Thank you. Your next question comes from Levi Spry from UBS. Please go ahead.
Hey, Levi.
Yeah, good day, Matt. Yeah, hope everyone's going okay there. Linden asked my sort of questions. I guess can we just push a little bit on the Kwinana train 2, what's delaying the FID or when can we just push you a little bit more on when we can expect the decision there.
We'll expect to see that over the next coming quarter or two. It's not actually delaying the project at all, because we're committing to the engineering, we're committing to building owner teams, we're committing to systems and processes in place. What we're actually doing is doing more early works versus making a final financial investment decision on train two. What we wanna be sure about in that financial investment, when we do make all of that financial investment decision, that all the rectification engineering has been captured into the train two design.
Okay. Thanks, mate. Just this arrangement with TLEA. If things do keep taking a bit longer with Train 1, like how much capacity is there to can you fulfill all of your contracts through China? Like
Um.
How do we think about that?
Yeah. There's only a shortfall of contract associated with the SKI, and it's more a relationship thing. Ultimately, they're all commercially sensitive, but there is no other requirements.
Okay. Thanks, Matt. Thank you.
Thank you. Your next question comes from Daniel Morgan, from Barrenjoey. Please go ahead.
Hi, Daniel.
Hi, Matt and team. Sorry to keep following up on this toll treatment comment. It's just very interesting. So with SK Innovation, I guess I'm trying to understand, is there more obligations you have to deliver product, for instance, next quarter or until, I guess, Kwinana Train 1 ramps up? Is there more obligations you have and therefore more toll treating you might do and more earnings that might come through, like what we've just seen, from toll treating arrangements in the next quarter? Thank you.
No. You know, there's a small volume associated with what we're doing for this toll treatment through TLEA. That was ongoing last quarter as well, so it's not a new thing. Effectively, there's no more opportunity really to toll treat through China except for that requirement.
Okay. When I look at this earnings, is that predominantly the toll treatment earnings? Typically, if something's being built or ramped up and not commercial, which this is not yet, I imagine that the costs and the revenue associated with the costs from the small volumes you've done at Kwinana are capitalized. Is that correct?
The sales are 12 of lithium hydroxide during the quarter. Does that answer your question? Maybe I hadn't understood your question fully.
Um.
Sorry.
Maybe I'll just clarify. I mean, typically pre-commercial production, all revenue and costs get capitalized. That's true, is it not?
No. We're actually putting them through the P&L at this present moment because you've got to remember they went into care and maintenance for a period there which drove a slightly different accounting treatment. Sorry, I didn't understand the question initially.
Okay, thank you. At Kwinana, you say you're gonna make several rectifications at the next scheduled shut. Why not bring that forward to now, given you've got immaterial volumes? Is it because you're waiting for equipment to arrive? Thank you.
Yeah. It's largely driven by timing, equipment, engineering.
Okay. Thank you very much for your answers.
Cheers, Daniel.
Thank you. Your next question comes from Kaan Peker from Royal Bank of Canada. Please go ahead.
Hi, Kaan.
Hi, Matt and team. Thanks for taking my question. The first question is really around the offtake. Just wondering, I know you've talked about sort of aligning the offtakes for Nova and Forrestania. They both get good payabilities. Now the duration of that timing and the strategy around that, will that depend on the study around the downstream processing that's expected by end of CY 2022? Yeah. Could we just get a bit more detail around that?
Yeah, correct. What we make sure is any offtake arrangement is coupled with downstream, and also include any provision that should we make a financial investment on downstream, then we would have the right to change those offtakes. The driver for the offtakes is really about how we optimize the Forrestania, essentially. That has the ability to ensure that we're not processing arsenic or have additional operating costs associated with processing arsenic. How we get improved recoveries because we're not having to drive arsenic as a reduction through the processing plants, et cetera. We think that the blending strategy will have a significant advantage, not just in payabilities and providing significant nickel metal units, but also on an operational basis.
Sure. With the offtake, it's sort of the same people that I suppose it's rolling off Jinchuan and Trafigura.
There's a huge amount of interest from both traditional offtakers, but the broader market. We'll cast that net very far and wide.
Sure. Thank you. The second question was around Nova. Just if you could talk through the quarter-on-quarter cost changes, particularly around processing quarter-on-quarter.
Sure. You mean on a C1 basis, that large variance is largely driven by that copper by-pass credit. You'll see that come through. In terms of operating, we had a shut in the quarter. You'll see some variance in operating costs associated in the processing plant, associated with where shuts occur and bin reliners, et cetera.
Sure. Thank you. Just last one. In with Forrestania, the inventory adjustments. Can you just talk through what's impacted those? Thanks.
Yeah, I can cover that off. Because we're in business combinations or we've done an acquisition, we have to fair value our inventory and all our balance sheets at the date of acquisition. You'll see this one-off large increase in inventory, which has flowed through to our cash costs because our inventory has been valued at net realizable value on the twentieth of June, which means that it had a negative impact on our EBITDA. We'll see the normal ups and downs that you see going forward. This is just a first quarter thing.
Cool. Thank you. I'll pass it on. Appreciate it.
Thanks.
Thank you. Your next question comes from Matthew Frydman from MST Financial. Please go ahead.
Hey, Matt.
Thanks. Morning. Yeah. Hey, Matt. Thanks very much for taking some questions. Firstly, just after a bit of an update on some of the discussions that have been previously flagged that you're having with your JV partners. Firstly, the TLEA quarterly dividend versus the monthly dividend that's coming out of Greenbushes. I think, you know, we saw evidence of that during the quarter, and you guys were discussing earlier that the quantum of the dividend, so any movement there in terms of moving towards a more regular sweep out of TLEA, perhaps a monthly sweep as per Greenbushes. And then secondly, the six monthly backward-looking pricing mechanism from Greenbushes. Any update to those discussions at the Talison level? Thanks.
Yeah, sure. I'll capture the dividend one first. As you're aware, we're doing monthly dividend sweeps at Greenbushes coming up to TLEA, and then at TLEA level, it's quarterly. That will remain consistent for the time being. In terms of pricing, how spodumene and pricing mechanisms at the Greenbushes level, that's still in discussion. As you're aware, you know, that was set in 2020, which is set biannual at start of mid-year, January, and also, mid-year and start of the year, so January and July. It's based on the preceding quarters. It consists of the three PRAs, which are Fastmarkets, Benchmark, and Asian Metal. That discussion is still ongoing. We expect to provide updates to the market next quarter on what that new pricing mechanism would be.
Sure. Thanks, Matt. Any comments around the fact that one of Albemarle's other JV partners, obviously Mineral Resources, is now adopting that same pricing mechanism for their spodumene transfers? Does that, I mean, affect the discussions at all? Or how do you take that?
Look, I would describe discussions as positive.
Okay. That's really helpful. Thanks. Just finally, the Cosmos update, obviously quite a bit to unpack there. I'm just looking at the component of operating costs and sustaining costs that you've now capitalized, you know, versus what was in the independent expert report. I don't have the exact numbers in front of me in terms of the mining costs and the sustaining capital that were described in that report. Should we be revising down our life of mine mining costs and our mine development costs by an equivalent amount of about AUD 140 million that you've now capitalized? I think the IER had, you know, AUD 80-AUD 90 a ton mining costs and up somewhere in the order of AUD 150 million of sustaining capital over the life of the asset.
Is it fair to take out that amount that you've now capitalized upfront?
Yeah. Look, majority of it. In terms of that, how we tried to bridge the gap so everyone could understand, we used that IER, and then we talked about AUD 140 million, which is related to timing. There's two main drivers within that timing on the AUD 140 million, which is both shaft and underground mining.
Okay, thanks. Thanks, Matt. That's helpful.
Thank you. Your next question comes from Matt Greene from Credit Suisse. Please go ahead.
Hey, Matt.
Hey, Matt. Thanks for taking the question. Hope you're well. Just my first comment, I'm sorry, I note your comments on Mt Goode, being a feedstock for you downstream. Just how are you conceptually thinking about this project now? Is the PFS following the scoping study that Western Areas was undertaking?
Yeah. They were doing scoping. We'll advance. We've started the PFS, and that PFS will be designed to complete at the mid of 2024. Again, it would be ideal to couple that with our thinking on downstream. We've started to do metallurgical test work now on Mt Goode. We will start this quarter on metallurgical test work. The idea of doing that metallurgical test work is to see properties and understand those properties related to downstream nickel as well.
Okay, thanks. You're still thinking open pit, 4 million tons grade at sort of levels?
That will be part of the PFS when we work through all of the options as part of the Mt Goode.
Okay, that's great. Just on the nickel downstream, did I hear you correctly earlier that FID is now mid-calendar year 2024?
Yeah, that's always been the case. Mid-calendar 2024 financial investment decision on nickel sulfate downstream.
Okay. Are you still thinking modular approach, single train, or does the study on Mt Goode and potentially, other upstream partners change the initial scopes?
The current study is all the optionalities we're doing at the moment. We're in the process of doing all the trade-offs as we speak. All of those sort of trade-offs are locked down, should be done early next calendar year. That will enable us to get into detailed engineering.
Okay, that's great. Just one last one, Matt. The recent budget, there was, I think, about AUD 1 billion earmarked for value-added downstream and critical metals. Are you engaging with the state and federal government? Are you sort of confident that you could see some financing?
Yeah. Look, human, we are confident that we would get significant support from government, and we're already seeing that support come through. It's just the timing. What we want to do is get a better understanding of our business case before we present to government to look at funding.
Dan's in the detail on that, and they haven't come out with a lot of detail on how it all fits in. We're gonna be working closely on that once when the detail comes out in order to align it with our business imperatives and the like. I hope that helps.
Yeah. Thanks, kath. That's all for me. Thanks, Matt.
Cheers, Matt.
Thank you. Your next question comes from Tim Hoff from Canaccord. Please go ahead.
Hey, Tim.
Hey, guys. Thanks very much for taking the question. I was just looking for the timing of the ramp up to 1.1 million tons. Has the capital change led to a pull forward in when you expect to hit 1.1?
The philosophy of advancing both AM5 and AM6 is to bring on additional ore sources, and that will enable a faster ramp up to the 1.1.
Okay, excellent. The next question I have is just around the realized price. I realized there was a carryover shipment. I think the last quarter we had 34,000 tons. Just doing, pricing out those, what you should be getting this quarter and what you were getting on the previous one, it points to a realized price of about $3,900. I was just wondering if you could explain the differential between what you've actually delivered and the $3,900.
It was 34,000 tons, and my understanding is the difference relates to the timing, forex changes at various points as to when those ships have been delivered. We're confident with our pricing there. It's timing effectively around forex.
Timing on forex, and then the other one is your technical grade.
Yeah.
You'll see that price come into this quarter coming.
Okay. That technical grade product, is that gonna be wrapped into the numbers that you report?
I didn't capture that. Can you say that one again? Sorry, Tim.
For the technical grade product, will that be wrapped into the next quarterly recorded price?
Yeah, it does get wrapped up into the quarterly price. You'll see a little bit of a discount. We tried to guide the volumes in the quarterly you can see as well. You have to take that into consideration.
Okay. Excellent. Thanks very much. Great. Thanks so much.
Thanks, Tim.
Thank you. Your next question comes from Kate McCutcheon from Citi. Please go ahead.
Hi, Kate.
Hi, Matt. I hope you guys are doing okay. At Greenbushes, you gave us milled tons of 1,473 kilotons for the quarter. If I do tons times mine grade and a recovery and some tons for TRP, it implies one of those numbers is kind of average. Can I get some color on those variables? Maybe TRP tons, milled grade or overall recovery?
Yep. We can take that one offline if you like, and we can give you a bit of a snapshot if you want.
Okay, sure. If you don't wanna share them with the call. At Cosmos, I might ask the prior questions another way. We've got an update on CapEx. With some of that OpEx moving into CapEx, what are the expectations for OpEx now? I think under Western Areas, they are expecting $360 a pound kind of OpEx. Any color there? Secondly, when can we expect to hit that 1.1 million tons with AM6?
Yeah, okay. I'll answer first with the OpEx one. In our OpEx will provide guidance on OpEx mid-calendar year as we do with normal OpEx. In terms of production profiles ramp-ups, you mean it will be. It's a relatively quick ramp-up profile.
Okay.
Okay.
AM6 will come online quite quickly.
AM5 will potentially come on earlier.
Okay, okay. Mid-calendar year, we'll also get an update on those kind of life of mine OpEx numbers as well?
Correct. Mid-calendar year, we'll provide OpEx and some ramp-up profiles.
Okay. Thanks, Matt.
No problems, Kate.
Thank you. Your next question comes from Kaan Peker from Royal Bank of Canada. Please go ahead.
Thanks. Just a quick follow-up question on Flying Fox. Just wondering what that current mine life is there. If we still expect to produce into the second half of this year.
Correct.
Can you please remind us what's banked into Forrestania cost guidance in terms of Flying Fox?
Yeah. Okay. Yeah, Flying Fox is to continue into next year. It's largely Flying Fox and the amount of tons we get from Flying Fox will largely be driven by our offtake negotiations. At the moment, Flying Fox are high cost tonnage. It's largely being mined, some of those stopes at high costs largely being mined because we are having to manage arsenic on site. If the offtake strategy comes into place, then we can make a decision on Flying Fox mining schedule, et cetera. It's a little bit early to give true guidance because it's really largely driven by that offtake negotiations.
Your unit costs are based on Flying Fox continuing into the second half of this year? They're the ones that were published a couple of months ago.
Yeah. The unit costs do. We'll have to have an assessment once we make another strategic decision on what we do with and how we optimize the Forrestania assets.
Sure.
Drive more margin.
Thank you very much.
Thank you. Your next question comes from Jon Bishop from Jarden. Please go ahead.
Hey, Jon.
Hey, guys. Condolences clearly to Peter's family and to the team. I've just got a couple of questions just in relation to Kwinana. You were talking about obviously early works and long leads ongoing at Train Two. The read through clearly is that it's a fait accompli. Can I ask though, what sort of changes, if any, the joint venture's been looking at in terms of the flow sheet in relation to what you've experienced at Train One?
In terms of Train Two flow sheet was rough, it will be the same. Major capital pieces are in place. It, and most of the challenges are associated with Train One, are doing with interconnectivity. It's got to do with engineering around those interconnectivities and material transfers versus the change in the flow sheet.
Okay. That materials handling piece is obviously being integrated into the layout plan. Is that right?
Correct.
Okay. Just very quickly around the Odysseus development. Can I just ask around the inventories for AM5 and AM6? Do we just take the existing resource inventories as last updated by Western Areas in terms of integrating those into the life of mine plan for now?
Yes.
Okay. Great. Thanks very much.
Cheers, mate.
Thank you. There are no further questions at this time. I'll now hand the conference back to Mr. Dusci for closing remarks.
Thank you, operator. Thank you everyone for joining the call today. I'd also like to thank you for your support and stay safe and have a good day.
Thank you. That does conclude our conference for today. Thank you for participating. You may now disconnect.