Thank you for standing by, and welcome to the IGO Limited FY 2023 half year and December quarter webcast. All participants are in a listen-only mode. There will be a presentation followed by a question- and- answer session. If you wish to ask a question via the phone, you will need to press the star key followed by the one on your telephone keypad. If you wish to ask a question via the webcast, you will need to type your question into the box and click Submit. I would now like to hand the conference over to Mr. Matt Dusci, Acting CEO. Please go ahead.
Thank you, Melanie, good morning, everyone. Thank you for joining the call this morning as we present our combined December quarter and first half FY 2023 results. Joining me on the call today is our Chief Financial Officer, Cath Bosnich. Slide two highlights our cautionary statement and disclaimer. Of note, all currency amounts in this presentation today are Australian dollars unless otherwise noted. Moving to slide three. While the focus of today's presentation will be on the December quarter result, I first want to acknowledge the excellent progress IGO's made during the first half of FY 2023 on delivering to our strategy in building a globally relevant, vertically integrated business, delivering products critical to the clean energy transition. The period had its challenges, including the loss of our Managing Director and CEO, Peter Bradford, in October, which came as a devastating shock to the IGO family.
Despite these challenges, the IGO team demonstrated resolve and determination, and we have delivered a set of record results for the half. Our focus during this period has been on delivering the significant growth of our lithium business, both at Greenbushes and Kwinana. The successful integration of Forrestania and Cosmos assets into the IGO portfolio, enhancing our nickel business through improved scale, diversification, and the opportunity to drive value through synergies which are unique to IGO. This has also been a key enabler to recommence studies on downstream nickel to produce cathode precursor directly from nickel concentrate. Most importantly, continue to foster our unique culture and supporting our people's health, well-being, and career development. It is our people and our culture that then underpins our success. Moving to slide four. As noted last quarter, our safety performance remains a key focus.
Pleasingly, we've seen improvement quarter-on-quarter performance with respect to our TRIFR rates. There's still a lot of work to do. We acknowledge that we need to improve. I also want to take this opportunity to thank the emergency response team at Nova, who did a fantastic job in responding to the fire at the power station in December. Moving to slide five, where we lay out some of our key highlights for the December quarterly results, including we have delivered record earnings and net profit after tax. We are pleased to declare a record dividend payment to IGO shareholders of AUD 0.14 per share. At Greenbushes, production growth, combined with continued strength in the lithium price, generated another record quarter for earnings and dividends. At the Kwinana Lithium Hydroxide Refinery, declaration of commercial production at Train 1 was a key milestone.
Within our nickel business, higher nickel prices helped offset the impact of Nova production loss due to the fire in December and weaker production and higher costs at Forrestania. Significant progress has been made at Cosmos, which remains on budget and schedule. We're also proud to have been again included in the Dow Jones Sustainability Index for both Australia and Asia Pacific region, recognizing our commitment to actively contribute to positive outcomes for all stakeholders and the environment. Finally, as discussed last quarter, Justin Osborne joined the board in October. Just last week, we're delighted to announce the appointment of Samantha Hogg as a non-executive director. These appointments form part of our board renewal program. Moving to slide six, where we detail the key financial results for the quarter and first half.
As with the prior quarters, IGO's strong financial results were driven by the lithium business, with IGO's share of net profit from our lithium joint venture, TLEA, rising 21% quarter-on-quarter to AUD 346 million and AUD 631 million for the first half. Group underlying EBITDA was 10% higher quarter-on-quarter to AUD 436 million, while net profit after tax increased 33% quarter-on-quarter to AUD 338 million, both representing quarterly records for IGO. Group underlying free cash flow was AUD 235 million for the December quarter. This outstanding performance has positioned IGO's balance sheet with AUD 515 million cash and a net debt position of AUD 175 million. I'd also like to acknowledge the strong half-on-half results shown on this slide. The IGO business has been transformed.
In particular, I would like to note the 136% increase in underlying free cash flow in this half year. Moving to slide seven, where we reconcile the 33% quarter-on-quarter increase in net profit after tax. As shown, the key drivers of the increase include improved lithium business profitability and lower quarter-on-quarter income tax expense, reflecting income tax treatment on IGO's share of net profit and dividends received from TLEA. This was offset by low earnings from Nova and an AUD 18 million unfavorable mark-to-market revaluation of listed investments. Moving to slide eight and a reconciliation of cash. Again, the lithium business has driven a significant increase in cash to AUD 515 million, and a record AUD 334 million dividend received from TLEA for the quarter. Nova free cash flow was significantly below the prior quarter at AUD 103 million.
This was in part due to the interruption to production caused by the fire, along with a large buildup in its receivables. This is more than doubling of the receivables quarter-on-quarter, which will positively impact cash flow in the current March quarter. Cosmos recorded AUD 72 million cash outflow relating to the ongoing project development activity. We also made AUD 102 million of tax payment during the quarter, which includes remittance of income tax related to the group's FY 2022 income tax return. IGO's drawn debt as at the December 31st, totaled AUD 690 million, resulting in a net debt position of AUD 135 million. Turning to slide nine.
With the excellent financial position over the first half and continued strength of the IGO business, I am pleased to advise that the board has declared a AUD 0.14 per share fully franked interim dividend. This will be paid on the March 31st. The dividend equates to AUD 106 million, which is at the upper end of the 15%-25% underlying free cash flow band stated in our dividend policy. Given the ongoing strength of IGO, the board has commenced a review on the group's capital management framework. We expect to be in a position to update the market on the outcomes of this review in conjunction with our FY 2023 full year results. Turning to slide 10, and on to a discussion of the lithium business, which we hold via our joint venture interest in Tianqi Lithium Energy Australia, referred to as TLEA.
Moving to slide 11. The contribution of TLEA to IGO's recent financial results has been significant. For the December quarter, IGO's share of net profit in TLEA was AUD 346 million, up 20%-21% compared to the prior quarter. The AUD 334 million of dividends received from TLEA brings total year-to-date dividends to AUD 414 million. This is an outstanding result, reflecting the quality of the Greenbushes asset, which has generated EBITDA margins of 87% for the half year. The joint venture announced in early January the proposed acquisition of Essential Metals via a scheme of arrangement and thereby expanding and diversifying its lithium portfolios in Western Australia. The transaction remains subject to an independent expert report and shareholders and court approval, with completion expected by May this year.
IGO will manage the exploration activities and initial project studies over the ESS portfolio on behalf of the joint venture. Moving to slide 12, and to a discussion of performance at Greenbushes. Production was 5% higher quarter-on-quarter at 379,000 tons, attributable to improved plant throughput and higher recoveries, which helped offset marginally lower mill grades. Sales, revenue, and EBITDA were AUD 2.3 billion and AUD 2 billion respectively. Cost of goods sold, excluding royalties, were 4% higher quarter-on-quarter at AUD 263 per ton, mainly due to higher mining and processing rates. Average realized pricing for both chemical and technical-grade products were $3,984 per ton, which was marginally higher than the prior quarter.
Moving to slide 13 and to a discussion on several key drivers which are expected to generate significant value at Greenbushes. The expansion of mining and processing operations is continuing at Greenbushes. Construction of the Chemical Grade Plant 3 is progressing to plan as it is on track for practical completion by late in FY 2025. The works to expand the mine service areas, tailing storage, and installation of the 132 KV power line from Bridgetown to Greenbushes has also progressed well. In addition, the team is working to continually optimize the operation. From the July 1st, 2023, Macmahon will be assuming the mining contract at Greenbushes, which will bring a new level of capacity and efficiency to the load and haul operations as the team ramps up production.
Elsewhere, process modifications at CGP1 are being implemented to improve plant throughput and recoveries, while studies have commenced to add further value through ore sorting in-pit and into the CGP feed stream. In addition, construction of a new accommodation village's site has been approved, which will help attract and retain talent at Greenbushes and enable future growth. Turning to pricing, as flagged in our September quarterly result, the Greenbushes spodumene pricing mechanism has been revised effectively January 1st, 2023. From this date onwards, spodumene concentrate will be transferred from Greenbushes to its stakeholders, being TLEA and Albemarle, using price which references four key lithium benchmarks, Fastmarkets, Asian Metal, Benchmark Mineral Intelligence, and [Platts]. The pricing mechanism will reset quarterly using the average price from the prior quarter to set the price less a 5% bulk discount.
Turning to slide 14. The graph on the left-hand side of this chart shows the exceptional growth in production achieved at Greenbushes over the last six quarters, with costs remaining relatively stable, especially given the impacts of inflation on cost. Looking ahead, as a result of the revision of the spodumene pricing mechanisms, the chemical grade spodumene price applicable to the March quarter sale is estimated to be $5,957 per ton FOB. For the March quarter, spodumene production is expected to be in line with the September quarter. IGO expects full-year production to finish at or marginally above our stated guidance range of 1.35 million-1.45 million tons of concentrate.
From a cost perspective, we're expecting the influence of escalation and inflation seen across the industry to have some impact on unit cost during the second half of FY 2023. As a result, IGO expects unit cost for the full year to be at or marginally above the top end of the AUD 225-AUD 270 per ton guidance range. Finally, accounting for the newly approved capital projects, including the process modifications at CGP1 and the new accommodation village, we expect to be implemented over the 2023 calendar year. FY 2023 capital guidance has been amended to be between AUD 550 million and AUD 600 million. Turning to slide 15 and onto Kwinana.
Having rectified several bottlenecks and increasing plant availability and run times, operations at Kwinana have improved, with production increasing to 585 tons of lithium hydroxide in the December quarter. In addition, TLEA declared commercial production from Train 1, which reflects their confidence in the capacity of Train 1 to operate continuously and produce battery-grade product. EBITDA of AUD 12 million for the quarter was lower than the prior quarter, primarily due to a higher capitalization of costs in the September quarter compared to the current quarter. Capital expenditure was AUD 16 million for the quarter, split between Train 1 and Train 2 early works. Now turning to slide 16 and an outlook for the Kwinana refinery.
While the Kwinana team have made strong progress towards rectification of train one over the last quarter, a full technical review conducted by TLEA with the assistance of the technical team from Tianqi in China, has redefined the packages of work required to enable train one to deliver towards nameplate capacity. As a result of this review, the ramp-up schedule has been adjusted by approximately six months, with production capacity expected to reach between 60% and 70% by the end of the calendar year 2023, with final optimization to occur thereafter. To complete the necessary works, sustaining and improvement capital for Train 1 is expected to trend higher for the remainder of the financial year, with full-year costs expected to be within the range of AUD 35 million-AUD 45 million.
At Train 2, early works continued during the December quarter and the project's execution strategy is being reviewed. It is unlikely they will make an early decision on the financial investment decision on Train 2 until the full completion of the front-end engineering and design feed stage. Given this change in approach, IGO now expects to make this financial investment decision during the second half of this calendar year. Moving to slide 17, where we'll shift focus to the performance of our nickel business unit. Moving to slide 18 and starting with Nova. As announced during the quarter, a fire at the power station at Nova in December resulted in the suspension of operations for 18 days. While the response and recovery from the fire has been tremendous, effort by all, there's been an impact on our production and cash cost results for the quarter.
You can see this impact to metal production on this slide with nickel, copper and cobalt all down between 30% and 40% compared with the prior quarter. Consistent with significant lower production volumes, cash costs were higher at AUD 5.30 per payable pound. Sales revenue and EBITDA were also lower 19% and 25% respectively, with higher metal prices marginally helping offset the production loss. Nova was safely brought on back online in late December, after 18 days shutdown, and production rates have returned to normal levels. I'd like to thank the team at Nova, as well as our power partner, Zenith, for their efforts in bringing Nova back online safely. Moving to slide 19. At Forrestania, the December quarter was softer, with lower quarter-on-quarter production and higher costs, again offset marginally by higher realized nickel price where compared with the prior quarter.
Lower production was driven by 3% lower mill tons and 5% lower recoveries, a trend which we can expect to continue to see over the remainder of FY 2023. Cash costs of AUD 10.97 per payable pound were 26% higher quarter-on-quarter, with the rise attributable to cost escalation recognized during the quarter, including rise and fall associated with mining contracts as well as lower production volumes. As with Nova, 33% higher nickel price helped offset the weaker operational result, and EBITDA of AUD 45 million benefited from the absence of the one-off inventory fair value adjustment, which impacted the prior quarter result. Free cash flow for the quarter from Forrestania was AUD 22 million. Moving to slide 20. At Cosmos, the project de-delivery team has remained very busy with strong progress across many areas of the development.
Of note, final design and long lead ordering for the processing plant was complete. Place plant is near completion with the commissioning expected this quarter. Work on a shaft is progressing well, with the second leg expected to commence this quarter while the head freight assembly is advancing. Finally, sealing of the airstrip is expected this quarter ahead of commissioning. Capital for the quarter was AUD 77 million. The project remains on schedule and on budget. Moving to slide 21. On the basis of the first half operating results and reviewing the outlook for the second half, IGO is updating guidance for the Nova and Forrestania operations.
At Nova, and reflecting production loss as a result of the fire, FY 2023 production guidance is being amended downwards to between 23,000 and 25,000 tons of nickel, 10,000-11,000 tons of copper, and 800-900 tons of cobalt. In line with the reduced production guidance, cash cost guidance is also being adjusted to between $3.30 and $3.70 per payable pound. This amended guidance on C1 cash costs also takes into account lower by-product pricing, particularly copper, as well as lower copper production. At Forrestania, while the March quarter's costs are expected to trend lower, they are unfortunately expected to remain higher than previously guided as a result of lower production and cost escalation. FY 2023 cost guidance is being amended to between $9.25 and $10.25 per payable pound.
Production guidance for FY 2023 is unchanged. We are confident we can improve performance at Forrestania with the completion of concentrate blending opportunities as part of our broader offtake negotiations and also the rollout of groupwide contracts across all sites. Moving to slide 22. In the interest of time, I'll only touch briefly on our exploration activities for the quarter. Moving to slide 23. A commitment to unlocking discoveries through exploration has been at the core of IGO for many years. For the world to continue its journey towards decarbonization, new mineral resources will need to be discovered and developed. This view underpins our explorations team's focus on the discovery of nickel, copper, lithium, and rare earth deposits and is why we have built the portfolio of projects you can see on the map to the right of the slide.
Last quarter, the team's primary focus was on Nova, Fraser Range, Forrestania, Kimberleys, and the Paterson projects, many of which are held by exploration joint ventures and partners. By leveraging the best exploration technology, applying leading geophysics and geochemical capacity, we believe we have the right ingredients to find the critical new resources we all need for the future. A comprehensive update of our recent activities will be provided in our upcoming annual mineral and oil reserves statement. Moving to slide 24. We're also focused on honoring our commitment to the environment and sustainability. To help deliver on our aspiration to be carbon neutral by 2035, we're in the process of delivering a range of projects that seek to remove or minimize emissions from our operations.
Pictured here is the VSUN Energy Ultra Standalone Power System, which will shortly be making its way to the Silver Knight exploration camp. Utilizing combined solar and wind generating with battery storage capacity, the system will be the major source of site energy requirements at camp. Elsewhere, the expanded solar farm is expected to be operational during the current quarter, slightly delayed due to the fire in December. We are actively seeking alternative power solutions at Nova which may reduce our emissions further. These and many other projects are just some of the ways in which we are working towards achieving our sustainability targets. Moving to slide 25. In summary, before we move to Q&A. We've delivered another set of outstanding financial results with our lithium business driving record EBITDA and net profit. We also declared a record interim dividend of AUD 0.14 per share.
We are laser focused on the many growth projects within the lithium business at both Greenbushes and Kwinana, which promise to deliver excellent returns over the coming years. Whilst the fire at Nova was a significant disruption last quarter, we have recovered quickly and are determined to continue to optimize and maximize the broader nickel business through new offtake blending opportunities in the near- term. As discussed, we have updated guidance at Nova, Forrestania, and Greenbushes to reflect our half-year review of those assets, we're actively addressing opportunities to improve performance at Forrestania. As always, we remain intent on improving safety and well-being outcomes for our people with whom today's results would not be possible. Thank you for joining us on the call this morning. I will now hand back to the operator for questions.
Thank you. If you wish to ask a question via the phone, you will need to press the star key followed by 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 and click Submit. Your first phone question comes from Jon Bishop with Jarden. Please go ahead.
Hey, Jon.
Morning, guys. Can you hear me okay?
Yep, loud and clear.
Perfect. You've just given some CapEx guidance refresh for Greenbushes there. You framed it around the new village and CGP1 plant optimization. You obviously refreshed CGP3 and 4 capital estimates in August for the site visit. I mean, the industry is obviously experiencing a fair amount of creep, and you've seen that in your costs and everything else. Is there any scope to changes for those capital estimates on those bigger ticket items?
Yeah. When you look at that reframing of capital for Greenbushes, it doesn't capture CGP4 as that hasn't yet been approved. What it does capture is. Essentially, you break it into buckets. You'd probably give 60% to new projects. You'd give 5% to bring forward some of CGP3 capital just through changes in schedule. The rest would be associated with existing capital projects that are capturing additional scopes within those projects and some minor escalation within those.
Okay. No, that's helpful. Broadly speaking, the capital increase, or the guidance increase you've given today will, in essence, capture some of industry inflation for at least CGP3. Is that a very simplistic way to look at it?
Yeah, from all the capital projects. One of the things too is that, for both Talison and TLEA, they work off a calendar year budget as well. It's also reflecting the resolution that we get, and also associated with Talison and Talison board approvals on new capital projects, which ultimately deliver strong returns on all of those capital projects.
Perfect. Just on CGP3, as I understand it, the construction's on an old tailing site. I presume you've done all the geotechnical work there. Have you seen any issues around subsidence or any ground stability issues whilst you've undertaken early works there?
They did preliminary geotech work, and then they've as part of the first phase, they were doing piling testing. They're doing the piling testing and the design, and they're in the process of doing piling work at the moment. There's been no change to I'm aware of in terms of ground conditions or geotechnical concerns.
Perfect. just around the delayed timing of FID on Train 2, just to be clear, that's second half of next calendar year?
Correct. Second half of this calendar year.
I thought it said in the presentation 2024, but I must have misread that.
Yeah. There's actually a bit of a typo there. If you go back to the quarterly second half of this calendar, we pushed it out. We're aiming for this first half or this financial year. It'll come into our next financial year. The change there is a little bit about execution philosophy. We previously were prepared to make a capital decision without actually finalizing FEED. Given rectification on Train 1, learnings out of Train 1, it makes more sense to actually just push out the financial investment decision by an order of six months at maximum, to make sure that all of the engineering designs, all of that is built into the final cost estimate of Train 2 before we make the final investment decision. We're aligned. We've been working with TLC. It's a prudent approach.
Okay. I think I asked this last time I got the opportunity on a call. Has there been any sort of major change to process flow sheet design at all? Is there been any consideration based on your learnings from Train 1? Is it just literally getting the cost estimates and the dotting the I's and crossing the T's before committing the body?
Yeah. You can break that question into two. The process design, process flow hasn't changed. What will change is some of the engineering components and engineering elements associated with different areas of that processing plant. That's some of that learning, rather than doing rectifications, et cetera, like we're having to do on Train 1. We might as well capture all of that in the FEED, in a total re-engineered.
Perfect. All right.
Thanks, Jon.
Thanks for taking the questions.
Thank you. Your next question comes from Kaan Peker with Royal Bank of Canada. Please go ahead.
Hey, Kaan.
Hi, Matt and team. Congratulations on the quarterly result. Great to see Kwinana's first commercial sales of hydroxide. Just wondering, with the hydroxide pricing achieved for the qualification process, is there a discount to the index? What index is that off? Is there more than one customer taking part of that qualification process?
Yeah, there's an element of commerciality that I'll keep to that one. Yeah, so I can't really get into that sort of detail, especially those sort of low volumes of where we're at with negotiations.
Sure. Not a problem. Maybe the second one is on the acquisition of Essential Metals. Just trying to understand how that actually complements the existing TLEA assets. Does IGO have a right of first refusal for any acquisitions brought to the table?
Correct. I'll talk first about the joint venture structure. I said it's a global joint venture with TLC, Tianqi China. Everything ex- China. Both parties have a right to go and identify opportunities, but they'll have to offer it into the joint venture. Each party will then have to make a decision whether they want it into the joint venture or though. If they don't, they have a right to do it by themselves. For Essential Metals, it goes into TLEA. Obviously IGO's wanting that asset in TLEA. You know, we view that as a stepping stone again for Western Australia to continue to build our lithium business in Western Australia. We're working well with TLC. IGO will be the operator of that project. We'll bring skill sets to that project and through the studies and exploration.
Sure. Thank you. I'll just squeeze one last one in, if that's okay. The last one. Just on Greenbushes. Great to see recovery rates at CGP2 and TRP increase, particularly given lower feed grade quarter-on-quarter. What's changed the quarter-on-quarter step up, and is the target to get to around 75% for CGP2?
Yeah. Look, the change is about consistency and, you know, we were in our cold commissioning phase of CGP2. We'll take some of that back into CGP3. I can't remember the final recoveries. I'm not sure if we have actually provided that, but target.
It was provided on the quarterly .
Yeah, I can't remember that one, but we can come back to that one if you like, Kaan. Get Richard to come back to you.
No worries. Can you share anything in terms of recovery rates for CGP1?
We're trying to get away from actually sharing individual recoveries on actually ops. You know, we're sharing CGP2 because it was, and TRP as part of the ramp up. Once we've reached ramp up, the idea is just to not to actually break it down to that sort of granularity.
Sure. Understood. Well, thank you very much. Appreciate the call.
No problems at all.
Thank you. Your next question comes from Lyndon Fagan with J.P. Morgan. Please go ahead.
Hi, Lyndon.
Good day. Thanks very much. Look, I just wanted to ask what the latest budgets are for CGP3 and 4?
CGP3 is still what we've provided as a capital range. I think that was at AUD 500-550. We haven't provided any update on CGP4.
In light of all the recent capital escalations, is it fair to assume that's a stale number, or are you happy to say that that's kind of on budget?
At the moment we're tracking on schedule and on budget, and as part of the capital improvement, we accounted for escalation.
The revision to CapEx today doesn't assume any increase in the CGP budget. Is that what you're saying?
Correct.
Okay. What I'm really trying to get at is how to forecast CapEx for the next few years. Is there any color you can provide or is it sort of likely to stay around this AUD 500 m illion?
Yeah. A lot of the surface infrastructure would start to wind down. Then you'd just be building in CGP4. You would also have to account for additional deferred waste stripping that will come. You know, the idea of providing. We'll try and provide a little bit more clarity on some of that as part of our Lithium Strategy Day, again.
Right. I've got a similar line of questioning for Cosmos. You mentioned that's on budget. Can you remind us what that is and I guess how much is left to spend the following year?
Yeah. If I remind, we have AUD 175 million. It would be around about, the following year in the order of AUD 60 million-AUD 70 million. We and because of where we're at start of that project, we've got good line of sight. Our capital number includes contingency as well, so we're monitoring that as well. At the moment, we feel comfortable of that. You know, we are confident in terms of remaining on schedule and on budget.
Thanks. It would be great to see a list of all the projects and their associated budgets in the future. A final one, just on the Kwinana disclosure. There's no sales revenue disclosed. There is an EBITDA number which has gone down with higher production. Is there some toll trading? It looks like there's a note 28 that isn't at least in the pack I've got. Do you mind talking to that?
Sorry, I missed the beginning of that question. If you could repeat that, sorry.
Just looking at page 28. Page 28 of the quarterly and the sort of final page with the Kwinana financials. There's EBITDA of AUD 11.6 million, which is down from AUD 21 million last quarter, but the production's materially higher. I vaguely remember some toll trading last quarter. Are we going to be seeing revenue come through, or how do we think about the toll trading going forward as well?
The difference in EBITDA was related to the getting ready for commercial production. They did a whole heap of capitalization of costs in the September quarter, which impacted that quarter in a positive way, and that's why you're seeing the differential there. In respect of sales revenue, we are getting sales revenue at, from both what I suppose is a novation, which people are referring to a toll trading arrangement and also from our direct sales. At this point in time, we've got some commercial sensitivities around those things and therefore we're not disclosing that.
Great. Thanks a lot. I'll turn it over.
Thanks, Lyndon.
Thank you. Your next question comes from Rahul Anand with Morgan Stanley. Please go ahead.
Hey, Rahul.
Hi, Matt and team.
How are you? Good. Thank you.
Good. Thank you. Look, I have a couple. I might start with Kwinana, Matt, if that's okay. You know, thanks for the clarity around sort of the ramp up profile going forward. I just wanted to touch upon that 60%-70% nameplate number that's been put out. I mean, how are you thinking about the asset in terms of the nameplate itself? I mean, do you think that's still achievable at Train 1 o r should we think about that as more an asset or a learning experience where you'd probably run below nameplate for life of asset or for a long period of time, and then Train 2 is where we expect to get back on track? Also if you can provide a bit of color in terms of how much spodumene you're currently using to convert, you know, to per ton of lithium hydroxide, and where you plan or where you see that tracking. That's the first one. I'll come back with a second. Thanks.
Yeah. Let's break that first one down. Nameplate at train one is or from design is 24,000 tons. You look at what drives nameplate, there's a couple of things. One is recovery, so efficiency of operations. The other one is throughput, and then the other one is reliability. To get to nameplate, you need all three to reach the design criteria. What we've worked through is a detailed ramp-up profile. We've really looked through where those constraints are on each of those three elements to get to that production profile.
We've got a program of work, including, scheduled shuts about how we rectify and what those rectification programs would be as we work through to get to the 60%-70% towards nameplate by the end of this calendar year. Going forward, that ramp-up profile will continue, and we will continue to drive that closer and closer to nameplate. There is an expectation that we'll still get close to or nameplate.
Okay. Just as a follow-up quickly, if I may. You highlighted those three, you know, items that are required for the nameplate. Which one of these three would you identify as the biggest risk at this point in time or the biggest opportunity, if you had to put it that way?
Again, they're kind of engineering quite complex. They, I mean, even with the capital you're seeing on the capital increase, they're only minor changes. Things like heat exchangers, screw feeders, feed to the dryer, baghouses where we're capturing the waste products, all of those engineering things that we have to fix. Look, I couldn't single out one or two. To continue to get to the nameplate, we've got to get all of those right.
Okay. All right. I guess the recoveries covers the amount of spodumene, so you're obviously consuming more than where you should be and you plan to improve on that.
Yeah. At this point in time, the recoveries wouldn't equal what the design was meant to be. As we would expect to get closer and closer of that as we do these rectifications.
Okay, perfect. Look, just then on to perhaps train two and, you know, given the delay in FID. Is it fair to assume that that would then impact your schedules for train three and four, which then potentially brings about perhaps a bit of a delay in CGP3 and 4 because they were supposed to be timed with Train 3 and 4?
Unlikely and unlinked. If anything, there may be an option to actually bring Train 3 and 4 together so that what we're doing is capturing all the engineering designs into Train 2, and then it could be a cookie cutter of Train 2 into 3 and 4.
Understood. Okay. Look, final one from me around Forestania then. Look, the costs are obviously much higher, but, you know, you had a bit of seismicity this period. I just wanted to touch upon, you know, your work around the blending strategy, how that's progressing, and how are you feeling about the reliability of these assets given their age, you know, and the issues that you faced this quarter?
Yeah. Look, we understood that on those assets and we are, you know, they don't have the same sort of flexibility as a new asset, as you expect. As we deliver some of these benefits, we'll expect to see that cost come down.
Sure. Thank you very much. Appreciate that. I'll pass on.
Yeah. No problems. Thanks, Rahul.
Thank you. Your next question comes from Matt Green with Credit Suisse. Please go ahead.
Hey, Matt.
Hey, good morning, Matt and Cath. Hope you're well. Matt, if I could just start on Greenbushes, CGP1, the optimization work you're doing there. I recall the nameplate compliance was about 700,000 tons of concentrate, and I think you've been operating above that. How should we be thinking about the incremental production from the mag separation circuit?
Yeah. Again, we haven't provided that because we're kind of capturing and wanting to try and capture it all into one. What it does, the mag separation means that you can actually improve both recovery and miner throughput. It's recovery is the key value driver in that when you're looking at it as a standalone business decision on that capital decision.
Okay, got it. This probably, you'll probably get a similar response on CGP2. The ore sorting, you know, this is a relatively low capital item, and I understand a few of the spodumene operations are looking at it. Any indication from trial work you've completed as to the uplift you could see on CGP2 and the timing? I guess, are you considering ore sorting for CGP3?
Yeah, it's too early. They're finalizing studies at the moment. Once we're in a position to actually. The Talison board makes a decision on those capital items and approves, there might be an opportunity to talk to those in a little bit more detail.
Okay, that's great. Just going on to Kwinana, you've entered commercial production, but you mentioned the product qualification process is continuing. I'm just keen to know why this is and when do you expect to have your products fully qualified with your offtake partners?
That qualification is happening at the moment. You mean it will happen over the next three to six months. Do you want to talk about the decision to do commercial production at Kwinana?
Commercial production was related to the fact that there's confidence that we'll be able to do continuous production and be able to achieve consistent chemical grade through that plant. That's driven by accounting treatment, which is a little bit different to actually getting to sort of like nameplate and the like.
Thanks, Matt.
Okay. Thanks, guys.
Thank you. In the interest of time, questioners will be allowed to ask one question. Your next question comes from Levi Spry with UBS. Please go ahead.
One question?
No, Levi. It wasn't just for you.
Thanks for your time. I need to ask one more on Kwinana. When do you expect under the new schedule to get to nameplate?
We haven't actually given that. We would expect to work through that in the calendar year 2024.
Okay. Thanks, mate. I'm going to be cheeky. The te chnical product from Greenbushes, what was the price and what's the expected price and what are the plans going forward in terms of continuing to produce it?
That's an easy one because we can't disclose anything on that. You mean, Greenbushes has the capacity to get technical grade. They've got long-term contracts with the other shareholders. You'd expect those contracts to be renegotiated with time.
Okay. Thanks, mate. Thanks.
Thank you. Your next question comes from Daniel Morgan with Barrenjoey. Please go ahead.
Thank you. You indicated that spodumene production at Greenbushes is going to be the upper end or slightly above the top of the range. Obviously, year to date, you've been running extremely well at a 1.48 million ton rate. Is there anything in the rest of the year that might cause a pullback like grade or maybe the contractor changeover as a risk? Thank you.
Shouldn't do. The contract changeover will be well managed and it'll be the risk profile there will be the ramp up in 2024, calendar year 2024. You know, we feel comfortable we'll deliver to that top end.
Okay. Just being cheeky like Levi, Kwinana, you did 10%, you know, throughput on average during the quarter, but I imagine there were some run times where you had a good go at it. You know, is there any way you can outline to us like a time period, like a number of days or something, where it was running at, you know, 40%, 50%, 60%, you know, some number? Like, can you give us some feel for how the plant was running continuously when you had a good run at it?
It doesn't really work that way because we're restricting throughput as we work through some of the bottlenecks. We were at the back end of December, we were about 15%. It's not like a real true sprint where you will just turn it on and run at 70% because you have to get all the chemistry right and balance it all or you end up just end up actually taking yourself offline. It's just a gradual ramp up.
Okay. Thank you for your perspective. Cheers.
Thanks.
Thank you. Your next question comes from Kate McCutcheon with Citi. Please go ahead.
Hi, good morning, Matt and team.
Hey, Kate.
Timing of some of your, hey, your nickel studies, the timing of those. Are we still expecting updated life of mine OpEx from Cosmos or the WSA assets, I guess, in the back end of this calendar year, was it?
Yeah. we'll provide some further guidance when we come out with the FY 20 23, we'll also will look at, FY 2024, sorry, we'll also look at Cosmos as we get closer to that production profile coming in.
Two separate announcements?
Yeah. We'll provide guidance when we issue our guidance for FY 2024 plus, Cosmos may come back through when we're getting up to commissioning. Some of the other studies, we also have that Mount Goode study that's designed to finish mid-calendar 2024, and also the feasibility study on the downstream mid-calendar year 2024.
Sorry, what was that first part?
Mount Goode. Yeah, Mount Goode 2024 and then in mid-2024 and downstream mid-2024 as well.
Okay. Thank you.
Thank you. Your next question comes from Matthew Frydman with MST Financial. Please go ahead.
Sure. Thanks. Morning, Matt and team. I've got one question. It's in a few different parts, but I promise it is just one question. You called out cost inflation impacting your operating costs during the quarter, I guess particularly related to your mining contractors at Forestania, but also at Greenbushes. You suggested that those increased costs are likely to be sustained over the rest of FY 2023. I'm interested in a couple of things here. Firstly, in the transition to Macmahon at Greenbushes at the start of FY 2024, how do you expect that's going to impact your unit cost? Is that going to be a better outcome for Greenbushes in terms of mining unit costs or, you know, or albeit considering that, you know, clearly you're going to be moving much higher volumes going forward.
Secondly, the nickel business. You know, part of the synergy value on offer at the time of the merger with Western Areas was obviously consolidating, you know, some of your supply contracts. Obviously, you've got Barminco at all three sites. You know, are those discussions around consolidation of contracts still ongoing? Is there any opportunity there to extract a bit of a better unit cost outcome across the nickel business?
Let's take Greenbushes first. Greenbushes we've changed to change of mining contractor, bigger gear, more efficiencies. On a unit cost basis, we'll see costs go down. As per any operation or any sites, you know, we've seen labor costs, we've seen power costs go up. That some of those will start to balance out. Still driving for efficiency, still opportunities to drive efficiencies, productivities, but that headwind is still there with inflationary escalation of costs. On the nickel business unit, we're partway through that sale, what we would call delivery on synergies and optimization. We have yet to deliver on the blending strategy. We have yet to implement all the group wide mining contracts and some of the contractual synergies that we can extract and drive value from all three operations.
Thanks, Matt. That's pretty clear. I'll sneak in my cheeky one, which is, can you just update us on the offtake and blending discussion? I thought we would expect to see that with today's result, but, unclear what's driving the delay there.
Yeah. It's still in commercial discussion, that's why we're not in a position to actually release it.
Okay. Thanks very much, Matt.
No sweat.
Thank you. Your next question comes from Tim Hoff with Canaccord. Please go ahead.
Hey, thanks guys. Your royalty over the past few quarters has been calculated on the WA Department of Mines assessed price rather than your reported price because there was such a large difference between the lag. Does the new price mechanism change how that functions at all? Was there any engagement with the ATO prior to the change on how they might view it given that. It appears that you're lagged pricing on the way up, but now you're connected on the way down.
I'll respond to the first one or the second one. I mean, as part of this process, this is all managed through Windfield Board. The Windfield Board takes a position for both shareholders on how they protect themselves from tax and et c., and just making sure we're doing the right thing from a tax perspective. We don't think there's any risk there on changing pricing mechanism. If anything, it actually provides greater transparency. In terms of the royalty, I don't know. I can't answer that one.
It's unchanged at this present moment. Obviously we would like to influence that through Greenbushes.
The consultants?
It's unchanged ultimately.
Yeah. Through Talison. Yep.
Excellent. I might get in my cheeky second one, which is, at Nova, can you give us some guidance on the timing of capital for Silver Knight and when that first production might come from the asset?
Yeah. We're still working through that one at Sillimanite. The challenge with the Sillimanite is ensuring that we actually get the right recoveries. At the moment, it looks like Sillimanite, the urgency of Sillimanite is dropping because we can't blend, so if it's going to come into the production profile, it will come in at the end of Nova.
Okay. It's, yeah, finish one mine, start the other.
Remembering there's about six months worth of production, so it's not.
Yeah. I mean, in terms of that recovery, does that require any capital or is that just tweaking the plant?
What it does is some tweak of the plan. What it does is if you mix, you'll end up, reducing recovery out of Nova and on an NPV basis, it just doesn't make sense.
Yep. Okay, excellent. Thank you very much. I'll pass it over.
Thank you. Your next question comes from Hugo Nicolaci with Goldman Sachs. Please go ahead.
Morning, management team. Thanks for taking the question. Just sort of level the point on Kwinana, if I could, but I was just wondering if you could go into some more detail around the modification or rectification projects you've identified. You know, is it still the dryer as identified at the site visit? Just how much of the planned CapEx increase relates to the various components? Thanks.
Yeah. We won' t get into that sort of resolution. Fair, but fair to say that dryer in terms of both the dryer feed and the dryer will be one of the elements that we need to fix to ensure that we work towards nameplate capacity.
Thanks for that. Just one more, if I could, in keeping with everyone else. Just curious to the extent that you can talk on behalf of JV around the ESS acquisition, just in terms of target. You know, how important was that business having an existing resource? Did the JV look at other assets? In terms of broader strategy, you know, how important is diversifying that upstream exposure? Any comments around, you know, the timing of the acquisition. Thanks.
Yep. You know, I'll talk from an IGO perspective rather than a TLC perspective. You know, we're keen to continue to grow that joint venture. That joint venture is our lithium business. It's structured as a global joint venture. You can see how well it's working where TLC is helping with downstream processing, and we're working on the mining and the processing side of the upside. It actually bringing both of those groups together for us is a winning proposition, and we're continue to interest in growing that business.
Great. Thanks.
Thank you. Your next question comes from Mitch Ryan with Jefferies. Please go ahead.
Thanks, management team. I'll just keep this to one. You've seen other industrial facilities in Kwinana have their production curtailed due to lack of access to gas over the last couple of months. Do you foresee that as being a problem over the coming 12 months in your ramp up, or is it a risk and or how would you go about mitigating that risk?
Yeah, we haven't seen that have an impact on us at the moment. We're also probably not one of the larger of the gas users in Kwinana. It's something that we'd have to look through and make sure that we actually do mitigate. That mitigation compared to the East Coast, I mean, what we saw from the gas was some disruptions at multiple sites, gas producing sites across Australia.
Okay. Thank you.
Thank you. We are showing no further phone or webcast questions. I'll now hand the conference back to Mr. Dusci for closing remarks.
Thank you. Thank you, Operator. I think it's been a good conference call, so we'll just finish it now. Thank you very much, everyone.
That does conclude our conference for today. Thank you for participating. You may now disconnect.