Thank you for standing by, and welcome to the IGO Limited 2023 June 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 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 Matt Dusci, Acting Chief Executive Officer. Please go ahead.
Thank you, operator. Good morning, everyone. Thank you for joining this call this morning as we present our June Quarterly Operating and F inancial Results. Joining me on the call today is our Chief Financial Officer, Kath Bozanic. Slide 2 highlights our cautionary statement and disclaimer. Of note, all currency amounts are in Australian dollars unless otherwise noted. I also note that our quarter and full-year results are unaudited. We'll be reporting our audited full-year financial results on the 31st of August. Turning to Slide 3. I want to start this morning's call with a comment on safety. Over the course of the last 12 months, we have experienced too many incidents of harm to our people.
The board and management teams have responded to ensure that our people are engaged with our safety programs and driven a review of our risk assessment, safety systems, and training to help minimize the likelihood and severity of safety incidents. We have boosted resources both on-site and from corporate support and continue to closely examine ways in which we can drive better outcomes. It's pleasing that we have recorded reductions in our total reportable injury frequency rate over the course of FY 2023, with the majority of these being low-severity incidents. We still have a way to go. Turning to Slide 4, where we outlined some of the key highlights for the June quarter. Financially, the strength of our lithium business has continued to drive excellent financial results. Another record for both underlying earnings and free cash flow was delivered in the June quarter.
This has enabled us to build exceptional balance sheet strength. Operationally, Greenbushes was a highlight, delivering record spodumene production in the quarter, resulting in exceeding full-year production guidance. This performance, combined with strong, strong spodumene pricing, delivered another record dividend from TLEA. At Kwinana, the ramp-up of Train 1 experienced ongoing technical challenges, which resulted in lower than expected quarterly production. In our nickel business, Nova and Forrestania both finished FY 2023 strongly, while development of the Cosmos Project also made material progress. I note the impairment that we announced two weeks ago. We acknowledge this disappointment, and I'll discuss this later on in this presentation. Finally, as always, sustainability has been a focus over the quarter. The key highlight here was the commissioning of the expanded solar farm and battery energy storage system at Nova.
Turning to Slide 5, we'll provide an overview of our June quarter financial results, as well as unaudited full-year financial results for FY 2023. Key highlights to note here include: a 16% increase in IGO's share of TLEA net profit, up to AUD 522 million for the quarter, which drove a corresponding 19% increase in underlying EBITDA to AUD 636 million. This brings IGO's underlying EBITDA for FY 2023 to just over AUD 2 billion. This is nearly a threefold increase compared to our FY 2022 result. Underlying free cash flow of AUD 381 million for the June quarter was again enhanced by strong dividends from TLEA.
As a result, the balance sheet is in great shape, with cash at bank of AUD 775 million and a net cash position of AUD 415 million, following the repayment of a AUD 90 million of our debt facility. I note we have not reported a group NPAT result in this quarter, as this result will be impacted by the impairment charge, which we announced two weeks ago. This impairment value is yet to be finalized, and as such, we'll provide unaudited NPAT with the full year results at the end of August. Turning to Slide 6, where we reconcile cash. As with the last quarter, the big driver in cash uptick was the record quarterly dividend received from TLEA.
Other points to note include strong cash generation from Nova of AUD 118 million, a cash outflow of AUD 5 million from Forrestania, which was driven by restricted sales for the quarter. AUD 53 million received from the sale of investments related to our divestment of our holdings in Nickel, and AUD 90 million scheduled debt repayment relating to the group's debt facility. Turning to Slide 7. Alongside our quarterly results disclosure this morning, we have also released details of our updated capital management policy. As our business has transformed over recent years, we understand that shareholders need clarity and transparency with respect to how IGO will seek to balance. The reliable and consistent return of capital to shareholders, while maintaining our strong balance sheet and ability to respond to potential growth opportunities.
IGO's shareholder return policy has been updated with a target range of between 20% and 40% of underlying free cash flow when liquidity is less than $1 billion. When liquidity exceeds $1 billion, there is board discretion to pay in excess of 40% threshold. We'll announce our final dividend for FY 2023 with our full year results on the 31st of August. Turning to Slide 8, where we'll jump to a discussion of our lithium business. This is held by our joint venture interest in Tianqi Lithium Energy Australia, referred to as TLEA. Turning to Slide 9. As noted in the highlights, the strong financial performance of our lithium joint venture has continued, driven by strong production performance at Greenbushes and favorable pricing.
IGO's share of TLEA's net profit after tax was up 16% quarter-on-quarter to $522 million, bringing a full year result to just over $1.6 billion. The quarterly dividend received from TLEA for the June quarter was $423 million, up 32% versus the prior quarter. For FY 2023, IGO has received just shy of $1.2 billion in dividends from TLEA. This is an exceptional result. Turning to Slide 10, and onto Greenbushes. The June quarter performance saw 11% stronger production compared to the March quarter as a result of higher feed grades into CGP1 and CGP2. This was a record quarter for Greenbushes. Full year spodumene concentrate production of 1.49 million tons was above our full year guidance.
Sales, which was impacted by shipment delays in the March quarter, recovered strongly in the June quarter, resulting in a strong uplift of sales revenue, up 23% to AUD 3.5 billion, and EBITDA up 24% to AUD 3.2 billion on a 100% basis. Unit costs, excluding royalties, of AUD 304 per ton for the June quarter, were marginally higher, reflecting ongoing inflationary pressures in the sector, while the full year cost result of AUD 279 per ton finished just above the top end of our guidance. We've also introduced a new cost reporting metric in today's quarterly report. To improve clarity on co-production cost, we'll report cash costs of production going forward, which will include mining, processing, crushing, site admin, and deferred stripping, and utilize production rather than sales as a unit of measure.
The realized spodumene price for the June quarter, including both chemical and technical-grade products, was $5,431 per ton for the quarter. I note that the chemical grade spodumene pricing for the current quarter has reset at $3,739 per ton, which reflects the lower prevailing benchmark pricing we witnessed in the March and during the quarter. Turning to Slide 11. The graph on the left illustrates the production growth at Greenbushes over the recent two years. Production growth to the current, to the current 1.5 million tons per annum run rate, has been enabled by the commissioning of CGP2 and the Tailings Retreatment Project. The next step up in the production profile is expected when we commission CGP3 in 2025.
As noted last quarter, a review of the capital cost estimate for CGP3 has been underway in order to address the impacts of cost escalation and challenges related to engineering and design, particularly of pilings. While the final cost estimate is subject to further update and require approval from the Talison Board, IGO currently expects the total remaining capital to be between AUD 550 million and AUD 605 million. This equates to an approximate uplift of AUD 180 million versus the original guidance, after AUD 125 million of expenditure was incurred in FY 2023. In the meantime, other capital work programs continued to focus on the Mine Service Area, power supply, tailings dam four, and accommodation village during the quarter. Turning to Slide 12 and on to the update on Kwinana lithium hydroxide facility.
The ramp-up of Train 1 continued to be challenged, with only 142 tons of lithium hydroxide produced during the quarter, which was well below expectation. The team faced a number of technical challenges and plant delays coming out of the shutdown in May to rectify several key bottlenecks. The plant has now been stabilized and has returned to approximately 20% of nameplate capacity. We'll continue to work through engineering and rectification work on Train 1. Turning to Slide 13, where we'll provide guidance for FY 2024 for our lithium business. Spodumene concentrate production from Greenbushes is expected to be in line with FY 2023 performance and has been guided between 1.4 million-1.5 million tonnes on a 100% basis. Cash costs of production are guided at between AUD 280 and AUD 330 per tonne.
Costs are expected to be marginally higher than FY 2023 due to the ongoing impacts of inflation, which we partially offset by improved mining cost. FY 2024 CapEx at Greenbushes is guided to be between AUD 850 million and AUD 950 million, representing a sizable uplift versus the FY 2023 spend of AUD 513 million. This increase in CapEx reflects a significant level of expansionary activities on site, with many key projects running concurrently to deliver the increased mining and processing rates into the future.
Of note, majority of the capital guided can be attributed to 5 key projects, including CGP3 construction, the third stripping as we invest in the cutback to open up the Kapanga zone, the permanent accommodation village to de-bottleneck operations from workforce constraints, continuation of construction of Tailings Storage Facility 4, and other additional supporting infrastructure for the site. This is a sizable investment at Greenbushes and will enable future growth to that 2.5 million tons production and beyond. At Kwinana, we're not in a position to provide production guidance at this point, as we continue to work through rectification and ramp up production. Capital CapEx at Kwinana for FY 2024 is guided at AUD 35 million-AUD 45 million. The vast majority of this, which relates to modification and rectification work required on Train 1.
Turning to Slide 14, where we'll move to our discussion on the nickel business unit. Into Slide 14, we will start with the Nova operation. Quarterly production performance was stronger for all metals. Nickel production finished FY 2023 marginally below the bottom end of guidance, while copper and cobalt production finished within guidance. This stronger quarter was aided by a higher mill throughput, with power issues experienced in the March quarter, now mostly resolved. With higher metal production, cash cost performance also improved. June quarter cash costs of AUD 2.60 per payable pound were 31% lower quarter-on-quarter, and full year cash costs finished at AUD 3.54 per pound within guidance. For the full year, Nova generated AUD 460 million in underlying EBITDA, with EBITDA margins over the full year at over 62%. Turning to Slide 16.
At Forrestania, improved processing capacity and performance delivered a stronger quarter-on-quarter production result and a 16% improvement in, in cost. Production and costs both finished FY 2023 within guidance. Of note, sale revenues were markedly lower as a result of lower nickel prices, while free cash was also lower due to limited trucking availability and poor weather resulting in road closures. We expect it to improve over the coming quarter. Turning to Slide 17 and onto Cosmos, where we continued to progress project development during the quarter. Key deliverables included completion of the paste plant and development of underground chambers for the material handling infrastructure. In addition, as at the 30th of June 2023, the processing plant and shaft were approximately 85% complete, while the headframe pictured to the right was also nearing completion at the end of the quarter.
Capital expenditure for the quarter was AUD 98 million, with a total of spend over FY 2023 of AUD 338 million. Turning to Slide 18, where I'll talk through the impairment we recorded against the Western Areas assets and the Cosmos Project review currently underway. As announced two weeks ago, we will be recording a non-cash pre-tax impairment of between AUD 880 million and AUD 980 million on the assets acquired from Western Areas in 2022. Subject to finalization and audit, this impairment charge will be recorded in our full year results, due out at the end of August. This impairment is disappointing and reflects higher CapEx and operating costs, challenges to the mine production schedule, and delays in development at Cosmos.
A comprehensive, independent review of the Cosmos project is underway, with the review team given a broad mandate to better address the risks and opportunities to the current life of Mine Plan, capital cost estimates, and schedule. We expect this review to be completed during the December quarter. At which point, we'll provide an update to the market. Turning to Slide 19, where we set out our FY 2024 guidance for our nickel business. Starting with Nova, FY 2024 production is guided between 21,500 and 23,500 tons of nickel. This is in line with FY 2023 production levels that, as you remember, was impacted by the fire in December. Year-on-year, the Nova Mine Plan is forecasting lower milled tons and grade. Copper and cobalt production are also expected to be marginally lower than FY 2023 production.
Cash cost guidance of between AUD 3.40 and AUD 3.90 per payable pound of nickel is marginally higher year-on-year, reflecting lower unit production and our expectation that some inflationary pressures will persist into FY 2024. At Forrestania, we guided to lower year-on-year production, with nickel production between 7,500 and 9,000 tons for FY 2024. This reflects the conclusion of mining from the Flying Fox mine, expected in December, which will result in lower mined and milled tons. Cash costs are expected to be in line with FY 2023 performance, between AUD 9.50 and AUD 10.50 per payable pound. Capital development at both Nova and Forrestania are expected to be higher year-on-year. As noted earlier, we're also in the process of completing a review of Cosmos. We are not in a position to provide guidance at this point.
Turning to Slide 20, we'll provide a brief update on exploration activities during the quarter. Moving to Slide 21. Exploration activities continue across our portfolio. In FY 2024, we've allocated an exploration budget of AUD 65 million-AUD 75 million. This budget is driven by a bottom-up assessment of high quality opportunities to unlock value across our portfolio. Activities of note during the quarter include, at the Fraser Range project, we have ongoing programs of work at both Silver Knight and others near Nova targets, where we have continued to encounter disseminated nickel sulfides in drilling. In the Paterson, we have diamond drilled two key copper targets, Nifty East and Rainbow West, with assay results pending. Turning to Slide 22, and to a summary of today's results. Turning to Slide 23.
To summarize the quarter, we have continued to deliver outstanding financial performance with another quarter record underlying EBITDA result and strong free cash flow generation. Our balance sheet is in great shape with a net cash position of AUD 415 million. Greenbushes has driven much of this performance, with FY 2023 production exceeding guidance, which, combined with strong pricing, has generated exceptional dividend flows back to IGO. We continue to invest heavily into production growth at Greenbushes, with a focus on construction of CGP3. Nova and Forrestania has also delivered during what has been a challenging year for both projects. Development at Cosmos continues, while we conduct in parallel an independent review designed to deliver optimal value on the asset.
As advised, we'll be working over the coming weeks to finalize our full year audited results, including the impairment. We look forward to engaging again on the thirty-first of August. Thank you for joining us on the call this morning. We'll now hand it across 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. We ask that you please limit your questions to one per person with one follow-up. If you wish to ask a question via the webcast, please type your question into the Ask a Question box. Your first phone question comes from Rahul Anand with Morgan Stanley, Australia. Please go ahead.
Oh, hi, team. Good morning. For my question, I had one on the writedown. I know there's a review on the way, but you've, you've talked about potentially the differences in the spot and consensus nickel price forecasts. You've also talked of cost inflation in terms of the Cosmos Project. Can you perhaps shed a bit more light on whether you're using spot or consensus forecast for that writedown figure? What's the nature of the writedown in terms of the OpEx? How should we think about that, please? Thanks.
Hi, Rahul. I'll answer that. We're using consensus nickel for the impairment pricing, so that'll answer the first part of your question. In respect of the impairment, there were numerous contributions to that. It escalated capital and operating costs, challenges in the mine schedule, and challenges in the development schedule. In terms of giving you an idea of the split of that, it's a bit hard to do that because they all contribute to differing levels. Not one of them was more than any of the others.
Right. okay. In terms of just, the combined-- I mean, you've talked about the synergies or the positive, you know, gains you've made out of blending the products as well from the Western Areas assets and IGO assets. Can you provide an order of magnitude of what level of writedown that part of the synergies have seen?
The, the devil's in the detail, so at this point, no. We'll be providing more information around the impairment as part of our annual report, but I can let you know that that was factored into our impairment calculations.
Okay. Just,
Yeah.
Yep. Sorry, go ahead.
Yeah, fair to say, most of that value that we come from, it comes from Nova and Forrestania.
Yeah.
It hasn't, we haven't realized that value yet for Cosmos.
Sure. Thanks. Just to close off that impairment point, I know it's only one question, apologies. Just to square off, you're only using reserves in this calc, right? I mean, any sort of upside in terms of your resource expansion and conversion into reserves, is still not captured here?
... Correct. We're working on expanding our drill programs, and, and there is some opportunities at depth and laterally, which we'll be working on over the course of the next 6 months-12 months.
Yeah, it's important to note that this impairment's driven by accounting standards. What we're working through with all of and part of that, with that independent review, is also assessing those opportunities so that we can clearly articulate the value proposition for, for Cosmos.
Understood. Thanks a lot for the detail. I'll pass it on.
Thank you. Your next question comes from Hugo Nicolaci with Goldman Sachs. Please go ahead.
Morning, Matt and team, and thanks for the update this morning. Maybe just one around Kwinana. Just hoping you could provide a bit more color around the technical challenges to the restart, following the plant maintenance in the quarter, and then maybe just how the plant's been performing through July following the modifications. Thanks.
Yeah. Fair to say that we, you know, we were disappointed with the quarterly results out of Kwinana, you know, with that, with that small production. There was a number of reasons on that, and it's not fair to point to one of those reasons in terms of that production profile. We have stabilized the plant now, and we're back up to around about 20% of nameplate. We're, we're consistently about 20%. We continue to work through some of our rectifications, including the performance at the lithium hydroxide back end, which we shut down, and we still not-- still haven't got there out of that shut.
Great. Thanks for that. I mean, is there any particular part that's still underperforming? I mean, is it still the dryer circuit that's not up to nameplate capacity and what's holding that back? Or just any detail you can provide as to which parts of the plant that are still kind of holding you back there?
Look, it's fair to say there's, there's as we work through ramping the project, ramping to get to closer to nameplate, and then you also notice that we've pulled back to in calendar year 2023 to that 50% target. It's fair to say there's a whole, there's a list of things that associated with debottlenecking. One of the key debottlenecking areas is in that back end, around that dryer, around the material handling, material handling. That, that is a constraint, but there is other constraints that we're going to have to continue to work through as we, as we ramp up Kwinana.
Great, thanks. Just rounding out the Kwinana piece, I mean, you comment, in the release, that the feed costs on Train 2 are the only CapEx you'll incur in FY 2024. Feed completing in early calendar 2024. How do we interpret that around the timing that you're currently expecting a potential FID on Train 2 at this stage then?
Yeah. We're in the process of committing to an engineering group on the feed. We expect feed to be completed, we've pushed out slightly, so it'll get completed early in FY, early in calendar year 2024. There'll obviously, after completion of feed, then it's got to go through approval process to, to reach a capital decision. That's why we haven't guided any, any sort of decision, because ultimately that will come through a board approval, and once that decision is made, then we'll inform the market.
Great. Thanks for that. Pass it on.
Thank you. Question from Levi with UBS. Please go ahead.
Hi, Levi.
thanks for the, thanks for the call. Probably want to talk about Greenbushes and capital, please. So the new capital guidance, can you just break it down and sort of walk us through that a little bit? You mentioned a AUD 180 million increase on the CGP3. So does that get you to full production? What else is in there? Talk through the stripping. What is the sustaining number? And I guess, what is the read-through here for CGP4?
Yeah. Okay. A few, few questions in there, and I, I'll try to get through those. As we guided in the quarter, you know, we're looking at a cost increase on CGP3, about AUD 180 million. That's an estimate, so keen to you know, it hasn't been approved by the board at Talison, and still looking at locking what exactly CGP3 cost would be. You saw that FY 2024, we're going to AUD 880 to about AUD 950 for FY 2024. If I break that down, there's a number of key projects. Like CGP3 accounts for around about 30%-35% of that. Deferred stripping would be another 15%-20%. The permanent camp village is about 10%-15%.
Tailing stamp 4 is about another 10%-15%. Then you've got enabling capital, et cetera, including some offices and et cetera. So a lot of, a lot of the capital that you've seen in FY 2024 is really about positioning Greenbushes as we continue to expand and grow and realize that value proposition that we have at Greenbushes. CGP4, if I met, is the last question. Working through studies on CGP4 with the idea that that should go to Talison board sometime early in calendar year 2024 for approvals.
Okay. Thanks, Matt. Thank you.
Thank you. Your next question comes from Lyndon Fagan with J.P. Morgan. Please go ahead.
Thanks for that. Just on Cosmos, are you able to give an idea of when we should expect first production?
Look, we're going through the independent review at the moment, Lyndon, and as we've guided into, in the quarterly report, we're anticipating to be able to give some more flavor in the December quarter. Until then, when we've withdrawn guidance and won't comment on it. We need to finish this review.
I guess the other way of looking at it, if you spent AUD 98 million of CapEx in the fourth quarter, should we expect that rate of spend to continue, or is there any dramatic change in demobilizing the construction project?
Again, there's fluctuations in, in CapEx during any project. I, I think that we're not guiding on, on CapEx for the next quarter or two. We need to go, go through this independent review. Sorry, I can't give you more than that at this point.
No worries. I'll try my luck on a, another asset. Just at Nova, what, what's driving the lower milled tons? I realize the lower grade, just a function of the Mine Plan, but what's driving the lower throughput there? Does that continue in subsequent years?
Yeah. Lower throughput is largely driven by just mining schedule. You see grade drop off, but you also see some of the, some of the higher volume stokes also drop off. It's just scheduling, mining scheduling, stabilizes around about this, this level.
This is the kind of new run rate going forward, is that, is that what, how we think about it?
Yeah, it's fair to say, except to when you get to the right, to the back end.
Right. Is there anything on Silver Knight worth commenting on or?
No, not in terms of materiality to, to, to Nova or extension of life of mine. Silver Knight really is really about the exploration opportunities around it.
Yeah, no worries. Okay, thanks. I'll turn it over, I mean.
Thank you. Your next question comes from Carter with RBC. Go ahead.
Good morning, Matt and Kath One question on the TLEA dividend. Just wondering, you know, the previous dividend was impacted by that essential transaction. With that now not proceeding, has all the funds allocated to that now been distributed this quarter?
Yeah. There is that Essential Metals, no acquisition there. That just becomes part of the pool, pool that comes through, that we do the cash sweeps through TLEA. That's been lifted from any, any restriction, as we do cash sweeps through TLEA.
Okay, thanks. The second one, just maybe the quantum of the EBITDA loss for Kwinana. A bit more detail around that. Is that essentially due to the technical challenges that you previously flagged?
Yeah, the reduction of sales during the quarter, which you will have seen.
There's no more detail around it, it's just the technical challenges?
Yeah, and reduced, revenue coming through, obviously.
Yeah.
Lower volumes, revenue coming through. We've still got significant inventories at Kwinana that we're looking. That's part of the qualification. Once we reach that qualification, we'll also sell, sell that inventory that sits in the warehouse.
Sure. I'll just, last one on Cosmos. I, I know it's been talked about, but, and there is a review going on, but, it seems like the shaft and the headframe is progressing. The underground development rates are actually okay. What, what, what's actually changed? Is it more the, the plant?
As we sort of said in the quarterly, we've had some challenges with the mining schedule underground, and it's been a little bit more difficult with geotech, which, we've had delays in AM6, which I think we spoke about last quarter. There's schedule slippages, there's cost escalation on both the CapEx and operating costs. I hope that answers your question.
It does. Thanks. I'll pass it on. Appreciate it.
Thank you. Your next turn comes from Mitch with Jefferies. Please go ahead.
Good morning. Thank you very much for taking my question. Just wanted to turn to the Integrated Battery Materials Facility, and in light of what you've seen both at Cosmos and more specifically at Kwinana with regards to capital blowouts. The first question is: How much capital have you sort of allocated to it within the feasibility study? Secondly, how much of it is dependent on Cosmos ore feed to be successful?
Yep, I, I'll answer, I'll answer that. You know, we're still continuing to advance that, advance the study. This quarter, this quarter was quite, quite lumpy in the expenditure because we were doing all the pilot test work. Pilot test work essentially running, and we'll continue that during this quarter, this quarter coming, where we're running pilot continuous associated with this process flow sheet. It's all part of the de-risking program, where we're doing that before we jumping into any sort of engineering. We're doing our test work is at a more, more advanced level than where our engineering is. Expenditure, I can't, I mean, the expenditure's in the AUD 20 million-AUD 30 million over the total feasibility, so I can't remember what's, what's for FY 2024. That sort of magnitude....
in terms of investment, to provide that optionality, continue to engage with the third party, as part of that, bringing in that PCAM capacity. The relationship to Cosmos, the one of the key drivers of the Integrated Battery Materials Facility is looking at some of these disseminated deposits that we have, in Cosmos as well, like Mount Wood, and that's a key enabler for them to come through.
Okay. Thank you.
Thank you. Your next question comes from Matthew Frydman with MST Financial. Please go ahead.
Sure. Thanks. Morning, Matt and Kath. Yeah, look, I mean, my question is a bit of a broader philosophical one, so it might be challenging to answer succinctly, but just wondering if you can try and articulate, I guess, what lessons have been learned as a business from the disappointments of the Western Areas acquisition? I mean, if I look at IGO exiting FY 2023, it's obviously very well capitalized. You've got strong cash generation looking forward from Greenbushes, and we know that there's lots of assets on the market. You know, other assets will come up for sale over time, whether it's base metals or lithium. I guess, you know, how does your target criteria and your risk profile change for acquisitions, you know, firstly, from the learnings of that failure?
Secondly, in terms of your internal investment opportunities, how does your investment criteria for internal, internal projects change? You just talked about the Battery Materials Facility. You know, how can you back, as a business, your, your assessment of the value of that project, when the assessment of the value of the Western Areas assets, which, you know, obviously you should have known, you know, very, very well or certainly much, much closer to your existing business, you know, your assessment of value there was, was so far off. I guess, yeah, holistically, wondering in your view, what, what the process failures were and, and how have they been fixed going forward? Thanks.
Yeah. Thanks, Matt. Appreciate the question. Yeah, look, you know, I kind of look at it as, as, you know, it is a setback. You know, we acknowledge that. Acknowledge that it's disappointing, but the, the value for what we've got to do is take those learnings and actually position ourselves that we actually can become better at it. Now, the, the specific learnings, I won't get into those specific learnings, et cetera, but, you know, there is learnings. You know, as an organization, we've got to take those learnings and, and do better. In parallel to that is we've got to work to deliver Cosmos value, and that's what we're doing. In terms of internal investment, internal, internal investment, you talked about the Integrated Battery Materials Facility. It is a study.
I mean, there's not a decision to make a capital investment into Kwinana. What we're doing with the study is providing that optionality, and also what we're doing with that study is to, is ultimately try is to ensure that we de-risk it as much as possible, so that if the decision was made, then we would feel comfortable with that decision. It doesn't change anything we're doing at this point in time. If anything, it strengthens us, so that when some of these other decisions come, that we're, we are making a, what's even a, a better decision, go-going forward. I didn't get into a lot of details there, Matt, but, I hope it gave a little bit of a, a, little bit of context.
Yeah. No, that's helpful. Thanks, Matt, and I know it's a pretty, I guess it's a philosophical question, as I said. Maybe is there, is there anything, I guess, a bit more objective that you can outline? For example, you know, any sort of changes in how you view hurdle rates for internal or external investments or, you know, I guess, how you look at commodity price risk or, you know, kind of any of those other factors that, that may be fed into that Western Areas acquisition that, that were shortcomings, you know, anything from an objective or quantitative sense that you, that you can do differently going forward?
look, I, I, I don't think it's the right environment at the moment to get into, into sort of that detail. Like, we, we do want to share, and we will want to share those learnings very specifically, because it's an opportunity for us to, to, to reflect on those. I just don't think it's the right time for us to go into that detail, but more than happy to have that sort of conversation at the right time.
Okay. Got it. Thanks very much, Matt.
Thank you. Your next question comes from Hayden Bairstow with Macquarie. Please go ahead.
Yeah, morning, guys. Just back on Greenbushes, Matt. Just keen to understand, I mean, obviously you went through the CapEx on, on Levi's question, but just sort of what's left from here and, and sort of where the decision-making processes are. I mean, I'd imagine the amount of money this thing makes, it's all going to go ahead almost regardless of the CapEx, and it certainly seems that way, given what Albemarle is committing to downstream. Just keen to get an understanding of where you think, you know, CapEx revisions can actually, might actually change any of the decision-making plans here in terms of moving to CGP4 and, and then ultimately sort of 2-2.5 million tons.
Yeah, okay. Thanks, Hayden . You know, the business for all shareholders at Greenbushes, it's just a, such a logical decision to, for us all to invest capital into that project, to unlock continued value. What you're seeing is, you know, ultimately CGP is a lumpy capital. When the decision gets made on CGP4, that would also be a lumpy capital. Into capital. Some of the other enabling features, like the Mine Services Area, what we're doing with the village, what we're doing with power reticulation, what we're doing with tailings dam, all of those sort of things are ultimately enabling capital that has to be completed before you can make decisions on CGP4 and continue to ramp up.
Yes, from a, from a Talison perspective is, is one of our challenges is that when the capital project becomes approved, then it gets approved very simply, and they're working off different financial years as part of budgeting approvals, et cetera. There is a little level of complexity that we've got to work through with various shareholders and stakeholders.
Yeah. Okay, great. Just on Kwinana, can you just confirm, is there still that final tie-in with Synergy at some point later this year, and that's sort of really the starting point of, of getting this thing ramped up?
There is a part of that with Synergy on power, and that's when we look at they're also going to do a shutdown in that Kwinana area, and that's where we'll time the October shut or roughly October shut. I wouldn't say that's a constraint on production. The constraint on production, the ramp ups are individual things associated with, with debottlenecking specific areas of the plant.
Okay, great. Well, thanks for that, Matt.
Thank you. Your next question comes from Tom Hayes with CLSA. Please go ahead.
Thanks for that. look, I've just, I've just got one question on Kwinana. I'm just wondering if you could give us an update on how you're thinking about Trains 3 and 4, given the challenges that we're still having. Has there been any sort of commentary or change of thinking, from your, from your joint venture partner on whether they should be constructed in Australia in the future? Thank you.
Train, Trains 3 and 4, looking at completing PFS studies, but what we're wanting to do is, is sequence these. We don't want to get into a whole lot of details on Train 3 and 4 until we've got until Train 2, and then we'll take Train 2, and then Train 2 will be a version 2. Train 3 and 4 will be different versions, et cetera. What we won't do is rush into those decisions and make sure that we actually sequence Trains, different Trains at Kwinana so that we're taking learnings and improving. We're so grateful that we... Train 2, for example, had stopped. Otherwise, we would be facing the same sort of issues with Train 1 times by two.
Thank you. I'll leave it there.
Thank you. Your next question comes from Jon Bishop with Jarden. Please go ahead.
Good day, Matt and Kath. Thanks for taking the question. Just on Kwinana again, is there any sort of view, obviously putting Trains 3 and 4 to one side, any view from the TLEA joint venture to look at introducing a third party into that part of the business in terms of providing some specialization? Obviously, you've had a number of problems with Train 1 at the moment, and Train 2 is being sort of pushed out as a consequence. Is there a view to maybe look at third-party intellectual property and introducing that into the joint venture at all?
None at the moment, Jon. We've got to remember that Train 2 is a legacy. Train 1 is legacy. That was built at a specific time, under a different engineering group, without the rigor and the studies, without feed. They were building and designing this plant, Train 1, at the same time. Although we face challenges on Train 1, and we acknowledge that, there's no, I mean, Train 2. When we make the financial decision on Train 2, the challenges on Train 2 would, would not be like Train 1.
Okay. In terms of the engineering of Train 2, I think I've sort of asked this question before, but given you've got a fair amount already constructed, is there an ability to manifestly change that flow sheet to, to work symbiotically with Train 1?
Yeah, there is. Remember, Train 2 has major pieces of equipment installed. It doesn't have all, everything else. Except for, except for the back end around the dryer, we are comfortable with every piece of other major piece of equipment installed. It's all about the subsidiary equipment around bag houses and belts and conveyors and piping and everything, et cetera, tanks. The envision that that won't change, there's no need to change it. If anything, we'll take those learnings out of Train 1 and apply that to Train 2.
Right. Thank you.
Thank you. Your next question comes from Lyndon Fagan with J.P. Morgan. Please go ahead. Pardon me, Lyndon, your line is now live. Please go ahead.
Oh, sorry. Just another follow-up on Kwinana. Can I ask the question, why even do Train 2? I guess, what gives you the confidence that the project would even be economic, given the problems with Train 1, and why not maybe look at toll trading or, or some other option to monetize a downstream opportunity while Train 1's finding its feet. I, I don't see why there's any rush jumping into Train 2.
Yeah.
at all, to be honest. You'd be keen to explore that. Thanks.
Okay. Lyndon, Train, Train 2, you know, what's clear to articulate is we won't have the same issues on Train 1 as Train 2. We are yet to make a financial investment decision on Train 2. What we're doing is doing all the feed work and truly all the feed and a true assessment of what that capital to complete on Train 2 is. Then ultimately, that will be part of our investment decision on whether we go or not go. I mean, that will largely be driven by both risk, opportunities, and also the financial return you'll, you'll drive out of Train 2. That will all come together as part of the end, end process on feed.
If for some reason that project was marginal, then your argument would stack up. We don't believe that at any point in time.
Is there a way of thinking about competition for capital? I mean, when it comes to the lithium strategy, why not... if it's gonna cost you another $500 million or $1 billion for Train 2, why not put that towards an upstream opportunity to get more mine supply, as opposed to going downstream, where pretty, pretty tough going?
Yeah, that will all be part of the decision at the time, once we have resolution on what all of that value proposition is, and the level of confidence on that value.
Lyndon, we are continually looking at the deployment of capital and where best to deploy it, 'cause there are competing projects and competing priorities. That's part of our standard investment criteria process, determining where the best bang for our buck is for our shareholders.
Great. Thanks for that.
Thank you. Your next question comes from Rahul Anand with Morgan Stanley Australia. Please go ahead.
Thanks for allowing me back on. Look, I just wanted to follow up quickly on Nova. You know, just following on from that throughput point. My understanding was that the additional mill capacity was built basically to be able to maintain production through lower production periods or lower grade periods. Is that not the strategy anymore? I mean, are you looking to keep throughput at this level till pretty much end of mine life or, or a fair bit later? Is that how we should be thinking about this now? Because my, as I said, I, I, I thought the expansion for the mill was to offset grade impacts. Thanks.
Yeah, thanks, Rahul. That expansion of the mill has offset grade impacts. You know, that we've seen as grade has declined consistently. At a point, you become mine constrained. It's about mine constraint. Mine constraint is limited to the number of stopes, turnover stopes, areas that you think can mine, et cetera.
How should we think about what the mine capacity is then versus that bottleneck?
Yeah. That's why That's why you're, you're seeing, that 21,000- 23 ,000 tons of nickel. That's-
Gotcha. Okay. The mine, mine is basically able to do about 1.6 million tons per annum?
Yeah.
It will be-
A little bit less.
Right. Right. Okay, are you able to also provide any sort of, understanding on nickel recovery impacts as the grades move lower from, you know, your current levels, and in the future?
Look, that's all accounted for in that production profile that we've guided to that, 2021-2023, plus the cash costs, on the payable.
Yeah. Yeah. Okay. All right, that, that was the one from me. I'll pass it on.
Thank you. Your next question is a webcast question from Michael D'Adamo with Canaccord.
Can you set, step up through price, transfer pricing and how Kwinana buys spod and sells hydroxide? What sets the price for hydroxide, and has this margin squeeze occurred because you sell at the price of Chinese hydroxide?
That's, you know, that's a long question there. I'll, I'll just keep it very short, and then, if we need to jump on a call, Michael, with you, we can talk through that in detail. Basically, spodumene, 50% spodumene, going to, to Albemarle, 50% going to, to TLEA. TLEA on sells product that it doesn't use to TLC. That spodumene pricing is done at a 4 times benchmark. It's a, has a, has a lag for the last quarter to the current quarter. Kwinana lithium hydroxide, at the moment, we haven't qualified product at Kwinana. I mean, close to qualifying product. Qualification of product is when we also feel comfortable, too, with performance of the plant.
Once that qualification is complete, then it's under contract to, to the customer, and that is that they have pricing mechanisms built into that contract. Happy to go into detail with you on that one.
Thank you. That's all the time we have for our question and answer session. I'll now hand the conference back to Mr. Dusci for closing remarks.
Thank you, operator. Thanks everyone for the call today. I look forward to talking with everyone this week. Cheers!
That does conclude our conference for today. Thank you for participating. You may now disconnect.