Thank you for standing by, and welcome to the IGO Limited FY 2023 results webcast. All participants are in a listen-only mode. To ask a question via the phones, you will need to press the star key, followed by the number one on your telephone keypad. To ask a question via the webcast, please type your question into the Ask a Question box and click Submit. I would now like to hand the conference over to Matt Dusci, Acting Chief Executive Officer. Please go ahead.
Thank you, Travis. Good morning, everyone. Thank you for joining the call this morning as we provide a summary of IGO's audited financial results for FY 2023. Joining me on the call today is Kathleen Bozanic, our Chief Financial Officer. She will be available to answer questions during the Q&A session. Also note that we released both our annual and sustainability reports this morning, as well as our FY 2023 mineral resource, ore reserve, and exploration update. Slide 2 highlights our cautionary statement and disclaimer. Of note, all currency amounts in this presentation today are in Australian dollars, unless otherwise noted. Moving to Slide 3. Before we move to the financials, I want to discuss the important work we are doing to build a more sustainable business and making a positive impact on future generations. I encourage you to refer to our ninth Sustainability Report issued today.
The report provides a snapshot across the multiple facets of sustainability throughout our business, including safety and well-being, our response to climate change, environment, business integrity, our financial contributions, traditional owners and communities, and our people. IGO has a proud history in the work we do in sustainability, and this year is no exception, with some highlights including: We have maintained a strong engagement with our communities who support our ability to do what we do. In FY 2023, we made community financial contributions of nearly AUD 800,000 to a range of organizations, and our people contributed 370 hours of voluntary work across our community. We continue to strengthen our relationships with traditional owners, including finalization of our Reconciliation Action Plan, which reaffirms our commitment and vision for reconciliation.
For FY 2023, we spent over AUD 8 million with Aboriginal and Torres Strait owned or managed businesses. We look forward to ways we can continue to deepen our engagement, support, and partners with traditional owners in FY 2024. We continue to pursue our response to climate change and decarbonization of our business as we target to be net zero by 2035. Our internal decarbonization fund generated AUD 8.3 million during FY 2023, with nearly AUD 16 million currently available to fund carbon reduction and offset projects and programs. Our people are key enablers to everything we do. We have an amazing team and a great culture. It's something that we are deeply proud of. We understand the importance of diversity, and we continue to work on increasing female and Aboriginal representation in our workforce.
Most importantly of us all, is our engagement and pride that our people have in working with IGO. An area that we have to and will improve is on safety. It's disappointing to have recorded an increase in our TRIFR over FY 2023. While it's reassuring to have seen a decrease in severity of injuries and harm to our people, we should do better and we can do better. The board and management are responding by further boosting resources, training, and active leadership to drive better outcomes over FY 2024. Turning to Slide 4, which provides a high-level financial and operating summary for the year. We delivered an outstanding set of financial results with record underlying EBITDA, record NPAT, record underlying free cash flow. This result was made possible by the strength of our lithium business.
Our interest in the lithium joint venture, TLEA, which was acquired in 2021 for AUD 1.9 billion, has in FY 2023 generated over AUD 1.1 billion dollars in dividends back to IGO. This is an exceptional result. Operationally, Greenbushes was a standout in FY 2023, delivering record spodumene production, benefiting from strong commodity pricing, while Nova also delivered strong margins and free cash flow. The ramp-up at our Kwinana Lithium Hydroxide Refinery was delayed. However, we expected to see improved performance over the coming year as rectification work continues. At Cosmos Nickel Project, while project development progressed over the year, we've commenced a review to understand the risks and opportunities and drive optimal value. As previously flagged, we have recorded an impairment on the assets acquired from Western Areas, which predominantly reflects challenges at Cosmos. I'll discuss this further shortly.
Our strong financial performance has put our balance sheet in a fantastic position, with a net cash position of AUD 415 million, and enabled us to declare record dividends for FY 2023, which I'll come to in a moment. Moving to Slide 5, where I'll lay out our financial results in detail. As you can see here, all financial metrics have improved substantially compared to FY 2022. Revenue lifted year-on-year to just over AUD 1 billion, thanks to the first contribution from Forrestania, as well as strong commodity prices. Underlying EBITDA of almost AUD 2 billion rose significantly, driven by an outstanding contribution from the lithium business, specifically Greenbushes.
Net profit after tax for the year was AUD 549 million, another record, and an excellent result, despite the impairment impact of the non-cash impairment recorded against the assets acquired from Western Areas, which has now been finalized at pre-tax of AUD 968 million. On an underlying basis, this includes this impairment, net profit after tax exceeded AUD 1.5 billion. Underlying key free cash flow was nearly AUD 1.1 billion a year, a year-on-year increase of more than 3x . This has enabled IGO to repay AUD 540 million in debt over the year, and finish the year strongly with AUD 775 million cash available. Moving to Slide 6.
On this slide, we set out IGO's performance across key financial metrics over the last five years, demonstrating the financial transformational growth that has been delivered to the business over this period of time. As noted, today's result represents records across all key financial metrics. IGO is in an outstanding position to move forward in FY 2024 and beyond. Moving to Slide 7, where we reconcile the year-on-year change in the group cash position. I draw your attention to the record dividends received from TLEA of over AUD 1.1 billion, the strong free cash flow generation from Nova and solid contribution from Forrestania, and the accelerated debt repayment of AUD 540 million. I also note the AUD 53 million received from the sale of investments, which reflects our divestment of our holding in Mincor Resources during the year.
Moving to Slide 8. We have reconciled the underlying net profit after tax variance between the 2022 and 2023 financial years. Of note, we highlighted the AUD 1.4 billion positive contribution to net profit after tax from TLEA joint venture, resulting from strong lithium prices and production at Greenbushes. As shown, underlying net PAT for the year was AUD 1.53 billion, reduced to AUD 549 million on a statutory basis, with the application of the AUD 968 million impairment on the Western Areas assets and other minor adjustments. Turning to Slide 9. We recently announced the new capital management policy, which has been approved by the board.
The new framework showed on this side is designed to provide shareholders clarity and transparency of IGO's capital management strategy and seeks to strike a balance between returns to shareholders, balance sheet strength, and flexibility to fund growth. Under this new capital management policy, the target range for shareholders' return has increased to between 20% and 40% of underlying free cash flow when liquidity is less than AUD 1 billion. When liquidity exceeds AUD 1 billion, the board will use its discretion to consider paying above 40% threshold. Moving to Slide 10. In line with the updated policy and reflecting the exceptional cash generation over FY 2023, I'm pleased to report that the board has declared a AUD 0.44 per share final dividend, plus a AUD 0.16 per share special dividend for FY 2023. Both are fully franked.
The dividend will be payable on the 28th of September, 2023. This final dividend and special dividend brings total FY 2023 dividends to AUD 0.74 per share, including the AUD 0.14 per share interim dividend that was paid in March of this year. This represents a greater than sevenfold increase in year-on-year dividend payments and a total of AUD 560 million returned to shareholders in FY 2023. We are committed to returning excess capital to shareholders in line with our capital management policy. Turning to Slide 11. I'll take the opportunity to speak briefly to each of the core assets within our portfolio, noting that this was discussed in detail at our June quarterly conference call just a few weeks ago.
FY 2023 saw strong performance in Greenbushes, with total spodumene production of 1.49 million tons, up 31% year-on-year, while cash production costs were AUD 244 per ton. Combined with the elevated spodumene prices we enjoyed during FY 2023, Greenbushes delivered a record EBITDA of AUD 9.5 billion on a 100% basis, up sevenfold from FY 2022, representing an EBITDA margin of over 90%. As we move into FY 2024, our focus is on progressing the construction of CGP3, reaching a final investment decision on CGP4, and continuing to realize the potential of this world-class asset. Moving to Slide 12 and on to the Kwinana Refinery. Performance for Train 1 at Kwinana has been disappointing. However, we remain confident that the required engineering and rectifications are being implemented to enable improved performance over FY 2024.
We are committed to successfully completing rectification works and achieving 50% of nameplate capacity by the end of this calendar year. In parallel, front-end engineering design will progress on Train 2, with expected completion in early calendar year 2024. This FEED work is required to de-risk Train 2. A final investment decision will only be made once this work has been completed. Moving to Slide 13 and turning to Nova and the Forrestania operations. Nova and Forrestania both made a solid contribution over FY 2023, with group nickel production of 34,846 tons and group nickel cash costs of AUD 5.63 per pound. Combined underlying free cash flow for the financial year was AUD 587 million, with an EBITDA margin of 56%. This is a strong result.
Looking ahead, our priorities are ongoing optimization programs of both operations to improve productivity and reduce costs, while continuing to unlock value through production blending opportunities. Moving to Slide 14 and onto Cosmos, where we continue to progress project development during the year. Key deliverables include completion of paste plant, aerodrome, and development of the underground chambers for material handling infrastructure. Further, I'm pleased to say that progressing the processing plant and shaft are also approaching completion, bringing total capital expenditure for the financial year to AUD 338 million. As announced previously, we have encountered several challenges during the development of Cosmos. We are currently working through a project review on the current life of mine, capital cost estimates, and schedule. We expect the review will be completed during the December quarter and will provide an update to the market accordingly.
Moving to Slide 15 and onto our overview of our exploration activities. We are committed to being a supplier of metals critical for the clean energy transition, and exploration is a key part in this strategy. Investment in exploration and discoveries is essential if we are to source enough critical minerals to enable the decarbonization of the economy. In FY 2024, we've allocated AUD 65 million-AUD 75 million to exploration across IGO's portfolio, which is focused on unlocking high-quality nickel, copper, and lithium discoveries. We believe we have a fantastic opportunity to deliver significant value through discovery and from this commitment. Turning to Slide 16 for concluding remarks. The 2023 financial year was an exceptional year across our business, with record financial results as we continued to pursue our clean energy strategy.
Greenbushes continued to perform strongly, and as we continue to expand production and further optimize this world-class asset. Production ramp-up at Kwinana Train 1 is anticipated to improve over FY 2024, with a final investment decision on Train 2 expected to be considered after the completion of the front-end engineering and design. We are dedicated to unlocking value at the Cosmos project. A project review is currently underway, with outcomes expected by December. We have maintained our focus on shareholder return and disciplined capital management. Exceptional cash flows generated over the last 12 months has enabled the declaration of a AUD 0.44 final fully franked dividend and a AUD 0.16 per share special fully franked dividend. Moving into FY 2024, we are clear on what we need to do. We need to deliver on our internal growth projects, coupled with safe and reliable delivery from our operating assets.
B efore concluding this call, I would like to express my gratitude to the IGO, TLEA, and Talison teams. You are making a difference. Thank you, everyone, for joining us on this call this morning, and we'll now open up for questions. Thank you, everybody.
Thank you. To ask a question via the phones, please press star one and wait for your name to be announced. To ask a question via the webcast, please type your question into the Ask a Question box and click Submit. The first phone question today comes from Levi Spry from UBS. Please go ahead.
Good day, good day, Matt and team. Thanks, thanks for your time. Two questions. Firstly, just on the capital management, so the new dividend policy, can you just talk us through what the higher returns piece means in terms of, you know, do you have a target gearing level here? Obviously, shareholders are happy with the big divvy, but yeah, what does this mean around the, you know, AUD 1 billion liquidity?
Yeah. So I'll hand across to Kath in a second about, you know, in terms of the liquidity. Liquidity is cash reserves plus balance of undrawn debt. So at the moment, we have that AUD 775 million of cash, and we have that AUD 360 million of revolver, and that's how we define that liquidity. Ultimately, in determining the dividend, it really shows the strength of IGO, both in this what has been an exceptional year in FY 2023, but also going forward into FY 2024 and beyond. Do you want to talk about gearing?
Yeah. Obviously, internally, we have our gearing targets and ratios, and at this point in time, our gearing is quite low. What I would say about that is it's consistent with what you'd expect for an organization like this and what our peers have. And therefore, if we were to actually do something that required debt, we would utilize those targets in order to determine the amount of debt we could take. Hopefully that answers your question, Levi.
Yeah, kind of. I'm just not sure how, you know, why you can't pay out of debt, I guess.
Yeah, no, I understand. I understand the question.
Yep. Okay, maybe just the next question then, on Cosmos, while you're talking, I guess. So what are the options that are being considered? And can you just remind us, so AUD 338 spent in FY 2023. Can you just remind us, under the old plan, how much was left to spend to get to 1.1 million tons throughput? So sort of two questions there, I guess. Remaining CapEx under the old plan and, and what, yeah, what are you, what are you, what's in front of you?
Yeah, what's in front of us, I suppose, is we're doing that whole review, including this reassessment of capital costs to complete.
Mm-hmm.
Reassessment of schedule, timing to complete, and ultimately what that production profile ramp up would be under a new plan. So that's this program of work that we're committed to driving value out of that Cosmos project going forward. So we haven't come out, even as part of that FY 2024 guidance, we haven't come out with that capital costs to complete for Cosmos.
Yeah, I actually haven't got what was left on hand at the moment, but it's pretty easy to calculate from the numbers we've previously given you, Levi. I just don't have the exact number to hand right now.
No problem. I'll do that. Thank you. Thanks, guys.
Thanks, Levi.
Thank you. The next question comes from Kate McCutcheon from Citi. Please go ahead.
Thanks, Matt. With this special dividend paid out, would it be premature to read into that around how the timing and Train 2 at Kwinana might play out, or how you're thinking about the downstream battery precursor plan? Or if I ask it another way, can you remind me on the timing for how we should think about a Train 2 decision and also an update on a PCAM plan and study there?
Yep. Yep. So I can, I'll provide a bit of an update. So, I mean, ultimately, when we look at dividend, we also factor in our internal growth. So we take that into consideration when we were doing the dividend. So we feel strongly that we, I mean, the business is in such a good shape that we can continue to fund all the internal growth projects we have on our portfolio, which is quite significant. In terms of Train 2, we are doing front-end engineering design. We're scheduled to complete that in the first part of calendar year 2024. That will lead into a financial investment decision after that completion. With the completion of that FEED, we'll come out with capital costs and timing to on that capital spend and ramp-up profiles, et cetera.
In terms of that Integrated Battery Material Facility, we continue to have discussions with PCAM partner, and we're advancing feasibility studies on that facility. The idea is that we'll be in a position to announce the PCAM partner sometime this calendar year, with the completion of studies around about mid-calendar year 2024.
Okay. Thanks, Matt. And then if I can just squeeze in a quick one. After the impairment and the update, we're expecting for Cosmos next quarter, will that be underpinned by those FY 2023 resources you've announced today, with the DCF more than halving? It looks like reserves have remained flat there, but you've also used higher nickel price assumptions. Any color there?
Yeah. So if you strip back to the, on the mineral resource and ore reserve for Cosmos, the variance in nickel tons you see, on the resource s at Mount Goode. So what we've done at Mount Goode, in the resource, is essentially defined that to an open pit. It was previously reported at just above a cut-off grade, so you ended up with a lot of metal that would never come into a, a mining shape. So that resource has more confidence than what had previously been reported under, under Western Areas. And it would be what you would expect to see in an open pit, should we be successful in a completion of the pre-feasibility studies, et cetera, at, Mount Goode. In terms of the reserve, the reserve fundamentally hasn't changed.
Any reserve update on Cosmos will come out as part of this update plan.
Thanks, Matt.
Thank you. The next question comes from Daniel Morgan, from Barrenjoey. Please go ahead.
Hi, Matt, and team. Just to follow up on that last point. So this reserve announcement today across your assets, which includes Cosmos. There hasn't been any of the review work that's informed that, and so the reserve statement that you've put out could still be at some risk via the review process. Is that right?
Yeah, look, I would state that that reserve is based off previous reserves. We're obviously drilling, doing a lot of drilling at the moment, et cetera, and updating that whole resource model, and then we'll feed that into, feed that into the mine plan and, life of mine for, for Odysseus. If I was summarizing, so summarizing, just generally, that resource and reserve, resource and reserve, you saw depletion come out of, Nova. Effectively, we depletion out of Forrestania on a reserve basis. Some of the resources, have, have come out just because of the resources back-ended. Greenbushes is, is just a depletion. We're in the process of updating Greenbushes, and we would expect to see a new update on Greenbushes' resource and reserve in, start of calendar year 2024.
So on that latter point, what is in scope for consideration for the Greenbushes updated resource reserve? Like, what body of work has been done and what is being considered?
There has been quite a significant body of work in terms of drilling, resource extension work on Greenbushes, and then ultimately trying to determine where the optimal open pit would fall.
Is underground or potential underground in scope, or is it still too early for that?
It's too early for this. Will be too early for this R&R statement for calendar year.
I also note in the resource reserve statements that Silver Knight's been removed. I mean, it was not a large deposit in any case, but you no longer think that can be processed, and so what? Nova's got three years left?
Yeah. So correct. So Silver Knight has been taken out of resource because at the moment we don't have. And we're quite tight on resources, so our resources really have to have an economic path to development. At the moment, we don't have that economic path to development on Silver Knight, so we've taken that out of our resource statement. Why that is the case is, as we've talked to previously, is that blending Silver Knight with Nova reduces recovery at Nova. So blending is no longer an option. It is value disruptive, destructive. And then if you treat Silver Knight by itself, then it will require capital, and it doesn't support that capital.
Okay, and last question. On your exploration slide in your presentation, I refer to Page 15. You've got in the lithium section, the Forrestania project. Is that anything material, given that there's a few juniors out there that are multi-billion dollar companies on the back of, you know, new lithium projects?
Yeah. In the appendix, there's a summary report in the back of the mineral resource on exploration, and it talks to some of the lithium opportunities around Forrestania. Forrestania, you know, it's got a belt holding that's down strike from Mount Holland, Covalent, and there has been very little done on lithium. There's a couple of prospects that we're starting to drill this quarter, Ironc ap being one of those, which has some promising lithium. But again, in terms of materiality for us as a business, once it's material, then we'll highlight that to everyone.
Thank you very much, Matt.
Thank you. The next question comes from Lyndon Fagan, from JP Morgan. Please go ahead.
Thanks, and good morning. Just on the Greenbushes slide, where the capacity in FY 2027 is slated at 2.5 million tons. Are you able to confirm that that includes the tailings retreatment and what the latest guidance on when that finishes is?
Yeah. Okay. Hi, Lyndon. So yeah, so that 2.5 million tons does include tailings retreatment project. And under the original plan, you should , if tailings retreatment program doesn't continue beyond the seven years that it's currently sitting at, then production profile would come off. Having said that, you know, we're working through how we better utilize that infrastructure, and better feed that infrastructure so that we can continue to maximize and utilize all processing capacity at Greenbushes.
Just to clarify, I had that ending in FY 2027. Is that still the latest guidance for when it is meant to finish?
Yeah, I would approximate maybe another year on top of that, but in terms of this is total production capacity at Greenbushes, and we will be striving to ensure that we've, we fill total production capacity at Greenbushes.
Okay, great. And then, on Kwinana, are you able to speak to what the latest kind of conversion metrics look like? So how many tons of spodumene per ton of hydroxide? And, I mean, can you guide anything on the conversion cost there?
Not really. Not, you know, if we do, I can probably do a little bit more maybe at the quarter end, but generally, we, in this ramp-up phase, we're trying to keep that working through that ramp up because of the efficiencies. What we are doing is we're still getting that ramp-up profile right. We're still confident I'll get into that 50% of the nameplate by the end of this calendar year. I wouldn't expect, you know, today, because it's not that efficient, you don't get where you think you would be, but everything to date should suggest that conversion's not the issue. The main issue really is associated with these bottlenecks of production, of actually getting material through.
Okay, no worries. I might sneak a final one in, if I may. Just with that reserve downgrade or resource downgrade, particularly at Nova, now that it looks like it's wrapping up in three years, can you speak to some of what the rehab costs are that we need to have?
Yeah, we have that on our books. Can you remember what that final?
Yeah, it's about AUD 40 million that we've got provided for, and we did a review, a very bottom-up detailed review in the last 12 months of that.
So that starts spending when? Sorry.
Well, with Nova, we'll be looking at whether we pop it into care and maintenance for a short period of time. Because of the way the rehab works, we'd need to pull up roads and things like that for the tailings dam. So as we go through the next year, we'll be doing a work on what that plan is for closure. And bearing in mind, we're still doing quite a bit of exploration in that region, so it wouldn't make sense to tear up roads if we've got good prospectivity there. But I can say that in the next 12 months, we'll be looking at the timing of that in more detail based on what we're finding from an exploration perspective.
Great. Thanks for the color.
No problems.
Thank you. The next question comes from Jon Bishop from Jarden Group. Please go ahead.
Morning, Matt and Kath. Just around intermediary lithium conversion. So we're noting that lithium sulfate as an intermediary product is kind of all the rage at the moment. Is it sort of too early to comment on the joint ventures thinking around the commercial outlooks for Trains 3 and 4 at Kwinana, and any sort of color as to perhaps where, what you're thinking around what sort of form they may take?
Hey, Jon. Yeah, it's probably a little bit early, but, you know, we remain open to the different forms. Having said that, you have to remember that most of the savings you get from going to these intermediates is associated with transportation and other, other elements. For when you have, Greenbushes located so close to your industrial hubs, then, then you may not see the same sort of beneficiaries you do when you're going to an intermediate. And that, and you, you see, you also see Albemarle committing to that, lithium hydroxides as well, close to Greenbushes. So it gives you an idea of where, where those, savings come.
Gotcha. So there's no sort of thought, perhaps, to locate the crystallization part of the conversion elsewhere, say, proximal to European markets or North American or anything like that? Or is that just too early?
Yeah, it's very early, and I'll be. You know, I would be talking even theoretically, you know, but theoretically, you could do a sulfate, you could do a beneficiation if you wanted to. Somewhere closer would be one option, but again, the variance there on the drivers is transport, transport, et cetera. So you may actually benefit more just going straight to hydroxide.
Cool. Okay, and look, just a bit of a lateral one. Noticed that Ian Sandl's title has changed recently. Good day, Ian, if you're listening. He's gone to an Exploration Business Development Manager from GM Exploration. Is that a change in remit or a complete change in title and role? And I guess more broadly, I guess the high-level question is just around: Is there any change in your strategy around organic exploration at all?
Yeah, it's good, good observation, Jon. So you are correct, and we, we have brought in a new exploration manager, Suzanne, from OZ Minerals. So and it's just part of a continuation of what we do in our business, and looking at different skill sets within our business. So there's no change in terms of exploration and exploration approach. Remain committed to exploration. Building a portfolio and a pipeline is really important as part of, as part of executing strong exploration programs, ultimately leading to, leading to discovery. We'll do a portfolio review of our, of our exploration, through December, and we'll continue to make sure that our exploration dollars are wisely spent.
Great. Thanks for the answer.
Thank you. The next question comes from Robert Stein of CLSA. Please go ahead.
Hi, team. Thanks for the opportunity to ask some questions today. Look, the first one's sort of getting on that intermediary question. One of your competitors came out the other day and talked to some pretty low CapEx numbers in ASEAN as locations for downstream conversion. Just questioning whether you're exploring that at the JV level or even at the IGO level around potentially locating conversion offshore to make use of, you know, potentially labor cost advantages? That's the first. I might, I might follow up with a second.
Yeah, and look, you know, as a business and as a joint venture, we always explore options to try and create value. So, I mean, if there's an option to create value, then we will be exploring it. But it's a little bit early to, you know, it's too early for us to say that we have a preference on which way we're gonna go or how do we actually extract that value.
Sorry, as a follow-up, is that an alternative for Train 2, that you would look to the Train 2 FID and then compare it with other jurisdictions? And if not, what type of capital synergies or operating cost synergies are you expecting in the Train 2 FID versus, say, what's been executed around Train 1, outside of, you know, the typical type of learning synergies that you would get?
Yeah, look, specifically on Train, on Train 2, 30% of our, of our capital already is sunk on Train 2 with the major pieces of equipment. And then the way we view that is that, you know, ultimately we're working through the FEED to lock down what our capital to complete is. But we are in a huge advantage in terms of having Train 1, understanding what we need to do on Train 1, derisk, really derisking Train 2. For us to go into a new product and not leverage that advantage on Train 1, from Train 1 on to Train 2, would be a really lost opportunity, and we actually potentially may introduce further risk in terms of technical risk and engineering risk that we wouldn't wanna take on at this point in time.
So if I benchmark that to, say, like a, a nd I know that, you know, take the competition's sort of estimates with a grain of salt, but if you say, you know, at a AUD 6,000-AUD 10,000 capital intensity with the sunk capital and the learning advantages, we'd be expecting a material change or difference to what was executed under Train 1. Can you give us a rough capital intensity there, or is that?
Yeah, we.
Too early to say?
I, you know, ultimately what we're trying to do on Train 2 is really fully derisk it. So when we have a capital number, it will be engineered, it will have all the contracts in place, and we'll have firm commitment on that capital. You know, in this sort of environment, with these sort of complexities on these facilities, coming out with capital numbers early is not in anyone's favor.
No problem. Thank you very much.
Thank you once again. To ask a question, please press star one on your phone. To ask a question via the webcast, please type it into the Ask a Question box and click Submit. The next phone question comes from Matthew Frydman from MST Financial. Please go ahead.
Sure. Thanks. Morning, Matt and team. Maybe just following on there from, I guess, the questions around the downstream and in the context of, of the number you've put out there for Greenbushes production in FY 2027 of 2.5 million tonnes per annum. You know, obviously IGO's entitled to 24.99% of that, so a little over 600 kilotonnes there. You know, even if you T rains at Kwinana fully ramped up, that would only consume maybe a little bit over half of that. So I guess, what's your thinking around, what, you know, what, what's the goal there for, for that, for that spodumene product, for that difference? You know, are you happy to sell that spodumene to, Tianqi over the long run?
You know, do you look to place that into some kind of conversion solution down the track, you know, either with Tianqi or you know, within Australia? What, what's the thinking around that product?
You know, ultimately, the objective is value creation. So, I mean, it's always focused on value creation, how we drive value for both the TLEA as a joint venture entity and then also for IGO shareholders. You're right. So in terms of Greenbushes, you know, we are long from an IGO perspective or from a TLEA perspective, we are long on spodumene, and we'll continue to be long on spodumene as we build out production at Greenbushes. And, you know, we're comfortable with that. There's margins to be had on just on the spodumene and on that side of the business. Coupled with that is a cautious approach to continue to expand our downstream within the TLEA. That can be done through a number of ways.
Getting Train 1, first priority is getting Train 2 up and performing to that 50% and beyond into calendar year 2024. Train 2, bringing, making sure that we derisk Train 2, and then looking at whether Train 3 and 4 or, or how we drive value add maybe out of a sulfate, et cetera. In parallel to that, there is options potentially toll-free if there, if there was options outside of China.
Got it. Thanks, Matt. That's, that's pretty clear. Secondly, can I ask on, I guess, organic and inorganic growth, particularly in the context of the, the capital management framework you've presented? And, you know, I did ask something along these lines at the quarterly, but I, I guess, how do the board and, and management get comfortable with the approach to any sort of major investments in, in organic or inorganic growth in the future? Obviously, given the learnings from the Western Areas acquisition and impairment, you know, what sort of returns would you be seeking from a, from a major organic or an inorganic project?
You know, what returns do you need to clear in order to be more attractive on a risk-weighted basis than simply returning that cash to shareholders through your, you know, through your framework as you've outlined?
Yeah, they're all very good questions, and, I mean, they are questions that continually get discussed and, you know, at a board level, I'm very cognizant of that. Coming back to us as an organization is, yes, there is learnings. You know, good organizations take those learnings and improve. So we shouldn't. And ultimately strengthen ourselves. You saw, even at the moment, for us, really, it's about the significant investment that we're putting into the lithium business, and into the expansion of Greenbushes and then bringing on those Kwinana lines of productions. When you look at those returns by themselves, then, they dwarf anything else that we could do in terms of return to shareholders.
Okay, sure. Thanks, Matt. I guess maybe thinking about it in the context of the review you're doing on Cosmos. I mean, are you still gonna assess that in the framework of, you know, I guess, putting aside the sunk cost and the sunk capital in that project and looking forward at the returns that any sort of future investment that you're gonna generate and whether they, you know, again, meet the requirements of that framework?
Yes.
Okay, short answer. Thanks.
The answer is yes. Look, I mean, that's part of. That's why we're doing this work, you know, ultimately to get to a good, good answer and a good outcome. Remain confident there's value to be extracted, and we will be able to extract that value, but that has to be assessed against a framework of how do we deploy capital through our business.
You got it. Thanks very much, Matt.
Thank you. The next question comes from Hugo Nicolaci from Goldman Sachs. Please go ahead.
Morning, Matt and Kath. Thanks for the update this morning, and congrats on the special. Maybe just one following up on a previous question just around Kwinana, noting that you're aiming to get to 50% of nameplate by the end of the year. Some of your peers have kind of highlighted that they didn't see the need to ramp up production until they're fully battery qualified. Are you able to just remind us where you're at through the battery- grade qualification process with your offtake partners?
Yeah. We are confident of getting battery- grade qualification, and we expect that to be shortly. And that's not a consideration to getting production profiles ramped up. The consideration of getting that production profile is not, is about how we de-bottleneck the processing plant and continue with rectifications.
Great. Thanks, Matt. That's clear. And then maybe just another one following on from earlier question around the lithium exploration at Forrestania. Understanding the JV, that you have to offer new lithium opportunities into the JV first, does that still apply to assets you already had if you find lithium? Does that still have to be offered into the JV?
Yeah, you're right. So what would happen under a scenario like that is that at some point we would offer that into the JV at some form of market rate, at market terms.
Great. Thanks for that clarification. And then just last one, just around Greenbushes. Are you able to just update us, you know, are you still seeing any absentee issues now that Macmahon has been on site for a couple of months? And could you broadly maybe just comment on how you're seeing labor broadly across the WA assets? Thanks.
Yeah. Okay. Specifically at Greenbushes, and we continue to ramp up mining production with that change with Macmahon. So that's on, going on track. That you know short term, some short-term absenteeism, which you'd expect, but nothing material. Labor for WA in the market remains tight, and then each area has different challenges. And one of the biggest challenges at a, specifically at a Greenbushes level, really comes down to accommodation, and accommodation ability to actually accommodate the workforce, hence the investment in the mine village at Greenbushes. Within the rest of the, rest of our business, it really, it really depends on what skill set we're chasing, and what we've seen is that different skill sets have different scarcity, and that kind of moves around. It doesn't stay still in one discipline.
Great. Thanks, Matt. That's helpful. I'll pass it on.
Thank you. The next question comes from Tim Hoff from Canaccord. Please go ahead.
Hey, guys. Thanks for the question. Just in regards to the TLEA JV, is it correct that the lithium M&A opportunities, ex-China have to come into the JV before the individual companies, can assess them? If that's correct, how does IGO start to view if Tianqi brings in African, South, South American projects, or projects, ex-China around the world?
Yeah. Okay. So under the... It's a global joint venture, so correct, we've and it's all related to lithium, it's related to lithium and lithium products. How that joint venture works for new projects is a party has to offer it into the joint venture. So then the other counterparty, the other shareholder, has a right to say whether they would want it into the joint venture or not. You'll be able to see potentially that different lithium opportunities may or may not go into that joint venture, depending on different returns and different financial considerations or different investment criteria. That's not the joint venture not working, it's actually the joint venture working.
So does that stand to reason that IGO is gonna maintain its Australia focus, or will you start to look out to these other jurisdictions?
IGO will remain focused on value creation. And so that, you know, that's the underlying thesis for us, is we really have to see value and ensure that it fits within our capital management and our risk appetite.
Excellent. Thank you. And then I'm not sure if I missed it earlier, my phone line dropped out, but, Forrestania, is there, is there any guidance to, I guess, how much mine life that has got left? The reserve indicates it's about a year.
Yeah. So under current reserves, we've got about a year and a half.
Yeah. Excellent. All right. Excellent. Thank you very much.
Thanks, Tim.
Thank you. At this time, we're showing no further questions. I'll hand the conference back to Matt for closing remarks.
Thank you, everyone, for joining the call. We appreciate everyone's participation and thank you again. Have a safe and wonderful day.