Welcome to Liontown's half year 2026 results call. Following the formal presentation, there will be a Q&A session for investors and analysts. Participants can ask both text and live audio questions during today's call. To ask a text question, select the messaging icon. Type your question in the box towards the top of the screen and press the Send button. To ask a live audio question, press the Request to speak button at the top of the broadcast window. The broadcast will be replaced by the audio question screen. Use the dial in number and access PIN provided to ask your questions via the phone. Alternatively, for those on a home or personal network, you can ask your questions via the web by pressing Join Queue. If prompted, select Allow in the pop up to grant access to your microphone.
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Thank you, Michelle. Good morning, everyone, and thank you for joining us today. With me today we have Greg Jason, our Chief Financial Officer, Ryan Hair, Chief Operating Officer, and also Grant Donald, our Chief Commercial Officer. If we can go to the first slide, please, Michelle. The important information. I want to start here by framing where we are as a company, because this half has been a real inflection point for the business. Firstly, Kathleen Valley is delivering as designed. We completed the transition to 100% underground mining during the first half and generated over AUD 208 million of revenue, more than double the prior corresponding period. The underground mine is scaling and we've got some more information on that that Ryan will go through.
The plant is performing notwithstanding, we are feeding it lower grade material from the OSP and we're finishing the remnants of the open pit mine, and we're shipping our product to customers all around the world now. The first half financial result reflects what should reflect for a company that's still in ramp up period. The statutory loss of AUD 184 million. Greg will go into further detail about that, but I'll unpack it that the number becomes it doesn't reflect the operating performance of the business. I'll just break it down into three constituent parts. Firstly, is a derivative charge, that's a non-cash item that's directly related to the convertible note and Greg will speak to that, a little bit later. There's an AUD 90 million depreciation charge, which is part of the open pit. We've finished the open pit.
It's over a three-year period and so we have to depreciate it over that three-year period. This is some capitalized commissioning costs as we've called commercial production in our plant. The key takeaway is that the earnings profile is getting better and for the right reasons. We're now feeding a higher grade ore into the plant and blending it with our open pit and OSP material, and recoveries are lifting. We're realizing higher prices. They continue to strengthen in the second half and all three of these push for us to deliver better margins. The market is also helping. We're now seeing BEVs emerging as a second demand engine alongside EVs. When we look at when we approved this project back in 2023 or 2022, we've got a different environment from the market perspective.
Permitting, financing and construction all take years to put into place. Near-term supply response is gonna come from brownfields expansion and restarts. That's good news for us because we're already producing. Which brings me to the 4 million ton expansion study underway at Kathleen Valley. This is a brownfields growth option from an operating asset. There is one of only very few around the world that can bring on additional tons to the market as quickly as this option can. That's the setup. I'll now hand over to Greg and the team to go through the details. Over to you, Ryan.
Yeah. Thanks, Tony. We'll just go to the next slide. Thanks, Michelle. This slide summarizes where we are operationally, and the headline is that the transition to 100% underground mining is complete. That is a significant milestone. Open pit mining delivered 917,000 tons of ore during the half, with the final ore delivered in December. Underground ore mined totaled 533 ,000 tons, highlighting the speed of the ramp up. The plant processed just over 1.2 million tons at an average grade of 1.3% lithium. Recoveries continued to trend upwards, averaging 61% for the half. Concentrate produced came in at 193,000 tons at a weighted average grade of 5%. Every metric is heading in the right direction. The inflection point from here is clean ore and grade.
As underground ore becomes the dominant mill feed, we expect recoveries and production to continue to improve. With that, I'll hand over to Greg.
Thank you, Ryan. Good morning, everybody. Can I please have the next slide? Great. I'll talk through some financial highlights here and then give you some more details later in the presentation. You can see the production and sales up as both Tony and Ryan have discussed. At a realized price level, we've got 18% improvement period over period. We have changed the calculation methodology to be more in line with what our peers are doing. We were previously reporting realized prices simply being the period revenue divided by the tonnes shipped. What that meant was you've got some mark to market or provisional to final pricing adjustments that relate to prior periods and to the extent that there's pricing data after the end of the reporting periods that needs to be picked up in quotation periods that was being missed.
Now what we're doing is we're representing the estimate of the realized price only for the tonnes shipped in the period, and $888 is the result. Just to help you translate from the Q1 and Q2 numbers that we previously reported, we had said that Q1 was $700 and on this method it's $691. We had stated Q2 as being $900 and on this method it's $985. We'll keep that method going into the future. Talking about unit costs, you can see the increase to $985 per tonne. This was almost all driven by mining costs. In the first half of FY 2025, we were processing material that came from the open pit, the large ore load there, large body, clean feed, lower unit cost.
In the first half of 2026 we were blending OSP material, so that has higher levels of contamination and hence impacts recovery. We also have the premium cost of the crushing and sorting of OSP that fell into the half and not the prior. We transitioned into underground as well, which has a higher unit cost of mining relative to that previous open pit material. The net effect is what you see now. You can see that the increase on all-in sustaining is about another $45 higher. That is the impact of sustaining capital kicking in. We had a new plant freshly commissioned in the first half of 2025, and in the first half of 2026 we've now got sustaining capital programs underway, driving that result. Moving down to the P&L section.
We more than doubled the revenue and this followed both the tonnes and the improvement in price. Underlying EBITDA was an AUD 8 million loss. The first important point about here is, notwithstanding the improvement in realized price, it was still a subdued price for the period. And the prices that you see now in the market really don't impact us a lot for the first half of 2026. Many of our contracts have got backward-looking QPs and hence full exposure to the pricing as it was. Secondly, we've got the ramp up and the unit operating cost impact that I spoke about before, the transition from open pit to underground. We also had a capitalization of production cost in the first half of 2025 because we had not yet achieved commercial production for the processing plant. That was declared start of last calendar year and hence.
That was AUD 39 million. Big difference period-over-period. Then the D&A impacts once you get to the next line, the underlying net profit, - 89. It has higher D&A with the open pit coming to an end, amortized over a short period. We had capitalization of interest for the same logic around having achieved commercial production in the first half of 2025. Ultimately, that gets us to the 89. When you go to the statutory result headline, there is a significant impact from LG. That was all about revaluing the derivative on the books for their convertible option. It was non-cash, and you should think of it as the share price went up, the accounted cost of discharging that liability with equity went up. We had to recognize that in the half. The conversion occurred on the 4th of February.
You're gonna see an AUD 58 million gain coming through the books in the second half, and that represents the difference between the total liability we had at the end of December, being the derivative plus the debt, and the market value of the shares that we issued on the fourth of February. 239 million shares at AUD 1.77 being the closing price. You'll see 58 in the second half. We closed with AUD 390 million. That's news we published in January. Strong position as we entered the year. I'll talk more about the balance sheet a bit later in the presentation.
Sorry. Next slide, please, Michelle.
Great. Thanks, Greg.
Back to you, Ryan.
Yeah, thanks, Tony. Safety still remains our core operational focus, particularly as we scale the underground. Our lost time injury frequency rate held at one through the half. The total recordable injury frequency rate increased to 11.55, reflecting the trend we flagged during the last quarterly presentation around manual handling injuries across our contractor work groups. The targeted actions around field leadership and contractor oversight continue. Safety observations at just over three per thousand hours show sustained workforce engagement in proactive hazard identification.
Our hybrid power station delivered 82% renewable penetration for the half, which reflects our ongoing commitment to low carbon intensity production. AUD 11.7 million in expenditure on Tjiwarl businesses through the period reflects the strengths of that partnership and our genuine commitment to meaningful local employment and value creation. Now turning to underground production on the next slide. Thanks, Michelle. The 37% quarter-on-quarter increase in ore mined to 308,000 tons in Q2 reflects continues to track well against the planned ramp up. As we noted last quarter, the mine achieved a 1 million ton per annum run rate in September.
For the December quarter, the overall run rate was just under 1.25 million tons, leaving us well placed to achieve the 1.5 million target by the end of this quarter. Development is progressing well, opening additional work fronts across multiple levels. Reconciliation to both resource and grade models has been good. Stope performance and dilution continue to remain in line with expectations, and infrastructure continues to perform well. The summary is infrastructure is in place and working well. The ore body continues to meet expectations, and we are ramping to plan. Now moving to the plant. Next slide, please. The plant continued to perform in line with expectations as we progressed through the planned transition in mill feed composition. As I mentioned, just over 1.2 million tons processed for the half at 92% average availability, stable and reliable performance.
Lithium recovery averaged 61%, continuing to trend upwards, reflecting deliberate feed sequencing and ongoing circuit optimization. The feed mix is the key story here. In H1, open pit ore still comprised around 60% of the feed. In H2, that shifts to approximately 75% underground, and by FY 2027 we're targeting over 90% underground feed. As clean, higher grade underground ore becomes a dominant source of plant feed, recoveries will continue to improve. With that operational summary, I hand back now to Greg.
Yep. Next slide, please. This chart shows you the waterfall between first half 2025 EBITDA and first half 2026. We've talked about the increase in revenue, largely driven by the tons. We've got the increased cost of sales excluding D&A, the ramp up in tons as well, plus the impact of the higher operating costs. I mentioned the AUD 39 million difference that was capitalization in first half 2025, and that's the walk down to the - 8. Could you please go to the next slide, which looks at the net loss after tax. Same concept here from -15 first half of last year to -184. Of course, we've got the carryover of the EBITDA from the prior slide. The LGES is a AUD 148 million turnaround.
We booked a gain in the first half of 2025 on the fair value of the derivative, but we booked a charge in first half 2026, hence the AUD 148 million. We did get a turnaround on the FX. The rate went south in first half 2025, so you got lower Aussie dollar debt and the reverse happened in 2026. Additional D&A around the tons and the capitalization of the interest not occurring or lower level in the first half of 2026. That gets you to the AUD 184 million. Can I please go to the next slide? We started the period with AUD 156 million. We closed with the 390, so AUD 178 million of receipts. The difference between that and revenue, you can see a corresponding difference in an increase in accounts receivable. That's just a timing issue.
AUD 237 million of production costs has gone up, of course, with the high level of activity. The sustaining capital of AUD 16 million, I mentioned that before, that we're now sustaining given we're past the commissioning of the surface infrastructure and big chunk of growth capital. That was dominated by underground capital development, plus associated underground infrastructure and completion of the paste plant. You can see the equity raising from earlier in the year, and that's where we get to AUD 390 million. Could you please go to the next slide? This LGES conversion has given us a real balance sheet reset. We got notice in late January. The conversion occurred on 4th of February, and it took AUD 482 million of liabilities off the books. The offtake agreement with LG is still in place. It's a 15-year agreement.
It's unaffected by the conversion and the change in shareholding. We still have the LISP and Ford debt, which is covenant light. The Ford repayments were rescheduled from last year until September of this year, and that's just over AUD 11 million per quarter. That begins in September. The AUD 15 million of LISP we will repay in equal halves over FY 2027 and FY 2028. That's quarterly payments as well. You can see the debt maturity profile of the Ford and LISP money. Starting the year with AUD 390 million. Conversion of LGES resetting the balance sheets put us in a great position. Start the year, keep going with the ramp up, look at the growth opportunities.
Consider diversification. I'll hand back to Tony.
Thank you very much, Greg. If I can go to the next slide, please, Michelle. That sort of sets us up for the next few slides that I wanna take the listeners through. You know, let me come back, and I think it's important that we look at this slide to show as history has unfolded and what does the future potentially hold. If we can talk about this chart tells a specific story. You can see the two previous spodumene upcycles, roughly 15 months and 18 months respectively. You can also see where we are today, where prices have come off the bottom and the market is tightening. The question is: How can we actually respond when the market needs them? I mean, the strap line says it all. The supplier response will favor existing producers.
There will be a greenfields lag. If their projects are not shovel-ready today, they will take longer to bring on, at least three years. New projects face years of permitting, financing, and construction requirements, so unlikely to deliver tons in this next upswing. The brownfield projects have an advantage. Existing operations with infrastructure and approvals in place will respond materially faster. The way we are looking at our project, we are going to progressively debottleneck and deliver incremental tons as we move the expansion along, which brings early cash flow in, but also it happens to manage our capital profile.
I'll leave you in this slide by saying that bottom strap line, which is, "We are uniquely positioned as an existing producer with the infrastructure and optionality ready to respond decisively." If we move to our specific project. Next slide, please. The 4 million tonne brownfields expansion. I mean, we spoke about this in our quarterly review. You know, the 4 million tonne is really a refresh of what we presented as part of our DFS. We're going to bring into this refresh all the latest understanding and knowledge of our operations so that we can fine-tune the design criteria. We know the areas that we need to target. They were stress-tested as we start to operate. Then we'll look at what do we do to give us that incremental debottlenecking to unlock those tonnes.
An expansion is expected to reduce our unit costs as we amortize our fixed costs and we increase scale. As I mentioned previously, you know, Liontown has a competitive advantage. We are a recent developer, and we've got all our key approvals and supporting infrastructure in place, and we're expediting timelines. We will bring this to the board in the first quarter of FY 2027, and it's subject to the board's approval and the way the market is unfolding at that time. If I go to the next slide, please. Just this final slide. I mean, we're delivering the transition, and the earnings are improving, as I said. You can see by the right-hand side of this slide, you know, the mine plan comparison. Oh, sorry. If we just move to this final piece.
I mean, I won't repeat what I said at the start. You know, Kathleen Valley, we're delivering as designed. We've gone through the ramp-up phase, and we've produced a series of financials that reflect that ramp-up. The more important point is earnings trajectory are improving as the ramp-up progresses and the market tailwinds that we're getting. We've got a real live option in the 4 million ton expansion that we're refreshing that will set us up to capitalize on an improving market. If we go to the final, just in closing then. You know, before I open up for questions, I want to acknowledge the team at Kathleen Valley and what they've delivered in this transition, both safely and on schedule. They've done what, you know, we said they would do, and that's what matters for me and the board.
I wanna also acknowledge our shareholders who have stuck with us. The story is simple here. We are through the hardest part. The transition is complete. The balance sheet is cleaned up. Costs are coming down. Prices are going up. We've got growth options. We're in a very strong position as we look forward. Thank you, and I'll take questions from here.
Thanks, Tony. If you have not yet submitted your text question or joined the live audio queue, please do so now. To ensure everyone has the opportunity to ask questions, please limit yourself to two questions initially. You're welcome to reenter the queue if you have further questions. I will introduce each caller by name and ask you to go ahead. You will then hear a beep indicating your microphone is live. Our first question comes from Hugo Nicolaci from Goldman Sachs. Hugo, please go ahead.
Morning, Tony and team. Congrats on continued strength and ramp-up of the project. Look, firstly on the debottlenecking piece. Sounds like things are progressing quite well already on restudying that. If you're ready to go to the board in the September quarter. I'm just wondering if you could provide a bit of commentary around how you're seeing the cost piece there relative to previous expectations. I think historically, sort of talking to the low hundreds of millions AUD to debottleneck the plants and sort of similar magnitude to build the next mine to support that. I was just commenting in terms of, you know, directionally upwards the sort of magnitude of how much those costs have maybe increased since you last looked at those, please.
Well, clearly, Hugo, thanks for the question. We're looking at that right now, right? We're very alive to the market context. When I mean the market context, I mean the market context for construction and the supply of equipment. You know, the previous estimates that we provided to the market was AUD 100 million for the plant and AUD 150 million for the mine, right? You know, we'd like to think that that's the same order of magnitude, but I don't want you to hold me to it until we finish the study.
Yep, that's clear. Maybe just one in terms of the cost piece. You know, I appreciate the underground mine's still not commercial yet, and that's still targeted for the June quarter this year. Be able to just give a bit of a breakdown in terms of where your mining costs and processing costs are sitting at the moment and then where you expect them to get to as things continue to ramp up?
Okay. Ryan, do you wanna take that or do you want me to handle it?
That's fine, Tony. I think, Hugo, we've previously made some commentary in relation to the underground mining costs, which are kind of in the order of AUD 100 a ton, all delivered, and the costs kind of sit around about that. When you've got that data, you can probably infer then the processing cost, given we've become pretty transparent around the overall unit operating cost. Directionally, when we spoke in the quarterly presentation, we spoke to the fact that we'll obviously give further guidance around FY 2027, as we go through that kind of budgeting process.
I think the thematic that we've previously spoken about, where, you know, as we mine into the lower levels of the mine at larger scopes, which means that the same cost to kind of get those tons out is distributed across more tons, will directionally lower the unit cost of mining. Similarly, as we put more clean ore, clean underground ore specifically through the plant, recoveries will improve. Production will therefore follow and the denominator, being production, being bigger will have some fixed cost dilution impact. All things speak to directionally what we've spoken before about the value of the larger scopes and increased recovery and production all still trending unit operating cost lower.
As I said, we'll provide further guidance as we go through our internal budgeting process in the lead up to FY 2027.
The next question is from Levi Spry from UBS. Levi, please go ahead.
Yeah, good day, Tony and team. Thanks for your time. Maybe really one for Ryan, I guess. Just now, you know, partway through, good partway through the March quarter, can you just give us a bit of an update on the 500,000 tons and I guess the 70% recovery target? How the ramp up of both those are going?
Yeah. Thanks, Levi. I appreciate the question. The 1.5 out of the mine we're very confident in. As you said, we're most of the way through the March quarter at this stage, still very comfortable with the way that the mine's performing, and the way that, you know, equipment ramp up, and ongoing development of the mine is giving us further work fronts and further opportunities to track on. I'm still very confident in that. Beyond that, you know, beyond the 1.5 to the 2.8 at the end of FY 2027, again, everything's still on track for that.
As I said in my opening remarks, the mine continues to perform pretty much exactly as we had planned it to. Nothing on the horizon that we're concerned about there, other than you know, ramp up always has quite a bit going on, but as I said, the team has it all in hand. In terms of the plant, you know, we're still very confident in the plant's ability to you know, run for extended periods of time. Good availability, good throughput. In terms of recovery, as we've said, I think a few times before, 70% recovery is very achievable. We're on clean underground ore and whenever we run underground ore through the plant, we get circa that level of recovery.
In fact, only two days ago, we had a +70% recovery on some slightly contaminated underground. We mixed it with some of that OSP material that Tony was referring to. Plenty of data for us to support underground delivering that type of recovery. In terms of Q3, we are processing more open pit material than we had planned. Or certainly, you know, back when we originally came up with the budget 12 months ago. You might recall at the end of the last quarter, we'd indicated that we had extracted more ore out of the open pit. With that additional ore out of the open pit, we therefore had larger stockpiles, and we've been processing that through this quarter.
The predominant feed type at the end of the quarter will only just be converting to underground by the end of the quarter. We'll expect to see more of that consistent 70% recovery as we head into Q4. Hope that answers the question, Levi.
Yeah. Perfect. Thanks. Thanks for the extra color. Then just back to the 4 million ton expansion studies for FY 2027. Can you just sort of play the timeline movie with that one, I guess, versus the, you know, ramp up to 2.8 within the FY 2027? You know, how are you thinking about ramping up to 4 from underground mining as opposed to the plant?
Tony, I'll take this. That's okay?
Yeah.
I think probably the easiest way to think about this, Levi, is that the 2.8 case I think just continues. In order to get to the 4 million tonne case, we'll be doing a couple of things in parallel. The first is that if you refer back to the slide where we had that 4 million tonne case, and I don't know for sure whether you can go back there.
There was a section of the Mount Mann deposit which, as part of the recalibration in November 2024, we deliberately went past, and we can now go back and start to extract ore out of those upper levels in the Mount Mann ore body. That's point one, and that will be incremental over and above what we have put in the 2.8 case. The second thing is that the other thing that we had chosen to do in November 2024 was defer the work in the Northwest Flats deposit. What we will do is start to extract ore out of that deposit.
The option we've got now, which we didn't have at that time, was to actually go from the bottom of the open pit, and take that ore directly out of the Northwest Flats deposit. That will also happen in parallel. If you think about the 2.8 case, you add on some additional ore out of Mount Mann and some additional ore out of Northwest Flats, which is now easier to get at, coming from the bottom of the open pit, then both of those, you know, should happen in parallel.
With the 2.8 case, and with all that in mind, we're anticipating that the underground mine ramp up will, broadly speaking, match the de-bottlenecking that Tony spoke about when he was talking about the plant work that we'll do to incrementally unlock capacity out of the plant. It's roughly over the same period of time, and as Tony was indicating, brownfields expansion is always gonna be quicker than greenfield. You know, if you said a greenfield was gonna take 3 years, then we'll be, you know, probably more in the order of a couple of years rather than 3.
The next question is from Hugo Nicolaci from Goldman Sachs. Hugo, please go ahead.
Hello again, guys. Back so soon. Firstly, just a follow-up, Ryan. Just wanted to clarify that AUD 100 a ton mining cost. Is that what's being expensed or is that the total cash cost, including the sustaining development capital?
I might hand to Greg on that one, but yeah, Greg, maybe you start, and I can provide some color.
Yeah. Oh, yeah, go ahead.
Total cash.
Yeah, total cash.
Great. Thanks. Is that? It doesn't include the development spend, though?
It doesn't include the amortization. It is the cash cost of the mining.
Got it.
It doesn't include sustaining capital. The development cost.
Yeah. Well, maybe the best way to provide color on that is that, so if you've got the actual, you know, cash cost of the day, plus what is relatively minor sustaining cost, then that's included in the hundred. The development cost of which, you know, you may spend a significant amount of time and money, obviously the work we've done to date, getting to that zone of the ore body doesn't include that. It does include the minor sustains, so things like, you know, increased vent, some, you know, pasting costs and those kind of things. It does include that, but not that development cost. Hugo, if that makes sense.
Next question is from Andrew Harrington from Petra Capital. Andrew, please go ahead.
Thank you. Morning, gents. Could you elaborate on your customer, Wagon Wheel? Like where is your, you know, quarterly shipping destination? Is it all China or half China? How do you see that going forward?
I'll hand that over. Thanks for the question, Andrew. I'll hand that over to Grant Donald, our Chief Commercial Officer.
Yeah, sure. Look, in previous presentations, we've included our offtake chart just to show where the volumes are going. I'd refer you back to that. Broadly speaking, you know, our main off-takers are Ford, Tesla and LG. As we've said previously, the Ford tons in the first 18 months are going to Chengxin, which is a Chinese refiner with a facility both in China and in Indonesia. From 2027 and 2028 that will go to Canmax in China. The LG volume and the Tesla volume have traditionally gone to China. Obviously it's well noted that Tesla built a refinery in the U.S. and that's the plan for the ultimate destination for that product once that one's fully ramped up.
Okay. Thank you. A broader question in terms of with the Middle East war, do you expect any changes in terms of your, say, fuel costs, and I guess, are your customers saying anything differently or more urgently to you? Or what things do you think may shift if this goes on, that, you know, positively or negatively to you?
Yeah. Andrew, I might take a portion of that question, and then I'll ask Grant to finish it off in relation to customers. But in terms of fuel and diesel specifically, I mean, we are 80% renewable. That gives us a big, big advantage. Most of our power is generated by renewable sources. On average, our total diesel cost is about 4%-5% of our overall cost base. It's not a significant amount. We're pretty confident from that perspective. I'll hand over to Grant to talk to you about the customer impact.
Yeah. No, look, I mean, talked a little bit about where most of the volume is going. At this point, we haven't got any sense from customers that there's any issue from taking a ship from Australia to China. It's a relatively short voyage, you know, less than two weeks. I expect that trade to continue. We have seen some disruption from Africa into China, and that has sparked some interest from customers who are exposed to Zimbabwe volume, to secure more volume. You know, that's a different issue.
That is all the questions from the queue. I will now hand back to Tony for closing remarks.
Thank you very much, Michelle. Thank you to the listeners. Thank you to the people asking those great questions. Thank you to my team for putting today together. Leanne, Jared, Ash, and Claire and the team, really appreciate it. Yeah, let's look forward to the second half.