Ladies and gentlemen, thank you for standing by, and welcome to Mineral Resources Institutional Investor Call and Presentation for the Full Year 2021 Financial Results. I'll shortly hand over to Chris Ellison, Managing Director Interim Resources. Please be advised that today's call is being recorded and the presentation contains forecasts and forward looking information. Today's conference call. A copy of the presentation and a transcript of this call will be posted to Mineral Resources' website under the News section at mineralresources.com.au.
At the end of the Managing Director's address, there is an opportunity for institutional investors, analysts and media to verbally ask questions.
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I will now hand over to Chris Ellison.
Thank you. Thanks, Rachel. Good morning, everyone. Thanks for joining us. This is the Mineral Resources full year results.
I'm Chris Allison. I'm going to be joined by our CFO, Mark Wilson, and Mark will walk you through the financial part of the business. Big year for Mineral Resources. Good results we've turned out, but it's been a tough year and everyone trying to navigate and trying to understand what effects This COVID virus is having on our business and it had effects on us pretty much on a daily basis, But we've managed to get a landing. It has not been easy, but it's been outstanding.
We've had some record profits record tonnes. Moved a lot of dirt around and we've got some outstanding opportunities in front of us over the next 2 to 3 years that we got a challenge to be able to deliver on. I'll talk about those a little more shortly. The safety in the business has been outstanding. The caring and the culture and the well-being, we've got Some amazing people in our business and we've got a lot of good people that have been around a long time.
I'm going to talk a little bit about how we're caring for our planet And then we'll talk about where we've been over the last 12 months and where I'm taking the business moving forward. Some key highlights. We've invested heavily in the business in terms of our people, in terms of the culture, How we care about our people, how we look after them. We care about them around not just safety, but their mental well-being and their health And that's making a lot of inroads into us getting to a better place with our people. We've had some outstanding innovations that we've developed over the last 12 months.
We're able to turn those into projects. Our safety Around our people has been significantly improved over the last year. And frankly, I thought we were sitting last In terms of industry standard, I didn't think we could get better, but our team had delivered a 30% better result on that. EBITDA were up 148 percent at 1,900,000,000 yen 1,500,000,000 cash in the bank. Mining Services volumes are up, iron ore shipments are up and the lithium, it's been a tough market out there in the lithium with Keep Mount Marion running and Mount Marion's delivered almost 500,000 tonnes of product.
It's probably the only hard rock mine in the country that's been running at 100% production. On the energy front, we've increased our exploration footprint. So we're now the largest landholders in the Perth Basin and also We've picked up a huge track of land up on the onshore Carnarvon Basin in a joint venture. Innovation, We've had some great progress. We've delivered on the 15,000,000 tonne a year next gen plant.
It's fully operational and probably running a bit ahead of our expectations. We've developed some carbon fiber screens for our crushing and processing plants and in conjunction with Kenworth, we've delivered some 3 20 tonne payload haul trucks. We've got 5 in operation and another one due shortly. But overall, it's the best year we've had to date and that's really Thanks for the dedication of an amazing team that we've got, in fact probably the best by far management team I've Out of my work and career. Safety, as I said, outstanding result.
You consider that we've added over 1500 permanent people to our payroll during these times, which has been a difficult task, but to bring them on board and to be able to Get them to understand our culture. We've got them involved in a lot of the training we do, which is the core of our safety. But nonetheless, we did have one injury during the year. We had a crushed finger. We had an immediate response to that with all of the senior management involved.
We got an evacuation. Our Chairman of MinRes Health, Doctor. Neil Fong, Managed the case remotely and when I say remotely, I mean he was holidaying up in the Kimberley and he made sure that we got all of The right key wrapped around the young lady and we've managed to save a finger and have a full recovery. So A big deal in our business, something like that happening. So we've made changes across our business to make sure that we don't have a repeat of that, but Our safety has been exceptional results.
If you have a look at our peers, I mean, we sit at the very bottom of the curve. Well-being, another big focus in the business over the last 3 years. We've really looked long and hard at the culture of the business and the well-being of our people. We consider now not just to bring them home safely, but we want to bring them home mentally and physically Strong and fit and we want to make sure that our people understand that they are More than just employees for the business. We want them to be with us for a long time, their entire working career And we're doing a lot of things to try and make the work environment for our people probably in the top 20% in the country.
We're developing a new head office. It's going to have state of the art facilities. We're going to have gym, wellness center, restaurant, cafe in an amazing work environment where people are going to be able to work in good peaceful areas. They can work in collaboration. They can do a whole range of things.
And then we're going to carry that out to our mine site. So new camps we develop are going to be more resort style than a camp. We're going to have bigger rooms. We're going to encourage couples to be able to work and live together on-site. We're going to have Olympic sized pools.
We're putting in wellness centers, restaurants, cabins, cafes. We're going to have in some of the Areas where we've got camps on the coast, we're going to have crisis as we are in our new head office. Look, Some of the things that we've been doing around particularly around mental health, we have had a full time psychologist on board for about a year now and making a huge difference in the business. We got 50 trained first responders through our Lifeline partnership. We've got over 700 people that have completed the mental health literacy models And we're really starting to get a different focus in our workforce and around site around mental health.
We've got a great partnership with Youth Focus. They've got a dedicated person that looks after our under 25 year olds and They can be in direct contact with that person. The mental health training, we're trying to destigmatize people reaching out to get help and we're making great inroads with that. We're growing the MinRes Health business. So When we move into our new facility up in Osman Park, we're going to be Staffed with a medical facility.
We're going to have a couple of doctors in it. We'll take care of all our people medically. We've got over 40 nurses on the payroll and we've got a physiotherapist coming on board to help around our wellness center. So A lot of work we're doing around our people, but the people are the core to this business and they continue to deliver. Sustainability.
We're developing our talent. We've got new apprentices that come on board. We do an intake every January. This year we brought 14 on board. We got 63 in total in the business.
We got 53 trainees. They've basically come on board at entry level. Most of them have never heard of a mine site before let alone seen one. We try and get them into the business through dump truck operators. It's the easy entry for them.
We get them on to site. We've got young people out there that start around 90,000 a year on salary and Once they're in the business, there's a whole range of things we can do to progress them through in different career paths and that's working extremely well. Graduates, we've got 14 that we brought on board recently and they range through accounting geologists, engineers, METs, Environmental Department right across the business. Our contribution to society would put about in billion spend into the WA economy over the last 12 months. We've paid about $700,000,000 of our favorite Taxes to our beloved governments.
We've increased our social contribution to over 70 different charities And they're generally around health, well-being, education, employment, family violence, a whole range of issues that we think that We have a need to contribute heavily to our sustainable business. We're committed to 0 emissions by 2,050 and we think that we're going to bring that in much sooner than that. We've reduced our emissions intensity by 5% this June. Yes. We've developed a transition plan to low carbon future and we want to achieve net zero emissions And we've outlined that in our sustainability report that will be out in October this year.
Basically, look, In the short term, we're doing everything we can to reduce the burn that we have on diesel and we're looking to replace that with a whole range of alternate clean fuels and we're Succeeding on that on a weekly basis. So I mean we're very heavily focused on making sure that we can Clean up the workplace that we're in and make sure that we're very much aware of the fact that we want a carbon neutral world. Financial performance, good headline numbers, return on invested Capital, almost 40% this year. It shows that we are very focused on making sure that if we're going to invest in something, we've got a minimum return we Inspect. We've averaged about almost 37% return over the last 3 years, Revenue up 76%, underlying EBITDA, good delivery on that.
The cash at bank, dollars 1,500,000,000 and we're putting out a second half dividend of $1.75, that's $2.75 for the full year. So look, I'll just pause on that for a minute and I'll let Mark walk you through where we've been on that financials.
Thanks, Chris, and good morning. It's a pleasure to be here with you this morning to walk you through the FY 'twenty one financial results. As I've done in previous years, I'll focus my comments on the underlying performance of the business. This year, we have continued to improve our disclosure. You'll find a reconciliation of our underlying earnings to our net earnings in the segment note to our financial statements.
That note reports that over the course of the year, we've generated unrealized gains of approximately $230,000,000 pretax on our investment book, unrealized FX gains of about $52,000,000 and impairments of about $46,000,000 10 of which were taken in the second half. We've also for the first time provided you additional information on mining services, tonnages, actual tonnages to assist. Overall, I'd characterize this as another year of strong operating performance by the business. We're benefiting from the significant investment we've made in recent years to support the development of our mining services core capability, which runs deeply through the business and we're using that capability to leverage into new opportunities in the commodity space. Starting with the P and L, as Chris said, record profitability for us both at an EBITDA and an NPAT level, Very strong results across the business.
The only part of the business that hasn't contributed strongly to the result is the lithium commodities business. Chris touched on this in his opening remarks. The volumes out of lithium were extremely strong. We shipped 23% more year on year, that the pricing remains soft through the course of the year and it's really only since the end of the year that we've started to see that lithium price start to move. In terms of volumes through the whole business, they've been consistently strong in terms of growth, Whether it be in iron ore shipments, lithium shipments, mining services volumes growth of 20%, strong growth activity through the business.
Mining Services margins have remained stable and strong through the year, solid performance from that segment. Commodities margins have improved as a result of stronger commodities prices. We have started to see, particularly in the second half, Cost pressures emerge through the business and we expect those cost pressures to remain with us for a short period yet. As a result of the and following the strong financial performance through the year, the Board's resolve to declare a fully franked final dividend of 1.75 That takes the total payment over the course of the year to $2.75, CHF 40, as I said, record payment. And that's The next slide attempts to describe the path of the year in terms of our EBITDA performance.
And yes, we have grown underlying EBITDA by $1,100,000,000 which is a substantial result. What this slide shows is that Leaving aside the performance of the commodities prices and the associated impacts of royalties and so on, The underlying business has performed very strongly. We've seen 18% growth year on year In terms of our cash flow, On the next slide, we've seen very strong cash performance out of our core operations this year. We've had a very strong working capital performance, means that our operating cash has been very Strong, well over $1,900,000,000 We have invested heavily in the year with CapEx at $745,000,000 and I'll talk to that in the next in Slide, a bit more detail. Over the course of the year, we did make the final payment of $333,000,000 on the tax on Wodgina gain as previously foreshadowed.
So over the course of the year, we've spent over $900,000,000 on taxes and dividends. In terms of the CapEx, we did guide earlier this year in. So a 600 number for the full year. We've come up a bit higher than that. We've had some additional mining services opportunities that we've invested in.
We've also started to spend on ash burden and on oil and gas. So we've landed the year at 745 Inc. Guidance next year is a little bit below that. As Chris said, we have also invested during the year in the new head office and that we see that as a Critical component of the offering for the business going forward. In terms of the balance sheet, Cash, as Chris said, finished at just over $1,500,000,000 cash despite a significant year of investment and tax payments and so on.
We have seen receivables and payables grow consistent with the growth in the business, as you would in. But I think one of the really interesting things for me is that whilst we've been able to deliver substantial growth in the business and we've held our inventories pretty much there or thereabouts And so the working capital position has been extremely strong against the backdrop of a very in A business that's growing at a significant rate. There's a fair bit of commentary on the rest of that slide, so I won't go through all those points. I will note though, in summary, whilst the business whilst the balance sheet has grown significantly over the year, It's in a very, very strong position to support the growth opportunities that are in front of us. Next slide takes you through a waterfall movement of net debt over the year.
We finished the year net cash 280,000,000. When you adjust the opening position for certain events that relate to prior years such as the Wodgina tax payment, We really started the year on a net debt basis of 2020. So looking at a $300,000,000 in. Take a moment to go through a few more slides, show you a little bit about the history of the performance of the business over the last 5 years. So the last 5 years, we've grown earnings strongly.
We've done this by broadening the offering of our mining services business, developing those capabilities further, engaging with external clients and leveraging into new commodity opportunities for the business. We've been able to grow the business significantly over the last 5 years. The balance sheet size has doubled. We've done that without raising any equity and we've been able to maintain conservative gearing on the balance sheet through that period. Consequence of that is that we have improved diversification, increased scale of operations and businesses in a far more robust position.
We're now generating more predictable cash flows and earnings through the business. In terms of our free cash flow generation, We do believe and we've said this consistently that return on invested capital is the right measure for us to be focusing on. This industry is capital intensive. Projects do span a number of years. It is important that we retain capital discipline.
We do focus on an after tax measure of 20% at project level. We do that with the aim of delivering at least 12% at a corporate level. That discipline, that approach has seen us generate about $1,400,000,000 in cumulative free cash flow over the last Finally, in terms of Performance Since Listing. You can see on the left, our return on invested capital outcomes Over the 15 years since the business listed, both on an actual annual basis and on a rolling 4 year basis to show the cycles, What that discipline focus on ROIC has done, it's helped us deliver significant growth in cash flow, operating cash flow. Through that, even over the last 10 years, we've delivered that $6,000,000,000 of in cash flow through the operations.
That's allowed us both to strengthen the balance sheet through retaining earnings, but also to pay out dividends and the dividends have grown at an average of about 29% per annum over that period. The end result of all of that is that the business is extremely well placed With a strong balance sheet to leverage into the significant opportunities that we have in front of us going forward.
Okay. I'll just run you through what the business has been up to over the last 12 months, and then we'll get to where we're heading to over the next 1 to 3 years. So anyone that's new to the MINRes business, we have a reasonably unique Business Model. We started life as a mining services organization. We've had that in our DNA ever since and we work hard to keep that.
But Over the years, we've grown into a range of different commodities where we've been able to do joint ventures, farmers and in some cases, we've taken over businesses that have got good commodities sitting inside them. In. We've been able to develop them in a fairly unique way. We can get them up and running reasonably quickly so that we make sure we catch the cycles in the market And we can turn those projects into reasonably long term operations. So We're predominantly WA based.
All of our commodities are WA based. We've got good infrastructure and supply chains up and down the coast. We're in Western Australia. By good fortune, I mean, it's one of the probably the best mining regions in the world. There's a high level of social acceptability by people that live in WA for the mining industry to be able To operate the way it does, we're very politically stable and we've got a very savvy government that understands Our WA is best positioned to generate the revenues that it does.
And we're also very close to our trading partners, in particular our biggest trading partner, China, who Western Australia very much values that relationship and we're working hard to in. We're addressing our carbon footprint. We're looking at all Different fuel types, whether it be from the sun or from batteries and we're trying to Make sure that we're up there with any new technology that comes out. We want to reduce our carbon footprint and we're working as Hard as anyone is to do that. The business is generally made up of 3 pillars.
So we've got the mining services, which is our foundation. We've got the commodities and then we run what we call our innovation and new technology. And that over the last 2020. 20 or so years has enabled us to be the leading crushing and mining services organization in Australia. And in fact, in.
We rate in the world in terms of our capability and the amount of rock we crush. So a good solid business. In terms of mining services, we've got A huge workforce that have been with us, most of them have been with us for a long time and that in itself is the culture and The reason why we're so good at what we do is we got so many very, very good people. The iron ore, we've got 3 operating mines, 2 in the Pilbara and one down in the Yilgarn. The lithium, we've got 1 up north in the Pilbara again and JV with Albemarle From the U.
S, that's a sixty-forty JV with Alvheim at 60. We call that the Marble JV because it owns Not just the Wodgina mine, but it also owns the Kemerton hydroxide facility that's currently under construction in due for completion late this year. In terms of energy, we're the largest acreage holder in the Perth Basin. We have a huge amount of land up there. We're actually drilling our first hole and we've also got a large track of land offshore, the Carnarvon Basin up near Onslow.
And innovation, as I said, we've got a lot of proprietary technology inside the business And we benefit through our crushing and processing hubs. We're in carbon fiber transport systems to make sure we've got in Services for over 20 years. And we've got a lot of energy in that space and we're just getting started with that. There's some great opportunities ahead of us. The mining services performance over the last year, it's been exceptionally strong.
We've grown by about 20%. It bounces around a little bit the growth in the mining services, but some halves. We jump up by 30% or 40%, but we seem to sit at an average of better than 20% over the last couple of decades and that's probably only going to get better as we go forward over the next 3 years because we've got Some incredibly good long term mining services contracts that we've got locked away. Over the last 12 months, we've had 3 new contracts we've entered into. We've got 5 that were renewed and Our customer retention in our mining services business is always extremely high and that's Simply based on the value that we can return to our clients in terms of performance and cost.
We run 26 operating plants around the country. We got 17 open pits operating. In our construction division, we recommissioned in the Carina Mining iron ore hub and we're using that to get more tonnes out of the Yieldgan. Wan Mana. It was designed, constructed, commissioned all in the space of 5 months.
So first or 5 months after we Put the first shovel on the ground and that started at a 5,000,000 ton run rate. We got 20 cranes and a couple of 100 people down at Kemerton in. And in the Ashburton, we're finalizing the design and trying to finalize in. Let's get all the approvals in order so that we can get that started shortly. And they've designed and constructed the parka range down on the Yieldgar and that's in the energy space.
We've put down almost 700 ks of seismic was completed and we've Got our first big drill rig on-site and we're over a kilometer down in that hole at the moment. Had a bit of disruption with COVID getting people across borders, but They'll get that down over the next 3 or 4 weeks. And our energy guys are also installing The 2.1 meg solar power station up at our new Wan Mana site and that's something that we're going to be continuously doing right across our sites. We'll be adding That clean type energy wherever we can, which is most places we are lucky that we've got lots and lots of sunshine in WA. In MnRes Marine, which is a new part to the business, headed up by Jeff Webber.
He's done an amazing job. He's pulled together, finalize the design on a new concept of the transshipment. It's going to be able to pick up 20,000 tonnes in about 5.5 meters of water And take the ore out to Capesize Carriers and we'll be able to load those. It'll in fact be Our lowest cost port operation in WA once we get that into operation. Our long term mining services, a couple of charts in there that you'd like to see.
The mining services business, as we say, it averages a bit over 20% a year over the last 3 years. It's averaged 30. The margins are always strong. They're consistent through the cycles. They don't move around too much regardless of commodity prices and They've got very good predictable long term annuity streams, so very good part of our business.
Commodities performance, the numbers are all there to look at, costs and tonnes that we have. We had A lot of disruption with COVID trying to move people across borders and people getting locked out, but the upside of that is that in. Our WA government has been very strong in making sure that WA is safe and all the mine sites have stayed open. We've had no mine sites in WA closed through COVID, Which has turned out to be a powerhouse for Australia. So we come in at the bottom end of guidance, but as I said, We've never been through a virus like this before, so we're learning to manage it now.
We're learning to live with it. Iron ore costs are up slightly Due to increased costs we've got wrapped around trying to keep them to operate under these conditions and we've got some short term increase in strip ratio, which will probably disappear by about the end of the calendar year. The Yield Gun Hub, We've got that bedded down well, mine planning is running well and it's basically sitting in a steady state. We're slowly replacing all the big in land haulage fleet down there with our new 3 20 ton road trains and we're pretty much running at capacity through the Esperance port and We got some material going through back through the Kwinana Port where we used to export the Kwinana ore. Lithium prices are increasing We still see demand.
It's a little bit rubbery, but because there's much less product in the market than there was 2.5 to 3 years ago. Obviously, the supply demand is moving reasonably quickly over the sort of 6 or 9 months, but we just got to wait and see where we head with that. If we turn too much supply on, we may end up in a Not a good spot, but our friends at Albemarle are very focused on where that's heading. But the outlook certainly for lithium It's looking extremely robust and it's going to be a significant contributor to our business over the next decade or so to come. Mount Marion, it's been running well.
Exports are up the on the prior year. We've improved the yields, we've lowered the costs slightly. So Marion's running well. Future direction where the business is heading going forward. We've got lots of opportunities out there.
We've developed some of them we've been working on for the number of years and they take time to come to fruition. I mean the average job in our business probably takes about 3 years from when we first spot it to when we can Actually get it on the ground and it can take longer, 4 or 5 years. So we've always got a long pipeline in projects that we're looking at and they're always at different stages. So, the core of where we're going, future opportunities in the mining services, There are a lot of opportunities with the big Tier 1 minuteers that we work with, and we're not just out there turning up in. As a mining services contractor, when we turn up, we turn up probably the best processing and crushing equipment in the country, Certainly very innovative, low cost.
We can get to site. We've got without doubt, we've got the best workforce in terms of Safety and the culture and the way they go about things and get things done. They're very consistent at the top end of the market on production and mining and crushing processing And our supply chain, very similar. We've got 2 big supply chains that run through the Pilbara and down here in the south. And there's a combination of big off highway trucks, trains and on highway road trains.
We are without doubt the biggest hauliers in the world when it comes to Number of trucks on the road and off highway and tonnes moved with rubber. So there's Probably a couple of good opportunities we're looking at putting to bed externally and then over the next 3 years, The mining services part of the business is going to be adding some next gen crushing plants through Ashburton and then later through the South West Creek Hub. They'll be adding at least 145 of these big jumbo road trains in the Ashburton And they'll also be owning and operating those Fortran shippers that will run around the clock and all of those guys will be delivering about 30,000,000 tonnes a year of production and And we can see a bit of daylight or we can squeeze that a bit beyond. Southwest Creek Hub, it's Probably going to come to light in the next month or 2. The government's decision, they've obviously been held up on that a little bit in They've been fairly full on managing COVID and a whole range of other issues and keeping us safe state, but we expect some announcement on that not too far down the track.
And if we can get that moving then we'll be the Mining Services business will own the life of mine mine gate to FOB ships, the logistics supply chain part of that, that'll be there. So some big opportunities sitting in there for The Mining Services. Commodities, the iron ore, we are going to Put first ore on ship out of the Parker range in September. Mt. Richardson is next, the Utah Hub.
Iron Valley will continue forward but at a reduced rate. One Mana is ramping up from 5,000,000 to 10,000,000 tonnes over the next few months. And Lambs Creek, we think we'll have that online by about the end of next calendar year. So That's our Utah hub and good mine planning wrapped around that. We know where we're going with it.
The Ashburton hub, 30,000,000 tonne operation, incremental parts of it have already started. It's approved by the Board, but subject to us Landing the final approval. So the port approval was due out imminently and we've got a little part of the corridor for the Off Highway Road to get approved. So we're aiming for feet on the ground up there in about September And we're looking for 1st ore coming out of there in the first half of twenty twenty three and it'll be at the back end of that first half, Great project. And then Southwest Creek, look, it's basically awaiting the government to announce what the Channel and port allocations are for the inner harbor.
We're hoping to be successful on that. And if we are On both those projects, we'll be making announcements probably between now and the AGM, but the AGM will be able to give you an awful lot of color about where they're at and where they're heading. Commodities on the lithium, look, the Mount Marion will continue as it has up over the last 12 months. It will do that again this year. Wodgina, status quo remains that we're in caretaker mode up there and at the appropriate time that will start, that will come back online.
We are focused at the moment on Kennerton. We're looking to have construction on Train 1 complete by the end of the year and sufficient product coming out of that so we can get it out and let the customers test it. Train 2, as Alba Marl announced last week, is about 3 months later because the labor's come off that to make sure we deliver on Train 1. But generally speaking, under the conditions that have prevailed over the last year. They've done extremely well to get that plant where it is.
So our focus on lithium over the next 3 years from a MINRes point of view in We want to try and make sure that all our spod gets converted to hydroxide. So we'll be working on that for the last 6 months and we hope to have some developments on that over the couple of months. Innovation, look, we've spoke about that. We've developed some great Pieces of kit and equipment. I mean, generally speaking, the trans shippers and the big road trains, they allow us to be able to deliver commodities that are in regions previously stranded because there's no supply chain, there's no rail, there's no ports.
So they're allowing us to be able to get into regions right around the country and be able to deliver product onto a ship at a very, very low cost, which means that there'll be sustainable projects through all of the cycles. So Trucks next gen, lots and lots of Development going to happen around those over the next 2.5 to 3 years. So finally, I think we're getting towards the end. Guidance would give you some tonnes. We'll give you an understanding roughly of what the costs are.
We think certainly the mining services region is going to grow And we give you a peg in the sand on the CapEx. That CapEx is probably changeable obviously if we when the approvals come through and We get a grounding on Ashburton. We'll be coming back to the market and we'll give you full details around Where we're heading on that and what the costs look like and that'll probably crank up our CapEx once we get moving on that without doubt. So closing comments, it's been a tough year in some ways, but it's been A great year for the business. I mean the business has developed extremely well.
The business is running well. We've got an amazing Management team sitting in the business. It's been frustrating in some areas. The government have been really working Hard to keep our safe state. Approvals are a little slower than we'd like, but they're working through that and we're Getting them out slowly.
So held the projects up a little bit, but not too much. We've got a lot ahead of us. We've got contracts coming through over the next 12 months. We've got 2 without doubt, 2 major iron ore projects that we'll be starting up. But this COVID and this latest wave that we've had running around the world and True, the East Coast is very disruptive.
The business it's going to continue to be disruptive. It disrupts our supply chain. It makes sourcing people and getting them to our projects difficult, but we're learning to live with that. But look, There's huge opportunity out there and we'll do what we always do. We've got a very strong Board.
They've been very focused. We've had A few of our board members that haven't been able to get over here, from time to time we've got one. We've got Zizzy sitting over in Hong Kong and She can't get into the country, but incredibly supportive. They've been on the screen. They've helped us and the management team led by Brownie, Paul Brown, Mike Gray, Mark, looking after the money, a whole lot of amazing people that sort of sit under them.
And I mean, that's the heart and soul of this business and that's what drives Bottom line, it's driving an incredible future. So look, thanks to all of our people in MINRes that have Delivered this year and we expect to have a very successful year going forward. And finally, look, thanks also to the McGowan government that without a doubt made this state probably the best state in the world to live in. And financially, we're robust, but we're also healthy, fit and we can get out and about and we can still in Enjoy Life. So that pretty much wraps up the presentation and Mark will come back up and join me.
And If you've got any questions, we'll do our best to give you an answer.
Thank Q1. As a courtesy to others, please limit yourself to 2 questions at a time. And if you have further questions, you are more than welcome to rejoin the queue to ask those. Your first question comes from Jack Gabb from Bank of America. Please go ahead.
Thank you and good morning. First question is just on the Services division. I think you said on your first half results call, volume growth over the next 3 years would be about 30% per annum, in Excluding Ashburton, just curious whether that 30% growth can still stand longer term? Obviously, I've seen the guidance for this year. Thanks.
No, look, that's going to be a mixture of what we call contracts with our Tier 1 customers and also with at least 1, probably 2 joint ventures that we'll be working through.
Okay. So $0.30 is realistic or not for
Look, quite frankly, where we're going to land, I would say 2.5 to 3 years moving forward, The entire MinRes business will double and that will be in terms of long term mining services contracts we'll have with both our external and Joint Venture Partners and Commodities. Commodities will be stronger than that.
Perfect, thanks. And my next question is just on iron ore. I guess you said that the Board approved the Ashburton project. Just Clarity on the CapEx of the €69,000,000 You'll give us the full sort of CapEx and OpEx breakdown post receipts of the permits, and And I guess we're expecting that, what, in the next this month essentially because you just start working September, is that right?
Yes. So the CapEx that we've got there at the moment, That's just for incremental design and some CapEx on a Few long lead items where we're putting deposits down, but we really can't get going in earnest until we get those 2 approvals that I mentioned and we expect them to come through, in Look, in the next 2 to 4 weeks. So once that happens, the project will be a goer, and then we'll certainly be Publishing the capital spend on it and the timing.
Great. Thanks. Sounds like it's going to be a busy quarter. I'll pass it on.
Yes, I think there's going to be look, there'll be quite a bit of news flow over the next 3 months coming out of us.
Thank you. Your next question is from Hayden Bestow from Macquarie. Please go ahead.
Just a couple for me. Just on the lithium side of things, I know Al Baumab said the other day their The spot strategy hasn't changed either, but just interested to see any discussions with Ganfeng. Obviously, Pilbara pushing these much higher spot sales On pretty low volumes, whether you see a potential shift in how spodumene is priced versus Carbonate and hydroxide and whether that would ultimately change a bit of the shift in the strategy going just pure downstream and those spot sales on spodumene. And just then the second one on Ashburton, just came to understand the structure of that with this Red Hill acquisition. Is that likely to be brought into The initial production scenario or do we still stick with sort of Bangaru South as the base feed for the 1st few years?
Thanks.
Well, look, firstly, on the lithium Hayden, I think going forward, our strategy is going to be that we want to Make sure that we pick up the downstreaming margin. So we're really focused on making sure that we can build our own hydroxide plants, own them and operate them, And that will be done obviously in joint venture with both our partners. So we're not in a rush to open up Wodgina And then just go sell rock into the market because it would be very short term. And We're not really comfortable that the market can support that type of supply coming into it at the moment. And then what's the second question?
Ashburton.
Ashburton? Yes.
On Bangaru versus Red Hill.
Yes. Now look, at the moment, I mean, our focus is in Kameena. That's what all our planning is wrapped around. Going down the path with the Red Hill, I mean, look, it's Simply an opportunity. We're obviously we want to gather as many tonnes in the region as we can for the long term.
But that the offer we got on the table, it's obviously waiting on shareholder approval. So before we Get ahead of ourselves. We'll just wait and see what the shareholders think of our offer.
Okay, great. Thanks.
2020. Thank you. Your next question comes from Harsh Bhatia from Citi. Please go ahead.
Hi, Chris and Jim. Thanks for taking my question. Maybe first one is for Mark on the balance sheet. Net cash position of $280,000,000 I mean I know $200,000,000 will be allocated to RedHill acquisition. Beyond that, is there any target for net debt?
Or is it like keeping powder dry for the development of iron ore helps? Thanks.
If I think I've heard the question correctly, I think the question is, is there a target for net debt going forward in Based on what we have
in front
of us. Yes.
So the answer is we expect we'll move into net debt over the course of this next year Off the back of the expected development of those iron ore opportunities, but we haven't put a public target out in terms of what that number we'll get to.
Thanks. And just a clarification, FY 'twenty two Mining Services volume guidance like 15% to 20%, Does it include or it assumes anything for what's in our Ashburton project?
No, no. There's nothing in there for those.
Okay, thanks. I'll pass it on.
Thank you. Your next question comes from Lindon Fagan from JPMorgan. Fleet. Go ahead.
Thanks very much. Just in regards to your FY 'twenty two iron ore guidance, I can see that the yield guard is going to be 100% fine. And so I'm wondering whether there's any opportunity to get some lump product in in FY 'twenty two sorry, FY 'twenty three and beyond. I'm wondering if you can give us a feel for Yutar Point as well, Noting that the lump portion has gone down there as well. And then the next question is just on Ashburton.
I'm still struggling with the timeframe that you guys are targeting. So it looks like 2020. If you're going for 2023, 1st half ramp up, Ashburn is going to be built in 18 months basically. So without sort of material CapEx approvals right now. It just feels a bit optimistic and I'm wondering if you can share a bit more color on The timeframe that you're targeting for that project.
Thanks. Yes. Look, firstly, the yield gain will remain on fines. The logistics down there in the supply chain, if we run all fines, it allows us to get quite a bit more out in terms of tonnage Rather than trying to run 2 products and when we first opened the mine, in fact, we were probably running close to 4 And it was just really inhibiting our ability to be able to get them on ships, get tons on ships. And look, up north, we're sort of heading Mainly in the same direction and we're just probably stepping away from lump up there again really around the Supply Chain and when we start moving lots of tonnes, we got limited space at the port.
So Yes. And then time frame around where the build on the Ashburton, I hear what you say. I don't think anyone predicted that we were going to build and turn on Wan Mana in 5 months and I'm I'm guessing that you're struggling with yes, I can understand that, but that's just what we do. I mean, we're going to turn Ashburton on Probably first store coming out around June of 'twenty three.
Thanks very much.
2020. Thank you. Your next question comes from Matthew Frydman from Goldman Sachs. Please go ahead.
Yes, sure. Thanks. Morning, Chris and team. Couple of questions. Firstly, I guess, the capital guidance you've given across the commodities business, $140,000,000 in growth capital, verify 'twenty two.
I'm guessing part of that's maybe the expansion of Wan Mana. You also mentioned replacing the haulage in Yilgarn. Was there any other key projects you wanted to highlight in that bucket? And also sustaining capital up about $70,000,000 again
Hi, Matthew. The answer to the first question is we're also looking to open up other areas up in Utah around Lamb Creek, for example, over the next 12 to 18 months. So that's a key part of the strategy going up there. We also have some spend earmarked, in development spend, drilling and so on around Marilano or Belmia. So that's up in that part of the world.
In terms of the sustaining, what we're doing is we're actually trying to upgrade the depth and capability through the commodity business. So we are in. Investing more heavily in areas like camps and so on, key infrastructure, which probably suffered from a little bit of underspend in the past. So there is a heavy component of that going forward as well.
Yes, got it. Thanks, Mark. And then I guess second question on, I guess the ramp up of Kemerton and how that's going to impact the P and L this year. Just wondering when do you expect to see an earnings Contribution from Kemerton and whether you could maybe give us some more color or some more detail on, I guess how you're expecting to set your set realized pricing on those hydroxide sales, how you're expected To pass through your feedstock costs and I know obviously that Albemarle in their earnings call talked about the potential for spodumene swaps Now Marion, to I guess effectively say your equity component and say, just wondering if you could just give a bit of a breakdown on how that might When you guys expect to receive, I guess, Kemerton as a in post commercial production from Albemarle, when that you expect that handover to occur and how that breakdown could occur in terms of supply ex blood demand.
So in terms of Kemerton, Albemarle have stated that they're targeting to have completion towards the end of the half this year, in the end of this calendar year. That will enable them to start to generate samples of products, samples of hydroxide that then need to go to their customer base in. That process can take between 3 to 6 months. So when we put our budgets together internally, we've assumed no contribution, as you can see in the guidance slide for Kemerton over this current new financial year. There may be minor immaterial sales, but I won't contribute.
In terms of the question of in speed and spot and swaps and where the product is coming from and where it's going to and so on. We've been consistent in our messaging for some time now that our focus is on downstreaming of the spod. We see opportunity to do that at Kemerton, but we also see opportunity to do that offshore where the capital intensity is considerably lower. We do have the ability to direct our Share of the Mount Marion FEED. That is something that is open to us going forward.
Historically, the relationship with Gangfeng has worked well, but we're Keeping our options open with respect to that feed. It may form part of other options for us, possibly overseas.
Sure. Thanks, Mark. And just quickly before I come back with more questions while we're on Kemerton, obviously, again, Albemarle Talk to the cost pressures and the capital budgetary pressures they're experiencing as Chris mentioned. Can you just remind us, I guess, what your CapEx exposure is at Kemerton, if any? And when what you're expecting Almirall will capitalize versus, I guess what they'll hand over to you and it sounds like that probably won't be till FY 'twenty three.
So we have no exposure to Wilbur Mills cost outcomes on Kemerton. When we did the deal some time ago, we drew the line in the sand and the cost was the cost. So we have no exposure going forward.
Thanks, Mark. I'll come back with some more. Cheers.
Thanks.
Thank you. The next question is from Rahul Anand from Morgan Stanley. Please go ahead.
Hi, Chris and Mark. Thanks for the opportunity. 1st one is around costs, especially at the iron ore division. Just wanted to talk around Iron Valley at around $100 a And then also Yogan moving up a bit. How should we think about this?
Is this a new cost base for the business? Do you think this continues into the future? I guess, how should we think about the growth aspirations as well from that perspective in terms of the operating in capital costs for Ashburton given where the market is in terms of labor and inflation. I'll come back
with the second question. Thanks.
I think, look, those were under some cost pressures with COVID around labor and A range of other things that have come along. We've also had an awful lot of wet weather over in this side of the country over the last few months, But they are relatively Iron Valley is a relatively high cost operation. It always has been and we've always had a red flag out there with that. When we get to the Ashburton, it's a very different cost structure down there. We'll be moving more tonnes, but The nature of what we can do between site and those supply chain, those big road trains, They're probably in terms of per tonne kilometre, less than half our haulage costs up in the Pilbara.
So we'll be in the we won't be in the very bottom of the cost quartile, but we'll be down there.
Raul, hi, Koji. Just further to what Chris says, in relation to Utah and specifically Iron Valley, bear in mind in. We operate that mine through a mine goat sale arrangement with the PCI. And so the royalties on that project have gone up Significantly as the iron ore price has moved. So you would expect those costs to come down as the iron ore price comes off.
Now that's fair. Just one follow-up to that one. I mean, in terms of The trucking solution for Ashburn, does that remain to be the choice? Or is there any other choice, Chris, in terms of the carbon intensity, and I know you were looking at an electric solution as well previously. Any movements on that before I ask my second question, please?
Yes, I mean we're looking at different fuel sources to put in those trucks as everybody is. I mean we've got the mining fleet and The trucks we're going to consider going forward, but look, there's opportunity to be able to take the next step with them towards gas. We haven't got anything final on that, but they are they're a low cost solution. And Even if we run trains, I mean the trains we're running down in the south, I mean they all run on diesel. So part of our challenge is to be able to get out of diesel and that's something we're working, I in the whole industry is working extremely hard on.
Got you.
Okay. And the second question is around Wodgina. Just wanted to get an update For me on the conversion side, obviously, Albert Miles talked about trying to find a conversion opportunity in China by either purchasing a plant or building 1. Do you have any updates? How are your conversations going there?
Have you thought of timelines? Obviously, a big project Admittedly, but still I mean you can bring up bring the project on in terms of 3 phases as well in terms of 250 at a time. So is there an opportunity here to perhaps do that in steps? And is there any update in terms of your conversation?
Look, when Albemarle are able to secure hydroxide by either one way or the other, That will give us a timeline. It's going to take us I'm going to guess it's a good 6 months to be able to crank Wodgina up again to get the right people on it, The right equipment, I mean all of the things that we need to turn that on are in short supply, but We'll have ample warning on it, but no, look, it's just solely dependent on whether they can or when not whether, but when They can bring hydroxide online in China.
Thank you. Our next question is a written question submitted by Brad Thompson from the Australian Financial Review. He asks, Albemar on its results call last week, seems to suggest that it might not restart Wodgina until it acquires downstream processing capacity in China. What is the MINRes understanding on Awachina restart and is it dependent on Albemar acquiring downstream capacity? Canada.
Do you have workforce capacity in WA for a restart?
Yes. Look, on the first side, yes, it is quite clearly, I mean, We'll restart once Albemarle are in a position to be able to convert the spod to hydroxide. And Secondly, yes, we can put the workforce together again and to be able to bring Wodgina back online. A lot of the key people that We're at Wodgina through the previous commissioning, is still sitting inside the business. So we've got a lot of people spread over a lot of sites, so We can pull a very good crude back together again to make that work.
And further to that, Wodgina is a fantastic project, people will want to be there. It's got great facilities and it's going to deliver a great product when it gets going. Q1.
Thank you. We will now return to the following questions. The next question is from Peter Kerr from the Australian Financial Review. Space. Go ahead.
Hi, guys. Double teaming with Brad. Regarding Ashburton, have Baowu signaled to you They are keen to go ahead and develop the iron ore tenements in the West Pilbara that you and they both have a mutual interest in.
Yes, look, the answer is they are relatively keen to be able to get those developed in operation and We've been working through I've only just recently joined the Equilla Board. So we're working through a range of issues in there, But I think somewhere down the track, there's no doubt they would like to get that into operation and we're working with them to try and make that happen.
And I guess as we've seen it unfold this year, we viewed it as a bit of a in some ways a boom time play. The way you're talking today about unit costs, Are we wrong to say it that way? Do you see that these West Pilbara tenements are viable through iron ore market downturns?
Absolutely, yes. The Ashburton project, as I said earlier, I mean, it would survive It would make money in a downturn environment and certainly Any of the downturns I've seen over the last 15 years, it'll still make contribute good cash.
In the presentation that we bring both on our CapEx and on OpEx. So we'll have lower capital intensity in Through the design and the installation of the next gen crushing plants, the jumbo train road trains that Chris has I outlined earlier give us a great operating advantage and then we have this great transhipping solution that also offers CapEx and OpEx benefits. I
think too, Peter, when the trans shippers are running, Onslow will be our lowest Cost Port in WA and that'll be the 4th port that we operate out of. So yes, it'll be the lowest. Great.
And could I just ask
you about the substantial shareholder you've taken in Venturex, the ASX listed company? Can you tell us about the strategic rationale for that and if it's about wanting to get exposure to mining services in the underground Realm. Is that not something Minres could have done, I guess, just by expanding its own Mining Services division?
No, we like the skill sets that Bill Beaumont and his team will have, and they in Probably rank them as probably the best underground miners in Australia and we just see opportunity going forward Where we could possibly work together on different projects.
Beauty. Thank you.
Thank you. The next question is from Danielle Lemagerie from The West Australian. Please go ahead. Hi, good morning. Just on the issue of vaccines, there's obviously been a lot of discussion around mandating COVID vaccines for workers following SDC and making compulsory for their workforce.
Chris, will you be mandating vaccines for Minrose workers?
Look, we're going down the path at the moment of trying to secure vaccines for our workforce and for their families. So our first course of action is to try and get our entire workforce vaccinated and then look, we'll just have to See what happens in the environment. I don't think we want to be out there scaring our workforce off. I mean, yes, look, Our first quarter call is to get them vaccinated and we have our aim is to be able to get our secure our own vaccines and be in run it through our COVID testing facilities that we run right around the state and just make sure we get them all done. And then look, we think we're going to be living with this thing for who knows the next 5 or 10 years.
So all of our people are going to regularly need to in booster shots. But I don't think we're going to come out and say that it's mandatory that they've got to have it to go to site at this stage.
And just on that, have you had any more feedback from the federal government on your push to get involved with the rollout?
Sorry, Daniel. On the push to couldn't hear the end of the question.
Sorry, on the push to get involved with the vaccine rollout.
Yes, that's something we're working on behind the scenes. As I just said, I mean, we would it's our preference to be able to go and secure our own vaccine And be able to administer that to our workforce and we are working on that behind the scenes to try and see if we can make that happen.
And just one more quick one on field shortages. I'm sure you probably saw the McGowan government came out last week that announced a $4,000,000 advertising blitz to rural workers from interstate Canada and New Zealand following the Skills Summit. Do you is it your opinion that these incentives will work? Or are they shortsighted?
No, look, I think as long as the international borders are closed, I mean, we've just basically got That 150,000 or 170,000 migrants that aren't coming in the country. So I think all of those Things add value. I don't think there's any doubt about that. But the key thing that we've got to do is we've got to be able to get fresh people into Australia. And we're trying to work through that in the mining industry through The CME to see if we can get something happening around quarantine facilities.
So we're going to need 30,000 to 40000 people over the next 2 to 3 years in the mining industry in WA alone. So we've just simply got to Figure out a way of being able to safely bring people into WA.
Thanks very much for your time. Thank you. The next question is from Nick MacLean from Surrey Asset Management. Please go ahead.
Hi, guys. A question more longer term and for you, Chris. Where you've got this business from Scratch. Where do you see it in 10 years in terms of what you want mine to be in 10 years?
I think probably a bigger version of what it is today. I think we'll still be A little conglomerate. We're going to own commodities. We're focused on what kind of commodities we want to own, but we certainly want to keep Growing our commodity business and we want to grow the mining services and the better our balance sheet gets, the better The quality of assets, I mean, if we are lucky enough to be able to be involved in the Port Hedland Harbour, for example, And we can end up with a Cape Carrier berth up there. Those are the sort of assets that we'd like to be adding to the business.
Those supply chains where we can, We're a project that will support rail. We'll be adding that to our business. But yes, look, we've got to be focused on developing Clean Commodity Products wherever we can and obviously getting down to 0 carbon emissions is A big part of that. So that's obviously playing a big part in the commodities people choose to go and mine now And how we go about doing that. But look, I think in short, I'm happy at the way the business is.
I mean, we're working hard on making sure that We've got a really high quality environment inside our business for all of our family, our people And trying to make sure that we've got generations of people in the business. So that's equally as important to me as making sure that The people make this their home.
Yes. So I get that, Chris, for sure. But you've returned in Great returns over the last, whatever it's been, 20 years or so. How do you keep doing that for the next
Listen, I'm not going to lie, sometimes stare into the crystal ball and wonder that myself, but look, We've been able to do it and I know that subject to the world not changing too much, I know that over the next, say, 3 to 5 years, We can at least keep that up, if not better that. I mean, we should be able to better what we've done over the last 5 years. If I'm thinking 5 to 10 years out, pass. I mean, I need a little more time to see what where the world's going to be in 3 years from now.
I'm not sure I believe that could, but okay, I'll take that.
Thank you. The next question is a written question from Heath Andrews at PAC Partners. City. Can you comment on the timeframe for Wanmana to branch 10 MT? And do you see Lam Sand Creek as replacing Iron Valley when it operates.
Yes, look, I think we can probably be One manor will probably hit that number around the end of the calendar year. And look, yes, I think The Lambs Creek will probably eventually take over from Iron Valley. I think our impurities at Iron Valley Getting out there a little bit and we're currently blending, but at a point in time, yes, I think that Lamb's Creek and Wedge will probably take over.
Thank you. The next question is a written question from Garrett Lucas from ABC News. Keyas. When you purchased the Yilgarn assets, I understand the mine life was around 3 years. What have you grown if you now with the introduction of Parker Range Ore.
And is the state government's original deal on royalty relief for the Yilgarn due to expire anytime soon?
Let's tackle the royalty relief. I mean that hasn't got that much longer to go and That's for specific pits down in the Yulgarne and the Fraser range is not one of them. And yes, we did. Based on the information that was available to us, at the time, we thought we had originally, we thought we had About 6,000,000 tonnes per annum production down there for about 5 years was the original And we're currently running at not quite double that, but we're sitting up around the 10,000,000 tonne run rate And that's determined by the port capacity and we think that we've probably got somewhere between 7 10 years left down there at that rate.
Thank you. We will now return to the following questions. The next question is a follow-up from Lyndon Fagan from JPMorgan. Please go ahead.
Thanks for that. Just on the Southwest Creek I was hoping to gauge your level of confidence on being awarded those. You mentioned there was a couple of well, there Might be more to say in the next few months. Are you able to share what those milestones are? How many other players are in the mix to try and win that access and if you are awarded access, How ready is that project and whether you're willing to share capital intensity, I suspect not, but I figured I'd ask.
And then the next one is on Mount Marion. We're obviously seeing spodumene prices over 1200 in the market. What sort of lag is at Mount Marion? When should we expect those prices coming through
Look, based on the way we sell Marium, we've probably got a couple of month lag on the prices And that's sort of a lead lag. I mean, it happens the other way when the prices are going down. It's about the same, but it's a couple of months on that. And Yes, look, the month on month, the value that we get per tonne down there has grown substantially. And then On Southwest Creek, look, there's not a lot I can say on that.
I can't there are obviously All of the users of the Inner Harbor and Port Hedland would like to increase their channel allocation. So there's 2 things out there. There's the allocation in the channel and how many tonnes you're allowed to ship out the channel and they're chopped up into A and B class and then D class are basically just tons that you can get through being efficient. So we can't Give any indication on anything until we know, A, if we've got access to the berth or we get the right to develop them. And then secondly, how much channel allocation we actually get.
So and that could be anything from 0 to 50,000,000 tonnes. So once we understand the volume that we can get, we can then determine How many tonnes per annum are going through there and what the capital cost is to get them delivered. So we've sort of got most of that figured out, but I mean, it just depends holding solely on what we are able to get, if anything. But our level of confidence up there On being able to get something, I mean, it's extremely high. It was originally those berths in Southwest Creek were in 2,008 set aside as we all know for junior miners so that we can be a company like us can one day become a major.
So our level of confidence is extremely high.
Thanks. And if I could just squeeze another one in. On Utah Point, you've got 14,000,000 tonnes that you could use there. What's the bottleneck preventing you from staying at that run rate in FY 'twenty two? Thanks.
Just the COVID virus.
Right. Right. Right. Right. Right down the haulage, there are challenges with haulage.
You need drivers obviously for the trucks and a lot of the drivers come from the Eastern States. And some of the guys up there have been on long swings Without saying their families, that's the challenge, one of the many challenges that Chris was referring to when he was talking about the COVID challenges earlier.
Phones. Your next question is a follow-up from Matthew Feidman from Goldman Sachs. Please go ahead.
Yes, sure. Thanks for taking a few more questions. Firstly, on the mining services business, wondering if you can just give a little bit more context on what is in the pipeline to deliver that 15% to 20% growth. Just wondering in your discussions with the majors, where are you seeing the opportunities in volume growth? Is it from crushing?
Is it from dirt moving? In where they need Min Services. And also wondering if you can give any color around Whether that growth is going to be weighted more towards internal projects or expected external wins, whether there's any weighting to the first half or the second half, in whether it's a relatively easy split. Thanks.
Yes, look, firstly, most of it would be will be external, what you're referring to as external. And secondly, I don't like to give too much detail around what we're looking at or Who we're talking to because obviously we have competitors out in the market. So my preference is to be able to let you know after we've secured it.
Okay. Thanks, Chris. That's helpful. And then secondly, there were some questions earlier around the timing and the timeline for Ashburton. You've given us some guidance there in terms of expecting that project to be online by 2023.
Clearly, there's still a big build to happen there. You talked about over 100 road trains, 4 trans shippers, lots of kilometers of port road to build. While you said the price might come online in 2023, just wondering if you could give us some context around how long you expect the ramp up will be to get to that 30,000,000 tonnes brand, I mean, how much is it going to take to for your partner to build and deliver 100 grade trains to be able to get to that 30,000,000 tonne random number?
Yes, look, I think that a combination of approvals and quite right, you point the supply of the equipment, We're probably going to take a good solid 12 months from when we turn on to be able to get up to around 25 in 2020. There's no doubt about that. I think in the first 12 months of operation, we'll probably do somewhere around about 12,000,000, 15,000,000 tonnes. And then the 2nd year of operation, we'll probably be bringing on A bit more horsepower in terms of equipment and road trains and the 2nd year will probably be up around 30 and maybe a touch better.
Thanks, Chris. That's really helpful. Maybe just last one quickly. You've been pretty clear in terms of your spodumene conversion strategy and how you're saying that. Just wondering, we've talked a lot on the call about, I guess price strength in lithium and particularly spodumene.
You guys have obviously got a very successful track record in terms of developing spodumene deposits. Do you see an opportunity currently to bring in new deposits online perhaps outside of the Marvel JV? Is that something that in You think Mint Kit still have, I guess, an edge in or are you not particularly interested in that given you've already got some pretty significant oil capacity?
No, no, we are look, we're out there looking at a couple of different regions. We've got some drill rigs out there at the moment looking for Some more SPOB, which is away from both the Marble and the Gangfang JV. So we are hunting pretty much everywhere that we think that there's an opportunity and we're very keen to get another deposit.
Okay, great. Thanks, Chris. Thanks for all the questions.
Thank you. The next question is a follow-up from Rahul Anand from Morgan Stanley. Please go ahead.
Hi, Chris and Mark. Thanks for the opportunity to ask another one. Look, I only have one question in Marion. I just wanted to understand the cost trajectory there. We've obviously moved to new grades in 2019.
And that's helped recoveries higher. I mean, my numbers were I mean, I was expecting Q2. Could you provide some color as to how we should think about the cost performance 1st half versus second half and maybe even versus FY 2020 and the second half, is there a great drop off perhaps in terms of the material you're mining from the pitch. Is that one of the drivers for this cost increase or how should we think about it?
Look, a couple of things. Firstly, Mount Marion is run under a mining services contract. So, MnRes run that on behalf of the joint venture. And then secondly, the dirt that we've been mining down there hasn't been yielding quite as much over the last 9 or 12 months, but that's just a function of where we are in the different pits. And I think we're probably going to overcome a lot of that moving in So I wouldn't be counting on the costs coming down a lot, but there is some opportunity out there for us
Okay. And just one follow-up. In terms of the strip ratios, I suspect we're probably around the 8.5 mark at the moment. Do you still expect them to come off to around 7.5 Over time, or do you think we're going to see sort of the strip remain high as well?
I think they're probably going to keep the strip about where it is. I mean, they work the pits where we've got stuff at depth and Not so deep. I mean, they worked them to try and maintain that average. And I think that's sort of at the moment, it's going to be the average for the next couple of years going forward.
Okay, perfect. That's very helpful. Thank you very much.
Thank you. 2017. There are no further questions at this time. I'll now hand back to Chris for closing remarks. Okay.
Well, look, thanks everyone for joining. We're sort of already past The year we're delivering now and we're sort of head down and fall on into this financial year. And I mean, so far things are going well, but Look, we are going to have probably an awful lot more news flow when it comes to the AGM and we'll make sure that we Can lay out fairly clearly where these projects are going. That is all approvals being in place. But Look, I expect over the next couple of months, we'll get all of that bedded down.
So we'll save everything up to the AGM. But look, thanks To everyone, again, thanks to all of the staff that we've got in MINRes that made this happen and thanks to all our shareholders, our investors And particularly all of the moms and dads out there that bought our shares back on the float and they're still sitting out there with them. It's really nice to see that A lot of those long term people have got some great rewards out of what we've been able to deliver. So look, thanks, everyone, for joining, and