Ladies and gentlemen, thank you for standing by, and welcome to Mineral Resources' September quarterly call. My name is Chris Chong, the Investor Relations Manager. Shortly, I will hand over to James Bruce, EGM Corporate Development, to provide a short introduction before opening the lines for analyst questions. Just a little bit of admin before we kick off. Please be aware that today's call is being recorded and a written transcript will be uploaded to our website. This call is a Q&A with our sell-side analysts to discuss our quarterly production reports. If you wish to ask a question by the phones, press the star key followed by the number one on your telephone keypad. The moderator will then open your line and invite you to speak. Please start with your name and company for the record.
If you wish to ask a question via the web link, please type your question into the ask a question box. This is meant to be an interactive and free-ranging discussion. With that, I'll pass the call over to James for a quick introduction.
Thanks, Chris. Good morning, everyone, and welcome wherever you are. Thanks for joining us today. It's been another busy quarter for MinRes. I'll just go through some comments. We had a pretty good safety performance, industry leading once again. Our mining services business had another predictable and solid performance during the quarter. We progressed with the Onslow Iron FID decision and work is progressing on that. Our iron ore business performed well and in line with our expectations. The lithium business, Wodgina, we started Train 2, and we converted hydroxide for the first time at Wodgina, producing 931 tonnes, and that will be sold in Q2 of FY 2023.
At Mt Marion, there's a significant amount of work that many of you saw when we did the site visit. The expansion work is progressing. The pit is actually in very good shape to deliver for FY 2023. This quarter, our spodumene production was 54,000 tonnes, which had 25% high grade material. That was impacted by the plant shutdowns and tie-ins. Our guidance remains at 300,000-330,000 tonnes, and we expect that to be 40% high grade. As the expansion comes online, we expect to do our share of 450,000 tonnes of production from Mt Marion, and that will be at 50% high grade once that expansion commences early next year. At Mt Marion, we converted 307...
3,722,000 tonnes of hydroxide at a price of $79,000 a ton. In the announcement, we've just set out the spot price used for conversion is going to be set by formulae used by Greenbushes. It's very, very similar to that. I'd just make the point that as we convert our spodumene into hydroxide, there will be, you know, timing on cash flows that you'll be thinking about. It'll take three to four months to ship spodumene and convert it, and there's about another three months based on payment terms. You know, that's just the timing of cash flows. But we are going to be a fully integrated hydroxide producer. Finally, I'll just finish off with our gas business.
You know, we received some approvals from DMIRS during the quarter, and we expect to start drilling in December through next year. A pretty exciting quarter for us. I'll leave my prepared comments at that and open it up to questions. Rachel, if you could please queue up the questions, please.
Thank you. Your first question comes from Paul Young with Goldman Sachs. Please go ahead.
Morning, Chris. Morning, James. Thanks for doing the call again. A few questions on the iron ore business, James. The first one is around the price realizations, which might have been a little bit below expectations. I see that you're switching the strategy from M- 2 to M - 1. I think you might have previously flagged that. Just curious around, you know, that change in sales strategy there. Is that you're gonna be selling through traders? Are you selling through different steel mills? And, you know, you think you'll get a benefit on price realizations with that change?
Yeah, Paul. We had you know previously announced that at our full-year results. I don't think there's any real change in who we're selling to. It's just a matter of reducing from two months to one month. And that will actually reduce the volatility on a quarterly basis in the price received. You know, it's still gonna take us another quarter or so to get to the full one-month QPs. You know, I don't think it. Over the long term, it doesn't change. It'll just reduce quarterly volatility of the numbers.
Yeah. Got it, mate. Maybe just on the Yilgarn, just the shipments there. Just that appears a bit of a build in inventory. Looking at the risk between production and shipments. Is that just really timing of vessel arrivals at Esperance?
Yeah. Look, it's just, you know, You're exactly right. You know, production is going per plan there and shipments will follow.
Yep. Great, mate. Thanks. Lastly, just on switching to Wodgina, and the production of hydroxide. Well done on that front, and the recoveries actually look pretty good when you
You calculate the conversion factor. Maybe just further to that, anything you can sort of provide as far as, you know, the quality of the hydroxide? You know, any sense of, you know, how we should think about pricing? Should we be using, you know, I guess Mt Marion as a guide?
Yeah. I mean, you saw the pricing for Mt Marion during the quarter, 79,000. You know, we will sell the Wodgina material in the Q2. That will be priced now or the next month or two. You know, there are no quality issues.
Great. All right. Well, I'll let someone else ask questions. Thanks, James. Thanks, Chris.
Thanks.
The next question comes from Alex Ren with Credit Suisse. Please go ahead.
Morning, Chris, James, and team. A couple from me, please. On this first one on this spodumene pricing mechanism, same as Greenbushes. Just wondering, when was this signed, and, you know, how long is this agreement in place for? Is this a legacy agreement from a couple of years back? And, you know, is there any risk for transfer pricing or that, you know, running into troubles with the ATO? Also, I understand IGO might be moving away from this to a more up-to-date pricing mechanism next year. Is this something you are discussing with Albemarle these days? I'll come back on the second one. Cheers.
Yeah. Thanks, Alex. You know, as we have stated many times through the last year, we want to be a fully integrated hydroxide producer and, you know, this is the mechanism, the pricing mechanism by which we will price the spodumene as it goes into conversion into hydroxide. It's, we've aligned it with Greenbushes and, you know, we would expect that to apply going forward.
Even if Greenbushes is moving away, will you still stick with the current structure?
Well, we've announced the structure that we're going with right now, and if things change then we would, you know, announce any changes in the future. You know, there is no change right now. We've only just announced it, so it is what it is.
Right. Got it. Also on Wodgina. On the bottleneck project. I think the aim is to get a capacity of each train from 250 to 320, if I remember correctly, with the aid of low-grade product down to 5.5%, right? Just wondering, is there a rough timeline on this? You know, when do you expect Train 1 and Train 2 at least to get to, you know, roughly get to 320 run- rate? Or is this more, you know, contingent on whether Albemarle's converter is able to accept low or lower grade feed?
Alex, I think we went through this a little bit on the site visit. You know, we've learned a lot from what we've done at Mt Marion, and we've had a very successful strategy there and had a really good partnership with Ganfeng in being able to convert that material. At the moment, the agreement with Albemarle is to produce 6% and the three trains at Wodgina can produce 250,000 tonnes at 6% spodumene. You know, there are, in our view, significant benefits of reducing that grade to 5.5% and increasing production to 320,000 tonnes of spodumene. We don't yet have agreement and you know, right now we're ramping up the trains.
Once we get agreement and once the trains are ramped up, we would obviously announce that in due course if we get agreement with Albemarle.
Understood. Basically the most recent hydroxide produced out of Wodgina, that's based on 6% grade?
That's right. Yes.
Yeah. Also, sorry, if I could quickly squeeze in one more. Wodgina full year guidance, now 190%-210%, that's based on 50% equity, right? Currently you haven't moved up to 50% yet. Is this effectively saying the full year attributable amount will be more like the lower end of guidance? Or would there be sort of some kind of backdating mechanism, effective date would be July 1, 2022?
You're right in the comment that the guidance does assume the 50%, and everyone should note that. You know, when we come out of agreement, you know, we would update you at that time.
Understood. That's it from me. Thanks, team.
Thanks, Alex.
Your next question comes from Matthew Frydman with MST Financial. Please go ahead.
Sure. Thanks. Morning, James and Chris. Thanks for taking some questions. Maybe firstly following on those comments around the restructure of the MARBL JV. You've put a bit of a comment there in the footnote, suggesting that the scope of the proposal has been updated. Not sure if that's new language there, but just wondering, you know, how should we take this in terms of exactly what's being considered in this update? And also what's the updated timeline around resolution of the restructure?
Thanks, Matt. There's no real change here. It's just, you know, with this cautionary language that legal required us to put in place. There's no change in expectations here at all.
Thanks, James. Any update on the timeline?
No, we're not prescriptive on the timeline, and it will occur when it occurs, Matt. You know that, you know, we're hopeful of getting completed.
Got it. Thanks. Maybe to, I guess, approach the question of the JV restructure in another way and maybe a bit more philosophically. You know, I think there's consideration in the market around the inclusion of additional conversion assets in that JV, you know, be they in Australia or overseas. Just wondering how the team internally thinks about MIN contributing capital to acquire or build additional conversion assets for something that effectively you're getting for free currently, or at least very cheap relative to the cost of capital. I mean, I understand that the returns on achieving a chemical margin for your sales versus a concentrate margin, you know, would justify additional capital, but you're already really achieving those returns through your tolling arrangements.
How do you see that incremental return of applying additional capital to acquire conversion facilities, when really you're only getting back the, you know, that incremental economic rent of the tolling charge you're currently paying? I mean, does that incremental return clear that Chris's ambition for 20%-25% return on capital?
Matt, I think there's a couple of things. One is we've got a strong intent to convert over the long term all of our share of spodumene into hydroxide from all of our operations. We want to do that. You know, we've got assets that have lives of 20 years and 30 years. We need a long-term solution. Tolling is a great short-term outcome for us, but they are short-term agreements. You know, over the long term, the return on invested capital is definitely by making the investments in the hydroxide capacity. The other point is that we would want to have you know, control of that, of those volumes into a market which is very strong, and we expect to be strong for a long time.
We see ourselves being one of the world's top four producers in hydroxide. As a top producer, you know, we want to have control of the outcomes for the business. That has significant value to all shareholders in MinRes.
That makes sense. Thanks, James. That's a very clear answer. Maybe finally from me, before passing it on, just on the iron ore business, you made some comments around how you're seeing realizations. Just, I guess, you know, fairly direct question, you know, did the Yilgarn make money in the September quarter? I mean, looking at your received price relative to your FOB Cost Guidance, it's hard to see how that asset didn't lose money during the quarter. I guess notwithstanding the margins that you make on mining services from an intersegment perspective. I mean, what's giving you confidence to continue operating that asset? Are you seeing better pricing outcomes in the current quarter, given the fact that discounts have closed up? You know, is the cost performance better than what's implied in the guidance?
Yeah, just wondering the context there.
Yeah. Matt, I think there's a number of moving parts right now within both the cost structure and the iron ore price realizations, which are, and the puts and takes are that we continue to be very focused in Yilgarn and Utah Point assets on cash and cash flow generation. You know, the puts and takes are that the Aussie dollar is, you know, significantly lower. The freight rates are lower. Oil prices are coming in a bit. And you know, all of those, some of those are external to what we're doing, you know, at the operations. At the operations itself, we've given cost guidance, and you can take that as read.
Also on the revenue side, at Yilgarn, we've got a lump ore that's gonna come in from this quarter that we're in right now. You know, I think all of the puts and takes are that we continue to manage this business very effectively. We will continue to be agile. You know, I think we're aware of what we need to do to maintain profitability.
Thanks, James. That's really helpful. I'll pass it on and might get another opportunity. Thanks.
Yeah. Thanks, Matt.
Kaan Peker with Royal Bank of Canada. Please go ahead.
Hi, Chris and James. Thanks for taking my questions. First one's really around Mt Marion spodumene pricing. It seems like it's down quarter-over-quarter despite having a higher percentage of high-grade con. Was this largely driven by the ramp-up and I suppose the inclusion of lower grade, higher impurity ore being used in the concentrate?
No. No. Kaan, it's more just spod pricing and you know the delta in the pricing structure. You know, we've given you what the new pricing structure is. You know, that's based on Greenbushes. I think that's the delta that you're seeing coming through. As we are converting it all to hydroxide, you know, we will you know see the benefit on the hydroxide side where we sold you know product at $79,000 a tonne.
Yeah. I mean, on that, given that you are targeting to become vertically integrated, and I think you mentioned fully vertically integrated, should our focus be more on the hydroxide pricing, which appears to have come in better than expected?
Absolutely. I mean, we, you know, that's been our strategy all of this year. We've first talked about it in February and, you know, we expect to make this a long-term part of our business. We are not selling, you know, spodumene. We're selling hydroxide.
Yeah. Makes sense. Maybe on Wodgina, could you provide any progress on the permitting? Is it still expected for February 2023? Where are we up to in terms of that progress?
Yeah, no. That's Kaan, that's our expectation and we don't see that being a limit to what we're doing. You know, we do have some flexibility at Wodgina. You know, Train 3, as everyone saw on the site visit, you know, that is ramping up over the next couple of months and will be available. The thing that limits our production at Wodgina will be the pit. You also saw the pit and you know, the steps that we've got to take there. You know, we don't see any approvals being a limit at the moment.
Sure. Last question before I pass it on. It's more around iron ore and the pricing there. Should we expect product quality to change over the year?
In iron ore?
Yeah.
We will be producing more lump at our Yilgarn operation, so the product quality will go up because of that. It's 20% lump is in the guidance.
Yeah. All right. Thank you. I'll pass on. Appreciate it.
Thanks, Kaan.
The next question comes from Lachlan Shaw with UBS. Please go ahead.
Morning, Chris and James. Thanks for the time. A couple from me. Firstly, hopefully an easy one. Again, just to come back to the Wodgina joint venture and the question of moving to 5.5% from 6%, can you just remind us, what steps and what catalysts you need to work through there? Is it a case of qualifying 5.5% with Albemarle? What do you have to do to sort of get both partners to agree and get that change in effect?
Yeah. I mean, obviously, Lachlan, as you'd be aware, we're negotiating a pretty important set of new arrangements with Albemarle and, you know, I think a lot of the focus is on that. You know, I think we as MinRes will be hopeful of a change to, you know, producing 5.5% because of the benefits of it. You know, in due course, hopefully we get agreement to do all of that.
Yeah. Okay. Makes sense. Timing, I'm guessing you're sort of angling for as soon as possible, but what do you think is realistic?
As soon as possible, I don't know if I can be, Lachlan, it's subject to, you know, agreement by both parties and legal agreements. I think we've been, you know, we've talked about that for a little while now, so, I can't give a date.
Yeah. No, understood. Thanks. Just moving to mining services. Obviously, nice little lift in the quarter there for contract tonnes. Can you talk to activity levels that you're seeing in the market? You know, which commodities are you seeing more active than others? And I guess related, you know, how is the competitive landscape at the moment?
I mean, we perform our mining services across lithium, iron ore, and a few gold operations. There's no doubt that it's very active in the iron ore space. We've also actually, you know, we in the last six months have started work at a lithium operation in the Northern Territory as well. I think, you know, the iron ore industry has capacity and the mines are moving a lot further away from the fixed infrastructure. As that occurs, our services become more valuable and in demand. In terms of the competitive landscape, you know, we tend to compete against the mines performing these services themselves. You know, we generally are more productive and more efficient in the delivery of those services.
That's our value proposition. You know, we are having some success. You know, the volume growth in our mining services business over the next three to five years will be very significant. We expect to double the business. Some of that obviously comes from our own internal joint ventures, but another component is also the third party, you know, services which continue to be attractive for us. You know, it is a pretty good environment for us. It has been a good environment for the last several years. Our proposition and the value that we can add to clients, I think is well understood.
Thanks. That's great. I'll pass it on for now.
Thanks, Lachlan.
Lyndon Fagan with JP Morgan. Please go ahead.
Thanks, guys. Just a quick update on Kemerton, if I could. Is there any kind of further color on commercial production being reached? Or like when?
You know, I think we've put the comments in the quarterly here and you know, Lyndon, it does take a period of time for these projects to go through both commissioning and qualification. The qualification period can be anywhere from six to nine months. You know, we would hope that it's gonna be shorter than that, but it is a process that the joint venture has to go through. So I don't think. You know, we're not expecting any major production coming out at Kemerton in financial year 2023. But it should, you know, from 2024, it should ramp up.
Okay. Thanks, James. It's good to see those separated tables around the hydroxide sales for the various mines. I do notice this time you haven't provided the EBITDA. Are you able to give some color as to whether we're likely to get that going forward? Or i.e., is it omitted while the sort of joint venture's being signed off? If not, does the toll charge at Wodgina look the same as what it does at Mt Marion?
Lyndon, you know, this is a quarterly production report. We don't, you know, disclose EBITDA in our quarterlies. I don't think you should have had an expectation of it in this quarterly. You know, we did disclose it at our full year results, and we will disclose it at our half year results in February. The EBITDA margins for tolling, you know, last half was 30% or thereabouts. You know, I think a reasonable assumption is that sort of level going forward. You know, I think if you work through the received price, I'll talk about the Mt Marion material, but we, you know, because we've put out the price received there was AUD 79,000. That includes the VAT.
It includes obviously the conversion of, you know, to work out what the EBITDA would be. You'd need to have the conversion of the spodumene, and you've got the spodumene pricing, and you've got the spodumene volumes. You can do that calculation. There's a converter margin that you need to be thinking about. Oh, it's a conversion cost, I should say, that you need to be thinking about. I think, you know, if you went back to last half, that was about $10,000 a ton or thereabouts. If you use that, you would come up with an estimate of what you think EBITDA would be. I'll leave you to work through those numbers, but that's the sort of color that I can give you.
Yeah. No, that's helpful, James. I've got all that. I guess as a reminder, is the toll charge on the input, i.e., the tonnes of spodumene converted or the output and put against the tonnes of hydroxide produced?
It's on the tonnes of hydroxide produced.
Okay, great. It's sort of independent of whatever grades going in. Thanks. I guess the final one, just a bit of housekeeping. The Greenbushes pricing is obviously how you're doing your pricing. The royalty at Greenbushes uses a different basket of indices. I think the state government includes Platts. Is that the same case for you guys?
We've given out the basket that's used. It's Fastmarkets, Asian Metal and Benchmark Minerals. That's, you know, the basket that we're using.
That's clear for your revenue. For the royalty calculation that you're paying the government against-
Yeah.
I mean, the IGO situation is that there's a different basket with Platts included. Is that the same for you guys? Is our royalty calculation based closer to spot, is what I'm asking.
Lyndon, I'll get back to you, but, you know, I'll say this right now, we put those numbers out there because that's what we expect the royalty calculation to be. But I will absolutely confirm that with you, in following up.
Thanks. I guess just final one. Why was the iron ore discount so large, given that we have seen a narrowing of grade spreads more recently?
Yeah. It was, you know, it was 78% if you exclude prior period adjustments.
Okay.
I think that's in line.
That's helpful.
Yeah. Yep.
Yep. Thanks, James. Much appreciated.
Thanks, Lyndon.
The next question comes from Rahul Anand with Morgan Stanley. Please go ahead.
Hi, James. Hi, Chris. Thanks for the call, very helpful. Look, I just wanted to firstly perhaps follow up on Lyndon's question. Look, lots of good color there in terms of the cost of conversion. I just wanted to also, you know, perhaps follow up on that and check if that conversion cost is perhaps moving with the hydroxide price at all. Is it linked? Then if not, is there any sort of profit share differential that happens as the price moves up or down?
Thanks, Rahul. So, you know, these are short-term agreements that we have in place for the conversion and, you know, as such, I don't think, you know, Our intention is to convert these short-term agreements into long-term investments for us in the hydroxide capacity. But specifically to your question, the ten thousand dollar ton number I sort of gave you as sort of, you know, guidance is a number that only applies, you know, in this current market right now because we've got short-term agreements. And, you know, what it includes is the cost of conversion and for the use of that plant for that period of time. That's the way you should think about it.
This is why long term, I think, you know, we definitely want to own our own plants and to make that investment because long term, I do think the return on invested capital will be even better than what we're doing right now.
Sorry, James, you did drop out there for a bit. Did I get that right? That includes the margin and that's obviously a short-term contract, so it's fixed for now. That's right, yeah?
Yes, that's right. It includes the cost of conversion and the capital charge of using the plant for that period of time.
Okay, that's perfect. Obviously this is probably going on in the background as we speak, but in terms of rolling those contracts to future periods, how's that conversation going? Obviously this is a great market to be doing that, but what's your intention initially perhaps in terms of the length of contract you wanna give out, especially given you're looking to have your own conversion facilities going forward?
Rahul, the market is very strong right now and demand is significantly higher than I think many market participants think. You know, I heard the comment yesterday that Pilbara Minerals have stopped answering the phone and, you know, I think our phone equally is running hot. You know, with regard to the contracts, we want to maintain full leverage to indices and spot pricing. We also therefore do not want to lock up, you know, contracts over a long period of time for toll treating. We would rather be short term because we think the market is going to be in deficit for a number of years, as we've said previously, five years.
That's our expectation and we think that's a good environment to continue to negotiate the best outcome, but on a short-term basis as it relates to tolling. Longer term, we do want to make the investment into the conversion of these assets because we want control and we want to be a predominant market player.
Okay. Changing tack a bit to iron ore. I know the great discounts have been talked about a fair bit, so I won't repeat that. That was one of my questions. If I take a step back and we think about it holistically, I mean, obviously you're building higher quality assets in the future. In the near term, if you do have an environment where you start making cash losses at your iron ore operations, how should we think about the strategy? I mean, how long will you take to shut them down? Is there easy low-hanging fruit which you can pick to save on costs immediately so that they keep running in the near term?
I'm just trying to think about the last time we had a strong swing in the price and we lost a bit of cash in that period. I'm just trying to think about what happens in that type of an environment.
Rahul, you know, we're not in that environment today, firstly. Secondly, you know, we are agile as a management team. I think we've demonstrated that year after year, and that hasn't changed at all. You know, there are levers that we can pull at all of our operations if those circumstances come about. You know, you would note that, in almost a year ago now, we took 2 million tonnes out of our production plans when the iron ore price went from $220 a ton to, I think it was $80 a ton over a period of about 70 days or something, and we responded extremely quickly. I think we have proven through those type of activities that, you know, we continue to manage the business very actively.
We do know, you know, that in another 18- months' time, our Onslow Iron project will be ramping up and that is fundamentally different from a quality perspective, be much, much lower cost and a durable business with, you know, decades of mining services and infrastructure earnings coming to us as well as the iron ore earnings. So, you know, anything that, you know, we do will be prudent. I think this management team has proven itself time and time again.
No, they have indeed. Okay, final question from me. Updates on your other good quality projects, Southwest Creek. Any sort of approvals or building timelines? Any sort of update there?
That we've said that there's a two-year timeframe on those approvals. It's almost impossible to accelerate those approval timelines. I think this actually is a point that many people don't understand with regard to the lithium industry as well. You know, the industry is constrained by approvals. From our point of view, you know, we're going flat out on Onslow Iron. You know, that's where the majority of our people are in our iron ore business today. You know, we've got to deliver that project. Yes, there's still an opportunity to you know, move from Onslow into you know, Southwest Creek, but you know, we've gotta do what's right for the business today. We've gotta get Onslow Iron developed and in line with our plans.
No, that's perfect. Okay, just, I'd love a follow-up on that royalty question as well, 'cause I had the same question with regards to what level that royalty's paid at just 'cause IGO is paying a higher number.
Yes.
Other than that, thank you very much, guys.
Thanks, Rahul. We'll send an email out to all sell side participants with that answer just so that you've all got it.
Perfect. Thank you very much, team. I really appreciate the call.
Thanks, Rahul.
Next question comes from Glyn Lawcock of Barrenjoey. Please go ahead.
Hi, James and Chris. James, can you just maybe put a little bit more color around Mt Marion? You know, the grade of the spodumene produced, your conversion rate. I'm just looking at it thinking a 20% decline in production or shipments, a 40-odd% decline sequentially in hydroxide production. Just trying to understand what happened in the quarter for that to occur. Thanks.
Glyn, you know, production was production. In the prior quarter, I think high grade was 7%. In this quarter it was 25%. Our guidance for FY 2023 is for 40% high grade. You know, we're potentially high volumes going through this year as the expansion starts up come early calendar year 2023. As it relates to product grades and so on, we've given you you know, the average is of 900,000 tonnes is equivalent to 600,000 tonnes at 6%. So you can have a go at estimating what you think the difference between high grade and low grade is based on all of that.
As it relates to this quarter, you know, it was a disappointing quarter. We had a lot of work going on. As you saw when you were on the site visit. You know, there's a significant amount of work going on at the plant. The pit is now in a much better shape than it was even a quarter ago. And I think you saw that at on the site visit. You know, we've got significant amount of material in the bottom of the pit, which is white, and white is good when it comes to lithium and spodumene. So yeah, I think you know, the quarter-on-quarter movements you know are within a broader trend of increasing production.
Sorry, James. Maybe I should be a little bit more specific then. Maybe I've asked it badly. Just, you know, like, can we not be told tonnes processed through the plant and the grade that goes in and recoveries or something like that like we get from a lot of other companies? I'm just trying to reconcile why hydroxide production fell so sharply quarter-over-quarter when, you know, you were still shipping at a reasonable rate, nowhere near a 40% decline. Were there problems with your conversion, with Ganfeng's conversion in China? Were they limited by power or something? I'm just trying to understand why it fell so much as well.
No. Some of this, Glyn, you say like other producers do, there are not a whole lot of spodumene producers out there. You know, we own two of the spodumene mines. These are our plant designs that MinRes build, own and operate ourselves. You know, we're not about to disclose to other market participants exactly what our grade and exactly what our recoveries are. I think we've given the market enough information to determine revenues and to determine costs and to have an understanding of what the cash flow capability of these assets is. You know, that is something. The processing plants, there's a lot of IP that is specific to MinRes in those plants, and we're not about to share that IP with other market participants.
Other market participants are taking different strategies with regards to this. That's up to them. In terms of, you know, our hydroxide volumes, you know, there is. You know, I think the volume conversion was in line with expectations, quite frankly. It was, you know, I don't see there being a huge variance.
Maybe I'll come back offline. Just on the price realization for iron ore, you said 78%, if you exclude per-price period adjustments. The 58% I ndex averaged 87% for the quarter. Is that sort of where you'd expect to sit then? You would be getting less than another almost 8 percentage points less than the 58% Index, or is there something else going on in the quarter as well?
Yeah. Glyn, I mean, yes, that is right. It's pretty much in line with the FMG pricing of the very similar product.
Okay. Just finally, just you gave the conversion for Wodgina into hydroxide. It's obviously the first batch of product going through. Would you expect that conversion rate to improve, or is that was that actually a good conversion? I mean, I would've thought maybe you might have had a few issues with the first batch.
No. I mean, when you look at, if you do the math on the conversion rate, it was good. I think that just proves, you know, the product quality and, you know, obviously the grade as well that is going in there and yes, we converted it and the volume is as expected.
Yeah. To the extent the grade stays the same, I wouldn't expect a change in those conversion, implied conversion ratios.
Okay. You don't think it'll get down towards seven or under seven then?
No.
Okay. Thanks.
Thanks, man.
The next question comes from Kate McCutcheon with Citi. Please go ahead.
Hi. Good morning, James and Chris. I just wanted to clarify this spodumene pricing. The Greenbushes price mechanism only applies to tolling per se. Hypothetically, if you were to stop tolling and sell spodumene, that mechanism wouldn't apply. Is that correct? The second part of that. Yeah. That's great.
Sorry. That's correct, Kate.
Great. The second part of my question on that is what's the rationale here, particularly for Mt Marion? Is it to show your partners they're being treated on the same terms, or is it for transfer pricing transparency with the government?
It's totally to be totally transparent with the government on both corporate and royalties. Corporate tax and royalties, sorry. This is the formula that's been that we are going to use for those payments to DMIRS and the Australian Taxation Office.
Right. Understand. That's helpful. Just clarifying the timing on hydroxide production numbers. At Marion, your share of September quarter production goes to that 3,700 tonnes that you reported. You recognize production of hydroxide at Marion when it ships. Whereas at Wodgina, it's after it ships-
That's right. Yeah.
A lag of three to four months. June quarter sales at Wodgina are effectively going to that 931 tonnes, or was it not the whole quarter?
That's right. There is a delay of three months, three to four months.
Okay. For modeling purposes, though, we should just assume that everything that's sold at Wodgina is converted on a quarterly lag.
Yes, that's right.
Okay. We should assume from here all volumes at Wodgina are converted?
That's our intention, yes. We across both businesses, we want to convert.
Yeah. Okay. Thanks, James.
Thanks, Kate.
Next question comes from Rob Stein with Macquarie Group. Please go in.
Thanks for hosting this, by the way, guys. Just a quick one, maybe a different tack. On the gas, seeing the 10 terajoules per day plant and the potential to restart that. Just wondering how to think about the, you know, the potential size of the gas business. You know, I know it's very early stages. I know it's, you know, you're just with exploration wells at the moment. But just in terms of sizing, like, how are you guys thinking about that in terms of total gas sort of production or potential ranges around what you're looking at there?
Yeah. Thanks, Rob. Broadly, we're thinking of modules, and this will be subject, the number of modules will be subject to the size of the gas, how much gas we find. Typically, we would think of a module as being either 125 TJ/ day, possibly 250 or maybe even higher than that. You know, I think the other thing that we need to think about is the market and where we would sell that gas to. Obviously, our first intention is to sell into our own business and for our own requirements and for that of our JV partners. At, you know, at a 250 TJ/ day plant, you know, that would well exceed our own internal requirements.
You know, what we do with the gas, whether it be sold to other West Australian customers and, you know, WA at the moment, half of the power generation comes from coal-fired power, and the state government has got stated that it wants to close coal-fired power generation by 2030. There's going to have to be a new mix of power generation in WA, and we think that gas-fired power will be part of that mix, and so will renewables. But gas is the best source. The other consideration that we would have, apart from just supplying gas into maybe the WA energy market, would be also to supply maybe into LNG or into the gas pipeline.
The Dampier to Bunbury gas pipeline is about 15 km away from our existing gas fields, so really close to tie in, and then that would allow us to transport the gas up and down the coast as we wished, for a relatively low cost. It's a pretty big opportunity for us. It'll take us, you know, a couple of years to determine all of those outcomes and, but it's, you know, we are definitely growing our capability. Today, we've got about 50 people in our gas business, and we've grown that significantly over the last year. Yeah, I think it's a good piece of business for us to consider in the next two to five years.
Thanks a lot for that. That's great color. Just to clarify, we're talking about 125-250 as a hub size, and potentially there could be multiple hubs, or are you talking about that as the ultimate sort of end state, and that you would have different hubs sort of feeding into like a larger facility that would be around that size, that 125-250?
Look, Rob, I think it's all subject to how much gas we've got. We've got six wells that we're developing in the next 12-18 months. You know, we had obviously a huge success with our first well. You know, we've got to define the size of it. Part of the answer here will be how big the market is and how big the opportunity is to supply that market, and we think it's significant. Right now, I can't, you know, I don't want to get ahead of ourselves with regard to how many of these plants we might put in place.
Yeah, no, that's fair enough. I'm just trying to get a bit of a conceptual mud map of how that business grows and how it would look. No, thank you very much for the color. Really appreciate it.
Thanks, Rob.
Once again, if you wish to ask a question via the phone, please press star one on your telephone keypad. If you wish to ask a question via the web link, please type your question into the "Ask a Question" box. The next question comes from Mitch Ryan with Jefferies. Please go ahead. Hi, Mitch. Your line is live. You may have your cell phone on mute.
Hi. Sorry, can you hear me?
Good to hear, Mitch. How are you?
Yeah. Yeah. Good, thank you. Sorry about that. Firstly, just the first question and a follow-on to Rob's question with regards to the gas business. Can you, on a shorter term basis, just talk us through when we should be expecting sort of news flow on those drill results over the coming 12 months?
I mean, each well takes about two months to drill and complete and get results for. We're hopeful that, you know, December, January drilling and results, you know, when they come. These wells are 4.4 km deep. They do take a little bit of time to develop. Yeah, there are six wells. The program, you know, the news flow will come as required by ASX requirements.
Yeah. Perfect. Thank you. Back to the tolling, toll treatments. Can you talk to or provide any clarity on where the specific toll treatment facilities are? Obviously, they're in China, but where in China they are and/or their capacity. Do you have any insight or can you put any color to that, please?
Unfortunately, no, we can't. Sorry, Mitch. You know, these are short-term agreements and, yeah, we can't do that.
Okay. Third and last, can you just provide any color on the structure of the CSI contracts at Wodgina? I.e., like do you stand to benefit if you're obviously getting more tonnes but at a lower grade out of that operation?
We've got two contracts at Wodgina. One is for crushing, and that is purely on if you take the mined tonnes, the mined ore tonnes, your best estimate of what we would crush. And then we also provide cab services in the airport and so on. That's the other activity. The short answer to your question is no, it's not related to grade at all. It's purely mined tonnes out of the pit.
Okay. Perfect. Thank you. That's it for me. Appreciate it.
Thanks, Mitch.
Thank you. Your next question is a follow-up question from Matthew Frydman with MST Financial. Please go ahead.
Sure. Thanks very much for taking some follow-ups. I've just got a couple of hopefully quite quick ones. Firstly, on Glyn's question on the hydroxide production from Mt Marion. In the current quarter versus the prior quarter. Just to clarify there, is it correct to say that in the prior quarter, there was a build-up of feed over a number of months? I think it was dating back to February of this year, so effectively five months of feed that was reported in that June quarter number. Which I guess would explain, you know, at least a part of, or if not most of the difference that Glyn's highlighted.
Yeah, if you look on the table on the last page eight of our release, you'll see that Q4 FY 2022 was 6,722 tonnes, and that did include tonnage from Q1 effectively. If that's where Glyn was getting to, yeah, Glyn, that's the answer to your question.
That makes sense. Thanks, James. Secondly, I expect it'll be a pretty short answer, but you've put a comment in there on the front page around continuing to explore options to maximize the value of the lithium business. You know, we've got an AGM in a few weeks' time. Is there anything that we can expect at the AGM? I guess broadly in terms of updates, but you know, specifically around that journey to maximize value in the lithium business? Any new information either on the JV or any other considerations that you expect might come up at the AGM?
Hey, Matt, I think it would be a career-limiting move for me if I front run either my chairman or James McClements or Chris Ellison. I'll choose to plead the Fifth on that. Yeah. Look, I mean, I can't give you what we're going to say at our AGM.
Can't say I expected a different response, James, but I thought it was worth asking the question.
We're going to write resolutions there, Matt.
Thanks, guys.
Thanks, Matt.
Next question is a follow-up question from Lyndon Fagan, JP Morgan. Please go ahead.
Thanks, guys. Look, I guess I'm still just trying to reconcile the fact that the tolling agreements are short term in nature, but you've got, you know, multi-decade mine lives here and a desire to convert everything into hydroxide. I'm wondering when you're able to provide a bit more color on that roadmap. I guess that includes a hydroxide plan at Wodgina and, you know, potential study results. But, you know, clearly there's gotta be a whole bunch of assets either vended into the JV or built or, you know. When are you likely to be able to provide the market sort of how that looks? Or is it really just a case of bit by bit, sort of piecemeal things will come together? You able to provide some color there? Thanks.
Yeah. Lyndon, I think they're all really important questions for us as a company to answer. Obviously, we have a view. We haven't been able to express that view to the market yet because we've got a pretty important agreement with Albemarle to conclude. You know, I think once that agreement is concluded, I think all of your questions is beholden on the management team and us to disclose, I mean, exactly what those plans look like. Those plans need to include assumptions on capital, timing, volumes, costs, and all of those expectations. You know, we're well aware that at the moment, you and other analysts don't have that information. But we've got a very clear intent about what we want to do.
When the Albemarle agreement is announced, we would hope to put meat on the bones of all of that, so that you can. Because what we want is all of our shareholders in the investment market to understand the cash flow potential of our business. I think there is a very important agreement that we've got to conclude before we can do that. I think that should be the expectation.
Thanks. Thanks, James.
Thanks, Lyndon.
Thank you. There are no further phone questions at this time.
Great. Thanks for your time, guys, and have a great day. Please reach out with any further follow-up questions, and we'll come back to you guys on the royalty question.
Thanks, everyone. Enjoy your day.