Good day, and thank you for standing by. Welcome to Pilbara Minerals' December 2023 quarter updates conference call. At this time, all participants are under listen-only mode. After the speaker's presentation, there'll be a question-and-answer session. Please note, Pilbara Minerals will be only taking one question per person, with one related follow-up question permitted. To ask a question during the session, you'll need to press star one on your telephone.
Pilbara Minerals will also take some questions from the webcast towards the end of the call. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Pilbara Minerals' Managing Director and CEO, Dale Henderson. Please go ahead. Thank you.
Thank you, Maggie, and a warm welcome to those who have joined us on the call today, in particular to our long-term shareholders. I'd like to begin by acknowledging the traditional owners on the lands on which our business operates, the Whadjuk Noongar people of the Noongar Nation in Perth, where we are undertaking our call today, and the Nyikina and Kariyarra people, where our operations are located in the Pilbara. We pay our respects to the elders, past and present.
With regards to the introductions, the speakers joining me today are Luke Bortoli, our CFO, Vince De Carolis, our Chief Operating Officer, and also in the room, we're supported by a number of the team. As for the call today, and as outlined by Maggie, we'll be stepping through a short presentation, followed by a Q&A.
We'll be aiming for roughly 25 minutes of analyst questions and five minutes from the webcast. So looking forward to your questions. To start with, some opening remarks. The December quarter for Pilbara was one of disciplined delivery. This included at the operation, strong production volumes, cost improvement in the operation, and further ongoing sales, including a significant offtake expansion was signed.
As related to projects, all projects on track to schedule and cost, and in particular, our major project expansions. As related to chemicals, progress on those fronts, and lastly, the balance sheet. We took prudent steps to further defend our strong balance sheet with some CapEx deferral and some other capital preservation steps. Now more broadly, I appreciate there was plenty of activity within the lithium market.
This includes some very positive signs of the market continuing to grow, including strong EV growth, company mergers, and significant share purchases and assets locally within the sector. Of course, these activities are contrasted against news of developer project challenges and speculation on the pricing outlook for lithium products.
Further, these activities are set against a global backdrop of continued significant activity. I'll offer more comments on the market later. For Pilbara, we're looking through the short-term volatility. We remain focused on the long-term opportunity this market presents for our stakeholders, shareholders, and everyone connected to our business.
As this market takes shape, Pilbara is uniquely placed given our cost position, scale, operating know-how, market understanding, and balance sheet strength. We have navigated these choppy waters for the lithium market for some time. This is not our first rodeo.
With that, I can confirm we are head down with delivery against our strategy, which brings us to slide 2. The pillars of our strategy are prioritized to generate the most rapid value creation for our shareholders in service of our vision, which is to be a leader in the provision of sustainable battery materials products. In pursuit of this aim, the business is wired in service of four strategic pillars.
First, the operating platform. The operating platform is the engine room of Pilbara Minerals, driving our returns for our shareholders and stakeholders. Secondly, we want to be growing that operating platform to full extent, making the most of this incredible tier one asset that we have stewardship of. Thirdly, chemicals. This is all about dovetailing our production into chemicals to realize additional margin per lithium unit, ensuring we have a resilient business through downstream integration.
Fourthly, and a distant fourth, diversification. Ultimately, we are open to to diversify if and when an appropriate accretive extension is identified. The December quarter was a solid quarter of delivery. Now, let's skip to Slide 3 to touch on a few of the highlights for the quarter. Now, starting with production.
Production was on plan for the quarter, 176,000 tons, a 22% increase on the prior quarter. Sales were in line with production, with a 9% increase on the prior quarter. The delta to quarter production volumes is owed to timing of shipments. I would note that the timing of these shipments was more heavily weighted to the month of December due to some congestion at the port of Port Hedland.
As it relates to realized pricing, the timing of those vessels leaving port impacted the realized price as headline chemicals prices moderated downwards during the quarter to lower price, pricing at the back of the quarter. As such, realized pricing for the quarter was timed to the back of the quarter being $1,280 per ton on an SC6 basis or $1,113 per ton on a 5.2 basis.
As it relates to costs, in relation to costs, our continued focus on cost performance has yielded a cost improvement of a 14% decrease on the prior quarter, which is great to see. Operating margin. Although pricing moderated down during the quarter.
Healthy cash margin, margin was still generated from the operation care of Pilbara Minerals' cost position, which is a great outcome, particularly given this has been a ramp-up quarter. I'd like to remind all that the back half of this financial year will comprise larger production volumes here of the P680 expansion projects.
These larger volumes will support further improvement on a unit cost basis. As it relates to growth, the projects team has continued to deliver well. The P680 primary rejection facility was fully integrated during the quarter and has commenced yielding benefits. The P680 crushing and ore sorter facility is on schedule and on budget, targeting ramp up in the September quarter this year.
The P1000 expansion project remains on track for schedule and budget, targeting ramp up in the September quarter calendar year, this calendar year also. Sorry, calendar year 2025. As it relates to chemicals, our joint venture with POSCO for the 43,000-ton lithium hydroxide plant continued progress with commissioning Train 1 commenced in the quarter, and we had the privilege and pleasure of joining the opening ceremony during the quarter as well.
As it related to offtake, within the current quarter, March quarter, we were pleased to finalize an amendment to our existing offtake with Ganfeng for the next three calendar years, where we can supply up to 310,000 tons per annum.
I would note that within this agreement includes volume options at Pilbara election. We're delighted to expand our relationship with Ganfeng. They have been a long-standing partner of Pilbara Minerals further, they're amongst the world's leading lithium chemical converters.
This co-commitment speaks to the respective strengths we see in each other's business, and the want for deeper collaboration, and the want to expand our respective positions in this growth industry. So all of these highlights have only been achieved through our team. So a quick shout-out to the team at Pilbara Minerals and our contracting partners, whose dedicated focus is continuing to deliver the outcomes.
Thank you for another great quarter, in particular, upholding our focus on safety and navigating this hot summer period, which coincides with Christmas and New Year. It is through these results, we continue to build our reputation for disciplined delivery. Thank you, team. Also, during the quarter, we announced the transition of our long-serving chair, Anthony Kiernan. After eight years, Anthony is handing the baton to Kathleen Conlon, with the formal transfer occurring at the end of this month.
Tony's contribution to the journey of Pilbara cannot be overstated. From the fledgling minnow in the shed and Fremantle to the ASX 50 critical minerals lithium powerhouse we've evolved into. Tony has played a huge part, as has the full board he leads, in shaping the response at each of the important junctures the business has encountered.
Following his stead is Kathleen Conlon, a seasoned chair, a well-credentialed professional of large cap companies. Among the many strengths Kathleen brings to Pilbara includes strongly applicable industry experience from her time as chair of rare earth operator, Lynas. I've no doubt Kathleen will make a significant contribution to the board in the years to come. Welcome, Kathleen. To Tony, on behalf of the board, management team, and shareholders, thanks for an incredible contribution. You will be missed. However, I know you will remain in close contact. Thank you.
Now, with that, I will now pass to Vince for an update on the operations for the quarter. Over to you.
Thank you, Dale. Starting with Slide 5, as you can see there, we're seeing improved safety performance for the quarter. Our total recordable injury frequency rate has decreased from 3.99 in the September quarter to 3.35 for the December quarter.
This is very pleasing as our safety program initiatives continue to gain traction with our people, and however, we know there's no room for complacency when it comes to safety. Our lead indicator in safety interactions continues to trend strongly, and in the quarter, we ramped up our critical risk management training and awareness, and we've commenced to roll out our new critical risk management system, and the rolling out and embedding will continue into the second half. Moving to people and culture, we continue to deliver on our commitments through our cultural engagement survey that we completed.
Just in the last quarter, we delivered a new mining precinct, which sets us up for, for now and into the future. Additional new rooms that will help us through the expansion, new fleet, just to mention a few. We have a strong culture program that we've been building, consisting of a purpose-built leadership development program and linked to hiring leaders and people that align to our value sets.
This is continuing to drive improved results through our culture. Moving to Slide 6, onto volumes. Production was slightly ahead of our internal expectations at 176,000 dry metric tons, which is a 22% growth from the first quarter.
This was on the back of strong performance from both mining and both processing plants, and also continued commissioning of our P680 primary rejection expansion, which sets us up for the remainder of the year. Our full-year production guidance is unchanged. Onto processing, a strong quarterly performance from both plants was attributed primarily to improved plant availabilities, being 89% for the quarter versus 82% for the previous quarter.
As I mentioned, the commissioning of primary rejection, resulting in record processing throughput for the quarter and a 15% increase on Q1. Our improved shutdown cycle has also proved successful, and we now take the next step at moving to quarterly plant shutdowns as we move into the second half, which is a significant improvement from the 6-weekly shuts just a little over a year ago.
Recoveries were, however, challenged for the quarter at 65.9% versus 66.6% for the previous quarter. This is due to feed mineralogy as a function of face positions in the mine and as we bring on new mine zones, and also some plant instabilities as we commission primary rejection.
We continue to work on strategies to improve our recoveries, such as ore sorting, and we do expect these to improve into half two and into FY 2025. On mining, we continue to improve our mining performance, achieving another record for the December quarter at just under 9.6 million tons versus the September quarter, which was 9.1 million tons.
which is a 12.5% improvement half-on-half, and on the last quarter, same time last year, it's a 29% improvement in our mining productivity. This is a fantastic result from the team, and we expect further improvement as we continue to deliver on our mining uplift plan.
Key focuses of that plan in the coming quarter remain unchanged, beginning to implement our heavy mining HME strategy, phase one. Continued improvement on productivities realized through newer fleets, improved payloads, improved road networks, and system upgrades such as our fleet management system. On to costs. As mentioned by Dale, our unit cost for the quarter was in line with guidance, being AUD 639 per ton versus the Q1 performance.
We are comfortable in our unit cost guidance as we progress into the second half of FY 2024. In parallel with supporting ramp-up activities, we continue to implement operational productivity improvements that will result in improved unit costs into the second half. Some of those key initiatives that I just mentioned before is improved mining productivities that will result in reduction in mining fleet, our HME strategy, which is purchasing our own fleet and reducing hiring costs, and optimize s hutdown strategies, just to mention a few.
These assist in helping to offset some of the inflationary pressures we continue to see, such as diesel prices, labor, camp services, and contracted services such as, equipment, hire rates, power costs, and flights. And with that, I'll hand back to you, Dale. Thank you.
Thanks very much, Vince. As you've heard from Vince, plenty going on at the operation to continue to make improvements. Now moving to Slide eight. A reminder that the P680 project comprises two components, being the primary rejection facility, which increases production capacity, which has been ramped up during the December quarter that we just spoke to. And there's the integrated crushing and ore sorting facility that you can see on the slide.
So as it relates to the crushing and ore sorting facility, progress for the quarter included completion of the civil and concrete works, and the award of the SMP, being structural, mechanical, piping, and electrical instrumentation controls contract to Primero. So thank you and well done to Primero. We look forward to your good performance.
The project remains on track for June quarter commissioning and ramp up during the September quarter. Looking forward to that facility coming online. Now, moving to the next leg of expansion, the P1000 project on Slide 9. Progress for the quarter included detailed design completed for construction and fabrication packages, all earthworks progressed, and awards of the contracts for concrete and fabrication.
We remain on schedule, with first oil targeted for the March quarter of FY 2025. And so just a mention, too, well done to the operations team and projects team on the close work on P680. It's not easy maintaining parallel operations at full, full, full extent, plus integrating what has been a large brownfields addition. So on time, on budget. Well done to the two teams, Primero, and all the respective contracting partners.
Thank you, guys, and looking forward to you repeating those results in the next legs of expansion. Moving to slide ten, the drilling program. During the quarter, we commenced our latest drilling program with almost 12,000 m drilled in the quarter. I would note that we have rationalized the drill program for this year to focus on nearer surface ore lodes and priority sterilisation drilling that provides shorter-term benefits to the operation.
Noting, of course, that we've had considerable success last year with drilling. We had an enormous increase in reserve last year, 35%, which provide an extension up to a 34-year mine life. As such, we've got plenty of ore ahead of us, hence we are just rationalizing and focusing on the must-do drilling in the near term. Moving to chemicals on slide twelve.
A quick reminder on the different lithium product pathways that we have, with increasing level of processing or value-adding, moving from left to right. On the left, our spodumene concentrate, which is our core business today. Our Mid-Stream in the middle, which is the production of an intermediate lithium chemicals product, and then to the right, downstream lithium hydroxide being battery-grade feedstock product.
As it relates to the Mid-Stream, the aim here is to generate a superior lithium intermediate product for market, which will add more value at the mine site and is undertaken through more sustainable methods, in particular, reduction of carbon energy intensity. We are busy progressing our demonstration plant for this. It's on track and looking forward to progressing that in the year ahead.
As it relates to downstream, moving to slide 13, and downstream chemicals facility joint venture with POSCO in Gwangyang, South Korea. December was a busy quarter with a number of milestones. The Pilbara Minerals board visited the plant late last year for the official Train 1 opening ceremony, and commissioning continues to plan and is expected to be materially completed in the March quarter, with full ramp-up of capacity expected to occur within 18 months from completion.
As Train 1 was prioritized in the December quarter, we now expect that commissioning for Train 2 will commence in the second half of this calendar year. The JV has also increased the funding requirement for the facility from $800 million to $895 million, inclusive of $65 million contingency. Pilbara Minerals' 18% share is equivalent to $17 million.
This increase is fully funded by additional short-term debt facilities that were established during the period. This increase is owed to a number of items, and includes inflation and exchange rate movements. The joint venture will sell uncertified lithium hydroxide products to other chemical converters and traders. The products will be certified in approximately 6-12 months.
Regards to Pilbara Minerals' option for equity increase from 18%-30%, we thought we would touch on this in brief. As a reminder, Pilbara has a call option, so up until the date, the conversion facility, i.e. the chemical facility, receives independent battery certification. Pilbara has the call option to exercise at cost, plus a subscription price of 3.58% per annum.
Thereafter, Pilbara can, up to 18 months after the plant's been commissioned, elect to step up to from 18% to 30%, once 90% of nameplate production capacity has been achieved. So, some very favorable terms for Pilbara, which enable Pilbara to be a 18% disinterested participant for quite a long period, yet, as we observe the development and ramp up of the operation. So we just wanted to share that one. So as I say, Pilbara remains currently an 18% equity interest in that joint venture. Now, with that, I will now pass to Luke to take us through the financials.
Thanks, Dale, and good morning to those on the call. Please turn to Slide 15 of the presentation for a summary of the group's key financial metrics for the December quarter and H1 FY 2024 period. Group revenue in the December quarter was AUD 264 million, a 46% reduction on the September quarter, driven primarily by a 50% lower average realized price.
Average realized price declined from $ 2,240 per ton in the September quarter to $ 1,113 per ton in the December quarter. Despite the decline in revenue, operational performance was positive period-on-period, as mentioned earlier. Sales volume was 160,000 tons, 9% higher than the September quarter, which was enabled by higher production volume.
Production volume was 176,000 tons, a pleasing 22% higher than the prior quarter and in line with plan. As mentioned earlier, this was achieved through higher mining volumes and processing plant availability in the period. Processing volumes in turn benefited from one less shutdown for the quarter and higher throughput enabled by the ramp-u p of the P680 project's primary rejection facility.
As previously disclosed, FY 2024 production volume for the full year is weighted towards the second half of the financial year, in line with the ramp-up of the P680 project. Looking at unit costs, unit operating costs on an FOB basis improved by 14% in the December quarter, compared with the September quarter to $639 per ton. Unit operating cost reductions were underpinned by higher sales volume.
As outlined at the full year 2023 results announcement, planned investment in production-related costs in FY 2024 has increased in total dollar terms to support the expansion to P680. However, this quarter's results show the scale benefits of higher production volumes that are beginning to be realized by the group.
On a CIF basis, unit operating costs were AUD 805 per ton in the December quarter, a 20% reduction period-over-period, primarily due to a decrease in royalty costs from lower sales revenue. Turning now to slide 16. Slide 16 provides a summary of the group's key financial metrics for the H1 FY 2024 period. Group revenue in H1 FY 2024 was AUD 757 million, a 65% reduction on H1 FY 2023, driven almost entirely by a 67% lower average realized price.
The H1 FY 2023 period captured the historical peak in spodumene concentrate prices with an average realized price of $4,993 per ton, versus $1,645 per ton in H1 FY 2024. H1 FY 2024 did deliver production in line with our plan at 320,000 tons of spodumene concentrate produced, approximately 10,000 tons higher than the prior corresponding period....
This was achieved through a significant step up in total material mined and ore processed, as Vince mentioned earlier. At the unit cost level, unit operating costs on an FOB basis were 16% higher in H1 FY 2024, at $691 per tonne. And also, as mentioned earlier, investment in production-related costs has increased to support the ramp up to P680, which is reflected in these unit costs.
The scale benefits of higher production volumes to unit costs are beginning to be realized in the December quarter. Unit operating costs on a CIF basis declined 21% to $900 per tonne in H1 FY 2024, reflecting lower royalty expenses in line with reduced revenue. Turning now to Slide 17.
The group continues to maintain a strong cash position with a closing cash balance of $2.1 billion as at 31 December. The December ending cash balance was $897 million lower than the prior quarter, primarily due to the impact of income tax payments, but is in line with the prior corresponding period, being 31 December 2022.
Focusing on cash margin, our cash margin from operations, defined as receipts from customers less payments for operating costs, was AUD 176 million in the quarter, reflecting the strong cash generation of the business, notwithstanding lower spodumene prices. In addition, cash margin from operations less ongoing CapEx, being capitalized mine development costs and sustaining CapEx, was also positive in the quarter at AUD 118 million.
These metrics show that even with the lowest spodumene prices observed in the December quarter relative to prior quarters, the group remains cash flow positive, pre-growth CapEx and financing cash flows. Turning now to Slide 18. We believe the group's cash balance and overall balance sheet position is a competitive advantage relative to many of its peers in the lithium sector.
This is particularly the case in an environment of lower spodumene prices and potentially more difficult capital raising conditions. With a low unit cost structure and a strong balance sheet, Pilbara Minerals is uniquely placed to withstand and capitalize on a period of lower prices that could rationalize the market.
With increasing production capacity, the group is also uniquely placed to take advantage of an improvement in market conditions when the pricing cycle turns. Notwithstanding this balance sheet resiliency today, the group has increased its focus on unit cost efficiency in the ramp up to P680 and P1000, and it has also conducted a review of non-essential spend.
Based on this review, the group is revising its FY 2024 CapEx guidance from $875 million to $975 million, to a reduced range of $820 million-$875 million, with a number of new projects and enhancements deferred for conservatism.
This represents a reduction of $100 million at the top end of the range and $55 million at the bottom end of the range. It's also equivalent to a reduction of one half to a third of the discretionary component of total CapEx that relates to new projects and enhancements. We also note that to preserve the group's balance sheet position even further, it's unlikely that a dividend will be paid for the H1 FY 2024 period.
The Pilbara Minerals Board will make a final determination on the H1 FY24 dividend payment and announce it with the H1 FY24 results. The combination of CapEx spend reductions and pausing on a dividend payment would result in approximately AUD 200 million of total cash savings at the top end of the range, relative to what would have been spent otherwise. These reductions, we believe, are prudent in the current environment and will place the group in an even stronger position going forward. I'll now hand it back to Dale.
Thanks very much, Luke. Now moving to the market, on Slide 20. So yeah, it's been, it's always lithium confusing signals in the market. So to help with this, of course, we'll offer our view here. And to do that, I'll sort of step through in three parts later and down. So starting first with some broader market observations.
Two, I'll then speak to some industry-specific observations for lithium. And lastly, finish with our business and what does the current landscape mean for our business strategy. So starting with the macro market observations. So the broader market global backdrop remains turbulent, with, of course, ongoing conflicts in Ukraine and the Gulf region, and areas of inflation globally.
As we look out to the year ahead, it appears to contain the drivers for further potential change. I note that 2024 is a historic year for elections, with over 50 elections occurring this year, which include, of course, U.S., India, Mexico, European Union, South Africa.
In fact, the Times are suggesting that over 49% of the world will be voting this year, which is pretty incredible. So obviously, change is afoot with those elections. Stepping to industry observations. At the industry level, despite the downward trend in pricing over the past year, signs of grassroots growth remain very positive. Noteworthy facts in this regard include: global EV sales increased 31% on the prior year as seen on the left-hand side of the graph. As it relates to China, the December quarter set all-time records for EV sales.
In 2023, China EV sales were up 37% on the prior year. For the December quarter, China EV penetration rate was 38%, so 5% year-on-year from the prior year. And as it related to the December, sales totaled 1.1 million units, giving a penetration of rate of 41%. So very strong signs of the uptick of this important demand market for lithium.
As it relates to government support, a series of further support initiatives were announced during the quarter. Noteworthy news here included the South Korean government on the 13th of December committing $29 billion over 5 years for local battery companies and critical minerals.
The European Commission on the sixth of December noted they're planning on additional funding to the tune of EUR 3 billion in battery manufacturing. And then the U.S. government on the fifteenth of November, providing up to $3.5 billion for cell manufacturing. So big licks of cash going in to fuel the establishment of this growth industry.
So fantastic to see that occurring. As it relates to Pilbara customers, we undertook several trips to Asia during the quarter. This included a trip to South Korea and China, where we engaged with all of our downstream chemical partners. And I would note that our chemical partners are the major established participants within the industry, most of which have got an international footprint and international relations.
The consensus feedback was one of cautious in the near term as it relates to processing. However, all have a strong conviction on the long-term prospects of the industry, and all of our major customers are building, in some way, shape, or fashion, and seeking further, further long-term supply from Pilbara, which is, great to, to see and great to, see that we share this, same view of seeing through short-term softness for the long-term prospects that this industry provides.
Now, obviously, the most, the best evidence of this was the offtake, expansion that we did with Ganfeng during the quarter, which I spoke to, earlier. But outside of that, we are getting inbound, requests, for supply contracts at, at this time.
So again, another positive signal, and, despite, as I say, some softer pricing at this moment in time. Now, moving to the last point here, what does this all mean for Pilbara strategy? Well, there is no change. And as I noted in my opening, we are looking through the short-term volatility to the long-term opportunity this incredible, incredible market presents for our shareholders and all our stakeholders connected to our business, as are our chemical partners.
As such, we'll keep focused on our discipline delivery, and Pilbara Minerals is uniquely placed given our cost position, scale, operating know-how, market understanding, and balance sheet strength, and we have navigated these choppy waters before. Now, as our outgoing chair, Tony said to me on the phone yesterday, "When it comes to lithium, pens down, it's Pilbara." And of course, I couldn't help but agree.
So shout out to you, Tony. Thanks for that one. Now, with that, I'm pretty much... I'm over time. Sorry about that, and I'll hand back to Maggie to go to Q&A.
Thank you very much. Just a reminder, to ask a question, please press star one one on your telephone. Please stand by as we compile the Q&A roster. Our first question comes from Rahul Anand, from Morgan Stanley. Please go ahead.
Yeah, hi, good morning, team. Thanks, thanks for the call. Just, one clarification from me on the pricing and the revenue lines. Firstly, on the pricing, is it fair to understand that 44% of the volumes would be adjusted for your quotational price at the end of January? And as we see the realized price at the moment, it's reflecting prices up to January 7.
And then I guess the second part of that is, I did note that the per ton revenue number is still lower than the pricing line, in terms of achieved price. Is that being impacted mainly by quotational price adjustments from the previous quarter?
I'll take that question. Thanks, Rahul. On the first part, the volume, which is subject to final pricing adjustments, is probably something in that order. On the second part of your question, perhaps we take that offline. I think if you were to look at sales volume, multiplied by price and then adjust the FX rates, it's very much in line with revenue.
Okay, all right. We'll take it offline. That's my one. I'll queue back in. Thanks.
Thank you. Our next question comes from Levi Spry from UBS. Please go ahead.
Good day. Good day, Dale and team. Thanks for your time. Maybe sticking on price, I guess, you know, price reporting agencies, I think, are reporting the price is currently around 850, so SC6. Can you sort of just talk to is that what you're seeing?
How does that, you know, how does that, I mean, your realized prices are coming out at the moment? And I guess the context here, just around, you know, what your customers continue to say about 5.2% product. Thank you.
... Yeah, good day, Levi. Yeah, the pricing indicators at the current market, I would agree with you. It's anywhere in the range of $800-$900 of what we're seeing from the price reporting agencies. So I think, I think you're about right there in terms of what we're seeing with the market. And pleasingly, we've seen some more convergence of all of the pricing references, which I think is helpful because in prior quarters there was a wide divergence between spot-
Yep.
-pricing and the chemicals. So, which is, I appreciate causing a lot of confusion and concern out there. So, that has sort of tracked together, which is great to see. Which, albeit it's, the price is a bit lower, which is not what we're after, but at least it, it's tightened up a bit.
As it relates to product grade, there, there's no issues around 5.2, 5.3, and no call for, for any change, there. So, we're okay on that front. Does that, that answer your question, Levi?
Yep, yep. Yep. Unless you wanna add anything on, on realized prices, I guess. Thank you.
You can look forward to that one next quarter.
Thanks, mate. Thank you.
Thank you. Our next question comes from Mitch Ryan from Jefferies. Thank you.
Morning all. My question relates to the updated agreement with Ganfeng for increased offtake. I understand that it's tied to prevailing market prices, but are there discounts associated with that quantum of volume? How should we think about that?
Good day, Mitch. I can take that one. No discounts. No, no, it's the same pricing across the lot and a consistent principle we have with all of our offtake agreements is to make sure that our spodumene concentrate reflects the prevailing market pricing. But I confirm there's no discounts for a larger volume.
Okay. Thank you. Appreciate that.
No worries.
Thank you. Next question comes from Hugo Nicolaci from Goldman Sachs. Please go ahead.
Morning, Dale and team. Thanks for the update and congrats on the official opening in South Korea. Maybe just before my first question, just a quick clarification. The cash waterfall slide, you've got on slide 17, there's AUD 98 million of other investing, but non-CapEx, spend. Can you just clarify what that was?
Yeah, I'll take the lead on that and then pass to Dale. So, a component of that related to share purchases in the quarter and another component related to payment on the acquisition of Altura in respect to stamp duty. I'll just pass it to Dale for any other comments on that.
No, thank you, Luke .
Great. Thanks. Thanks for that, guys. I mean, maybe then just moving, I guess, more to kind of a strategic question. Obviously, a different lithium, lithium pricing environment to where we were maybe 6, 12 months ago. I mean, how important, in your view, is maintaining a net cash position and, I guess, preserving dividends at the full year result? And then with market conditions and share prices as they are today, how do you see the returns profile of the competing strategic priorities between, you know, further expansion of Pilgangoora, buybacks and acquisitions of likely longer-dated greenfield projects? Thanks.
You go, you're making the most of that question. Good on you. Well, probably just start with the divvies. So we've provided some clarity on that in the quarterly release, basically flagging no dividends and a want to preserve capital. As it relates to how the current market changes our thinking? Well, it doesn't really as per the presentation we've stepped through.
This is the establishment of a new industry. The grassroots prospects of where this is heading directionally are pretty remarkable, and we have strong conviction on that as we have done for many years. And this is not the sort of first period of soft pricing Pilbara had to navigate. So you've been through this. We've been through softer pricing before.
We have a playbook, effectively. The difference now is we're materially stronger in every respect of scale and know our relationships, our balance sheet position. You could not ask for a better position to navigate these waters. So for us, it remains keeping our eye on the long-term prize and being positioned to make the most of this industry as it unfolds.
So, I'd probably also add that I think what is inherent in this industry today is a level of volatility, and it tends to surprise everyone. I think going back in time, the downward pricing was probably longer than people expected, but then equally the turn was more vicious and much higher than anyone anticipated.
And it would be reasonable to expect more surprises in the future, given that there is such... It's coming from such a small base, and there are big moves afoot to pull this industry into maturity. So we'll see how we go. But as I think all of our investors can take comfort, that we are disciplined in delivery. We're prudent in our approach, and as I say, we remain strongly convicted on the long-term prospects. Thanks for your question, Hugo. All righty. Next.
Thank you. Next question comes from Hayden Bairstow from Argonaut. Please go ahead.
Good morning, Dale, and the team. Just, just a bit of a follow-up from that. Just interested to understand, I mean, obviously, you, you want to get these projects built and stopping anything halfway through a project is never a great idea anyway, but just your willingness to then, you know, adjust the volume ramp up into these expansions, just depending on where the market actually is. Is that something that you're keen to do or, or you'll look at? Or is it, given your, your cash margins are still pretty good, you'll just sort of push ahead regardless?
Yeah, good day, Hayden. Good, good question. You know, that is something we could consider, but not something we think we need to yet. I mean, we'll continue to monitor the prevailing market pricing, and we will obviously make the decisions which reduce risk for shareholders and maximize their returns.
One of which is we could moderate the produced volumes if that made the most sense for the business, as we did during 2019, 2020. But no signs of needing to do that at the current pricing levels at this stage.
Great. Thanks.
Thanks, Hayden.
Thank you. Our next question comes from Al Harvey from JP Morgan. Please go ahead.
Good morning, Dale. Yeah, just wanna dig a little deeper into the balance sheet conservatism there, I guess. You've got a couple of studies coming over the next couple of months. So first off, you've got the downstream partnering. Just kind of wanting to get a sense, do you expect that to be CapEx heavy potentially, or is there an option that you could go down a more offtake-heavy route, like you announced with Ganfeng last week?
And then beyond that, I know you haven't ruled out the study on expanding Pilgangoora further. That's first study outcome in the June quarter. So just trying to put those two together in terms of, you know, preserving the balance sheet and what options there might be in that respect.
Yeah, good day, Al. Yeah, as it relates to downstream partnering, I'd say it's unlikely there would be any sort of capital requirement in the near term. If we're proceeding with a partnership, you know, and if there was a proposition to build something together, you know, these things normally there's quite a long gestation period time in terms of studies and so on and so forth.
So I think it's not very probable that there's any sort of large CapEx requirement in that regard. As it relates to studies at the mine site, they're all pretty low cost, relatively. And we don't see any harm in carrying on of those at the project level. Yeah. Does that answer your question, Al?
Yeah. Thanks, Dale.
Thanks, Al.
Thank you. Our next question comes from Kate McCutcheon from Citi. Please go ahead.
Good morning. Thanks, Dale and Luke. Just on the cost piece, what are some of those non-essential spend items that you've trimmed to give you that AUD 55 million-AUD 100 million reduction in CapEx? And is there a second round of things you could look at if prices continue to trend lower, or on spot, you're not looking at that here?
Hi, Kate. I can take that. Thanks for the question. So the non-essential spend that we looked to reduce, and when I call it non-essential, I'm referring to the fact that it's not critical for production expansion, included things like commencement of a new village construction, some non-essential roadworks, warehouse upgrades.
It's items of that nature, which we can prudently defer in FY 2024. Beyond this, as it relates to our CapEx guidance that we provided at the full year 2023 result, there is unlikely to be any material more opportunity for reductions, given that the vast majority of the remaining CapEx relates to P680, P1000 construction, deferred stripping, and sustaining CapEx to keep the mine going.
That doesn't mean, though, that as we roll into FY 25, there won't also be a prudent review of CapEx going into that next financial year. Does that help answer the question?
Yeah. Thanks, Luke.
Thank you. Our next question come from Glyn Lawcock from Barrenjoey. Please go ahead.
Good morning, Dale. Just on the pricing again, just obviously in the past, in the rising market, you were able to renegotiate with your customers. Is there any signs of that now prices have gone the other way, like pressure on you to lower the linkage rate to the chemicals? And any insight on whether, what your costs were pre the credits that have now come back from tantalum? Thanks.
Yeah, good day, Glyn. I'll speak to pricing and Luke can speak to our tantalum credits. Yeah, as it relates to pricing renegotiations, it's fair to say there's pressure on renegotiations as pricing increases and decreases. It's a bit of a constant.
What we do is of course adhere to a contract terms so to the best of our ability. So one of the underlying challenges of course in the market is the volatility and the divergence of the different price points that we saw that we just spoke about previously. So hence yeah that's one of the reasons that there's always plenty of discussion around what is the correct representation of the prevailing price, et cetera.
Out of all of that, it's always an ongoing discussion around pricing. But I think Pilbara are pretty confident in this regard now, having been operating in the industry for a fair while, and with a good base of competing customers, we know what fair value is, and of course, we'll do the best we can to maximize the benefit for our shareholders.
Yeah, on tantalum, there was a small amount of tantalum sales in the quarter, relatively immaterial. I can come back to you with the detail if that's helpful, Glyn.
All right. And can I just follow up, Dale, on your response, just so you haven't had to drop the prevailing rate to linkage?
For the quarter, I can't get into specifics. I think one customer may have come up for review, which we had a look at. And in that case, there's been no sort of a change in terms of the proportion of proceeds to Pilbara. But of course, it's a case-by-case basis and the underlying market is moving significantly. So, as I say, we'll do the best we can to navigate any shifts to maximize the benefits for our shareholders.
All right. Thanks very much, Dale.
Thank you. Our next question comes from David Fang from CICC. Please go ahead.
Good morning, Dale and team. Thanks for taking my question. Just wanted from an inventory management perspective, since we're seeing that, the sales in December quarter is slightly lag behind your, production ramp up.
So just wonder, is this due to the ramp up itself or kind of related to port congestion? We understand that Pilbara Minerals has always been very successful in, keeping a very low inventory. So how should we expect the sales to catch up with, production in the March quarter?
Yeah, good day. David, if I understand your question right, you're talking about the delta between sales versus production.
Yeah.
Yeah, as per my commentary and earlier, that's just sales timing, being shipped by port. It's not to do with any sort of stockpiling strategy. Yeah, as a business, we appreciate others in the industry have used stockpiling as part of their strategy with market.
That's not what we've done historically, and we're not looking to do that in the near term. So, we expect those volumes will move through the system in due course, in accordance with the agreed shipping schedules we have with our customers. Does that answer your question there, David?
Oh, yeah. Crystal clear. Yeah. Thank you. That's really helpful. I'll pass it on.
Okay. Thank you.
Thank you. Our next question comes from Ben Lyons from Jarden Securities Limited. Please go ahead.
Good morning, everyone. Good day, Dale. Firstly, just possibly if you could clarify, how much was the stamp duty payment associated with the Altura acquisition, please?
Sure, I can take that. It was approximately $15 million.
Great. Thanks, Luke. And then, possibly a bit of a cheeky one. I'm not sure if anyone's got the numbers to hand, but can you possibly provide the breakdown of sales by month during the quarter? So in October, November, and December stat, if you've got them at hand, please.
There was approximately 90,000 tons that were shipped in December, with the remaining tons in the months preceding that. So that I think is the right way to look at it.
Okay, awesome. Thanks, Luke. That helps. Thanks, guys.
Thanks, Ben.
Thank you. Thank you for the phone line questions. We will now move on to the webcast questions.
Okay. So Dale, the first question we have is: Can you provide any more... Sorry, give me a second. What does the extra supply of offtake agreement with Ganfeng suggest in terms of the broader movement? As in, why have you, why have we signed more offtake with Ganfeng?
Yeah, thank you for the question. So Pilbara has got the great position of being able to partner with sort of the best-in-class chemical converters globally. And we continue to have discussions across all of them as we have, you know, future offtake available. We chose to extend Ganfeng's, well, increase Ganfeng's volume based on the fact that, look, we think they're a great partner. We've worked with them for the many years. They are, as I mentioned in my commentary, one of the leading converters.
And as I also mentioned in the commentary, they have strong conviction on the long-term outlook, and we think we've got a great partnership there, and it makes good sense to offer them some more tons as we get more tons upcoming coming from the expansion. So, but we like others. Ganfeng's great, but there's some other great converter partners out there as well, which of course we're in discussions with. Thanks for the question.
Okay, next question. PLS is heavily shorted, as we all know. Is there any development that the hedge fund companies are aware of, which drives them in this shorting wave?
That would be a question for them. But as it relates to the short interest, yeah, Pilbara is one of the large liquid stocks and pure play lithium in the ASX. What we hear from those whom are wanting to short Pilbara, what we hear is that they're betting on price movement downwards. I note that as it relates to lithium, we're not alone in terms of being shorted.
And certainly the U.S. market, the other big lithium groups are shorter to something similar to us. So we're not alone, but of course, we stand out a bit in the ASX. As to what the hedge funds are worried about, I hope they're shaking in their boots.
I hope they're worried that there'll be other government stimulus and other things which tends to pop up, because what we know in this industry is that pricing and demand can turn very quickly, and that could deploy a short squeeze. But only time will tell. We'll wait and see.
Okay, thank you. What update dates can you provide on the Calix joint venture and progress of the Mid-Stream project?
Mid-Stream is on track, so busy. There's some updates within the release there, which can be read, but it's on track for schedule and budget. Busy doing design and procurement and looking to start some construction later this year. So on track as per the previously guided dates.
Okay, thank you. What is the progress of discussions with parties regarding the additional 300,000 tons of take from P1000?
Yeah, no, those discussions continue and yeah, we look forward to updating in the market in due course. Yeah, unfortunately, I can't offer much insight at this point, given the sensitivity of those discussions. But we remain positive on what we can do in that regard.
Okay, thank you. What is the nature of queries outside of China and any sort of potential partnerships ex-China in the coming year?
Yeah, it's fair to say there's a, there's a wide spread of inquiries globally, ranging from established car companies, emerging car companies, chemical groups, entrepreneurial groups, you name it. So there's plenty going on out there in terms of companies who can see the opportunity for this emerging market. And of course, we talk to them.
But Pilbara, we keep our feet on the ground in terms of thinking deeply about maximizing the opportunity for our shareholders. So we think deeply about, obviously, returns, risk, and ultimately, we keep a sharp focus observing the evolving landscape of the supply chains, which are emerging. The decisions we have to make around product commitment are long term. These are multi-decade commitments, and we need to get that right.
Yes, we very much entertain the inbound discussions from abroad, but as I say, we keep a sharp focus to make sure we make the right decisions for our shareholders.
Okay, and last question. Are we looking at reducing production, given the low market lithium prices?
We are comfortable to keep the foot down in the current market. And as we run our scenarios, it makes good sense to do so. As reported in this quarter, despite the softening pricing for the quarter, we had strong operational margin delivered. Further, as mentioned in the quarter, delivery of the full expansion improves unit costs.
It's a good thing to do. So, this is the other reason for carrying on with the approach that we're doing. Now, that does not mean we don't keep an eye on the horizon and current pricing, but at the current prevailing market pricing, we are pushing on as per the plan and as announced today. Thank you for the question. Okay, so with that, that's a wrap, everyone.
Thank you all for dialing in, and thank you again to the team and all those at Pilbara for another great quarter. We look forward to updating at the half year in the coming weeks. Thank you all for dialing in.
Thank you. This concludes today's conference call. Thank you for participating.