Good day, and thank you for standing by. Welcome to the Pilbara Minerals P2000 PFS Outcomes conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will 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 need to press star one one on your telephone.
Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Pilbara Minerals' Managing Director and CEO, Dale Henderson. Please go ahead.
Thank you, Maggie, and good morning, everyone. Thank you all for joining. I'd like to start by acknowledging the traditional owners on the land in which we are making this call from today in Melbourne, the Wurundjeri people. I'd also like to acknowledge the Whadjuk people of the Noongar nation in Perth, where our West Perth offices are located, and also the Nyamal and Kariyarra people in the Pilbara, where our operation is located.
We pay our respects to their elders, past and present. I'm joined on the call today by a number of the team. The speakers will be myself and Paul Laybourne, our project director, whom has been stewarding the study we announced this morning. And I would add, he's dialing in from the Pilbara today.
I should also add that Paul takes carriage of all projects for Pilbara Minerals, including the P680, P1000, and midstream projects. For the call today, it's a short call. We've got 30 minutes assigned to step through the accompanying slides. Please read these in conjunction with the more detailed ASX release for the PFS. I will aim to speak for approximately 20 minutes, with the remaining time for questions that Maggie made mention of.
So what's the call about? Well, today, we released to the market an exciting set of PFS results for the next leg of expansion at our mine site at Pilgangoora, the P2000 Project. Now, there's a lot more study work to be completed before we can consider an FID.
However, we thought it would be worthwhile to have a brief call to talk through, firstly, the significance of these study outcomes, and secondly, how we see this highly accretive project being progressed, noting that the current sentiment for the market is frankly not the best in the last couple of weeks. Now, let me start by saying, we will only expand when this expansion makes sense for our shareholders and partners, of course, taking into consideration the market outlook at the time.
Pilbara Minerals' growth strategy to date has been one of phased and incremental step-ups with the market. We will continue to follow this philosophy.
I would also add that the next step of the project requires a deeper level of study, which will be timed for the December quarter next year, and any FID decision is to follow that study outcome. So that's more than a year away, which is frankly an eternity in the lithium industry. Those studies have generated an exciting accretive extension for the Pilgangoora asset, a large step-up in production capacity, low unit operating costs, and building off the performing asset base at Pilgangoora, operated by a performing team with more than 6 years of demonstrated operating experience.
It's a great outcome. Now, moving to slide 3 to touch on a few of the highlights. You can see here... Now, the PFS has delivered some strong set of outcomes, both in physicals and financial outcomes.
As it relates to the physicals, you can see this prospective extension lifts production capacity to more than 2 million tons per annum in the first six years of operation, and an average of 1.9 million tons for the first 10 years. In both cases, those volumes are referring to a 5.2% product, consistent with what we're producing from the mine at the moment. As it relates to mine life, a change in mine life from 34 years to 23. As it relates to the financial outcomes generated from this study, an incremental NPV of AUD 2.6 billion, an incremental IRR of 55%, unit operating costs in the range of AUD 550-AUD 650 FOB.
I'd also add that the valuation is based on the long run pricing of $1,500/ton real. Now, we've included a sensitivity for price within the announcement, given the large impact that that has on the valuation. And we've also utilized Benchmark's price forecast as one of the key industry forecasters. You'll see from that forecast, an NPV benefit of $5.4 billion is actually generated. So, a large step-up courtesy of their higher-priced forecast that they're anticipating.
Now, this is an incremental valuation benefit we've demonstrated here. Incremental in that we've compared it against the base operation and quantified the incremental benefit of this next leg of expansion.
And of course, all of these details are found in the full release that we've shared. Now, as I mentioned a moment ago, the next steps is really that next detailed level of study, which is due in the December quarter next year. So that is the highlights. Stepping through to slide five, a quick overview there of Pilgangoora and Pilbara Minerals, which I'm sure most will be familiar with. Stepping forward from there to our strategy slide on slide six.
Our vision for the business is to be a leader in the provision of sustainable battery materials products. We have four planks to that strategy, which are listed off in priority order there. Today's announcement speaks to the second one, growing to achieve the full potential of the Pilgangoora Operation.
I'd like to think this study does exactly that. Moving now to slide seven. We thought it'd be worthwhile to do a quick reminder of our resource and the significant scale that our resource has. What you see here is the hard rock universe, and the green bubbles relate to the Pilgangoora asset. And what we're showing is the journey over time of the Pilgangoora asset from 2017 to 2021 to 2023.
Now, that 2023 resource upgrade translated to a reserve upgrade that occurred in August last year, and it's since that reserve upgrade, we've stepped forward with this study. Now, that reserve upgrade was a 35% lift to 214 million tons, and here we are with the study outcome building off that reserve.
Now moving to, slide 8. So as the resource has grown, the production capacity of the mine has grown as well, and in lockstep with the market. Now, I'd like to highlight this growth as being staged and incremental, taking care with each investment step to maintain a strong balance sheet while investing prudently to position the business for the benefit of upwards price movements.
We have laid each stepping stone deliberately and forward of ourselves, and then stepped forward, with conviction when that timing made sense, for the business and for our shareholders. The development path for the P2000 will follow the same disciplined approach. And it's worth adding, the history of discipline and growth steps is also accompanied by discipline and execution.
And in this vein, it's been great to see this reputation of disciplined execution continue to accrue of on time and on budget delivery of our project expansions, most notably the P680 and P1000 project, which continue to track on time and on budget. So great to see this happening, and it's a credit to Paul and his team in particular, working closely with the operating team and the full team of Pilbara Minerals, to be continuing to deliver on this great reputation that we've been accruing for ourselves. And with that, I'll now hand to Paul, who can step through the P2000 project and the PFS outcomes. So over to you, Paul.
Yeah, thank you, Dale. Good morning, everyone. I'm returning from site at the moment, so hopefully everyone can hear me clearly on the line. The philosophy of the overall study was solving for the most value accretive options by maximizing the lithium recoveries at the lowest unit cost. How we achieved this was leveraging the 7+ years of deep in-house know-how across our geology, mining, processing, and now project delivery experience that has been accrued across the business.
What has flowed from this work, in the first instance, is that we maximize a consistent and reliable ore reclaim from the mine, and then we match this increase through the mine output to a new and more expansive processing capability. The new processing capability is optimized to complement the two existing facilities that are currently Pilgangoora and Ngungaju.
If I can just direct you to the slide where it gives you an overview of the general arrangement. We've shown the current expansion work of P680, P1000, and the existing plant that is shaded in dark to the top right-hand side of the slide.
And you can see that we've mapped out the footprint of the P2000, which is effectively a new train, all the way from new crusher through the crushing system, ore sorting facility, leveraging from the good work that's been developed on our ore sorting P680 development, through the concentrate stockpile and into a flotation and processing circuit, where, again, we're able to leverage on the operational knowledge that we've created through the existing plant, and also our new expansive technology that we've built in the P680 and soon to be P1000.
I think it's important that we note, this is a PFS, which highlights the accuracy for the capital estimates within industry standards, -20% to +30%. Refinement of technical information will form part of the next stage of the study, and that will flow into financial analysis. We've used and leveraged from the experience of our expansions to date, P680 and P1000, and we've used this to assist with the accuracy of the capital estimates.
Now moving to Slide 11. This is a production profile we've mapped out as part of the study, and as you can see, and as Dale mentioned, at a 5.2% product grade, this will produce in excess of 2 million tons per annum for the first six years of the operation and a 10-year average of 1.9 million tons.
The straight dotted line on the graph denotes the 10-year average. This large increase in volumes provides the strong step-up in value, which has been mentioned throughout the study and also previously by Dale on the call. Moving to the next slide. So just some high points. There's been a lot of work gone into the study, but just calling out some of the high points of the study.
So the life of mine is now 23 years, assuming that there's no further resource growth, and that drilling program will continue. We have a capital cost estimate of AUD 1.2 billion, and we note that this capital intensity per produced tons compares favorably to other projects based on our assessment of the information available.
There is a reduction in operating costs to range between $550 and $650 a ton FOB. Again, noting that this is a PFS-level estimate, which will be further refined in the next stage of the study. Strong NPV incremental outcomes demonstrate a benefit of circa $2.6 billion, relevant, relevant to the current operation. This benefit is highly leveraged to the pricing, and we'll take you through that further on in the presentation. Based on these inputs, a payback period of 3 years is noted in the ASX release, and to this end, we've provided some further sensitivities to the NPV. If we can just turn to the next slide, please.
The PFS has used the long-term SC6 price of $1,500 a ton, which is in line with the market consensus from 11 analysts, including Benchmark Minerals, for FY 2027 onwards. The graph does show an increase in average long-term price left to right and corresponding incremental NPV change. However, as we all know and we've experienced, pricing is not flat and is likely to fluctuate in cycles.
So as such, and as Dale mentioned previously, we've included the price curve produced by Benchmark Minerals for a comparator that generated an incremental NPV of $5.4 billion, in an attempt to highlight the potential value that can emerge for shareholders, during rises in prices, which, even if they are on a temporary basis. Apologies for the background noise. I am very close to my side.
I'd also like to highlight the upwards movement in the Benchmark Minerals, which aligns with the timing for when we could potentially bring this additional production to the market. We will, however, always consider the market outlook far closer at the time of the FID, which is currently planned at the end of the calendar year, December quarter. Just moving to the next slide, please.
There is a much more detailed project schedule that accompanies the study, but we've tried to map it out in a more higher level to be able to present. So a deeper level of the feasibility study is the next stage of the process, and that will continue on until December quarter next year. FID will be considered post the completion of the FS.
As Dale's mentioned previously, it'll be around what economic conditions of the market are at the time, and also any further findings during the feasibility study stage. With that, I'll hand back to Dale.
Thanks very much for taking us through that. Also thank you to Paul and the broader project team, the operating team and the full business. All the great people of Pilbara Minerals have contributed to what is a fantastic PFS outcome. As I mentioned in my opening, this is an exciting accretive extension to the Pilgangoora asset.
It's a large step up in production capacity, with low unit cost for production, and it's building off a performing asset base, care of a strong operating team with more than six years of demonstrated operating experience. All of that's folding into what you see today. But as Paul mentioned, this is PFS, next level of feasibility study to come, which is due December quarter next year.
So this extension unlocks more value and can be timed appropriately with the market at Pilbara's choosing. And of course, it leads to those benefits of potentially more downstream integration, more offtake, et cetera, et cetera, which of course, the business will consider over time. With that, that completes our walkthrough of the slides. We'll move to questions. For any questions we do not get to on the call today, please reach out to James Fuller, who will be more than happy to take those. And with that, I'll hand back to Maggie for the Q&A.
Thank you. As 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 Mitch Ryan of Jefferies. Please go ahead.
Morning, Dale and team. Thank you for taking the question. It just relates to the strip ratio. In your Q, you said all reserve pits would sustain mining rates of 110 million tons per annum, which would deliver greater than 10 million tons of ore feed. The other reserve strip is 7.6. This implies sort of a 10-to-1 strip ratio. Just if you could provide any color or commentary on what's driving that?
Yeah. Good day, Mitch, good to hear from you. The strip ratio is fairly consistent between the two mine plans, with an uptick late in the mine life, based on the latest mine plan. So the averages compare in the first couple of years. But of course, yeah-
I just want to say, sorry to interrupt there, Dale. Yeah, so the earlier years are at 7.6 or below, and then in the later years, it steps up towards that 10 to 1.
Correct. That's, that's the way I understand it. Yeah.
Thank you. That's my one question. I'll pass it on.
Thanks, Mitch.
Thank you. Our next question comes from Hugo Nicolay of Goldman Sachs. Please go ahead.
Morning, Dale and team. Thanks for the call this morning. I just wanted to squeeze in a quick clarification, just 'cause I think a few people are probably asking the same question. To clarify, the P2000, is that at a 5.2% product grade, rather than the 5.7% to P1000? And then the second clarification: does the AUD 1.2 billion include any CapEx to develop the mine to support that ongoing rate? And then I'll come back with a question. Thanks.
Good day, Hugo. Thanks for your questions. To the first question, yes, the product grade is 5.2%, consistent with what we've been targeting and producing from the mine site. So the study is built around that. And just to expand, that's all about maximizing recoveries and production for the lowest unit cost and maximizing for revenues. As it relates to capital allowance for mining, strip is capitalized strip is not included in that estimate. And Luke, did you want to offer any other comment on those allowances for mining?
Yeah, the estimated construction costs, which Paul can speak to in more detail than me, includes the plant construction costs and some costs for the construction of tailings facilities. It doesn't include any mining, processing, or other operational costs.
Great. So what do you think you need to spend on the mine to actually support this expansion?
We haven't provided that detail, but it is included in the NPV calculation.
Okay, great. And then just around, Dale, you touched on the 5.2% supporting recoveries. But just going through the footnotes, it says your whole ore float's targeting a recovery of 67.5%, which I would have thought, given, you know, Ngungaju's kind of around 68%, and Pilgangoora's targeting 75%, that would have been maybe slightly higher. Are you able to just comment on what's driving that recovery rate? Now, is it lower grade areas with higher impurities, or just a lack of ore sorting for the expanded capacity? Just any color there.
Yeah, sure. So if you go, I'll offer a comment and Paul might wanna add to it. The philosophy applied is, with this extension, is about maximizing global recovery across the full ore body and leveraging the respective process of plant strengths to full extent, with that aim of outright maximized lithium recovery. What that means for this particular processing plant is, the team is equipping and optimizing it for a subset of the ore profile, such that it's best equipped for some of the lower grade diluted ore. And hence, that's why you'll note that the recovery noted there is not in the seventies and the high sixties.
But what it does is it contributes to large and maximized recovery across the three process plants in combination. And this new plant detailed here will, as I say, will be equipped with the appropriate processing steps to effectively achieve that aim. Paul, did you have anything you wanted to add to that?
Yeah. Thanks, Dale. I think the only thing I'd like to add is that, as outlined to the PFS study, we've used relatively conservative inputs into our processing model. And what we'll do is we'll get much more live data coming from the ore sorting facility that we've installed as part of P680, and we'll certainly incorporate that into our feasibility study. And we, yeah, we would expect it to be on the... more on the improvement side, rather than less.
Great. Thanks for that. I'll pass it on.
Thanks, Hugo.
Thank you. Our next question comes from Rahul Anand, from Morgan Stanley. Please go ahead.
Hi. Morning, everyone. Look, I was gonna ask the exact same question around recoveries, obviously around the underlying, but I did miss a part of that answer. So just to reconfirm, if you are switching to the 5.2% for the underlying volumes at your current project, can I confirm what your recovery targets are at the 5.2% for the current project?
And then in terms of the mine development CapEx, if you were to not proceed with the 2 million ton per annum project, what's the underlying mine development CapEx, roughly in terms of sustaining capital terms for the current ongoing project? That's the first question, please.
Thanks for the 2 questions, Rahul. The recovery is covered in the footnotes at the back, described the expected recovery of 67.5 for this new plant. The other plants are as per prior guidance. Ultimately, the team will be pursuing a improved number over time as the test work matures and as actuals start to come through from the new technology that Paul mentioned, with the ore sorting, the online analyzers. There's more capability coming, and as part of the P680 and P1000 projects, which ultimately will enable the operating team to achieve further recovery lifts is the aim. So that's on the recovery.
As it relates to mine CapEx, Luke, do you want to speak to that?
Yeah, sure. So we'll be providing updated guidance to the market on FY 25 at the full year 2024 August results announcement. What we have said before, though, is the sustaining CapEx from the existing operation will be broadly in line with what we've disclosed in 2024, that that is the sustaining CapEx component.
But, um-
Okay. Sorry, can I? Yep, yep, it does. And just one last one from me, just around the accuracy of estimates. Where do you see that 30% to -20% range that you've provided? What, what items do you specifically think are most at risk in terms of that inflation?
Paul, that's probably best addressed by yourself, so I'll throw to you.
Yeah, no problem. So at this stage in the PFS, the mine plan is one of the most critical components from a technical perspective, and that flows into the overall flowsheet. We need to make sure we apply the industry standards to our capital estimates, which we've done for the CapEx stage. But what I can do is provide more comfort around the accuracy, on the basis that we have live data from P680 and P1000, and we've then use industry standard escalation provisions to look into the future.
So in terms of the major risks, we've assessed those as part of the design, and we've incorporated them into our overall provisions already.
Okay. Thank you.
Thanks, Raul.
Thank you. Our next question comes from Hayden Bairstow from Argonaut. Please go ahead.
Yeah, morning, guys. Just to focus on the mining, I guess, just the lift in TMMs to that sort of +100 million tons a year. Just can you do that in your current footprint, and do you have enough water to do all this, or do you need to go and source additional?
Yeah. Good day, Hayden. Thanks, mate. In terms of the lift and mining capacity, it seems quite comfortable about that, and we've noted in the ASX releases, potential further upside, as the team considers larger fleets and ultimately, over time, improved productivities from mining. So we think we've taken a fairly conservative approach around those assumptions. As it relates to footprint, yes, I can confirm that the existing footprint is adequate.
That's what the studies are based on. But in the next level of study, I suspect there'll be further optimizations, which, all going well, will improve the mine and cost. So, but we'll wait for those next level of study outcomes.
As it relates to water, yes, we will require more water. However, the increase in water won't be proportional to what we've had in the past. The team is working through some solutions which will, on a unit basis, reduce the required water on a unit basis. But in terms of absolute number, yes, water will increase.
We will need to find more water and increase the water reserves. However, we don't see any cause for concern around the ability to do that. For many years, we have ensured that we have been extending the ground and network such that we can explore for and extend the available resource. So, we are well on the way to progress that.
Not anticipating any issue in that regard, but, as I say, we do need to increase the water to the operation. Does that answer your question, Hayden?
Yeah. Perfect. Thanks, mate.
Thank you. Just a moment for our next question, please. Our next question comes from Alexander Papayiannis from Citi. Please go ahead. Alex? Alexander, are you there? Hi there. Are you happy to move on to the next question?
We might wrap it up, Maggie, I think.
Okay.
But given we're on the hour. So just final comments from me is, look, thank you all for those who were able to dial in. I hope that what's come through today is a fantastic set of PFS outcomes, which demonstrate the scale of the Pilgangoora asset and what lies ahead. And as I mentioned, next steps is more study, but ultimately we will carry on with building out this incredible asset into what's an incredible market. Thank you all for your time, and we look forward to touching base in the future. Thank you.
Thank you. This concludes today's conference call. Thank you all for participating. You may now disconnect.