Thank you for standing by, welcome to the Pilbara Minerals December 2022 quarterly investor conference call and webcast. All participants are in a listen-only mode. There will be a presentation followed by a question and answer session. First for teleconference participants, followed by online questions from webcast participants. For teleconference participants, if you wish to ask a question, you will need to press the star key followed by 1 on your telephone keypad. For webcast participants, if you wish to ask a question, please type it in using the Ask a Question facility on the webcast browser. I would now like to hand the conference over to Pilbara Minerals Managing Director and CEO, Mr. Dale Henderson. Please go ahead.
Thanks very much. Hello everyone, welcome to the Pilbara Minerals December quarterly activities call. I'd like to start by first acknowledging the traditional custodians on the land which our business operates. In Perth, that's the Whadjuk Noongar people, and up north where our operation is, the Nyamal and Kariyarra people. We pay our respects to their elders, past, present, and emerging. Moving to introductions, our presenters today, of course, myself. We've got Brian Lynn, our Chief Financial Officer. Vince De Carolis, our new Chief Operating Officer, is with us. Alex Eastwood, our Chief Commercial and Chief Legal Officer. Also in the room today, supporting us is, we've got Greg Jason, our Assistant CFO, Kevin Spoors in investor relations. We've got Nicholas Read from Read Corporate.
Thank you all for joining us today. We're looking forward to taking you through our updates and moving to Q&A. The outline for the call will follow the usual format. I'll give some opening remarks. I'll then hand to Vince to talk about the operations. I'll then talk about the projects and chemicals progress that we've made. We'll hand to Brian for the financials. Lastly, back to myself for some comments on the market and closing comments. We'll then move to Q&A, which will be in two parts. The analyst call, which will be approximately 30 minutes. We'll move to the webcast for approximately 20 minutes, which will be moderated by Alex. Moving to slide 2. What an amazing quarter we've had.
The December quarter for 2022 are the best quarter to date for the operation. Step up in production tonnes to 160,000 for the quarter. Sales 148,000, a step up on the prior quarter. The realized price for the quarter, a big step up there. From a unit cost perspective, a modest decrease. Great set of numbers for the quarter and big credit to the full operating team and extended business for bringing that home. Moving to Slide 3. If that strong pricing times strong volumes is equal, a strong balance sheet, to the tune of AUD 2.2 billion, being a 62% increase on the prior quarter. Big step up there as a function of, as I say, of that strong volume and strong pricing.
Other highlights for the quarter included the offtake, price reviews were completed, as part of the normal cycle, which has resulted in some improved pricing outcomes which take effect from effectively December. pricing, moving forward. The capital management framework for the business was established and deployed to market, which was inclusive of our inaugural dividend policy. In the funding category, we were successful in securing the AUD 250 million debt facility from the Australian government to support the P680 expansion project. That funding, I'd say, it's a real coup for Pilbara. Long tenured debt, competitive terms, and importantly, it's government endorsement of our critical minerals project, which we think bodes well for the business as we look to reach outwards to the global market in the years to come.
In the projects category, the board approved the pre-FID funding for the P1000 project to the tune of AUD 38 million to support long lead procurement and engineering. In the chemicals category, progress in two joint continues there, which I'll speak to later. There was consummating the joint venture with Calix for our midstream demonstration project. Great to get that signed up and be locking arms with our friends and partners, Calix. Lastly, quick update on executive recruitment. We've been going flat out in that category. Obviously, Vince coming on board as our new COO, it's the first cab off the rank, and welcome, Vince. Our other executive roles that we're employing for have vastly progressed.
That, and those roles being the chief sustainability officer, chief development officer, the new CFO, the new Brian, big shoes to fill, and our new project director. We're flat out. I'm an interview machine the last couple of weeks. We're getting there and looking forward to announcing those appointments in the weeks to come. Moving from highlights now, for those who are new to Pilbara, we just wanted to do just a very quick introduction and speak to strategy. Pilbara is building an Australian powerhouse and lithium battery materials production. We've got a tier one asset, tier one location, a tier one team, and it's all coming together at the perfect time.
That tier one asset we've got is a massive hard rock pegmatite system, one of the largest on the globe, and it's in a tier one location. Southeast of Port Hedland, one of the largest bulk export ports globally, and of course, domicile in Western Australia. One of the best mining precincts, you could hope for globally, which has all the mining and technical support you could hope for as a miner and operator. Then the tier one team. We've got a fantastic development and operating team whose skills were forged during the downturn, and they are the key ingredient which is unlocking the value, that Pilbara is creating. Most recently, of course, the ramp-up of the Ngungaju operation, which, of course, was the Altura operation.
We're, of course, deploying that expertise to scale as we step into the expansion of P680, P1000. As I say, all of this is coming together at the perfect time. fantastic complement of events and Pilbara's support is like no other to thrive in this burgeoning market. What's our mission? Our mission is to be a leader in the provision of sustainable battery materials products. Our strategy to deliver on that has four legs. First and foremost, it's about delivering on our commitments, making sure the operating platform is shooting the lights out. I'd like to say, I'd like to think this quarter is case in point. Secondly, it's about achieving the full potential of the Pilgangoora operation.
This is about ensuring that we, first and foremost, we're extending that resource to full extent through drilling this massive tier one asset. You'll note in section 6 of the report that we're busy drilling further, so looking forward to seeing how that goes. Having extended the resource, then it's about matching that with the right processing capacity. Of course, in the first instance, this is P680-P1000. Of course, on the assumption that there's more growth in the asset, that would afford more growth in the production capacity. Work to be done to confirm that, but we remain optimistic. Leg 3 is about extracting more values, more value per lithium unit through our chemicals participation.
In this regard, the first cabs off the rank are POSCO joint venture for the development of a 43,000 ton lithium hydroxide plant in South Korea. There's our joint venture with Calix for the R&D project for the midstream project. The production of high-grade lithium salts in the mine site. We look to do more in this category. The more we can add value per lithium unit through downstream integration, that creates more value to channel back to our shareholders. Moving down to the fourth leg of our strategy, diversifying revenue beyond the Pilgangoora operation. That, of course, is expanding beyond our base asset. When you roll all of that together, we think it's a strategy grounded in fundamentals of value creation trained on our mission.
It's an absolute privilege and Pilbara continues to have a fun time ahead as we step through these growing leaps as we expand this impressive base of work that we already have. In my opinion, there is no better growth story than lithium, but I might say I am slightly biased. With that sums up pretty much our strategy. That's it at the high level. Now, at this point, I'll hand to Vince who'll offer us a bit more detail about the operation for the quarter we've just had. Over to you, Vince.
Thanks, Dale Henderson. Starting with safety on slide 5. We've had a good quarter. A key lead indicator, safe interactions, has seen improvement on the prior quarter, and that's a key focus for us, indicating increasing engagement with our workforce. On the back of that, our lag indicator, the total recordable injury frequency rate, has also improved quarter-on-quarter, sitting at 3.5. In the people space, we've completed our cultural song stick. Pleasingly, we've commenced our graduates program with 17 inaugural participants who will hopefully someday be our future leaders. Moving on to slide 6 in production and sales. We've had a strong quarter, as you can see in the graphs, in both sales and production. In mining, we've had a consistent ore supply to the processing plants. However, this hasn't been without its challenges in the quarter.
The main challenges have included some equipment availability, resource levels with the current hot market, and some mining hygiene control practices. For the quarter, we have mined a slight reduction on the prior quarter at 7.4 million tonnes. Importantly, the ore supply volumes to the processing plants have been maintained. However, suboptimal mineral feed at times has occurred, and that's impacted the processing plant recoveries. Moving on to the processing plants. Both Pilgan and Ngungaju have performed well and consistent in both availabilities and throughput rates. Recoveries have also been consistent, albeit down on target and between the high 60s to the low 70s, and that's dominantly dependent on the mineral feed. Moving to slide 7. Just to finish off on another good news story. Very pleased to report that-
Energized our new 6-megawatt solar plant, representing our first step in decarbonization, which looks fantastic out in the plant. With that, I'll hand back to Dale.
Thanks very much, Vince. Moving to slide 8, a quick update on our expansion that leg 2 of our strategy. The P680 project, civils, earthworks effectively complete. Our procurement well underway, and we are maturing and coming near the finalization of the execution contract for that project. Obviously moving as quickly as we possibly can to bring that project to life. Still targeting that September quarter ramp-up, which remains on track. We did revise the capital estimate for the project during the quarter, which was announced last couple of weeks back. That project remains of full steam, and we look forward to bringing that to life in due course.
As it relates to the P1000 expansion, as I mentioned in the highlights, the board approved pre-FID funding of AUD 38 million to support procurement and early engineering. The full FID for that expansion, we're on target to have that approved and out the door back of the current quarter, in the March quarter. It's foot down on the expansion, and we're keeping the throttle jammed wide open to make the most of this market. Moving from slide 8 to slide 9, just to update on the chemicals. The third leg of our strategy. As it relates to the POSCO Pilbara joint venture, construction is absolutely underway in South Korea. You can see from the picture on the left-hand side of that slide.
The team there is absolutely focused on schedule and delivery of that project. Myself and Tony Kiernan at Chair had the privilege and benefit of being there in November. As you can see, it's well underway, and they remain Pilbara, POSCO remain on target for that quarter four ramp up of commissioning commencement for the first train of that plant. Excited to see that unfold in the months ahead. Moving to Midstream joint venture. As I mentioned in the highlights, that agreement was finalized during the quarter for the development of the demonstration plant.
For those not familiar with the Midstream project, what this is about is doing more processing of our product at the mine site, producing a different product to market. A superior product to market, I believe, because for several reasons. First and foremost, a big step down in carbon energy intensity. Two, a big step up in the concentration of the lithium units. Three, leaving behind the alumina silicate waste at the mine site where it can be readily handled. Alumina silicate waste is what is part of the existing spodumene product, which has to be handled by our customers. Those three benefits for the product we think are material. With all of that, obviously, that step up and 50 concentration offers a reduction in transport volumes.
There's a lot of benefits, which can flow from this, if we get this right. Plus, doing some more value-add onshore, we think makes good sense. We like what we see in terms of the test work. We like what we've seen in terms of the study work. The big step we need to do is this demonstration plant, which is about deploying the unit step process at scale and validating, effectively unit cost, reducing the volumes of the product so as we can test the market for pricing and iron out any process learning. As much as we're excited about it, we very much put R&D on the can and others will recall we were successful in some grant funding for this project as well. It's an exciting project.
It has the potential to change the future of our business and that of the industry. We remain cautiously optimistic, but as I say, it's R&D, and we're delighted to have that joint venture finalized with our friends at Calix. Well done to Alex and the commercial team for getting that across the line in the quarter. That completes the chemicals update. At this point, we'll move to slide 10, and I'll hand over to Brian for the financials.
Great. Thanks. Thanks, Dale. Good morning, everyone. I'll probably just quickly give a very high-level summary of the financials for the quarter. Offer some commentary around selling price, costs, cash positions, and then a little bit on the capital management framework. In summary of, I think, in the June quarter, I described the June quarter as transformational for the company. I think I described the September quarter as pleasing from a financial perspective for the company. I would describe the December quarter as an absolute cracker from a financial perspective for the company. The business generated very healthy operating margins.
These led to an AUD 851 million improvement in the company's cash position. We stand with about AUD 2.2 billion in the bank at 31 December 2022. This is really all driven on sort of the key metrics. All key metrics were better than what we'd done in the September quarter. We had a lift in production tonnes. We improved our sales tonnes at a healthy improvement in our US dollar realized price. We also managed to lower our unit operating costs as well. We also ended a quarter with a net cash position to net of debt of just over AUD 2 billion.
As Dale mentioned before, we took the opportunity, given the continued growing cash position, to establish a capital management framework, which we disclosed to the market in November. On selling prices and operating margins, you know, a really important outcome for the quarter was the completion of the price reviews with our customers. This when combined with what was an ongoing positive market, hence an average selling price of US $5,668 per tonne was achieved. With 148,000 or 149,000 tonnes of product sold at an average grade of 5.4%. The equivalent SC6 price, reference price for this product was US $6,273 per tonne.
A fairly significant increase compared to the September price, I think it was about a 33% increase. The average realized price in Australian dollar terms was also bolstered compared to the September quarter because of a continuing depreciation in the Australian dollar. I think it appreciated by about 4%, which obviously helps our revenue line. These strong pricing outcomes supported obviously a very strong operating margin at the Pilgangoora operations. We achieved a margin in Australian dollar terms of about AUD 7,400 per tonne, and that's equated to about AUD 1.1 billion of margin. In terms of operating costs, the unit operating costs that we generally refer to is one which excludes freight and royalties.
That was in Australian dollar terms, AUD 579 per dry metric tonne, which was a 5% improvement on the September quarter. I think about operating costs within our business. You know, I think operating costs continue to be elevated where they were sort of 12 months ago, and still are being impacted by labor shortages, particularly in the WA mining sector. Supply chain disruptions continue, and there is this general inflationary pressure being experienced. Obviously we continue to incur higher mining costs as we invest more in the mining state and particularly in moving more waste. Just thinking about the quarter, we did, however, get some benefits compared to the September quarter.
The lift that we had in production, which was about 10%, obviously gives us economies of scale when it comes to cost. Most of that production lift was actually bedding down the Ngungaju plant. Most of the extra tonnes came from the Ngungaju plant, which was pleasing. We had a lot of maintenance costs during the quarter with 1 less shutdown compared to the September quarter. We also benefited from lower diesel costs and particularly as a result of the reinstatement of the government's temporary reduction in the fuel tax credit, which equates to about AUD 0.23 per liter. We include the freight and royalty costs in the unit cost. The December quarter had a unit operating cost of AUD 1,169 per tonne.
This was about 6% higher than the September quarter. That increase is really driven by an increase in royalties. So with the higher selling price we achieved, we end up paying about another AUD 130 per tonne in royalty costs. Pleasingly though, we did see a reduction in the cost of freight, as pressures in the shipping markets started coming off during the December quarter. Moving to slide 11 and just some commentary around the cash position. As I mentioned, you know, very healthy cash position of AUD 2.2 billion at, you know, an increase of AUD 851 million over the quarter. The key movements was the cash operating margin from the Pilgangoora operation. That was about AUD 950 million.
We spent about AUD 73 million on capital, that's across capital waste development movements, the P680 project and other sustaining and capital development projects. We paid about just a bit more than AUD 10 million in relation to the syndicated facility agreement we have in place. So that's across both principal and interest with the $5 million principal payment made during the quarter. We also had about AUD 11 million worth of payments under our under our various leasing arrangements. It is worth noting, though, with talking about the cash position, that the company has not yet commenced paying tax.
So our first tax payment, which will be about AUD 90 million, is due in February 2023, when we actually lodge FY 2022 tax return. Once that tax return is lodged, we then enter into the monthly tax installment process with the ATO. Then we'll start becoming a regular taxpayer. Obviously with that, we'll start building up franking credits as well. Within the quarterly, just to highlight, we have Notice that we are considering our FY 2023 guidance that we previously provided in August.
Obviously our key metrics are all sort of probably above guidance at the moment. We are taking the time at the moment to review our FY 2023 guidance and we'll release an update on that when we release our half-year results in late February this year. Lastly, just some commentary on the capital management framework. As mentioned, with the growing cash position, we took the opportunity to structure a capital management framework, which we released to the market in November. Now that framework is designed to firstly prioritize, you know, current operations, making sure that we maintain a strong balance sheet through all commodity cycles. We deliver on sustainability commitments and initiatives, and we pay a sustainable dividend to our shareholders.
Within that capital management framework, we did disclose our inaugural dividend policy and the view of the company is that we will apply that dividend policy to paying a fully franked dividend for the first time based on the FY23 financial results. With the company's current strategy to grow and diversify the business which Dale alluded to before, cash flows will also then be allocated to growth paths that we think will deliver longer-term shareholder value. In the next 12 to 18 months, you know, we will be allocating capital to obviously the P680 expansion project, the P1000 expansion project which we'll be releasing our NFID session on shortly.
The, you know, the downstream joint venture with POSCO for the chemical facility in South Korea. The midstream project in joint venture with Calix. We will also be looking for other downstream lithium chemical opportunities. Obviously, if there continues to be excess funds beyond those requirements, then that cash will be allocated towards either debt reduction or for further returns to shareholders in the form of special dividends or share buybacks. I think that's everything I wanted to cover off on. I might hand back to Dale now.
Thanks, Brian. A cracking quarter indeed, given that we've just completed the finance section, it's probably finally just to thank Brian for what an amazing journey. Of course, for those who don't know Brian, signaled his intent to transition from Pilbara after an incredible six years and what a journey to, and you just heard it there, to be talking about the steps we're taking for this business around dividends, the cash flow which is being generated. Brian has been the CFO who stewarded that journey from a finance perspective, from the tin shed in Freo, and to go the other side of the globe to raise the first financing, the $100 million US Nordic bond.
Here we are today, a ASX 50 company with strong cash flows and amazing futures. Brian, well done to you, mate, and congratulations on a stellar chapter. You'll be definitely missed but we thank you for your amazing work on behalf of the board, all the team. I would also just say, Brian continues to support us on a bit of a part-time basis, so we're still gonna be, you know, twisting his arm to help us out. He's not going, exiting completely. Thank you, Brian. Now just moving to market update. In this space, I thought it'd just be worthwhile just to offer Pilbara's view of the market and look, there's nothing particularly surprising in what I'm going to step through here.
There's plenty of commentators in this space. We did want to offer our perspective of what we see unfolding and hopefully provide some confidence and assurance to those listening who are trying to make sense of some of the divergent opinions out there. Firstly, we'd start with the fundamentals for lithium remain incredibly positive. The world is absolutely converting in terms of the renewable energy transition. As it relates to the EV subset being the key demand subset for lithium at this point in time, it continues to pick up pace, and it's absolutely moved from a China story to a global story. That rate of change has been through the increase through the likes of the Inflation Reduction Act and the U.S. government policies and so on and so forth. The long-term shift seems well fueled.
It's a structural shift well underway. That being said, in the near-term horizon, and particularly when we look back the last two months, there has been some pullback. You know, we've seen a 15% reduction in chemicals pricing from those highs in November. When we say 15%, that's coming off a high $80 mark down to sort of a high $70 mark. That's. Then when you start to ask yourself, "Well, what drove that?" Well, largely Chinese-centric. It was the COVID unlocking going from the zero-COVID policy to frankly, the gates were lifted. That coupled with the EV subsidies being removed and taken back, plus we're heading into Chinese New Year.
The sum of those. My suggestion I'd put to you is 15% reduction of those highs is not that bad. You know, we've got very healthy pricing. And had I been asked 6 months ago for a prediction around China pulling up the gates and going from a zero-COVID policy to fully letting COVID integrated into the society, to be honest, I think the impact has been pretty modest, all things considered, would be my personal view. Where does the market head? That's the big question. From our perspective, you know, the insight we can offer is we're positive about the outlook. The reason we're positive is, first and foremost, the demand indicators in the main remain strong.
As we look to supply, we of course keep a close eye on the emerging supply and the various analysts and commentators in this space. What gives us a lot of comfort is bringing supply to market is incredibly hard. We know that because we've done it, and it will not be easy. It is not straightforward. It does not matter which raw materials, lithium suppliers that you're dealing with, whether it be brine, hardrock or clay, they're all difficult, they're all bespoke, and it's not a capital helps, but it's not, it does not guarantee speed. When we start to consider supply versus demand, as we look forward, we feel we're in a good position. We'll see how we go. Granted there is uncertainty in the market, but the long-term theme shift remains positive.
Unfortunately or fortunately, it is the establishment of a new industry, and we've seen lithium has been a little bit volatile. What I would put to you is if you want to participate in lithium, the place to go would be with a large operator who knows what it's doing, who's got a base of expansion, who's got other means to integrate further downstream. That's exactly what Pilbara offers. We think we're incredibly well-placed, and we're positive about the outlook for the market, and look forward to continuing to grow our business into this demand set. Moving now from the market, just a final couple of comments. Great quarter, cracking quarter as Brian characterized it. Strong pricing, strong production, cost base where we heading in the right direction, flowing through to a very strong balance sheet.
Project's on track. Chemicals project's underway. All into a strong lithium market, albeit, recently tempered, by the COVID changes in China. Fantastic quarter. Thank you to all our shareholders, and particularly those longstanding shareholders who supported us through the downturn. We've not forgotten you. We'll now move to questions. I'll pass back, to the moderator.
Thank you. If you wish to ask a question on the teleconference, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star two. If you are on a speakerphone, please pick up the handset to ask your question. Your first question comes from Thomas Hayes from CLSA. Please go ahead.
Hi, Dale and Brian. Congratulations on a great quarter. Brian, congratulations on your contribution to the company. Just looking at your production on an annualized rate, you've got about 580 on a 6% basis, which is about a 12% improvement, I calculate. Understanding the seasonality in the Pilbara region, I'm just wondering if you can talk through, you know, how seasonality will affect your production going forward and what the remaining 2 quarters will look like. Should we expect them to hold at these levels? Thank you.
Yeah. Hi, Thomas. Thanks for your question. As it relates to guidance, we will be updating our guidance in the half years. We'll provide some detail on that one there.
Thanks, Dale. Just a second follow-up. You know, just focusing on those questions around the debt facility provides extra flexibility to expand and diversify further down the material supply chain. I'm just thinking about, you know, what that means in terms of regional exploration and M&A that could be on the cards. Do you see, you know, further downward pressure on price as an opportunity to acquire, you know, people in the region, given some of the negative macro news?
Yeah, Thomas, as it relates to that leg 4 of our strategy around diversification on the Pilgangoora asset, it's fair to say we're very early in that thinking. You would have noted in terms of the executive appointments, I noted recruiting a Chief Development Officer. You can read into what that means. It's fair to say, yeah, we don't have we haven't for you to form a view, I should say, on the where to next. Of course, we're starting to progress a lot of the homework around what that looks like. You'd have to say, you know, Pilbara has a couple advantages others don't. You know, of course, we've got a very healthy business first and foremost.
Secondly, we like to think we've honed some very valuable skills in the space of hard rock lithium processing, and we have a spread of very important strategic relationships in the space. That combination is highly valuable and very useful if looking to expand into another asset or operation. As I say, no decisions at this stage. Brian, did you have anything to add? Yeah. Thanks, Thomas.
Thanks for that. Just a quick one, just on the BMX strategy. you sold 25,000 tons this quarter, up from 15. I'm just wondering if you could provide any commentary on sort of how many tons you expect to sell in the quarters to come?
Yeah. Thomas, look the BMX platform's course gone really well for us. We've not provided any guidance as to what proportion of production tons we will deploy on it. The reason is we wanna retain that flexibility. We of course consider all the different avenues to market which include, A, BMX as spot sales, B, tolling as a possibility, and C, working with our existing customers. All of the above remains available to us. Yeah, no guidance on that one.
Thank you. I'll leave it there.
Thank you. The next question comes from Hugo Nicolaci from Goldman Sachs. Please go ahead.
Oh, hi, Dale and Brian. Thanks for the update and again echo Tom's comments. Brian, you know, great work on what you've done so far with the company. Two for me, please, if I could. Just firstly on, you know, your time in Korea, Dale. I was just keen to better understand, you know, how the downstream was kind of progressing on the ground there and what key milestones we should kind of expect as we move towards commissioning at the end of this year. Then secondly, just kind of following up a little bit on Tom's question around the M&A piece. Do you know, to what extent would you look at kind of domestic versus offshore in terms of future downstream opportunities and how important is, you know, partnering versus being a sole operator? Thanks.
Yeah. Okay. Thanks, Hugo. Yeah, in terms of downstream milestones, well, for the POSCO joint venture, the key one is that commissioning commencement in the December quarter for train one. Train two is in the commissioning commencement in the following year. Those are probably the key ones to watch for. As that project moves forward, we'll of course be providing a deeper level of insight as to progress and the next set of milestones. Moving to your second question on M&A, to what extent do we value domestic versus offshore? Well, yeah, look, obviously, our backyard is the best place you could go in terms of we know the area well. As to offshore, look, you know, we...
There's many options out there, but one of the things we're very sensitive to is our offering to the market being a tier one asset in a tier one location. We'd consider very deeply our next step around making sure we didn't dilute that offering. Yeah, can't give you a steer as to one over the other, but in the months to come, we'll provide a bit more insight into how we think about M&A and that leg 4 of our strategy.
Great. Thanks for that, Dale. That's my two. I'll pass it on. Thanks.
Thank you. The next question comes from Levi Spry from UBS. Please go ahead.
Good day, guys. Happy New Year, everyone. Hope everyone's well. Just if I could ask another question on the guidance. Can you talk through exactly what is driving the stronger performance? Maybe you can talk to the current mining and processing capacity across both the plants before you add the 100,000 tons from the December quarter. Thank you.
Levi Spry, I'll offer a view here then Vince De Carolis might want to fill. What's guiding the happy New Year to you, too, mate. In terms of the stronger performance, I'll put it down to just rhythm and routine coming together in both deep mining and processing. That being said, for the quarter, the mining had its challenges, which Vince De Carolis offered some insight to. What we see it, frankly, is more optimization opportunity to come, which Vince De Carolis and the team are very focused on. We look forward to moving further up the curve in due course, which of course that's what our operating team is tasked to do. You think you want to?
I think that covers it, Dale, for the high level.
All right. Thanks, Levi.
Okay. Thank you. Thanks, guys.
Thank you. The next question comes from Alistair Harvey from JPMorgan. Please go ahead.
Yeah. Good day, Dale and team. Don't wanna labor the point too much, but just on that guidance, I guess it is under review with the financial result. It was a very strong first half. What are the key moving parts that are kind of concerning you that's not giving you the confidence to come out a bit earlier with an updated guidance? It looks like that will go up towards the top end of the range or even beyond. Are you thinking more changes in grade profile, catch up in plant maintenance? Just trying to get a sense of those key levers there.
Yeah. Thanks, Al. Look, I think there's been a couple of things which occupy our mind in this space. One is about optimization of the mine plan. We've been busy recutting many different versions of that to maximize our production. That's one element which of course then sort of feeds into a plant optimization piece. The other bit which is probably worth noting is the season we've had has not been too bad in the way of cyclones and wet weather. It's been in the main very mild, which has been nice. Yeah, you. Frankly, I think this has actually helped a little bit more than we were expecting for the, you know, production outcomes we've had. That's been an overlay.
Yeah, we're obviously computing, our guidance, as we speak. A half years, will be here before you know it. We're targeting, late February, for those. That's not too long away.
Yep. We'll be patient. Just another one on pricing. It was a solid price in the quarter. Not much guidance for next quarter. Do note your announcement before Chrissy on those successful renegotiations. In those renegotiations, was there any major changes in contract mechanics? I'm wondering if you could comment on any benefit from lags with respect to spot prices, which as you mentioned, have rolled over. Yeah. Are you able to indicate roughly where the price might sit today if you ran the numbers?
Al, sorry. We're never given guidance on pricing first and foremost. As to what were those changes and the formulas, unfortunately, we can't give you any insight there either. Sorry about that.
That's all right. Just finally, saw a bit of CapEx inflation at Pilgangoora. One of your peers has just announced an upward revision. I was just wondering if you could give us any sense of how the POSCO hydroxide plan's going with respect to plan budget.
Sure, Al. So far so good, schedule and budget for the POSCO joint venture. I've just added it is early days in terms of the progress of the project. As you can see from that photo, things are underway. You know, the lion's share of the build is yet to come. We will of course keep the market informed as that progresses. Nothing of concern at this point.
No worries. I might line up one more. Thanks, mate.
Thank you. The next question comes from Matthew Frydman from MST Financial. Please go ahead.
Sure. Thanks. Morning, Dale and team. I just want to sort of carry on from Al's question on pricing and, you know, forgive me if the answer is as brief this time around again. You know, as you said, you know, clearly the chemicals pricing has fallen by maybe 15% since you made that announcement in late December. I guess, you know, how do we think about, you know, how that realized price, you know, that you quoted $6,300 a ton, how does that move proportionally relative to those reference prices or to those benchmarks?
I mean, is there anything that you reference in those major offtake contracts that, you know, that means that your realized price shouldn't move proportionally to what we can see on chemicals pricing?
Yeah. Thanks, Matthew. The price reviews that we announced during the quarter gives you a bit of a feeling for the relative change. I appreciate that's not. We haven't given insight into the mechanics, and the reason there isn't is 'cause we can't. But as to is there some additional factor which would take it out of whack of the prevailing market pricing, the answer is no. The intent to all the formulas is that it follows the market movement and making sure that the Pilbara shareholders are receiving the appropriate value as that market ebbs and flows. There's no sort of left field factor integrated in there.
Got it. Thanks. I appreciate there's commercial sensitivity. Thanks for the additional color there, Dale. Secondly, again on the FY 2023 guidance, more on the CapEx guidance, I guess particularly the amount that you've spent in the first half, you know, versus what you previously quoted as full year guidance. I suppose the question is, you know, obviously the run rate in the first half was a lot lower than, you know, what you might imply by guidance. Were you always expecting such a large second half skew in the spend rate when you set that capital budget or, you know, do you now need to rethink, I guess, CapEx guidance as well as potentially production guidance?
Then I, you know, I suppose, you know, maybe to partly answer the question, is it really just a question of timing of the cash outflows or is there anything else going on there in terms of that spend rate?
Yeah, sure. I'll offer a view and Brian might wanna add in this space. Firstly, it was always gonna be skewed to the right, just as a function of the timing of the build. That's first and foremost. Has there been some elements of drift to the right? Yes. Nothing, nothing untoward. Well, did you have anything to add there?
Yeah. Yeah. Look, Matthew, that's right. In terms of the P680 project, I think, you know, most of the first half was about doing engineering works and those sorts of work, which take time, but don't actually consume a lot of cost. It's once we get into the real build, which is what's about to happen now, is when we start really you know, incurring those costs. Put aside the P680 projects in terms of all the other capital items. I think we're largely in line with where we thought it'd be. Probably maybe a little bit behind, but not significantly different.
My expectation is that, you know, whatever the gap is for the first half, we'll make up in the second half. A lot of it is around the timing of the P680 spend.
Okay. That's great. Thanks very much, Vince. Then thirdly, maybe just quickly, can I ask on concentrate inventory at the end of December? You've been producing more than you've been selling for, I guess, you know, probably 4 of the last 5 quarters. Is that just a natural consequence of that ramp-up in production, and you know, more of a timing question? Or are there any logistics constraints or anything else that's driving that inventory build? Thanks.
Yeah. No, thanks, Matthew. You know, the inventory builds aren't anything untoward at the moment. As to logistics bottlenecks, no everything's been going okay. Load-out through the port has its moments, of course. Yeah, nothing, nothing which gives us cause for concern.
Yeah.
Matthew. Sorry, it's Brian. Just one other point on that. It's probably worth noting, there was one cargo at the end of, at the end of the quarter, which was meant to go out in the December quarter, in the month of December, right at the end. Due to sort of port, you know, the way the vessels lined up at port and a bit of congestion, that particular cargo, which I think it was about 15,000 tons, fell into the first couple of days of January. If that cargo had actually left the port, then clearly our stocks or our sales and our production would have been, you know, fairly similar. It's really just around timing.
Got it. Thanks very much, Brian. Yeah, would also echo the other analysts' comments, all the best for the future. Thanks very much.
Thanks.
Thank you. The next question comes from Austin Yun from Macquarie. Please go ahead.
Morning, Dale and the team. Congratulations on the strong quarter. Just two questions from me, if I may. The first one is just around the dispersed stripping. At the start of the year, financially you indicated that you are doing some catch up on that. Just wondering how that is going. You know, just want to have some high-level color on the pre-strip profile for the next 12 months. I'll come back with the second one.
Yeah. Hi, Austin. Thanks for your question. Yeah, the high-level stripping has typically been around a 5-to-1 ratio for the year we're in. That being said, we have, during the course of the year, reworked our mine plans a few times and with the objective of opening up more ore options. We're deep into that. There has been some shifts to the mine plan, which of course plays through to strip ratios.
Okay. Cool. Thanks. Does that mean that the strip ratio will come down? Just a follow-up. Do you need to build some mine ore inventory just ahead of the P680 commissioning, which is around like the September quarter this year?
Yeah, Austin, there will be a little bit additional ore inventory, but nothing material in our guide.
Got it. The second question is around the price negotiation. Just in terms of the frequency, I don't know if there's any comment for when you're going to have the next major discussion with your key offtakers?
We don't sort of guide on that one either, Austin Yun, given that each of the review mechanisms are unique to those offtake agreements. We can say that they're semi-frequent, I guess you could say. They're more than an annual review.
Understood. Thank you, Dale.
Thank you. The next question is from Tim Hoff from Canaccord. Please go ahead. My apologies. The next question is from Glyn Lawcock from Barrenjoey. Please go ahead.
Good morning, Dale. Just on the December quarter guide, is it possible to provide us with the head grade, the recovery and the product grade from the plant in the quarter?
We haven't disclosed those, Glyn.
Okay. You're not prepared to. Does it do you expect any major changes from the December quarter into the March quarter and the June quarter of those three?
No.
No? Okay. Okay. I'll try and push a little bit more on the pricing. You actually did give guidance in your results or the announcement on the 21st of December. You said you'd get $6,300 when applying current pricing reference data. Now that reference data has fallen 15%. If those reference data don't move, would you still get $6,300?
Well, the pricing reference data at that time that matched that would be within that guidance, that would be the way to think about it. We don't guide on price. The obvious reason that the market moves. We cannot offer more detailed information into those formats because they're commercially sensitive. I think the other key point there is that the market data using for pricing is current to the relevant time of the shipment. You know, pricing is provisionally priced and then a final price. Whatever the cut times or the shipments are, is gonna be the market data that you're gonna use.
Yeah. Thank you.
I appreciate that. I appreciate that. I guess I'm just asking is when you made that comment, current pricing reference data, were those pricing data above where we're currently seeing the reference data today then?
Yeah. Glyn, I think the answer to that is yes. I mean, the idea of those pricing formulas is to try and work off a hydroxide and carbonate price, and sort of reference it through to a spodumene concentrate price. Clearly if your reference prices is to a hydroxide or carbonate price and those prices are moving, then our price moves. That's the way to think about it.
It's a variable price.
Yeah. Perfect.
Market.
Yeah. Yeah. You wouldn't get $6,300 if the current pricing reference data stays where it is. That's all I'm making sure I'm clear on.
Yep. That's correct.
Dale, just a final question. What's your thinking behind waiting till August 23 for the maiden dividend? I mean, by then you're probably gonna have close to AUD 4 billion+ of cash in the bank, it would appear. You know, you are paying tax as of, I think you said February, I think on the call. You know, why wait? I mean, you could prepay some tax and pay a dividend and announce a dividend in February. Just why the wait? Thanks.
Yeah. No. Good question, Glyn. No, we are certainly thinking about that one. That's an active discussion internally.
Okay. Thanks very much.
Thank you. The next question comes from Anthony Barrick from S&P Global. Please go ahead.
Hi. I'm just interested in your comment earlier about bringing supply to market is really difficult. Looking for some color there. I mean, is it just the usual shipping issues which have every commodity has been plagued with for the last year or whatever, or a year or more? Or is there more to that's specific to lithium?
Yeah. Thanks, Anthony. It's, you know, my comment was more directed at the latter in that lithium and then let me give you the hard rock view, given this is our wheelhouse. Lithium hard rock as a natural resource has a lot of nuance which is unique to that resource. The challenge becomes matching a bespoke process path to that natural variation in the ore body. That challenge is just further compounded by the fact that the nature of hard rock material, it's challenging in terms of hygiene control. The mine practice around that require a lot of effort, a lot of accuracy. The ore body knowledge and management, a lot of effort and accuracy, which is a learned process over time.
Into the processing plant, it's a learned process and an optimization process which commences once that project is actually built and operating. There's quite a journey of test work and then operating practice in operation to really optimize all of that. In addition to that, you've got the, just the more practical elements that you just mentioned about being a an operator in a competitive environment, all the other logistics challenges and so on and so forth. Yeah, my comment was, as I say, more directed around the nuance of the mineral concentration for hard rock. What we envisage is for the new operators, they have to go through that learning journey. It's very hard to shortcut that.
That's not something that's amended anytime soon then, or? It's all, sounds like it's all within your control though?
Yeah. Yeah. No. Well, it is. But it takes time. It takes grassroots, test work, flow sheet, modeling, deep understanding, lots and lots of field, test work. It's. If you look back at our historic journey, you know, the, where we are today is the product of years of work and effort in this space. As I say, there's no real shortcuts. Is it in your control? Yes. But there's a lot of effort which is, as I say, hard to shortcut or accelerate.
Okay. Thank you.
Thank you. The next question comes from David Feng from China International Capital Corporation. Please go ahead.
Oh, thank you. Good day, Dale, Brian, everyone. Thank you for taking my question. My first question is, may I have the production volume breakdown by Pilgan and Ngungaju during the quarter? Another question from me is, Ngungaju's volume is this due on track now or part of its volume is already secured by some offtakers? Thank you.
Yeah. Good day, David. Yeah, firstly, yeah, we're not segregating the processing asset volumes. The reason we're doing that is we consider the operation as one. We report one set of numbers sort of flowing from that operation. As to available production tons outright, again, we think of the operation as one, so the Ngungaju operation in combination with the, with the Pilgan. As to what is those available offtake tons, we've guided in the past that once we're expanded to the P1000 being 1 million tons per annum, there's approximately 400,000 tons unallocated.
Once we're in that expanded format, which of course, we could afford us opportunities around. Could be vanilla offtake, could be other downstream joint ventures, a la POSCO or other types of transactions.
Okay, brilliant. Got it, Dale. I'll pass it on. Thank you.
Thanks, David.
Thank you. The next question comes from Kate McCutcheon from Citi. Please go ahead.
Hi, Dale and team. Good morning. We noted that you're not giving away any carrots on expected pricing next quarter. Perhaps can you give some color on inventories at the moment, comments on what you're hearing from customers? I mean, you're producing a 5.3% product and I think, when you set guidance, you were looking at a 5.7%. Demand for lower grades seems to be strong. Secondly, when can we expect another BMX auction?
Kate, now in terms of what are we hearing about in inventory, we have anecdotal scraps of information, so let me make that clear up front. We don't hear of large volumes of inventory in the system, at least in the next step of the supply chain, which is pleasing to hear. I note that that opinion seems to be throughout some of the commentators notes elsewhere as well. As to grade, we've guided that we've progressively been tweaking down the target product grade. That's just a function of wanting to maximize lithium units to market.
As to the next BMX sale, we haven't guided on that, and we're keeping our powder dry, so to speak, around the timing of that. Moving forward, we're not looking to disclose BMX auctions as we have in the past. We consider it business as usual. Yeah, moving forward, we'll probably yeah, as I say, not look to disclose those and just get treated as-
Okay.
part of business. Yeah. Thanks, Kate.
Okay. No announcements on BMX going forward?
Yeah.
Okay. My second question is just on the P1000 project. It looks like you pushed back FID there by about a quarter, I think. What was the driver of that delay, and what are the final pieces you need to get certainty on, or what are you working on to make that decision?
Yeah. The drivers for the delay, there's a few things, Kate, that we just wanted to, in a nutshell, just take a little bit more time just to bear down some of the estimates. We're cost-conscious around the fact we don't wanna add more time to the overall schedule. We want to obviously ramp up the operation to full extent as quick as we can. That's why we went forward and had the board approve the pre-FID, FID funding to maintain our schedule.
Mm-hmm. Okay. Thank you.
Thanks, Kate.
Thank you. The next question is from Ben Lyons from Jarden. Please go ahead.
G'day, Dale. Mate, that's disappointing that you're gonna stop reporting BMX numbers going forward. It's been a great platform that you've helped develop, personally, I think increased disclosure is always positive for the industry. Hopefully you might reconsider. Anyway, my question was on the tolling discussions. I was hoping you might be able to provide a bit more of an update there. You know, it seems like everything's pretty aligned for a deal here, where you've got, you know, a big prize in terms of the economics. Anecdotally, there's plenty of spare conversion capacity in China still, and obviously you layer on your very strong operating performance, which frees up some of those uncontracted volumes. Can we expect anything more wholesome in terms of tolling in the short term? Thanks, mate.
Yeah. G'day, Ben. Yeah, sorry to disappoint you on the BMX. Yeah, as to the tolling, yeah, look, it's we've got the team busy doing work on it. Yeah, unfortunately can't offer too much insight at this point.
Right. Righty-o. Okay. Thanks.
Thanks.
Thank you. The next question is from Joshua Hain from REST Investments. Please go ahead.
Thanks for that. Good morning, all. I guess just in light of the sort of current mining challenges you've alluded to at current production levels, I'm just interested how that is sort of flowing into the P1000 thinking, given, you know, you'll need to move a significant amount of dirt to get there. I guess, you know, are you committed to that level of expansion, or is that still something that could be tweaked?
Yeah. G'day, Joshua. Yeah, as to P1000, we're absolutely committed to that. As to the mining volumes, the run rate that we're moving TMM out needs to go up a little bit more, but not massively from where we are.
As to the challenges we've had, part of the explanation is we have been going through a period of effectively establishing our own owner/operator operation. We had MACA Mining, which we'd progressively tapered down. We've been tapering up our own fleet, albeit, you know, it is supported with some equipment hire contractors and some service contractors in drill and blast. I think mostly drill and blast. There has been, I guess you'd say some teething elements around establishing the operation. As shift to shift, week to week, month to month, it's getting better and better, and the team is bedding those operational roots down.
We see continued progress, there's no cause for concern about being able to resolve those challenges we've had and make sure we've got an efficient mining operating platform to support P1000.
Okay. Fantastic. Thanks for that.
Thank you. The next question is a follow-up from Alistair Harvey from JPMorgan. Please go ahead.
Yeah, thanks. Thanks for letting me have the follow-up. Can't get much out of you on the, on the SPOD pricing, just wanting to get an update on where tantalite markets are at the moment. Noticed that your shipments picked back up after a quiet couple of quarters and can have a material impact on the cash cost through the byproduct mine. Any color on that would be helpful.
Sure. No, thanks, Al. Welcome back. As to, as to tantalite, yeah, with the from a production volume perspective, it's been slightly down on where we wanted it to be. Principally around two reasons. We've got some maintenance work which was deferred, which was meant to happen on the quarter vein. We've had to defer that. That's one element. The other element is just the concentration of tant units coming into the ore feed has ebbed and flowed at different points which translate to production volumes. As to the latest pricing, I'm looking around the room. Has anyone got the latest pricing? No, I'm sorry. I don't have the latest pricing at this stage.
As you'd expect, our tant, relatively speaking, yeah, the team's focus is on lithium. It's not lost on us, the benefit of those tantalite credits, however. It doesn't, by proportion, lithium gets the focus.
Yep, makes sense. Thanks again, Dale.
Thanks, Al.
Thank you. We will take the final 2 phone questions before moving to webcast questions. The next question is from Michael D'Adamo from Canaccord. Please go ahead.
Hi, Dale. Just wanted to query your strategy around ore movement. We've seen the mining rates have been higher than the processing rates for a while. Are you guys building a low-grade stockpile, or is it some sort of blending and ROM management strategy?
Good day, Mike. No, all of the above is the answer there. The operation is a blending operation where the team mixes minerals effectively. As a function of that, there is this sort of stockpile build as a function of mineral type, and there's also a stockpile build which relates to people, ore on the post-rock, post-rock to ore body interface. We call that contact. There's also some stockpiling which moves around that as well. Yes, there is stockpiling.
Okay. Thanks, Dale.
Thank you. The next question is from Alex Ren from Credit Suisse. Please go ahead.
Hi, Dale and team. Happy New Year and congrats on a strong quarter. Just a follow-up on the BMX pricing. Obviously, it has served as a, you know, great leading indicator when prices went rising, and has helped on the contract negotiation. Now, you know, you know, now in a falling pricing backdrop, just trying to understand, is this part of the strategy, trying to sustain your realized prices? Just could you give us a bit more color on this decision to, you know, not to publish the pricing anymore?
Good day, Alex. Look, firstly, as to where the surprise goes, falling versus rising versus staying the same, I don't think anyone knows that. Probably the first point.
The second point as to the rationale of not looking to disclose on the BMX platform, the thinking there is, you know, by proportion, it's not a big part of our business. As to the visibility of that pricing, of course, it finds its way out into the market in any event. Obviously, the price reporting agencies are all over this stuff, whether we disclose or not disclose. From our perspective, shining the spotlight on it through ASX releases is not required and not necessary in terms of the activities in our business.
Understood. Yeah. Congrats again on a nice quarter. Thanks.
Thanks, Alex.
Thank you. There are no further telephone questions at this time. I'll now hand over to Pilbara Minerals' Chief Commercial and Legal Officer, Mr. Alex Eastwood to MC webcast questions.
Okay. Thanks very much, welcome everyone, and thanks for all your questions. We do have quite a few questions. I'd say a number of them have already maybe touched on. We've touched on certain topics or some of these questions can be consolidated, so I'll just try and go through them methodically. The one that's, we've got quite a few questions about dividends, which I think we have touched on, but essentially perhaps, Brian, you could just.
Relay the message there. The questions concerned about timing of the dividend, and in particular which month and whether there's even a possibility of increasing the ratio payout of the dividend given a very healthy cash position.
Sure. Thanks. Thanks, Alex. On the question of the payout ratio, I don't think that would be increased. I think we do wanna try and at this point allocate as much of the cash to growing the business. I think that needs to be the emphasis of the business for the next 12-18 months. You know, in terms of the timing of the dividend, you know, we do refer to the fact that, you know, the first dividend is gonna apply to the FY 2023 financial year. Yeah, the board is still considering exactly what that timing is gonna be. That decision is gonna be made. You know, there, yeah, there is a possibility that it could be an interim dividend and then a final dividend paid later on.
That still is under consideration. The board and the company are very aware of the buildup of cash that is going on and, you know, interested and keen to return some of that money to shareholders. We just need to find the right balance there. Obviously part of that is also just being cognizant of the level of tax being paid and the franking credits that might be available.
Yep. Thanks, Brian. One on the same theme, capital management. We have a few queries about the possibility of a buyback, as opposed to a dividend or in conjunction with the dividend. Can you provide some commentary on that?
Yeah, look, it's part of the considerations, you know. You know, we clearly keep an eye on the company's share price and have got some value triggers, if you like, where we would think about buybacks. Again, I'd sort of emphasize that I think we're better to deploy the capital in trying to grow the business. I think we've got a lot of very good opportunities ahead in the next 12 to 18 months, which are being explored. We're bringing, you know, the right people into the company to try and make the most of those opportunities.
You know, the P1000 project, once it's up and running, you know, we're gonna have in the vicinity of 350,000-400,000 tons of available tons which aren't committed. Clearly that's some leverage that the business should be using to try and grow. I would have thought that's probably where the efforts of the business need to be, including where we choose to spend the money.
Thanks, Brian. I'll start, a question that's come through as to, in relation to Ngungaju, as to whether there's any updates on the Ngungaju plant, in terms of production, predictions, et cetera.
I'll just say, yeah, Ngungaju's going well and nameplate.
Yep. Yep. A question's come through. Quite a few questions about strategy, which I think might be easy to consolidate, but essentially a few questions about strategy to diversify further downstream, and also strategy to diversify potentially into other commodities like copper. There's particularly a line of inquiry about North America being a particular favorable opportunity given there's a lot of, you know, junior emerging, I think, lithium companies in North America. There are some advantages in North America from an ESG point of view. Really people are just asking for a bit of commentary about that, Dale.
Yeah, sure. No, thanks, Alex. As it relates to diversification through downstream within lithium, our view is that it makes really good sense to be integrated downstream for several reasons. The most important of which is that it enables a higher proportion of value to be created for our shareholders. Second benefit is, it puts in place a codependency between raw material supplier and that downstream converter and effectively hardwires you into the supply chain. It's another key strategic advantage. The other pieces around downstream we of course consider is geographic diversification and also having alignment as it relates to sustainability credentials and working with that counterparty to, you know, pursue that aim. The POSCO joint venture is really case in point.
We think continued downstream makes really good sense for our business, and we will continue to explore and think through that aspect. Moving to other commodities. Look, in this category, look, you know, we haven't made any decisions as to where to next in terms of diversification beyond the Pilgangoora asset. As I mentioned earlier in the call, we're definitely working through a process of turning our mind to this. As I mentioned earlier, we've got a Chief Development Officer coming into the business who'll be obviously leading up this function. Watch this space, but as I say, no decisions in this category. Do we, do we see opportunity as it relates to the renewables energy shift and the need for more copper and the like? Yes.
Yes, of course, we're believers in that as we are in lithium. Moving to North America as a prospective opportunity. Yeah, absolutely. North America clearly has got some great assets. That being said, it is in many, many parts of North America, it is very much a pioneering challenge. They do not have some of the benefits we enjoy in Australia or particularly Western Australia, with established mining industry, engineering and technicals, plus all of the logistics and support infrastructure. What Western Australia has is hard to beat. In some parts of North America, they don't have that. From an approval standpoint, again, that's probably not as good as we enjoy here. All said and done, is it a prospective emerging area? Yes.
We would think it will take time. Are we interested in it? It's certainly on the cards as all other opportunities. As I said earlier, we haven't made any sort of decisions as to where we'll go. Yeah, North America is certainly higher up the list than other parts of the globe.
Thanks, Dale. Next question has come through concerning port capacities. The question is: What is the company doing to improve the rate of loading product at the berth of Port Hedland with P1000 not too far away? It seems the current rate of loading via the Rotobox system may be too slow.
Yeah, thanks, Alex. As it relates to port outload, our base case using Rotainer boxes, it's fine and works as a methodology by which to outload concentrate, both at our current production levels, but also at the expanded production levels for P1000. However, a bulk outload system is absolutely a better methodology in terms of moving higher volumes and unit cost. Now, in this category, we are engaged with PPA, it's well known that Lumsden Point is to be developed. The government flagged funding, AUD 200 million last year to go towards the development of that port facility. We are in discussions with PPA, as you'd expect, to support and influence the fostering forward of that development.
Yeah, we will look to work with the PPA, with a view to hopefully help get a bulk outload system installed for the purposes of concentrate. Certainly PPA is very receptive and keen to form a solution there. For the long game, and let's not forget, we've got a multi-decade operation, we think in the full course of time, that's where we're headed.
Thanks, Dale. A question about P680. Essentially, what are your plans to maintain and accelerate the P680 project? What do you anticipate the annualized production rate will be after the P680 project is commissioned?
The P680, if I asked the team to accelerate, I think they would, they would go, "What do you mean? We already are." We've asked the team to go at warp speed as it relates to the speed of not only the delivery of P680, but P1000. You know, we're bullish on lithium, and we are bullish on our position to expand our operating platform and we think we have an incredible opportunity to capitalize on this market. To capitalize on this market, we have to get that additional expanded production capacity in place as quickly as we can, and that's what we get up to do.
On the same theme for P1000, the question is: As lithium prices are so high, is upgrading the facilities to 1 million tons per annum, your first priority?
More lithium units to market is priority 1. Yeah, as per the strategy outlined at the start, operating platform number 1, to expand that operating platform as rapidly as we can. Yeah, the sooner we can do that, the more units to market, we can enjoy that pricing.
Question. A few questions around BMX. How much volume in dry metric tonnes per annum could be run through BMX?
I guess the sky is the limit with the, with the cap being what does, what does Pilbara have available. Broadly speaking, at the expanded P1000 case, there's, as mentioned earlier, there's 400,000 tons approximately of unallocated tons. That 400,000 tons could go through different pathways to market, one of which could be the spot sales through BMX. However, as mentioned earlier in the call, we are a fan of downstream integration because we see that as a better avenue to create more value for our shareholders extracting value through that next processing step.
Yeah, I think, that's another question about BMX. What is the future strategy for it?
Yet to be determined, I would say in that regard. I think BMX has been an absolutely massive step forward, very helpful for the industry to provide a trusted representation of price discovery. Certainly, spoke previously about we like the idea that it's growing into an industry platform. That's certainly a possibility. It's an open question as to where we take that platform.
Okay. Question about Calix. Does the Calix demonstration plant become a usable, you know, for operations if the demonstration is proved, you know, commercially viable?
Yeah. The short answer is yes. You know, the scale of that demonstration plant is such that it will produce material volume of product to the tune of about 1,000 tons of high-grade lithium salt. Subject to the pricing of that product and subject to the unit cost through that facility, we anticipate there'll be healthy margin to be made. Obviously, that depends on the market, in which case you would keep that running. I think the A bigger question is if it's a compelling economic proposition, well, how do you go to scale? If you are going to scale, what does that mean for the demonstration plant? We haven't made decisions around this, but certainly it's to be worked through and thought through.
Yeah. Just going back on BMX, a question came through around timing, you know, the next, the next auction. Will there be one in January? Volumes, you know, 5,000 tons versus 10,000 tons. A question also around, you know, why we on occasion we've accepted, you know, pre-bid auction pricing.
I must give this one to you. As to timing and volumes, we haven't guided in that regard for BMX. It was mentioned earlier in the call, we've purposefully kept our options available to us such that we will pick what's best for our shareholders. As to the strategy of accepting pre-bid versus going to auction. You know, I'd say BMX has been a process of discovery, not only in deployment of the system itself, but also how to best engage with the market. What we've been doing is exploring both those options of the direct bid but also the pre-bid option. We haven't formed a view of what's best, but it's just been a different strategy which we've chosen to explore.
Question now, perhaps Brian, this one can be directed to you, is, you know, what is the current profit margin sales? I suppose with increased supply coming from competitors, over the, you know, is the margin likely to fall over the next 12 months?
I can talk to what the profit margin was for the December quarter. We took, you know, the operating margin is really the realized price, which was $5,668. If you convert that to Australian dollars, that's probably, I don't know, getting revenue per tonne of about just over AUD 8,500 a tonne. Our cost per tonne is the AUD 1,169 per tonne in Australian dollars. The difference between those two is the margin you're making per tonne. That's about just over AUD 7,400, I think. That times, you know, the 148,000 tonnes we sold is the margin for the December quarter.
Margins going forward are, you know, really dependent on what the market's doing and what the market price is.
Yep.
That's not just about selling price you get, but obviously if the whole mining industry comes off, then the expectation is that your costs come down as well. As a business, what we've got to do is look after our costs as much as we can, and that is the best way to protect margin.
Thanks, Brian. Next question is, what % of sales are China-based? What's the impact of COVID to these?
Sure. The current proportion of sales to China is quite high, in the order of 95%. However, that will change as a joint venture with POSCO begins to ramp up, by which point it would be approximately one third, two third to China, depending where we've got to with the P1000 expansion. Ultimately at P1000, I mentioned there's approximately 40% of the production profile unallocated. That of course is a key consideration. The forward view, P1000, it might be 30% China, 30% South Korea, and the balance to go somewhere.
Yeah. Thank you, Dale. A question about grade. We noted in the quarterly, you know, average grade was 5.4, sold. The question really is, you know, what was the grade that was actually produced during the quarter?
I think from memory it's about 5.3 produced in the quarter.
Yeah. Yeah. Just under 5.4. That's right.
Question about exploration. Dale, could you provide an update on localized exploration around the current Pilbara sites?
Yeah. Yeah. No. Well, first and foremost, we've got drilling underway at Pilbara. Yeah, Section 6 of the quarterly provides a bit of detail around that. John Holmes, our long-standing exploration manager, is back out there working the rigs hard, and we're looking forward to seeing how he goes in the coming months. Due to doing a new reserve later in the year. Touch wood that goes well, and we're quite positive on that. As to more regional exploration, we've been doing a little bit, but it's fair to say the activities have been fairly minimal in that regard, given we are concentrating our efforts where we can make maximum value as quickly as possible.
That's first and foremost, at our base asset, trying to keep the foot down and, do everything we can to expand that as rapidly as we can.
Yep. Just another question around that. Asking when, you know, about expanding reserves. There's a question about do we have initial results, indications, but I don't think we're in a position to disclose those. Perhaps just comment on the intention of exploration to expand the reserve base.
Busy drilling now. As for that reserve update, approximately August, I'd expect the timing for that reserve update.
P1000, is there a ballpark number for this investment?
No ballpark number. Obviously, as we look to disclose the FID later in the quarter, we'll obviously the capital benefit of that will be part of that decision.
Couple of questions about Calix. Could you give some detail about explaining the benefits of the midstream flash calcination?
Sure. The flash calciner, we think is potentially a big step forward for the calcination of spodumene product. Why we think it's a big step forward is firstly, it's electrically fired, and therefore you can plug in green energy effectively. In contrast, the conventional rotary kiln, big long horizontal kiln is either gas-fired or coal-fired, so very carbon energy intensive. We think that swap from hydrocarbons to electric is firstly the first big benefit. The second big benefit is that the nature of a vertical kiln, we see, has a benefit in the way it actually enables the alpha to beta phase conversion of the spodumene particle.
Because the vertical calciner enables the product to form, the particles are effectively dislocated from the other particles. That means one of the challenges that you get in a rotary kiln is particle-to-particle contact, which affects what's called the eutectic. It is a fancy way of saying the temperature properties change, and you have issues around melting. It all equals a lithium loss. What we've observed through test work is the vertical kiln is superior in this regard. Those are probably the two big advantages. Probably the third big advantage would be thermal control of that vertical kiln. Given that it's electric, you've got more ability to control the temperature.
Therefore means you can dial in or strongly control the required temperature for your phase conversion for that spodumene. In contrast, back to the rotary kiln calciner, which has the big jet engine of flame. That has a thermal gradient. Because it has a thermal gradient, you get variation in the phase change property. In a nutshell, those are probably the three key parameters. All said and done, at the end of the day, it will remain a cost game for competition. Unit cost will always matter and hence why we need to get our demonstration plant built, so that we can make sure that we can compete on the global stage.
Thanks. we're at the home run now. Two final questions. First one, would we consider building our own lithium chemical plant?
Yes. Yeah, we would. Over to Matt Simon.
Yeah. Okay. The final question, which I think is a good question to sort of close out the session is, can we provide some commentary about Pilbara's market valuation? You know, noting that we are obviously producing significant revenue and have great prospects of expansions compared to, say, some of our other peers. You know, is there a message to existing or prospective shareholders as to why to invest into Pilbara?
Sure. Well, where do you start? look, I think, as I said in some of my opening comments on the strategy slide, you know, Pilbara's got an incredible offering in this space. You know, Pilbara, first and foremost, is developing an enormous tier one asset in a tier one location. We've got this remarkable opportunity to scale up this operation into a growing demand set for lithium. The barriers to entry are high. Processing of lithium is very challenging. Pilbara has a technical advantage, technical and operating advantage. Has got a demonstrated track record of delivery. That would be a couple of key reasons. Further, we're down, well down the path of downstream integration with partners who matter.
You know, the likes of POSCO, who've been in this space for a long time, moving forward rapidly with the development of our joint venture chemicals plant, and one now in South Korea, which is at the doorstep of the existing battery material supply chain, being LG Chem, SK Innovation, so on and so forth. We stand poised to benefit from that. We're getting into the likes of the midstream project, which is novel. Look, it has real potential to make a real dent in carbon energy intensity. If we can get that right, we think that will go really well. To our knowledge, there is no other operator or business in this space tackling this head on.
Pilbara is focused on this and doing everything we can to drag the cart forward. Now, if that goes well, of course that benefits will flow back to our shareholders. The combination of the above means that Pilbara has an absolutely unique offering to market that, in my opinion, no one else does. The remarkable thing is we're only partway up this growth curve. That's without turning our mind to the next steps of growth beyond the Pilgangoora asset, leveraging our strengths around balance sheet, technical aptitude, so on and so forth. Gee, you know, where do you stop? That's it in a nutshell. PLS, fill your boots. Thank you very much for that last question. My final comment is, yeah, thank you to all who joined the call today.
Again, to those longstanding shareholders, thank you for your support, and we look forward to updating at the half year late in February. Thank you very much for your time. Back to the moderator.
Thank you. That does conclude our conference for today. Thank you for participating. You may now disconnect.