Please be advised that today's conference call is being recorded. I would now like to hand the conference over to your first speaker today, Dale Henderson, Managing Director and CEO of PLS Group. Please go ahead.
Thank you, Maggie. Good morning and good evening, everyone, and thank you for joining us today. I will begin by acknowledging the Traditional Owners on the lands of which PLS operates, the Whadjuk people of the Noongar nation here in Perth, and the Nyamal and Kariyarra peoples from the Pilbara. We pay our respects to elders past and present. I am joined today by Brett McFadgen, our Chief Operating Officer, and Alex Willcocks, our Chief Financial Officer. The September quarter delivered record production and lower unit operating costs. Despite weaker lithium pricing, the business continued to generate substantial operating cash. Since the quarter end, we have approved the P2000 project, and we have completed our second U.S. bond offering. Today, we also announced a power agreement with Fortescue that is expected to further reduce future operating costs and power-related emissions intensity.
These developments demonstrate our strategy in action, delivering today whilst investing in Pilgangoora's long-term competitiveness. We will take you through the results and strategic developments before opening the line for questions. Moving now to Slide two. Our ability to create value through the cycle starts with Pilgangoora, a large long life operation that we own 100%. We control its development and capital investment, and PLS shareholders retain the full economic interest. P2000 builds on that foundation. It is expected to increase production capacity to approximately two million tons per annum, recovering more of the ore body and reducing mining intensity. Our ore reserves now contain an increase of 31% in lithium, supporting the larger production profile whilst retaining approximately 20 years of open pit mine life. Today's power agreement adds further expected cost savings beyond the P2000 FID assumptions while materially lowering power-related emissions intensity.
Colina and our downstream partnership in South Korea provide additional growth and diversification options, which we will progress selectively. We ended September with AUD 2.2 billion in cash and the US $700 million bond completed after the quarter end, which further extends and stages our debt maturities. Including these proceeds, pro forma liquidity is approximately 3.7 billion. That financial strength gives us flexibility through the investment period and the capacity to invest through the cycle. Our focus is to use this capacity with discipline, improving competitiveness and investing for attractive long-term returns for our shareholders. Moving now to Slide three. The September quarter delivered record production and lower unit operating costs against a weaker lithium pricing backdrop. Production reached 260,000 tons, up 25% on the June quarter, supported by strong performance from Pilgan and additional production from Ngungaju.
Ngungaju has now completed its ramp up on schedule. FOB unit costs fell 12% to AUD 539 per ton. Average estimated realized pricing of $1,809 per ton on a SC5.2 basis. Revenue was AUD 563 million, down 24%, reflecting lower pricing and sales volumes affected by shipment timing. Since quarter end, we have also approved P2000, which I mentioned a moment ago, which is expected to increase production capacity to approximately two million tons per annum late in the decade. The Fortescue Power Agreement announced today is expected to further improve that future operating profile, reducing FOB unit cost by a further AUD 15 to AUD 20 per ton against the P2000 FID cost base once supply commences. With that, I will now hand over to Brett to take us through the safety and operational performance.
Thank you, Dale. Moving to Slide four. Safety is our highest priority. No production outcome or financial result outweighs the safety and well-being of our people. Our rolling 12-month Total Recordable Injury Frequency Rate improved to 2.36 at the end of September from 2.77 at the end of June. However, four of our people sustained recordable injuries during the quarter. We simply need to do better. Our focus remains on visible leadership and quality engagement with our frontline teams, identifying hazards and checking that critical controls are in place and working. This slide also shows increased safety interactions per site leader. These conversations are an opportunity to understand the risks where the work happens and reinforce those safe work practices. Moving now to Slide five.
Pilgangoora delivered record production of approximately 267,000 tons in the September quarter, up 25% on the prior quarter, driven by strong performance from Pilgan and additional production from the restart of our Ngungaju operations. At Pilgan, improved feed quality, ore sorting benefits, and stable plant operations supported the strong performance. Overall, Pilgangoora lithium recovery was approximately 75%. Ngungaju restarted as planned in July and performed in line with expectations through the quarter. It reached full operational status in October, delivering against the ramp-up timetable we previously outlined. Mining activity increased in line with the mine plan with 11.5 million tonnes of total material moved, including 1.5 million tonnes of ore supporting requirements across both plants. Sales were approximately 223,000 tonnes, down 11% on the prior quarter, reflecting shipment timing while customer demand remained strong.
This was a strong start to FY27, although production in any single quarter should not be taken as the run rate for the full year. Quarterly volumes will vary as a function of ore feed characteristics, planned maintenance shutdowns, and other operational activities. Taking these factors into account, we have today reaffirmed our full-year production guidance volumes and unit costs. I will now hand back to Dale.
Thanks, Brett, and well done to you, Chris, and all the operating team for delivering a cracking quarter. Moving now to slide six. Our wholly owned Colina project in Brazil provides a further opportunity for growth and geographic diversification. During the quarter, we completed the acquisition of Lithium Ionic interests in tenements adjacent to Colina and commenced infill resource development drilling on the acquired ground. Alongside this work, we continued metallurgical testing, flow sheet development, and infrastructure studies. Feasibility study outcomes remain on schedule for the December quarter next year. These studies will inform the project's development pathway. Any decision to proceed will depend on successful study outcomes, funding, and supportive market conditions. Moving to slide seven. Our chemicals investments provide access to additional markets and opportunities across the lithium value chain. We continue to progress these opportunities on a staged and disciplined basis.
At P-PLS in South Korea, output was moderated to align with customer demand and prevailing conversion economics. At our midstream demonstration plant, commissioning progressed with first ore through the electric calciner, which provided successful conversion. First product has taken longer than anticipated as the team works through commissioning of the specialized equipment and integration of the plant systems. First lithium phosphate product is now expected in the December quarter this year. With that, I will now hand over to Alex to take us through the financial performance.
Thank you, Dale. Good morning, everyone. Moving now to slide nine. Revenue for the September quarter was AUD 563 million, down 24% on the prior quarter. This reflected a 14% lower realized price as at the 30th of September, together with sales volume affected by shipment timing. Turning to costs, FOB unit operating cost was AUD 539 per tonne, 12% lower than the June quarter. This improvement was supported by operational and cost efficiencies, reflecting cost discipline embedded across the business through our Cost Smart Future Ready way of operating, as well as a greater volume of capitalized waste. We expect unit costs to increase over the remainder of FY27 due to wet season impacts and anticipated increases in diesel prices. Embedded efficiencies position us well to mitigate these pressures, and we will remain on track to achieve full-year guidance.
Cash margin from operations was AUD 329 million for the September quarter, demonstrating the underlying business's cash generating capacity despite lower realized pricing. Following further price reductions through October, provisional pricing adjustments on first quarter sales are expected to reduce second quarter cash margin by approximately AUD 88 million, based on estimates as at the 26th of October. Turning to capital expenditure, CapEx on an accruals basis was AUD 185 million, up 50% on the prior quarter, driven by pre-FID expenditure on the P2000 expansion. During the quarter, we also paid the final FY26 dividend and funded the Colina tenements acquisition. We closed September with cash of AUD 2.2 billion and total liquidity of AUD 2.7 billion. Together with future operating cash flows, this underpins our capacity to fund the P2000 expansion. Following quarter end, completion of our second US bond further strengthened that funding capacity.
I'll now cover financing and our balance sheet position on slide 10. We have secured additional long-term funding ahead of a period of significant capital investment, strengthening our financial flexibility as we progress the next phase of growth. As announced on October 26, we completed a US$700 million offering of the 8% senior unsecured notes due in 2032. This was our second issuance in the U.S. debt capital markets, and despite recent market volatility, we pleasingly received strong ongoing support from high-quality global institutional investors. The financing reflects our proactive approach to capital management, adding long-term funding and further diversifying our debt maturity profile. Across our 2031 and 2032 senior unsecured notes, the weighted average cost of funds is now 7.48% per annum. Weighted average debt maturity across those notes has extended to 5.3 years.
The additional liquidity strengthens our resilience through the commodity cycle and provides greater flexibility to manage our investment program and capital allocation priorities. Those decisions continue to be governed by our capital management framework and dividend policy. Our focus will remain on maintaining the financial capacity to execute our growth strategy while preserving flexibility through changing market conditions. I'll now hand back to Dale for the corporate update.
Thanks, Alex, and well done to you and all the team on the second bond. Moving now to slide 12. Since quarter end, we have progressed three complementary initiatives to increase the value we recover from Pilgangoora and strengthen its long-term competitiveness. P2000 combines greater production with a more efficient approach to the ore body. Improved processing capability allows more mineralized material to be recovered as ore, reducing mining intensity and supporting lower long-term unit costs. The feasibility study supports approximately AUD 1.9 billion investment with an incremental post-tax net present value of AUD 2.7 billion under the disclosed study assumptions. Alongside P2000, we're investing in the access road, permanent village, and mine services facility. These investments are expected to improve productivity and reduce costs in the existing operation, whilst also supporting its larger future scale.
Today's power agreement with Fortescue delivers a further expected benefit of AUD 15 to AUD 20 per ton reduction in future FOB operating costs against the P2000 FID cost base. This benefit is additional to the valuation shown here on the slide. This is a substantial investment program directed at greater production, better productivity, and lower costs. With Pilgangoora's 100% ownership by PLS, our shareholders retain the full economic exposure to that larger operating base and its future returns. Now, I'll now take you through each initiative, starting with P2000 on slide 13, which we'll move to now. This image shows the new Jimmagunya processing facility with its dry and wet plants to be built alongside the Pilgan processing facility. It will become our third major processing facility at Pilgangoora.
Under the P2000 operating plan, total Pilgangoora production is expected to average approximately two million tons per annum over the first 10 years at steady state. Over that period, average FOB unit costs are expected to be approximately AUD 600 per ton in real terms. This includes the expected benefits of the Fortescue power agreement I mentioned a moment ago. First production from Jimmagunya is targeted for the September quarter of calendar year 2029, followed by an approximate 6-month ramp-up period to steady state. Moving to slide 14. Pilgangoora has grown substantially since production began. With a long operating life ahead, we are investing in the permanent infrastructure suited to its scale and future requirements. The access road upgrade will enable larger road trains moving from triples to quads. This upgrade is supported by an initial funding commitment of AUD 11 million by the Western Australian Government.
We are grateful for the state's support for this public access road upgrade and for the Cook government's leadership on shared infrastructure investments of this nature. Moving to the camp, the new 1,200-bed cyclone-rated village will support our work crews and allow the existing village location to be used for more efficient mine sequencing. Moving to the mine services facility. The mine services facility is expected to improve equipment availability and maintenance productivity whilst reducing maintenance costs. Together, these investments are expected to improve the existing operation whilst providing the infrastructure capacity to support P2000. Moving to slide 15. As mentioned today, we announced a 20-year power purchase agreement with Fortescue, with PLS becoming its first external customer to connect to its Green Grid. The agreement guarantees a minimum of 325 gigawatt hours per annum and supports the additional power requirements for our P2000 expansion.
We expect to invest approximately AUD 150 million between FY27 and FY29 in connection and network upgrades, with approximately AUD 20 million expensed in FY27 this year. From 2029, the agreement is expected to reduce operating costs, as mentioned earlier, by $15 to $20 per ton. This is the most effective power solution for Pilgangoora, whilst also significantly advancing our power strategy. We expect PLS to reduce power-related emissions by approximately 80% compared to our FY23 baseline, and we've shown a schematic in the slide deck illustrating this. I just like to commend Fortescue for their leadership with this initiative. Renewables such as solar is such a It is the low-cost solution for power generation in so many locations around the world, and that's certainly the case in Western Australia. Equally, network solutions just make a lot of common sense.
In this case, we've got both coming together and a credit to Fortescue pulling this initiative off, and we're delighted to be their first customer. Again, we congratulate them for having the courage, the conviction, and the fortitude to deploy this scale network and looking forward to that future low-cost power. Moving to slide 15. Sorry, slide 16. P2000 is expected to position PLS amongst the world's largest primary lithium producers with a competitive cost position and a long life operating asset. The production comparison on the left is based on attributable ownership. With Pilgangoora's 100% owned by PLS, our shareholders retain the full economic interest in the substantially larger production base. The chart on the right places Pilgangoora in the second quartile of the forecast 2030 industry cost curve using the P2000 FID operating profile. This combination is important.
Greater production increases our exposure to stronger lithium markets, whilst competitive costs strengthen our ability to operate through weaker market conditions. With approximately 20 years of open-pit mine life under the P2000 plan, these benefits extend across a long operating horizon. Turning now to guidance on slide 18. As mentioned by Brett, our FY 2027 operating guidance remains unchanged for production volumes and unit operating costs. Today's change is an additional AUD 20 million in FY 2027 for capital expenditure for the Fortescue power connection and associated on-site infrastructure.
This takes enhancing infrastructure expenditure to AUD 185 million, and a total FY 2027 capital expenditure guidance between AUD 1.13 billion to AUD 1.195 billion. The AUD 500 million FY 2027 allocation for P2000 remains unchanged from the guidance announced at FID, and that figure includes the previously announced pre-FID expenditure. Base capital guidance is also unchanged. Turning now to the lithium market outlook.
Lithium pricing remains volatile. Strong long-term demand growth can coexist with periods of weaker pricing because prices reflect near-term supply, inventories, purchasing conditions, and most of all, they reflect sentiment. The cost curve on the right shows current spot pricing below the estimated sustaining costs of a meaningful proportion of the industry supply. That puts pressure on operating returns and the incentive to invest. Sharp downward price movements also undermine investment confidence. Investors and lenders become more cautious, making capital harder to secure, particularly for greenfields projects requiring substantial investment before generating revenue. That creates a challenge for future supply. The industry needs investment ahead of demand, but the price cycle can discourage that investment when projects need to advance. For PLS, this highlights the value of financial strength and an established operating base.
They give us the capacity to invest through the cycle where long-term economics justify it, expanding production while improving competitiveness. The next slide shows the battery economics and adoption trends supporting that longer-term demand opportunity. Moving now to the next slide on slide 21. The long-term demand outlook starts with the economics of batteries. The global average battery pack prices have fallen approximately 90% between 2010 through to 2025. That has improved the competitiveness of electric vehicles, energy storage, and supported wider adoption. In September, globally, more than one in four vehicles sold were electric, with penetration reaching 28%, according to Benchmark Mineral Intelligence. Importantly, growth is broadening well beyond China. Ex-China EV sales increased 29% year to date to September, accounting for 48% of global EV sales, up from 38% a year earlier. The expansion is even faster in storage.
Ex-China battery energy storage installations increased 67% year to date, representing 60% of global installations. These are substantial growth rates across an increasingly broad market. They highlight the potential for demand to outpace expectations as adoption accelerates in markets outside of China. Benchmark Minerals' September forecast projects lithium demand to approximately triple by 2040. Electric vehicles remain the largest demand source, with storage adding substantial growth. The pace of adoption matters. Faster growth across these markets would bring forward the requirement for additional supply. Moving to slide 22. Meeting that growing demand requires both new projects to be delivered and existing operations to perform. New supply takes time. The chart on the left shows discovery to production timelines across the mining industry, increasing from approximately six years in the 1990s to around 18 years for mines entering production in 2020 to 2024.
For calendar year 2027, forecasters are divided. Some project a surplus, others expect a deficit, reflecting different assumptions about demand and supply delivery. Benchmark Mineral Intelligence forecasts a deficit of approximately 100,000 tons of LCE. The downside scenario shown here identifies a further 400,000 tons of supply at risk from policy, security, and environmental issues. If those shortfalls materialize, the deficit in the BMI-based analysis could widen to approximately 500,000 tons on an LCE basis. The important point is that supply underdelivery could tighten the market beyond current base expectations. Our strategy is to build resilience through the cycle and retain the capacity to invest through it. At Pilgangoora, we are building on an established operation, existing infrastructure, and our experience delivering the P680, P1000, and the Ngungaju restart. Our financial strength allows us to progress investments based on their long-term economics through periods of market volatility.
In P2000, well, it puts the strategy into action, increasing production and improving long-term competitiveness. With PLS shareholders retaining the full economic exposure through our 100% ownership. Moving to some final comments. The September quarter demonstrated what our business can deliver. Record production, lower unit operating costs, and substantial operating cash generation despite weaker lithium pricing. Ngungaju's ramp-up is complete, on schedule, and our FY27 production and cost guidance remains unchanged. We are now building the next phase of Pilgangoora. P2000 is approved, our ore reserve has grown, and our infrastructure and power investments are expected to strengthen productivity and long-term competitiveness. The US $700 million bond completed after the quarter end further strengthens our debt maturity profile and financial flexibility. Together, these strengths give us the capacity to invest through the cycle and build a larger, more resilient business.
Our task is now to deliver safely, efficiently, with capital discipline. We've been here before. With Pilgangoora 100% owned, our shareholders again retain the full economic exposure to the operation we are building and the long-term value we aim to create. Thank you for joining us today. With that, I'll now hand back to Maggie to open the line for questions. Thanks, Maggie.
Thank you very much. We will now conduct the Q&A session. As a reminder, to ask a question, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. PLS will take one question per person with one follow-up question. Please stand by while we compile the Q&A roster. First question comes from the line of Levi Spry from UBS. Please go ahead.
Hi. Good morning, Dale and team. Thanks for your time after a very nice quarter, and thanks for the detail on the QP adjustments there, Alex. Just in terms of the CapEx forecasts, if I look at slide 17, can you just help us think about the base forecasts going forward?
Do you want to take that, Alex?
Yeah, absolutely. Morning, Levi. Thanks for the question. Through relation to base CapEx going forward, and I assume the question is more an outlook for FY28. You may remember we called out that mine development was elevated this year and will remain elevated next year, as part of the mine planning activity. Sustaining capital, we have called out, is at a high point now. I am not expecting that to drop to what we referred to in the P2000 announcement as long run steady state, sustaining capital of around that AUD 40 million to AUD 60 million.
I do not think we will see it drop back down from AUD 85 million to AUD 100 million to the AUD 40 million to AUD 60 million range in FY28, but I will expect it to begin to drop. There is a number of smaller, but value accretive projects, in addition to some other projects that sit within those numbers.
In a similar way, infrastructure and projects will continue to trend down, but FY28 will remain slightly higher than the long term. Hopefully that gives you a feel. The one piece to flag, and we will speak to this more at the December results. As you know, we announced the updated reserve post the quarter end, and so the quarterly results in terms of the FOB and the mine development CapEx has been prepared based on the reserve that was in place at 30th of September. We are working through all of the detailed work by mine plan stage of what the new reserve and the new strip ratio implies.
To the extent there is any update on essentially the accounting split between what goes through FOB and what goes through that CapEx number, which may impact future years, we will talk to that more at the December quarterly. From a cash perspective, it will be unchanged, but as I spoke to at the P2000, with the strip ratio changing, that does have some longer-term implications on what fits through FOB versus deferred strip and mine depreciation.
Yeah. Very good. Thanks for the extra detail there. Maybe just one follow-up on the market. If we are in the middle of some sort of destocking cycle on the BESS outlook, what color can you give us, Dale, on the size and duration of potentially that, going forward?
Yeah. My crystal ball is not with me today. What I can speak to is some of the trends which are very constructive. We are seeing a downward trend in lithium chemicals inventories. We are not seeing and not hearing of any elevated spodumene concentrate or other primary lithium supply inventories elsewhere. There is discussion around slightly elevated battery inventories further downstream. However, there is conjecture around what does that actually mean. Historically, we have seen that rise and fall out of step with fundamentals depending on orders, and we may well be seeing a dynamic based on BESS orders at the moment. So on an inventory basis, the trend is looking very constructive. Then as we turn our mind to demand indicators, there is a lot to like. Global EV sales are still a net positive.
In terms of the sub-markets, China gets a lot of focus, as it should, being the principal growth engine for many years. What is not getting the focus is some of the other sub-markets to the same extent. So the rest of world category, the Asia ex China categories are all stepping forward in leaps and bounds in the order of +80% type growth rates on the prior year. So those are positive. ESS also outright very strong, albeit a smaller component of the demand stack. So when you look at this combination of drawings down inventories, plus strong demand markers, plus hesitance on supply side, I think this forms a constructive set of conditions for price support. Time will tell, and as you know, Levi, what we see in terms of pricing behavior is it is principally sentiment-driven, not fundamentals-driven.
Ultimately, fundamentals prevail, but we do see these phases of sentiment having an outsized impact in both directions, and I think we're going through one of those phases right now.
Yeah. Thanks, Dale. Thank you for the extra detail. Thanks.
Thank you. Just a moment for our next question, please. Next we have James Redfern from RBC Capital Markets. Your line is now open.
Good morning, Dale and team. Congratulations on the strong quarter. Just wanted to ask two questions, please. The first one, I guess just sticking with the lithium market, I was just wondering at what spodumene price would you consider, I guess, slowing down the ramp-up or, I guess, even the containing production at the Ngungaju plant? Then my second question was just, I'm interested in what the, I mean, it's probably confidential, but just a rough indication of the electricity price that the PPA has been signed with Fortescue, please. Thank you.
Yeah. Good day, James. Thanks for that. I will take the first one on the market and Alex can speak to the power costs. Yeah, as it relates to a potential price point for Ngungaju, historically, we have not guided around that, given that, of course, that would be a judgment call based on not a near-term outlook, but a midterm outlook. So we do not have a number in mind for you there. However, as you can see from the results today, we are making very strong operational margins at current pricing care of our low-cost position. Beyond that, of course, we are well supported care of price floors. Several of our recent offtakes have got price floor support of US$1,000 per ton. So, we have a different makeup of conditions to consider any changes to the operating platform.
Thanks. Morning, James. In relation to your question on electricity, as you indicated, look, it is a confidential agreement so I am not able to provide detail. What you will have seen, though, is in terms of the impact on FOB costs between the AUD 15 to AUD 20 a ton, it does make a meaningful impact on our broader costs. Obviously, that comes from the negotiated outcomes. I think the other piece when we look at any long-term agreement like this, naturally, we look at it on a returns perspective, particularly given the capital that is also associated with it, and we are very comfortable that it is a strongly value-accreting project overall.
Okay. Fantastic. Thank you very much. That is good.
Thanks, James.
Thank you. Next question comes from the line of Rahul Anand from Morgan Stanley. Your line is now open.
Hi. Good morning, Dale and team. Thanks for the call. For my first question, I just wanted to touch upon sort of the processing grade. Obviously, the production performance was very strong, which is pleasing to see. If I back calculate the processed grades, I get to about 1.45. That does seem a fair bit higher than even where you mined in the last quarter. Just wanted to understand that head grade into the mill at 1.45 sustainability and sort of how should we view that? That is the first one, and I will come back with a follow-up. Thanks.
Yeah, I will take that one, Rahul. Yeah, look, we do have some good ROM stocks there, and we are able to blend, mainly for impurities and to really get the best out of our ore source. What you often see coming out of the mine is not directly proportionate to what goes through the mill. We do everything that we can to get the best feed quality to both plants. We have been working hard over the last couple of years to get our stockpiles just right so that we can blend for that ore sorting. That gives us a kick as well with that grade because we are removing all those impurities from the material. It might be a little bit easier once we go with our new reserves going from the coarse ore stockpile forwards.
You probably will be able to see it a lot simpler of what is coming through going into the plant.
Got it. Okay. For my follow-up, I just wanted to touch upon that Fortescue PPA that you just signed. Can you give us some understanding if you've talked about the cost savings, which is great, but I do note that it's not firmed power. I just wanted to understand per megawatt hour, what's your cost there? How does it compare to your on-site generation? I guess, do you have plans to firm it up yourself or to then eventually look at firming? Or you're going to use your diesel back-end or gas back-end to firm up that supply? Thanks.
Yeah, Rahul. No, thanks for the question. I'll give you a description to the extent that we can, given some of the details are confidential. The short answer is we do have backup at site. Obviously, as a remote site, we progressively built out our own power systems. So we have that. We've made note in the release today that we'll look to scale that up slightly. This ensures that we're absolutely covered for power. Then part of the cost benefit we're leveraging here is care of that larger network that Fortescue has. There's a lot of complexity in really how this is all tied together commercially. The key outcome is, as we've disclosed today, it's a cost reduction, quite material, AUD 15-AUD 20 per tonne. Then in parallel, it's a very material step down emissions intensity.
So it's a fantastic outcome for the business.
Sure. Okay. Thank you.
Thank you. Just a moment for our next question, please. Next question comes from Kate McCutcheon from Bank of America. Your line is now open.
Hi. Good morning, Dale and Alex. I am sorry about your lost crystal ball. The new bonds that you issued, 8% is materially higher than other bond issuances we have seen from miners this year. It adds another AUD 80 million or so to your interest costs. You have given us a vague use around general corporate purposes. Just keen for some color on the timing of tapping the bond market there. Is it defensive with the CapEx spend for P2000, or is there any more kind of color you can add around that decision and the timing?
Yeah, of course. Thanks, Kate, for the question. The bond really fits into our broader philosophy around when it comes to capital management and ensuring that we have a really robust and resilient balance sheet through the cycle. We do take a long-term approach to funding, and we do not seek to access debt markets when funding is immediately required. In this situation, we have chosen to go ahead of time. What we found with the bond markets, and as you well know, obviously the coupon rate is a function of both the U.S. Treasury rates and credit spreads. Our inaugural issue, which we did in April, was particularly well-timed. It came at that real low point in both Treasuries and credit spreads compared to long-term averages. What we then looked at is obviously the US Treasury rates have risen as just global inflationary concerns have heightened.
What we have actually seen is that our PLS credit spread has remained in line with our first bond, and it is currently the second bond that we put in place was well below the broader high yield index spread. We were really pleased to have that continued long-term support, and we felt it was a good time to access the market. As you would also appreciate, there is disclosure windows when it comes to the bond market, and we were currently within a window, which would have then closed until sort of the second half of the year after the half year results. All of those things combined, and outlook for broader Treasuries, all fed into the decision on the timing. In terms of broader uses, as we have said, obviously P2000 is underpinned by the cash we already had on the balance sheet and future operating cash flows.
What this bond does is it really ensures that we can continue to have flexibility throughout this next two to three year significant capital investment period. That should we wish to pursue other avenues of growth, we have the flexibility to do that. It also gives us the resilience that through a really wide range of market conditions over that period of time, we continue to invest in those growth projects unimpacted. As I said, a number of factors combining into timing, and also future usage.
Okay. Got it. Thanks for the color, Alex. Can I just come back to James's question on Ngungaju? You made the decision to restart that in February. We were sitting above $2,000 a tonne then versus $1,300 now. How long will we need to see this pricing level for the team to possibly revisit that? Or are you happy in inverted commas with US $1,300 a tonne and those additional tonnes from that higher cost plant?
Yeah, thanks, Kate. Yeah, very comfortable with current levels. We're making strong margins across the operation as evidenced today in the quarterly results. It's not in the near-term thinking at this stage.
Okay. Thanks, Dale.
Thanks, Kate.
Thank you. Next question comes from Austin Yun from Macquarie. Your line is now open.
Good morning, Dale, Alex Willcocks. Just an extension to the US$700 million bond issuance, just hopefully to get more color. Firstly, just thinking through potential stress testing and the minimum liquidity requirement as you go through the peak spending in the next couple of years. Does this bond issuance play into that part? How should we think about a comfortable liquidity level, when you assume a lower pricing environment? Iff any color can be provided on that. Thank you.
Alex
Yeah. Thanks. Morning, Austin. Thanks for the question. In relation to how we think around liquidity, we think around liquidity in two pieces. One, through this investment period, but also on the other side of the investment period, essentially being a business that is double the size as we are today. We broadly think around our minimum liquidity level, we would want to maintain around AUD 1 billion. The way that we think around that is really around AUD 500 million in cash with AUD 500 million in the undrawn RCF. That sort of obviously then is one of the factors when we think around what's the appropriate level of balance sheet resilience that we want through the cycle.
Cool. That is really clear. Just one quick follow-up on the upstream, we know there is potential or concern of demand on the downstream. Keen to get color from your engagement with your refineries. Do you see any tightness on the spodumene supply? There has been some speculations that some other spodumene producers may be struggled to deliver the promised tons in the next 3-6 months. Have you noticed when you are dealing with your customers in terms of changing behavior? Thank you.
Yeah, Austin. As it relates to recent calls for spodumene, there is strong demand. It is not fever pitch, but there is certainly, without question, strong demand and from PLS's perspective, no issues placing volumes at all. To the question of, are we hearing of distress with some of the other suppliers? Yeah, it is hard to get a read on that conclusively. I think the reason there is some overhang on some of these regions. We have seen changing rules in Zimbabwe, and there is question marks on where does that go. Mali, similar story as well. Of course, as you know, some of the Chinese mines are remained in the off position. All of those, there is question marks around if things can be brought back on or will things be turned off. So there is that sort of overhang.
Some chemical converters are very much looking towards stable, reliable suppliers like PLS for supply. What we sought to do with the materials today is actually demonstrate with that waterfall of how significant some of this supply, which could be under pressure, could be. Because, yeah, it is not immaterial. So time will tell.
Okay. Yeah. No problem.
Thanks, Austin.
Thank you. Next question comes from the line of Thiago Ojea from Citi. Your line is now open.
Hi, good morning. My first question, we have had a very strong result in terms of costs. If we look what is the current cost, midpoint, if we look at the guidance, the implied midpoint, AUD 620. This would be 15% above September. Even the bottom of the guidance would be AUD 50 above September quarter. Can you give us a little bit more color on how you see the costs playing out throughout the year? That is my first question. Thanks.
Morning, Thiago. Thank you for the question. As Brett called out, obviously when we look at a quarter result, it is important to realize that it is just for one quarter, and there will be a number of factors that play into that. Obviously, production for this quarter was particularly strong. It also depends on the recoveries that we receive through the plants, depending on where we are through mining activity, shutdown activity. One of the big pieces for this quarter is, from a weather perspective, it is probably one of our best quarters in terms of just stable operating conditions. Just as a reference point, the September quarter last year, the FOB reported was AUD 540. Again, it was significantly lower than the overarching result. How are we thinking about it? We are really pleased with the operational cost efficiencies that we have seen in this quarter.
We've been able to see that embedded. I think that sets us up really well as we go through the rest of the year, and we may start to have some of those different impacts from weather. The other piece that we've seen when we look at the full-year guidance, and we called this out when we gave guidance, is obviously we had to make an assumption within there around diesel prices. As we look at the September quarter, diesel cost has come in probably just below. I previously talked to an 8%-10% range for diesel. We've come in just below that for this quarter. But when I look at now the outlook for diesel futures, I expect it will be towards the top end of that range in the December quarter. Then, who knows?
Again, we probably need Dale Henderson's crystal ball in terms of exactly where diesel pricing will land as we go forward. So a few different aspects going in there. We're really pleased with the performance this quarter. It sets us up well, but no change to full-year guidance given a number of those pressures coming through.
I see. On my follow-up question, going back to the PPA deal with Fortescue. I understand you cannot provide exactly what is the power cost per megawatt, but can you give us at least a broad idea on how much lower would be this versus the current LNG and diesel blend? What would happen with the $15-$20 cost saving if the Green Grid is late? Thank you.
Thanks, Thiago Ojea. As it relates to this power agreement, it's timed essentially contemporaneous with when P2000 is coming online, or the power will be slightly ahead of P2000. Given there's a lead time for the Green Grid build-out and the transmission lines, et cetera. So what we've presented today is comparing the benefit that we expect in the future relative to that future case. So P2000 relative to P2000 with this power. We've talked about the capacity that we can access there of the 300 plus and the cost of the 15 to 20 bucks a ton. So that's the way we've framed it, because it's most relevant. As to the question of the impact of delays. We have base load covered care of the existing facilities, which I mentioned earlier, we're looking to expand.
That covers off if in the event the grid was late. However, we are not expecting the grid to be late, given our discussions with Fortescue and their timelines. They appear to have a good handle of their scheduling when they are looking to bring things online. For those reasons, I think we are in a really good standing.
Thank you.
Thank you. Just a moment for our next question, please. Next, we have Glyn Lawcock from Barrenjoey. Your line is now open.
Good morning, Dale. Just firstly on cost opportunity, maybe you see obviously the PPA was a good one today. What other opportunities do you think you have got out there? Because it sounds like you are still going to be running some gas-fired power back up. So you are obviously trucking gas in. Is there opportunities maybe to pipe the gas in and save costs there? Anything else you have got that you could do to maybe help lift or drop the AUD 600 cost base? Thanks.
Yeah. Good day, Glyn. Thanks for exploring this. The good news is, yes, there is more cost out opportunities to go and I'll rattle off a couple, and Brett might want to weigh in as well. Just to start with power. The power agreement we've signed today, that will be the power for P2000. We're not expecting to, in any large volume, be relying on that backup power. The opportunity around piped LNG, et cetera, is not there. We'll be placing reliance on the PPA. That being said, as mentioned earlier, for some reason, there is an issue where we've got that backup coverage. Further cost out opportunities could include autonomous mining, ongoing improvements in lithium recoveries, of course, at port.
In time, we love the idea of moving to a bulk loading facility, and we've had discussions with Pilbara Ports Authority around that for Lumsden Point. Those are some initiatives. What else have we got, Brett?
You've pretty much stolen all of my thunder, Dale.
Okay.
The only other one is that we've spoken about the quad road train, so moving to getting our goods and services in at a better price as well with the roadwork update. Our strategy is going to give us a really good advantage. We'll continue to work with our owner miner strategy and moving into the mobile maintenance strategy. There's a fair bit that we always go after, Glyn, as you know. Our Cost Smart Future Ready program is always in there as well. Obviously, this PPA opens us up to further downstream electrification opportunities as they come to fruition as well. It's pretty exciting.
Okay, that's great. Then maybe just a follow-up, if I could, on everyone's talking about the cost for the quarter and the year. But it's a question, I guess, looking at it. If you look at the first quarter production, it really only annualizes at roughly your midpoint of guidance. So one would hope you're going to hold the volume at this level each quarter. Obviously, there'll be weather to deal with in the coming months. Just trying to understand then, is it all diesel? How much of the deferred strip was an incremental increase compared to normal to pull the cost down? Does that mean you're not going to capitalize as much stripping in future quarters as well? How much was that you capitalized this quarter, additional, perhaps? Thanks.
Yeah. Morning, Glyn. Two pieces. In relation to the production, what we expect to see as we go forward is obviously Ngungaju within ramp up. What we'll expect to see is that the Ngungaju tons for the following three quarters will be at a higher level, and that probably will offset what we're saying around the Pilgan plant had a particularly strong quarter this quarter. There's sort of some detail behind the total production amounts. Diesel, look, it depends where pricing goes, will have an impact. In terms of capitalized waste and the impact of that is more of a call-out versus the June quarter. We talked to the fact that this year we were going to see an uplift. We've seen that uplift.
It probably won't be quite the same benefit as we move through the following three quarters, but it will still remain higher than the previous year. So a few different moving pieces within that.
Sorry, maybe just a better way to ask is, what was the AUD a ton benefit you think you saw from additional deferred stripping?
Yeah, we don't
And will that remain?
As I called out, I'm expecting it to remain higher than last year. But I think as we go into quarter two, three, and four, it will be slightly lower than what we saw in quarter 1, but we don't provide that level of detail.
All right. Thanks.
Thanks, Glyn.
Thank you. That concludes our Q&A session. I will now hand back to Dale for closing remarks.
Thank you all for dialing in today for our September quarter results. A really strong set of outcomes for production and cost, record-breaking, in fact. Post-quarter around a couple of fantastic releases. A second U.S. bond to the tune of US$700 million power agreement that we have announced today. A fantastic set of outcomes which, in combination with P2000 and the infrastructure announcements, sets us up for a fantastic future. Thank you all for your time, and look forward to tuning in in the future.
This concludes today's conference call. Thank you for participating. You may now disconnect. Have a great day, everyone.