Release Date: August 26, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Record production of 725,000 tonnes and record sales of 707,000 tonnes.
- Achieved a healthy EBITDA of $538 million with a robust EBITDA margin of 43%.
- Strong cash balance of $1.6 billion, even after significant investments.
- Material improvement in safety with a 27% reduction in TRIFR to 3.4.
- Progress in sustainability initiatives, including the release of the FY24 Sustainability Report and the first reconciliation action plan.
Negative Points
- Average realized price of lithium declined significantly from USD4,447 per tonne in FY23 to USD1,176 per tonne in FY24, a 74% decline.
- Revenue decreased by 69% to $1.3 billion due to lower lithium prices.
- EBITDA reduced by 84% compared to the prior corresponding period.
- No final dividend declared for H2 FY24 to preserve balance sheet strength.
- Increased capital expenditure in FY24, with payments for property, plant, and equipment totaling $810 million.
Q & A Highlights
Q: The results indicate about 154,000 tonnes of sales that are still subject to provisional pricing as of end of FY24. Has this changed? And should we model sort of that 20% spot sales going forward?
A: You are approximately right in respect of the volume, which is still subject to provisional pricing. Due to the declining lithium price, our expectation on the provisional pricing adjustment is relatively immaterial, around about $16 million of net cash outflow. (Luke Bortoli, CFO)
Q: There seems to be $82 million of stocks. When will these be processed? And is it more around the P1000 or a much later date?
A: The total increase in inventories was around $85 million. The current portion comprised about a $15 million increase in spodumene concentrate due to shipment timing, and a $15 million increase for ROM stockpiles in preparation for the expanded P680 crushing and ore sorting facility. The noncurrent side includes contact ore stockpiles, which will be processed over the life of mine as a small percentage of annual processing fee. (Luke Bortoli, CFO)
Q: On the P&L, noting the feasibility study costs of about $33 million, does this include capital expenditure on building the midstream plant?
A: The midstream project is classified as R&D. As a consequence, none of the costs related to design, engineering, and construction can be capitalized. The feasibility costs reflect the full amount incurred in respect of design, engineering, and other purchase of construction-related material. (Luke Bortoli, CFO)
Q: On the cash flow statement, there's an acquisition of a subsidiary for about AUD13 million. Does this relate to the recent transaction with Latin Resources?
A: It actually relates to stamp duty costs on the purchase of Altura, not related to the cost of any investment or purchase of shares. (Luke Bortoli, CFO)
Q: The debt facilities are much bigger than the total of your existing ones. Are you repaying your existing syndicated and government facilities? Is this also optionality for more countercyclical growth?
A: Yes, we will repay the existing project-style debt facilities. This makes good financial sense given our current cash balance and will save interest costs. The new corporate facility is a natural evolution, providing more flexibility and appropriate for the size of the company. It is not solely directed to investment in growth but has that optionality. (Luke Bortoli, CFO)
Q: How much can you ship out of Port Hedland, and what is the timing on construction of Port Lumsden?
A: For the P1000 project, we do not need Lumsden Point capacity and will continue to use the Public Berth. However, Lumsden Point is under construction and expected to be ready late in calendar year '25, with full operations by late '26. Pilbara will have some capital requirements around the shed and potentially other land-side infrastructure. (Dale Henderson, CEO)
Q: Can you give more color on how the new debt was sized and its purpose?
A: The sizing was based on through-the-cycle downside and upside scenario modeling, ensuring appropriate liquidity. The facility was well oversubscribed, and it provides access to in excess of $2 billion of cash and debt. The covenants are materially more favorable, and the facility is intended to provide flexibility and support for future growth. (Luke Bortoli, CFO)
Q: How does the business think about the timing of new projects or expansions?
A: The timing is based on a combination of market outlook, internal analysis, and readiness of studies. For example, the P2000 project is still in the prefeasibility stage, with a feasibility study due in December next year. We will consider market conditions at that time. (Dale Henderson, CEO)
Q: Will the inventory expense around contact ore continue to grow in FY25?
A: The contact ore stockpile inventory balance will increase over FY25 but at a lower growth rate compared to FY24. This growth will moderate as we start processing the contact ore through the P680 primary rejection facility. (Luke Bortoli, CFO)
Q: What through-the-cycle spodumene price have you used in your capital allocation framework, particularly for the calculation of your leverage target?
A: The specific price is confidential, but the leverage ratio target was based on benchmarking peers, internal modeling, and maintaining a conservative approach given the evolving lithium market. (Luke Bortoli, CFO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
