Pilbara Minerals has revealed its interim financial results for FY24, underscoring strong production levels, a focus on cost improvements, and significant expansions in its off-take agreements. The company boasted an EBITDA margin of 55% and a strong balance sheet with over $2.1 billion in funds. Despite facing lower lithium prices, Pilbara Minerals maintained profitability and cash flow, with a net cash position of $1.8 billion. The mining group emphasized its commitment to sustainability and outlined strategic growth pillars, including a focus on the chemicals sector.
Key Takeaways
- Pilbara Minerals reported a healthy EBITDA margin of 55% for H1 FY24.
- The company has a robust balance sheet with over $2.1 billion and a net cash position of $1.8 billion.
- Significant off-take expansions with Ganfeng and Chengxin indicate a positive outlook for the lithium industry.
- No interim dividend was declared for H1 FY24, saving approximately $200 million in cash.
- Pilbara Minerals is focused on its P680 and P1000 expansions to leverage market cycles.
Company Outlook
- Pilbara Minerals is optimistic about the lithium market, with recent increases in lithium carbonate pricing and a rise in new sales inquiries.
- The company's strategy remains steadfast on low-cost production, scale, and balance sheet management.
- Expansion plans are progressing as expected, with no changes in product grade strategy or capital expenditure projections.
Bearish Highlights
- Lower lithium prices have impacted revenue, but profitability and cash flow remain strong.
- The company is managing short-selling pressures by delivering on promises and maintaining strategic inventory levels.
Bullish Highlights
- Pilbara Minerals is confident in its growth from the P680 and P1000 expansions, based on its operating performance and track record.
- The company is well-positioned for future strong pricing environments and potential shareholder rewards.
Misses
- No interim dividend was declared for H1 FY24 as a strategic move to reinforce the balance sheet.
Q&A Highlights
- The company discussed its position as the largest pure-play lithium group on the ASX and its confidence in the growth plans for P680 & P1000.
- Updates on joint venture partnerships and changes to lithium chemical slides are expected to be provided later.
Pilbara Minerals (ticker: PLS) has managed to navigate through industry changes without altering its core strategies, focusing on sustainable production and cost efficiency. The company's interim financial results reflect a strong command over its operations and a clear vision for capitalizing on future market opportunities. The mining group's commitment to expansions and strategic inventory management also illustrates its readiness to defend against market volatility and short-selling pressures. Investors and stakeholders can anticipate further updates on joint venture partnerships and detailed chemical slide changes later in the call.
InvestingPro Insights
Pilbara Minerals (ticker: PILBF) has demonstrated resilience and strategic acumen in its interim financial results for FY24. The company's robust financial health is further echoed by key metrics and insights from InvestingPro. With a market capitalization of $7.24 billion and an attractive P/E ratio of 4.53, Pilbara Minerals stands out in its sector for its financial stability and potential for growth.
InvestingPro Tips for Pilbara Minerals highlight two critical aspects of the company's financial position. Firstly, the company holds more cash than debt on its balance sheet, showcasing a strong liquidity position that can support its growth ambitions and weather potential market downturns. Secondly, the valuation of Pilbara Minerals implies a strong free cash flow yield, indicating that the company is generating a healthy amount of cash relative to its share price, a positive sign for investors looking for value.
InvestingPro Data metrics further enrich the picture of the company's financial performance. The Revenue Growth for the last twelve months as of Q4 2023 stands at an impressive 241.63%, reflecting the company's ability to scale up its operations significantly. Additionally, the Operating Income Margin for the same period is 79.01%, demonstrating Pilbara Minerals' efficiency in translating sales into profits.
For investors seeking more in-depth analysis and additional InvestingPro Tips, there are 10 more insights available on InvestingPro, which can be accessed by visiting https://www.investing.com/pro/PILBF. Remember to use the coupon code PRONEWS24 to receive an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
These data points and tips underscore the company's solid financial standing and its potential to continue thriving in the dynamic lithium market. With its strategic initiatives and strong operational metrics, Pilbara Minerals is well-equipped to maintain its growth trajectory and deliver value to its shareholders.
Full transcript - Pilbara Minerals (PILBF) Q1 2024:
Operator: Good day and thank you for standing by. Welcome to the Pilbara Minerals FY24 Interim Financial Results Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. Please note, Pilbara Minerals will only be taking one question per person with one related follow-up question permitted. [Operator Instructions] Pilbara Minerals will also take some questions from the webcast towards the end of the call. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Pilbara Minerals, Managing Director and CEO, Dale Henderson.
Dale Henderson: Thank you, Crystal. And a warm welcome to those who have joined us on the call today, in particular to our long-term shareholders. I'd like to begin by acknowledging the traditional owners on the lands in which our businesses operate, Whadjuk people of the Noongar Nation in Perth where we are undertaking this call today Nyamal and Kariyarra People where our operations are located in Pilbara. We pay our respects to their elders past and present. I'm joined today by Luke Bortoli, our CFO, Vince De Carolis, our COO and the wider team is also in the room supporting the call. We know that it's a very busy day of reporting today, so we will limit the call to 45 minutes. The focus of the presentation is of course centered on the half-year financial results. However, we will take the opportunity to recap on the progress during the half and finish with some market commentary. For this update, we'll step through a short presentation and followed by the Q&A as outlined by Crystal. As always, we look forward to your questions after the presentation. Moving to slide 3 for some opening commentary. The half to the 31st of December was a period of strong delivery for the company at a time when we saw pricing moderating downwards. For Pilbara, we're looking through this period and we will remain focused on the long-term opportunity this market presents for our shareholders. Pilbara is uniquely placed given our cost position, scale, operating track record, market understanding and balance sheet strength. We have navigated the uncertain waters of this lithium market for some time. A few highlights for the half include at the operating level, strong production volumes and since the end of the reporting period a few significant expansions to our off-take profile. As it relates to cost, given it's a ramp-up year and as flagged previously we have pre-invested in supporting some business capacity, however, we have simultaneously been driving our cost through improvements and efficiency improvements. The cost was $691 per tonne FOB for the half. As it relates to projects on track, the schedule and costs of P680 and P1000 expansions and a reminder that the production capacity for this year is back-ended, care of the P680 expansion. As it relates to chemicals, progress with the POSCO (NYSE:PKX) joint venture, of course, with the opening ceremony in the December quarter and the midstream demonstration plant moving forward. As it relates to the financials, I won't spend too much time on numbers because I don't want to steal Luke's thunder but EBITDA margin for the half of 55%. So despite pricing being softer, that's a very healthy margin. I think many businesses would long for. As it relates to the balance sheet, very healthy balance sheet at over $2.1 billion and we've taken prudent steps to further defend our strong balance sheet with some CapEx deferral and other capital preservation steps. Now moving to slide 4. We've touched on a few of the sustainability highlights for the half as it relates to safety, strong improvement in TRIFR from the prior period at 17%, reduction to 3.89 as it relates to our decarb strategy, we released our power strategy, so a meaningful outcome which sets out a pathway that we're pursuing. And as it relates to community, we've issued 12 community grants the period, supporting a number of regional community groups across important areas such as education and mental health. As it relates to our strategy, moving to slide 6, just to quickly recap on this. Our strategy is prioritized to generate the most rapid value for our shareholders and service of our vision which is to be a leader in the provision of sustainable battery materials products. In pursuit of the same, the business is wide against four strategic pillars. Firstly, the operating platform, it is the engine room of the business, driving our returns for our shareholders and stakeholders. Secondly, expanding that operating platform to meet the most of this Tier 1 assets. Thirdly, chemicals, this is about dovetailing our production to chemicals to realize additional margin for lithium unit whilst ensuring a more resilient business through downstream integration. Fourthly and a distant for diversification. Ultimately, we're looking to diversify if and when an appropriate accretive extensions identified. Moving now to Chemicals on slide 7. A reminder about different pathways on the left you a spodumene concentrate being our core business today. In the middle our midstream product which is an intermediate Lithium chemical product and the right downstream battery chemicals being hydroxide or carbonate and increasing value add moving from left to right across those products. As it stands today, our business is almost entirely weighted to upstream production, like spodumene concentrate production. And of course, we continue to build out that platform. And to this end, we have provided a couple of updated photos reference slide 8 for both the P680 and P1000, those photos there as of the 20th of February. You can see the P680 crushing and ore sorter they're on schedule and on budget targeting ramp up in the September quarter this year. P1000 expansion remains on track also schedule and budget target ramp up for the September quarter, calendar year 2025. Now moving to slide 9. Outside of the reporting period in January, we announced a significant expansion of our existing off-take agreement with Ganfeng, one of our long-standing major customers. Ganfeng, our foundational customer at Pilbara Minerals and one of the largest producers of lithium chemicals globally. They've commercialized many key process routes and lithium products used widely today and they have the customers who matter. The cemented offtakes a significant increase in the allocation to Ganfeng for some of the allocation at our discretion which preserves our ability to increase spot sales if and when we think that will create greater shareholder value. Moving to slide 10. More recently, we've also announced an extended and expanded offtake with Chengxin lithium. Chengxin are another leading lithium chemical converter with operations in China, Indonesia, Argentina and Zimbabwe. I just want to make a few more general comments about both these contract extensions to Ganfeng and Chengxin as they represent a couple of key points. Firstly, lithium demand. These extensions are material and they evidence the underlying outlook that these two major converters see for the industry. And of course, Pilbara is the same. Secondly, these agreements with Pilbara are a vote of confidence in Pilbara as of course, a preferred supplier. And thirdly, these mid-term contracts reduce short-term sales uncertainty whilst preserving our longer-term optionality regarding allocation. So we like to think we're getting the best of both rules with these couple of extensions. I'd like to add that since we announced the medium-term off takes, we have seen a marked increase in inbound inquiries from existing and new customers looking to lock in medium to long-term supply. I'll offer some more comments on the market later but at this point, I'll now hand over to Luke for a deeper dive through the half year financials. Over to you, Luke.
Luke Bortoli: Thanks, Dale and good morning to those on the call. Please turn to slide 12 of the presentation for a summary of the group's key financial metrics for the half year ended 31 December, 2023 or H1 FY24 period. There were a number of financial highlights in the H1 FY24 period, notwithstanding the impact of lower prices. As Dale mentioned, we reported profitability which was healthy with an EBITDA of $415 million and an EBITDA margin of 55%. From a cash perspective, we also reported a positive cash margin from operations pre and post ongoing CapEx. In addition, our ending cash balance was above $2.1 billion, broadly in line with December 2022 or the prior corresponding period. Turning to physicals. We reported production volume of 320,000 tonnes in H1 FY24, 4% higher than the prior corresponding period. This was achieved through higher mining and processing volumes. As previously disclosed, FY24 production volume is weighted towards the back end of the financial year, in line with the ramp-up of the P680 primary rejection facility as Dale noted. Sales volume was 306,000 tonnes in H1 FY24, 7% higher than the prior corresponding period, enabled by higher production volumes. Average realized price declined from US$4,993 per tonne in H1 FY 2023 to US$1,645 per tonne in H1 FY24, a 67% reduction. As a result of declining prices, group revenue was $757 million, 65% lower than the prior corresponding period, albeit with the benefit from some higher sales volume. As mentioned earlier, EBITDA was $415 million in H1 of FY24, a reduction of 77% on the prior corresponding period like revenue and the remainder of the P&L, the decline in EBITDA primarily reflected the impact of lower realized prices. There was a partial offset from lower total costs period-on-period driven by lower royalty expenses. Statutory profit after tax was $220 million, an 82% reduction on the prior corresponding period, reflecting the same drivers as EBITDA. Turning now to slide 13. Slide 13 provides further detail on the group's profit and loss, including the key metrics used by management to assess the performance of the business. Operating costs, excluding depreciation and amortization, improved by 17% relative to the prior corresponding period to $276 million in H1 FY24. The decline in costs reflected a continued focus on cost management as well as lower royalties due to reduced pricing. On an FOB unit operating cost basis, unit costs increased by 16% in H1 FY24 compared to H1 FY 2023 at $691 per tonne, consistent with our December quarterly. On a CIF basis, unit operating costs were $900 per tonne in H1 FY24, a 21% reduction on the prior corresponding half, primarily due to the decrease in royalty costs mentioned earlier. Turning now to slide 14. Slide 14 provides a chart which tracks our production volume, revenue, EBITDA and EBITDA margin percentage over time. On this chart, we can see that despite declining revenue driven by lower realized prices, we maintained a healthy EBITDA margin of 55% in H1 FY24. This margin contributed to maintaining our strong balance sheet and cash position. Turning now to slide 15. Slide 15 shows a summary cash flow statement for the H1 FY24 period and H1 FY 2023. As mentioned earlier, cash margin from operations measured as receipts from customers less payments for operating costs was $536 million in H1 FY24. Moving down the cash flow statement. The previously announced FY 2023 income tax catch-up payment totaling $763 million and $111 million in income tax paid relating to FY24, contributed to a net operating cash outflow of negative $319 million. In terms of investing cash flows, there was a significant increase in CapEx in H1 FY24 with payments for property, plant and equipment and mine properties of $398 million, in line with our previously stated guidance. This includes growth capital expenditure of $211 million on the P608 and P1000 expansion projects, $78 million of capitalized mine development costs or deferred stripping, $47 million of new projects and enhancements on size and $40 million of sustaining capital spend. Our net financing cash outflows were $349 million, primarily reflecting the final FY 2023 dividend payment of $421 million made in September 2023. There was also a net increase in borrowings of $126 million, mainly attributed to additional drawdowns under our government agency loan facilities for the funding of P680 project works. Turning now to slide 16. Slide 16 provides a waterfall chart representation of our H1 FY24 cash flow statement. During the H1 FY24 period, we saw a total change in cash or cash outflow of $1.2 billion, with cash declining from $3.3 billion as of 30 June, 2023 to $2.1 billion as of 31 December, 2023. The $1.2 billion decline in cash in the period largely reflected the previously announced FY 2023 income tax catch-up payment as mentioned earlier of $763 million and $421 million of dividend payments relating to FY 2023. In the absence of these two cash outflows, the change in cash in H1 FY24 will be broadly flat. As mentioned above and importantly, cash margin from operations measured as receipts from customers less payments for operating costs remained strongly positive at $536 million, reflecting the strong cash generation of the business even at today's lower spodumene prices. Importantly, cash margin from operations was ongoing capital expenditure deferred stripping and sustaining CapEx was also positive. These metrics highlight that even with the lowest spodumene prices observed in the half, the group was cash flow positive pre-growth CapEx and financing cash flows. Turning now to slide 17. The group continues to have a strong balance sheet position with net cash of $1.8 billion as at 31 December, 2023 and cash and available liquidity of $2.1 billion. As mentioned earlier, during the half, additional drawdowns were made under the group's government agency loan facilities established in February 2023 in support of P680 construction. Turning now to slide 18. Slide 18 sets out our summary balance sheet. At 31 December 2023, the group recorded net assets of $3.2 billion, relatively flat on the prior period. Turning now to slide 19. As mentioned at the December quarterly, the group's cash balance and overall balance sheet position is a competitive advantage relative to many of our peers in the lithium sector. This is particularly the case in an environment of lower spodumene prices and potentially more difficult capital rates and conditions. With a low unit cost structure and strong balance sheet position, the company is uniquely placed to withstand and capitalize on a period of lower prices that could rationalize the market. With increasing production capacity, the group is also uniquely placed to take advantage of an improvement in market conditions when the pricing cycle turns. Notwithstanding this balance sheet resiliency today, the group has increased its focus on operating cost efficiency in the ramp up to P680 and P1000 and it has also conducted a review of other non-essential spend as mentioned in the December quarterly. As a result of this review, as previously disclosed, the group has revised its FY24 capital expenditure guidance from $875 million to $975 million to a revised range of $820 million to $875 million, with a number of new projects and enhancements deferred for conservatism. This represents a reduction of $100 million at the top end of the original guidance range and $55 million at the bottom end. It's also equivalent to a reduction of one half or a third of the discretionary component of CapEx that relates to new projects and enhancements. We also note that to further preserve the group's balance sheet strength, the board has not declared an interim dividend for the H1 FY24 period. The combination of CapEx and reductions and pausing on a dividend payment results in approximately $200 million of total cash savings at the top end of the range relative to what would have been spent otherwise. These reductions will place the group in an even stronger position going forward. The group's financial strategy remains focused on P680 and P1000 expansion while seeking to reduce unit costs through that expansion as well as cash cost optimization. This will further position the company ahead of its competitors and enable it to capitalize on both downside and upside cycles in this emerging lithium sector. I'll now hand it back to Dale.
Dale Henderson: Thank you, Luke. Now moving to the markets. So slide 21. I'll touch on my commentary on four parts here. First, a little bit about the long-term outlook. Secondly, the industry landscape that is emerging in response. Third, some short-term and more current observations of the market. And lastly, how we, Pilbara Minerals, are thinking about navigating the evolution of the sector. So starting with the long-term outlook, the long-term outlook remains incredibly positive. Growth stimulants continue and other markers for long-term upward directional trend continue. Noteworthy facts of late include, of course, EV sales globally. The calendar year 2023, $13.6 million, an increase of 31% on the prior year. As it relates to China, EV sales, of course, a major part of the market. $7.8 million sold for 23, increasing 34% on the prior year. As it relates to supply chain investment, some notable transactions include with LG Chem on the 15 of December announced in US$821 million, 60,000 tons in the EMA cathode plant in the US. On the 7th of Feb, LG Chem announced US$18.6 billion cathode supply deal with General Motors (NYSE:GM). On the 11th of Feb, JSW, investing US$4.8 billion for a battery plant in India. the 18th of January, Ganfeng announced a four-year supply deal with Hyundai (OTC:HYMTF). 16th of January Northgold secured US$5 billion alone for gigabit battery expansion. It appears to go on and on. In terms of government support, these continue and some noteworthy highlights here, the 10th of November, the US government providing $3.5 billion for cell manufacturing 6th of December, European commission planning an addition of €3 billion of battery manufacturing. 13th of December, South Korean government investing US$29 billion over five years, in support of battery companies in critical minerals in Korea, 2nd of February, the German government setting up a €1 billion fund for critical raw materials investment. Now we've included the slide on slide 22 which also sort of highlight on a summary level, some of the government policy support which is, of course, helping support the uptake of EVs in addition to their organic growth and uptake of EVs more generally. And of course, EVs being a key subset and not the only demand subset. We also have mass energy storage which is harder to get a read on given the addressable market is not clear. However, the various data points we've seen are very positive to the growth in that sector as well. Now EVs, mass energy storage combined plays through to effectively a new industry that we stepping forth. Slide 23 provides an outline of the expected forecast specifically around EV market share penetration and EV-related battery demand. Probably one thing to take away from this is the dominant position that China holds for both demand currently and forecast. So I just to highlight that one. Moving to the industry landscape that is emerging in response to this new demand set being lithium battery products. I appreciate that many investors are probably familiar with this landscape. However, not all are; as such, we thought it would be helpful to provide some additional detail on this area. So moving to slide 24; this details the supply chain that is evolving specifically noting the growth for the lithium chemicals manufacturing two, cathode making and three battery manufacturing referred to as the Gigafactories What is noteworthy from this slide is, again, China, the extent to which China is the center of the lithium in supply chain today and is expected to play a major role in the future. And by extension, so will the technology and partners from this region. The other noteworthy winches the global growth potential which is expected. And as you can see, it's across the board. However, generally speaking, the existing basis of manufacturing outside of Asia do not exist today and is unlikely to assist us for some time. There will be a period of gestation, we believe. So given this evolving landscape which we see emerging on the small base, this has shaped Pilbara's actions over the last few years in three principal ways. Firstly, Pilbara's made a practice of partnering with established supply chain partners who have an established track record, know-how and supply chain relationships and which, of course, these groups see the same in Pilbara. Secondly, Pilbara has taken measured and incremental approach in entering different domiciles and downstream businesses. Pilbara's minority position with POSCO or our joint venture together in South Korea and the option step-up at Pilbara's election to increase equity speaks to this approach. The third principle that Pilbara has pursued – it has pursued has been about preserving optionality. Pilbara's preserved optionality with the sales book that retains significant tonnage allocation for calendar year 2027 and beyond thus enabling the benefits of short-term security through participating in the supply chain that exists today, whilst retaining long-term optionality such that we can scan the horizon to make sure that Pilbara's shareholders are and through Pilbara are dovetailed into the most optimal business propositions as this landscape evolves. That's a little bit about the industry landscape and how that's shaped some of our thinking. Moving to short-term observations of the current market. The insights we can offer here are, firstly, as it relates to our customers, all our customers for avoidance of data taken new product and in some cases, asking more, as it relates to pricing and over the recent while it appears to have leveled and we also note that there's been a small increase in the pricing for lithium carbonate of late. As it relates to new sales inquiries, as flagged earlier, we have seen some more activities, more inbound inquiries. And I think we've had more over the last eight weeks and we had quite some period. So great to have those inquiries coming to us. So having spoken to the long-term outlook, the industry landscape which is evolving and some of these near-term observations, what does this mean for Pilbara strategy? In short, no change to our strategy. In fact, I hope this commentary helps to explain the deliberate and careful steps we've taken over the years and what's guiding the decisions in support of our strategy. We will keep our focus trained on what accelerates value creation for our shareholders and strengthens our position that we have established. That is our operating track record, it's a low-cost producer with scale, the engine room of the business, growing that operating platform to full extent, providing production volumes and unit scale benefits at lower unit operating costs and positions the business for higher-priced environments as we've seen historically. Chemicals participation, taking a measured incremental approach with established partners with the aim of extracting more margin for lithium unit for our shareholders. And I would also add prudent management of the balance sheet that Luke spoke to, the key strength relative to others in the industry. This combination uniquely positions Pilbara, a low-cost operations, scale, operating track record and balance sheet strength times to think for better combination to best leverage this growth market. With that, we'll now move to questions. Back to you, Crystal. Thank you.
Operator: Thank you. [Operator Instructions] And our first question will come from Manav Shah from Morgan Stanley. Your line is open.
Rahul Anand: Hi, good morning. It's Rahul Anand from Morgan Stanley. Good morning, Dale and team. Look, my question is around the downstream. We had one of your peers report today that has been involved in a bit of downstream lithium production and their comments were very strongly against having a downstream strategy and that the economic rent, so to speak, in the lithium market line with the miners. So, taking that into account, I just wanted to perhaps get an update from you on how you're thinking about that downstream strategy. Is that still front of mind for you? And how do you think of the economics there? And as my follow-up, then just an update on Calix (NYSE:CALX) and when you expect first production there? Thanks.
Dale Henderson: Rahul, thanks for your questions. As it relates to downstream -- the pursuit of downstream, I fully appreciate that there's different approaches being deployed out there. And I appreciate that given the mixed results from different downstream businesses out there that creates questions around the merits of participation or not. I can't obviously speak to the specifics of others out there. But what I can speak to is the first principles approach, Pilbara has always thought through in the space. We think the right downstream proposition makes sense for two reasons. Firstly, it needs to be about the economic returns, obviously. And there will be, we think, downstream operations that will win into the future, ones who are low-cost operations to achieve the right product quality who are then able to unlock that additional margin here of the service of converting spodumene concentrate into a high-grade battery product. There is margin to be made if it's the right proposition. So, economics there. But the second benefit which I think does not get quite the attention it deserves is the merit supply chain integration. Downstream participation causes a codependence which is both important for the raw material supply and the converter further it's actually very important for their customers as it relates to the qualification of materials and ultimately, the optimization of cost and safety outcomes to achieve that aim. So, in this regard, it's different from other commodity types and to call it the commodities probably not necessarily a good characterization because of this factor. So, all that being said, we will judge propositions on its merits. It's part of the reason we've taken a staged an incremental approach. And -- but we think there is opportunity there. So, we'll continue to pursue that. But we will, as I say, at this stage, is incremental. As it relates to tailings, that project is moving forward and we're on track with that one. Does that answer your questions, Rahul?
Rahul Anand: Yes, it does. And I know you press for time, so I'll pass it on Quebec. Thanks.
Dale Henderson: Thanks, Rahul.
Operator: Thank you. And our next question will come from Levi Spry from UBS. Your line is open.
Levi Spry: Good day Dale. Good morning team. Just a quick question, I guess, getting your views on the domestic Chinese supply sort of situation. Have you got any updates for us on what you're hearing there? We've seen the news wise around CATL, potentially having some disruptions and then potentially some environmental inspections, maybe disrupting some of the supply. I guess, have you got some views, what's your latest on the -- I guess, the supply and cost structures of that part of the supply side?
Dale Henderson: Yes. Thanks, Levi. Yes, as it relates to that particular piece of news around the closure or the pause of that particular operation. I don't have any unique insight around that. I do find a bit of news very interesting, because if it is to be true, it signals effectively a swing price potentially for spodumene, i.e., a price which knocks out a little bit of low supply and of course, being owned by CATL being depending which you're the largest batch manufacturing globally, if there's ever a group who could keep a mine running it would be CATL. So certainly, I guess sort of in some ways, a positive signal but no, I don't have any particular unique insight there, Levi.
Levi Spry: No Problems. Thanks, Dale.
Dale Henderson: Thanks, Levi.
Operator: Thank you. And our next question will come from Alex Papaioanou from Citi. Your line is open.
Alex Papaioanou: Hi, Dale. One of your peers today noted that they may pull back volumes of one of their build expansions, pending market conditions. Are you still planning to bring P1000 online as soon as you can? And is there any change in the thinking there?
Dale Henderson: Yes, Alex. No change in the thinking as outlined in our commentary intentive to carry on with the expansions, noting, of course, they are in mid-flight but also noting that the delivery of these expansions supports a lower unit cost and of course, we have -- we studied the landscape in terms of the competition and we're feeling fairly comfortable about the ultimate cost position that we are pursuing. And look at other groups are looking to come out of the market, that's their decision and I completely respect that. Thanks, Alex. Do you have a follow-up then?
Alex Papaioanou: Yes. Just on costs spend, given that your G&A is now annualizing at around $60 million per annum, should we think about that being the common number going forward?
Luke Bortoli: Yes, I can take that, Alex. Thanks for the question. Yes, from this point forward, we don't foresee that there would be any material uplift in the G&A and broader exploration and feasibility study cost base. I think it's fair to say that there's been a level of investment required to mature the business from what was 12 months ago, a very small corporate office that was playing catch-up in respect to the size of the company and the size of the operation. But from this point forward, we would see it as relatively stable.
Alex Papaioanou: Great. Thanks. I'll pass it on.
Operator: Thank you. Our next question will come from Hugo Nicolaci from Goldman Sachs. Your line is open.
Hugo Nicolaci: Morning, Dale and Luke. Thanks for the update this morning. Just one on spot train pricing. If I go back to your full year results in August last year, you gave production guidance of both 5.2% and 5.7% kind of hedging around a lower pricing environment, meaning you need to reduce the -- or increase the grade of your product. Where are you at now? What do you think in the current pricing environment? Are you seeing existing customers or any of your recent offtakes start to preference material towards that higher end or – and maybe you're seeing a shift to more than just a linear pricing discount, if so? Thanks.
Dale Henderson: No change in the product growth strategy. We're still targeting around 5.2 type level. As to any request or pressures to change, the answer is no other than every converter always would prefer the highest grade because it makes life pretty slightly easier but no push or pressure on Pilbara to shift on product grade. And as it relates to any penalty or discount, I can confirm, no, it was just linear and I don't foresee any change in the current market. Do you have any follow-up?
Hugo Nicolaci: If I can squeeze in a follow-up. Just on your CapEx piece, maybe for Luke. Can you just elaborate a bit more on the moving parts of CapEx still expected in FY24 around the order? And maybe any indication of what you're expecting around the tailings facility and other spend into FY 2025?
Luke Bortoli: I'll refer you back to the CapEx guidance that we previously provided in aggregate, I think it's fair to assume that we are tracking to that guidance across all the categories that we specifically outlined. We don't go into the detail that you're looking into.
Hugo Nicolaci: Thank you.
Operator: Thank you. Our next question will come from Kaan Peker from RBC. Your line is open.
Kaan Peker: Good morning, Dale and team. Two questions from me. Just – first one is on sales and production. Given that we are mostly 3Q, how is sales tracking versus production for this quarter? Thanks.
Dale Henderson: Good morning, Kaan. Obviously, we'll update as part of the March quarterly release. We're only halfway through the quarter but happy with progress. Things are coming along.
Kaan Peker: Matching -- sales is tracking with production?
Dale Henderson: So yes, so there's a, I guess, a sales strategy philosophy. We have always worked on the basis of not stockpiling inventory moving finished goods and no change to that strategy. Occasionally, there's some depths and flows in inventory as a function of shipping timing, particularly over that quarter cut-off, sometimes we get a little bit of inventory at those times but nothing other than that, no. No, there's no strategy around stockpiling finished goods or anything we try and match our production closely with sales to keep moving it as quickly as we can from the mine to the customer.
Kaan Peker: Sure. Understood. And second one is I just noticed that the realm inventories have been increasing, I mean, is this a strategy to reduce risk with the P680 ramp-up?
Dale Henderson: I'll offer comments and potentially [indiscernible] way as it relates to wrong strategy, what drives the wrong strategy can be partly around, obviously, volumes are required for the mine throughput and of course, the higher throughput we need high-end feed volumes. That's part A. But the other aspect of wrong strategy is a function of managing grade and mineral variability as it flows from the mine. So that that's very much driven by our mine plan and we are in the development so that does change over time as a function of where you are in the pit development. And the team we've got, sort of, things through how to optimize those feed sources for ultimately optimal recovery which, of course, plays through to lower unit costs. This is okay with that one. So I want to get that one. Yes. Thanks.
Unidentified Company Representative: Okay. So we'll go listed some questions from the webcast now. First question is how can we manage short selling to which is taking the share price?
Dale Henderson: I guess the best defense to short-selling is raw -- control. And that's always been our objective to run the business well and deliver on our promises. So that's the most important thing we focus on. Obviously, we can't control pricing in the market evolution but we can control what we control. So that's typically the best defense. But as it relates to the short position in Pilbara, I'd just like to highlight a couple of aspects around us is being the largest pure-play lithium group on the ASX, we are one of the few instruments available for those who want to bet on the market dynamics. So that is an aspect in what years those and are choosing to short or more choosing to show it based on where they see the market; that's one aspect. And also add, we're not alone -- when you look to the other markets and some of the other lithium companies listed on other exchanges but some of them have some quite high short position. So again, kind of reflecting that dynamic. But yes, as I said in the past, always holding a short position. But in many respects, are pretty brave because given that this industry is taking shape quite rapidly, what we've seen is it does -- pricing does move quickly and it does shift up very quickly and that -- maybe that happens, maybe it doesn't but if it does happen, that could catch up some of these people who are betting on downward movement. Only time will tell. But for us, we'll carry on delivering our promises.
Unidentified Company Representative: Okay. Thank you. The next question is when can we expect to hear something about the JV partnerships from the P1000 tonnage.
Dale Henderson: Later in this call, we'll look to update on that one.
Unidentified Company Representative: Okay. Next question, someone picks up the changes to the chemical slide where we've changed some of the numbers from a lithium metal -- just want to have an explanation on why some of those numbers changed?
Dale Henderson: Sure. Sure. The other reason. It's not so much a case of the numbers being changed. It's more a case of representing the content of lithium using different units. And we've done this quite deliberately to make it a bit clearer. The percentage of lithium metal versus lithium hydroxide or lithium oxide -- the percentage varies depending which of those compounds you're talking about. So what we've chosen to do is to provide that these updates are all about making it clearer, the difference of lithium concentration that you get across those different products set. And there's a few footnotes there which I speak to those conversions.
Unidentified Company Representative: Okay. Thank you. Some of your peers are curtailing supply. What gives you the confidence to maintain growth from P680 & P1000?
Dale Henderson: What gives us confidence is our operating performance and track record and unit cost performance against the other competitors in the landscape. This is the principal source of confidence. That plus the Groundswell of positive news but I mentioned earlier that we see us supporting ultimately the formation of an incredible industry. We Pilbara, one of be positioned to enjoy the benefits of future strong pricing environments, as we did historically with the Altura Acquisition.; and our shareholders are well rewarded as a function of being positioned for that point of the market and we're hopeful for Déjà vu [ph]; time will tell. Okay, I think that's a wrap. I appreciate all for listening and to jump on to call. Thank you all for your time and we look forward to updating in the due course as always. Thank you very much.
Operator: Thank you. This concludes today's conference call. Thank you for your participation. You may now disconnect. Have a wonderful day.
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