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IGO Ltd
Earnings Call Analysis
Q4-2024 Analysis
IGO Ltd
In a challenging economic environment for lithium, where prices are subdued and demand projections are uncertain, IGO Limited is demonstrating resilience. The global market for lithium, particularly in Western regions, is facing skepticism, while in China, momentum continues as electric vehicle (EV) adoption grows. IGO’s focus remains on capitalizing on its core asset, Greenbushes, which is positioned at the lower end of the cost curve, ensuring strong margins despite market volatility.
Greenbushes, IGO's flagship asset, has returned to full production capacity, achieving an impressive EBITDA margin of 68% for the latest quarter, which contributed to a remarkable total cash generation of $760 million over the full financial year. Looking ahead, production guidance for FY '25 is optimistic, with a midpoint slightly above the previous year's figures. Additionally, operating costs are expected to range between $320 to $380 per tonne, providing a clear financial roadmap in the upcoming year.
The appointment of Rob Telford as the new CEO of Talison (the joint venture responsible for Greenbushes) brings a wealth of experience aimed at optimizing the mine’s performance. Telford's strong technical background and history with BHP is expected to drive operational excellence and enhance production outcomes. Furthermore, the company is progressing with the construction of CGP3, anticipated to commence commissioning in the third quarter of FY '25, despite some initial delays affecting both costs and timing.
The Nova mine, another integral part of IGO's portfolio, performed well by the end of the year, successfully managing to stay within cost guidance despite facing production hurdles in previous quarters. However, as the mine approaches its end of life, management is aware of the diminishing optionality and is focused on maximizing the remaining value through careful management of production schedules and costs. Guidance for FY '25 reflects a careful balance of these factors.
As part of its ongoing strategy, IGO is emphasizing cost management across its operations. For FY '25, capital expenditure guidance totals $900 million, reflecting growth-related investments, particularly in CGP3, where prior inflation and project challenges have been acknowledged. IGO's executive team is cautious and focused on optimizing existing operations before committing to new large-scale investments, underscoring a disciplined approach to managing financial resources.
Looking ahead, IGO is investing in exploration to potentially expand its resource base. The exploration budget for FY '25 is set at $50 million to $60 million, indicating a strategic focus on testing existing tenements for viable resource prospects. This exploration initiative aims to position the company favorably for long-term growth and resource sustainability amidst an evolving lithium landscape.
At the Kwinana processing facility, incremental improvements are planned as IGO continues to enhance operational stability. These adjustments are aimed at aligning sales with production more effectively, as the company works to resolve inventory backlogs and meet customer demands. Significant capital allocations are set for upgrading equipment and processes to improve efficiency and output in the coming quarters.
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[Audio Gap]
[Operator Instructions]
I would now like to hand the conference over to Mr. Ivan Vella, Managing Director and Chief Executive Officer. Please go ahead.
Thank you. Good morning. Welcome. Thanks for joining us everyone. Kath Bozanic is joining me with -- on this session again today. I'm going to try and run through the highlights quite quickly and just leave more time for the Q&A. There's a couple of slides we'll step through. First of all, on safety, look, the last quarter, we've seen a continued improvement in performance, which is encouraging. There's still plenty to do. I guess, I feel the momentum and the direction of improvement is good when we look back over the last financial year, but still at a TRIFR of 10.4 is still not where we need to be. And it's great to see the focus across the team, across the business on safety.
Our leading indicators in regards to safety interactions and leadership engagement, the general focus across the business is continuing to lift and that gives me a lot of encouragement and a sense that we're on the right track, but need to keep working at it. We've also been focusing heavily on the psychosocial safety of our people and I'll talk more to the changes in our corporate structure and exploration later in the call. But as you can appreciate, a period of a lot of change, a lot of uncertainty within the business and also within the broader market that thinking about the wellness and the psychosocial safety of our people is very important.
Before I dive into Greenbushes, I thought I'd just share a few reflections on the market, which probably isn't going to add a whole lot across the call. I think that we would all agree there's a lot of uncertainty, a lot of things we don't know about the world of lithium. It's still very volatile and obviously, prices are quite subdued at the moment. There's a fairly high level of pessimism across the market, both on the demand side, we see lots of media and commentary around EVs. My observation is that in China, there's still a pretty solid momentum and progress and strong take-up. There's obviously quite a lot of focus on that from the government in the way it's been incentivized equally. There's a great product being offered to consumers there in the EVs and a great price point.
You then contrast that with the Western markets where there's a lot more uncertainty and more questions. And obviously, the political situation in different environments is playing into that as well. So, not much signal, real tight signals for direction on demand overall. And I guess, we see that on the supply side as well. There's a mixed set of stories coming through around projects that are progressing, some that aren't. And overall, still a fairly high degree of uncertainty. Our view continues to be that over the medium term, supply will be more challenged than a lot would hold out. And of course, we want to continue to focus on our asset Greenbushes, which is right at the bottom of the cost curve and continue to, I guess, get the very best from and help it with its performance.
Let's talk through Greenbushes briefly. I think some real highlights from the quarter. Clearly, it's great to see it back to full production, the other 200,000 tonne sale that we talked about in the last quarters, a good outcome and I think removed any constraints there from production. It's nice to see the challenges of Q1 and the uncertainty there unraveled and put us back on a path of full production. The EBITDA margins for the June quarter were just shy of 68%, which is fabulous in this kind of market and 85% across the full financial year. It just shows you the incredible strength of this asset. That translated to some good cash generation and dividends that flowed through to IGO, totaling $760 million over the full financial year, $159 million for the quarter.
Looking into FY '25, we got a new CEO for Talison coming, Rob Telford, who some of you, I'm sure, will know, ex-BHP stunning career, very, very strong technical background. He has a pedigree around operating excellence and improving mines across that business in his career. He's got extensive experience. He was the Global Head of Safety -- Health and Safety for BHP at one point as well. He comes very motivated to make the shift and to, I guess, bring all of his experience to bear as he helps to optimize and lift the performance of Greenbushes.
We're also continuing our construction of CGP3, which is the next step of growth for Greenbushes. We've had, as you know, some early delays on the piling, which added some time and cost. And beyond that, we're still progressing towards or expecting our commissioning to commence in the third quarter of next year. From a guidance point of view, we expect Greenbushes to continue to run unconstrained through FY '25. The midpoint of our production guidance is just a little bit higher than where we finished in FY '24 and costs have guided between [ $320 and $380 ] per tonne.
On Kwinana, look, a good quarter, a better quarter, maybe not good, a better quarter, certainly some improvement. The team is focusing very hard on operational stability and control and doing their best to manage the asset as it is until the shutdown in the last quarter of this year. That's where we will expect to make some more material changes to the way that the assets configure and lift performance again. The production of the battery grade material progresses and I think that's very stable and something that we can depend on now. And the sales have started to flow as well, which is good. We need to work through some of the backlog of the inventory there, but it's nice to see our customers taking that product.
A couple of comments on Nova, which had a really strong finish to the year. They had a tough last quarter in or quarter prior. This quarter, they really came home well and finished the year just a little below guidance on tonnes, pulled in their cost guidance. And overall, this is a mine that's obviously delivered very well for IGO over the years. It is getting towards its end of life and the optionality in that mine is certainly or less and more constrained now. We don't have the open pathways and schedule that we've had in the past. So, we're very conscious of that. And our guidance for the financial year '25 reflects that. We think that we need to be quite attentive to that schedule and make sure that we get the very best out of the asset.
Equally, we're working hard on our costs across Nova to make sure that they're trended and managed in alignment with our production. The team at site doing a fabulous job. I was there last week, spent a few days with them, went underground, went [ through the mill ] again and performing well, doing a fabulous so and I have a lot of confidence that they'll manage this much more complex phase of the mine through to closure in a couple of years time.
Forrestania, so we see that's obviously much closer now. It's got a matter of months to go effectively. We expect that we'll move that into care and maintenance by the end of the year. And we just recently had another seismic event. This is not unusual for a mine of that depth and that age. And that definitely affected some of our planned schedule on the stopes and the tonnes that we can pull out. These are the, I guess, the normal challenges that you get when you're nearing the end of life of a mine. We'll manage that closely. The cash position is still strong given the hedge that we have in place and we continue to focus on our South Ironcap exploration. There's some good potential there and something that makes a lot of sense given the infrastructure base that we've got in place.
On exploration, we've been working through that broader business review that I signed posted last quarter. That's progressing at pace. Suzanne is our GM, Exploration, has done a fabulous job working through an end-to-end rethink of how we approach our exploration. We've got, as I've said before, fantastic ingredients in terms of our tenement and landholding belt-scale positions in very prospective ground, fantastic capability in our team, just deep technical capability across all the disciplines that we need, access to incredible range of data that underpins our work. And we're now just rationalizing that program of work, the portfolio that we focus on and directing our attention on to the areas of our most prospective to generate value.
Our guidance for FY '25 takes our budget down to $50 million to $60 million. But ultimately, that's going to trend down towards a target run rate for the following year of less than $50 million. And that's really about making sure we manage all of the commitments across that tenement -- those tenements and our position to make sure that we've gone and tested each of those as we unwind some of that portfolio. I'll also note the impairment that we announced a few weeks ago, $275 million to $295 million against our exploration portfolio and that's part of this rationalization and review that's going on that focused on predominantly on Silver Knight, Mt Goode and a range of other largely nickel-related assets in our portfolio.
I won't go through the guidance slide, which I sort of touched on much of this as I've gone through it, but we can come back to that in Q&A as you need to. Maybe just to sum up, and I wanted to sort of take us back to the 5 priorities that I've talked about. I'm now just over 6 months into the role and these 5 priorities, I think, really stand well and we're making good progress against them. Firstly, on safety and sustainability. We continue that focus on safety. And I think, of course, it's a journey, but there's a good momentum and direction of improvement there.
Through this period, and I'll talk more to the changes, we're also very focused on our culture and that's something that IGO has been well regarded and recognized for. We're going through a lot of change affecting our people and that's very difficult. It's so hard hearing from people in our business where they're leaving our business that they deeply connected with IGO and they're not necessarily worried about finding another job. They're worried about not being part of IGO. And that's heartbreaking to hear, but equally, it speaks to the culture that we built and what we need to reinforce and not lose sight of through this period of change. And of course, that has a very strong link to safety performance across the business.
Secondly, on Greenbushes, I've talked about our focus there working closely with our joint venture partners. We're very aligned on that future for Greenbushes. Everyone is equally committed to the success and performance of that asset, driving efficiencies, productivity and very careful allocation of our growth capital. It is clearly the best place we can allocate capital by a long shot. There is a lot of potential there. And we believe that the new management under Rob's leadership will absolutely make a standout difference. He'll bring fresh eyes, fresh experience that deep pedigree from his time in BHP and help us lift the business to the next level.
Kwinana, look, the big focus is on that shutdown. The team is preparing well for that, getting all of the materials and equipment in place. That will be a significant milestone for Kwinana and will tell us the potential of that asset. It is good to see in the intervening period that they manage very closely on their day-to-day operating performance. Nickel, I've talked about really the priority there is managing our cash and our performance from safe production at Nova and then taking Forrestania through to care and maintenance as quickly as possible.
And then lastly, I talked about preparing for growth and that really is about reviewing our business top to tail. I've sort of sign posted some of this in my prior calls. The focus on getting the right capability, the right strategy and the right focus across our business is key. We are finalizing the exploration business review. That's progressed well. We've gone through a significant corporate review looking at our operating model and our org structure. That's well progressed as well. We've been working through the impairments of different assets across our balance sheet in exploration as we rationalize our portfolio. And as you know, we're working through and well progressed on a significant strategy refresh as well, which has taken a very deep dive into the commodities that we're focused on in the battery metals sector.
So, all of this significant work all in parallel, which has been tough on the team. They've done a great job to steer through that. And I feel very confident with where we're getting to. We've got new ELT members joining. Brett just started last week and it's great to have him on-board. Marie comes in a few weeks' time. She's excited about that as well. And I think both will bring fantastic fresh new energy and experience to the team. And with that new strategy allow us to look forward with a lot of confidence where we take IGO in its next chapter.
The last point I wanted to note was that our quarterly reporting in the spirit of simplifying our business, which we're doing from top to tail, we're also going to simplify that and you'll see next quarter a recut and reshaped and much simplified quarterly report, really focused on our operations and our operating performance and separating that from more of the detailed financial results that we've tended to put in the past.
With that, I'm going to -- as I go 15 minutes, probably a bit longer than I'd hoped, but anyway, let's throw it open to Q&A and tackle the questions you've got.
[Operator Instructions] Your first question comes from Rahul Anand from Morgan Stanley.
Two questions from me. First one, perhaps on Nova, seems to be a bit of a drop-off in production into next year, at least versus our forecast and consensus, which I think were informed by some of the slide presentations in the past. I just wanted to check in on a few things. I mean, is this a bit of a change in the plan to preserve mine life? Are you still expecting mine life to be around that FY '27 mark? And how you're thinking about grades till the end of mine life? That's the first one on Nova. I'll come back with a second on Greenbushes.
Raul, yes, look, thank you. Great question. I'm sure it's on everyone's mind. And look, I haven't been here to sort of be part of the calls and the conversations in the past. This is -- there is no change in the plan. From my point of view, the teams basically run the stope sequence and schedule. And this is what basically pops out in terms of production. Grades are reasonably flat. There's nothing material that we're expecting in terms of change on that. So ultimately, this is really about just that sequence and making sure that we've got a reliable and predictable production plan through this year. So yes, I don't know, it helps you much.
Basically, flattish production up to FY '27, is...
Yes, it will continue. It will dip off at the end naturally, right, the tale of any mine as you run down to the end, we'll start to dip. But yes, that time frame is still the plan. We can see the stope sequence right to the end and subject to seismicity or other issues that come up, which can happen, we have pretty good confidence in our production plan right through to the end now.
Look, my question on Greenbushes then, around the CapEx, obviously, the $900 million number for next year, just wanted to understand, I mean, has there been inflation in the CGP3 related CapEx? Or we're talking about pre-strip requirements seems to be quite sizable. I mean, is this the point where we start to have a bit of congruence between the mine plan that was put out by Albemarle versus what was put out by Tianqi? I mean if you can help me square the circle on the CapEx for next year, please?
Yes. Look, let me make a few comments, and Kath can add to it as needed. The CapEx, if I talk about the big bites, obviously CGP3 is a key piece in there. There's work on tailings as well, so, a new tailings facility that we're expanding there. Water as well and pre-strip, which you've already mentioned. The other piece that's probably not on your mind is some land purchases. When we think about our waste management, waste dumps across the site. So -- there's some in there which are one-offs, of course, and through growth CapEx and there's some which like tailings and stripping which are part of the business. Now, they will go up and down. You know that with Kapanga coming, we've obviously got some elevated strip in parts of the mine life. But I don't see this as something that says, well, you draw a straight line across our CapEx going forward at that level.
So, I mean has there been an increase in the cost for CGP3, I guess, because I wouldn't go back to the acquisition presentation because that $500 million to $550 million number was probably ignoring the inflation that was going to come through the years? But I mean, how much has CGP3 ended up costing in the end, if you can provide us a ballpark on that?
Yes. Look, I can't share that. I mean our joint venture partners are all party to this and we're not open to sharing all that detail at this point for each individual projects. But I mean, clearly, there has been cost inflation. WA has seen that across the board. And I also called out the initial impacts of the piling challenges they had at the start of the project, which both affected the schedule to some degree and the costs. So, there's growth in rates, but there's also been some change in scope as well due to that.
Thank you. Your next question comes from Jon Bishop from Jarden Group.
Just on your guidance for Greenbushes, you've given sort of a broader range than what you've done in previous years. Can I get some context as to the drivers there?
Okay. Thanks, John. Look, the midpoint is just above where we're at now. There's certainly an opportunity as we optimize and stabilize CGP2 and the tailings repurposing or retreatment facilities to drive more production. We've got a plan from Talison. That's what we sort of used to drive our guidance, but there's certainly upside opportunity on that. So, I wanted to broaden that range until we get a better sense. As we know more information from them, we can always tighten that.
And possibly interrelated, you talked about China versus Rest of World signals. I mean just using rudimentary math of a [ 0.75 ] to 1 conversion at current chemical prices at the moment, looks like conversion costs would need to be sort of below USD 4,000 a tonne to make a margin at current prices. Are you seeing any changes in joint venture behaviors, particularly from an offtake perspective?
That's -- so on your math, that's assuming that you don't count the margin you make on the spodumene then. So, if you roll at $7,000 for your spot as a cost and then $4,000 that gets you into the territory. Is that what you mean, Jon?
Yes.
Yes. So, sure. Yes. Look, I mean, I think that's the whole world thing. Converters are under pressure, right? There's plenty of people who are finding it difficult to make a lot of money at this price point, even the people who are converting that industry standard, which what we would see is $3,000 to $3,500 is probably the leading practice in the industry and maybe $4,000 to $5,000 for those that are still refining their processes in that range with spodumene at the level it is, there's not too many people making money. Of course, what you then call out is, of course, at that point, we're still making EBITDA margin in the mid-60s.
Yes. I guess where I'm getting to is are you seeing any change in your partners, particularly given their vertical integration around offtake behavior?
No.
Your next question comes from Kate McCutcheon from Citi.
You announced that cash sweep out of TLEA in June. How much cash sits in that JV at the end of June? I think from the last disclosures, it would imply there's over a couple of hundred million there. So, I just want to check my math there. And how do we think about timing on when that suite might normalize, i.e., that cash consistently gets swept across and maybe that ties into a train to FID decision, if you can talk through that, please?
Yes. The cash balance has come down considerably with the dividends that have been paid, but also there was quite a large tax bill that was paid out of Greenbushes. So, it's normalized to a fair level, which we're confident with sustainable level going forward. When we put out our annual report, we'll do the summary that we've done in the past in the next 2 or 3 weeks, which will give you a little bit more detail. Across the 2 businesses, it's in the order of about $200 million cash being held. So that probably gives you a bit of an indication around where that balance is at the moment. It will be a bit lumpy going forward based on where our CapEx is and what we need to retain from that perspective. In respect of Train 2, it's in FEED process at the moment that would be coming out or being provided to the shareholders and joint venture partners late this year and FEED will follow that. And we will do a very robust review of that in terms of timing and approvals.
And I'll maybe just to add to that, Kath, it's a good summary. Clearly, we're going to stress test that economically very thoughtfully, one on the performance and the economics of Train 1. Two, albeit that half of Train 2 is built. That still doesn't mean to say it's a free kick. It does give us some optionality, but it does need to pass the hurdles and the test for capital allocation and it's a very, very difficult industry. It's highly competitive. There's a lot of capacity that's being built in China. Those refiners, converters are making very limited margins. So, we're very close to that. We're aware of it. We will stress test that very thoughtfully and make sure as we look at the FEED, we have a very clear view of the economics and the potential of it in the market.
And then a quick one, your nickel guidance, what byproduct pricing have you assumed maybe for copper?
Sorry, what byproduct?
Yes, correct. What copper pricing have you assumed in your guidance for Nova for your cash costs?
As we always do, Kate, it's consensus. I don't have the exact sense on me at this present moment. But consensus is what we utilize.
Okay, cool. And then when you're re-cutting your quarterly, if we can put back in the cash flow without waterfalls, that would be excellent.
Okay. Thanks for the feedback. The problem is, I guess, copper consensus seems to be changing, doesn't it?
Sorry, the cash flow waterfall charts.
No, no, I know. Just having a laugh at the copper consensus. That's all. It's hard to keep up with all the AI.
Thank you. Your next question comes from Hugo Nicolaci from Goldman Sachs.
One on Greenbushes, you've noted that maximizing the value at Greenbushes is going to be part of the strategic review. And I appreciate we'll get more color on that one in August. But at a higher level, if I look at it, the JV is already looking to implement ore sorting across a number of the plants at the site level. I mean, do you think that extending the TRP with some of those optimizations could potentially push out the need to do CGP4 and you could potentially get the same volume out of that optimization? And then I'll come back with the second.
Yes. I mean great question, Hugo. Absolutely. The asset we have at the TRP, obviously, absent the grinding capacity you would need isn't part of the plant and how we repurpose and we think that's got to be part of the broader optimization. The other point which you're calling out is how do you get more out of the existing assets. We've got 2 significant processing assets there with CGP1 and 2 and then soon, 3. The recoveries are still not where they need to be. We know that. The throughput improvements and potential is another area of focus. So, for me and I guess the worrying I have is get the very, very best out of your existing assets before you sign up a bunch of capital for new assets. That's certainly going to be my bias. As I look at those investment decisions with the other joint venture partners, I suspect that will be of the same mind.
But what we've got to do is bring in the best thinking to help us make sure we've got that potential being realized step by step. I think Rob Telford is going to be a huge part of that with his background. And making sure that we've squeezed every drip we can out of those existing processing facilities before we just jump to a new investment decision. It's not to say that, that CGP4 in itself doesn't have value. We need to think about that in light of the broader market as well, though. And as I've called out at the top of the call, there's so much uncertainty and unknowns, we just need to be really thoughtful and careful about those kind of big capital decisions.
And then just one on Kwinana, also called out $80 million to $100 million spend on those Train 1 improvements. Can you maybe give more color on what those improvements for the December quarter are and what level of performance you expect them to deliver at this stage?
Yes. Look, Hugo, I mean I'm not going to give you a number unfortunately. I know you'd love it to give you specifics, I want to set the team up on that basis. But they're in the back end of the plant in the hydromet phase or section of the plant. I'll give you an example, a portable centrifuge or an extra centrifuge separating the lithium crystals as they start to form. There's a new piece of equipment, there's modifications as well. There's also a gas treatment facility that we're putting in that will go in post the shut, but separate stand-alone piece of work, which is happening in Q1. So that capital that we've guided on cover the full financial year. It's not all being consumed in that shut-in in Q4 this year. Some of that will run, in fact, a fair chunk of it will also run into the second half of this financial year.
And just to clarify that, I mean, is that kind of most of what you expect to have left in terms of train on rectification or is this another step and maybe there will be another significant leak of rectifications in FY '26?
Well, yes, great question. Don't know. It's still too early to tell. I'm asking that question as well. So, the team has got a clear view of what they need to do for this job and the modifications and improvements they're expecting. We've got the gas treatment facility to finalize that the foundations are done. We're waiting on some of the equipment to come through and then that will be installed. There are the things we need to do beyond that, which they're anticipating and planning for, hence the guidance. But can I give you a runway beyond that into FY '26? No, not yet. That is certainly something I'm eagerly awaiting.
Thank you. Your next question comes from Tim Hoff from Canaccord.
I was just wondering if we could get some -- an idea of what care and maintenance costs might be for Cosmos and Forrestania over the course of the next year?
Okay. Yes, sure, Tim. I think 12% to 15% is what we've guided for Cosmos and have we given a number on Forrestania, yet.
No, we haven't given a number, but it will be less than the Cosmos because we'll be actually flooding the mines, which saves us quite a bit on energy.
Yes, it's quite -- I mean, Tim, I guess, probably the context that's helpful is it's a very different approach. Care and maintenance is, I guess, about keeping our assets in a healthy position at Cosmos and we're continuing to work on the study and looking at the mineralization. There's some Brownfield exploration there going on across that property. For Forrestania, it's a very different context where those mines will ultimately close and we don't have to maintain them.
And just around Forrestania, are there any options on that for monetizing the asset, realizing there's a few gold bits and pieces around the area? Has there been any approaches on that one?
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Perhaps with the debt at Greenbushes, was that [ 1.55 ] drawn in the end? Or is that still undrawn.
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Thank you. Your next question comes from Daniel Morgan from Barrenjoey.
Just on the Kwinana assets, were there any net realizable value changes embedded in the Kwinana result? And also, if you could just touch on the sales outlook of that. When will we have sales roughly aligned with production?
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And second question just relates to the relationships with JV partners and also the beefing up of your executive team. Just want to dive and if you could touch on when you started, you wanted to improve the relationships with JV partners and you've also beefed up the executive team. Just wondering how that's going to -- how those 2 might relate and how embedded you might be in helping to optimize these assets for the JV partners?
[Audio Gap] preeminent and fantastic player in the lithium industry and they don't know mining in depth and I'm sitting on the board of Winfield now and much more involved in Greenbushes. It's great seeing the 3 different shareholders or joint venture partners they're working together each bringing their strengths to try and build and optimize that business. And I think this is where IGO can bring more and more value to the table with our mining depth.
We talked about our new ELT members. So, Brett clearly brings real depth in sales and marketing in commodities, a number of commodities across Asia and China. He knows China very well, having lived and worked there several times through his career and he's got that broader commercial and corporate development background. And then Marie brings real operating pedigree and we'll get very involved with the work at Greenbushes and Talison supporting the team, supporting, [indiscernible] ramps up. They know each other well from their past and again, doing what we can to bring more mining pedigree and support to the optimization of Greenbushes.
Thank you. Your next question comes from Kaan Peker from RBC.
Two questions from me. The first one is on the nickel assets. There's comments around nickel concentrate for domestic delivery being directed for exports. Can you give a bit more detail around that?
Yes. Yes, I can. We deliver to Nickel West in Kambalda, but we were asked to do a delivery, export [Technical Difficulty] process more during the last couple of months. And so we delivered down to Esperance for a shipment, which is, I think, imminently going if it didn't go away in the last day or so.
So, I assume that's got to do with take-or-pay commitments with Nickel West?
I wouldn't say take-or-pay, but under our contractual arrangements, they can ask us to deliver to a different location.
And how much of your product is that? And I assume that's the same payabilities for Nova?
Yes. We don't really talk to commercial arrangements, but it is the same payabilities as what we had in the Kambalda deliveries.
And the percentage of your product that can be asked to be redirected?
It's -- well, they can redirect all of it, should they choose and under the new arrangements, we will be exporting.
And who pays for the transportation difference?
It's your standard. There's a freight differential that gets -- is in the contract that gets dealt with.
So that's IGO or BHP?
It's BHP, because the freight differential is at their risk.
And maybe just a second one on the TLEA cash sweep. If Windfield hadn't restructured its JV debt, so, i.e., you got more debt on the books that pay for CapEx. Would that dividend been as large?
Look, I think -- your -- you can't take a point in time to assess that. We'd accrued quite a lot of cash. Windfield, Talison accrued quite a lot of cash in the lead up to that dividend payment. It was within a judgment of what we need to look forward for our CapEx requirements, what do we need in terms of buffer and with a view on the market and the realization for the production that we're producing and taking a perspective on that, we then released the cash that we could. So, there's a number of factors that came into that, including the 200,000 tonne sale to clear that and open production fully and equally pull those receipts in. So yes, it's not as simple as saying, well, the debt equals the dividend.
Thank you. Your next question comes from Lyndon Fagan from JPMorgan.
Just with the CapEx guidance for Greenbushes, I'm wondering if you're able to separate sustaining and growth for me? I'm just a bit unclear on how to think about sustaining CapEx going forward considering how big that number is.
Yes. Look, great question. I understand the driver behind it. It's not something that we can share given our JV there to separate that. We don't guide on that split out of CapEx, unfortunately.
Is there something within the kind of scope of the operations that may have affected the sustaining piece? If you can't talk to a number, just to try and understand a bit more about what's happening on the ground.
So, stripping will obviously vary and particularly when we've got new parts of the pit we're opening. We have, I mentioned, purchasing land to give us more access for waste dumps. So that's not a -- is that growth or is that sustaining, probably hard to judge. How you want to assess that. So, there's a few things in there that are not normal. As I mentioned earlier, when I went through the CapEx. Obviously, CGP3 is playing growth and that runs through our tailings facility. So that's in flight at the moment and some of our water management as well.
I think some of these things you can argue their growth because they underpin the growth. And without them, you don't have the basis to continue to grow and deliver CGP3 and CGP4 and so on. I know I'm not giving you clear specific direct answers on sustaining CapEx. But it's also an asset where probably the other point I'd make is we've now ramped up CGP1 and 2, they're running at full rate. And we've got a much bigger mining function across the business that we still need to get to a place where that's optimized and stabilized. So, far from a place of being able to point to a long run or stable sustaining CapEx requirement for the business.
And I guess how many more years are these lumpy items continuing for? Like when would the sustaining CapEx start to look a bit on normalized?
Well, can I maybe answer the question in a different way. I'm really eager for the business to go through that full life of mine optimization. I think that's what tells you the best pathway, the best NPV from it. And obviously, we'll give you a clear view of how you balance your CapEx over time and optimize the cash. So, I don't have that yet. So, I think to jump to it, it just be guess work at this point. I mean we have a point of view from the plan, but I think there's still so many things to work through so many upside options to look at before we try and put a stake in the ground on that.
And then I guess the last one is also on Greenbushes. I'm just trying to reconcile the EBITDA with the implied net profit that feeds into your underlying EBITDA. I'm wondering if you can help us understand some of the items there, like what's the depreciation running at these days? Maybe what sort of interest bills coming through that's affecting that to kind of set some parameters going forward.
So, one thing I'll comment on there is when you actually look at our net profit and the depreciation, we've also got the purchase price allocation depreciation going through there. So, when you look at IGO, there's another layer of depreciation. Depreciation is at a standard rate that you'd expect for mines in terms of their life. In terms of interest, it is -- it's at commercial rates. They achieved a really good interest rates there. So, I think that there will be a little bit more detail on that in the annual report.
And is there any other items we need to think about? Or is it really just those?
I think it's those two. I can't think of anything else out of -- unusual in there.
Thank you. Your next question comes from Hugo Nicolaci from Goldman Sachs.
I just wanted to come back to the comments around preparing for growth. Noting in the slides, reshaping the business and improving your capability. What areas do you feel you need to improve your capability? And I guess, what are some of those growth focus areas that you're looking to?
Hugo, you want an early cut of the strategy. Look, I think I'll give you a couple of examples. Brett is a great example, bringing in someone with a much deeper set of sales and marketing commercial expertise. His experience in China, I think is very important as we look forward. Those are capabilities that we've really not had any focus on as a nickel business, selling to one customer for a long time in a very stable model. We produce contracts and manage contracts. So, thinking about how lithium grows as an industry and as a market and how we want to best position that, there's a lot to do.
I think all of the industry players are looking at that. You probably saw the announcement around Ganfeng and their positioning just the other day. There's -- it's a very mature commodity and market and I think a lot of upside. So, there's one example. Our depth around lithium is obviously in focus more broadly in terms of the understanding we've developed and we've grown that in the last year or so. I think there's still plenty more to do there as we learn and understand that industry, both in terms of the raw material supply, understanding our competitors in brines, but also then the processing and the value chain as well.
Beyond that, exploration, I think we've got a fantastic team and capability. We are reshaping and rethinking that and looking to drive a lot more from our investments in exploration looking forward. And there's key areas there that I know Suzanne is focusing on lifting and changing as well. There's a couple of examples. I'm sort of giving you a couple of headlines, but we will certainly talk more to that depth in the strategy refresh when we present that.
I look forward to that strategy refresh. And then just another one for Kate. I appreciate a few different ways of asking this question so far. But I guess, from Greenbushes perspective, would you categorize the deferred stripping for FY '25 as a material part of that CapEx guidance?
Yes. As we've directed in the past, stripping has gone up, and I think Ivan touched base on that. Yes, it is a very small portion of that CapEx.
Thank you. Your next question comes from Rob Stein from Macquarie.
Just in terms of the maturity of the market, how you think about your position in the market? When you look towards growth, how are you using, I guess, the collective experience of the team in iron ore and the like to really think about value over volume and production targets and growth as you look to bring on CGP, potentially before or repurpose the tailings treatment plan? How are you sort of thinking about signaling that, how you're thinking about bringing that onto the seat? Some of your competitors are quite aggressive in talking about volumes. And I've got a follow up.
Thanks, Rob. Yes, a big question. There's a lot in that. I probably -- I won't try to cover it all now. It's something we can talk through more as we get into the strategy. But I think we're very unique in the part of Greenbushes that we hold and then I guess that overall asset in its cost position. It's just so strong, it gives you a very different outlook. That said, of course, the offtake is then shipped to 2 major players in the industry and how they manage it. There's still a level of uncertainty around that forward demand and how that plays out with all of the other political pressures on it. So, we've got to be thoughtful about that forward market. But I guess, as you all know, the tonnes that we produce out of Greenbushes are always going to win on a like-for-like basis against spodumene from anywhere else in the world. Even some of the best deposits out there that are being considered for development just don't have the same cost potential.
So, if you look at the forward market and you said you need to roughly double the number of producing lithium assets in the world over the next 8 to 10 years to meet demand, give or take and that's going to take a significant amount of capital flow to do it, Greenbushes should be at the forefront there. It's got the best margins and the best positioning to keep up with that new demand. I might leave it there and I don't want to be cryptic, but it's probably a broader conversation we have as part of the strategy, talk through our perspectives. We're also really humble about that. We've done a lot of work. I'm just trying to understand the lithium market. First principles, ground up a lot of direct information, a lot of analysis.
And as I know, you're all doing, it's difficult. There's a number of factors there or things that no one can really know for sure and that's what creates this degree of uncertainty in the market of lithium. What I'd point to, though, is the rate of growth that's still ahead of us on any scenario. And how that supply comes online. Mining is harder than probably people realize, bringing on new mines and growing mines and keeping up with all of that in a responsible, sustainable and thoughtful manner is actually quite challenging. So, there's a lot to think about.
Well, maybe just a quick follow-on then. How do you think about buy versus build in that context? You've obviously sort of faced with the future in this quarterly with one of you operations shutting down the next -- is it few years away? Do you look at buy versus build with an immediate sort of 1- to 2-year sort of outlook to say, hey, look, we've got some capabilities here. We can actually help deploy them in some emerging operations. We don't need to necessarily add volume growth to Greenbushes, we can go and acquire something when the market is [Technical Difficulty] that way. Is that something that you're considering as part of the strategy update?
Look, we're looking at what's going to give us the best capital returns. And as I said, Greenbushes is pretty hard to beat. You go through any scenario and any list and it's just such an attractive asset. There's so much upside. As it grows, there's a lot of prospectivity in the area as well, which our exploration team are working on to get access and to better understand. Of course, that's the question of the moment, Rob buy versus build. And everyone is going to look through that with different eyes depending on where they're starting from. And as I said, we're in a very privileged place with an asset at the bottom of the cycle is generating a mid-60s EBITDA margin.
Thank you. There are no further questions at this time. I'll now hand back to Mr. Vella.
All right. Look, thank you. Great questions. Good list. Look, overall, it was a good quarter. It was nice to see Nova finish well. They had some challenges in the prior quarter and they turned it around. So, all credit to the team. The other highlight I guess, is seeing Greenbushes back at full rate and really starting to move. There is a lot more we can do there, but we've got to also celebrate the work that Greenbushes is doing. It's a big complex operation now. There's a lot to it. And they're going through some change, obviously, with leadership. I do want to recognize Lorry, who's been the CEO there for 9 years, and I think over 20 in [ Tianqi ]. He's done a lot as that business has built up from being a very, very modest little lithium mine now to being the preeminent global example of a spodumene mine in the world.
The other call out I wanted to make was just to our team. They are going through quite a lot of change with the corporate review, the exploration business review and broader changes. And the strategy is not just hotly awaited by you, but equally by our team within IGO. Everyone is wanting that sense of direction. Of course, there's no silver bullet there or it's not that easy, but a lot of things underway at the moment and the team has been really constructive and carrying through this whole process. And I look forward to, by the end of this next quarter, having that clear picture of where we're headed, being able to share that more broadly and start to get some momentum up to deliver on those outcomes.
With that, I'll leave it there. Hope you all have a good day. Thank you.
And that does conclude our conference for today. Thank you for participating. You may now disconnect.