Pilbara Minerals Ltd

ASX:PLS

Earnings Call Transcript 2019-Q2

[Operator]

Thank you for standing by, and welcome to the Pilbara Minerals December 2018 Quarterly Conference Call. [Operator Instructions] I would now like to hand the conference over to Mr. Nicholas Read. Please go ahead.

[Nicholas Read]

Thanks very much, Jessie. A very good morning to everyone, and thank you for your time this morning. On behalf of Pilbara Minerals, I'm very pleased to welcome you to the company's inaugural quarterly analyst and media conference call and webcast. This follows the release on the ASX platform earlier this morning of Pilbara Minerals December 2018 Quarterly Activities Report and an associated quarterly update presentation. Leading today's call for Pilbara Minerals, I'll shortly introduce the company's Managing Director and CEO, Ken Brinsden; and Chief Operating Officer; Dale Henderson. Before I do so, I'd like to briefly run through some housekeeping notes for this morning's call. Ken and Dale will open proceedings with a short presentation of the quarterly results before handing back to the moderator to open the call to questions from analysts and media. In the interest of efficient time management, today's call will run for approximately 40 minutes in total, including questions. [Operator Instructions]Please note that shareholders and other interested parties are welcome to listen to the live webcast of today's call, which is available through the BRR Media service using the link provided on the front of the quarterly and the presentation on the ASX platform. A recording of this webcast will also be available using the same link shortly following the conclusion of today's call. I'd also like to make you aware that shareholders with questions, Pilbara's management team are welcome to send them to [e-mail]. Without further ado, I'd like to hand over to Mr. Ken Brinsden, Managing Director of Pilbara Minerals, to introduce today's presentation. Thanks very much, Ken.

[Kenneth Edward Brinsden, MD, CEO & Director]

Thank you, Nick. Thank you, Jessie, and thanks to everyone who's joining our first quarterly call. And this will become part of our regular agenda at the Pilbara Minerals, given that we've moved into the realms of lithium and tantalum raw material producers. Joining me here on the call today and subsequently available for questions, we have Dale Henderson. Dale will provide some further detail with respect to the operating performance during the December quarter and a bit more descriptive analysis of the successful commissioning and ramp-up at the Pilgangoora plant. But also, in the room, we have Brian Lynn, CFO; Alex Eastwood, our Company Secretary and General Counsel; and Linda Reddi's in our Corporate Affairs area. Thanks again to everyone for joining. Much appreciated, and I look forward to your questions as I'm sure Dale will. So to kick things off, the December quarter, really it was, by almost every measure, a formative quarter for Pilbara Minerals. Moving well beyond the proof of concepts, Pilbara has demonstrated what can be achieved with respect to a quality resource, a sizable reserve and a sophisticated processing facility. The combination of both dense media separation, obviously gravity for the purpose of tantala removal, and then flotation for the purpose of the full lithium recovery. And full credit to Dale and his team because they have the plant working in symphony, absolutely fantastic results and, as I said, more than a proof of concept as to all the work that Pilbara Minerals has put in over many years to achieve what I believe is a fantastic outcome for shareholders in the successful commissioning and ramp-up at Pilgangoora. And we're very much looking forward to what the plant is capable of over time. It was a landmark quarter. The first shipment, very strong quarterly sales in the spodumene category, and the official opening of the Pilgangoora Project, all just amazing outcomes for the team here at Pilbara for the work that's been put in and the shareholders that have hung with us over many years to see Pilgangoora come to maturity. The ramp-up at Pilgangoora has gone very well. We'd like to think that we set ourselves aggressive targets in establishing the plant. And as I said, full credit to Dale and the operating team at Pilgangoora because they've gone a long way to achieving those aims. Aside from all the work that's been going at Pilgangoora, it's otherwise, just as is always the case, a very, very busy time for Pilbara Minerals. We continue to work on the required expansion initiatives, which are multi-faceted. The first of which, of course, is to have the expansions financed. And we've continued to progress the financing and especially that with respect to customers, with both Great Wall and Ganfeng coming along in support of the Stage 2 expansion initiative. And as a result of those discussions and more, we've started to think about what's possible or what's ultimately possible with respect to the Pilgangoora Project as we contemplate a Stage 3 expansion. And that's driven by the -- especially the medium-term demand that we see coming from customers. And one of the more important demand elements is that we've also experienced from Korea via our relationship with POSCO. POSCO, as you'd imagine, is continuing to engage with -- especially Korean battery manufacturers, cathode materials suppliers and determined that they should build a larger facility as they start up chemical conversion or large-scale chemical conversion in Korea. And as a result of those discussions, we signed a nonbinding MOU that contemplates expanding the proposed Korean chemical facility from 30,000 LCE equivalent to 40,000 LCE equivalent and predominantly in the hydroxide category. That is a really important initiative for Pilbara Minerals because it affords another -- it's another pipeline opportunity that diversifies our spodumene sales but also, importantly, allows Pilbara Minerals to participate in the downstream initiative via joint investment with POSCO. We're very much looking to -- forward to continuing to crystallize that initiative during the March quarter, and we should have more to talk about with respect to those Korean initiatives in the coming months. In the production and sales, as I said, very strong production, very strong sales and, importantly, very high-quality product. And again, I think that's a point of difference for Pilbara Minerals and the Pilgangoora Project, a really high quality product that we believe is going to be valued by our customers for the long term. And that's the reason why we have the cream of the chemical conversion crop working with Pilbara Minerals in the continued development of Pilgangoora. On the tantalite side, the tantalite is literally falling out of the plant with plenty of tantalite production. And we're now going through the process of upgrading the tantalite -- or the primary tantalite concentrate into a final tantalite concentrate. And one of the points I'd make is, as I reference Slide # -- I think that's Slide #5, production and sales, you'll see that we're carrying quite a bit of stock in the tantalite categories, and that primarily relates to the stock that's being treated for the upgrade to 30% tantalite. And the results -- our initial results coming through from that program are also very strong. So we're looking forward to some of those high-grade tantalite sales in the coming quarter or 2. Otherwise, there has been a general build of stock, and the inventory has continued to grow. We're deliberately calling that out because that is part of the equivalent of ramp-up costs as we develop the Pilgangoora mine. We're carrying quite a bit in the way of ROM stocks primarily driven by access to fresh ore, and the thin layer of oxide ore that sits at surface will continue to be bled through the plant over time. But the primary feed has to be the fresh ore, so hence the ROM stocks. And then otherwise, just building up inventory through our supply chain prior to shipment. And clearly, there's some costs associated with that. There has been costs associated with that in prior quarters and the prior half, and there will continue to be some costs associated with building out that stock position in the current and future quarters whilst we stabilize or present more like steady run rate production. That's it in the way of opening remarks. I'm going to hand to Dale now. Dale will start to drill in for a little bit more detail about the performance of the plant and expectations from here. So over to you. Thanks, Dale.

[Dale Henderson, Chief Operating Officer]

Good morning, everyone. In terms of the plant performance, the last 6 months has clearly all been about ramp-up so -- particularly in the September quarter. The challenge for the team was really around stepping through wet commissioning and increasing the stability of the plant. As we moved into the December quarter, that's been around -- a focus of increased stability and ultimately starting to do a lot more fine-tuning and optimization of the plant, and we're delighted to report that this has all gone very, very well. So looking at Slide 6. The graph there speaks to throughput volumes. So this is the [ MC ] volume coming into the plant. And you can see from that, that we've had a steady improvement via volume coming through the plant. And in particular, this last month of December, we're in excess of 90% coming through the plant. So we're delighted with that. And what that effectively demonstrates is the plant's ability to volumetrically process the intended design volumes for the operations. So we're very happy about that. So moving from Slide 6 to Slide 7. This graph represents the salable concentrate produced by the operation. So we're delighted with that curve. You can see the cumulative curve is a bit of a ski jump, which we're very happy about. And again, December was a particularly good month as we continue to step up in terms of volume of on-spec concentrate produced. In fact, I think we're approximately about 85% of design throughput volume rate for December. So that's going very, very well. And as Ken mentioned, that's equated to several vessels, which have been delivered today to our customers. Moving on to Slide 8. Product quality, very, very good quality; fantastic, in fact. Average grade across the 4 vessels delivered to date has been in excess of 6% for lithia and we've had low iron. Iron, particularly, has not been a problem at all at Pilgangoora operation. Equipment -- that area is performing very, very well, and that played through the average iron grade there, which you can see at 1.27% for the first 4 shipments. All of these measures, of course, has been verified by independent parties as required by our customers. Lastly, in terms of operating performance. Moving to Slide 9, recovery. What we've sought to do here is to provide that next level of detail, showing really the holy grail. And the key challenge the operations team has to sell, which is the maximizing of recovery. What you can see here, there was some instability, that's the squiggly line, in terms of recovery, particularly through the period of October, which was largely owed to stability issues, in particular, water. But as you can see from the trend, we're starting to get some very, very steady improvement in recovery. And in fact, the most recent data for this shows we're approximately 90% of where we want it to be in terms of recovery. So more work to be done, absolutely, but we're well on track and certainly trending in the right direction in there. So very happy about that. So that really completes probably the key parts of the operating performance, and I'll hand back to Ken.

[Kenneth Edward Brinsden, MD, CEO & Director]

Okay. Thanks, Dale, much appreciated. And a lot of good learnings and hard work being done by the team at Pilgangoora, much appreciated, I'm sure, by shareholders. If we move on to elsewhere in the business on Slide 10. We've provided further background to -- through a corporate update. And one of the most significant packages that we've progressed predominantly during the December quarter related to the next steps with the financing of the Stage 2 project. If you go back over time, you'd be aware that there's a financing commitment from the customers, and in particular, Great Wall, Ganfeng and historically POSCO, in support of the Stage 2 development. So we closed our terms with Ganfeng and with Great Wall as it relates to the progress of the Stage 2 funding. And that becomes the cornerstone to the completion of the debt side of the financing, which we expect to progress with respect to the bondholders and predominantly the existing bondholders under the Nordic Bond structure. And our expectation is that we'll continue to make more progress on that during the March quarter, which, in turn, will close the financing and then represent the commencement of the major site works for the Stage 2 expansion, which takes processing capacity to 5 million tonnes per annum and spodumene concentrate tonnes between 800,000 and 850,000 spodumene concentrate tonnes. With respect to Korea and the relationship with POSCO, we're obviously very happy as to how that relationship is progressing with this into the due diligence exercise now as it relates to the proposed chemical facility to -- or hydroxide plant in Gwanyang in South Korea. And POSCO is demonstrating an amazing level of technical imports and understanding of the lithium business and the chemical conversion industry by their PosLX technology, which produces a very high-quality hydroxide product, which would actually be clearly industry-leading. And I believe the Korean cathode materials and battery makers are very much looking forward to that facility, so much so that they are applying pressure to continue to see that facility grow. So hence, the discussions with POSCO about -- and which has culminated in a memorandum of understanding as it relates to expansion to 40,000 LCEs of -- or equivalent, predominantly in the hydroxide category. So we're very much looking forward to continuing the progress there in South Korea, and we think it's an important pathway for the future growth of the Pilgangoora spodumene concentrate production. $70 million in cash in the bank, and that's a combination of historical cash flow from operations, but also to prior investment from POSCO in support of the continued ramp-up of operations and the initial early works in the development of Stage 2. So moving on to markets. We're on to Slide 11. And clearly, 2018 was a tough year, especially for the Chinese conversion -- or lithium chemicals industry, the evidence being a reasonably significant fall in price in China, albeit off of very high highs. And as a result, that clearly impacts the value in the spodumene that contributes to battery-grade lithium carbonates or, for that matter, battery-grade lithium hydroxide. And as a result, there is an impact on the spodumene price received. Now having said that, I would contend that the USD 742 per tonne received for shipments during the December quarter was actually very strong pricing in relation to our product. And that's a function of capable chemical converters, receiving the product with a view to longer-term relationships and the ability to continue to keep growing with Pilbara Minerals. Our pricing is a function of predominantly Chinese domestic pricing but also references the external pricing environment ex China. And that's an area where the pricing has still been, we would say, very strong and, again, especially in the lithium hydroxide side category, given the demand for the high nickel cathode materials. So against that backdrop, the general view would be that pricing does obviously come off its highs, but it's nonetheless still a very strong price. And when you take into account our expected cost base as we continue to ramp up the operation, then we'd argue there's very healthy margins to be won in the lithium business. And then over the medium to long term, a significant opportunity in interconnected spodumene supply through chemical -- your own investment in chemical conversion facilities, and hence, the push by Pilbara to continue to participate, especially in the Korean market. We think that's a very important part of Pilbara Minerals' growth profile. So in summary, Pilbara Minerals, I opened the call with saying, December being a formative quarter for the company, much more than proof of concept. It's actually happening. We're producing a high quality product. The tonnes are pouring out of the plant, and we're continuing to grow the production base based on strong operating performance. In parallel, the organization is working very hard on the continued growth based on a high quality and very large resource at Pilgangoora. So we're opening up the window for development into Stage 2 with some insight to the future in the project through the proposed assessment of a Stage 3 growth project and, again, predominantly supported by customers and their demand with respect to future growth. Pilgangoora has an important part to play in lithium raw material supply globally. And Pilbara Minerals is both having a lot of fun getting involved, but also looking forward to a very bright future as a result of the quality and scale in that resource. Jessie, that's it from us here in the office, and we're happy to open up the floor to questions. Thank you.

[Operator]

[Operator Instructions] Your first question comes from Nick Herbert from Crédit Suisse.

[Nick Herbert, Research Analyst]

A few questions for me, please. Firstly, just on mining. That grade looks pretty good, 1.39%, and looks like it's tracking a little bit ahead of the plan you put out previously. I'm just wondering is that a grade that we can expect to be maintained over say, the next couple of quarters?

[Kenneth Edward Brinsden, MD, CEO & Director]

Nick, the grade is just slightly higher than the average reserve grade, and we carry that for a couple of years in the current mine plan. And that was actually part of the final definitive feasibility study plan as we thought about the Stage 2 development, which is actually now what's being executed on the ground. We get some benefit in being able to rerate the overall plant capacity by feeding a slightly higher grade, and that should contribute to slightly higher cash flow in the early years in the project without materially impacting the existing reserve and, we'd argue, based on the expectation that the reserve will continue to grow with little or no impact.

[Nick Herbert, Research Analyst]

Okay. Good. And then just on site costs, the $52 million that you project as the operating cost for March quarter. And how does that -- or how do you expect that to change as you go through ramp-up in terms of -- dollar million value, how that looks, say, once you get to June and September quarter?

[Kenneth Edward Brinsden, MD, CEO & Director]

Yes. Yes. So there's a couple of things driving that, and really, the key is the combination. It's actually probably 2 more significant impacts. One relates to just the general concept of the plant continuing to ramp up, and how that translates in terms of cost is slightly more shutdowns in the plant. They're typically smaller shutdowns but more frequent and, therefore, slightly higher in cost; and then just general uptime in the plant and the proportion of uptime versus downtime; and then the overall impact of inventory management, so continuing to build stocks; and white stripping in relation to the build-out of the remaining infrastructure. So for example, the Stage 2 tailings dam facility that requires waste, which drives higher strip ratio over these next couple of quarters. So the combination of all those things, ramp-up, stocks and then slightly higher strip ratio, translate to higher costs over the next couple of quarters. But as we move out of -- so when I think about it from a -- we're not providing any guidance. But when I think about it from a guidance point of view, as we move from commercial production into -- or we declare commercial production, put it that way, then we're in a position where we can be perhaps a lot clearer going forward with respect to where the costs are being realized.

[Nick Herbert, Research Analyst]

Okay. Got it. And then just finally, the downstream JV. I'm just wondering when can we expect to get more details, I guess in terms of feasibility, where you start to put some numbers around it. And then also in discussions with POSCO, do you think they'll be open to increasing the funding for project to cover, I guess, increased CapEx associated with the expansion?

[Kenneth Edward Brinsden, MD, CEO & Director]

Yes. Couple of things in that, Nick. So our expectation is that from a feasibility and a due diligence point of view, we'll have largely completed our work during the March quarter. And that's being driven by a time line to present to their respective Boards in May 2019, which is, in turn, primarily driven by POSCO. As you could imagine, they have a much more significant process to go through as compared to what Pilbara Minerals might go through. So we're really running to their time line. March quarter, completion of the due diligence exercise and the contributing feasibility studies, we will have made our presentations to our Board and, as a result, be ready for the execution of the joint venture terms, which, in turn, will go to the POSCO Board. So that's roughly the time line as it stands with respect to the Korean chemical project. On the financing side, I guess sort of generally speaking, there is plenty of conversation going on about the funding of the project, and there might yet be the opportunity to participate in more funding by POSCO. But another model that's being proposed by POSCO is the participation of the Korean development banks in the development of the chemical plant in support of its construction costs. So those discussions are incomplete but potentially key to the completion of the final financing.

[Operator]

Your next question comes from Steuart McIntyre from Blue Ocean Equities.

[Steuart McIntyre, Senior Resource Analyst]

Could you please just confirm the spend to date on the Stage 1 CapEx? As I recall, it was around $274 million. Is that -- how far through that are you?

[Kenneth Edward Brinsden, MD, CEO & Director]

Yes. Sorry, mate, that was the Stage 1 capital development profile?

[Steuart McIntyre, Senior Resource Analyst]

Yes. Correct, correct.

[Kenneth Edward Brinsden, MD, CEO & Director]

Yes. No. That's, in essence, complete. There is just very small rats and mice development costs that remain but very, very small in the scheme of things in relation to that capital development costs. The spend that's being executed now primarily relates to the early works that we've described in Stage 2, which includes some site works that's, in essence, being developed for Stage 2 but in support of Stage 1. So for example, additional process water supply. We have some additional storage space going in at the mine site. So that really defines -- it's more to do with Stage 2 than it is to do with Stage 1. Stage 1 is largely complete.

[Steuart McIntyre, Senior Resource Analyst]

Okay. Perfect. So again, I see from the quarterly, you're expecting to achieve commercial production this quarter. Does that mean we should be seeing a breakdown of operating costs in the June quarter when that comes out next quarter?

[Kenneth Edward Brinsden, MD, CEO & Director]

Yes. I think that's reasonable to assume, Steuart. Yes.

[Steuart McIntyre, Senior Resource Analyst]

Okay. Okay. Excellent. Now you guys are obviously in a pretty unique position of being in direct regular contact with 4 major end users. Are you able to provide a little bit more color on your take on the current market conditions and, I guess, the outlook for prices? That's -- as I say, you guys are in a pretty unique position compared to the rest of us to sort of have a feel for what's going on out there. It's pretty opaque market.

[Kenneth Edward Brinsden, MD, CEO & Director]

Yes. Yes. Yes. Look, yes, so a few comments in that regard, Steuart. So clearly, the chemical conversion industry in China has been under pressure during 2018 so, relatively consistent falls in price for them during -- and especially in the lower-grade lithium categories. Perhaps not quite such a big impact in battery-grade or Chinese battery-grade or battery-ready products. But in any case, their margins are being squeezed. And as a result, the net impact to Australian spodumene suppliers is, well I believe, inevitable, and it translates to lower spodumene prices. But there is nothing to complain about with respect to USD 742 a tonne. That still translates to very healthy sort of spodumene operating business in Australia and would suggest -- make for a very good business. When I think about the future, there is some uncertainty with respect to the chemical conversion industry and next steps as it relates to central government policy and its support of the vehicle electrification sector and, therefore, the battery sector. That uncertainty translates to a bit of a wait-and-see approach. That's part of the dynamic that, I think, is in play. The chemical conversion industry, to a certain extent, is sort of sitting on it hands, waiting for the next move in the industry. In the meantime, EV sales continue to grow very strongly in China as they do elsewhere around the world. And the net effect of that, of course, is increasing demand. Another dynamic I'd expect to come into play during 2019, Steuart is further exports from China of battery-ready products. I think that's probably going to be a big dynamic in 2019, especially while there's this arbitrage between international pricing and China domestic pricing.

[Steuart McIntyre, Senior Resource Analyst]

Okay. Okay. Look, that's helpful. I guess -- sorry, just to finish up on that. The -- you sort of talk about the Stage 3 expansion being largely led by your end users looking to -- looking, I guess, longer term and wanting to secure longer-term supply. So that's not a -- that's obviously nothing to do with the near-term supply/demand dynamic?

[Kenneth Edward Brinsden, MD, CEO & Director]

No. No. I think -- yes, the -- well, exactly right, I guess. The medium- to long-term expectation is that a huge amount more lithium raw material suppliers come out of the ground, and a lot of that'll end up in the hydroxide category because of the growth in high-nickel cathode subset of the market. So the biggest view would be low-cost, high-quality spodumene linked to battery-ready capability in chemical conversion, and especially in the hydroxide category, is an important subset of the market to be involved with. And I'm pleased to say that we have that in spades because of the relationship with POSCO, General Lithium's capability in hydroxide, they were the original hydroxide patent holders; and then, of course, the massive growth that's going on in Ganfeng and especially in the hydroxide category. Both General Lithium and Ganfeng are in the process of ramping up new hydroxide capacity right now. They've been commissioning those plants since about the third quarter and calendar year 2018 and now starting to hit their straps in terms of both underlying production and quality with an expectation that, that quality will become qualified for overseas markets. And hence, my view that the export market out of China for battery-ready products, especially those coming from spodumene, is going to be a bigger dynamic during the course of 2019 and onwards.

[Operator]

Your next question comes from Larry Hill from Canaccord Genuity.

[Larry Hill, Analyst]

Ken and Dale, well done on the [ correct ] quarter and, yes, good start-up in production. I just wanted to just question. Your path to recovery did not [ play ] at right spot at the end of this quarter. Just [indiscernible] obviously commissioned up and got things going on the core circuit, is that performing as well [ any of the fines ] that needs to be sort of tweaked? Or where will the improvements in recovery come from?

[Kenneth Edward Brinsden, MD, CEO & Director]

Yes. Dale, why don't you speak to that?

[Dale Henderson, Chief Operating Officer]

Sure. So the core circuit has performed very well, and we're quite comfortable about its performance. And we don't see necessarily a lot of churning in that part of the plant. The fine circuit is where we see the next incremental improvements to be made as far as recovery goes, and we're looking forward to talking about this next quarter because, yes, we continue to make improvements in that space. And now that the plant is performing, they're pretty stable, we are in a position now to really fine-tune the fine circuit, particularly. And the fine circuit, different from the core circuit, requires stability above all else, and that's the key enabler. So next steps in recovery is the fine circuit and that's what we're going to focus.

[Larry Hill, Analyst]

Yes. And just to stick to that point, I know that you've talked about the disruptions being mostly quarter-related. And that was also [ cited ] another operation recently in [indiscernible]. Does that have any impact on [indiscernible] for Stage 2 going from 4 million to 5 million tonnes [ or so ] water requirements? Have you had to change what Stage 2 water management will look like?

[Dale Henderson, Chief Operating Officer]

The -- yes, you're right. But firstly, we have had some disruptions from water, the Stage 1, which are sold. As to how that affects our thinking for Stage 2, it hasn't really affected our thinking in that regard. But what we are doing is ensuring that we continue to increase our water supply options for not only Stage 1 but Stage 2, of which we have an abundance of supply secured to support the future development.

[Kenneth Edward Brinsden, MD, CEO & Director]

Yes. Larry, couple more things to add there, mate. On -- we've had a really successful year during 2018 and full productivity exploration team at Pilbara in water exploration, both at site and through the region around Pilgangoora. We've been able to open up, from a discovery point of view, a couple of new borefields that we believe are pretty significant, and they've become basically the mainstay for future expansion, obviously, in Stage 2, but also into Stage 3. So we would contend that the water -- and actually, very fresh water is readily available in the region. You just have to go and explore for it. And I'm pleased to say that we've been pretty successful at that. So in those early works that we're doing around Stage 2, water is a key part of that. And we're actually developing those borefields, including pipelines, bores, getting out of bore that profit being slow. So that assists with overall water supply. Just going back one step also, Larry, as it relates to the recovery question. Just remind you that the Pilgangoora circuit is different in the sense that it's a closed circuit. So we carry all ore feed through both DMS and the sinks in the DMS to flotation. So there's no rejection of lithia or waste at DMS. It all go through the flotation. So my point there is that the flotation is really the key to the overall lithia recovery. And the team's been doing a really good job in terms of learnings in and around the flotation circuit and what really makes it sing, so hence, our confidence in the continued improvement in that part of the plant.

[Operator]

Your next question comes from Kristie Batten from Mining News.

[Kristie Batten;Mining News]

I was just wondering if you could talk a little bit more about the potential Stage 3 and what sort of -- what the timing is around that. When you say that it's in the evaluation phase, is that equivalent to a scoping study? Or is it earlier than that?

[Kenneth Edward Brinsden, MD, CEO & Director]

Yes. No. Good question, Kristie. And we've actually commenced the scoping works as it relates to Stage 3, and we built that into the detailed engineering in Stage 2. And our logic in doing that is that you afford the greatest opportunity for subsequent expansion if you design the right elements in the program prior to the work. So basically, what you're doing is you're building Stage 2 with Stage 3 in mind. In certain subsets of the plant, that might mean putting bigger equipment in or laying more concrete or even just more earthworks, all of which adds value to the subsequent expansion. So to go back over history, the Stage 1 project was built with Stage 2 in mind. And the benefit in that has been to both speed up and, we'd assume, lower the cost ultimately of the development in Stage 2. So for example, a bigger coarse ore stockpile with more substantial feeders below the stockpile, heavy aerated conveyors in certain locations to support the additional flow for a subsequent expansion, earthworks, drainage, you name it. So there are lots of things we've done in Stage 1 in support of Stage 2. We'd like to carry that same logic into Stage 2 with a view to Stage 3. And the benefit in all that is, hopefully, faster and/or cheaper development over time. When we think about the timing of Stage 3, it is early days, Kristie. But what we're hearing from the customers is that the period post-Stage 2 -- just a quick reminder, we're commissioning Stage 2 in the March quarter of 2020. We've been looking to execute Stage 3 with a view to ramping up Stage 3 during 2021. That's the rough time line that we're working to driven by the customers' demands.

[Kristie Batten;Mining News]

So when you said that you sort of built -- you built -- you're building Stage 2 -- you built, sorry -- you built Stage 1 with Stage 2 in mind. Was anything to Stage 3 built into the DFS for Stage 2?

[Kenneth Edward Brinsden, MD, CEO & Director]

Not the DFS for Stage 2, but we've certainly done that since the definitive feasibility study. So look, it's a good question, Kristie, and what it means is that we might yet end up spending a small amount more in Stage 2 in support of a subsequent Stage 3. But that's to be determined by the completion of the detailed engineering. So yes, more work to be done. Not built into the original DFS for Stage 2, but we've certainly been thinking about it since.

[Operator]

Thank you. That concludes our question-and-answer session. I will now hand back to Mr. Read for closing remarks.

[Nicholas Read]

Thanks very much, Jessie. A big thank you to everyone for all their participation today. That wraps up Pilbara Minerals' first investor conference call. Thanks to Ken, Dale and the team here in Perth. Just a reminder to everyone that a replay of this call is available using the same link, and that'll be live very shortly in the next hour or so. And also to any shareholders with follow-up questions for Pilbara's management team, you're welcome to send those to the e-mail address that I've mentioned at the opening, [e-mail]. Thanks very much for your time. We do appreciate it. Enjoy the rest of the day, and have a good Australia Day long weekend. Thank you.