Pilbara Minerals Ltd

ASX:PLS

Earnings Call Transcript 2023-Q4

[Operator]

Good day and thank you for standing by. Welcome to the Pilbara Minerals June 2023 Quarterly Activities Conference Call. [Operator Instructions]. 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. Please go ahead.

[Dale Henderson, MD, CEO & Director]

Thank you, Andrew, and hello, everyone. Welcome to the Pilbara Minerals June quarterly call for 2023. Firstly, I'd like to acknowledge the traditional custodians on the land on which our businesses operate, the Whadjuk Nyoongar people in Perth, who are undertaking our call today, and up north where our operations are in Nyamal and Kariyarra people. We pay our respects to the elders, past, present and emerging.

For the call today we'll have two other speakers to myself, being Luke Bortoli, our CFO; and Vince De Carolis, our Chief Operating Officer, and we also have some Q&A with Alex Eastwood, our Chief Commercial and Legal Officer. Also with them, in the room today joined by a number of the team, Paul, and welcome to all.

As to the flow for today, same flow we've done, typically, we're going to try and keep it to an hour and acknowledge others have got -- other goals to go to. We'll be stepping through a short presentation, then to 20 minutes of Q&A with the analysts and then 10 minutes of webcast questions.

Now moving to our presentation, Slide 2. Just a quick recap on our strategy. Our aim and our vision is to be a leader in the provision of sustainable patchy materials products, and we're absolutely getting on with the job. And in many ways, we are a leader in this space, whether it would be some of the innovation we've done, whether that's BMX, our tolling arrangements and the improvements we've made in recovery or just our scale, we are moving forward in leaps and bounds.

Service to our own strategy comprises or key legs. The first and foremost is the operating platform. We want to make sure that operating platform is shooting the lights out quarter after quarter and shift after shift. I'm pleased to report in this quarter we've been doing exactly that. Beyond ever wanting to grow the operating platform and make the most incredible Tier 1 asset that we have the privilege of stewarding into life, the Pilgangoora asset.

Third leg of our strategy is around chemicals. We're looking to participate more deeply into the chemical supply chain such that we're extracting more value for lithium unit and channeling those incremental value back through to our shareholders. And lastly is about diversification and being able to move beyond the Pilgangoora asset, which we're in a hurry to, and we'll obviously, we're able to do that, to do that in time.

Now moving from Slide 2 to Slide 3, touching on the quarter, which was, we have had a cracking quarter, topping off a cracking year. On the top line there you'll see our operating performance. Production, a 10% increase on the prior quarter, the 160,000-plus tonnes, and that's a 64% increase year-on-year. Sales, another record broken, 22% increase on the prior quarter and a 68% year-on-year increase. And then that's playing through to the balance sheet, a 24% step-up in the balance sheet Pilbara's stronger volumes and healthy pricing.

And from a year-on-year basis, it's a 464% increase on the prior year. So an incredible set of numbers from the operating platform.

Moving to the blue boxes, which speaks to those leagues 2, 3 and 4 of our strategy. As it relates to growth, expansion is well underway. I'm pleased to report that P680 primary rejection expansion project, which delivers us the next 100,000 tonnes is tracking well and on target, and that will give us a 17% step-up in produced volumes. Midstream, it's moving forward to an FID. And then the POSCO Pilbara Lithium Hydroxide joint venture is on target, both CapEx and schedule.

So looking forward to seeing that come to life in the back half of this year. Moving to diversify and the partnering process, well underway, and we'll offer a couple more comments on that later. And then exploration, we completed a 46,000 meter program. The mining team are busy crunching the numbers, and we look forward to updating the resource and reserves in due course. So an absolutely cracking quarter, which is rounding off a cracking year.

And with that, I'd like to just thank the team at Pilbara Minerals and our contracting partners. It's not been easy. Growing is tough and growing in lithium is particularly tough. Building and operating these lithium mines is really, really difficult. And Pilbara has honed expertise know-how in this regard and it's on show today.

So thank you to the team out there for all the teamwork across the full Pilbara team, both our head office and site team. I know it hasn't been easy but well done to you guys. You deserve all the credit for this, in combination with our contracting partners.

And that completes a quick, quick summary. And then for that, I'll now hand to Vince just -- for a bit of a quick update on the operations.

[Vince De Carolis, COO]

Thank you, Dale. Starting with -- on Slide 5, regarding safety. You can see our lead indicator safety interactions continues to trend strongly. In the fourth quarter, we ramped up our critical risk management training and awareness, and we expect this to deliver improved safety performance in FY '24. However, it does need to be noted that our focus on energy is yet to translate to one of our leading indicators being total recordable injury frequency rate, which has increased from 3.5 in the March quarter to 4.7 June quarter, due to a high frequency of low-severity soft tissue injuries.

This is in part been due to a rapid increase in new employees, particularly in mining and expansion projects such as P680. However, we have a strong and defined safety program for FY '24, and we expect this will deliver positive improvements in safety performance and culture.

We've also been delivering on our commitments flowing from our first cultural engagement survey, completing a number of improvements that support an enhanced work environment. Amongst recent improvements include: new workshop facilities and new administration precinct at a [indiscernible] operation. More than 400 additional new rooms and a new and upgraded in June, just to mention a few, with others to come as we move into FY '24. Pleasingly, our voluntary turnover continues reducing quarter-on-quarter, and our female employment is just under 23%.

Moving on to the next slide, moving on to volumes. Production was broadly in line with our expectations and a record for the quarter, with a strong performance from both processing plants, and sales delivered a record also. I can also confirm that this production volume, we achieved at the upper end of the previously reported production guidance. In processing, the strong quarterly performance was attributed to a number of improved -- combination of a number of improvements. Starting off with improved recoveries, it was 70% for the quarter versus Q3 66% due to the implementation of recovery projects and increased focus in all hygiene practices.

We also successfully achieved our first 10-week shutdown cycle from our previous 8-week cycle, which contributed to a combined improved availability for the quarter, an 87%, which was on plan to improve on Q3 85%. Processing rates were also strongly improved on Q3, and that's attributed to our ongoing asset management program and continued focus to improve our systems and processes.

And moving on to mining, we achieved a record in mining for the quarter. Mining 8.5 million wet metric tonnes versus 798,000 wet metric tonnes last quarter, which was a 10.1% improvement quarter-on-quarter, which is a great result. Our mining uplift plan in gaining traction, inclusive of additional resources during improved utilization rates, investments in equipment resulting in improved availability and mining productivities, and we've also implemented new mining facilities within the quarter, inclusive of HME workshop and a drilling blast workshop, again, just to mention a few.

And finishing with cost. Cost has fallen within the middle of the range of our cost guidance at $613 per dry metric tonne FOB and our guidance was to $640. Our cost base was revised last quarter due to cost pressures across 3 areas, being inflationary pressures, one-offs and reinvestment. But this time we've seen those stabilize, and we will guide our updated cost expectation as part of the ended year results.

With that, I'll hand back to Dale.

[Dale Henderson, MD, CEO & Director]

Thanks very much, Vince. Now moving to our expansion Slide 8. As I mentioned in my opening remarks, the P680 expansion project, specifically the primary rejection component is on track, which will be delivering us an additional 100,000 tonnes worth of production capacity. So delighted with the progress there with our team, Primero build partner [indiscernible] all lay more on our project director and team, great to see the progress on that.

The other part of the P680 project relates to the large crusher and ore sorting facility. We have base shifted that to the right by 2 quarters. And principally that those are redirecting resources to the primary injection works. I highlight that the large crushing ore sorter is required to support the P1000. It's not required for the P680.

The new crusher ore sort of size for the larger operation with additional crushing capacity, and we don't need that for the P680. Hence, as you'd expect, prioritized increase in tonnes from P680 primary injections.

As it relates to the broader P1000 project, good progress having there with long lead order. Engineering is underway, and we're on track for that one. So that's going well and looking forward to bringing both these incremental step-ups to the operation. It's remarkable to think that 1.5 years to 2 years will almost be double where we are today. So if you think about that production capacity times healthy pricing, Pilbara stands positioned to be a healthy cash flow generator, of course, subject to the prevailing market conditions.

I'd like to conclude the expansion update there. And with that, I will step now to the chemicals update. Moving to Slide 10. The Mid-Stream Project is progressing, we're heading towards our FID. A couple of highlights here, the government modern manufacturing initiative grant funds of $20 million.

That contract was executed during the quarter, which was great. And the team is effectively busy finalizing the documents in support of the FID, the demonstration plant. But those are not committed with the Mid-Stream demonstration part. What this is all about is producing more value-added lithium products for market and doing so using more renewable processing steps. If we get this right, the ideas will materially concentrate the lithium of the mine site, drop out the aluminum silicon waste, which is normally present with spodumene concentrate and three, materially step down the carbon energy intensity curve.

All the work we've done today is very positive around this.

The demonstration plant, as the name suggests, it's all about demonstrating the process at a reasonable scale such that we can test this, the unit cost performance recoveries. And all going well, set the stage for a broader commercial application. So we're doing this again in combination with our joint venture partner, Calix, another great Aussie company, and we're excited to be progressing this project. This could have big implications for our business and the industry. So looking forward to progressing that project in due course.

Moving now to Slide 11. Our joint venture with POSCO for the construction of a 43,000 tonnes lithium hydroxide plant in South Korea is going well. As you can see from the photo, plenty of booms in the structures going up, and both those 2 hydroxide trains are on track. Train 2 being the first trains of being complete -- to be completed and commissioned to 65% complete. And the other train is at 35%.

So very much in the construction phase right now. Commissioning for the first of those trains is to occur in the back half of this year and very excited to see that come to life. And this will be Pilbara's participation in lithium chemicals, manufacturing, which is really, really exciting, delivering on an aim we've had since inception of the project. So really excited to see this come to fruition in the coming months.

Moving now to Slide 13. On the partnering process, this is well underway, nothing new to report here, but this is an incredibly exciting process. And I would put it to all. This is probably one of the most exciting transactions available in the market, exciting in the sense that we're offering up to 300,000 tonnes of spodumene concentrate, which effectively [could start] multiple hydroxide trains. Two, it's coming from Pilbara.

And my view, and of course, I would say this, you can put the derisk proposition of group room now sort of deliver product to market with the delivery of this product in short order. And three, yes, subscale. Yes, as I mentioned, 300,000 tonnes, there's not been significant supporting multiple hydroxide trains. So we'll see how we go.

Partner, the process is -- we're in the life with this. It's a long-term contract offer we're providing here. And it wouldn't surprise you that we've had a lot of interest. If we look in the rearview mirror of the first time we ran a process like this in 2017, you can count the participants on one hand. And then ultimately, what's flow from that process with the joint venture with POSCO.

Fast forward to today, the long list is something more like 70-odd. But of course, we are looking to -- when we have -- we are shortlisting down to a much smaller number, but we're in progressing discussions. But I mentioned that just to highlight the interest in the industry and how much the industry is rapidly evolving and growing. It's really exciting and Pilbara stands, of course, to do some pretty exciting amount. We'll see how we go.

Now that concludes this session. And with that, I will hand over to Luke to take us through the financials for the call. Over to you, Luke.

[Luke Bortoli, CFO]

Thank you. Thanks, Dale, and good morning to those on the call. Please turn to Slide 15 of the presentation. This slide sets out the group's financial metrics for Q4 FY '23 versus Q3 FY '23. Group revenue was $844 million in Q4, representing an 18% decline period-on-period.

The June quarter showed an improvement in production of 10%, as mentioned earlier, and an increase in sales of 22%, which partially offset the impact of softening prices by 33%. At the unit cost level, unit operating costs on the FOB basis in Q4 were broadly flat at $628 per tonne versus $632 in Q3, with higher mining costs driven by the 10% increase in material moved offset by higher sales volumes. Unit cost on a CIF basis were $976 per tonne in Q4, a 15% improvement on the prior period, reflecting lower royalty costs associated with lower revenue and lower shipping costs.

Turning now to Slide 16. Slide 16 sets out the group's financial metrics for FY '23 versus FY '22 with significant growth shown across all key metrics. Group revenue grew to $4 billion for the financial year, up 238% on the prior period. Strong customer demand reflected in higher pricing and a material uplift in production were the key drivers of FY '23 revenue performance. Sales volume grew by 68% and average estimated realized price was up by 87% on the prior period.

In terms of unit costs, on an FOB basis, costs increased 11% to $613 per tonne for the financial year. All key components of operating costs were higher than the prior period. This, however, reflected pre-investment in mining for P680, targeted investment in repairs and maintenance to improve availability and productivity and ongoing enhancements to our facilities to cater for the growing operations. As mentioned previously, throughout the year, our unit costs were also impacted by labor shortages and inflation in crushers. On a CIF basis, costs increased to $1,091 a tonne from the prior year at $844 a tonne, up 29%.

This cost increase was primarily driven by higher royalty costs due to higher sales revenue.

Turning now to Slide 17. Notwithstanding the decline in revenue largely driven by prices in the period, we saw continued solid cash operating margin and very strong growth in cash in the June quarter. Cash margin from operations was $920 million in the period, comprising $1.1 billion from sales of concentrate to customers, less $201.9 million of operating costs to produce and sales of concentrate. Pleasingly, net cash margin from operations of $920 million was broadly in line with the March quarter at $919 million, notwithstanding the decline in revenue. Further down the cash flow statement, there were income tax payments of $120.9 million.

There was a total cash flow through investing activities or CapEx of $160 million, and there were net proceeds from borrowings of $19.7 million of cash inflow and a cash outflow of $21.4 million related to other financing costs, including interest and lease payments.

Strong revenue growth and strong cash operating margin led the group to close the quarter with a cash balance of $3.3 billion, a $665.5 million increase over the $2.7 billion recorded as at 31 March. This increase in cash compares favorably to the $456.5 million increase in the March quarter, albeit that quarter included the company's inaugural dividend payment. I'll now hand it back to Dale.

[Dale Henderson, MD, CEO & Director]

Thanks, Luke. And congratulations to the numbers there. Moving to the last part of our presentation on the market. And as at previous calls, I put my commentary into 3 categories, a little bit about the long-term outlook. I'll then step into the June quarter and touched on our observations.

And then lastly, looking out with Pilbara's view of the market and how that's driving our decisions.

So starting with the long-term outlook, it's incredibly positive, and there appears to be a sustained structural deficit unfolding. And it doesn't matter which day the [indiscernible] tends to be new announcements day after day. And I'll just highlight a couple of the more meaningful ones we've had as of late. To the Biden administration, it's making available a green bank for support of clean energy projects such as residential [ income ], EV charging station at community's ongoing projects.

The Canada government announced on the 6th of July to be providing USD 11.3 billion in Santos to Stellantis and LG for their battery plant developments. The International Energy Association released on the 12th of July, some of the data they produced comparing the year of '22 to the prior year '21. They note EV sales reached a record high of $10 million in '22. It's a tenfold increase in just 5 years. They noted that renewable electricity capacity additions rose by 340 gigawatts, the largest ever development, and that's in the year '22.

We also noted that investment in Clean Energy reached a record $1.6 trillion in the year of '22, an increase of almost 15% on '21, demonstrating continued confidence in energy transitions even in an uncertain climate -- so from the IEA.

If we look to some more EV specific news points, we've had some Chinese policy support recently around AEV subsidies and also more recently, the China's National Development and Reform Commission have outlined a STEM initiatives for our automobile consumption and new energy vehicle support. And then there's actually the data around EVs themselves. China specifically at 44% year-to-date growth compared to H1 in '22, a 36% quarter-on-quarter increase for China.

Moving to the more global EV picture, China, U.S. and Europe combined 39% year-to-date growth for H1 '22 and a same quarter-on-quarter increase. So at the macro level, there is just massive moves around energy transition, which, of course, lithium as a key enabler and stands poised to be a great market to be in for a long time to come, given the necessary role of lithium is going to play. So that's at a very sort of high-level macro picture.

Stepping now to our June quarter observations. Starting, of course, with pricing. What we saw, of course, was pricing stabilized. We had that sort of down dip through the March quarter, then a sort of uptick and it's been relatively stable. Speaking with a few of the commentators in the market in the last 24 hours, they note that the volumes are fairly thinly traded.

And what that means is volatility continues to play out. And with the assembly traded volumes and very few data points around the market, what happens is you typically -- and this can get outsized responses. And it's worth touching on the Guangzhou Futures trade, which happened last Friday, which was for a futures contract for January onwards. That contract we think went lower than expectations, and the market response for our view was outsized and the [real] of that one contract was one of -- that must be the direction of the market.

All I would say is a caution everyone that these types of data points, whether it's the Guangzhou Exchange or the [virtual] exchange, we have seen the past outsized responses to small contracts and small volume movements and are encouraged to be able to step back and look at the macro drivers because from our view, they remain very strong. And specifically, as it relates to our customers, demand remains strong. We have no issues moving our product slides at the gate. The question is what pricing? And we have an abundance of offers to sell the customers so far to -- if we had to choose to.

So given this noise that you hear around some of these market trades, the other structure, we assure you, from our perspective, this is a great market. We're having no issues selling our product into this market. And before, we've just had demonstrated just incredible returns here of a strong market and frankly, strong pricing.

So we remain very positive about where we're at, which takes me to the last comment. Well, what does this all mean for Pilbara? So we have conviction around this market and their growth plans. We are in the best markets at the best time delivering possibly one of the best assets. So we continue to keep the foot down.

We throw all those [gem] wide open, and we're looking to develop and expand as rapidly as we can to make the most incredible market. It's an amazing time in history and Pilbara finds itself on an absolutely unique position. We were an early mover. That was tough, but that has now flipped into the much incredible opportunity that we are absolutely focused on making the most of. So looking forward to seeing how this market unfolds in the years to come.

And I think we're incredibly well poised and looking forward to touch work delivering many good quarters to come for our shareholders.

Okay. So that completes the market commentary. And with that, I'd just like to hand back now to Andrew, the moderator to go to Q&A. Thank you, Andrew.

[Operator]

[Operator Instructions] And our first question comes from the line of Hayden Bairstow with Macquarie.

[Hayden Bairstow, Macquarie]

Just a couple of quick ones. So firstly, just on the spodumene pricing. Just get -- keen to get an understanding, is there any sort of changes in the market? Are we starting to see variances in discounting as your product grade falls or a greater focus on impurities? Or is it all just the difference between what we worked out versus we delivered was really around just timing on each month on shipments versus the different pricing indexes you use?

[Dale Henderson, MD, CEO & Director]

Yes, that's right. It's the latter. It's not a case of the former. It's not a case of step changes or the discount is more the makeup of the reference points in time.

[Hayden Bairstow, Macquarie]

And just the second one, just on the sort of the growth outlook organically. I mean just worth, I guess, touching on -- we've seen a few others struggle with recovery rates as they ramp up. There's nothing different you're doing really other than mining more material -- are you in terms of pushing towards the P1000, everything else is pretty much exactly what you have now?

[Dale Henderson, MD, CEO & Director]

Pretty much, yes. The -- I'd like to think that we've honed the recipe, the Philippine concentration for our particular ore volume mine site. The expansions, which we're doing are effectively copy-paste of that recipe, but there's more upside to come. So the team, as you'd expect us doing a suite of improvements to count more and more recovery because that's the business we're in, and the likes of the new [indiscernible] and P1000 with a few whistles and bells, which are coming in as part of that, which will help improve recoveries further in time.

[Operator]

And our next question comes from the line of Levi Spry with UBS.

[Levi Spry, UBS]

Maybe just can we flesh out the realized price a little bit more. I suspect that's disappointed you guys on The Street. I'm getting lots of questions on it. So how do we go about forecasting it given the data that we see from the price reporting agencies and the 5.3%, 5.4% grade.

[Dale Henderson, MD, CEO & Director]

Yes, Levi. We appreciate the 5.3% always a struggle. And you recall some quarters, we surprised The Street. And other quarters like this one, it's slightly under. And largely, this has all been around timing, principally.

Each of the offtakes, we've got commercial relationships with each of those offtakes that we can't really divulge the specifics of, but there are minor variations which play through. But I would stress that the timing of the key component. And unfortunately, can't divulge too much on the specifics there, Levi, due to commercial sensitivity.

[Levi Spry, UBS]

Okay. I'll try one more on it. So what price are you seeing now in the context of the weaker Chinese prices? You mentioned the Guangzhou one, but Wushi -- and what price are you seeing right now?

[Dale Henderson, MD, CEO & Director]

It's pretty stable at the moment, Levi. I think the pricing, we've realized is not a bad volume. But just to highlight that our pricing is exposed to the pricing outcome in the future, so the prevailing market is what sort of ultimately affects the realized price. So if we derive the chemicals pricing, we'll see a rise in our realized price and conversely, so it is a bit of a crystal ball gazing. So you've got to take a view of the future pricings.

[Levi Spry, UBS]

Okay. And maybe just one last one, a slightly different one. On the partnering process, you mentioned a very large contingent of parties initially and how it compared to when you did the deal with POSCO. Can you talk to how the industry may have changed or may have not changed in terms of the likely outcome here? So capital intensity, margins, things like that.

Can you just throw a few data point adders in terms of the range of outcomes we can expect?

[Dale Henderson, MD, CEO & Director]

Sure. I probably can't give you the detail you're chasing there because we are early in the process. But to the broader concept of the listed industry change, it certainly has. It is a much -- it is very much a global industry now. And we're seeing new parties are looking to enter entrepreneurial routes.

We're seeing the old hands in the industry, continuing to expand. And of course, we're seeing car companies and the like and other types of groups, who historically probably wouldn't have played in the space or getting on with it. So it does feel like the [roads are worsened] for Pilbara which is a great place to be. As to the specifics around which projects, which parties and we're well too early in that process. But we are, as you expect, narrowed down to [tridecimal words], but we're liaising this in this regard and look forward to our value and providing some more detail on this later in the calendar year.

[Levi Spry, UBS]

Okay. And last one...

[Operator]

Sorry, his line dropped. And our next question comes from the line of Kate McCutcheon with Citi.

[Kate McCutcheon, Citi]

Following on from Levi on the downstream partnering plan, are you wedded to hydroxide? I guess, given the LFP mix is growing, is carbonate something you're considering? Curious to know how you think about the future of the chemicals mix, I guess.

[Dale Henderson, MD, CEO & Director]

A good question. We are not wedded to a particular chemical at this stage of keeping our mind open to all opportunity. It's too early to guide as to what that looks like. It's probably worth also adding this concept of producing a Mid-Stream intermediate product is something we, of course, think deeply about. And that too would be part of the discussions around whomever we ultimately partner with.

And ultimately, the world needs to have better intermediate products and spodumene concentrates. And given that this type of contract and partnership is a multi-decade type relationship we're, of course, considering what was an intermediate product supply chain look like. So that's part of the work we're thinking. But yes, too early to sort of guide on which products we're chasing but we look forward to updating more later in the year.

[Kate McCutcheon, Citi]

Okay. No, that's helpful color. And then have you had any further thoughts on concentrate grade moving forward? Would it be fair to assume 5.3% is new 6 moving forward for Pilgangoora? And if so, how should we think about the P680 nameplate on that lower grade?

[Dale Henderson, MD, CEO & Director]

Yes, good question, Kate. Yes, our objective is to keep the project grade around where it is north of 5%, but somewhere around where we are. Now for the principal reason that this enables us to maximize the recovery from the mine site. And so our objective is to continue that as long as we can. But of course, we need to make sure the customer and market support it now of which it does at this time.

So provided that this is where we will continue to do that, what does that translate to for the P680 and P1000. Ultimately, it does give us a bit more upside in terms of produced volumes. If you go back to the P1000 FID, you'll see that a bit of extra information there around what a 5.7% grade looks like moving to a 5.2% or 5.3%. Thus, give a little bit of upside above that, which we look to do, as I said, provided the market support.

[Kate McCutcheon, Citi]

Okay. And then finally, just a quick question. One of your peers reported a pretty large exploration budget for next year. Can you just remind me how much of spending on exploration in each year at Pilgangoora?

[Dale Henderson, MD, CEO & Director]

I don't have those numbers on hand, but it will be somewhere to spend -- somewhere less than $20 million. It's likely what we'll be doing for the year ahead.

[Operator]

Our next question comes from the line of Tom Hays with CLSA.

[Tom Hays, CLSA]

Just a few follow-ups. Maybe I'll start with the one that Hayden asked. So we've seen sort of recoveries increased to 70% and sort of implies ahead or feed grade around 1.4. I'm just wondering what does that grade profile look like over the next 2 years as a sort of move beyond the higher grade in the central pit referring to the mineral resource and reserve statement, and noting that [third] lower iron oxide. So I'm interested what interplay that will have with recoveries or does the new kit that's going in sort of offset that?

[Dale Henderson, MD, CEO & Director]

So as it relates to the head grade we've had to date in the next couple of years, it is elevated, and that's in upfront with the market since the inception of the project around that, and it's just a function that the ore presents. Where does it take us in terms of recovery long term?

We've guided sort of a 75% recovery long run average with a long-run head grade of approximately 1.2. Now we haven't been at 75% consistently of late, albeit there has been some improvements. What will take us up the curve is -- and you alluded to it is, we do have some levers coming as part of the upcoming expansion projects, which will equates -- will enable, I think, more leaders of the team to take care of few more recovery uplifts.

And the other piece, which adds to this is the all petrol work the team are doing continues to advance. And what that does enable to marry mineral variation with bespoke set points processing plant, which in combination equals higher recoveries. So yes, the improvement there continue, and it won't stop. We were a multi-decade operation and the team will keep focused on making out percentage point that we can for recovery.

[Tom Hays, CLSA]

And maybe just a follow-up, just sort of looking at the downstream sort of trying to get an idea for further processing data points. I guess we're seeing across sort of the Aussie lithium peers quite different approaches to adding downstream lithium hydroxide capacity. I'm just wondering how you're thinking about sort of the competitive advantages of your strategy versus a domestic or U.S. or China downstream strategy. So what are the key benefits or key risks that you'd like to call out that gives you sort of conviction in your strategy, which to date has targeted an experienced chemical producer in the battery raw material value chain based in Korea?

[Dale Henderson, MD, CEO & Director]

Yes. Thanks, Tom. A good question and the one we wrestled. And I think what the whole industry is wrestling within those [indiscernible] of an industry. And so we're seeing many different ways to [indiscernible] the ability of emerging.

To date, of course, we have a joint venture with POSCO. And in many ways, we felt that ticked a lot of boxes. In other words, an existing battery material, so it would cost domicile and the group was known to build and operate that operation and consider commercial towns. I reckon that bit of an example of ticks in the boxes as to where do we go with this partnering process. We are looking globally at all the options.

Each proposition has a complete different set of attributes.

But broadly speaking, there are things we're interested in supply chain integration, that's an established battery materials hub or not or want to be in the future to the commercial return to our shareholders, equity percentages, et cetera, of 3 alignment around sustainability objectives for government support or participation to be part of the government's support and supply's chain, our IRO and technical know-how. Those are to name but a few of the key parameters that we think seriously as we wrestle with this challenge. But I appreciate that our observing the market yet there's some quite approaches being deployed and everyone turn something different that appears at this stage.

[Operator]

And our next question comes from the line of Kaan Peker with RBC Capital Markets.

[Kaan Peker, RBC Capital Markets]

Two questions on the growth assets. The first one, just want to get a bit more of an understanding around the POSCO JV. Why Train 2 is ahead of schedule relative to Train 1? What's the differences between the 2 trains sales and standard different technologies, maybe if you could expand on that, and I'll circle back with a second.

[Dale Henderson, MD, CEO & Director]

In today's account, so Train 2 is the -- you're correct, they were the 2 different trains and those 2 trains use different lithium hydroxide processing routes. Train 2, which is the one which is being delivered first and utilizes POSCO's painted by electrodialysis process, which POSCO has developed many years ago, but that's Train 2. That one to be delivered first. The other train, you will see conventional sulfate route. You might ask why 2 different trains deploy or the true business, it's all about cost of production and each of the trains, depending what the cost inputs are, one now went over the other.

The conventional sulphate probably requires more chemicals where the electrodialysis would requires more electricity for that to work. So depending what those cost inputs are, one now went over the other. The discussions we have with POSCO with all the teams to -- for those technologies as a particular way of hedging and a way of working through, which process might be best optimized for the future for that location. Hope that fills in some gaps, Kaan.

[Kaan Peker, RBC Capital Markets]

And the second one is on the P680. Just I think you mentioned or it sounded like the delay was related to labor. I'm just sort of consent that the CapEx spend is probably a little bit slower. Is there anything specific in terms of equipment delivery or infrastructure that's relating to that delay? Or is it just more labor?

[Dale Henderson, MD, CEO & Director]

Kaan, you're correct. There's more labor and resource not driven by long lead equipment.

[Operator]

Our next question comes from the line of Al Harvey with JPMorgan.

[Al Harvey, JPMorgan]

A couple for me. Just looking at the cash tax paid in the quarter, it did look a bit lighter than I expected. You have previously mentioned some installments on the prior tax deal. So I just wanted to get an understanding of what's left to be outstanding tax for cash tax paid over the rest of the year from prior quarters and any other lag effects we should be aware of it?

[Luke Bortoli, CFO]

It's Luke here. I can take that one to answer. So in the quarter, there was around about $121 million of tax paid. Since April, we started paying tax or income tax on a monthly basis. For the FY '23 period, there are 9 months before April where cash tax hasn't been paid, and a make-whole payment will be paid in December this year when our FY '23 tax return is lodged.

So their cash tax payment around December for that 9 months of tax not yet paid.

[Al Harvey, JPMorgan]

And then just back on to the pricing. I guess we saw inventory movement trickled down for the first time in the last few quarters. Just trying to understand the decision to move volumes -- more volumes into the market with prices moving lower. How do we interpret that on what you're thinking about near-term price trends? And I guess just as a second part to that question, what is the approximate storage capacity of finished products at Pilgangoora?

[Dale Henderson, MD, CEO & Director]

On the first part there, in terms of timing of sales and shipments, as a policy, we haven't tried to play the market. We have always taken the view of that the market will rise and fall, and some of the rise and fall happened very quickly. So rather than preempt, we've taken the view that as we will produce or we'll move and sell the product. So any surge, which has played through in terms of our sales, like the quarter we've had is actually just driven by logistics, shipment timing and sales moving from just tipping over from one quarter into the next. So no strategy on our part to sort of play the market timing. And I appreciate that some of other lithium operators have talked about doing that, which is a bit different and fair enough. Can you just recap on your second question there?

[Al Harvey, JPMorgan]

Yes. Sorry, Dale. Just trying to get a sense of what the storage capacity of the finished spod concentrate is at Pilgangoora. I guess, over the last couple of quarters, it looks like it's built up to about 40,000 tonnes. Just trying to get a sense of where that could cap out.

[Dale Henderson, MD, CEO & Director]

Yes, sure. No shortage of space at a proven goal, so we can effectively store as much as we want. But that's not what we want. We want to be liquidating finished products as quickly as we can. We have some storage limitations at Port Hedland.

There is still very significant materials of 60,000 tonnes covered storage, that type of thing, but on-site business there's no shortage of space, if we chose to store spodium there.

[Al Harvey, JPMorgan]

Right. And just a final one before I queue up again. Just trying to get a bit more of a sense of what drove that delay in the commissioning of the crushing and ore sorting. So you mentioned labor there. Just wondering if this does flow on to impact the timing of P1000.

[Dale Henderson, MD, CEO & Director]

Yes. I think the WA market is tied in terms of construction and engineering resources. That's definitely present and an effect a component of that play through with the crushing ore sorting that we mentioned there. But I would not sort of translate that through to an impact on P1000. The team has factored in their expectations for this market into that schedule, and we're not anticipating any issues around that schedule.

So we feel we've allowed for the market conditions there. So we'll see how we go.

Well, just conscious of time, we can to -- move to the webcast questions. Now for those and we did not get to from the analyst calls, we will follow up with you with direct calls after the session today, and we tend to move really faster at this time.

[Alex Eastwood, Chief Commercial & Legal Officer]

Okay. Thanks, Dale, and good morning, everybody. I'll move over to the webcast questions now. I noticed we've got less than 10 minutes. So to the extent we don't get to every question, then we would welcome shareholders to always reach out on our shareholder query line, and we can respond by e-mail.

So first question, there's a few questions around dividend policy. They mainly center around timing for the ex-dividend and whether we'll maintain the policy or even consider increasing it. So I might pass that over to Luke.

[Luke Bortoli, CFO]

Thanks, Alex. In respect to the second half full year '23 dividends, details of that dividend will be announced with the full year results announcement towards the back end of August. I can't speak to any specifics before that point, but there will be a full set of details in the announcement.

[Alex Eastwood, Chief Commercial & Legal Officer]

Thanks, Luke. Next question is probably for Dale, and concerns the Calix JV. And the question tends on, if the demonstration plant JV goes ahead, then what percentage of the mill tonnes of spodumene will we be converting to Mid-Stream product before going overseas? So that's really the question. Dale?

[Dale Henderson, MD, CEO & Director]

Yes. So the demonstration part -- part of the portion will only require a small part of our full profile in the order of approximately 20,000 to 30,000 tonnes of spodumene concentrate per annum, which will translate through to something like 2,500 to 3,500 tonnes of lithium chemicals product. So we're about, of course, is pretty small for the demo.

[Alex Eastwood, Chief Commercial & Legal Officer]

Yes. Thanks, Dale. Next question is more around the batteries market. Do you consider spodumene batteries a threat to the demand for lithium?

[Dale Henderson, MD, CEO & Director]

The short answer is no, and we take a lot of comfort from clearing our customers around this point. The spodumene batteries look -- appear to look like they are much more sterile and less dense, and there are some technical elements to almost to strengthen more challenging to work with. And do they own a segment of the market? I think ultimately, yes, the likes of benchmark have done some forecast on this and because I think it's quite a small component, but that looks more inclined to be deployed for mass energy stores rather than say a big offset. There are hybrids occurring where it's lithium mine in combination with the sodium battery, but it appears that the lithium battery is very much required to achieve the necessary energy density requirements for the EV.

So it doesn't give us grows for a concern at all.

[Alex Eastwood, Chief Commercial & Legal Officer]

Okay. Thanks, Dale. Question, are we looking to acquire businesses with our cash holding just goes to our M&A strategy?

[Dale Henderson, MD, CEO & Director]

Well, we're going to be retained once it's formed up and, of course, getting underway to consider inorganic growth opportunities. And as part of that, they will consider assets and businesses, and that's what they get to do.

[Alex Eastwood, Chief Commercial & Legal Officer]

Next question, [indiscernible] mine with 60% renewable power from day 1 and BHP has announced a decarbonization strategy for their Pilbara mines that shows the economic benefits of decarbonizing the mine sound. Can the team please update shareholders on their mine decarbonization strategy?

[Dale Henderson, MD, CEO & Director]

Yes, of course. So we're down the path with decarbonization already. The first step of the floor is a 6 megawatt of solar farm, which is still commissioned and it's running today. As to the next steps of our decarbonization strategy, we've got work underway on that as we speak, and we will be updating later in the year. But we will -- we're absolutely going to be taking decarbonization steps aggressively as we can.

It's the right thing to do to market expectation, and we want to be as green as we possibly can, as quick as we can. So I will update the market in due course around what those next steps of decarbonation require over the year.

[Alex Eastwood, Chief Commercial & Legal Officer]

Question, with so much growth diversification in the near term, incredible operational performance in our Tier 1 asset and a very strong balance sheet, want to thank the shareholders. Can you comment on the current share price? How do you feel PLS is being valued by the market?

[Dale Henderson, MD, CEO & Director]

That's a great question, Nathan. Thank you for that. Well, of course, we're very cheap at the moment. Of course, I would say that ultimately, I think what the whole market and those as sort of the several market struggle with is what is the long-term price for lithium. That affects all valuations of all the big companies material.

And if you go back in time to 2017 to 2018, the long-run lithium pricing for spodumene is expected to be around USD 600 to USD 700 a tonne. Jump forward to today, we're seeing a long-run forecast of double that or sometimes higher, depending which group. And there are some apologizing that going higher again. Where does it end up? Nobody, of course, knows.

That's the birth of an industry. But that one parameter will have a material impact on the valuation of all working companies, including ours. But outside of that, what we're focused on is what you've highlighted there, control and what we control, making sure we do the best we can to supervise that on the operation, expanding operation and making the most this incredible environment. Thanks for your question.

[Alex Eastwood, Chief Commercial & Legal Officer]

Okay. A quick question. It's a technical nature. What is the primary rejection facility?

[Vince De Carolis, COO]

Sure, I'll take that one. Without getting too deep into the technical nature of it, all that comes out of mines generally have gained material. The primary rejection is going on to our Pilbara operation, and it's very early in the processing part, that's up the front of the flow sheet. And essentially it uses intense media separation with specific gravities that reject a lot of game upfront. The benefit of that is further into the processing plant like our flotation circuits.

It cleans up the -- what is presented further into our operation. And by doing that, it also improves our unit costs. So without getting into all the technicalities, probably the simplest way that I can explain.

[Alex Eastwood, Chief Commercial & Legal Officer]

Thanks, Vince. Looking at the time, I think we have reached 8:00, so it's time to bring the call to an end. I'll just pass over to Dale Henderson to close out the meeting.

[Dale Henderson, MD, CEO & Director]

Thank you all for dialing in. As we've taken it through, that's been the most incredible quarter, wrapping up what's been an incredible year. Big thank you to the team who's been toiling all the way, delivering those results. A big thank you to our shareholders and our accompanying partners and our stakeholders who all play a role in our business. So thank you all.

Thank you for dialing in, and we look forward to talking again in the future. Thanks very much.

[Operator]

Ladies and gentlemen, this concludes today's conference call. Thank you for participating, and you may now disconnect.