Lithium

Discussion in 'Commodity Futures' started by themickey, Dec 28, 2018.

  1. themickey

    themickey

    Has been a strong month, the $26-$28 level about where downtrend has broken.
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    #61     Feb 22, 2020
  2. themickey

    themickey

    Mineral Resources Limited (MALRF) on Q2 2020 Results - Earnings Call Transcript (ASX - MIN)
    Feb. 12, 2020 3:27 AM ETMineral Resources Limited (MALRF), MALRY

    https://seekingalpha.com/article/43...f-on-q2-2020-results-earnings-call-transcript

    Mineral Resources Ltd (OTCPK:MALRF) Q2 2020 Earnings Conference Call February 11, 2020 9:00 PM ET

    Company Participants
    Christopher Ellison - MD & Director
    Mark Wilson - CFO & Company Secretary

    Conference Call Participants
    Hayden Bairstow - Macquarie Research
    Rahul Anand - Morgan Stanley
    Levi Spry - JPMorgan Chase & Co.
    Damien Williamson - Bell Potter Securities Limited
    Matthew Chen - Foster Stockbroking
    Scott Ashton - SHA Energy Consulting

    Operator
    Thank you for standing by, and welcome to the Mineral Resources Investor Call for the First Half FY '20 Financial Results Presentation. I'll shortly hand over to Chris Ellison, Managing Director of Mineral Resources. At the end of the Managing Director's address, there will be an opportunity for institutional investors, analysts and media to ask questions. [Operator Instructions].

    I will now hand over to Chris Ellison. Please go ahead.

    Christopher Ellison
    Thank you. Thank you, and good morning. I'm Chris Ellison. Welcome, everyone. Thanks for joining us. This is the Mineral Resources Half Year Results. I'm joined by our CFO, who you all know, Mark; and the Company Secretary, Derek. I'm going to run you through and give you a quick summary on where we landed in the first half and a few of the highlights. Mark is then going to give you some detail through the financials and then I'll give a little more detail around the operational performance, and then I'll give you a bit of an overview of where we're taking the business moving forward.

    Key headlines. We've had one of our best first halves ever. Our statutory EBITDA, $1.6 billion, good results. Underlying EBITDA was $330 million. The $1.6 billion has got the Wodgina transaction in it. Mining Services continues to grow. I think I said at our AGM, over the next 3 years, we expect that part of the business to double. Iron ore kicked in $185 million EBITDA. We've got about $1.3 billion cash sitting at the bank, and we're going to pay a dividend of $0.23. The Mining Services performed well. It's growing at about 40%, but our Mining Services doesn't just include crushing and processing. It also includes our mining and transport fleet. We've had some good growth in that area. Crushing tonnes are up about 11% and a very -- the largest part of the business.

    The iron ore. Kooly is at about 10.5, heading towards 11 million tonnes at the end of February. We're bringing the Parker Range on board. You might remember, we bought that off Cazaly last year, so all the approvals are in place. We're just finalizing some bits on that, but that will be coming into production as part of our blend late April, early May. The lithium business. We're not selling a lot of lithium at the moment, but we've got a pretty amazing business. We've got a lithium business that probably sits in the top 5 in the lithium businesses in the world. It's going to be a big part of Min Res going forward over the next 20, 30 years. It's probably got 40 or 50 years of lithium sitting in the ground. And I don't think there's any doubt that with the push where everyone's heading with the environment, that power storage is going to be a big part of the future.

    Mt. Marion. It's been continuing to run at a pretty steady state. It's a very reliable plant. It just spits its tonnes out regularly. The costs have been coming down, that's a short-term thing. We are probably going to get into a new pit with the strip going up a little bit going forward. The Kemerton hydroxide plant. It is under construction. And that's under the management of our new partners, Albemarle, and it's scheduled for commissioning in 2021. And Albemarle will deliver us a 40% shareholding in the plant once they finish construction and they start to wind up the commissioning.

    And innovation has been quite strong in the business. As you know, it's all hitting in the right direction and mostly been successful [indiscernible] again soon. Safety performance. Outstanding result where we've landed with safety, considering we've had a lot of construction going on all last year. It's always very challenging bringing in the construction teams and new people into the business, but we've worked through that, that's all over now. We had about 600 of those guys on the payroll. So we were setting up around over 3,500 employees. We're back to around 3,000 and a bit now. We're probably better than the top 10% of the mining industry where we've landed and the way we've managed that part of our business. It's critical. I always say it's no use having a good result financially if we can't back it up with our safety. If we can't keep our people safe, we don't have a sustainable business.

    Lost time injury frequency rate, that means that the last time we had one of our people with an injury that lasted a full shift was over a year ago, and we work very hard to stay at that 0 rate. And our TRIFR rate is starting to trend back down to our target, around 2.5%, critically important. Financial performance summary, a very strong half. Revenue is up. The balance sheet is very robust. Strong EBITDA, as I said earlier. A 52% return on invested capital. That's obviously inflated, of course, with the result we got out of Wodgina, but nonetheless, it's real and we got the cash to prove it.

    We're building a 30- to 50-year business. It's a very, very strong, robust business. It's across mining services, commodities, infrastructure and innovative assets that we're bringing online. And we've got a very solid mix of commodities across a range of geographical locations. So we've designed a business that we're trying to get it working with our commodity cycles over decades.

    Shareholder value. Again, very strong and very compelling what we've delivered. Over the last 14 years, we've averaged 19% growth on earnings per share, 21% average return on invested capital, 26% total shareholder return growth per annum. And we've converted 99% of EBITDA to cash and we pay the dividend every year since we've listed. So I think a good result for our shareholders.

    I'll pass over to Mark and let Mark walk you through the financials, and then we'll come back and have a look at a bit more detail around the operations.

    Mark Wilson
    Thanks, Chris, and good afternoon, good morning, depending where you are. It's Mark Wilson here. It's a pleasure to be able to walk you through the results for the half from a financial perspective. Chris has touched on a few of the key headlines. I'll take you through a little bit more detail. In the deck this period that we've released to the platform this morning, we've included a lot of material in the supplementary information, so there's a fair bit of detail in the pack, which should help you going forward. That's consistent with our approach in recent times to try to work to provide improved disclosure.

    In terms of the overall perspective, as Chris said, strong overlying -- underlying result of $330 million, the headline, just under $1.6 billion of EBITDA. As Chris said, that's driven by the Wodgina, the sales disposal, which recognized a profit of about AUD 1.3 billion. That disposal, as we've said in periods past, is consistent with our approach to recycling capital. That's something you should expect us to continue to do into the future as we pursue growth. Also sitting within the strategy -- well, in the results, in addition to the Wodgina numbers, the usual unrealized losses on foreign exchange and also our listed investments, primarily Pilbara Minerals. This is a reconciliation, a data reconciliation of those adjustments to help you follow that linkage through in the appendix and the supplementary information. And I'll talk shortly about impairments that we've taken in the half that also sits in the numbers.

    In terms of the return on invested capital, and I just want to touch on this for a moment because I know it's important to investors. We recognize that we're now sitting on a significant balance of cash. We've said, as long as I've been in the business, that we will continue to invest for growth. That is what we're going to do with that cash. We will value it highly. I think the returns that Chris has just touched on in terms of our track record over 14 years shows an ability within the business to be able to invest successfully for growth. Nothing has changed as we look to the future. And Chris will take you through some of the investment opportunities that we have. From my perspective, it's an incredibly exciting period to be in the business with what we have in front of us. We will continue to target returns in excess of 20%, that's how we think about the business.

    In terms of the P&L, there are a couple of key themes that I just want to pull out. One is -- and Chris will talk through the Mining Services performance in a little bit more detail, but that's a very solid result. And it's importantly driven by performance on projects that we have already as well as new contracts that we landed late in fiscal '19 and we've been seeing the full benefit of those contracts come through in this half. Higher tonnes through the period, as Chris said, but also broader service offering, which has led to that growth. And importantly, that's consistent with what we did in recent periods where we've talked in terms of the growth prospects for this business. You're seeing in this result that growth emerging in the bottom line of $172 million of EBITDA for the Mining Services business.

    On the Commodities business, very strong performance, particularly by iron ore. Tonnes were solid. The price, certainly on the pcp, was much higher. But costs, importantly, under control and in line with what we'd foreshadowed a few months ago with our AGM release.

    In terms of the realizations at iron -- of iron ore, just to help people understand, there have been a couple of factors that have meant the realizations on an average per-tonne basis are a little bit softer than you might have expected. One is the discounts, certainly for the 58% product, did open up a little bit during the period and that had an impact. And also as we've moved to increase output at Kooly, that's opened up other opportunities with that ore body and that's giving us access to other products that we are now putting into the market, which has a slightly different profile. And as we continue to grow Kooly, you should expect that sort of profile to continue.

    In terms of lithium, lithium was effectively a net 0 marginal contributor to earnings in the half. That's one of the stories of the business that -- with the lithium market, where it is, it's soft at the moment. Marion contribution was there, offset by some costs at Wodgina for care and maintenance. The details of all that are in the supplementary information. As lithium comes back on, including the hydroxide in the future, that represents a significant opportunity for the business.

    Just walking quickly through some of the other features. Depreciation, amortization, again, more detail in the back. Depreciation charge, a little bit higher than might have been expected to be the case a few months ago, and that's really driven by the increased run rates coming out of Kooly. It means we're turning over some of those assets a little bit quicker.

    Interest expense. We've got the $700 million bond sitting there, about 8%, offset by interest earnings that we've made on the cash and will continue to make until that cash is invested. Tax for the period was a little bit higher, effective tax rate at about 33%. We don't see that as being anything other than a one-off and that we would expect that to revert to the norms of 30% or thereabouts going forward.

    We've provided in the deck a bridge to help investors understand how the business has performed on the prior comparable period, showing the movement to take us from the $102 million that we did in the first half of '19 through the $330 million. And you can see a strong performance by both services, Mining Services and the iron ore business. In terms of the impairments, basically those assets that we've impaired, almost without exception other than perhaps the stockpiles, are assets that were acquired in one form or another, either directly or by virtue of some sort of acquisition of the business more than 5 years ago. As we've refined our operating plans over the last 6 months and thought about how we're taking the business forward, we've taken a view that those assets aren't required and we've effectively taken them through the impairment mechanism.

    In terms of the cash flow, much better performance from the business in terms of cash conversion this period. Just to put that in context, the last full financial year, FY '19, we had a working capital outflow of over $160 million over that year and that's reduced significantly in this half to $13 million. That outflow that occurred last financial year was permit -- just to remind people, that was primarily associated with the build in stocks as we grew and ramped up the Kooly operation. We're continuing to grow Kooly, but through the period, we've also had the benefit of selling a significant volume of tonnes at Iron Valley and also some residual DSO holdings. So the cash performance in the business has been solid.

    Just note that consistent with what we expected, we paid circa $70 million in tax on the Wodgina transaction profit in December. So we've previously guided to 400 circa tax liability on -- $400 million to $450 million on Wodgina. $70 million of that's gone in December. And that's it, the cash number. In terms of the balance sheet, as I said and Chris said, we're net cash. That cash balance is very valuable to us. It offers us a lot of resilience with current uncertainties globally, which Chris will touch on, but it also gives us a wonderful platform to continue to grow the business with. And as I said, we'll trade that with the discipline that you would expect us to apply.

    In terms of Kemerton, we do have, as Chris said, effectively a 40% interest in that project as it's completed. That shows in the balance sheet as a noncurrent asset, effectively a receivable. And once that's complete, that will come under the balance sheet as an asset and then be depreciated thereafter. In terms of the CapEx and the net debt, we have included a pretty detailed breakdown of the CapEx. You'll see later on in the deck that the CapEx number for the year hasn't changed. A key part of the spend over the last 6 months has been the deferred strip, which has happened at various sites, including Kooly. There is also the Wodgina construction that was completed during the half as we moved that project through in advance of the sale to Albemarle. They are the major items of the Capex.

    And you can see in the waterfall that we've provided, the build of the net debt. We've included the office lease, consistent with the new accounting standards in that calculation, to arrive at a net cash position of just under $80 million. So to summarize, from my perspective, a very strong performance across the board, particularly during a period when lithium prices have been very soft, good cash conversion, very healthy balance sheet and very well positioned for the future. Thanks, Chris.

    Christopher Ellison
    Okay. So operational performance during the period. For those of you that are new to the business, last year was a building year for us. This year is a growth year. Our business, Mineral Resources, it's generally made up of four core pillars. So we have the Mining Services, the Commodities. We've what we call the profit share and the infrastructure and innovation. So sitting in the Mining Service, that's the heartbeat of the business. It's the foundation, the engine room, that's where we focus. That's where we get our agility to be able to be fast movers and to be able to make sure that we've got a highly productive workforce. It keeps us agile. Generally speaking, I don't think it's unrealistic to say if you just set only a couple of mines, life would get pretty boring and you could get fairly lethargic. I mean, our contracting business keeps us at the front end of where we're going.

    Commodities business. We operate 4 mines in the business. So we've got iron ore and lithium in the Pilbara and then we've got iron ore and lithium down in the Goldfields Yilgarn region. We like to be spread geographically and we're lucky we've sort of got those locations over there, a little bit of good planning and a little bit of luck in having that. Then we've also, of course, we've got the 40% ownership of the Kemerton lithium hydroxide plant. We don't own that yet. That is being built by Albemarle. That will be delivered in 2021 when the commissioning starts and we'll take up ownership, about 40% then. That's part of the Wodgina sell-down of that 60% profit share. We take generally an equity position in a mine asset, 40% to 100% normal. We'll fund it, we'll design it, build it, own it, operate it. We'll take a life of mine services contract.

    And finally, on the infrastructure and innovation, what we aim for there is we want to own strategic port and rail allocations. We run supply chain networks, which are very valuable. And then we have the innovation and technology, which helps us develop mainly around our Mining Services business, which, again, keeps us at the front edge of being competitive and delivering to our clients.

    So performance through the Mining Services first in the first half. Great performance from our team. Total tonnes crushed was up 11% compared to an annualized rate of last year. Client retention, amazing. We -- very focused. We have lost no contracts. We've added three, in fact. Koolyanobbing. Good performance down at Kooly. We've got about a 10 million tonne run rate. We're heading up to 11 million hopefully around the end of this month. And then it's our intention over the next 12 months to be able to grow that up to around 15 million tonnes, and that's sustainable in the longer term.

    The open pit mining business. So all the dirt that we dig has basically doubled over the last 6 months and continues to grow. Supply chain logistics. We've moved about 7.1 million tonne of ore either by rail or road to the port. And construction has started on our 15 million tonne NextGen plant. That's going to be replacing an existing plant of about 7 million tonnes. We were -- originally, we let the contract to build that in China about four weeks ago and then about a week ago, we terminated it and we moved that up into Eastern Europe. That was probably the only exposure we've had that's directly been affected by the coronavirus, but we will keep that on track.

    In the energy, we got a study going on to put some solar power down in Yilgarn. We want to displace a couple of megs of power we're generating by diesel, and that's our continued effort to try and get the business free of diesel over the foreseeable future. We're doing a study on a 35-meg gas-fired power station. And in the Perth Basin, we're getting ready to start running 250km of onshore seismic survey. And we're going to drill at least one conventional gas well, about 4.5km deep. I emphasize conventional because all of the region up there so far has been conventional gas and that means that we are not keen on fracking for a lot of reasons.

    The Commodities performance. We've laid out 3 of the tonnes on the 3 sites and Wodgina, of course, is sitting in care and maintenance. So you can run that across your model. Iron ore prices are up, as we all know, though lithium is down and it's been on a continued decline over the last 12 months. Iron ore pricing this year, about $40 a tonne, better than it was same time last year, good result. It has softened over the last month with the -- mainly the news of the coronavirus, but it keeps sort of bouncing around the mid-80s at the moment. We've got an improvement over the last year of about $0.04 a tonne on the exchange rate, so that's worth -- on our grade ore, it's worth about an extra $6 a tonne. So sometimes you just get lucky with commodities. We've got everything sort of running in our favor in iron ore. And the low key -- the low-grade discounts actually earlier have softened a lot as the prices have been firming.

    Koolyanobbing performed with expectations and guidance. And as I said, it's going to continue to grow tonnes. Iron Valley. It's a high-cost operation, but it's one of those mines that just keeps giving. It is dependent on elevated iron ore prices. If prices get down to low numbers, it won't be able to deal with that. And the tonnes that we are running and the costs are basically in expectations with our budget and our guidance we've given.

    The lithium business, it's under pressure. We all know that. It's going to stay there for the foreseeable future. But Mt. Marion is -- continued at a steady run rate. It just keeps delivering about the same tonnes every month. Cost of -- the guys have pulled prospect there over the last 6 months, but it's a temporary thing. We're going to go into a higher strip pit, so those costs are going to move up a bit. And of course, Ganfeng has an offtake arrangement with Mt. Marion, so they take all of the production. Wodgina, pretty much totally complete on the construction. It turned out to be a very impressive site, albeit that it's sitting on care and maintenance. We had about 270 people up there when we shut the mine. And out of the total 270, we were able to move most of them around and we ended up with about 80 on redundancy. First time Mineral Resources has ever had to go and make mass redundancies like that, but we managed it very well and our people moved a lot of them around and we've still got them around the business. But that will stay on care and maintenance until we see any sort of improvement in the -- in that lithium market, which is a ways off.

    Outlook for '20. The crushing, we expect growth to continue at the same pace, Kooly to keep growing its tonnes. As I've said, we've got this NextGen plant, 50 million-tonne unit under construction. We're going to deliver that by August this year. And we've got a number of high-quality opportunities in the Mining Services area that are under discussion, and there's expectation of more significant growth in that area. Processing will remain flat and we expect the mining fleet to probably grow another 20% or 30% over the next 6 months.

    Commodities outlook would give you some tonnes in there and what we expect to happen over those three sites and pretty much bank on Wodgina staying shut for the foreseeable future, at least the remainder of this calendar year. Iron ore development, an area that we're quite focused on. We've got a lot of growth in this area going forward. Koolyanobbing, you understand where that's sort of hitting. I mean, it's laid out. As I said, it's heading towards a 15 million-tonne run rate. We're going to continue to consolidate that whole Yilgarn region. We're talking to our neighbors. We're looking everything that's got any signs of black. There are lots of iron ore outcrops down there that haven't been drilled. We are lining all those up. We're going to drill them. Mt Richardson drilling is starting in March. So we'll continue working through that region. There is a lot of upside for us down there.

    By the end of this year, we're going to have in excess of 800 people on the payroll down there. So you may remember when the McGowan government wanted to try and save that entire region and try and hold people at work, it was about 440 jobs that we saved down there. Indirectly, there's probably about another 500 at the time, so well done to them. They've done a good job. And we've got a good asset out of it and our people have managed it extremely well. They've cut some more costs out of the business, so that's a good story.

    Iron Valley, as I said, it will just continue to tinker along at about an 8 million-tonne run rate as long as we sort of have reasonable sale prices. A couple of the bigger projects going forward. Marillana, we hold a lot of hope for that. We've got drill rigs out there and we're running a fairly aggressive campaign through the labs. And we've probably got about another 4 months of work out there to see if we've got a 20- to 25-year mine life of about 15 million to 20 million-tonne a year, and that ore will be coming out of there in excess of 60% Fe, all going well. We're looking at -- mass yield recovery is important and then balancing that with the -- a grade that we can sell at the top end of the market.

    And then the West Pilbara. We're doing a lot of work down there. We've got to -- kept down there an exploration team. Quite a significant study going on, and we think we're going to have some very good news coming out of there over the next 6 months. We've got exploration drill rigs down there pumping down holes. We are doing a study. In the meantime, we understand roughly how much all we got out there and that will be proved up over the next 6 months and 12 months, but we're looking at about a 3-mine operation in that region. We're looking at running a medium-gauge rails out to the West Pilbara and that will deliver tonnes into Port Hedland and we are looking at building two capesize carrier berths in the inner harbor, so quite an extensive project for us. We've been talking about that for some time, but it's actually starting to get a heartbeat. And we've got a very strong team doing that development.

    The hydroxide. Just to repeat it before, we've got a partnership with a great company in Albemarle. We see them as probably the leading lithium downstreamer in the world. They're very confident in what they do. They've been around running the chemical plants for a long time. They are building the Kemerton plant. They're actually doing an exact copy of the plant they operate in China. That's being built down in the Southwest. We expect that to commission around '21. It's probably going to be -- from commissioning through to its ramp-up to get it to its final design of 2 25,000-tonne trains, it's probably going to be into 2022 when that's really starting to come into its own. But once that's built and they finish spending the money, they then pass over 40% share to us. So we don't have any exposure at all to capital. We have no dollars to that.

    Perth Basin. We got about 6,500 square kilometers of highly prospective acreage out there. In 2020, as I said, we're planning the seismic drilling and a conventional well. We're surrounded out there by 3 of the largest conventional onshore gas discoveries. Two of them happened in the last 12 months. We also have a partner out there. So the well that we're going to drill is lucky a deep one. And Norwest Energy have a 20% interest in that with us and they've got a 22% interest in another plot, EP 426, which looks reasonably prospective as well. We have a 17.3% shareholding in Norwest Energy. On future projects. So we're running fairly hard on 4 significant greenfield projects that we're looking at. They are sizable projects. They all look like they're going to get over the line and they'll get to development stage. A couple of them have got very high-quality infrastructure assets that sit in there that will last 20 to 40 years that will be operated by Mineral Resources. They'll add a lot of horsepower to our Mining Services business.

    As I said earlier, we've got about $1.3 billion cash at the bank and we're adding about $50 million a month to that. So we're going to continue to build our war chest. We're going to continue to invest as we have over the last 25-or-so years. It's nice to be in a strong cash position, not somewhere we've been before. We've always done it pretty tough. But having the cash and investing in high-quality, high-return projects, I think, is going to give the business significant growth going forward. But we always aim for and we are able to achieve at least a 20% return on the capital we invest. So we see that growing our business the way we have in the past is probably the best use of those funds going forward. So we have been asked in the past what we're going to do with all the cash, and I always said we're going to do what we do best, and that is we're going to be remaining at the top end of the Mining Services group that's probably been in the top 5% of delivering returns to their shareholders. We'll keep doing that.

    Just briefly, innovation. It's going pretty well. We're expecting to be able to add some significant revenue to our business through a number of these projects. The 15-million-tonne NextGen plant is a significant development, developed in-house by an engineering staff here, very clever what they've developed with that. They can put the plant on the ground in about six weeks from zero to commissioned and ore coming out of it. In about 8 weeks, you can put 2 of them side by side. You can have a 30-million-tonne operation. And the capital cost is extremely low and the operating cost is low, so a great achievement we can deliver to our clients. We'll be putting a number of those on the ground over the next 12 to 18 months. First one is getting built now. I expect that we'll probably follow that up with another order so we can get one in the yard ready to go straight behind that one.

    Carbon fiber. We've gone a little bit slower on that. So we've finished developing a 150-tonne trace for the MRL internal fleet, and we've moved on now and we're focused on developing the 200-tonne model, and we expect to have that on the ground well before we get to midyear. But we're also looking at working with a partner, the same partner we've got the NextGen plant with on developing carbon fiber screens. We've got them on the drawing board now.

    Synthetic graphite has been very successful. The pilot plant produced 96% graphitic product, and we're looking now at how to commercialize that.

    The BOSS system. That is on hold at the moment. We've had some a couple of technically challenging issues. We're working to try and overcome those. We're confident that we will. We've engaged some external experts to help us find the solutions. That doesn't affect our Pilbara infrastructure project. That was never designed for that. The Pilbara infrastructure project needs to move significantly more tonnes where the BOSS system comes into its own. It's a great unit for a feeder system to existing hubs.

    So that pretty much wraps up where we are. I want to thank our senior staff. We've got an exemplary team sitting in the business. You can see from the results that we've got. We've got a much smaller team than we've had in the past but very agile, very clever, hardworking. So from Mark running the financial side of the business and getting involved much more than -- in the operational side, and I got Mike Grey and Paul Brown that run this business and done an exceptional job for it, so well done to them.

    I also want to make a -- pay tribute to a good friend and colleague, Bruce Goulds. Bruce passed away on the 11th of January. I had to sit down to have a conversation with him and tell him a while back that it's time for him to move on out of the business. He'd been with me 14 years and he needed to go and pay a lot of attention to his health. That broke Bruce's heart not coming to Mineral Resources every day. And then finally, Bruce lost the battle and we buried him a short while ago. But I'm sure there's a lot of you who's out there that dealt with Bruce over the years. He's an outstanding human being, and he absolutely took huge ownership of his part of this business as we grew it over the years.

    So that pretty much wraps it up. We're out in Sydney tomorrow and Melbourne on Friday presenting. So if any of you -- if you've got any questions, we can field them now. Other than that, we probably will see you at each. So look, I'll hand back to you and see if anyone wants to ask us any questions around that.

    Question-and-Answer Session

    Operator
    [Operator Instructions]. Your first question comes from Hayden Bairstow of Macquarie.

    Hayden Bairstow
    Chris, it's a great result. I just want to have a couple of questions on guidance. I mean you left everything unchanged, which I guess is partially prudent given the uncertainty. But just looking at the first half run rate, I mean Mining Services looks like it's in a pretty good position given Kooly's ramping up in the second half. And also on some of the cost guidance, I mean it's a similar story. I guess it's with that ramp up at Kooly, surely, we'd see some sort of cost reduction if we get much higher tonnes in the second half and a similar story for Mt. Marion, I guess, given how low the costs were in the first half. Just interested in your thoughts on the decision not to move any of those guidance ranges at this point.

    Christopher Ellison
    Yes. Hayden, good questions. First, I mean I don't think there's any doubt that this coronavirus is going to have an effect on the mining business. It's going to have an effect on a lot of businesses from where we're sitting. We just don't understand how much of an effect it will have. And secondly, look, over the years, there's always been something that comes along that really -- the unexpected that touches, as you know, a lot of the -- we've had the SARS. We've had the Asian meltdown. We've had the GFC. All of those events, no one saw them coming. And I'm just not quite sure what this is -- if there's a knock-on effect with this coming out. But if we get down the track to March-April and we can see a different result coming out to the guidance we've given, we'll flag it then.

    But I mean, look, I think that if we tried to increase the result now, I mean, I think we'd be a little bit foolish because I mean, we can see some headwinds out there. And it's just -- look, I mean, you guys can figure it out as much as we can. I mean we're no smarter than what you are, but I think it's inevitable that there's going to be an effect where -- whether they slow down shipping or -- no one's quite sure yet. Probably, the one thing I would say about the coronavirus is that I think that we don't want to overreact to it. I think we just need to make sure we're doing all of the precautionary things that we can in managing our business going forward. An overreaction would be silly. But it could be that they've got this under control, but for all those reasons, we're not moving our guidance.

    Mark Wilson
    And Hayden, just to -- it's Mark. Just to extend on that, the question on the cost side, again, that will factor into anything that we have through March-April when we look at the cost as we increase it.

    Operator
    Your next question comes from Rahul Anand of Morgan Stanley.

    Rahul Anand
    I might start with Mt. Marion, if I may, please. So in terms of the first half results, we're running roughly 45,000 tonnes ahead of shipments and you're clocking roughly 480,000 tonnes on a production run rate. I don't want to ask the guidance change question but I guess what I want to ask is, is there any reason for us to think that perhaps there's a difference in the production and shipment numbers being reported? Or are they exactly like-for-like, i.e., you built inventories to the tune of about 45,000 tonnes? That's the first part of it, and I'll come back with the second question, which is also on Mt. Marion.

    Christopher Ellison
    Rahul, the tonnes, we're running out of it. We seem to consistently ship around 33,000 to 35,000 a month. That goes pretty well. The -- we're about to move into a new pit, and the mining costs are going to go up. There's no doubt with that. I mean our mine planning tells us that. So that's why we've left the guidance on Mt. Marion where it is because we're going to -- we think the guidance we've given is pretty much spot on with what those final numbers would be. So good cost in the first half, high cost in the second half.

    Rahul Anand
    Right. So I'm actually trying to touch more on the differential between production and shipments, Chris. So we saw about 45,000 tonnes being produced more than what was shipped. Was that all -- has that all gone to a build in inventories in the first half?

    Christopher Ellison
    No. No. I mean I'll have to come back to you on that.

    Mark Wilson
    It's a timing thing, Rahul, just timing of the shipments.

    Rahul Anand
    Right. Okay. But that is all going to be shipped out, right? There's no sort of moisture differentials or anything that we need to worry about?

    Christopher Ellison
    No, I don't...

    Mark Wilson
    No permanent sort of adjustment that you need to think or work through.

    Rahul Anand
    Perfect. Okay. And then the second part of the question is more related to your grade guidance for the full year, which also remains unchanged. Now we've obviously switched to a split whereby only 63% of the first half was high grade. And it looks like the second half is going to have a lot more lower grade now as well as you wait for, I guess, new studies and study results and plans to take the plant to full 6%. Could we perhaps chat about that a bit to understand whether that's something that needs to be looked at closely in terms of guidance? And then also, I saw an announcement from Ganfeng setting aside $50 million for the Mt. Marion plant. So is there aggression in the study? Or how is it moving at the moment?

    Christopher Ellison
    No. Look, it's moving well. But I mean, Ganfeng, the 4% was only -- it was an innovation that guys did a few years ago where they could add some equipment and pull that 4% out on top of the 6%. And by the time we got around to changing it all in 6%, Ganfeng decided they really liked it, and they had a plant that was really almost designed for that. So they want us to keep supplying it for the foreseeable future. So what we've done is we've done quite a lot of work on the plant. We've been able to throttle the plant back and not run it as that. So that means we've turned a lot of components off and we're trying -- that's giving us a downward pressure on our costs. So we've been able to wash some costs out doing that. But we're going to lose those savings, as I said, going forward on the strip and this new deposit we're moving into. It should only last somewhere around 3 to 6 months, but once we get through that, we get back to a much steadier state and a lower cost run rate in the plant. So we'll tie those together in about 6 months' time and you'll see a noticeable difference.

    Rahul Anand
    Okay. So I mean, in the second half then, would you be doing roughly 75% to 80% 6% product? Because that's roughly what's required to be at 70% for the full year.

    Christopher Ellison
    No. No. We're not going to achieve that, not in these 6 months going forward.

    Operator
    Your next question comes from Levi Spry from JPMorgan.

    Levi Spry
    Two questions, I've got, by the sounds of it. So firstly, Mining Services, EBITDA of $172 million, but your guidance is $280 million to $300 million. Is that right? What are the risks to that not being annualized?

    Christopher Ellison
    The risks are China throttling back on its intake of ore, of commodities.

    Levi Spry
    Yes. But how does that affect that division? How will we see it?

    Christopher Ellison
    Well, we would be producing -- I mean if China has to throttle back, they have to shut down some of their plants. There will be less all going in. We'll have to pull back on the production. That's the worst-case scenario.

    Mark Wilson
    So it affects us in a couple of ways. Levi, it's Mark. The -- clearly, we have an arm's length approach to the way that we think about Mining Services. It charges typically on a per-tonne basis, so either internally or externally. We think of them as the same. So if we're selling externally or crushing externally in this reduced demand, there's a risk there. We have some sort of contractual protections in those external contracts. But more on the internal side with Kooly, even Iron Valley, Mt. Marion as well, we provide mining services to the joint venture there. And if there's, for whatever reason, reduced ability to transact on lithium spot, it will impact on the Mining Services. So all of those are possible. Do you think they're likely -- we think it's a risk, and all we're doing is trying to be prudent at this point in time given that we're in the fifth week in the new period.

    Levi Spry
    Yes. Okay. And so on Kemerton, can you just give us a bit of an update on what it looks like down on-site? What stage is that? And then also just interested in when we start to think about, I guess, the third and fourth train or what your intentions are for the other 50% of the Wodgina product or finding a home for it, the time frames around that.

    Christopher Ellison
    Yes. Sure. So we have no involvement in Kemerton at all. But in saying that, we're here to help Albemarle in any way we can to get their costs down. So we put our crane fleet. Progressively, it's moving down there to be able to do all the heavy lifting, and we've been able to save them some money on that. We're going to put some of our core construction crew down there, and they're going to do some of the build. We get paid for that. We get reimbursed for anything we're doing on that.

    The trains are scheduled to come online in '21, both of them. And we have an expectation that, that ramp-up could take 6 to 9 months. Don't quote me on that at the moment, but that's just a guess. The remainder of the ore for Wodgina, I expect that will be processed over in Asia in the medium term. I don't see any immediate plans for us at Kemerton but I'm not booking for Albemarle. They may decide to do something different. But certainly for us, I mean, I think we're trying to top out our 2 trains down there.

    Operator
    Your next question comes from Damien Williamson of Bell Potter.

    Damien Williamson
    Just a quick question on capital management. You made the comment that you've got $1.3 billion in cash and growing. What's your view on the USD 700 million bond, which was priced at about 8%, which is really reflecting the high-yield market in America last year and the hurdles that Wodgina sales you had to go through? And would you say the potential of buying that back early under the clauses for that bond?

    Christopher Ellison
    No. No. We don't -- we have -- look, I think we're happy with the interest rate we've gotten. We're happy to have that bond, and we're happy to have the cash in the bank, considering that there are some very, very good opportunities out there going forward. If we can get -- we can invest that and get 20%-plus return on that money invested, I'd see no compelling reason why we would want to go and buy that bond back to -- cash is king at the moment.

    Damien Williamson
    Okay. And just another question on the Wodgina with the mine going to care and maintenance. You say that potentially taking that mine back on board once the Kemerton modules are up and running and transferred across to you. Do you think that could be a catalyst to restating the Wodgina mine?

    Christopher Ellison
    Yes. Look, we really haven't made -- we haven't even thought about that. We're just playing it by ear because I mean, there's no real indicators on when the demand is going to come back. It's sufficient to turn that on. And look, over the last 30 years, we've seen the tide change. We've seen prices go ballistic and we've seen them go through the floor. I mean no one would have thought that last year, we're going to see iron ore hit up to USD 125 a tonne, so hard to know. The one thing we do know is that in 5 years, 10, 15 years from now, there's going to be a very large, consistent demand for lithium. And there's going to be growing -- a growing need for power storage. We just don't know when that's going to start sufficiently soak up the demand.

    Operator
    Your next question is a follow-up question from Hayden Bairstow of Macquarie.

    Hayden Bairstow
    Just a couple on -- firstly on Mining Services. I mean there's obviously no new contracts or anything in the first half. Have you got any sort of major renewals coming in the second half? Or are you seeing any opportunity for work with some of the majors in the Pilbara? So obviously, it's -- and particularly, Rio struggling when to hit volume targets of late. I was just interested in your thoughts on that.

    And then also, just on Mt. Marion, obviously, spodumene prices are coming under pressure. Do you have some sort of floor price agreement with Ganfeng? Or if that mine starts losing a bit more money, do you just keep pushing along with it? Or is -- given you've got the services contract in Ganfeng obviously makes any downstream. Or is there an opportunity or a chance that actually could get -- put on care and maintenance as well?

    Christopher Ellison
    Never say never. I would think unlikely that's Ganfeng's. First source of good ore, and it probably remains their only source of good ore. They own half the mine, and they've got an offtake in all of it. And yes, there's a floor price. So we get down to a cost-plus arrangement if the price is less than our cost of producing. So it's designed so that the mine doesn't lose money.

    Hayden Bairstow
    And on the contract mining business in the Pilbara?

    Christopher Ellison
    Oh sorry. Yes. Look, I think there's a lot of -- there is no doubt there's good opportunity. You can see from our growth where we are that our team have been very successful. And there is no -- there is a range. I said earlier there are some good discussions going on and some opportunities that are sitting out there. We generally grow that business at about 15% a year. It's been more than that in the first half. It's going to be more than that in the second half. So look, we are all over the opportunities that are sitting out there, and we'd like to think we're going to continue to get more than our peer share.

    Mark Wilson
    Hayden, just if I can jump into it -- to that. These opportunities typically take some time to negotiate. And occasionally, they take longer than we would like, longer than we might expect, but we typically get there in the end. So there are a number of opportunities that we're pursuing. They're really underpinned by a few things. One is the ability of our business to perform with a high degree of safety, which is really important to our clients and to ourselves, of course. The second is productivity. And I think we can show and have shown in the past that we're as productive, more productive than others in the sector. And then the third piece is the IP that sits in the minds of our team. And they're key differentiators for us, and that's what's driving those conversations with clients.

    Operator
    Your next question comes from Matthew Chen of Foster Stockbroking.

    Matthew Chen
    I just wanted to get a sense of where your end users for your iron ore product are situated in China, like there are some channels -- there's a port of call that the shipments are going to return from the Chinese New Year holiday at the start of this week. You might have some early indication of how things are playing out after the break of the novel coronavirus.

    Christopher Ellison
    Yes. Look, I haven't heard of any ships being turned away or laid up. There is -- the first issue that was put in place is that any ships that leave China and come down to Australia, they've got to be 14 days clear of China. So that just means that they want to know if they're all safe and well. So if they get here and after 12 days steaming, they pack up for 2. But I haven't heard of any ships being turned away, and certainly, none of our clients have asked us to stop or slow down. But I think we're all waiting for this weekend, and that's when a big chunk of the -- well, the remainder of those that aren't back at work come off the New Year. And we're going to see a few hundred million people moving across China. So within the next 7 to 10 days beyond that, that's when we get the indication on how bad this is going to get or how good it's going to be.

    So in saying that, there are a number of the smelters out there that are operating now. There's a lot of them that didn't turn off. They run on a skeleton staff. So a lot of those are unaffected. I certainly know the guys from Albemarle on their hydroxide plants, they're running. There's a few out there that aren't. So it's a bit patchy. But look, the real test comes at the end of February when -- once all the migration back to the cities happens and they have time to see who has actually picked up the virus.

    Operator
    Your next question is a follow-up question from Rahul Anand of Morgan Stanley.

    Rahul Anand
    Just wanted to touch a bit on the Mining Services business. Mark, perhaps you can help here as well. First half '20 Mining Services EBITDA, taking out the negative 10% from construction, that 1 82 number, that's basically all ongoing business. There's no sort of initiation payments of crushing or anything lumpy in there. That's the first part of the question. And then the second part is if we look into next year, the extra 15 million tonnes per annum, that's over and above this ongoing run rate. Am I right to think of it that way?

    Christopher Ellison
    That 15-million-tonne plant that we spoke about, the NextGen 2 plant, so that's replacing an existing 7-million-tonne plant. It's net of about 7 or 8.

    Rahul Anand
    Okay. Understood. And any lumpy payments at all in that 1 82 number, Chris, in terms of P&A? Sometimes there's initiation payments for setting up crushers, et cetera. So anything of that sort in there?

    Christopher Ellison
    I wish. No, nothing, no initiation gifts or anything of that matter. They're not -- they're just not that generous anymore. In the old days, we used to get them but they're welcome to do the site payment. They tend to know that our balance sheet, they say we can afford to get it there ourselves and spread it over the life of the mine. But no, they're all normal operating charges with no lumps in there.

    Operator
    [Operator Instructions]. Your next question comes from Scott Ashton of SHA Energy Consulting.

    Scott Ashton
    Just a quick question on your energy business in WA. You've been pretty well known for making astute deals at the corporate and also at the asset level. So just sort of wondering why don't you throw a bit more money at the energy business. You're only doing one well and a bit of seismic. So probably just on the back of that, what's the sort of the cost of the well that you plan to drill? And I think from memory, last year, you were sort of indicating maybe a 3-well program. So what sort of changed there in going after a fairly big price in terms of gas?

    Christopher Ellison
    Yes. Interesting you should say that. We've been -- I was going to say we've been playing with that for probably about 18 months or 2 years. That's probably the truth of it, but we've got a plan on where we're going on that. I can't share it with you at the moment, but we're going to do something pretty amazing over the next few months that you'll be really impressed with. So that's going to be -- that will turn out to be a very good asset for us, and I'll give you some more news on that in about 6 months from now. But we're doing something, we think, pretty amazing with that.

    Mark Wilson
    Yes. And just to expand on that -- Scott, it's Mark. We do see significant opportunity in that energy space, and it does get a fair bit of attention internally.

    Scott Ashton
    Yes. I suppose just -- again, I appreciate all that. I'm certainly not going to push you on a bit. When you're generating sort of $50 million a month and the cash position that you've got, you're in a very sort of privileged financial position to make some really meaningful changes, especially if you're going to build sort of a multi-decade business on a couple of commodities. So I just -- I sort of hope you're not just doing sort of a capital-light approach to really going after the gas irrespective the fact that you've got two other guys that have got, what, collectively maybe two Tcf of gas. If you find another Tcf there, I mean that's money for gen, for your business, I would have thought.

    Christopher Ellison
    Yes, it is but it's great to go and find the gas. It's like finding iron ore. You -- finding it is one thing, but being able to monetize it and make some serious return of it is probably -- that's where the trick is. I mean I think that we've come up with a good solution on what we're going to do with that. But look, you'll be happy with the results we'll get on that. So just give us a little more time to be able to consolidate that.

    Operator
    There are no further questions at this time. I will now hand back to Mr. Ellison for closing remarks.

    Christopher Ellison
    Okay. Thanks. Look, thanks, everyone, for joining. Thanks for your support that you've given us over the years and over recent times. As always, we're focused on trying to deliver for our shareholders but also importantly, delivering for the people who work in the business as well. It's a circle. So as I said earlier, we'll be out in Sydney and Melbourne tomorrow and Friday. So we'll catch up with some of you there if we're not competing with anyone else that's delivering better results, and we'll be able to probably give you a little more detail. But look, thanks for joining and we'll see you over the next few days.
     
    Last edited: Feb 22, 2020
    #62     Feb 22, 2020
  3. themickey

    themickey

    index(5).png
    Currently has a PE 3.5
     
    #63     Feb 22, 2020
  4. themickey

    themickey

    https://www.bloomberg.com/news/arti...lithium-in-hours-not-months?srnd=premium-asia

    Breakthrough Technique Could Produce Lithium in Hours Not Months
    David Stringer March 09, 2020
    1400x-1.jpg
    A new filtration technique could cut the time needed to produce lithium raw materials at South America’s vast evaporation ponds to hours from months, according to a study by a group of international scientists.

    The method, developed by researchers at Australia’s national science institute CSIRO, Monash University, the University of Melbourne and the University of Texas at Austin, mimics the filtering capabilities of living cells to extract lithium from concentrated salt water, where the metal is typically mixed with other materials, including potassium and salt.

    “We could one day have the capability to produce simple filters that will take hours to extract lithium from brine, rather than several months to years,” said Huanting Wang, a professor of chemical engineering at Monash University, and among the authors of newly published research on the technique.

    Early studies indicate about 90% of contained lithium can be recovered using the filter system, compared to about 30% when producers use the existing process of pumping brines into a series of ponds and allowing the sun to evaporate the liquid for as long as 18 months, according to the researchers. Fort Lauderdale-based Energy Exploration Technologies Inc., which is seeking to commercialize the technology, says the process can also cut refining costs by about half.

    Lithium, key for rechargebale batteries that power electric cars, is currently mainly produced either by refining spodumene, a mineral typically extracted from hard rock mines in Australia, or by processing salty brines found predominantly in Chile, Argentina and Bolivia.

    Though lithium prices have tumbled since mid-2018 as a raft of new mine projects have lifted supply and amid weaker demand in China, suppliers are focused on developing more efficient production techniques ahead of a forecast demand revival from about 2023, according to BloombergNEF. There’s currently not enough lithium capacity under development to meet a forecast 2 million tons of total demand by 2030, BNEF said in a note last month.

    New extraction technologies promise to curb the use of water and energy in lithium production, and to potentially open up new sources of supply, including petroleum wastewater and geothermal brines, according to BNEF. Companies including Eramet SA, Rincon Ltd. and Summit Nanotech Corp. are among others who’re developing nano-filtration technologies.
     
    #64     Mar 10, 2020
    vanzandt likes this.
  5. themickey

    themickey

    LIT_Barchart_Interactive_Chart_01_22_2022.png
    Party is over for a while, cold bath time.
    Buying opportunities down the track though for those who remain focused.
     
    #65     Jan 22, 2022
    vanzandt likes this.
  6. themickey

    themickey

    It's been some while since last posting in this thread, here goes again.

    There are no sectors I'm aware of which have been trashed as hard as Lithium this past year or two.
    Like as trading is, market darlings only stay that way a short while then become overheated and flame out. But with market darlings, frequently they offer yet another opportunity.
    This because market darling often have some substance to their story, just that technical traders will take the money and run, leaving a shop full of bagholders nursing wounds.

    IT'S TIME FOR LITHIUMS DAY BACK IN THE LIMELIGHT!

    Stocks you may wish to consider atm on US mkts....
    SQM, LTHM, LAC, SGML, PILBF, LIT (ETF)

    The ASX market though offer a bigger variety of lithium stocks, there are some real beauties on ASX.
    AKE, AZL, CXO, INR, LKE, LRS, LTR, MIN, PLL, PLS, SYA, just to name a few.

    Do your own research.
     
    #66     Dec 19, 2023
    vanzandt likes this.
  7. themickey

    themickey

    upload_2023-12-20_3-29-18.png
    Lithium ETF, 3 years, weekly
     
    #67     Dec 19, 2023