Earnings Transcript for LINRF - Q1 Fiscal Year 2025

Operator: Good morning, everyone, and welcome to the September Quarterly Webcast for Liontown Resources. I have Tony Ottaviano, Managing Director and CEO; Adam Smits, Chief Operating Officer; and Jon Latto, Chief Financial Officer, with me this morning to present the company's results. Following the formal presentation, there will be a Q&A session for investors and analysts. Participants can ask both text and live audio questions during today's call. [Operator Instructions] If you have any issues asking a question via the web, a backup phone line is available. Dial-in details can be found on the Request to Speak page or on the Home tab under Asking Audio Questions. To view documents relevant to today's meetings select the documents icon. A list of all available documents will appear. When selected, the document will open within the platform. You will still be able to listen to the meeting, while viewing the documents. Text questions can be submitted at any time, and the audio queue is now open. I will now hand over to Tony Ottaviano.

Antonino Ottaviano: Thank you, Josh, and welcome, everyone, to the call. We are immensely proud to today deliver our first quarterly, which includes a suite of production results. It's been an immensely proud journey that we've been able to do, from explorer to developer, now to producer. So we've joined the ranks of the global lithium producers as of today. This quarterly report demonstrates very clearly, our continuation of what we say we deliver, and we are in the process of moving forward on a ramp-up that we're very confident, and is in line with our expectations. So if we go to the first slide, please, Josh, is the important information. So the next one, please. Okay. I'd like to start with ESG and the first bucket being safety. I mean we are a company that has come out of construction, and we're now moving into a new phase of being an operator. As a result, the risks present themselves in a different way. And the management team led by Adam Smits are very conscious of this, and our focus remains relentless on safety. Any injury is one injury too many. And whilst these results are steady, we continually look to remove all injuries from the workplace as best we can. Our social metric around - one of the social metrics, we've got many, but the one around female participation in the workforce. And again, from a company that started with nothing, we've now got well over 320 employees, and we've hit the industry standard on female participation. That's not the end. It's just the beginning. Whilst [to be in the town] can offer various value propositions for female employees to join them, we'd like to encourage females to also consider companies such as us that, we can offer a differentiated value proposition. On the environment, and there's a great photo that demonstrates this. A company of our size made a bold commitment that we would get at least 60% renewable power, and build Australia's largest hybrid power station, and we've done that. Not only have we done that. We've exceeded our 60% target, with 86% renewable penetration at first production. And finally, again, like injuries, we don't want any material reportable incidents, and we've done well there, and we continue to be vigilant. Next slide, please, Josh. Looking at production highlights. I might hand over to Adam to give us that overall view of production.

Adam Smits: Okay. Good morning, everyone. I think the key metrics here, are pretty standard for a company such as ours. Mining, 4.1 million tonnes for the quarter. We started mining very early in the piece. The open pit mining has been running almost 20 months. Underground has been running since last October, so nearly 12 months. And that's proven in a way that's just, I guess, drumbeating through and producing the tonnes when we need them. So we're not living hand to mouth. We've got decent stockpiles on the ROM at grade. Processing 280,000 tonnes for the quarter based on two months. To put that in context, we've already processed nearly 200,000 this month. So you can see the progression from when we started. Plant availability, I think, reflects the amount of effort, design and effort and work that we put into building the plant, 87% for the quarter. To put that in context, 99% for the last week, 98% for the last month. So this is real, I guess, a real positive for what we've built and allows the team, to then optimize the plan. And that's where people should get some confidence. Production, 28,000 dry metric tonnes for the quarter. That's in excess of 52,000 tonnes as we sit today, with sort of 65,000 tonnes forecast to be shipped. So that gives you a feel, for how confident we're going with the production. Sales 10,000 that was our first shipment. Our second shipment got away last Friday of another 22,000. So you can see not only are we producing it, but we're getting it out the door as well. And lithia recovery at 51%, there's a chart a little bit further in the slide deck that shows you how that has progressed, and continues to progress, I think would be the best way with lithia recovery.

Antonino Ottaviano: Thank you, Adam. So if we can go to the next slide, please. Mining performance. So there's a suite of slides now that we will talk through, which are regarding our overall performance. This will be something I will share with Adam. I will just hit some highlights. As Adam mentioned, we've been going in the open pit for more than 20 months, and we've been getting through the underground for over -- nearly 12 months. And if you look at some of those photos, the open pit, we've now got the full flow of the ore body, as we've predicted as part of our mine scheduling. So, we're now producing 100% ore, very little waste. The underground, you can see from that photo, tremendous progress. We've got jumbo productivity in excess of 311 meters per jumbo per month. And in the recent month, September, we averaged over 320 meters per jumbo per month, which is an outstanding effort. And you can see the ground conditions in the underground. They are exactly what we expected. It's dry and very good from a geotech perspective. Adam, do you want to add any of the specifics around…?

Adam Smits: No. Look, I think the underground has just progressed remarkably well. Byrnecut as a partner has been exceptional. We have over 5,000 meters of development now, both capital operating and level development. The open pit, the timing of that pit was quite critical. We wanted to actually be in ore when the plant started up. So not only have ore on the ROM pad, but be producing more ore. We're forecasting by the end of the year to have north of 1 million tonnes of ore on the ROM pad, or stockpile next to the plant, to give you a feel for how well that pit is going, and the - I guess, the foresight in starting that open pit team early. As Tony said, no major issues in terms of hydrology. In fact, we've had no water seen underground. And likewise, the pit continues to be dry. Importantly, in terms of weather events, both the underground and the open pit, there's been a lot of work putting them, and tested throughout the last year or so, to prove that we're not going to get interruptions in ore supply, due to rain events.

Antonino Ottaviano: Thank you, Adam. Next slide, please, Josh. Now this one, these next few slides, I will hand over to Adam. But as a CEO, I'm very, very proud of these outcomes. Only eight weeks' worth of data, and you can see the trends. And I've got to thank our designers like Lycopodium, and all our partners in helping us get to the plant up and running, and producing these sorts of results only after eight weeks.

Adam Smits: Yes. As I touched on earlier, a key focus in the design phase with Lycopodium was around a very operable and maintainable plant. A lot of effort and time was put into selecting the right materials, based on past previous or other projects. What would you call it, battles with poor material selection. Certainly, we haven't had those issues to-date. As I said earlier, 98% availability for this month is where we're tracking, and 99% for the last week. And you can see that trend on availability there. The only dip really was when we had a shutdown at the beginning of this month. In terms of recovery, there's been a steady progression there in recovery, from where we started in week one to sort of where we're sitting now. Average last week was 55%. This week, we're in the 60s. So there's definite progression is what we expected. We've got - I think to put it in context though, we've got a brand-new team with a brand new plant, and these curves, and this is reflecting not only, I guess, the ramp-up phase, but it's reflecting that the plant is being commissioned. So we are commissioning and ramping up simultaneously, and that's what those numbers are reflecting. So I think it's fairly remarkable that we're not far away from some of our peers, certainly in terms of recovery after barely two months of operation. The other point there to point out, is tantalum came on stream in October this month, already north of 70 tonnes there of tantalum. That is just like icing on the cake in terms of income for the company, and that's worked straight out of the box, with plenty of room for improvement. So there's more upside there as well.

Antonino Ottaviano: The final point that I'd make on the plant is, we've built and now commissioned and into operation the most modern - lithium plant on the planet, and with maintenance and operability front of mind, which then translates to operating costs. So next slide, please, Josh. There's a further reinforcement of the plant's performance, and I'll get Adam to talk to you, through this as well.

Adam Smits: Yes. Look, I think just in terms of weekly production and not only throughput, but also production, so you can see there the milling tonnes have steadily increased. We're roughly putting through 7,000 to 8,000 tonnes a day now, and then it continues to improve. It's all part of the ramp-up. It's all planned. And likewise, the concentrate production, the last couple of weeks, sort of reflecting where we're going, north of 1,000 tonnes a day of concentrate. Importantly, that concentrate from day three, I think it was, has been on spec. So north of 5% lithium, and well under 1.5% iron. So...

Antonino Ottaviano: And we have produced over six at times.

Adam Smits: And the last three or four days, it's been north of six. Just to give people an indication, north of six, north of 66% recovery. So real, real metrics; real, real progress, again, reflecting the money and the time and the effort, and the design work that went in upfront. It hasn't been just to build a shiny plant. It is delivering results. The crushing circuit is idling. It runs between six and 10 hours a shift simply, because it's got that excess capacity up at sleeve.

Antonino Ottaviano: And finally, on the plant design, as Adam has already talked about, we've got a whole of all flow sheet, which is providing a stable platform for us to be able to progressively improve, and get the efficiencies we expect. And there's significant optimization levers still available to us. We're only just started, so we know what they are, and we're hunting them down. Next slide, please, Josh. On shipping, as we've mentioned in our opening slides, we've had a strong start to shipments, and our offtakes. Our first shipment went out of Geraldton on the 27th of September. We've also initiated our spot sales strategy, as we've always indicated, from the last two and a half years, that we're always going to dedicate a portion of our production, to the spot market in order to generate that transparency that's required. And we've done that, and we're delivering on that. Sales of the proceeds from this quarter, will be recognized in the December quarterly. On the offtake agreements, our strategic offtake agreements, we're planning to progressively deliver into them as production ramps up, and there will be announcements on that in due course. The other point of note, is we've had negotiations with Ford, and we've come down to a win-win situation, where we've now balanced our offtake book by having some of our product priced off a carbonate index, as opposed to a hydroxide only. And in return, Ford is getting their product when they require it. Next slide, please, Josh. On the cash flow waterfall, I'll now go to my CFO, Jon. And Jon can walk you through that.

Jon Latto: Yes. Thanks very much, Tony. What I'll do is just walk across the cash flow from left to right. So, we opened the period with $123 million of cash on hand. Clearly, as we announced to the market, we then secured a US$250 million in convertible notes with our foundational offtake partner LGES, and that converted to A$372 million. So that's the big green bar you can see there. Moving across, we then had some financing costs, and that's primarily some leasing costs that we paid. Plus, obviously, there's some - there's some adviser fees and legal fees associated with putting the convertible note in place. Moving across, you see a $1 million deposit that was associated with a 20,000 tonne sale that we made in September. That's a small deposit associated with that sale. Obviously, the inflow of those funds we expect to receive, or we will receive or have received in October. Then what you see is the $52 million outflow associated with our operating activities. So what that is, is our mining costs at the open pit for July, August and September. Our processing cost for August and September, given that we started production on the 31st of July, plus, obviously, our site administration costs, our maintenance costs and also our corporate costs. Then there's a small little bar of $2 million of net interest receipts, and a few minor sort of fees, but basically that's an inflow. And then, we move across to a $29 million bar, and what that effectively relates to, is the capital spend at our mining operations. So we've got our deferred waste in our open pit, but also the cost of moving forward with our underground, looking to bring that online. And when you take all that into account, we would have ended up pre any capital spend associated with the Kathleen Valley project, with a cash balance of $413 million. Then during the quarter, we spent $81 million - we had $81 million outflow associated with costs required to get to first output at Kathleen Valley. And that cost things like the - EPCM contractor, the structure mechanical piping, [mod squad], first fill, first spares things like that. And then, we had some capital spend of $69 million, and that really relates to additional capital spend that was not required for first production. And that's primarily expenditure on the paste plant, which is required for the underground, but also capitalized commissioning costs as we ramp - as we continue to ramp, the processing plant up. And that leaves us with a very healthy cash position at the end of the quarter of $263 million. And having said that, I'll hand back to Tony.

Antonino Ottaviano: Thanks, Jon. Can we move to the next slide, please, Josh? Okay. Business optimization, we want to be strong through the cycle. We've indicated in our more recent announcements around the fact that we have embarked on a business optimization, looking at our costs, looking at our mine plan, and how best we optimize. But first and foremost, it starts with productivity. We've already mentioned that the plant is producing in line with our expectations, but we want to get more productive, and we've got a number of operational levers that will deliver this for us. The second piece, which we've been highlighting for some time is our mine plan optimization. We've got a world-class ore body in Kathleen Valley. We've designed that ore body to be exploited, when we had a market that was extremely strong, and we were getting to 3 million tonnes as quick as we possibly could, and then quickly ramping up to four. The world has changed, and we need to understand how that operates within that context, and we've got some strong options in that regard. We're looking at all our input costs, everything from existing contracts to new contracts. All the consumable costs, everything is being reviewed, and we're making fantastic progress. This is a systemized, well-organized focus on all key drivers of operating costs in the business. And finally, like everything, there should be a capital component, which we're looking at. We've done - we're assessing all our capital spend from top to bottom. We're looking at whether we can optimize that capital spend, defer it or remove it entirely, with the view we're not going to simply remove and then replace it in operating costs, because there's also a focus on that. We're looking at recurring savings. We're also going to be implementing a capital allocation approach and process, and that will come out, and that will give us further insight on how capital will compete within the organization. And finally, we continue to look at our mining engineers, our mine planners, continually look at how to best spend the sustaining capital in the underground, in order to optimize development costs. We will be providing an update to the market. We said we were going to provide it in the first quarter of next calendar year. We brought that forward to by the end of this year, and that was a result of we're getting strong performance in the plant, and the work is being done. So, we will be able to give you further insight on that in the coming weeks. Next slide, please. Finally, as a summary, safety continues to be our priority. And we've demonstrated that we're moving from construction into operations. We're acute that, that has a different - there are different suite of risks, and we are looking at that and managing that. We've joined the ranks of being global lithium producers, and we're on our ramp-up, and we've delivered our first shipment, and we got clear line of sight around steady state. Our mining activity continues to progress to plan, with the underground achieving nearly 1,900 meters of development for the quarter, at a jumbo productivity of in excess of 300. As I said, the last month, we've got north of 320. On the mining activities, we will produce - when we do make the announcement on the mine plan, a suite of options. And we will pick the option that we believe will best optimize the business, through this current cycle and into the foreseeable future. It won't include care and maintenance, just to be clear. We've got a strong balance sheet with $263 million worth of cash in the bank. We continue to collaborate with our customers. The reason we have this customer-led finance is, because our interests are aligned. Our customers want our product, and we want Tier 1 customers, and we continue to work together on that, as we manage a very difficult market. And we are - and we have initiated our spot strategy. Finally, it all starts at the resource. We've got a high-grade large resource in Kathleen Valley. That provides optionality in a whole range of things. We've got a plant that gives us that optionality, and we've got an ore body that gives us that optionality. And we'll be able to provide guidance to the market, on how we navigate this market through that, with this ore body and the plant we've designed. And we'll provide that business update, as I said, by the end of this year, maybe earlier. So that brings our presentation to an end. I'll now, Josh, hand over to Q&A.

Operator: Thank you, Tony. [Operator Instructions] Our first question today comes from Kate McCutcheon from Citi. Kate, please go ahead after the beep.

Kate McCutcheon: Oh hi, Tony and Adam, well done on the ramp-up and the physicals. You've just said that the mine plan update will come in the next couple of months. What can we expect on that? I think you just mentioned options. Will there be recut operating cost for the 3 million tonne case? I think the last market disclosures were based on 4 million tonne case. And would it be fair to expect lower concentrate grades, as a response to what customers are wanting?

Antonino Ottaviano: Kate, we will provide all of what you've requested in that update. Detailed costs - the mine plan that we've selected to take us through, our position on concentrate grade, all those things will come out in the next few weeks. I'm not going to preempt it now. But what I will say, Kate, is we will publish our costs according to the World Gold Standard. We will give you cash costs and all-in sustaining costs. We're not going to play games with things that are in and out, and not included. We're going to be very transparent in how we produce it, and I would recommend the industry does the same.

Kate McCutcheon: Okay. Good. I like it. And then just on the CapEx, I think you just said there was about $70 million there that wasn't required for commissioning. Does this mean that it wasn't included in that $120 mill that you said was left to spend in CapEx at Kathleen Valley when the convertible was announced? Or is it a pull forward of spend? I just don't recall there being any growth CapEx in your study after commissioning. And can you just remind me when you expect to declare commercial production, and how to think about the remaining construction CapEx per se?

Antonino Ottaviano: Okay. A couple of points to that. The $120 million that we - or $122 million that we announced as money still to spend for the project when we did the convertible note was to bring on the project to first production. The paste fill plant, for example, is not required - wasn't required for first production. In fact, it will be required a little bit later. So therefore, that capital was spent and included as part of our working capital. And that's what we're showing in the $69 million. In terms of commercial production, the - we have flexibility within our offtake agreements, and I've already mentioned this in our presentation that we can call commercial production on a customer-by-customer basis, right? So, we will make a series of announcements around commercial production in the foreseeable future, and we'll address that point. But it's not a requirement of anything specific, right? It's when we believe that it's our election when we're ready, and confident that we can supply into those contracts.

Operator: Our next question today comes from Hugo Nicolaci from Goldman Sachs. Hugo, please go ahead after the beep.

Hugo Nicolaci: Good morning, Tony, Adam. Jon thanks for the update this morning and congrats on hitting some milestones. I just wanted to dig into a few points made earlier. Adam, you noted you've already processed 280,000 tonnes of material in the month of October. Appreciate we're probably jumping the gun on that outlook, you're looking to provide in a couple of weeks, but any indications as to how you expect that ramp-up to progress over the next couple of months from here into next year?

Adam Smits: Yes. Look, I think we had a target on tonnes of about eight months from start-up to nameplate. And we had, I think, about 15 - between 12 and 15 months on the recovery.

Antonino Ottaviano: 15 to 18.

Adam Smits: Yes. So notionally, we're well and truly in those bands of throughput. We're currently sort of processing at a rate of about 325 tonnes per hour, versus a 380 tonnes sort of throughput rate. And that's driven by the plant overall in terms of - what we're chasing there is recovery and grind as opposed to just straight nameplate tonnes through, whilst maintaining grades north of 5%, and keeping that iron level low. So that's the driver for the throughput. So that will be progressively ramped up in a way that keeps us satisfying the con grade. In terms of recovery, anyone that's played with lithium knows that's not the easiest thing, to chase those recoveries. We're not far off our peers already after two months of running. We're well and truly in the mid-50s, and we're having days in excess of 60 already in a plant that is basically brand new. Some of our peers have taken 14, 18 months to get to where we are today, and we know that, because we've had a look at other data. So I think, we're traveling really well. We've got a brand-new team. We've got a brand new plant. And I think we're well and truly in that sort of banding of those sort of trajectories, if you like, in terms of both recovery and throughput that we put out there. If we can get there faster, trust me, as the team will tell you over the weekend, when I was sort of whipping them in a frenzy to put more out, we will. But at the same time, we've got to do it safely, and we've got to do it sustainably. There's no point being one-day wonders. We've got to be able to know what we're doing and know, which levers we're pulling and what the outcomes are. So pretty much like we've done through, the whole process from PFS to scoping, DFS, very measured approach in a way that we can be sustainable about it.

Hugo Nicolaci: Excellent. That's helpful color. I appreciate that. And then, the other one was really just focusing on the timing of cash flows. Just give us a bit more information around the timing of payments you're expecting on your shipments. Obviously, you've had a deposit for the last shipment. Do you expect to get cash in the door when that's delivered to port? Or is it a longer dated in terms of cash coming in? And then, any extra comments you can make on, I guess, cash going out the door in terms of working capital, and other movements at the moment, and completion on things like paste plant and - that you've got coming up in the near term?

Antonino Ottaviano: I'll sort of answer that with Jon's assistance. But in terms of revenue, the first shipment's revenue is in the bank, we've got that. Those contracts are done by a letter of credit. So typically, a letter of credit, we - once we supply the customer with the quality certification, which are done within three or four days of the ship leaving the port, we will then be able to draw on the letter of credit. So it's about 10 to 15 days is what we're seeing. Okay? So we've just shipped, as Adam said, on Friday. Was it Friday? Yes, the 22,000 tonne shipment. And again, we will draw-down on the letter of credit pretty soon, once the quality certification comes through. So that's the sort of rhythm of the payments, right, that we're getting. In terms of capital cost going forward and payments, we've got - or maybe I'll let you, Jon.

Jon Latto: Yes. No. Thanks, Tony. I think the important thing to note here is that, firstly, there is no overspend on our project. We are bringing it in at the cost that we said we would. In relation to time frames, we do - there is some expenditure of that. There is some of those funds required for first production that we still have to pay for. But that's just the tail of the project is, just taking longer to play out from a cash outflow point of view. But again, I'll make the point there is no increase in cost. We're doing what we said we would do there.

Antonino Ottaviano: We're just finalizing invoices and those sorts of things, and agreeing on final contract numbers with the contractors.

Jon Latto: Correct. And in terms of time frame, what I would say to you is that the remaining cash outflow, associated with the construction of the Kathleen Valley project, will pretty much be done by the end of the December quarter.

Operator: Thank you. Our next question today comes from Levi Spry. Levi, please go ahead after the beep. Yes Jon, Can you hear me?

Jon Latto: Loud and clear.

Levi Spry: Oh, great. Good day, Tony. Sorry about that, this sounded a bit funny. Thanks for all that. But so can I just confirm that last number, so the cash outflow this quarter for the remaining capital?

Jon Latto: Yes, certainly, Levi. So what we're looking at is we've got - there's approximately $65 million to go, which is broken into two components. Basically, there's around about $50 million of cash payments to make associated with the cash payments to get us to first production. And then as Tony mentioned, we've got - we are continuing with the paste plant that's not required for first production, and there's circa $13 million to $15 million remaining there. And we expect those from a cash flow point of view to have moved through and be dealt with pretty much by the end of the December quarter.

Levi Spry: Yes. Got it. Okay. Thank you. Thanks very much. And just back to the optimized mine plan question. So I guess when can we see it? And what are the parts that are being optimized other than just a ramp-up to 3 million tonnes, not the 4 million tonnes?

Antonino Ottaviano: There are about five different levers, Levi that we're focusing on. So in the mine, we're looking at ultimate production. The second lever we look at is how do, we get to the working stoping fronts cheaper, so optimizing development costs. The third lever, we'll look at is what grades we are mining. So what is profitable and what is something that we will leave for the market rebound. The fourth thing, we will look at is what is the optimal size of the mill, and to meet the production coming out of the plant. And then finally, as we've spoken about, what concentrate grade do we produce, given our customers produce around 5.3 to 5.5, some of them produce 4.5. So that has a huge benefit for us as well. So they're broadly the levers that we're looking at. There are others, too. Capital, like I've explained. We've got that slide that sort of breaks it down for you.

Adam Smits: I think to add to Tony's point, the key differentiator for us is that unlike an open pit mine, with the underground, we can actually target where we go, whereas an open pit, you've got to come from the top and work your way down, and mine a lot of waste and you don't really have many options, other than sort of diving down and grabbing a bit of cheeky ore. But you've still got to come back and pull the waste down to get to it. But with an underground, we can have a very targeted approach, to chase both grade and tonnes per vertical meter, which is a key driver for the underground team and a key, I guess, advantage of our mine plan, especially from an underground perspective.

Antonino Ottaviano: And I think the tonnes per vertical meter is very important. We want to be able to keep those jumbos fully utilized, 100%. So our mine plan going forward is all around maximizing, and maxing out the equipment utilization. That's the first thing. The second thing is by going as hard as we have, on both the open pit and the underground, to get to 3 million as quick as possible. And then ultimately to 4 million, we invested in a tremendous amount of infrastructure upfront. Our paste fill plant for $4 million is built. It's being commissioned. It's done. Our ventilation system has been - there's a lot of thought going forward. It's being put in today. So the main vent draft is going in, and we've already done the decline drafts, to provide ventilation down to over 100 meters. So there's a lot of stuff that we've done upfront that we can now lean on in order to optimize the plan, if we decide to pivot a new way.

Operator: Our next question today comes from Reg Spencer from Canaccord. Reg, please go ahead after the beep.

Reg Spencer: Thanks. Good morning, Tony and Adam and team. I just wanted to follow-up on Levi's question a little bit. I'm presuming you're going to tell me that we're just - I'm just going to have to be patient and wait for the results of your optimization. But those alternative production scenarios that you're contemplating as part of that optimization, I presume that might include like a smaller higher-grade style scenario, or open pit only and slow the underground. I was just curious how those alternatives might sit relative to where your fixed costs might be?

Antonino Ottaviano: Reg, there's a lot in that question. You do have to wait, but I will give you some insight. Again, I've sort of been in this business a long, long time. You can fall into the trap that more tonnes are better, because they dilute your fixed costs, right? So typically, you can't dig yourself out of a cost position, by simply increasing more tonnes always. There may be an optimal throughput that balances your fixed costs, but also your overall costs. We're managing for cash. So we're looking at the sweet spot that gives us the best cash outcome. So that's why, we don't want to rush into this. There are many levers we need to pull, if we - to give us the ideal go-forward case.

Reg Spencer: Roger [ph] that. If I could just ask one last question. You mentioned concentrate grade is one of those levers you could pull, Tony. I'm just curious about what the trade-off between additional cost and impact on your throughput, to get a higher con grade and better pricing versus throughput tonnes, and what appears to be new industry standards of say, 5.3%, 5.4%. Again, perhaps I might have to wait for your optimization study.

Adam Smits: Yes, it's a good question, Reg. I guess it's well known that if you produce a lower con grade, you typically get better recovery, and you can typically push more tonnes through. So what we've been doing, obviously, our focus has been on actually making concentrate, and getting it out the door and getting some income in. So that's our number one focus. But making it on grade, and that's anything north of 5% and targeting some low iron. What we're starting to do now is optimize around what grade we produce and what recovery benefits we do and don't get. The circuit is so new, the team is so new that we actually, in all frankness, don't have a baseline yet as to what the levers do when we pull them. So for instance, the last few days, we've been getting very good recoveries, but also making grades around 6%. We couldn't do that a month ago. So we're trying to build up that data book, if you like, or that library of saying, right, if we want to make a five con, what recovery uplift do we get? And then what does that mean in terms of throughput, and what does that mean in terms of actually going all the way back to what do we take-off the ROM pad. So to answer your question, there is definitely a recovery uplift. There's definitely a con production uplift by dropping the grade, which everyone is aware of. We're just trying to determine what that is exactly, and whether it's worth the squeeze.

Antonino Ottaviano: But just one final point, Reg. If that strategy doesn't deliver more lithium units, then it makes no sense.

Adam Smits: Correct.

Antonino Ottaviano: Okay? So I think that's where you're heading. So, we will look at it. If it provides more lithium units, we'll do it.

Adam Smits: Correct. Correct. We're not just doing it for practice.

Operator: Thanks. Our next question comes from Adam Baker from Macquarie. Adam, please go ahead after the beep.

Adam Baker: Hi, Tony and Team, thanks for that update. On the remaining cash outflow at start of the December quarter. I assume that the $65 million, does that exclude the costs associated with open pit mining, as well as the underground development? And if it does, what do you expect those costs to be in the December quarter?

Jon Latto: So Adam, are you talking about the bar that was $52 million on that waterfall? Because that does include open pit costs.

Adam Baker: No, no. This is for the December quarter moving forward?

Antonino Ottaviano: Yes. So moving forward, Adam, it depends on the sort of mining optimization work that we will present. But what we're trying to do in that waterfall is to demonstrate to the market, what is recurring operating costs going forward, and what is non-recurring project CapEx that will cease by December, by end of December. So the $52 million that we've got there. I think there's another $29 million, right, which is development for the underground, sort of gives you a broad brush of what typically should be go forward. But we've made that comment in the slide that once those project CapEx come out, we will get to what we believe is the more normalized operating and cash cost profile. But again, we'll - this could all change once we come up with our revised plans.

Adam Baker: Got it. Yes. So assuming underground development rates increase a little bit, it will be similar to that $29 million, if not a little bit more moving forward, and that will be dependent on, obviously, how much development that you're putting through. So that's clear. Thanks. And maybe just on the ore milled grades. Is that something that you'll be looking at reporting in the future? And maybe how has that been reconciling to the block model?

Adam Smits: Yes. I think currently, we're running about 80% in terms of the reconciliation to the block model, I think, is a rough rule of thumb. That has improved significantly as the pit has got through the, what would you call it, stringy zones, to be well north of 80%. And now we're in the flat lying zones, which we always expected. And in some months, I think, we've had a positive reconciliation just to give you a feel for where it's going. So it's a bit of a moving fist, but it is tracked, and we are getting good, I guess, reconciliation in terms of tonnes and also grade. Milled feed grade has varied, and we're playing with that a fair bit in terms of how we set it up. I think we're running about 12 fingers currently on the ROM pad, and blending and understanding the impact of the host rock or the Gabbro, as we call it, has been a key focus for the last month.

Antonino Ottaviano: But I think there's a couple of points that I would add to that, Adam. Firstly, we all know the better grade we put through the plant, the better the performance and recovery, and we've seen it. Second thing is we're eight to nine weeks into production. We're still, I think, fair to say, getting our feet in terms of operating discipline. So managing that ROM pad, getting the operators to understand how to cook the recipe, in order to feed the ROM is still work that we're doing and improving on. So we've got to have a bit more time. We don't have the benefit of - many of our competitors have been operating for years. We're doing it at warp speed. And finally, in terms of ongoing reporting of grade, mine grade and ROM grade, we want to be transparent to the market. And as I said, we will be with our costs. But do our competitors report their mine grades on a quarterly basis?

Adam Baker: Yes. A lot of them do just on the mill grades going through the mill, but yes, we can circle back?

Antonino Ottaviano: I'll have to look at that.

Adam Baker: Thanks Tony.

Operator: Thank you. Our next question comes from Sam Catalano from Wilsons Advisory. Sam, please go ahead after the beep.

Sam Catalano: Yes. Hi. Good morning, Tony and team. Thanks very much. And I think - very well done as the first eight or nine weeks. I think what's clear from the questions this morning is that we, as an analyst community, are probably trying to draw far too many conclusions from eight or nine weeks of operations, which have seemingly gone well. But I'll probably add to that - theme. And just sort of push you a little bit more on the question that Adam asked earlier. So if we assume for the next quarter, that $81 million plus $69 million in your waterfall chart effectively becomes 65-ish. If you double output in the fourth quarter to say, 50,000, 55,000 tonnes of con, would the $52 million, and the $29 million double? Or would you think they'd be closer to where they are now?

Jon Latto: That's an interesting question. I mean, obviously, a large component of our cost base is fixed. So no, I wouldn't expect it to double. I mean there might be - I probably have to take that question slightly on notice, but I certainly would not expect it to double given the high fixed cost nature of our cost base. Obviously, there may be a slight increase, but certainly we would not expect it to double. No.

Antonino Ottaviano: And Sam, the other point is we are getting revenue. So you're going to look at that side of the equation, too.

Sam Catalano: Yes. Yes, of course. Thank you, guys.

Operator: Thank you, Sam. Our next question today is a text question. In the context of Rio's takeover, has there been M&A interest in Liontown specifically?

Adam Smits: I'll let you answer this, Tony.

Antonino Ottaviano: Look, in terms of the Rio transaction in the sector, our view in Liontown is it's positive. When you have a multinational as big as Rio providing what I feel is, as the bankers call it, a thematic reinforcement, that's going to be good. To have someone the size of Rio in as a supplier, will also sort of help balance the power between suppliers and OEMs and battery producers that, are far bigger than the current supplier suite. And finally, as it relates to Liontown, no.

Operator: Thanks. Our next question is another text question. What strategies is management implementing for the sale of tantalum?

Antonino Ottaviano: Yes. We have an arrangement with a major tantalum consumer, and we are selling it to them on a spot basis. So that's what we're doing with tantalum. But the ultimate objective, is to put in place long-term contracts, which we have had an initial round of discussions with a number of players, and we continue to do so. But the current production, is being sold to one of those players on a spot basis.

Operator: Thanks. And our final question for today. How many long-term share - sorry, I'll start again. To finish off, you have many long-term shareholders that have been with LTR over the journey. While the current market conditions look challenging, can you give us confidence in our Tier 1 quality to pull us through to the other side?

Antonino Ottaviano: Well, firstly, and I'm hoping a few of them are listening. The management team, the Board, and I know the Chair very much so, values the support and the conviction that the retail investors have put into Liontown. I have personally spoken to a number of them, and we couldn't ask for a better, and more loyal suite of shareholders, as opposed to maybe some of the investment funds. So, we want to do our very best, and we are working 24/7 to ensure that their investment is sound, and will continue to be so. We have a world-class ore body. There is unquestionable support around that. And also, we've built a world-class plant. Adam and the team have done a tremendous job. So, we're confident. So thank you for your support.

Operator: Thank you very much. That does conclude today's call. Thank you for your time, and have a great day. Please reach out to the Liontown team if you have any follow-up questions.