Liontown Resources Stock

Good morning, and thank you for joining us. This morning, we are announcing that the loan Liontown Board has approved the final investment decision to expand our Kathleen Valley operation. This is a major step in the company's growth.

I am joined by 3 members of our leadership team: Chief Operating Officer, Ryan Hair, Chief Financial Officer, Greg Jason; and Chief Commercial Officer, Grant Donald. Over the next hour, we will cover the decision itself what it delivers operationally, how we will fund and execute it and the market outlook that underpins it. We will leave some time for questions at the end. Next slide, please, Ethan.

Before we begin, I draw your attention to the important information and disclaimer on the slide and the cautionary statement on all reserves in the forward-looking statements. This presentation should be read with in today in conjunction with the ASX announcement. Next slide, please.

Okay. Now to the decision itself. Our Board has approved an expansion of Kathleen Valley with $389 million of expansion capital to lift targeted production of around 780,000 tonnes of spodumene concentrate per annum at a 5.4% rate. That is 5-year average basis from FY '30, peaking at more than 800,000 tonnes in FY '34. Time to market was critical, and this objective was facilitated by the fact that the plant was designed and built to scale. So this decision takes advantage of the built-in optionality, supported by improved market conditions and in line with our strategy of developing Kathleen Valley to its full potential.

The Board's confidence in this investment was grounded on the following key points that I want to outline this morning. First, efficient capital at $1,619 per dry metric ton, our capital intensity is among the lowest of recent plant field expansions in the sector. Second, speed to market. We are targeting first oil in the first quarter of FY '28, ramping to full 780,000 tonne run rate by the first quarter of FY '30. Thirdly, scale, which brings 2 advantages. We are lifting capacity from around 500,000 tonnes per annum to around 780,000 tonnes, a 56% increase or 53% on an LCE basis, which makes Kathleen Valley one of the most significant hard rock operations in the world. And with that scale comes the ability to have different conversations with our customers and with market more generally.

Scale also reduces our unit cost, we expect our unit operating costs to improve to a range of $8.40 to $9.20 per dry metric ton once we're fully ramped up, giving us further resilience that positions Liontown for sustained performance through the cycle, not just in the good years.

Fourth, compelling economics, we expect a payback of around 2.5 years from the end of construction. And the other key valuation metrics such as NPV and internal rate of return were also compelling to the Board to make this decision. From the broader economic standpoint, this expansion will support around 400 full-time roles and work to many supporting businesses and enterprises. Finally, favorable market exposure, the additional volume is uncommitted. It can be sold into the spot market or into potentially new offtakes priced with reference to the spodumene index.

Before I hand over to Ryan and Greg and Grant, we will touch a little bit on this section, and we concluded by saying that the internal analysis we used to do this assessment was based on market consensus forecast for pricing which then supports our intention to fund this expansion from our own balance sheet and operating cash flow.

Now I hand over to Ryan.

Great. Thanks, Tony. So Ethan, next slide, thanks. So over the next few slides, I'll walk through what we're building and when we'll deliver all of that. As Tony has indicated, what we're targeting is a 50 -- or over 50% increase in spot con production from around 500,000 dry metric tonnes a year to 780,000 tonnes over the 5-year period from '30 to '34, and all of that is on a SC 5.4% basis. Notably, the grade in FY '27 at the target of 5.2% is unchanged. And similarly, FY [ '28 ] '29 is expected to be around at 5.2%. But of course, we will continue to optimize both great recovery and production through that period and beyond.

To enable that increase in concentrate production, we will ramp up the processing capacity of the plant from which is currently around 2.8 million tonnes to around 4.2 million tonnes per annum. We have provided an indicative ramp-up profile through the period. So production does step up through '28 and '29, in line with the mine output ramp-up and the plant capacity increases over time. Notably, the profile includes scheduled nonproduction days given that we are debottlenecking an existing plant. By way of overview, there are 3 main scope areas for the expansion. Number one, is the mine expansion by developing the Kathleen's corner underground. Number two, with debottlenecking the plant; and number three, there's a related expansion of nonprocess infrastructure. Next slide, thanks, please, Ethan.

And turning now to the mine. In previous announcements and reports, we refer to the Northwest plants. This is now being renamed Kathleen's corner underground. In the November 2024 mine plan, we focused on high-margin tonnes from Mount Man and deferred Kathleen's Corner underground to FY '31. The expansion brings this forward to run alongside Mount Man.

Image shows 2 ore bodies side by side, and it's worth stepping through what this shows. Starting on the right with Mount Man, gray is what we've built to date, the as-built development and stocks. Red is the development still to come, and the blue shading is the Mount manned production stopes. On the left is Kathleen's corner underground. Green is the development underground capital development and the pink shading are the production stopes.

At the top end, the completed Kathleen's corner open pit and the Man box car. You can see the green development tying back into the open pit, which is our primary access for Kathleen's corner underground. There's a couple of things to take from this. The first is the gray, as built is a small part of the picture. Most of Mount Man is still in front of us, and we are now starting to get into the bigger parts of the ore.

Second, the green and red are largely separate networks, each with its own development. This is what gives us 2 indeed independent mining fronts. And 2 fronts are better than one as they provide flexibility in how we sequence or extraction over time and allows us to maximize productivity. We've continued to optimize Kathleen's corner and the new design reduces underground development by around 45,000 meters compared to the previous design.

This not only saves cost, but also decreases the amount of waste needed to be not once. I'm on covered in the expansion of funding covers preproduction development, resource definition drilling and fixed infrastructure, including electrical substations and primary bank large sheets. That is $145 million of the expansion cost. The result is an ore mining rate that increases progressively to a sustained rate of about 4.1 million tonnes per annum by the end of FY '29 through a combination of Mount Man and Kathleen's corner underground. Next slide, please, Ethan.

On processing, we are debottlenecking a plant that was built to scale. The main item is a near door mill in the grinding circuit. We ordered it during the early works process as a long lead item, which reduces schedule risk. In the rest of the plant, we upgraded Magnet separation, upgrade the tailings lines, pumps, piping, and make targeted improvements to crushing and screening. Both plant is upgraded to dial crane operation, additional binder store, upgraded mixes and a third base bump.

So both pace processing trains can run sometimes. You can see in the 2 images, the colors tell the story. On the left, at the top is the ball mill installation in gray is the existing plant and everything in color is new. The ball mill itself in yellow with its supporting infrastructure pumps and services around it. It stops in alongside the existing SAG mill. On the right is the debottlenecking scope across the rest of the plant. Again, Gray is existing rent is existing equipment that we're operating, mainly pumps and piping and purple is the new equipment. The thing to draw from these images is the same. They're most of the grade. The additional capacity comes from one major new in the ball mill and targeted upgrades at the bench points. That is why this is efficient capital to Tony's earlier point.

On nonprocess infrastructure, more tonnes means more demand on power, water and accommodation. We're operating power distribution and working with our power provider to add thermal, solar and battery storage. Keeping us aligned with our target of more than 60% renewable energy as demand grows. On water, we're extending our bore fields and upgrading storage. And of course, we'll upgrade the accommodation village with an increase in the permanent workforce as well as a temporary camp for the construction workforce. Together, that is $137 million for processing and $107 million for nonprocess infrastructure. Next slide, please, Ethan.

So bringing that all together, this is the delivery schedule. The 3 work streams are sequenced to phase activity across FY '27, '28 and '29. Happens corner preproduction development and infrastructure is underway now. an expansion in capital development runs through the first ore in Q1 FY [ '28 ]. The plant upgrades run the full length of the schedule because we're tying new equipment into a live plant. -- non-process infrastructure runs through to Q1 FY '29 and practical completion of the expansion is targeted by the end of Q2 FY '29. We are delivering with a dedicated owners team -- and an owners team, we've -- was heavily involved in the construction of the original Kathleen Valley project. Construction on-site has already started under the early works program and the long lead times are in order.

With that, I'll hand back to Tony.

Next slide, please, Ethan. Thanks, Ryan. Now I want to step back and show what this expansion means that Kathleen Valley's position globally. As I mentioned in my opening slide, this chart shows that the top 10 forecast lithium producers in 2030 on a lithium carbonate equivalent basis. Pre-expansion, Kathleen Valley is already a meaningful producer Post expansion by FY '30, our attributable production growth by around 53% to approximately 102,000 tonnes of lithium carbon equivalents and that consolidates our position among the major global lithium producers.

The key point here is the trajectory. Kathleen Valley is relatively young operation, and this expansion accelerates our rise up the global production ladder at around 100,000 tonnes of lithium carbonate equivalent a year, we moved further up the ranks of the major global producers. And as I said in my earlier slide, this scale does 2 things. It drives our cost down, but it also gives us a meaningful role with our customers and across the battery value chain.

I'll now hand over to Greg Jason.

Thank you, Tony. Good morning, everybody. I'm starting on Slide 9, which is around the capital expenditure for the expansion Left-hand chart shows you 2 things. The first 3 columns give you the time phasing across financial years '27, '28, '29. '27 is an update from the guidance we gave previously, and I will deal with that on the next slide. And then the right-hand column of that first chart gives you the breakdown across mining, processing and adding to the $389 million as described by Ryan. The right-hand chart depicts capital intensity. Tony talked about that early on in the presentation. We have looked at the announcements of recent spodumene brownfield projects, and the intensity is worked out as the capital expenditure divided by the annual production tonnes concentrate. You can see Kathleen Valley sitting number 2 from the left there, so very favorable on an intensity basis.

Our intention is to fund the CapEx through both the cash reserves that we started with the year. and with the operating cash flow that we're going to generate. We've done a range of modeling. The intention to fund in that way is based on consensus pricing. And we have looked at a range of scenarios. And depending on where price moves, of course, we could modify our project accordingly around the time phasing to manage that accordingly. Next slide, please.

This slide is giving you an update on the FY 2027 CapEx guidance. The first blue column, $320 million to $370 million is the range that we broadcast at the end of July with the Q4 announcement. And that contained $60 million to $70 million of all works on the expansion, just shown here in orange. We are updating our '27 guidance CapEx for the full year to [ 4 and 5 to $495 million ]. And so that's got an increase of [ $115 million to $125 million ] for Kathleen Valley expansion.

I'll talk briefly about nonexpansion CapEx for the years ahead. Obviously, sustaining capital recurs year-by-year. We'll have a couple more years of ramp-up capital development both the Mount Man and Kathleen's Corner underground. And we are executing or planning several previous third and optimization projects across FY '27 to '29. Some of the midpoints of the nonexpansion categories in FY '27 is $280 million. If you copy that right, the '28 to '29, you'll be a bit on the high side, maybe in the range 10% to 20%. And but we will firm up those numbers year-by-year when we give guidance around July of each year. Moving to the next slide. talking about the investment parameters and the economics. Penny's talked about the payback, 2.5 years and the job creation, the around 210 jobs created during the construction phase and 185 jobs created on an ongoing basis across both live town and our contractors.

We have forecasted the 5-year average unit operating cost from the first year of full production after a ramp-up is complete and that $840 to $920 per tonne on a real FY 2027 cost basis. We've got the CapEx there on sustaining of $90 million to $100 million. Average production over those years of 780,000 tonnes per year at 5.4%. And we've included there at the bottom, the long-term consensus sponge price on the C6 basis, [ 495 ].

I'll now pass you to Grant, who will talk you through the market context for this investment.

Thanks, Greg. As Greg just mentioned, you can see on the left-hand side here, our unit operating costs reduced, reduced the midpoint here for the purposes of the chart, but that's a 23% reduction through economies of scale and efficiencies. You can see where this places us on the SC Insight's hard rock cash cost curve on the right-hand side saw that in the middle, this boost is in a much stronger competitive position for the long term.

If we look at the next slide, in terms of the market context for this expansion, you can see that this is a fast market forecast for demand and supply gaps. You can see the market continues to grow strongly, driven by both stationary storage and EV demand. We continue to see forecasters measuring a gap into the future in terms of supply first demand. And as we've said before, using this chart, brownfield expansions are typically quicker to market.

This makes us with KV expansion very competitive and timely in terms of bringing new tonnes to market, as we've already covered. We will be a ramp-up, but we get early tonnes in '28. And this means that new operations, which take 5 to 8 years will obviously be in the market well after we've already been in the market for some time. If I move to the next slide. Well, that's the macro long-term view. The next slide covers the short-term view.

You can see here what we've done is a couple of candle sticks with the range of forecasts from various market forecasters. So we've got fast markets, mines DLS and M&S insights here. The point that we really want to emphasize here is that actually, we're talking about relatively modest deficits and surpluses in the context of a 2 million-ton market in 2026. And an even more modest surplus in 2027 versus a 2.4 million tonne expected market. This means the market is extremely close to balance, which leads to high levels of volatility as people take views on whether it flips to a deficit or a surplus.

But ultimately, we are talking about average deficits of less than 50,000 tonnes in 2026 and a surplus of 15,000 tonnes in 2027. That's about 0.5% supply and that should be weighed against the expectation that there's an additional 450,000 tonnes of LTE coming into the market in 2027. Any of those are delayed or deferred that could have a very material impact on the balance.

The other thing I'd like to flag is that none of these forecasters really take a view on inventory movements, there are assumptions around inventory staying broadly flat. This means any inventory rebuild could magnify the move to a deficit and copilot oversupply very easily. We also want to just comment on the short-term volatility we've seen over the past month or so. We do see a slightly softer sentiment in domestic China at the moment based on their own numbers not growing as fast as they have been historically. However, we believe this miss is the broader demand of base across other markets, both across stationary storage and EVs in the rest of the world.

If you look at Rest of the World, EV sales, for example, they've grown 90% over 90% over the past year-to-date. And that is now close behind Europe in terms of total EV sales. Europe is also growing strongly. And we continue to see those trends play out, particularly driven by higher petrol and diesel prices.

And with that, I hand back to Tony.

Thanks, Grant. Let us bring us back now to FY '27 and pull the guidance together in one place, now that it's inclusive of the updated expansion of capital. For FY '27, we are guiding to concentrate production of 390 to 440 at a 5.1% grade unit operating cost of 1,050 to 1,250 tonnes sold on an FOB basis and now total capital expenditure of 435 to 495, which Greg has already covered.

On the first quarter look ahead, our mining rate has been held constant at 1.5 million tonnes run rate before ramping up in the second quarter of FY '27. That's consistent with the guidance we've been giving the market for over 6 months. Our recovery product file stays consistent with the second half of FY '26 and given the feed mix as we process the remaining open pit stocks. And first quarter shipment timing reflects planned maintenance and some weather-related disruptions at the Geraldton port mainly due to these surge events. And just to explain that, these surge events are created in the Geraldton Port due to the design of the actual harbor.

As we get title movement based on seasonal variations, it creates a fairly significant sucking effect. And therefore, it makes it difficult for the ships to stay birth. So when these events occur, the ships either stay out at sea or the ones that are loading have to move back up to sea. This will be fixed over time as the government of Western Australia has put funding into the Geraldton Port. Now finally, costs associated with the next quarter will track accordingly with the production. Can we go to the next slide, please, Ethan.

Now finally, bringing this all together, Kathleen Valley is the most value-accretive project in our pipeline. And this is a low-risk expansion. It gives us more tonnes at a lower cost with execution flexibility. 4 numbers capture it. We're lifting production at around 780,000 tonnes per annum, up 56%, as we previously mentioned, but peaking at 800,000 tonnes in FY '34. We're doing this at a capital intensity of 1,619 per dry metric ton amongst the lowest of recent brownfield expansion announcements.

Our operating cost falls to $840 to $920 per metric dry metric ton. And the total capital expenditure is $389 million, the first ore targeted in the first quarter of FY '28. It's a brownfield expansion built on infrastructure already in place funded from our balance sheet and it's intended to lift production in tight markets over the next 24 to 30 months. It gives us flexibility to manage execution if prices move lower, with a mine life of more than 20 years, this is a sustained performance through the cycle. And once again, to close on the funding piece, Greg's already spoken about this. And our intention is to fund this from our own balance sheet and operating cash flow based on the consensus pricing we've seen. And the capital is phased over 3 years. That's again a very important point to note.

We're not doing this on the basis that we need the extra funding. We're doing this because this is a value-accretive project. And we've got the flexibility to adjust the pace if conditions change. That is what it gives us confidence for the Board to commit to this. And on that basis, I'd like to thank the team for doing a tremendous amount of work to bring this to a conclusion. We're very happy with the outcome, and we're ready to execute.

Now I'll open it up for questions. Thanks, Ethan.

[Operator Instructions]. Our first question comes from Elaine Fabris from Bank of America.

.We're just updating our model. And in November 2024, when you originally deferred the 4 million-ton case, it looks like you pulled out the development CapEx that corresponds to the development meters that you deferred. And today, the upgrade of the camp and power infrastructure seems to be new. Was the NPI upgrade always considered or what has changed?

Thanks, Elaine, and good morning. I might hand over to Ryan.

Yes. Thanks, Elaine. So the power upgrade was always going to be required as you step up from circa 2.8 million of processing to 4 million. And that's -- goes with, for example, installation of the boiler, which at what is a substantial load on the power network. Similarly, the mine when you're now building additional ventilation, et cetera, again, that adds additional loads. So that was always intended to be part of the story. And the accommodation, similarly, was always going to be required again at going from 2.8 million to 4 million tonnes, given that the equipment increased equipment that you require to move that amount of material. scale somewhat linearly. That said, there's limited additional wells required in the processing because the processing plan is fundamentally not changing. Again, it's upgrades of individual pieces of equipment and a ball mill, which doesn't have a huge load.

But short answer your question, those we're always going to be requirements and what we've done, I think, quite prudently is staged the investment so that we didn't have to pre-invest in either the Village or the power any earlier than we needed to.

Elaine, I will touch on the development question. So in November '24, we deferred, I think, at the time, 36,000 meters of development to preserve cash. based on the mine plan there. What the team has done now, having looked at the life of mine have been very effective in further optimizing this plan to remove the 45,000 meters. So this is in addition. So one was a deferral. This is actually a removal, and elimination of 45,000 meters of development. I hope that clears it up.

Yes. And then can I ask one more question? Compared to the 5.2% previously at guidance, was the long-term great assumption of 5.4% driven by customers? And would you mind talking me through the trade-off there?

Okay. I'll take that one. On -- that we're currently guiding is basically a value-maximizing optimization we've done that see us right at the moment. We're the best option for us in terms of recovery and maximizing lithium units is to target 5.2%. When the team did the life of mine plan and looked at the optimization that the new plan upgrades provide, it came up to 5.4%. That would decide that, that is set in concrete. We will review year-by-year what we believe the optimal grade is to maximize value and extract the best lithium units from the organization. It is not driven by the market. The market will accept the 5.2% or the 5.4% because the price is adjusted by grade. So that's the price and the grade piece.

Now how that value trade-off is done well is clearly an issue around the recovery curve that you have in your operation and what grade gives you the best recovery. And the middle urges will optimize this on a annual basis to determine based on the feed type, what that will give us.

Our next question comes from Hugo Nicolaci from Goldman Sachs.

Tony and team, firstly, congrats on the decision. No doubt being a rollercoaster to get back to this point. So congrats plenty of questions, but maybe starting firstly on the strategic side. You previously flagged the potential to do this expansion in staged incremental pieces to say sort of your 3.2 million, 3.6 million before 4 million to give you the flexibility of lithium prices decline and you need to go slower or we could look to accelerate the listing prices are higher. Is the plan still to keep that optionality in the build-out? Or does the relatively low capital intensity versus your current liquidity? I mean you're comfortable doing it all in one big go.

Yes. So Hugo, Ryan here. So look, broadly speaking, that strategy is one that we are still executing. So as we continue to debottleneck the plant, effectively, we're unlocking incremental capacity as we go. Obviously, some of it becomes a bit lumpy. So a ball mill, for example, adds more certainly grinding capacity than other kind of minor debottlenecking through the plant. Tony alluded in his remarks, about if the market does turn that we've got flexibility to make some decisions. And so at any point in time, we've got an option to defer, slow down the upgrades, and we'll end up at that capacity as we go. So if you have a look at that chart we provided about the spend over 18, 24 months at any point in time, we can slow down at that point, and we'll end up maybe at the 3.2, 3.6 or close to 4 million tonnes as you've alluded to.

So that strategy hasn't changed. It's just that our intent with what we see ahead of us at the moment in the market is to execute that plan, but bake in that delivery flexibility as we go. Hope that makes sense.

Yes. And just to further reinforce what Brian is saying, you will get that as the ball mill gets installed and commissioned and the mine production meets that capacity, we will get that incremental tonnage out the door. So that's why you see the step-up in production from FY '28, '29 and ultimately to '30. So it's inherent in the ramp-up.

Got it. That's clear guide. And then maybe using that as a segue into the mining piece and maybe a little bit more in near-term, but we've seen a number of WA underground miners recently flagged productivity impacts from undergo mining perspective this quarter. Have you seen any similar impacts or have you been able to hit the 1.5 million tonne run rate this quarter? And then into that sector backdrop, how confident are you, you can get the people to not only ramp up to the 2.8 million tonne exit rate this year, but then build a new underground at the same time?

Yes. Hugo, I'll take that one again. So first of all, as Tony reiterated in the guidance, we are maintaining that [ 1.5 ] run rate for this first quarter, which is what we committed to 6 months ago, we're still very comfortable with. So that's the first point.

The second point is that, again, we reiterated this in our full year results. The plan to go from 1.5 million to 2.8 million tonnes by the end of the financial year. which is underpinned by ramp-up in equipment, opening work fronts, et cetera, is all still part of the plan. And clearly, as part of getting new equipment, then our people need to come into the business. Part of the reason that we are partnering with mining provider that we have is that they are a Tier 1 provider. This is what they do for a living. They've got very deep reach both in terms of being able to get access to equipment, but also access to good quality people. And so again, broadly speaking, still very comfortable with that and their ability to kind of execute the plan we're working on together.

Furthermore, we are -- as we go into the opening up of the Canam Corner underground, again, it's effectively executing that same strategy. And again, we're working closer to the department that. Now more broadly, we do note that the WA market is hot. And you've seen those comments from underground miners and those challenges do exist. But our big focus at the moment is around making sure that we are both by design and in practice, increasing productivity. So again, at our full year results, we spoke about the level design that we're doing in Mount Man to maximize productivity. So we're doing that as part of the design, if you like, but also in terms of in practice, making sure that we are streamlining processes, training people well, onboarding them well to maximize productivity is what all about because the -- because those headwinds, as you noted, to exist, let's say, 2 the design, the practice and the partnership that we have, and we are very comfortable that, that plan is executed.

Next question comes from Austin Yun from Macquarie.

And just 2 questions from me. The first one, just around the port situation, like I understand when there's adverse weather condition does impact your throughput and you did comment on that the government is looking to that. I'm just keen to understand if there is any role that the company can play to deconstrain or debottleneck. And also, how should we think about this logistic constraints given that you will be ramping up volume, should we anticipate a bit of a more pronounced swing quarter-by-quarter going forward more into '28 and '29?

Thanks, Austin. I'll get Grant who manages our logistics to comment on that.

Thanks, Austin. Look, I guess the surge that Tony talked about has been identified as an issue. It's been in the plan for general support to do some construction of a seawall to try and mitigate this impact that is underway and scheduled to complete I think 2028. So they are doing things to address it. I would say while the port is used to doing with surge events, August was unusually high in terms of the interruptions caused by surge where effectively the port was closed for 60% of the month. that is not normal, even in this period where you typically get more surge events.

So what we can do is try and use the whole logistics chain that we've got to try and buffer to some degree. But ultimately, this is something the ports addressing, you think we can -- this is a kind of one-off and we should be back to normal in the future. But it does have not an impact, right, which takes a little bit of time to work its way through because it is a multipart user. So there's more than us on the path. But if you look at it, big picture. Bear utilization still remains quite low. So we don't really see any constraints there in terms of ramping up our volumes through that bit. However, we do have other options. So we're relatively consistent from Geraldton and Esperance. So there is some optionality there. Should we choose to explore that in the future. But at this point, we're comfortable with Joe.

Thanks, Grant. The second question is just around the portfolio. Don, you mentioned you're interested inorganic, so announced at the farming in South America. And now this brownfield expansion has finally settled. Just keen to understand from a group level perspective, it is the end of the CapEx cycle you a looking forward to further build up and build out new lithium platform?

Austin, good question. We've got a full agenda at the moment. Our focus is very much now going to be the successful execution, safely of the expansion works, which we're very confident about. Our investment in Argentina will have a very measured and disciplined ramp up. We've got a great partner in mix lithium and we will make some announcements around progress on that in due course. So at the moment, the focus is Kathleen Valley to its full potential opportunistic look at inorganic growth like the Centenario opportunity, and we continue to focus on what we can control.

Our next question comes from Lyndon Fagan from JPMorgan.

Just wanted to ask about the sustaining CapEx over the 5 years post expansion of $90 million to $100 million, does that include development spend? And if not, are you able to sort of shed some light on what we should be factoring into that?

Thanks, Linda. It's Tony. I'll get Greg to answer that question.

Well, Lyndon, the development is within $90 million to $100 million. We talked at full year and guidance about allocating development across sustaining and growth just during ramp-up. By that time, that 5-year period, we are ramped up and therefore, all development underground will be reporting through to sustain.

Our next question comes from Glyn Lawcock from Barrenjoey.

Two questions from me. First on just one for Greg, Tony, if I may, just on his commentary during the release, I sort of got a little bit lost. But just on the not the growth CapEx, but for the next 3 years, Greg, you talked about, I think, 280 million, but I'm not quite sure where that number falls from. I think in your slide deck on Slide 10, you talk about 90 to 110 million sustaining, 80 to 90 mine intra that's the '27. But then in the footnotes, you say it will hold at those levels in '28, '29. So does that mean sustaining stays at similar levels, mining 80 to 90 stays? That's what you're sort of referring to. And if you add those up, you get to an aggregate number for those 2 numbers, which is sort of like 300 million over 3 years.

Broadly, yes. Broadly, yes. The 280 million that are referred to as the sum of the midpoint of sustaining capital development ramp-up and the mine infrastructure and optimization and it excludes any of the expansion money in orange. So I was saying when you're thinking about '28, '29 natural inclination or does the 280 million continue into the next 2 years? We will have all of those components in the next 2 years. But if you did 280 million per year for 2 more years, you took it a bit, and that was where I made the comment about like I said 15% to 20% or 10% to 20% or something like that is where we lower by that amount.

Okay. Because I would to the 2.8% ramp-up development doesn't extend into '28, '29. So you're only carrying forward 200 per annum, roughly the sustaining cost of mining in '28 and '29?

Yes. The 2.8% growth CapEx or capital development, there is a chunky component in '27. There is some more in '28 because it's sustained level of development activity -- sorry, fortress words, a heightened level of development activity in those 2 years, and then it just comes back down to a normalized lifetime level. And then after we've got first production ore out of Kathleen Corner underground, then there will also be some heightened development for couple of years before that gets to a normalized level. So that's why I said it will continue into '28, '29.

Okay. So if you do 280 million per annum plus the growth CapEx at $389 million, you end up at around about $1.2 billion in total CapEx over the next 3 years.

Yes. And that's a bit over caught is the comment I was making when I said it won't be as much as 280 million per year for each of '28 and '29. It'll be a bit lower, and we'll give guidance on that at the end of each financial year.

Okay. That's great, much clearer. And Tony, just a question for you, if I may. Just looking at your 5-year guide, the '30 to '34 period I guess the moving parts are pre and grade. Where do you think the flex sits in that 5-year guide? Do you think could you squeeze more than the $4.2 million the recovery at 78 is probably above industry average. I mean where do you think the puts and takes are that you could maybe do better on or where it's a bit of a stretch, just your thoughts around the fleets over about 5 years?

I suppose, let's start with the recovery of 7 yard. We're giving ourselves 5 years to reach that level. And that level is consistent with what we published in our DFS as the life of mine average recovery. And given where our concentrating grade is we're targeting 5.4% for the purposes of this expansion -- if you ask me where some flex is, well, I think we've mentioned that. If we decide that the optimal grade is 5.2%, for example, and when we get to that point, well, there's some upside in concentrate production based on just a rate change, right?

Well, for the purposes of this analysis, we picked 5.4% because that's what the metallurgical modeling showed us as a sweet spot. But when we get there, I'm sure there is with the knowledge that we build, there might be some optimization that we can extract some more upside.

Sorry, and Glen, Ryan here. Just one more point just for the avoidance strap. So we've noted that the processing capacity is at 4.2%. You will also note in the detail of the announcement that the mining run rate averages 4.1%. So to your point, and in addition to Tony's comment around optimizing grade recovery, et cetera. Then to the extent that we can further accelerate some tonnes out of the mine and get to that 4.2%, then there's obviously a little bit in that as well as the spodumene concentrate forecast that we have, in essence, is based on the 4.1% even though we've got plant capacity of 4.2% and maybe a little bit north of 4.2%. So it's probably in the mine is the other answer to your question in addition to Tony's conservation.

And we, just to finally close that off, who I've been schooled by. So I'm sure the engineers have got some further upside in that plant that they're trying to keep up their back's lead. So when we get there in 2034, I'm sure we can extract it more.

Our next question comes from Thiago Ojea from Citibank.

Hi, everyone, and good morning. Thanks for the call. I have 2 questions. And the first one, I would like to go back to the sustaining capital. So the $90 million to $100 million, it's similar in 2030 and now for 2027, when you compare the 2.8% now to 4.1%, we are talking about an increase -- well, actually a decrease from $36 per ton on sustaining CapEx to $23. So how much of that is you guys are going to larger, lower levels in the mining plan compared to the tailings moving out of sustaining. And specific on sustaining as you -- what is the share of perhaps of new tailings development when you reach the 4.1 million tonnes? That's the first question.

Greg, do you want to answer that?

Yes. Yes. So tailings is part of sustaining CapEx, but it is irregular, meaning it's not every year that there's a lift. There is money being spent in FY '27. So that drives it up a bit, but doesn't occur every year. What was the other part of your question. I think you asked something about development. So it does vary a bit year-by-year, but I don't mean swings of 50%, nothing like that. And so when you bring it back to a sustaining CapEx per tonne basis, some of this is really a dilution of a fixed cost and efficiency that comes from the ramping up.

Ryan or Tony, do you want to add anything to that?

The other thing I would add, Greg, is that we've been very clear about what is development that sits in sustaining. And then because we're in ramp-up. There is a portion of development that sort of sits outside of sustaining. That will come to an end once we're in steady state, and I think that's the point we've got to make to the listeners around that move from an ramping up and then further ramping up to 4 with North of Kathleen's corner underground, combining there will be some growth development for a period of time, and then once we reach steady state in both operations, then that will minimize.

Yes. And I'll probably just add one data point just for context because I know it potentially look to mitigate in '27 and that future capital. But this tailings lift that we're talking about is just under $20 million. So that's of the sustaining capital number, 20% is on that one-off activity which I think you agreed that as FY '27 is sustaining, therefore, is arising. We then hopefully puts the FY '30 plus sustaining capital a little bit more in context.

Okay. No, that's clear. I think my second question is regarding the recovery rates. So last quarter, you were at 63%. I think you mentioned that the plant reliability you can deliver on 70%. The FID now presents a 78% recovery from 2030 to 2034. I mean how much of this stage from 70% would come from the new bone mill, a better green size control versus maybe the feed grade and the ore body. And when you expect to first demonstrate, let's say, 75% recovery on a quarterly basis?

Yes. So all good questions. So I think the first thing is in our full year results, I think we did dwell somewhat on both grade, but particularly contamination as the key determiner of recovery. and that is still the case. And so as we've seen in the past that as we forecast going forward, as we get into clean underground ore that is going to be the key determiner of plant recovery. There are a number of items, and we've mentioned it in into ball mill with better grind size control, plus a number of other optimizations that are being done in the plant. That will underpin some improvement in recovery. But I think the simplest way to say would be 70-plus percent recovery is based on feed grade. And then there's a couple of percent here or there based on both operating practices and some plan optimization works.

So your question around 75%. So I think it's the average of this year. We're not forecasting that. It will be some time between now and 2030. It will be very much dependent, as I said, on particular levels of contamination to the cleanliness of the fleet. But also ongoing optimization through the plant.

To Tony's point, we know we've got the work that supports 78% over the life of the mine. We know that that's just a factor of time, and there are elements of know-how, planned optimization blending and feed grade optimization of form part of that, and we're very confident we can achieve.

The next question comes from Hugo Nicolaci from Goldman Sachs.

Just a couple of clarifications, if I can. The production outlook you've provided, your indicative FY '28, '29 numbers, is that at the future of 5.4% or the current 5.2% grade?

Brian, again. Look, as I noted in my remarks, think about 5.4% as the FY '30 and beyond. And a target motion in '28, '29 at 5.2%. As Tony indicated, there will be a range of factors that go into that. But for the purposes of what you need to do, I think about it that way.

Got it. That's helpful. And then just similarly on costs, other than that $840 million to $920 million is on the expanded 5.4% grade. And can you just confirm that, that's all like-for-like with how you guide for FY '27?

Yes, it is like-for-like it's dollars per tonne sold whatever that grade may be. And therefore, for those years, it's 5.4%.

Thank you. That's the last question we have time for today. I'll now hand over to Tony Ottaviano.

Thanks, Ethan. There's not much more from our end. I thank the listeners for participating on this call. I also thank my team for the heavy lifting and the work they've done tirelessly over the last 6 months to bring this together and we look forward to our successful execution and a sign off.

Welcome to the Liontown FY '26 End of Year Results Call. [Operator Instructions] I'll now hand over to Tony Ottaviano, Managing Director and Chief Executive Officer of Liontown.

Thank you, Michelle, and good morning, and thank you for joining us today. With me today is Ryan Hair, our Chief Operating Officer; Greg Jason, our Chief Financial Officer; and Grant Donald, our Chief Commercial Officer, who's based in Perth at the moment. Each will take you through their part of this financial year.

This financial year, Kathleen Valley delivered its maiden profit and a strong operating cash flow while ramping up and assisted by better prices in the second half. We generated $182 million in operating cash with an NPAT of $93 million and an underlying NPAT of $14 million. The market handed us 2 very different halves this year. Prices were weak early, so we kept costs tight and preserved cash. When the market turned, we backed our assessment of it, and we are now reinvesting in Kathleen Valley with the same discipline we used to protect it.

Following a China trip by our Board, we gained confidence that the momentum for growth was clear and strong, and we moved quickly to approve the early works capital for our expansion project. Now on the specifics for the year. We concluded open pit mining and the underground ramp-up is going to plan. And there's more on that when Ryan does his session. We're on track for 2.8 million tonnes run rate by the end of this financial year, a figure that we've had in the market for some time.

As we enter FY '27, the focus is 3 things: safe, stable operations and a business that is resilient through the cycle, growing responsibly with the final investment decision on Kathleen Valley expansion, which is due next month. We are ready to scale. The processing plant was designed and installed for 4 million tonnes per year from the start. So much of the expansion capacity is already in the ground. This makes the expansion capital efficient and lets us bring production to market incrementally and flexibly matched to the market rather than in one step. We would fund it from our operating cash and have a strong balance sheet, and we have the team to execute it.

Ryan will now take you through the safety and sustainability sections. Ryan, over to you.

Thanks, Tony. We go to the next slide. Thanks, Michelle. So our safety performance for the year didn't meet the standards that we would expect. Our total recordable injury frequency rate for the year was 10.99 against 7.39 last year. And our lost time injury frequency rate was 1 against 0.92. The increase has been driven in the main by manual handling injuries across contracted work groups.

We've responded with targeted work on field leadership and contractor oversight, and our focus remains on keeping people safe and preventing high consequence events. The leading indicator is moving in the right direction. Safety observations were 4.74 per 1,000 hours, up from 2.61. That's a near doubling in hazard reporting and tells us people are proactively looking for risks in the workplace. These are rolling 12-month measures, so they move slowly. We expect the work underway to have an impact through the course of FY '27.

Turning now to sustainability on the next slide. Female participation was 26% and half of our Board is female. Female representation in leadership is just over 17%. We have more to do there. Our focus continues to be on creating an inclusive workplace and developing and retaining our team. Renewable power penetration was 80% across FY '26. That is the hybrid wind, solar and battery system doing what we built it to do and reducing our exposure to diesel and gas. We recorded 0 material environmental incidents for the year.

Lastly, we procured around $530 million in goods and services in Australia with around $450 million of that in Western Australia and roughly $24 million in -- with aboriginal businesses. And with that, I'll hand back to Tony.

Thanks, Ryan. If we go to the next slide, please, Michelle. This year, we concluded our open pit mining on schedule during the year and Kathleen Valley is now 100% underground operation. This was the operational transition, which was planned in the DFS in 2021, but we revised it in November '24 and delivered in FY '26 against challenging market conditions.

With that in context, FY '26 was our strongest year of development at 9,737 meters, and that is what unlocks the underground mining capacity for the ramp-up. We mined 2.2 million tonnes of ore with 1.29 million tonnes of that coming from the underground, and we processed 2.5 million tonnes of material through the plant at a very high plant availability. We produced 392,000 tonnes of concentrate, and we shipped 382,000, both weighted at an average concentrate grade of 5.1%. This is the foundation for the ramp-up to 2.8 and everything we're doing for the year ahead.

Go to the next slide, please. To the financials at a headline level. Greg will take you through more detail as he goes through his section shortly. Revenue was a record $639 million, more than double FY '25 on higher production and the recovery in price. Our average realized price for the year was USD 1,379, and I'll put that in context a little bit later in the presentation and up 75%, notwithstanding from the prior year, and it's a stronger second half from a price perspective. That feeds straight to cash. We delivered $182 million of operating cash flow and an underlying EBITDA of $147 million.

NPAT was $93 million, which includes full recognition of prior year tax losses and the underlying NPAT was $14 million, the first underlying NPAT for Kathleen Valley positive. One number to hold on to, we generated $182 million in operating cash before operations reach the full 2.8 million tonne run rate. This is a business that is cash generative through the transition to full underground production.

If we go to the next slide, please, Michelle. And again, I want to sort of put the year in context and FY '27 in context. As we sit here today, it's easy to step over the fact that less than a year ago, the market conditions were materially different. This slide illustrates 2 critical numbers. At June 30 last year, the spot price was USD 630 a tonne. 30th of June this year, it's risen to USD 2,210, an increase of 251%. How we got here was a strategic choice, which we executed. In November 2024, when the price was weak, we made deliberate decisions. We slowed down the underground ramp-up, moved to a flat 2.8 million tonnes a year mine plan from the end of FY '27, and we deferred nonessential capital works and pushed out Northwest Flats to FY '31.

We took roughly 38,000 meters of development out of our mine schedule. Every one of these moves preserved optionality, which we are now realizing. The market has turned. It's turned the way we said it would. The same discipline that we've now used to preserve cash, we will point towards growth. We're accelerating development, restarting the capital we deferred and recommissioning Northwest Flats. But we will continue to be disciplined on our costs, and Ryan's team are working on that every day. And we want to make sure that we put our team's innovation to the shoulder and put creativity first and make capital a last resort if we can. This is how we protected the business through the downturn, and this is how we're going to invest in the business as we take advantage of the better market. And we're funding this growth from our own operating cash flows.

Next slide, please. So given that context, we are now pivoted to disciplined growth, and we're focusing on 3 strategic priorities for this year. These are our vision. We start with that to be a globally significant provider of battery materials and with 4 outcomes which are constant, which is safe, stable operations, resilient through the cycle and being a reliable partner and profitable growth. These are delivered by focusing on 3 priorities:

First, the ramp up to 2.8 million tonnes per year by the end of this financial year, and that scale will deliver cost and productivity benefits.

Second, deliver Kathleen Valley's full potential. We've started Northwest Flats, the process plant to give us the full capability of its recovery potential and expansion decision to move beyond 2.8 million tonnes.

Thirdly, pursue the next wave of growth by selectively advancing exploration around Kathleen Valley and Buldania, holding on to the downstream optionality, but being very disciplined if we pursue any M&A activities.

Under all of it are the 3 enablers that don't move. We operate responsibly, we keep the mine plan flexible to the market, and we hold the financial discipline. Now Greg will take you through the detailed financials.

Thanks, Tony. Good morning, everybody. You can see the top left chart on Slide 10 depicts the revenue more than doubling from almost $300 million in '25 to almost $640 million in '26. And this was driven by a 35% increase in tonnes shipped, as you can see in the chart bottom left, and the 75% increase in realized price on the USD SC6 basis, which you can see top right.

The conversion wasn't quite as high once we got to Aussie dollars because there was roughly a $0.04 appreciation of the Aussie relative to the U.S. when we compare the 2 years. Unit operating cost is bottom right. You can see it's 23% higher than the second half of '25, going up to $984 and this was fundamentally driven by the transition to underground mining. Underground ore represented 18% of total ore mined in the second half of '25, was 37% in the first half of this year, 100% in the second half and an average of 58% for all of FY '26.

Moving to Slide 11. You can see the EBITDA NPAT. So we had $147 million of underlying EBITDA, which you can see on the left-hand side. This reflects the growth in production sales and materially higher price. This is compared to an underlying EBITDA of $20 million in the prior year. The underlying NPAT of $14 million is the gray in the middle of the chart. The first underlying NPAT generated from Kathleen Valley operations and includes the transition from open pit to underground.

Depreciation and amortization was about $13 million lower than the prior year. We had a lot of amortization of deferred stripping in FY '25 because the short life of the Kathleen's Corner open pit meant we had to write off that capital in a short period. And then in '26, we didn't declare commercial production for the underground mine until 1st of April, and hence, a lighter amortization load for that capital. $31 million of net finance expenses slightly less than '25 because we earned more interest on cash at bank, and we recognized $10 million income tax benefit from tax losses generated in '26.

The reason we've got losses on a tax level as opposed to the accounting is that we get an upfront deduction for a lot of the capital development underground and we also get accelerated tax depreciation on many assets using a diminishing value method for tax that [indiscernible].

Moving across to NPAT of $93 million. That includes a few adjustments for nonrecurring items. The most significant is the recognition of $113 million for a deferred tax asset for carryforward tax losses from prior years. And this was supported by a couple of things. One, the underground mine moving into commercial production and the significance of that is that, of course, the underground mine will generate the taxable income against which we'll utilize those losses. And the second factor was the stronger price outlook. The other big adjustment in the chart is that we had a fair bit of accounting noise around the LGES convertible notes with fair value and FX adjustments between 30 June last year and 4th of Feb this year when the conversion occurred. So we back those out to get to the underlying, but they are, of course, in the headline number.

Moving to cash flow on Slide 12. We began the year with $156 million in bank, $182 million of operating cash flow. You can see that every quarter got better than the one before, pretty good pattern to have. We had similar sales tonnes across the 2 halves and the improving operating cash flow from quarter-to-quarter was driven by the improved pricing. Keep in mind that we've got price lags embedded in our offtake agreements and therefore, the higher pricing in Q3 then resulted in higher cash receipts in Q4.

Equity raising in August was the lion's share of the financing activities. And then we had $134 million of total CapEx on a cash basis, including $14 million of early works ahead of the FID decision expected this quarter. Closed the year with $561 million, as you can see far right, which gives us a great platform to fully fund the ramp-up and the continued expansion of Kathleen Valley.

Moving to debt and gearing on Slide 13. Total debt, including derivatives and the derivative was related to the convertible notes has decreased $353 million to $369 million at year-end. This is a massive turnaround from a net debt position of $567 million at the end of the prior year. Gross gearing reduced from 55% to 20% and net gearing was 0 compared with 49% a year ago.

Finally, moving to the debt maturity profile on Slide 14. Our forward interest and principal payments commenced this quarter. We'll be amortizing the forward debt at the rate of AUD 45 million per year and have a balloon payment of AUD 175 million.

Next slide, please, Michelle.

Yes. Thanks, Tony. So you can see the quarterly repayments that's the $45 million in each of '27, '28 carried on into '29, '30 for the balloon at the end. And we've got a $15 million interest-free loan from the WA state government under their Lithium Industry Support Program, and we have commenced paying that off in quarterly amounts that will be done across FY '27 and FY '28.

I'll now pass back to Tony to go through the FY '27 lookahead.

Thank you, Greg. This is now actually Ryan. So we'll get to Ryan to do his piece.

Thank you, Greg and Tony. So look, over the next few slides, I wanted to provide some color on how we get from where we are today at roughly 1.5 million tonne per annum run rate to 2.8 million by the end of FY '27. Fundamentally, 2 things drive that: work fronts and equipment. On work fronts, FY '26 was our strongest year of development at just under 10,000 meters. That foundation and further development through FY '27 opens 7 new mine levels and takes us from 4 active work areas today to 14 by the end of the year.

Total material moved nearly doubles from 2 million tonnes last year to just under 4 million tonnes in FY '27. On equipment, the fleet nearly doubles from 21 to 41, jumbos and production drills from 4 to 7, loaders 6 to 12 and trucks 7 to 15. The point I want to emphasize though is sequencing. The step-up comes from the second quarter once the lower levels are open and then builds through the year. Why is this so important? Well, with the underground ramping up, obviously, that material becomes the dominant feed, which drives recovery in the plant.

On to the next slide, thanks. So this is what one of those levels looks like. This is level 2285 or 235 meters below surface at Mt Mann. And this is our next mining front. Three deliberate design features drive productivity and resilience. Dual access to the level and a dual cross-cut design allow concurrent activities. Truck loading bays that are off the main traffic route allow loading to be undertaken and not compete with haulage. So where we are today, shown in blue, access from the decline is complete, the majority of cross-cut development is complete and ore drives, which are shown in orange, commenced in September. This is what puts us on track for the step-up from the second quarter. The other point to note, of course, is that we continue to extract from the upper levels at the 1.5 million tonne run rate whilst building these lower levels.

On to the next slide, thanks. So this slide shows why the ramp-up gets easier from here and not harder. It shows ore contained by level at Mt Mann. In the upper levels of the mine, each level holds between 0.2 million and 0.7 million tonnes. The level on the previous slide, 235 meters below surface, holds 1.2 million tonnes. From 260 meters down, levels carry between 2 million and 5 million tonnes. In simple terms, the levels we've been mining give us about 18,000 tonnes of ore for every vertical meter developed.

On current and future levels, that is about 115,000 tonnes, more than 6x the ore for the same vertical development. There's 2 consequences arising from this. Firstly, scale, a single lower level holds on average a year of plant feed, and that gives us flexibility in sequencing. And secondly, quality. These levels carry a higher proportion of stope ore relative to development ore, which lifts the grade and consistency of what we send to the plant.

Next slide. Thanks, Michelle. Turning to the expansion early works. By way of a recap, 3 main scope items here. Number one, Stage 1 of the permanent mine services area. Secondly, the 5.5 meg ball mill, which is the critical path item for both throughput and recovery; and thirdly, underground development at Northwest Flats. Capital is up to $77 million of early works ahead of FID. And as Greg mentioned, $14 million was incurred in FY '26.

The project team is in place. Ball mill engineering design is well advanced and ball mill fabrication is progressing. Earthworks and construction have started at the mine services area and at Northwest Flats, we have grade control drilling, portal recommissioning and infrastructure works well underway. You can see some of this in the images on the left screen. Lastly, FID remains on track for the end of next month.

Next slide, thanks, Michelle. Northwest Flats is worth explaining and Tony has touched on, it is the clearest example of the optionality we preserved and are now activating now that we have the signal from the market. In the November '24 mine optimization, we deferred Northwest Flats to FY '31. We recommenced development at the end of FY '26. Additional portals and infrastructure through the open pit commenced in quarter 2 FY '27 with infrastructure established over the last few months. We expect development ore from Northwest Flats later in FY '27. Notably, the completed open pit has provided a second entry into the ore body. That gives us a mining front independent of Mount Mann, which is what underwrites volume beyond 2.8 million tonnes per year.

Next slide, thank you. On the plant, the key point is that the expansion is not a new plant. The circuit was designed for 4 million tonnes per annum under the original feasibility study. Crushing, screening, flotation and tailings are all sized for that. The items in orange are the focus areas of expansion, ball mill for grinding capacity, magnetic separation, water supply and storage and concentrate storage. Of course, at the next level of detail, we will also need to upgrade pumps and pipes. This is why this expansion is expected to be capital efficient and why it can be staged. We are filling in a flow sheet that was built for this volume from the start. And with that, I'll hand back to Tony.

Next slide, please, Michelle. Thank you, Ryan. Let me recap FY '27 guidance, which we gave at the end of Q4 and be clear about what it actually represents, starting with a point we've reiterated throughout this presentation. Our FY '27 guidance includes balancing our plant throughput and stockpiles with mine ramp-up. There's no surprises here. This was the November 2024 plan being executed and the reinvesting we are doing in FY '27 makes it more resilient, moving us from a previous flat 2.8 million tonne world to building the foundations for the new expansion world.

With that context, concentrate production of 390,000 to 440,000 tonnes, this production guidance accounts for the additional downtime we require to tie in expansion works during FY '27. On our cost guidance of $1,050 to $1,250 a tonne sold, I want to provide some further explanation here. We disclosed to the market in November 2024 that our 2.8 million tonne run rate was by the end of FY '27. In Q3 FY '26, we also disclosed that our next 2 quarters of underground production will be flat as we build out the development fronts, which one of those Ryan has just spoken through for the next increase of production to the 2.8 million tonne run rate.

We are, therefore, not at full run rate and some of that time is investing into the FY '28 ramp-up, but also the expansion. These 2 factors combined are the drivers of the higher cost structures we're seeing in the '27 guidance. Ryan has already illustrated some of those examples as to why this quarterly -- these costs have gone. Firstly, the total productive movement has increased from 2 million to 3.9 million, a 95% increase. To make this increase, we are bringing on more equipment ahead of the 2.8 million tonnes and started the expansion development in Northwest Flats. That is the work that takes us to 2.8 million tonnes a year run rate by the end of FY '27, and the production shows up in FY '28.

We see this impact on volume on fixed costs as we get to the other side of it. The investment ahead of production is what we're doing at present. We will provide further guidance on our forward cost structure when we publish our FID announcement, hopefully, later next month, all things being equal with the Board approving it.

The total CapEx of $320 million to $370 million, which doesn't include the expansion capital, sits behind next month's investment decision. More on that on the next slide. But before I move on that, Michelle, I do want to go back and look at the Q1 look ahead. So we've already spoken about this quarter being consistent with the previous quarter in terms of our underground production at roughly the 1.5 million tonne run rate. The recovery profile on the basis of that will be consistent with the H2 FY '26 results due to the feed mix. I want to stress that. And deferred shipment for Q1 FY '26 (sic) [ FY '27 ] is expected due to significant surge events and planned maintenance at the port. That doesn't mean there's any issue here with volume. It's just deferred, and we'll make that up in the course of the year. So that's what I wanted to mention in terms of giving the market a bit of a look ahead for this quarter.

So if we move to the next slide, which we'll quickly talk about on the sustaining capital and the capital in total. So we've got $90 million to $110 million of sustaining capital. That's basically to deliver a stronger base. That's the business as usual, tailings dam lifts, underground development, and processing plant maintenance. Then you've got the ramp-up development work. This is the capital we required to continue the ramp-up to 2.8 million. Then we've got mine infrastructure and optimization. I mentioned in my earlier slides around the fact that we deferred capital during the low pricing cycle to preserve cash, for example, the mine services area, plant optimization, non-process infrastructure, but we're now reinvesting in the business given our lookahead. And as Greg has already mentioned, we'll fund -- we're funding this from a position of strength with $561 million in cash, which means the program can be funded from operating cash.

So next slide, please. I'll now hand over to Grant Donald, and he'll take you through our marketing outlook.

Thanks, Tony. On the left-hand chart here, we've included a Fastmarkets slide demonstrating the gap between supply and demand. I think this very helpfully illustrates the size of the challenge for the industry in terms of expansion to try and meet that demand profile. Typically, we've seen supply response in relation to higher prices with much of the restarts now back in the market in the process of ramping up. And now the market supply relies on new projects coming to market, both in the form of greenfield and brownfield expansions.

We've included on the right-hand side a typical time line for new operations of 5 to 8 years and brownfield of 2 to 3 years. And this is the challenge that we have as an industry to try and keep up with that demand profile. This means that Liontown is well positioned given that our brownfield expansion is largely already built in terms of the plant with the ball mill that Ryan had given an update on. And as I said, we'll give an update on the full FID at the end of next month. But that relies on the Northwest Flats that Tony has talked to a little bit as well.

We go to the next slide. In terms of our offtake book, you can see on the left-hand side here, the last 9 months of the year have had a significant outperformance of spodumene versus chemicals. You can see this relativity as we talk about of spodumene to chemical linkage, which is hydroxide in this chart, has really stepped out from the historical averages. This has led to an underperformance of anyone who's got chemical linkage in the book. And you can see on the right-hand side that our -- 2 of our contracts 3 have chemicals reference for CY 2026, so calendar year 2026. But as we move into January, that flips the other way where 2/3 of our product will be linked to spodumene and only legacy contract on hydroxide.

These offtake agreements were entered into in 2022 to support the development and financing of Kathleen Valley. And at the time, no reliable spodumene index was available for contracting that was accepted by customers. We have worked hard to try and change the chemical exposure, and we were able to resell some of the Ford tonnes to Chengxin in the ramp-up period until the end of this year. And from 2027 and 2028, those are released, and we've resold those to Canmax linked to spodumene index.

So I think on a look-forward basis, you should see us start to close the gap a little bit on spodumene, but we do continue to have that 1/3 of the volume -- contracted volume on hydroxide. And with that, I'll hand back to Tony.

Thank you, Grant. Now let me conclude today's presentation by once again summarizing the key takeaways. 5 things. One, we delivered a profitable year and a strong operating cash flow of $182 million while still ramping up. The ramp-up is on plan and the 2.8 million tonnes by the end of FY '27 is on track. And I hope the detailed explanation that Ryan has provided gives further confidence to that. Third point we want to make is the market has turned. We backed our own judgment, and we're reinvesting into our flagship asset of Kathleen Valley with discipline. The balance sheet is strong enough to fund the growth from our own cash. And finally, we're ready to scale on that basis and expansion that can deliver production to the market incrementally and flexibly.

FY '27 is a year we invest to make the growth real. FY '28 is where you will see it being delivered. On FY '28 and beyond, the production cost and expansion capital will be part of the final investment decision at next month's Board meeting and FID. Today, it's about FY '27. The credit for this year goes to our people. I thank the Board, the accountability is mine, the shape of the business is right, but the job is not done. We know it. We'll keep our heads down and keep delivering. Thank you, and we're happy to take questions now.

[Operator Instructions] Our first question comes from Lyndon Fagan from JPMorgan.

Tony, firstly, I just wanted to pick up on your slide that talks about the M&A. It does feel fairly early in the journey to be looking for acquisitions, but just wondering if you can expand on jurisdiction, brine versus hard rock, what it is you're actually looking for at this stage?

Thanks, Lyndon. I feel that in the course of our presentation today that we let the audience clear that our priority is Kathleen Valley, first and foremost. So we're putting a lot of time and resources into prioritizing and ensuring that Kathleen Valley is to its full potential. But at the same time, we have to keep one eye on the broader market as we want to grow as a company. So we will look at opportunities as they present themselves. And we've been very public that our core competency is hard rock. So we will continue to look for hard rock opportunities. But also, we can't ignore one of the largest sources of lithium units in the world being brine. So we'll also keep a close eye on those brine opportunities. But we also acknowledge that we do not have capability as yet in that area. So any potential opportunity we look at in that area, we will partner with someone of demonstrable background.

Okay. Great. And another one I had was Slide 16 talks about the amount of ore per level at 2 million to 5 million tonnes. In the quarterly, it was quoted at 3 million to 5 million tonnes. Was that just a typo? Or do we need to read into that change of the amount of ore per level and sort of think about any sort of reduced productivity associated with that?

Yes. So Ryan here. Look, I think the underlying data that drives that graph hasn't changed. If you go back 12, 18 months when we first started talking about productivity through the lower levels of Mt Mann. The data is the same. I think the way we've characterized it, particularly when we've shown that graph, I think it's on Slide 18, which actually shows that level. We probably refined the way we've characterized it, but the underlying data is still the same, still expecting to get the same level of productivity out of those lower levels of the mine. And that's what we're trying to do a bit of a double-click into through the presentation today. So hopefully, that helps.

No change, Lyndon.

The next question comes from Austin Yun from Macquarie.

Just a question on the offtake, please. I understand your production will be flattish in the near term before a step-up in the first half of calendar year 2027. Just keen to understand your offtake commitment across the next 12 months. Are they evenly allocated? Or would there be any flexibility to your production rate?

I'll let Grant explain that one.

Thanks, Tony. Austin, look, I guess, when we start looking forward in the schedule, we typically get our guidance and sit down with customers and agree a forward shipping schedule. While the general principle is that has to be evenly spread, I think there's a recognition from customers that also has to match the tonnes that we have. So as we look forward across the total year, we don't see any issue with meeting our commitments on offtake in FY '27.

Just one quick follow-up, if I may. On the accounting side, I note that you changed the EBITDA calculation by removing some inventory movements. Could you please provide some color for that change? Would that push into the earnings levels? And also any implication to the unit cost calculation going forward?

Yes, Greg here, I'll take that question. It's a change that we made for the half year numbers as well when we restated half year '25. So previously, the EBITDA calculation was adding back the depreciation and amortization charged against the assets. But D&A goes into inventory and then it comes back out into the P&L as we sell tonnes. And therefore, the amount of depreciation and amortization actually in the P&L is driven by sales tonnes, what was booked against the assets. And so I think it's a more reflective representation of EBITDA to include the D&A that's actually in the P&L. And half 1 was restated, full year '25 was restated and then '26 was just done on that new basis.

Sorry, there was a second part to your question, which was impact on unit operating costs. That unit operating cost metric is a cash cost metric and therefore, the change in method of EBITDA had 0 impact on unit operating costs.

The next question comes from Glyn Lawcock from Barrenjoey.

Couple ones from me. Just to clarify, did you have any [ open cut ] ore left for feeding in this quarter, Ryan? Or is it just purely processing the underground that you mine?

You talking this quarter, Glyn? So quarter 1 of FY '27.

Yes, Q1 of FY '27.

Yes. So as we mentioned in the quarterly, we do have open pit material left in quarter 1, but we will have fully consumed that by the end of the quarter.

Okay. So there will be some supplement to the underground. Sorry, I was away for the first quarter. And then just maybe you could help me understand the disputed shipment that's in the accounts, what's in dispute? Is that a quality issue? Or what -- could you just help explain what that is and whether it gets resolved?

Yes, I'll take that one. I can't be specific as to the reason behind the dispute, but there is a dispute that we are currently working through. We've made a provision in our accounts around that dispute over one shipment, and we're pretty confident that we'll resolve that pretty shortly.

Okay. Is that a timing or quality issue, Tony?

I can't specifically give you the details because it is commercial-in-confidence because we're in the process of finalizing the negotiations. Well, if you want to -- it's nothing to do with quality, right? I can tell you that.

There are no further questions on the platform. I'll now hand back to Tony.

Thank you, Michelle. And once again, that brings our FY '26 to a close. We're really looking forward to FY '27. So thank you for the questions, and thank you for listening.

That concludes today's call. Thank you for joining us. You may now log out.

[Presentation]

Welcome to the Liontown at June quarterly call. [Operator Instructions] I will now hand over to Mr. Tony Ottaviano, Managing Director and Chief Executive Officer of Liontown.

We have a clear focus from a stronger position on productivity and growth in this financial year that will set us up for years to come. It's only a short 12 months ago, this call was about protecting the balance sheet and preserving cash. This quarter, we generated $137 million of net cash flow and closed with $561 million of cash in the bank, more than $0.5 billion.

The strength of that financial position gives us the pivot that we need from preserving cash to now investing in growth. The first proof of that pivot is in the ground, and you can see that with the strongest development quarter that we've had to record, up 35% and that keeps our ramp up to 2.8 million tonnes per year by the end of this financial year on track and on schedule.

I'll take you through the safety, the shape of that quarter and the strategy beyond the pivot, and the team will walk you through the operation and financial detail in the year ahead. And then I'll come back in the end and sum it up. So let's go to the next slide, please, [ Ethan ]?

I basically summarized in my opening here these key points, these 5 key points. And the last point I do want to mention is the focus on growth and the Kathleen Valley expansion, which Ryan will touch on, is progressing on schedule and will be subject to FID at the end of this quarter. So we then move to the next slide, please.

I want to start the conversation as we always do, with safety. And firstly, our TRIFR. I think we all acknowledge it's not where we want it to be, and we're applying quite a bit of focus on a day-to-day, hour-by-hour basis to improve this. We've engaged some external expertise, some former DuPont people that are the world's best in the area of safety leadership, and we've done quite an extensive survey and forensics of our safety position.

And we've got the confidence now to push this forward and make some improvement. But in the area of environment, there were no material incidents in this quarter. All the monitoring was completed and in line with our approvals, and we secured with some fairly significant groundwater lease amendments to lift our water extraction rates as we plan for our expansion.

Our hybrid power station delivered 71% of renewable penetration. It was down from the 85% that we had in the previous quarter, but that was largely driven by a lot lower wind resource over that period. And I also want to acknowledge our community and heritage team who kept the genuine engagement up with our traditional owners at [ dual meet ] this quarter and presenting the inaugural [ dual meet ] the buyers forum. If we can now move to the next slide, please, Ethan.

Our June quarterly results, our production of 103,000 tonnes of spodumene and we sold 108,000 tonnes over the quarter with 5 parcels, and we shipped a grade of 5%. Production was up around 7% in the quarter, and we held production stable while putting record effort into development. More on that when Ryan comes to speak.

Our realized price of USD 1,880 a ton on an ASX basis and benchmarking pricing held through the quarter. And we had strong volumes into firm pricing, which drove our revenue to $235 million, up 19% quarter-on-quarter.

I just want to have a short word on realized price because it's worth understanding how we sell. Besides the Q lag, some of our contracts are linked to the chemical pricing, which have not had to fly-up that the spodumene index has had. But Grant will speak about that further, when he comes to talk.

Our unit cost was AUD 995 a tonne, up 1% holding unit costs essentially flat in a quarter with a volatile external backdrop is a good result.

The number that matters to me most is cash. We built $137 million for the quarter, and we now, as I mentioned in my opening, at $561 million in the bank. Six months ago, we were talking about protecting the balance sheet and preserving cash. Today, we're holding more than $0.5 billion in cash.

And we've delivered on FY '26 guidance across every metric. And again, across a very challenging backdrop -- external backdrop. That discipline will now let us do what we need to do in FY '27. So if we just move to the next slide, please.

I think it's important that we set the scene because the 12 months seems like an eternity away. Last year, at the end -- at the same point, as I've mentioned in my opening, we were preserving cash.

Our net cash flow position was negative 17. We've just finished our strategic pivot where we deferred the North-West Flat ore body to FY '31. The Street was telling us that the market would only come back in the balance late calendar year '27, early calendar year '28.

And through our business optimization, we had stripped out or deferred $112 million worth of cash. And a lot of that was linked to less development, some over 30,000 meters of development that over the 5 years, we've removed. Roll the clock forward for 12 months, and we've seen a significant increase in price and therefore, our net cash flow position has improved markedly.

So that's given us that focus to move into growth. But we still want to maintain that financial discipline. And in this year, we've restarted some of the deferred spend that we had to make only less than 12 months ago, and we'll talk about that later. We've recommenced the commissioning of North-West Flats, and we've started a lot of rerecruiting and equipment ahead of the production growth.

So I think it's important that we set the scene that this year will be a year of investment coming from a year where we had to preserve significant cash to see us through and build a strong balance sheet. Next slide, please, Ethan. I'll now turn to Ryan, who will go through the operational performance.

Yes. Thanks, Tony. So on the operational highlights slide, as Tony has mentioned, development at 3,316 meters, up 35% on the prior quarter, and it's our strongest development quarter-to-date. This is the work that opens all access required for the next step up. And I'll talk about that in a short while. Underground ore mine was 356,000 tonnes at 1.4% lithium. Tonnes were lower than Q3, and that was a deliberate trade-off as we prioritize development in the quarter.

Across the second half, importantly, we averaged 1.5 million tonnes per annum, and we did that through the 2 biggest development quarters that we've run to-date.

In processing, 647,000 tonnes at 1.3% head grade, producing 103,000 tonnes of concentrate with the plant availability at 92%. Recovery was 63% percentage, 2 percentage up on Q3 and our strongest quarter for the year. Moving now on to the next slide. Thanks, Ethan.

Development is really the story of this quarter. As I said, at just over 3,000 meters in Q4 that takes FY '26 to 9,737 meters, up 33% from the prior year. This delivers additional work fronts and a more productive and flexible level design, which I'll talk about next.

Production remains on track, the 1.5 million tonne per annum average during the second half with the next step-up in underground mining rates coming from Q2 in FY '27. And moving on to the next slide, I'll give a little bit more color around where some of those development meters are going.

Through FY '25 and the first half of '26, as Tony indicated, we're designed for cash preservation, minimum meters in order to reach the ore body. We've taken the opportunity now to redesign the levels for both productivity and flexibility.

Three notable changes that we've highlighted on this slide. The first is dual access to the level, which is shown in orange. This separates the trucks in and out of the level, out of the decline.

Drill crosscuts shown in blue, allow stope cycle activities to run concurrently. So things like loading into trucks and charging -- drilling and charging stopes can be done in parallel right next to each other, which the previous design did not allow.

And thirdly, the truck loading bays, which is shown in green, are off the main traffic route and they maximize traffic flows through the level. Every extra meter here is deliberate. It lifts what a level can produce making each level more productive and increasing operational flexibility. Moving now to the plant on the next slide. Thank you.

As has been the case through the year, feed mix has been a significant driver of plant performance. Underground in this quarter increased to 55% of mill feed, up from 48% in Q3.

With a focus on developing the mine, we took the opportunity to bring forward the processing of lower quality open pit stockpiles. With prices where they are now converting that material into cash, is much more valuable than holding on to the stocks and it clears the way for a cleaner future blend.

ROM stocks closed at 239,000 tonnes, down from 550,000 as we continue to draw down on the last of the open pit stockpile. The balance is processed by the end of the quarter with some unsorted contaminated ultrafines available when opportune through the year. From there, feed will be underground and the processing rate lifts from Q2 FY '27, in line with the mining ramp up. Now on to the recovery. Next slide, thanks.

So on 1 chart, we outlined the single biggest driver of plant performance, which is contamination. Well, lithium grade and grind size both play an important role, the reason why we've spoken about the value of clean underground ore and feed mix is evident in this chart. As the lower quality open pit share of the blend comes down, recovery goes up.

Q4 was our strongest of the year, as I mentioned, at 63% on a 55-45 underground open pit plans. When we run higher portions of clean underground ore, as we did for most of April, which we spoke about in the Q3 update, the plant reliably delivers 70%. The plant is performing as designed.

What moves recovery is what we put into it. That said, we're always going to focus on optimization, and we'll do that through minor debottlenecking, trialing new reagents, refinement of control works and the like. Turning now on to the early expansion works.

So just as a recap, we have a number of elements in the early works ahead of FID. The first is the ball mill. Second is the development of the North-West Flat, which Tony has spoken about, and particularly developing that out of the Kathleen's Corner pit. Stage 1 of the permanent mine services area, as well as some other minor works. All up, we've committed to up to $77 million ahead of FID, and we expanded $14 million in FY '26.

In this quarter, we ramped up the project team, progressed detailed engineering on the ball mill, started earthworks and construction of the mine services area. And at North-West Flat, we completed grade control drilling, recommissioned the portal that was put into care and maintenance in 2024, and began infrastructure work to support the new portals.

As you might have seen from the video we just played before the formal presentation, there are numerous activities underway. Kathleen Valley is an exciting place to be, and we're putting the call out to continue to build the team that underpins the expansion. Notably, the FID remains on track for the end of this quarter, as Tony had mentioned. And with that, I'll hand over to Greg.

Thank you, Ryan. So moving to Slide 14, please. We set a record in quarter 3 with operational cash flow of $55 million, and we just increased that by over 200% to $180 million for quarter 4. You can see we had a bumper quarter in terms of customer receipts with over $300 million. That was an 83% increase quarter-over-quarter and reflects both the sustained market pricing and the strong tonnes shipped out of Kathleen Valley.

Production and other operating cash costs increased to $126 million. This reflects both the increase in tonnes processed and produced for planned maintenance activities during the quarter. And we also had higher royalties paid noting that there's a quarter lag between the quarter measured and the quarter paid. So in quarter 4, we paid for the royalties from quarter 3, and that had a substantial step-up in realized price compared to quarter 2.

$10 million of sustaining CapEx, that was $6 million higher at quarter 3, $4 million of that increase is associated with underground capital development for Mount Mann, where a portion of that is now classified as sustaining since commercial production was declared at the start of April.

$29 million of growth CapEx. This is a step-up from Q3 overlaps with what Ryan described a moment ago in terms of the expansion projects, including ball mill ramp-up in underground development including the commencement of North-West Flats in quarter 4. All of that adds up to a net cash flow of $137 million. And as Tony has said, we closed with $561 million of cash at bank. Net cash of $190 million and 21,000 tonnes of sellable product and inventory.

So we are in a very strong position for the continued ramp-up and further expansion as we look towards FID at the end of this quarter. Next slide, please, Ethan.

So looking at some of the other financial metrics. We had a record revenue in Q4, 19% increase to $235 million. Of course, that was also driven by the sales tonnes and sustained pricing.

Realized pricing on a USD SC6 basis was 2% higher and we were 4% lower on an Aussie dollar basis per tonne sold, which was a combination of the appreciation of the Aussie dollar and a slight decrease in the average lithium grade of tonnes shipped.

Unit cost of sales went up $14, so a small increase from Q3. There's a number of ups and downs in that, but simplistically, the higher diesel costs we incurred account for that change. And the all-in sustaining cost went up $63 a ton. So the higher unit cost of sales flowed into that, but it was almost entirely offset by dilution of lease payments because we had more tonnes during the quarter, which means that the increase is driven by sustaining capital.

$37 of that was associated with the underground capitalized mine development costs with the portion now going into sustaining, and we also had some other mining infrastructure CapEx across some projects include paste fill, return air ventilation, electrical substations, underground columns. Please go to the next slide, please, Ethan, which is a summary of our guidance for the year.

We have delivered across all the metrics, production, unit costs, all-in sustaining CapEx. $114 million across the whole year for CapEx. That excludes the $14 million that we have incurred already as part of the $77 million for early works ahead of an FID coming late this quarter. I'll now pass over to Grant, who will take you through the market outlook.

Thanks, Greg. Despite, I think, what share prices in the industry would tell you, the market remains pretty robust. We're still seeing very strong lithium demand across the sector. And I think the top right-hand chart here demonstrates very clearly that we've seen an unseasonal drawdown here on carbonate inventories, which is now at a point where you've got about 89,000 tonnes of carbonate, which is just around 20 days of inventory.

This is a multi-month low, and you can see a very different trajectory to last year. You will also understand in the market that while there's a lot of talk about brownfield restarts, most of those decisions have already been taken, but it takes time to actually see the product come back into the market.

We've also seen some large-scale expansions decisions taken, and also some expected in the near-term. But I think most of those have very large 24-plus month build times and then a ramp-up to follow.

So if you look at the chart on the right-hand side at the bottom, you can see the expected deficit. This is a fast market chart out to -- well into the middle of next decade. And that really starts this year where they expect to see around 50,000 tonnes of deficit for the overall carbonate market.

New greenfield projects have an even longer time frame, typically 3 to 5 years. That requires a more robust pricing outlook than this kind of volatility that we see. Makes it very hard to make long-term decisions, particularly for small juniors who needs funding. But the fundamental demand pathway for lithium remains positive. The Middle East instability to accelerate the economic case for EVs and for energy storage.

June posted another record for EV sales with over 2 million units sold globally, AI infrastructure build-out, coupled with broader energy security concerns are driving a long-term build-out of lithium battery storage capacity globally. And we've seen that the first half of the year grew 27% year-on-year which is pretty robust, and that's a benchmark number.

So with that, I would say the key message is the physical market remains tight. The trajectory remains very positive for the outlook not only for this year but into many years ahead. And as a requirement, the -- well, as a result, the investment that we're making to try and grow the business to be able to supply into that is a very sensible decision. With that I'll hand back.

Thanks, Grant. Ethan, on the next slide. So as we move into FY '27, I think this is probably 1 of the more important kind of points to make given particularly how coupled our ramp-up is to the underlying ramp-up within the mine. So I wanted to provide a little bit of color and a little bit of context around the work we're doing underground and particularly where all those development meters are going.

So this is obviously a fairly simplistic view as we go from our current run rate of 1.5 million to 2.8 million. We distilled it broadly down into 2 key things. One is the work areas that are open to us because that dictates the daily production rate, which then translates into annual production rate. And the second is the equipment to then access those work areas to produce.

So as we have a look at the number of work areas through the course of FY '27, we're unlocking 7 new mine levels through the mine. And bearing in mind, and as we've discussed many times over the past 12 months or so, those lower levels are around 3 million to 5 million tonnes of ore per level. So highly productive levels.

And each of those, at levels, have multiple work areas attached to them, which is underpinned by the level design that I went through in the earlier section. So by the end of FY '27, we are up to 14 active work areas compared to 4 at the end of FY '26. Again, that's a key enabler of going from 1.5 to 2.8 million tonnes.

With those work areas, then we obviously need more equipment. So jumbo is going from 4 to 7, which again allows us to continue to expand out the mine and particularly as we access the North-West Flats.

Production drills going from 4 to 7, loaders from 6 to 12 and trucks from 7 to 15. So with those initiatives, more mine levels and more equipment, we're very confident in the 2.8 million run rate by the end of FY '27. Moving on to the next slide.

Giving you a pictorial here around the mine and particularly some of the activities around the for Kathleen's Corner open pit access. So we've shown in purple Mount Mann. And you can see the shape of that ore body on the right-hand side of the image, access from the Mount Mann box cut. In blue is the North-West Flats. And you can hopefully now see in this image, the reason why we're expanding the effort to access that ore body from the open pit, given where it's like -- it's location and geometry.

That said, in quarter 4, we have reentered the portals in the Mount Mann boxcut that access the Southwest portion of the North-West Flats. And we've started doing some early development and some grade control drilling in that area. The focus in quarter 2 FY '27 will be to access the remainder of that ore body from open pit. We've already started early works to put in power, water, and air infrastructure in that location. So that is clearly a key focus for us in FY '27.

Importantly, as I said on the last quarterly update, we will get some small number of development tonnes out of the North-West Flats as we continue to develop it out. So with that, I'll end over to Greg.

Thank you. I'll start with the guidance for unit cost in 2017. We came up $987 per tonne for the whole of FY 2026, and we're guiding to a range of $1,050 to $1,250 per tonne sold. And this reflects the investment we're making to unlock production growth from FY 2028 onwards.

The 3 main drivers behind this increase, the increased mining activity is the largest driver. As we have described, we're now mining both North-West Flats and Mount Mann, and we're 100% underground in FY 2027, while we still had some open pit activities in '26.

The additional labor and equipment that Ryan spoke of supports both capital and production activities, and this has a flow-on impact to unit cost of sales. The mining method for North-West Flats during the ramp-up period involves jumbo development and stripping. And this has a higher unit cost than Mount Mann that's got a combination of mining importantly includes the production stoping. So this contributes to a higher overall average cost as well.

Secondly, the early mobilization. We brought people and equipment early to derisk the ramp up, which gives us the confidence in delivering the plan. These additional costs will be diluted on a per tonne basis as production ramps up.

And then finally, we've got economic factors or macroeconomic factors for the inflation in key inputs such as cement for paste fill, reagents, and labor. Next slide, please, Ethan.

Well, do you want to mention about the total movement, the increase in total productive movement? if we can just bring back that slide, Ethan, if we may. I think a key point here, just to underpin Greg's point around the mining activity is the increase in material move from '26 to '27 almost 100% increase, which demonstrates the increased activity that we are going to do this year, which is a pre-investment for unlocking the tonnes in '28.

Yes. Next slide, please, Ethan. So this is the CapEx slide. We're guiding to $320 million to $370 million of total CapEx. It includes the balance of the early works for KV expansion, the $77 million that was announced at the end of April, of which $14 million fell into to '26, so the balance falls into '27, but it excludes any further KV expansion CapEx that will be announced subsequent to the FID scheduled fourth September.

So we've divided the CapEx into 4 categories, about $90 million to $110 million of sustaining capital to keep the operation producing at current rate and includes tailings dam lifts, underground development at a steady-state rate and, of course, capitalized plant maintenance.

We've isolated out $90 million to $100 million of underground capital development to ramp up to 2.8 million tonnes per annum. This work is planned and we deliver that target by the end of June '27. So the distinction between the development in each of the categories is what does it take to get to 2.8 million tonnes? And what does it take to sustain 2.8 million tonnes?

Third category is $80 million to $90 million of mine infrastructure and optimization. This is capitals deferred through the period of low pricing to preserve cash, that covers infrastructure and optimization work across both the mine and the plant, such as the mine services area, and upgrade to the paste plant and expansion of the cap.

And then the last category is the balance of the $77 million for early works on the expansion. Really key point about all of this links back to our balance sheet strength. So $561 million at 30 June which means this entire program is funded from existing cash reserves, we're investing in growth from a position of strength and don't require external funding to do all of this. I'll now hand back to Tony.

Thanks, Greg. So just to wrap this up, the market guidance for 2027 is concentrate production, 390,000 to 440,000 tonnes. Again, this is in keeping with our profile for the underground mine ramp up and get to 2.8 million tonnes by 2027.

But it also includes -- and this is a key point, we are entering into our expansion. And in order to enable our expansion, we're going to be doing a number of tie-ins to our plant. So this figure also includes additional shutdown time of our plant in order to finish the tie-ins from the expansion. There is a material announced there for downtime associated with that time in addition to the normal shutdown maintenance that we have planned in the course of the year.

The unit cost of sales, Greg has already spoken about. And so if that's the range we are predicting. And also we're targeting. And then on the total capital expenditure, the $320 million to $370 million. Greg has already detailed that. And we wanted to give the market that detailed breakdown in order to -- because we often get asked questions around what is your steady-state sustaining capital, and I think we've given you an indication there, but also how is this capital proportion.

So rather than giving you this 1 figure, we have given you that breakdown so that's our guidance for 2027. It's really -- just to emphasize, a period of investment that we're putting in after a year of fairly lean and focused and disciplined on balance sheet. So I'll go on to the last slide, please, Ethan, just to wrap it up.

Look, I want to thank the team and -- for their presentation today. And let me bring it back to these 5 key things. Cash is building. Again, $137 million of net cash flow. And just to put that in perspective, that's already covered the $77 million that we have for early works and has some left over. So it's a strong position to be in with a realized price of $1,880. And this pricing supports this cash generation. We've had record development in this quarter. And again, as Ryan pointed out, we've made some significant changes to give us that flexibility and resilience, so we can deliver the 2.8 million with confidence, but also set ourselves up for the expansion, which is why we brought North-West Flats into production on the time we have.

We will continue to execute our operating discipline to ramp up at 2.8 million. And you can see that through the sort of targeted increase in work fronts, but also bringing in the equipment before we actually need it so that we can bet it down and put it to work and most importantly, get the people to operate.

And finally, we're progressing our growth at Kathleen Valley through the FID and expansion study, which will be delivered at quarter 1 of this financial year. But also we're working, as we said in our quarterly activities, on where we're going with Buldania. So we finished an initial scoping study and the team are going to be doing a bit of work on that in this financial year. So more to come on that. Okay. With that end, I'll now open it up to Q&A.

Thanks, Tony. [Operator Instructions]. Our first question comes from Hugo Nicolaci from Goldman Sachs.

Obviously, congrats on another ramp-up year and things progressing well. Look, firstly, on the underground development, you've previously given that sort of ramp-up outlook profile. So maybe can you just give us some comments on the magnitude of ore step-up you flagged in the second quarter?

And then the 2.8 million run rate target by the end of '27, how much of that is from Mount Mann versus some of the North-West Flat development material?

That's a good question, Hugo. I'll hand it over to Ryan.

Yes. Thanks, Hugo. So I think the simplest way to think about this and consistent with what we said in Q3 is that Q1 of FY '27 will be at around about that 1.5 million tonne run rate. And then from the end of Q1 to the end of Q4, if you draw a straight line, that's kind of broadly speaking, the ramp up through the course of the year.

In terms of your question around North-West Flats, it's pretty minor in the scheme of things. It's kind of less than 5% of the overall total. And so it's pretty much incidental to the development that we're going to build out the North-West Flats. Did that answer the question?

Yes, that's helpful. And then maybe just turning to recovery. Good to see the clean ore recovery sort of averaging 70%, which I think it's what you guys targeted sort of 15, 18 months ago. If I go back, can you just talk us through what you assumed in your '27 guidance in terms of ore mix and recovery? Is 70% now the right number given that you're basically down to sort of mine material?

So I think probably a couple of points there, Hugo. The first is that through Q1 FY '27, we're still processing an amount of open pit, which is kind of what I flagged there. And broadly speaking, you'd say that it's going to have a similar recovery outcome. It's the same broad segment, if you like, in Q1.

As we get into Q2 and beyond, then we do have obviously clean underground ore, and we would still target in that order of the 70%. But what I'd say is that recovery is an outcome of a whole range of other decisions. And at the end of the day, what we're going to target is producing on-spec material and maximizing that and recovery would be an outcome of them.

So I think what we're targeting, as I said, is still to maximize that recovery when we can. But Q1, as I said, will be pretty much a follow-on of Q4 of this year.

Next question comes from Austin Yun from Macquarie.

Just a question on the growth plant. So looking at the plantation, I just noted that the 4 million tonne number hasn't been referenced at all. I'm just keen to understand if there has been any change in your thinking? I know that earlier this year, you talked about stage expansion. So just kind of understand how to listen about the growth plan beyond the 2 8 million.

It's a good question, Austin. I get told by my Company Secretary that I'm not allowed to mention the number until we publish a DFS. So -- but I wouldn't worry about that number too much, Austin. It's broadly in line with that where we previously have mentioned.

Okay. Cool. Understood. Just 1 quick follow-up. I understand the company -- sorry. Just a quick follow-up if it's okay. Just on the -- I can see that the company is pivoting in terms of thinking on development meters. What is the right level of sort of a steady state given meters that are going to fit into your sustaining CapEx?

Yes. So Austin, from a total dollar number point of view, as Greg called out there, the $90 million to $110 million is the kind of the dollar number. Obviously, some of that is associated with plant infrastructure, but a bulk of that is going to be developed meters.

So you can probably back calculate from that, the kind of rough number of development leaders, but it's obviously substantially lower than the total meters we're doing over this year, which is very much around an investment in opening North-West Flats and continuing to open up Mount Mann.

Our next question comes from Jacob Li from Barrenjoey.

Just a follow-up on the previous question on recovery, if I can push you a bit further. Just going to the next couple of years, what sort of level of recovery do you think you can achieve with -- for underground for the previous PFS was a couple of years ago, we're targeting high -- mid- to high 70s. Do you still think that's the internal target? What sort of levers can you sort of pull going forward?

Okay. Just to break it down, the DFS that we published 6 years ago said life of mine average was 7 year. And for the next couple of years, clearly, we're going to target above 70, which is the target we've had previously. So that's how we're planning it.

And second 1 would be on your cost guidance. So FY '27 unit cost guidance sort of suggests that your operating cost rate would be around $480 million. Is that the right level of cost base to sustain 2.8 million tonnes on rate going to the long term? And also with the higher year unit cost mostly reflective of higher diesel cost assumption?

So the first -- the answer to your first -- you were a bit hard to hear, if I'm honest. But I think your first question is, is the $400-odd million that we are planning to spend this year indicative of a steady state 2.8 million? Well, the answer is clearly no there because as we've mentioned, there is a lot of front ending that we have done in this year in terms of investment that will unwind once we reach the 2.8 million steady state. And then we're going to get the -- on a unit cost basis, we will get the scale benefits of reaching 2.8 million and amortizing all those fixed costs that we have implemented this year.

Our next question comes from Stuart Howe from Bell Potter Securities.

Just on FY '20 guidance, you talked to the times that will occur. Just wondering if you can somehow quantify, I guess, what impact that might have had on guidance given, I guess, what sort of time the payer might be out for over the next quarters? And also which quarter is likely to impact the most?

Sorry. I didn't catch the last bit, Stu.

Which quarters will be impacted the most?

Just which quarters will be impacted the most?

Okay. We're still work -- just to add to the last bit, we're still working that through with some definitive detail because we haven't finished the study. So we'll know a bit more than that in the coming weeks and months before the FID.

So we've made an allowance over the course of the year. That allowance is about 10 to 12 days. But that will be firmed up whether we can utilize some of the existing plant shutdowns, but that will come out in the study.

And broadly speaking, it's back-end loaded because the early works need time to be delivered, ball mill being probably a good example, I would say. So it's very much more back-end loaded.

Great. And then just on the expansion itself and when you come out with the numbers on at the end of September, will you -- we have been in a position to talk offtake contracts around the extra production? How are you thinking about selling the extra tonnes?

I'll take that 1, Stu So our view is that we're going to maintain that volume for spot. We already have 3 long-term offtakes with Tesla and Ford and LG, albeit the Ford ones being redirected to change until the end of this year, calendar year.

And then from the beginning of next year, that will go to CarMax, on the spodumene index. But our view is we want to have more material available for spot so that at this point will be maintained for spot.

Our next question comes from Andrew Harrington.

Can we talk about operating costs? You're very clear in terms of displaying them. But is it SC6 basis that those numbers that are displayed?

No. The unit cost is on a ton sold basis. Ton sold...

So at 5.5%, do we assume or less?

It's definitely around...

0.2. [ 5152 ].

Okay. And if I may, another, in terms of realized pricing, the best way to look at it, looks going forward now that you're essentially selling regularly. Is that average of the quarter or average of the previous quarter? Is there a sort of rule of thumb that we should look at in terms of how you get to a rough average price?

Yes. So the average price is really based on our contract mix. As we've disclosed, we've got 1 contract on a relativity to hydroxide, 1 contract on a relativity to carbonate, which as I just mentioned, that rolls off at the end of this calendar year and moves to another contract which is on spodumene index. And then our last contract with Tesla is on spodumene index.

So I mean, if you look at this period that just passed, we had a significant outperformance of spodumene indices versus chemicals or the average fast markets SC6 price for the quarter was $2,500. But in that same period, carbonates averaged about $22,000 and hydroxide under $21,000. So that puts the relativity for spodumene in this quarter, about 11% or 12%. That is typically historically traded in the range of 7% to 9%.

So that's why it's important to try and move more of our booth towards spodumene index because that's ultimately reflective of the product we sell, which has embedded optionality to make carbonate or hydroxide depending on the customers' desire.

There are no further questions today. I will now hand back to Tony.

Thanks very much, Ethan. Thank you very much for the listeners and the good questions. As I said, without repeating it too much, we're in a strong position. We've got a very solid balance sheet. Our focus is now around value-accretive growth and the best option we have is a brownfield expansion of Kathleen Valley, which we're very focused on.

We're setting the operations up in order to meet that opportunity. And it's -- it will provide us the quickest tonnes in the market. So that's why there's so much effort being put into that. So with that, too much more, thank you, everyone.

That concludes today's call. Thank you for joining us. You may now log out.

Welcome to the Liontown March quarterly call. [Operator Instructions] I will now hand over to Tony Ottaviano, Managing Director and Chief Executive Officer of Liontown.

Thank you, Luca, and good morning, everyone. Before I launch into the presentation, I'd just like to introduce who else is going to accompany me on this presentation. There's Ryan Hair, Chief Operating Officer. We've got Greg Jason, our CFO; and we've also got Grant Donald, our Chief Commercial Officer. I'll start by saying this is a defining quarter for Liontown. So if we go to the next slide, please, Luca.

There are five things I want you to take away from today and mirroring what's been said on this slide. So firstly, cash on hand grew by $33 million this quarter, closing at $424 million. Operating cash flow alone was $55 million, and Greg will show this in a later slide. And for the first time since production commenced, the operating cash flow funded the business in full.

After capital investment in the asset and net financing flows, we will still end the quarter well ahead. This is the strongest financial quarter since production commenced. It's also worth noting that the Port of Geraldton was closed for several days at the end of the quarter due to the cyclone threat by Cyclone Narel. That delayed two of our shipments, slipped into April and the other departed in late the last day of March.

The cash receipts associated with that 31st of March shipment was approximately $64 million. So the underlying cash generating capacity of the business this quarter was even stronger than the reported $33 million. Secondly, the market conditions are strong, and our realized pricing reflects that. Our average realized price for the quarter was $1,845 per dry metric ton on an SC6 equivalent basis, up 87% quarter-on-quarter. The structural setup in the lithium market is compelling, and we're now capturing this through our contracted sales. And again, Grant will go through the market in some detail in his section.

We are delivering on plan. We've achieved our 1.5 million ton per annum underground run rate target early in the quarter, ahead of schedule. The ramp-up is tracking to plan. The orebody is performing as modeled and the grade reconciliation against the resource model remains strong. And again, Ryan will go through this in some detail in his section.

Fourthly, costs remain on track. Unit operating costs for the quarter were $981 per ton, and we're within our FY '26 guidance range. We're continuing to manage the ramp-up, the transition through a variable feed mix and the fuel crisis by ensuring our business optimization focus remains strong and disciplined.

And finally, the pathway to 70% recovery is now confirmed. We have demonstrated 70% recovery on clean ore, underground ore as we had planned and as we have identified to the market. This is sustained across the first 3 weeks of April. The plant is performing as designed and as expected.

Now let me go through a little bit more detail in the next slide, please. This slide gives you the quarter at a glance. And as the subtitle says, we are delivering on all fronts as the underground ramp-up continues.

Let me walk through each of the tiles for you. We've had production of 96,000 tons. And as we highlighted in our half year results, Q3 had fewer calendar days, and we ran a planned plant shutdown during that period. So production is on track. We've had sales of 84,000 tons across 5 parcels. We finished the quarter with significant inventory in port, around 26,000 tons of saleable contract. And as I mentioned earlier, the inventory build reflects the Cyclone Norel impact at Geraldton. It's a timing issue, not a market issue.

Pricing, I've already spoken about the $1,845 a ton and the cost -- unit operating cost of $981 per ton, and this is a fully loaded unit operating cost, right? It has leasing costs in there, inventory movements. It's a fully loaded unit operating cost. Consistent with our prior disclosure around unit operating costs, we want to make sure that we are being compared on an apple-for-apple basis. It's an 8% increase on Q2, reflecting the transitional feed mix and the ramp-up. This remains within our FY '26 guidance range.

Finally, the cash. And again, the headline number of $424 million is the $33 million of positive net cash flow generated this quarter. And I've already mentioned around the operating cash flow for the first time fully funding our business. As the banner shows, FY '26 guidance is maintained across all metrics: production, costs, all-in sustaining and capital expenditure. I'll now move on to Ryan to give us the health and safety and environment update.

Thanks, Tony. So I am on site today, Kathleen Valley, so apologies in advance if there's any unintended background noise. Our renewable power penetration held at 85% for the quarter, reflecting the investment in our wind, solar and battery hybrid system and reducing our exposure to gas and diesel. On safety, whilst our TRIFR has moved from 11.55 to 10.53, that movement is well within normal variation on a quarter-to-quarter basis. We're not reading anything into it, and we are continuing to stay focused on building a safety culture that prevents injuries and reduces high potential incidents. A healthy level of safety observations is a leading indicator of engagement, and we want to continue to see this indicator and the quality of safety interactions continue to build.

Next slide, thank you. So I'll now walk through the operational story for the quarter, starting with mining. As Tony indicated, we hit our 1.5 million ton per annum underground run rate ahead of schedule. The target was set for the end of March. We achieved it early and sustained it through the quarter, 402,000 tons mined, up 31% on Q2. As we've highlighted previously and as Tony mentioned, the orebody continues to perform as expected with grade reconciliation and stope dilution outcomes in line with expectations.

Our fleet capacity continues to build. An additional jumbo and additional haul truck arrived and went into production during the quarter, lifting both development and haulage capacity. This improvement and increase in fleet capability will continue, particularly as we get into developing the new development areas for the expansion in the Northwest Flats orebody. Looking forward, ongoing level development will unlock wider ore zones.

The next material step-up in our extraction rates is expected in Q2 FY '27 as we ramp towards the 2.8 million tonne run rate by the end of FY '27. Next slide, thank you.

Turning now to the plant. The plant performance this quarter reflects exactly what we expect at this point in the open pit underground transition. Plant availability was 90%, reflecting the planned shutdown schedule. Combined with fewer calendar days in the quarter, we processed 614,000 tons and producing 96,000 tons of concentrate.

Global recovery for the quarter was 61%. Through Q3, the underground open pit feed split was similar to Q2, but the quality of the open pit material was lower than the previous quarter, leading to a slightly lower recovery.

As Tony did mention in his opening remarks, at the quarter end and into the first part of April, while processing clean underground ore, the plant delivered 70% recovery, exactly what it was designed to do.

As we've said in previous updates, plant recovery is fundamentally a function of the feed mix. Looking forward, the feed mix will be predominantly underground with the remaining open pit stockpiles blended in during FY '27. -- and quarter 4 of this year. Turning to the next slide,

I'll explain the recovery trajectory in a bit more detail. So on recovery, if we look reading left to right, across the full March quarter, the underground mix was 48% and recovery, as we've said, was 61%. For the whole of the March period -- months, I should say, underground stepped up to 60% of the feed and recovery lifted to 64%. And in the first 3 weeks of April, underground was 67% of feed and recovery had been running steady at 70%. These results are very clear. As underground ore becomes the dominant source across Q4 and beyond, which it is now, we expect to sustain that 70% recovery target. It validates the recovery pathway that we have been outlining for some time and underpins our confidence in delivering FY '26 guidance, which we reiterated today.

With that, I'll hand back to Tony to talk about guidance in more detail.

Thank you, Ryan. So guidance is maintained across all metrics, as I alluded to in my opening. Concentrate production guidance between 365,000 to 450,000 tonnes is maintained and so are the unit operating costs and all-in sustaining costs. This is against a backdrop of fairly challenging conditions through the geopolitical unrest and the headwinds we're receiving from the various fuel-related input costs. There are 3 forward-looking statements that I'd want to is worth flagging. Firstly, the feed mix is transitioning. -- underground ore, as Ryan has explained today, is expected to be the dominant feed source in Q4, and we're already seeing this trend accelerate. In the first 3 weeks of April, we've seen the recovery improvement.

Second point that I want to note is the FY '26 guidance is being maintained despite the geopolitical headwinds, which I've alluded to. And -- but I think -- the rising fuel prices have had minimal impact on Q3 costs. But our business optimization focus remains strong and disciplined, as I said in my opening, and we will continue to look at ways of mitigating any of those headwinds to the best we can.

Thirdly, and this is an important point, we're reviewing the 2027 costs through our budget process. And that's ongoing right now, and we're working through both the geopolitical issues and how they have an impact on FY '27 budget, but also the interaction of the planned brownfield expansion that we mentioned in our announcement the other day around the early works. How that interaction goes with a brownfield expansion in an operating plant, and we will establish that as part of our study work and its impact on the budget when we announce the scope and the feasibility study at the end of September quarter.

Then on the early works piece, the early works and long lead procurement has just been announced for the Kathleen Valley expansion. These are additional to the current FY '26 guidance on CapEx. They're not embedded in the unit cost or capital numbers we issued at the start of the year. We expect the $15 million to $18 million that we've mentioned, expansion-related capital expenditure in FY '26, separate from the figures on this slide. And I will cover those numbers in a little bit more detail in the expansion slide. So to the next one, please.

I'll now hand over to Greg Jason, our CFO.

Thank you, Tony. Good morning, good afternoon, everyone, depending on where you are in the country. I'm going to begin with this cash flow slide. As Tony said, quarter 3 was the strongest financial quarter we've had since production commenced with operating activities funding all investing and financing cash flows to give us a net cash flow of $33 million. Operating cash flow improved significantly again from breakeven in quarter 2 to $55 million for this quarter. We had $165 million of receipts, which was a $37 million increase on the prior quarter. and it reflected the higher realized prices. As Tony also said, we'd have had another $64 million in the quarter Cyclone Norel hadn't delayed a shipment until 31st of March, and we subsequently received AUD 64 million in April.

Production and other operating cash costs decreased to $113 million, and that reflects the completion of open pit activities and the fact that the underground mine is still ramping up to $2.8 million by the end of FY 2027. And so therefore, the amount of mining cost hasn't taken the place of the open pit that's come to an end.

We had $22 million of growth CapEx in the quarter, a very similar amount to Q2 and again, predominantly related to underground development. $4 million of sustaining CapEx was a couple of million dollars higher than the prior quarter with different projects being executed across those 2 quarters.

We received a $10 million refund from EFA and that reduced a security bond arrangement with Zenith for the Kathleen Valley Power Station. There's still $10 million of bonds related to that. We closed the quarter with $424 million of cash, 26,000 tonnes of salable product in inventory. I know it's old news, but we also recorded the LGES conversion of debt into equity. There was $482 million of liabilities in debt and derivatives at 31 December that were removed from our balance sheet in February. So our net cash at 31st of March was AUD 61 million. And of course, that puts us in a really strong position for the continued ramp-up, the expansion that we talked about in the announcement yesterday and other growth projects. Could you please move to the next slide, which is the quarterly financial metrics.

So looking at the other metrics beyond the cash, our revenue increased by just over 50% to $197 million. The increase in realized price significantly outweighed the reduction in tonnes shipped during the period. The cyclone also caused a 12,000 tonne parcel to be delayed from March until April. And so there was almost $30 million of revenue that moved from March to April because of that delay. Tony talked about the increase in realized price, 87% on an SC6 equivalent basis. The Aussie dollar equivalent was a bit lower because of appreciation of the Australian dollar relative to the U.S. And as always, the realized price $1,845 reflects the contract mix, the exposure to different indices with the mix of QPs, some of which are forward and some of which are backward looking. had a $71 increase in the unit operating cost to $981, and that's fundamentally driven by the lower production tonnes, which in turn was driven by the feed mix, as Ryan talked about.

Fuel prices had a minimal impact on unit costs during the quarter. Our supply is contracted. It has not been interrupted to date. Like everyone, we continue to watch it closely. And we are maintaining full year guidance of unit operating cost of $855 to $1,045. All-in sustaining went up by $192 to $1,251. The unit operating cost impact of $71 flowed into that. We had almost $80 per tonne higher induced by the higher price driving higher royalties, a couple of million dollars of extra CapEx in sustaining and the lower tonnes accounts for the rest of the difference. I'll now pass to Back to Grant to Tony to talk about the market outlook.

Thanks, Greg. If we can go to the next slide. Thank you. Look, the market has been very strong during the quarter. We've seen significant physical tightness in the market, which is demonstrated by the drawdown in weekly lithium carbonate inventories as you can see in the chart on the top right here. Even more pronounced when you convert this from total tonnes to days of inventory as the market has grown, Typically, the market sat at around 40 to 45 days' worth of inventories. We're now down below 1 month, well below 1 month of inventories. And this is, I guess, against the normal seasonality you would see in this time of year, as you can see from the chart in the yellow line that's deviating from the prior years. This has been exacerbated by some supply disruption, which continues to create uncertainty, both in terms of volume and also in terms of restart time lines.

Brownfield restarts will start to come in towards the second half of this year. This is really the only source of new supply with any near-term prospectivity with greenfield supply taking 3 to 5 years of permitting, financing and construction to come into the market. On the demand side, we've, as I said, seen very strong demand from customers, and we're just back from a trip to China where I think the demand continues to be extremely robust with an ability for us to place many more tonnes than we actually produce in this current outlook. I think importantly, we're also seeing a significant increase in pack sizes across vehicles in China and globally. And this is actually accelerating lithium demand over and above pure EV sales growth.

We have also, I guess, benefited from the uncertainty and increased fuel prices in terms of that having an impact of driving increased EV demand. We've seen that in local markets, but we've also seen that phenomenon globally. And this is, in my view, not just a short-term factor that goes away when oil prices go back to normal, but is a fundamental step shift in demand profile for EVs and electrification. And with that, I'll hand back to Tony.

Thanks, Grant. So a good segue, strong market here's the commitment we've made as a company to the early works for Kathleen Valley expansion. So yesterday, we announced we were proceeding with the early works and long lead item procurement for the Kathleen Valley expansion. This is ahead of FID, which we plan to publish at the end of quarter 1 FY 2027. Now there's 2 elements to this. There's a strategic rationale, which I'll talk about in a minute, but there's also a risk mitigation rationale. Committing to the long lead items and mobilizing the team now mitigate schedule risk and equipment pricing risk in a tightening market. And we've seen the impacts already start to percolate through from the fuel crisis. We want to get ahead of that. It supports a robust capital cost estimate and FID by having some of these early things put away and position us to execute immediately once the Board approves the expansion.

The committed program is set on this particular slide. It has 6 elements covering the ball mill, which is a critical piece and part of the critical path, predevelopment drilling, underground development at Northwest Flats, which we've been flagging to the market for some time about the optionality that gives us, plus accessing it from the bottom of the open pit as this diagram here indicates. There's also Stage 1 of the permanent mine services area, which was a piece of infrastructure that we deferred during the downturn in an attempt to preserve capital. And then there's the third past pump that we want to put in to allow us to feed both Northwest Flats and Mt Man simultaneously.

Now there's the capital component. We've mentioned that these early works is between $15 million to $18 million, and we're going to commit about $77 million of capital expenditure ahead of FID, right? And further capital and operating cost details will provide you in the FID announcement.

Then finally, the strategic logic. I mean, expansion at Kathleen Valley is currently our most value-accretive growth option. These commitments lay the foundation that the growth will -- for growth and demonstrate our confidence in both the market and more importantly, the operation. So if I go to the final slide, please.

So just to recap the overall presentation. I won't go through each of these, but just to say that if I -- in closing, Liontown is now a producing cash-generating self-funded Tier 1 lithium operation. We've simplified our balance sheet. The market is structurally tightening, and we have a defined pathway to expansion with the early works program underway. The team is now building for what comes next. We entered the June quarter with genuine momentum. So on that point, I now turn to some Q&A, and I'm happy to answer it with the team.

[Operator instructions] Our first question comes from Austin Yun of Macquarie.

Just 2 questions. The first one is on the run rate to see it's already running at 1.5 million tonnes underground. How should we think about the continued ramp up? Is that a step change? Or is it kind of a linear from now to your target?

Austin, I'll let Ryan give you his response.

Yes. Thanks, Austin. So I think the best way to think about this, Austin, is that over the next 2 quarters, we will be consolidating this run rate. So we've -- I think part of what we wanted to demonstrate was that in fact, if you do the math, slightly ahead of 1.5 at the 1.6 rate for the quarter. We'll consolidate that over the next 2 quarters as we continue to develop at the levels below. And so as we've said in the announcement from quarter 2 FY '27, you'll see another step change. And from that point, think about it as fairly linear. So we'll have developed those levels, and then that will continue to ramp to 2.8 by the end of the FY.

Second one is just on the recovery performance. I understand this quarter was impacted by the mix and the early numbers that is already showing a margin improvement in April. I just keen to understand when you switch to 100% of the clean high-grade underground, what's kind of achievable recovery rate you'll be looking at? Can we get close to 75% to 80%?

Yes. Thanks, Austin. It's a good question. So look, what I would say in answering that is that what we tried to provide that in that slide, which shows the 67% underground and 70% recovery that is actually a blend. So that's actually got effectively 2/3 underground, 1/3 open pit material and 70%. So I think it's fair to extrapolate from that at 100% clean ore that it is higher than 70%. I think you'd be fully aware of our numbers around that kind of mid, maybe into the high 70s. I still think that the plant is capable of doing that. And on any given day, on a clean underground mix, the plant does demonstrate that. Again, for those who run these types of plants or who observe how they run, doing that consistently is what we're focused on. And so I think in the longer term, you can assume that we'll be higher than the 76 and trending towards the DFS numbers over time.

Our next question is from Stuart Howe of Bell Potter Securities.

Just on guidance is unchanged for production. And if you look at year-to-date, it implies quite a wide range for Q4. Just wondering what are some of the risks apparent to maintain such a wide range for Q4?

Thanks, Stu, and for the question. Look, for us, we've got 3 quarters of actuals. So you've got one more quarter left, and we can extrapolate basically where we'll fall within guidance to us. We are still transitioning, as Ryan has already mentioned, and we're still ramping up. So we're quite confident with that guidance.

Okay. And just secondly for me, on fuel supply, you noted that it's all secured under contract and remains uninterrupted. I guess. Can you talk a little bit more about this? Is there anything to give us further comfort that you will have security supply and perhaps some sensitivities if you've arranged any?

Okay. That's also a good question, Stu. I'll break it up into 2 parts. I'll answer the first bit, and then I'll get Ryan or Greg can jump in on a few metrics. For us, what is crucial, and I think it's been a systematic strategy from the get-go. We wanted to partner with major strategic partners in the supply and construction of our operation. So our fuel contract is with Viva. And so they're a Tier 1 producer, and therefore, we've got confidence in their schedule. Equally, our transportation is done by Qube, primarily for our product, and there are a number of others that do the supply of our consumables to site. Again, Qube has the size and the scale to manage their fuel supply. So we're very confident that they will continue to produce. So partnering with these large partners under proper contracts has served us good to this stage. Now in terms of some of the financials, maybe I'll turn to you, Greg.

Yes. So when we look at the diesel as a small component relative to the overall business because of the renewable power generation that we have. But nonetheless, we do have that cost. And it was a couple of percentage points of our cost base before the Middle East crisis drove price increases. And on a dollar per tonne basis, approximately $1 per liter on diesel or Jet A1, which impacts the aviation for the charter flights somewhere around $25 to $30 per tonne unit operating cost finished product. So that's for as long as it prevails.

Our next question is from Jacob Li of Barrenjoey.

Could you please provide some early color into your thinking around pathway to 4 million tonne per annum expansion 4 million tonne per annum is still the number. I guess my question is in 2 parts. First, you talked to a capital-efficient incremental debottlenecking process previously. Apparently, you've got key approvals and major infrastructure in place with some additional tonnes you can unlock from Mount Man and Northwest Plat, which were part of your original 3 million tonne per annum plan before a full expansion. Then I guess what about other lead items to 4 million tonne per annum in addition to ball mill paste pump you already committed to, i.e., ventilation raises, paste fill plant works, water, et cetera. In the last update, I think we talked about $100 million for the process plant and $150 million for the mine development. Is that still the right ballpark? So sorry, I don't want to sort of front run this. Just wanted to get some early color into your thinking around your pathway to 4 million tonne per annum expansion, please?

Okay. Well, there was a lot in that question. So thank you for that. What I will say on the CapEx side is -- and I'm not going to do any early predictions. We're going to let the guys do the work, guys and girls do the work and properly given how dynamic the market is, properly scope this and properly analyze the capital and operating costs. So we'll give you that when we're ready in Q1 of next year, financial year. In terms of how we -- what's the ultimate number? Well, again, that's part of the study, right?

And capital costs, what I will say is when we publish those numbers you quoted, that was in the DFS, that's 5 years ago. So I'll leave it to you to decide whether there's any inflation on that number. And in our capital costs, there will be costs associated with the expansion -- there's costs in these early works around accelerating. And when we did the Northwest Flats piece, it wasn't just to service the 3 million tonnes. It was also to develop the operations for the 4 million because we were going straight from 3 million to 4 million. So when the downturn came, we mothballed Northwest Flats. So I think to answer your question in conclusion, you're going to let us do the work first.

Yes. Okay. And just a follow-up. Is there opportunity to sort of unlock 3 million tonnes per annum in the next 1 or 2 years before the full expansion was probably my question just now.

Okay. Sorry, as I said, there was a lot in that question, so I apologize if I missed that bit. I think the nature of this expansion that we've already identified to the market is this debottleneck, unlock capacity, debottleneck, unlock capacity. And things like buying some more flotation cells, which is part of the area that needs upgrading, we will deliver that. Putting the ball mill will deliver that. So if you say to me, is there a possibility to go to 3 million tonnes in the next couple of years? Well, it all depends on the underground ramp-up because we've said the underground ramp-up will be at 2.8 million tonnes per year run rate at the end of financial year '27. So we're mine constrained until that point is reached. And then beyond that, we will unlock more capacity as we unlock more capacity from the underground.

And our next question comes from Ben Lyons of Jarden Securities.

Maybe just further on that last question. You have to talk about the mine constraints, but you've still got a heap of the OSP material. From memory, it's around about 1 million tonnes that you've still got on hand. And presumably, you just balance that versus that sort of 1.5 million, 1.6 run rate that's coming out of the underground. So you can still run the plant, let's call it, I don't know, 2.5, 2.6 capacity, allowing for your shutdowns and maintenance. Is that the right way to think about it, just a consistent processing of the OSP, which supplements every ton that comes out of the underground for the next 12 months or so?

Thanks, Ben. Not exactly. The stockpile of OSP has been reduced substantially in order to get to us to where we are now. So we're going to be less reliant on OSP stockpiles going forward. And therefore, that's why there's a gradual -- that's why we're saying FY '27 end of FY '27 for 2.8. So it won't be supplementing the feed right up until that point.

Okay. Cool, do you have a sense for -- is it like maybe 800,000 tonnes remaining or 600,000, 700,000?

I'll let Ryan answer that.

Yes. So at this stage, we've got a little under 400,000 tonnes of OSP remaining. And post sorting, bearing in mind that part of the sorting process separates the ore and waste. And so the actual accept feed will be somewhat lower than that. So it's probably circa 200,000 to 250,000 tonnes. So as we've -- as Tony has indicated, we will continue to feed that OSP accepts material through the plant. And that will kind of be blended in with the underground, but that will not last until we fully ramped up the underground mine, Ben, I hope that makes sense.

As we have no more questions in the queue, I'll now hand back to Tony for closing remarks.

Thanks, Luca. In closing, for me, -- the numbers this quarter reflect timing and not trajectory. The cyclone closed the Port of Geraldton, which would have made our numbers even stronger than they are today. And we're looking forward to the next quarter and the next 12 months. There's a lot of work going to be planned with the expansion and further growth. So we're very strong, and we're fully committed to the next phase of our operations. So thank you, everyone, for listening, and I thank my team for the hard work that's gone into producing today's materials and the results.

Welcome to Liontown's Half Year '26 Results Call. 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] I will now hand over to Tony Ottaviano, MD and CEO of Liontown.

Thank you, Michelle. Good morning, everyone, and thank you for joining us today. With me today, we have Greg Jason, our Chief Financial Officer; Ryan Hair, Chief Operating Officer; and also Grant Donald, our Chief Commercial Officer.

If we can go to the first slide, please, Michelle. The important information. I want to start here by framing where we are as a company because this half has been a real inflection point for the business.

Firstly, Kathleen Valley is delivering as designed. We completed the transition to 100% underground mining during the first half and generated over $208 million of revenue, more than double the prior corresponding period. The underground mine is scaling, and we've got some more information on that, that Ryan will go through. The plant is performing, notwithstanding we are feeding at lower-grade material from the OSP, and we're finishing the remnants of the open pit mine, and we're shipping our product to customers all around the world now.

The first half financial result reflects what should reflect for a company that's still in ramp-up period. The statutory loss of $184 million, Greg will go into further detail about that. But I'll unpack it that the number becomes -- it doesn't reflect the operating performance of the business. And I'll just break it down into 3 constituent parts.

Firstly is a derivative charge. That's a noncash item that's directly related to the convertible note, and Greg will speak to that a little bit later. There's a $90 million depreciation charge, which is part of the open pit. We finished the open pit. It's over a 3-year period, and so we have to depreciate it over that 3-year period. And this is some capitalized commissioning costs as we call commercial production in our plant.

But the key takeaway is that the earnings profile is getting better and for the right reasons. We're now feeding a higher-grade iron ore into the plant and blending it with our open pit and OSP material, and recoveries are lifting. And we're realizing higher prices. They continue to strengthen in the second half, and all 3 of these push for us to deliver better margins.

The market is also helping. We're now seeing BESS emerging as a second demand engine alongside EVs. And when we look at when we approved this project back in 2023 or 2022, we've got a different environment from the market perspective. Permitting, financing and construction all take years to put into place. So near-term supply response is going to come from brownfields expansion and restarts. And that's good news for us because we're already producing, which brings me to the 4 million tonne expansion study underway at Kathleen Valley. This is a brownfield growth option from an operating asset where -- and there is one of only very few around the world that can bring on additional tonnes to the market as quickly as this option can.

That's the setup. I'll now hand over to Greg and the team to go through the details. So over to you, Ryan.

Yes. Thanks, Tony. So if we just go to the next slide. Thanks, Michelle. So this slide summarizes where we are operationally, and the headline is that the transition to 100% underground mining is complete. That is a significant milestone. Open pit mining delivered 917,000 tonnes of ore during the half with the final ore delivered in December. Underground ore mined totaled 533,000 tonnes, highlighting the speed of the ramp-up. The plant processed just over 1.2 million tonnes at an average grade of 1.3% lithia. Recoveries continue to trend upwards, averaging 61% for the half. Concentrate produced came in at 193,000 tonnes at a weighted average grade of 5%. Every metric is heading in the right direction. The inflection point from here is clean ore and grade. As underground ore becomes the dominant mill feed, we expect recoveries and production to continue to improve.

With that, I'll hand over to Greg.

Thank you, Ryan. Good morning, everybody. Can I please have the next slide? Great. So I'll talk through some financial highlights here and then give you some more details later in the presentation. You can see the production and sales up as both Tony and Ryan have discussed. At a realized price level, we've got 18% improvement period-over-period. We have changed the calculation methodology to be more in line with what our peers are doing. We were previously reporting realized prices simply being the period revenue divided by the tonnes shipped.

What that meant was you've got some mark-to-market or provisional-to-final pricing adjustments that relate to prior periods and to the extent that there's pricing data after the end of the reporting period that needs to be picked up in quotation periods that was being missed. So now what we're doing is we're representing the estimate of the realized price only for the tonnes shipped in the period, and $888 is the result. Just to help you translate from the Q1 and Q2 numbers that we previously reported. We had said that Q1 was $700. And on this method, it's $691. And we had stated Q2 as being $900. And on this method, it's $985. So we'll keep that method going into the future.

Talking about unit costs, you can see the increase to $985 per tonne. This was almost all driven by mining costs. In the first half of FY '25, we were processing material that came from the open pit, the large ore load there, large body clean feed, lower unit cost. And in the first half of '26, we were blending OSP material. So that has high levels of contamination and hence, impacts recovery. We also have the premium cost of the crushing and sorting of OSP that fell into the half and not the prior, and we transitioned into underground as well, which has a high unit cost of mining relative to that previous open pit material. And so the net effect is what you see now. You can see that the increase on all-in sustaining is about another $45 higher. That is the impact of sustaining capital kicking in. We had a new plant freshly commissioned in the first half of '25. And in the first half of '26, we've now got sustaining capital programs underway driving that result.

Moving down to the P&L section. We more than doubled the revenue, and this followed both the tonnes and the improvement in price. Underlying EBITDA was an $8 million loss. The first important point about here is notwithstanding the improvement in realized price, it was still a subdued price for the period. And the prices that you see now in the market really don't impact us a lot for the first half of '26. Many of our contracts have got backward-booking QPs and hence, full exposure to the pricing as it was.

Secondly, we've got the ramp up and the unit operating cost impact that I spoke about before and the transition from open pit to underground. We also had a capitalization of production cost in the first half of '25 because we had not yet achieved commercial production for the processing plant. That was declared start of last calendar year, and hence -- and that was $39 million.

So a big difference period-over-period. And then the D&A impacts once you get to the next line, the underlying net profit, negative $89 million. It has higher D&A with the open pit coming to an end, amortized over a short period. We had capitalization of interest for the same logic around having achieved commercial production in the first half of '25, and ultimately, that gets us to the $89 million. And then when you go to the statutory result headline, there is a significant impact from LG. That was all about revaluing the derivative on the books for their convertible option. It was noncash, and you should think of it as, as the share price went up, the accounted cost of discharging that liability with equity went up. So we had to recognize that in the half.

The conversion occurred on the 4th of Feb. You're going to see a $58 million gain coming through the books in the second half, and that represents the difference between the total liability we had at the end of December being the derivative plus the debt and the market value of the shares that we issued on the 4th of Feb. 239 million shares at $1.77 being the closing price. So you'll see $58 million in the second half. We closed with $390 million. That's news we published in January, strong position as we entered the year. I'll talk more about the balance sheet a bit later in the presentation.

Next slide, please, Michelle.

Great. Thanks, Greg.

Over to you, Ryan.

Yes. Thanks, Tony. So safety still remains our core operational focus, particularly as we scale the underground. Our lost time injury frequency rate held at 1 through the half. The total recordable injury frequency rate increased to 11.55, reflecting the trend we flagged during the last quarterly presentation around manual handling injuries across our contractor work groups. The targeted actions around field leadership and contractor oversight continue. Safety observations at just over 3 per 1,000 hours show sustained workforce engagement in proactive hazard identification.

Our hybrid power station delivered 82% renewable penetration for the half, which reflects our ongoing commitment to low carbon intensity production. And $11.7 million in expenditure on Tjiwarl businesses through the period reflects the strength of that partnership and our genuine commitment to meaningful local employment and value creation.

Now turning to underground production on the next slide. Thanks, Michelle. The 37% quarter-on-quarter increase in ore mined to 308,000 tonnes in Q2 reflects -- continues to track well against the planned ramp-up. As we noted last quarter, the mine achieved a 1 million tonne per annum run rate in September. And for the December quarter, the overall run rate was just under 1.25 million tonnes, leaving us well placed to achieve the 1.5 million target by the end of this quarter. Development is progressing well, opening additional work fronts across multiple levels. Reconciliation to both resource and grade models has been good. Stope performance and dilution continued to remain in line with expectations, and infrastructure continues to perform well. The summary is infrastructure is in place and working well. The ore body continues to meet expectations, and we are ramping to plan.

Now moving to the plant.

Next slide, please.

The plant continued to perform in line with expectations as we progressed through the planned transition in mill feed composition. As I mentioned, just over 1.2 million tonnes processed for the half at 92% average availability, stable and reliable performance. Lithia recovery averaged 61%, continuing to trend upwards, reflecting deliberate feed sequencing and ongoing circuit optimization.

The feed mix is the key story here. In H1, open pit ore still comprised around 60% of the feed. In H2, that shifts to approximately 75% underground. And by FY '27, we're targeting over 90% underground feed. As clean higher-grade underground ore becomes a dominant source of plant feed, recoveries will continue to improve.

With that operational summary, I will provide -- I hand back now to Greg.

Yes. Next slide, please. This chart shows you the waterfall between first half '25 EBITDA and first half '26. We've talked about the increase in revenue, largely driven by the tonnes. We've got the increased cost of sales, excluding D&A with the ramp-up in tonnes as well, plus the impact of the higher operating cost. I mentioned the $39 million difference that was capitalization in first half '25, and that's the walk down to the negative $8 million.

Could you please go to the next slide, which looks at the net loss after tax. So same concept here from minus $15 million in first half of last year to minus $184 million. Of course, we got the carryover of the EBITDA from the price line. The LGES is a $148 million turnaround. So we booked a gain in the first half of '25 on the fair value of the derivative, but we booked a charge in first half '26, hence the $148 million. We did get a turnaround on the FX. The rate went south in first half '25. So you've got lower Aussie dollar debt, and the reverse happened in '26, additional D&A around the tonnes and the capitalization of the interest not occurring or lower level in the first half of '26. So that gets you to the $184 million.

Could you please go to the next slide? We started the period with $156 million. We closed with the $390 million. So $178 million of receipts. The difference between that and revenue, you can see a corresponding difference in an increase in accounts receivable. That's just a timing issue, $237 million of production costs has gone up, of course, with the high level of activity. The sustaining capital of $16 million, I mentioned that before, that we're now sustaining given we're past the commissioning of the surface infrastructure and a big chunk of growth capital. That was dominated by underground capital development plus associated underground infrastructure and completion of the paste plant. You can see the equity raising from earlier in the year, and that's where we get to the $390 million.

Could you please go to the next slide? So this LGES conversion has given us a real balance sheet reset. We've got notice in late January. The conversion occurred on 4th of Feb, and it took $482 million of liabilities off the books. The offtake agreement with LG is still in place. It's a 15-year agreement. It's unaffected by the conversion and the change in shareholding. We still have the LISP and Ford Debt, which is covenant-light. The forward repayments were rescheduled from last year until September of this year. And that's just over $11 million per quarter, so that begins in September. And the $15 million of LISP, we will repay in equal halves over FY '27 and FY '28. That's quarterly payments as well. You can see the debt maturity profile of the Ford and the LISP money. So starting the year with $390 million, conversion of LGES, resetting the balance sheet to put us in a great position to start the year, keep going with the ramp up, look at the growth opportunities and consider diversification. I'll hand back to Tony.

Thank you very much, Greg. If I can go to the next slide, please, Michelle. And that sort of sets us up for the next few slides that I want to take the listeners through. Let me come back, and I think it's important that we look at this slide to show as history has unfolded and what does the future potentially hold. But if we can talk about -- this chart tells a specific story.

You can see the 2 previous spodumene up cycles, roughly 15 months and 18 months, respectively. And you can also see where we are today where prices have come off the bottom and the market is tightening. And the question is, how can we actually respond when the market needs them? And I mean, the strap line says it all. The supplier response will favor existing producers. So there will be a greenfield lag. If their projects are not shovel-ready today, that will take longer to bring on, at least 3 years.

So new projects face years of permitting, financing and construction requirements. So unlikely to deliver tonnes in this next upswing. So the brownfield projects have an advantage. Existing operations with infrastructure and approvals in place will respond materially faster. And the way we are looking at our project, we are going to progressively debottleneck and deliver incremental tonnes as we move the expansion alone, which brings early cash flow in, but also it happens to manage our capital profile.

So I will leave you in this slide by saying the bottom strap line, which is we are uniquely positioned as an existing producer with the infrastructure and optionality ready to respond decisively.

So if we move then to the -- our specific project. Next slide, please. So the 4 million tonne brownfield expansion. I mean we spoke about this in our quarterly review. The 4 million tonne is really a refresh of what we presented as part of our DFS. We're going to bring into this refresh all the latest understanding and knowledge of our operations so that we can fine-tune the design criteria. We know the areas that we need to target. They were stress tested as we start to operate, and then we'll look at what do we do to give us that incremental debottlenecking to unlock those tonnes. So an expansion is expected to reduce our unit costs as we amortize our fixed costs and we increase scale. And as I mentioned previously, Liontown has a competitive advantage. We are a recent developer, and we've got all our key approvals in supporting infrastructure in place, and we're expediting time lines. So we will bring this to the Board in the first quarter of FY '27, and it's subject to the Board's approval and the way the market is unfolding at that time.

So if I go to the next slide, please. So just this final slide. I mean, we're delivering the transition, and the earnings are improving, as I said. And you can see by the right-hand side of this slide the mine plan comparison -- sorry, if we just move to this final piece.

I mean I won't repeat what I said at the start. Kathleen Valley, we're delivering as designed. We've gone through the ramp-up phase, and we produced a series of financials that reflect that ramp up. But the more important point is earnings trajectory are improving as the ramp-up progresses and the market tailwinds that we're getting. And we've got a real live option in the 4 million tonne expansion that we're refreshing that will set us up to capitalize on an improving market.

So if we go to the final, just in closing then. Before I open up for questions, I want to acknowledge the team at Kathleen Valley and what they've delivered in this transition, both safely and on schedule. They've done what we said they would do, and that's what matters for me and the Board. And I want to also acknowledge our shareholders who have stuck with us. The story is simple here. We are through the hardest part. The transition is complete. The balance sheet is cleaned up, costs are coming down, prices are going up, and we've got growth options. So we're in a very strong position as we look forward. So thank you, and I'll take questions from here.

Thanks, Tony. [Operator Instructions] Our first question comes from Hugo Nicolaci from Goldman Sachs.

Congrats on continued strength and ramp up of the project. Look, firstly, on the debottlenecking piece, it sounds like things are progressing quite well already on restudying that if you're ready to go to the Board in the September quarter. I was just wondering if you could provide a bit of commentary around how you're seeing the cost piece there relative to previous expectations. I think historically, you're sort of talking to low hundreds of millions to debottleneck the plant and sort of similar magnitude to build the next mine to support that. Do you want to just comment in terms of directionally up with the sort of magnitude of how much those costs have maybe increased since you last looked at those, please?

Well, clearly, Hugo, thanks for the question. We're looking at that right now, right? And we're very alive to the market context. When I mean the market context, I mean the market context for construction and the supply of equipment. So the previous estimates that we provided the market was $100 million for the plant and $150 million for the mine, right? So we'd like to think that, that's the same order of magnitude, but I don't want you to hold me to it until we finish the study.

Yes, that's clear. And then maybe just one in terms of the cost piece. I appreciate the underground mine is still not commercial yet, and that's still targeted for the June quarter this year. Are you able to just give a bit of a breakdown in terms of where your mining costs and processing costs are sitting at the moment and then where you expect them to get to as things continue to ramp up?

Okay. Ryan, do you want to take that? Or do you want me to handle it?

That's fine, Tony. So I think Hugo, we've previously made some commentary in relation to the underground mining costs, which are kind of in the order of $100 a tonne or delivered, and costs kind of sit around about that. When you've got that data, you can probably infer then the processing cost given we've been kind of pretty transparent around the overall unit operating cost. Directionally, when we spoke in the quarterly presentation, we spoke to the fact that we'll obviously give further guidance around FY '27 as we go through that kind of budgeting process.

But I think the thematic that we've previously spoken about where as we mine into the lower levels of the mine at larger stopes, which means that the same cost to kind of get those tonnes out is distributed across more tonnes will directionally lower the unit cost of mining. And similarly, as we put more clean ore, clean underground ore specifically through the plant, recoveries will improve.

Production will, therefore, follow. And the denominator, being production, being bigger, will have some fixed cost dilution impact. So all things speak to directionally what we've spoken before about the value of the larger stopes and the increased recovery in production all still trending unit operating costs lower. But as I said, we will provide further guidance as we go through our internal budgeting process in the lead up to FY '27.

The next question is from Levi Spry from UBS.

Maybe one for Ryan. I guess just now partway through, good partway through the March quarter, can you just give us a bit of an update on the 1.5 million tonnes and I guess, the 70% recovery target, just how the ramp-up of both those are going?

Yes. Thanks, Levi. I appreciate the question. So look, 1.5 million out of the mine, we're very confident in. As you said, we're most way through the March quarter at this stage. And so still very comfortable with the way that the mine is performing and the way that the equipment ramp-up and ongoing development of the mine is giving us further work fronts and further opportunity to extract more. So I'm still very confident in that. And beyond that, beyond the 1.5 million to the 2.8 million at the end of FY '27, again, we're still on track for that. As I said in my opening remarks, the mine continues to perform pretty much exactly as we had planned it to. So nothing on the horizon that we're concerned about there other than ramp-up always has quite a bit going on, but as I said, the team has it well in hand.

In terms of the plant, we're still very confident in the plant's ability to run for extended periods of time. So good availability, good throughput. In terms of recovery, as we've said I think a few times before, 70% recovery is very achievable when we're on clean underground ore. And whenever we run underground ore through the plant, we get circa that level of recovery. In fact, only 2 days ago, we had a plus 70% recovery on some slightly contaminated underground. We mixed it with some of that OSP -- assorted OSP material that Tony was referring to. And so plenty of data points to support underground delivering that type of recovery.

In terms of Q3, we are processing more open pit material than we had planned or certainly back when we originally came out with the budget 12 months ago. And you might recall, at the end of the last quarter, we had indicated that we had extracted more ore out of the open pit. So with that additional ore in the open pit, we therefore had larger stockpiles, and we've been processing that through this quarter. So the predominant feed type at the end of the quarter will only just be converting to underground by the end of the quarter. So we'll expect to see more of that consistent 70% recovery as we head into Q4. I hope that answers the question, Levi.

Yes. Perfect. And then just back to the 4 million tonne expansion studies schedule FID. Can you just sort of play the time line movie with that one, I guess, versus the ramp up to 2.8 million in FY '27? How are you thinking about ramping up to 2 point -- sorry 4 million from underground mining as opposed to the plant?

So Tony, I'll take this, if that's okay?

Yes, yes, yes.

Yes. So I think probably the easiest way to think about this, Levi, is that the 2.8 million case, I guess, continues if you think about that as kind of line item in your spreadsheet, if you like, that will continue. In order to get to the 4 million tonne case, we'll be doing a couple of things in parallel. The first is that if you refer back to the slide where we had that 4 million tonne case, and I don't know, Michelle, whether you can go back there. But there was a section of the Mount Mann deposit, which as part of the recalibration in November '24, we deliberately went past, and we can now go back and start to extract ore out of those upper levels in the Mount Mann orebody. So that's point one, and that will be incremental over and above what we had put in the 2.8 million case.

And then the second thing is that the other thing that we had chosen to do in November '24 was defer the work in the North West Flats deposit. And what we will do is start to extract ore out of that deposit. And the option we've got now, which we didn't have at that time was directly go from the bottom of the open pit and take that ore directly out of the North West Flats deposits. So that will also happen in parallel.

So if you think about the 2.8 case, you add on some additional Mount Mann and some additional ore out of North West Flats, which is now easier to get that at coming from the bottom of the open pit, then both of those should happen in parallel, as I said, with the 2.8 million case.

And with all that in mind, we are anticipating that the underground mine ramp-up will, broadly speaking, match the debottlenecking that Tony spoke about when he was talking about the plant work that we'll do to incrementally unlock capacity out of the plant. So it's roughly over the same period of time. And as Tony was indicating, brownfield expansion is always going to be quicker than greenfield. So if you said a greenfield was going to take 3 years, then we'll be probably more in the order of a couple of years rather than 3.

The next question is from Hugo Nicolaci from Goldman Sachs.

Firstly, just a follow-up, Ryan. I just wanted to clarify that $100 a tonne mining cost. Is that what's being expensed? Or is that the total cash cost, including the sustaining development capital?

I might hand to Greg on that one, but my -- yes, Greg, maybe you'll start and I can provide some color?

Yes. It doesn't include...

Go ahead. Total cash. Yes, total cash.

Great. So that -- it doesn't include the development spend?

It doesn't include the amortization. It is the cash cost of the mining. Tony?

It doesn't include sustaining capital. It doesn't include sustaining capital. The development cost.

Yes. Well, maybe the way to provide color on that is that -- so if you've got the actual cash cost of the day plus what is relatively minor sustaining cost, then that's included in the $100, but the development cost of which you may spend a significant amount of time and money, obviously, the work we've done to date, getting to that zone of the orebody, it doesn't include that. So it's -- so it does include the minor sustaining. So things like increased vents, sort of pasting costs and those kind of things, it does include that, but not that development cost. Hugo, does that makes sense?

Yes.

Next question is from Andrew Harrington from Petra Capital.

Could you elaborate on your customer wagon wheel? Like where is your quarterly shipping destination? Is it all China or half China? And how do you see that going forward?

I'll hand that over. Thanks for the question, Andrew. I'll hand that over to Grant Donald, our Chief Commercial Officer.

Yes, sure. So look, in previous presentations, we've included our offtake chart just to show where the volumes are going. So I'd refer you back to that. But broadly speaking, our main offtakers are for Tesla and LG. As we've said previously, the 4 tonnes in the first 18 months are going to Chengxin, which is a Chinese refiner with a facility both in China and in Indonesia. And from '27 and '28, that will go to Canmax in China. The LG volume and the Tesla volume have traditionally gone to China. But obviously, it's well known that Tesla built their own refinery in the U.S., and that's the plan for the ultimate destination for that product once that one is fully ramped up.

Okay. And a broader question in terms of with the Middle East war. Do you expect any changes in terms of your, say, fuel costs? And I guess, are your customers saying anything differently or more urgently to you? Or what things do you think may shift if this goes on that positively negatively to you?

Yes. So Andrew, I might take a portion of that question, and then I'll ask Grant to finish it off in relation to customers. But in terms of fuel and diesel specifically, I mean, we are 80% renewable. That gives us a very big, big advantage. So most of our power is generated by renewable sources. So on average, our total diesel cost is about 4% to 5% of our overall cost base. So it's not a significant amount. So we're pretty confident from that perspective. And I'll hand over to Grant to talk to you about the customer impact.

Yes. Look, I mean I talked a little bit about where most of the volume is going. At this point, we haven't got any sense from customers that there's any issue from taking a ship from Australia to China. It's a relatively short voyage, less than 2 weeks. So I expect that trade to continue. We have seen some disruption from Africa into China, and that has sparked some interest from customers who are exposed to Zimbabwe volume to secure more volume, but that's a different issue.

That is all the questions from the queue. I will now hand back to Tony for closing remarks.

So thank you very much, Michelle. Thank you to the listeners. Thank you to the people asking those great questions. Thank you to my team for putting today together. Leanne, Jared, Ash and Claire and the team, I really appreciate it. So yes, let's look forward to the second half.

Welcome to the Liontown Resources December Quarter Results Call. Following the formal presentation, there will be a Q&A session for investors, analysts and media. [Operator Instructions]

I will now hand over to Mr. Tony Ottaviano, Managing Director and CEO of Liontown Resources.

Thank you, Michelle, and welcome, everybody. Thank you for attending Liontown's quarterly presentation. With me today, we have Grant Donald, our Chief Commercial Officer; Ryan Hair, our Chief Operating Officer; and for his first quarterly with us, I welcome Greg Jason, our new CFO, who's been in the role for a month, and it's his first presentation for Liontown. We will support Greg in the course of the presentation given he's just fresh in the job, but I'm sure he's got most things covered.

So let's kick off. We have the first information slide, so please. And then we'll move to this first slide.

I mean the best way I can describe this quarter is is that it represents a genuine inflection point for Liontown. We've delivered our mines transition, and the open pit is done on schedule. Kathleen Valley is now Australia's first and only underground lithium mine, and we're completely focused on scaling and ramping up the underground production, and we're on schedule for that, too, and Ryan will go into that in deeper detail in his presentation.

Now let me walk you through now what the quarter actually demonstrates. Underground ore has been increased by 37% quarter-on-quarter. We're adding equipment, we're opening new mine fronts, and the ore body continues to reconcile the plan. This production momentum is real. On cost, both unit operating costs and all-in sustaining costs have improved by 17% and 22%, respectively. That's operating leverage coming through as we scale, and this will accelerate as volumes continue to build. We've achieved neutral operating cash flow for this quarter, which is a significant milestone given we're still in transition. We finished with $390 million in cash. This gives us both runway and future optionality.

The plant has high availability and is delivering. Recoveries have improved to 63%, up from 59%, and the pathway to 70% is in front of us, and it's driven by feed mix. As underground ore becomes the dominant feed, recoveries will follow. And again, Ryan will talk about that in his slides. So with the mines transition complete and cash flow improving, we're well positioned for the lithium recovery, and that's the story of this quarter.

So if we go to the next slide, please. Well, let me put some of the numbers around that improvement. Production came in at 105,000 tonnes, up 21%, a solid result, but the real story is the trajectory as we scale towards 1.5 million tonne run rate by March -- end of March. Sales were stronger at 112,000 tonnes, up 45%, as we cleared inventory and we moved to the -- up our shipping run rate. Pricing has lifted to AUD 1,365 a tonne. That's USD 900 a tonne on a U.S. -- a SC6 equivalent basis, up 28% on the prior quarter. Consistent with our standard QP pricing methodology, we have embedded price upside that will be realized in quarter 3. Revenue hit $130 million, up 91%, our strongest quarter since operations began [indiscernible] our production plus pricing leverage delivers. Finally, the direction is clear, production up, revenue up, margins improving, and we're achieving this before the full benefit of the lithium price recovery flows through our contracts.

So now, I'll move over to Ryan.

Yes. Thanks, Tony. So I'll just have a look at the safety and ESG slide. Thanks, Michelle. So safety remains our core operational focus, especially as we're scaling the underground operations. Our total recordable injury frequency rate increase reflects a higher number of manual handling injuries across contracted work groups. We've implemented targeted actions to strengthen field leadership and contractor oversight. Preventing high consequence incidents through strong field leadership is the priority. This is reflected in the leading indicator, safety observations per 1,000 hours increase showing sustained workforce engagement in proactive hazard identification.

Our hybrid power station performed widely through the quarter, 85% renewable penetration, reinforcing our commitment to be our low carbon intensity operations. We continue to focus on building an inclusive workplace, and we were thrilled to have supported the completion of our first apprenticeship by Tjiwarl community member at site, reflecting our genuine intent to meaningful local employment and skills development.

Now moving on to our operations summary. Thanks, Michelle. Completing the open pit on schedule has been a key milestone of Kathleen Valley. This has been an outstanding achievement. The original plan was conceived back in 2022 and has been executed flawlessly. Of particular note is the additional ore mined in the last quarter, positively impacting strip ratio and costs and highlighting the quality of the ore body and is a testament to the focus of the team. A sincere thank you to the whole open bit team, including our mining partner, IMC.

Over its life, the open pit played a strategic role beyond just ore production. The waste rock support construction of the ROM pad and the tailings facility, and the open pit ore -- early commissioning of the plant, which accelerated validation of the flow sheet and the operating envelope. Resulting for ore and OSP stockpiles, including the additional ore mined in the quarter, enhanced our FEED flexibility. We will continue to optimize sequencing into the plant as higher grade underground ore becomes the dominant source of plant feed, which will give us further flexibility during the ramp-up. Now with the open pit complete, we can turn our full attention underground supporting improved operating leverage as we scale.

So now moving to underground. The 37% increase in ore mine is tracking well to the planned ramp-up. In the last quarter, we noted that the mine achieved a run rate of 1 million tonnes per annum in September. For Q2, the overall run rate was just under 1.25 million tonnes per annum, leaving us well placed to achieve the 1.5 million tonne per annum run rate by March. Importantly, development is also progressing well with just over 2,100 meters in Q2, opening additional work fronts across multiple levels in the mine. As Tony mentioned, reconciliation to both resource and grain models have been good, which confirms the consistency of the Mount Mann ore body. As per last quarter, stope performance and dilution continue to remain in line with expectations. We've mobilized additional haulage capacity and expanded support infrastructure during the quarter. The summary is infrastructure is in place and performing well. We already continues to meet expectations, and we are ramping up to plan.

Now moving on to the plan. Again, as Tony indicated, the plant performed in line with expectations as we progress through the planned transition in [ no feed ] composition. Tonnes processed increased with fewer shutdown days in the quarter and ongoing circuit optimization, increasing the net throughput per operating hour. Recovery improved 4 percentage points in absolute terms to 63%. This reflects both a deliberate feed sequencing decision during the open pit underground transition as well as ongoing since optimization. The feed mix moved from 35% underground in Q1 to 45% in Q2. Open pit ore will continue to comprise roughly 50% of the fleet in Q3 before progressively transitioning to predominantly underground feed during Q4.

The next slide puts this into context. We've shown versions of this picture in previous updates. The first half of FY '26 builds the foundation. We completed planned maintenance, delivered process improvements, achieved a run rate of 1 million tonnes per annum underground and completed open pit mining on schedule. The second half is the inflection point. We're scaling to 1.5 million tonnes per annum by the end of Q3. And we are showing visually in orange the additional ore mined in the open pit being processed in Q3 before the shift to predominantly underground feed in Q4 and beyond. Our recovery total of 70% at the end of Q3 remained as clean ore becomes that dominant feed. In FY '27 and beyond, we reached a sustained 2.8 million tonne per annum run rate underground at the end of '27. And remaining open pit stockpiles will be processed opportunistically, again, as you can see, with a slight orange area in the graph. Resulting improved plant recoveries drive increased production, which deliver lower unit cost.

With that, I'll hand back to Tony to talk in more detail about guidance.

Thanks, Ryan. Okay. So if we go to the next slide, please, Michelle. Right. Let me give clarity on what we expect for the rest of the year. We've been consistent in stating that our FY '26 is a transition year. Again, open pit was completed, underground is scaling and becoming the dominant feed source for the mill. We have the ingredients to hold firm on our guidance. At the end of Q3, we expect the underground production to reach around the 1.5 million tonnes, as Ryan has already mentioned. And the 70% recovery target remains unchanged. This is clearly a function of the feed mix, and the mix is shifting in our favor. Production in Q3 will account for planned maintenance and fewer operating days. That's scheduled and shouldn't be a surprise.

The key point is that cash flow will improve from here every ton of underground ore that replaces open pit delivers better grade, better recoveries and a lower operating unit costs. And that's structure. Our guidance remains unchanged, as it's stated in the diagram or in the slide. And we're looking beyond this year, unit costs will trend lower in FY '27 as we reach steady state in the underground mine at 2.8 million tonnes, that's when the operating leverage really compounds.

So if we go to the next slide, please. Now I hand over to Greg to present his first financial performance.

Thank you, Tony. Good morning, everybody. It's a great time to join Liontown. I've joined an amazing team, and I look forward to working with them to deliver the strategy for our shareholders.

So starting with revenue, some of this Tony has gone through, $130 million, it's the strongest quarter we've had since operations began. About half of that increase was driven by the increase in tonnes shipped and half was driven by the increase in realized price. We had slight tailwinds on our back, but they had a negligible positive impact quarter-over-quarter.

As Grant and Tony have discussed in previous teleconferences, the Liontown offtake agreements are anchored to a range of pricing indices that includes spodumene, hydroxide and carbonate, and there's a range of quotation periods that are both backward and forward looking. The backward-looking QPs create a lag effect unrealized price increases and the forward-looking QPs are favorable, and prices are increasing, and we're already seeing uplift start to come through between provisional and final pricing during Q3. We expect to realize further increases in the realized price during Q3, given the indices have continued to decline since December. We finished the quarter with $130 million of cash, a very strong balance, and I'll provide some more commentary on that when we get to the next slide.

So moving now to unit costs. The operations team has delivered a 17% reduction in unit operating costs at AUD 910 per tonne sold. This was well within the FY '26 guidance being of AUD 855 to AUD 1,044. Importantly, it fell below the realized price of AUD 1,159 per tonne at the actual Lithia grade delivered. The reduction in unit cost was driven really by 3 key things: We had a very low strip ratio in the final quarter as the open pit came to an end, and so the unit cost of open pit was significantly lower. Underground mining led to the improvement in recovery, and we also had less OSP ore being processed, which contributed to that factor. And then finally, we're realizing economies of scale the operation continues its ramp up to steady stack production.

All-in sustaining costs also benefited from a reduction in sustaining CapEx with no capitalized waste from open pit operations as they came to an end. We note that underground capital development is being reported as growth CapEx at the front-end loading of that activity, and that will remain the case until we declare commercial production, at which time it will then be reported sustaining capital and go back into the all-in sustaining compilation.

Could you please move to the next slide, Michelle? So talking about cash flow and cash balance. Key highlight was obviously delivering and effectively breakeven operating cash flow. At the same time, as ramping up underground mining and transitioning the plant feed from open pit to underground ore. Cash receipts of $128 million were broadly aligned with $130 million of revenue during the quarter.

Cash costs increased to $122 million, and this reflected a decrease in open pit mining costs, the ramp-up in activity for the underground mine and ocean freight selling costs and royalties all increased with higher sales volumes and pricing. Growth capital of $22 million was predominantly underground development, consistent with Q1, sustaining capital reduced materially. It's a combination of the open pit activities coming to an end and not capitalizing costs there and just a lower number of projects in that period.

Financing costs of $5 million were broadly unchanged from Q1, and hence, the net result as we closed the year with $390 million of cash and 14,000 tonnes saleable concentrate. This positions us very well to take advantage of market conditions, see growth with continued focus on costs, capital discipline and shareholder returns.

I'm going to speak briefly about the LGES convertible notes. You have seen the announcement came out this morning, whereby LGS issued us with a notice to convert 100% of their notes into equity. This will significantly strengthen Liontown's balance sheet upon conversion by reducing debt and the associated derivative liabilities. On a pro forma basis, using the underlying debt values and gross debt will reduce from approximately $760 million to $360 million, our net debt will reduce from $370 million to net cash of $30 million, and gearing ratio reduces from 50% to 24% on a gross debt basis or 33% to 0 on a net debt basis.

Notwithstanding the conversion that will occur in H2, the accounting standards require us to fair value the option component at December '25. And while still subject to review by our auditors, we expect to recognize a noncash fair value charge in half and P&L of approximately $105 million. The primary driver of the higher fair value was the increase in Liontown's share price over the half from 30 June. A further fair value adjustment will be recognized on the conversion date to align with the final auction value.

I'll now hand over to Grant to talk about the market health.

Thanks, Greg. We can go to the next slide. Great. Thanks. So a quick recap of our offtake book here to make it easier to follow. You can see in the graph on the right-hand side that make up -- to fund the project, we created a suite of offtake contracts with strategic customers, and we have really taken a portfolio approach in our management of pricing exposures with contracts in aggregate referencing spodumene, carbonate and hydroxide, as Greg mentioned.

Now these prices don't always move in lockstep, but they do tend to move together when viewed over a longer horizon. And in this quarter, spodumene certainly led the price move upwards with chemicals following at a slower pace. But this is not always the case. And you can see the opposite, particularly in falling markets.

If we move to the market side, I'll talk briefly on some of the key figures. If we look in the rearview mirror count, the year '25 was really a breakout year for both EV sales with 3 months of the year actually exceeding over 2 million global EV sales for the first time, ending the year with over 20.7 million EVs sold, which is 20% up year-on-year. But of course, the big new story for the year was another year of outperformance for Battery, Energy, Stationary Storage, or BESS, which grew by 51% in 2025. These strong growth figures across both BESS and EVs pushed global lithium ion battery demand to almost 1.6 terawatt hours, almost 30% higher than the prior year.

In this last quarter, we also started to see the emergence of a lithium supply land deficit, which has caused strong move in prices over the past quarter, and this has continued into January. The expectation of continued deficits in 2026 is likely to provide further price support. And as you can see in the bottom chart here, while the moves off the bottom may have taken some market participants by surprise, history would suggest there's still further room to run.

And with that, I'll hand over to Tony.

Thanks, Grant. Now let me turn over to growth and specifically how we think about deploying capital as cash generation improves. We're not chasing growth at any cost. Every capital decision we run through this framework. First, we fund sustaining capital for -- operations, and that's a nonnegotiable as we require to maintain our business. And having a maintenance background, this is very near and dear to my heart.

Beyond that, we have 3 priorities that continually compete for capital growth: Realizing Kathleen Valley's full potential, that's the first pillar of our strategy; followed by debt management, and you saw the announcement today; and then shareholder returns.

We -- on the debt management, we still have the forward facility in the WA government loan, but maintaining the balance sheet strength gives us the flexibility through the cycles. And on the shareholder returns, we get the cash -- as cash generation improves, dividends and potentially other mechanisms become part of our conversation. I'm sure our Chairman will demand that. We're not there yet, but that's on the horizon. The framework matters because the market is rerating with you. So we're seeing that, and as we see that, the framework ensures that we allocate the capital properly, not just spend it because it's there.

So if we go to the next slide, please. So this should be familiar to most of the listeners on the call today. And what it reinforces that we're well positioned for the lithium recovery and providing that lithium recovery is sustainable. We've kicked off a study to refresh the 4 million tonne expansion cost that we had in our original DFS. And a lot of that is around ensuring that the DFS expansion is current with all our latest knowledge from our operating experience that we've gained over the last 12 to 16 months.

This is a brownfield expansion, however, an operating asset. There's a certain amount of already invested infrastructure, and that all our approvals are largely in place. This dramatically reduces our execution risk and time to market compared to a greenfield project somewhere else. The capital intensity is also lower because we've already made foundational investments, as I already mentioned. Incremental capital for expansion is far more efficient than starting from scratch.

And as we get the scale, we then -- it impacts our unit costs as we move forward. So we have a competitive advantage because we've recently been a developer. We've got a lot of that experience. We know how things done. There's a lot of stuff that's fresh and current so we can move that and apply that to our expansion.

So looking at the mine plan on the right, I thought if people recall, when we published our strategic tenant in November 2024, we said that there was a certain amount of tonnage that we would park. As market conditions improve, we'll go back. So that is a potential area of examination that we're now looking at. In addition, we've completed the open pit. So we've got access to Northwest flats through the bottom of the pit. That's another area that we're prosecuting as part of this study refresh.

So to be clear, each expansion is subject to the study outcomes, a sustained market improvement and finally, board approval. We're not committing to capital until the conditions are right, but we are preparing so that when we move, we can move quickly.

So if I move to the next slide, please. So finally, just to recap as we bring all this together. The December quarter represents an inflection point. The mine's transition has been delivered. The costs are within guidance. And cash flow is improving. We've done that, what we've said we will do. The open pit is completed on schedule, and the underground mine is ramping up. Recoveries are improving as the feed mix becomes dominantly underground, and costs are reducing. We need to ensure that as this price improves, that we maintain our operational credibility. So the focus on operational excellence is front of mind for us. We're scaling production as a recovering market. So every price increase flows through to the bottom line as we expand volumes. The leverage is significant. And we have optionality with a strong balance sheet now that we've converted our convertible note with LG, and the expansion study is being refreshed. Capital allocation framework is in place, and we can be opportunistic without being reckless.

I want to acknowledge the Liontown team and our contractors. This has been a demanding quarter by completing the -- while simultaneously scaling up a fairly large underground and we've delivered it. So we need to continue to deliver every day. Our focus is clear: execute the underground ramp-up, optimize the operation, generate the cash and create the value. Thank you for everyone for listening, and happy to take questions

Thanks, Tony. [Operator Instructions] Our first question comes from Ben Lyons from Jarden Securities.

Tony, I was waiting for the beep. I might start with the growth and that rapid pivot that you've made back from austerity back towards growth. Firstly, what sort of time frame have you allocated for the expansion study? And then secondly, I was just hoping to dive a little bit to the possible capital intensity of what ultimately will be brownfield expansion. And maybe you can just paraphrase what components of the nonprocess infrastructure have already sized to that 4 million tonne case? Like obviously, the paste plant is an obvious one. You're going to PPA, I assume, can really accommodate the incremental power draw. You've got the massive dent infrastructure in place already, and that processing plant is best of breed. So you might just need a bit more sort of milling and tank capacity. But yes, just trying to get a better perspective on the likely capital intensity if you pull the trigger on the 4 million tonnes.

Okay. Thanks, Ben. There's a lot in that question. So hopefully, I can cover off everything, and I'll also lean on Ryan as well. Look, I want to stress that no commitment per se has been made. What we're doing is we're dusting off that study that was done in 2021 and ensuring that it is development-ready, fit for purpose and includes all the understanding that we've built in the last 16 to 18 months of operation. So we want to be able to be ready. So if the market is definitely sustained improvement that we can be in a position to pull the trigger.

In terms of duration, I mean, the team have just kicked that off. But typically, I would say that we wouldn't see anything until the end of the financial year and into the new financial year before we sort of announce anything specifically. So therefore, I don't want to talk too much around capital cost because we don't have a definitive number because we've only just kicked it off. So we'll hold on that particular point. Is there anything else on the embedded optionality that we've got in terms of infrastructure?

Look, I think, Ben, you covered off pretty well in so far as the infrastructure we've already invested in and the type of things that we'll have to have a look at. As you said, milling is going to be a key one. Flotation sale or 2 might be the other thing. That's fundamentally what we've got to look at in the plant. There's some mining services infrastructure, which we'll have to have a look at. Obviously, the [ acceleration ] of whatever we might need to do in mining. And then you mentioned nonprocess infrastructure as well. And as you quite rightly pointed out, we've got a lot of that in a place -- post plant and the like.

Ventilation is another one.

Ventilation. So that the issue -- the things we'll have to look at is to make sure we've got water [ usage ] combination, probably the 2 kind of main ones. But as you can tell that a lot of it's in place, and there's a few kind of known constraints that we need to have a look at if we're going to be running at circa 4 million tonnes

Yes. Okay, cool. That's helpful. Maybe just one quick follow-up on that. I seem to recall that the initial concept was, I think, 4 declines. But now you've mined out the open pit, you're talking about possibly accessing one of the ore bodies through the bottom of the pit. Just whether the concept is to have sort of the 4 declines in place the 4 million tonnes of annual material revenue?

Yes. Yes, the concept is still to pursue the 4 declines. But if there's an opportunity that is capital efficient to get into the ore sooner because what we've said in our presentation is that we don't want to sort of -- if we decide to expand, we want to give progressive capacity uplifts. Not just sort of sit at 2.8 and then, bang, you get 4. We want to incrementally increase capacity. So if we can get access to earlier tonnes through the bottom of the pit, then that will be highly value accretive. So that's why we're sort of looking at everything again because we've now got far more options and levers to pull that we did back in '21.

Yes. I think, Tony, 2 points on that. The first is that -- and I think we've included that in the note that goes in the quarterly that Kathleen's pit is around about 150 meters deep. So if you think about it, we've already mined down that far. So it actually gives us -- it's much closer to the ore body in both depth and also in terms of horizontal distance as well. So as Tony has indicated, it does provide some good optionality.

The second thing is, and Tony has touched on it, to be clear, the expansion is less of a big bang expansion and much more about almost incremental debottlenecking as it comes to the plant, which supports Tony's comments about being able to release capacity incrementally rather than a traditional study, FID, amount of time before you actually get those incremental tonnes. So that's certainly the approach we're trying to take with the [ study ] exercise at the moment.

The next question is from Levi Spry from UBS.

Yes. So you're just following up on, I guess, the growth optionality and as you optimize the infrastructure in the ore body progressively, incrementally. What does that mean for how you view a sustained market improvement in pricing? Will the gold price sort of we learned through this last cycle? And given that maybe some of these are incremental capital steps, help us think about how -- what you need to see to commit to that?

Well, I think I've been on record in saying, Levi, that given the volatility that we see, look how quickly, the lithium prices scaled up since December as an example. We've got to be able to have it confident as a Board that we're seeing this price recovery. And the supply and demand signals are strong over a longer period of time. Whether that's 6 months, 8 months of consistent price improvement, that's something that the Board will have to subjectively make a decision around, right? But it can't be 6 weeks. So while we're doing the refresh of the study, we will be monitoring the market dynamics and fundamentals. And the Board will make a decision if it feels confident that the market has turned and turned in a positive and sustained way. But we don't want to start everything once we say oh, look, it's here.

Yes. Okay. And just on to the realized pricing piece. Just trying to understand, I guess, the lag on the way up. Can you just remind us of the pricing mechanisms behind those pieces of offtake that you've laid out there on the slide?

Yes. Sure. Levi, it's Grant here. So we have one contract, which is Q lag, and that's the traditional Q lag you see in iron ore, so kind of 4 months back. So you know the price when you put on a vessel, that's not unusual for cargoes going into Japan and Korea, for example. Then you've got the spodumene price through the renegotiation of the Tesla contract and the carbonate exposure this year from those offtake tonnes that were resold to [indiscernible]. And then from next year onwards, that will be spodumene index-linked.

Thank you. The next question is from Stuart Howe from Bell Potter Securities.

Tony, just on the expansion case again, and you spoke to sort of conditions arise and sustained improvement. I was just wondering, would you look to secure additional offtake arrangements to underwrite that expansion and potentially lock in some pricing?

That's a good question, Stu. I think in our previous quarterly call, we gave some feedback around our visits to Mainland China. And when we were starting to see the real increase in demand when refiners and other players in the battery value chain were looking for additional tonnes. So we don't -- we haven't seen a customer that hasn't inquired about those expansion tonnes. So we will look at that in a very strategic way and see how it pans out. But the interest is there for those expansion tonnes. But again, because the interest is there, it's got to come with the right pricing environment.

Right. And then just secondly, on the balance sheet. And obviously, the converting of the note vastly simplifies your debt positions to the extent you've been effectively net cash. But just wondering how you think about your liquidity going forward? Do you go back to the banks and look at -- back to the syndicates potentially for a replacement of the Ford facility. What are the options you see around your balance sheet?

Well, Stu, the Ford facility is a very attractive debt facility. We've said that numerous times. It's a very competitive coupon rate. It's 1.5% above bank bill swap rate. I mean you don't get a home loan at that rate at this stage. And it's very, very low covenant. So it's hard to see us, at this stage, getting a better deal elsewhere. But we'll be open to it and we'll continually track and assess our capital structure in the context of our capital allocation, and therefore, if the situation arises where we want to do something, then we will look at our capital structure accordingly.

The next question is from Reg Spencer from Canaccord.

Congrats on a quarter. It looks like everything seems to be [indiscernible], touch wood, in terms from an operational standpoint and from a market. Most of the other guys have covered off on the questions I had. But maybe just on pricing, maybe this is one for Grant. That auction you guys ran late last year was a great price discovery tool. Will you continue to run options like that, noting that you look fully committed from an offtake standpoint? But if we see any lulls in the market for whatever reason, may you run options like that again?

Yes. Thanks, Reg. For sure. I mean when we announced that first auction, we did note that we would continue to do auctions throughout the quarter 2026. We have deliberately, as a company, retained 10% to 20% of our book for spot, and exactly for these reasons to try and help that price transparency and create open markets for people to bid for cargoes. And that will continue to be a very key strategy for us as we move forward. And it could actually be what we end up [indiscernible] to do for any expansion tonnes if we do move ahead to create a bit more flexibility in the book.

Will you guys likely release the outcomes of those auctions? I know some other companies stopped doing that, but from my perspective, it seems to be a great little product for the market to be able to get a reminder as to what's actually going on and where pricing actually is relative to what price reporting agencies might put out there.

Yes, it's a good question, mate. Look, again, we made clear in that announcement that it's kind of business as usual when we run these options going forward. And therefore, we won't be necessarily reporting every single one to the market in a stand-alone ASX release. But you can be sure that the whole purpose of doing this is to create credible, tangible pricing data points to feed into the PRAs to make sure that the price actually reflects fundamentals. And every single time we do a transaction, it will be reported to all of the PRAs to ensure that, that's taken into account in their assessments.

Yes. So indirectly will be published by the PRAs.

Okay. So that gets reflected somewhere so we'll say it one way or another.

The next question is from Austin Young from Macquarie.

Just a quick question to follow up on this expansion plan. You mentioned that you will take a stage approach and unlock the capacity. Just kind to understand how should we think about the sequence. Is that coming from the underground first so you want to all more so? Or you will start to looking to increase the rotation of the site capacity?

I think the way we would tackle it, Austin, and I don't want to preempt the team because they've just kicked this off. But intuitively, you'd start with the longest lead items, right? So things like the bore mill, understanding what we need there and then placing an order would be first cap off the rack. And then what we need in the underground, given the lead time it requires to do the development work in the underground and in the open pit, if we're going through the bottom of the pit. So those are the sorts of things we would prioritize. And then subsequently, the other stuff can be done within that time frame. So if it's ordering [ 2 ] flotation cells and installing them and getting an improvement in recovery while we're waiting for the ball mill, the team will prioritize that. So that's work that will be done as part of the next phase.

Just a quick follow-up on that, assuming like a scenario where you -- all of your capacity for [indiscernible] first coming to a tight like market, would you consider OSP product as through to the market?

DSO?

Like you mean DSO?

Sorry, Yes.

Okay. Look, I have turned my mind. I saw some recent press on that by some other party. Look, at this stage, DSO doesn't really factor into any of our planning. Last time we looked at it, I mean the prices were much, much higher. But at these sorts of prices, I can't think we make the economics work to [indiscernible] But anyway, we haven't actually turned our mind to it. I'd rather be selling process on to be convinced.

Yes. I think to add to that, Tony, I mean, we built a process plant. Last time we looked at it, Austin, it was really around early cash flows in the context of building a project when we staffed at open pit mining earlier because we needed the waste rock or infrastructure build. So it's quite a different unique set circumstances. Our business is not selling DSO. So we'll leave that to the Africans.

Next question is from Glyn Lawcock from Barrenjoey.

I'm still just a little bit unclear about the 4 million tonne expansion and the timing. I heard you just kicked off the study. You probably won't come back to the end of the fiscal year, early next fiscal year, but everyone is now talking about turning capacity back on or are there expansion cases, which is obviously not good for the market cycle. But when could you actually get there? I understand you want to do a bit of debottlenecking that maybe you can creep beyond the 2.8. But when would it go to FID? And when could you conceptually get to for if everything -- if the stars are aligned.

Well, it comes back to this point around has the market turned and turned in a sustained way. It's a difficult question to respond to, Glyn. We might do the study, refresh the study, find out what we've got to do and then the market comes back off and we just put it back on the shelf, right? So at this stage, it's all hypothetical. If I decide to -- go ahead.

I was just going to say, let's just assume the market needs it. What's the best case you could do?

I think given underground development would be the probably the rate determining step, I would think it will be an 18- to 20-month program to get to the full pass uplift, but we would see smaller increments along the way.

That's from when you FID or you're talking about [indiscernible] today?

No FID yet.

And when could the earliest you get FID, do you think, again, assuming everything goes well?

Well, again, it's a hypothetical. I mean I don't want to be saying if we say -- I'd rather not answer it, Glyn, to be honest, because again, I'm just sort of speculating.

I was just curious.

Glyn, what Tony already said is we wouldn't expect to have the results of that study until the end of this financial year. So I mean I assume that's delivered, that would be the soon as you could ever make an FID.

Okay. That's cool. I just wanted to -- preliminary -- to get more work. And then, Tony, you're sitting on another asset, which market puts no value on [indiscernible]. I mean, is that something that exercises your mind again now? Or is now a good opportunity maybe in this market to offload it? Just how do you think about that sort of off to the side, obviously?

That's a good question, Glyn. We've got a lot of talented people that have now concluded their work as part of the open pit. And some of those folks will turn their mind to what [ Boldania ] could look like. So that's work that we're going to kick off and do in a slow burn.

Next question is from Andrew Harrington from Petra Capital.

Great spread outcomes expected over the next couple of quarters with where prices are looking at the they stay that way. I mean, obviously, performance and price are the combination. You haven't really spoken a lot about price. You seem reticent. I know it's volatile, but I guess that's the key element here in your stock performance. What are your customers saying? Have they shifted in the last week or in the last month? Or did they shift last year? How does this come about?

Do you want to take that?

I'll take this one. It's Grant here. So look, I guess I covered a little bit in my market side that -- the market is starting to anticipate supply/demand deficits into '26, '27, '28. You can see that SC Insights chart that I included on my slide on Page 16. What that means is you typically see inflection points in the psyche of customers ahead of that move. And I would say that happened in the last quarter last year, so the December quarter that we're talking about today. And it's very clear when we went to China in the very beginning of that quarter, that customers were focused on growth and getting access to more resources to enable that growth. So we expect that this expected deficit will continue to support prices throughout '26 and beyond. And we're trying to make sure that we're well positioned to participate in that as we move forward.

Okay. And my second question would be around M&A. That's something that we've spoken about in previous calls. What is your outlook on that? Or is that off the table now?

On the growth front, I think we've gone into some detail around where the focus is initially. It's organic growth. The best and most value-accretive option is to develop Kathleen Valley to its full potential. So that's one primary focus. And then we continue to opportunistically focus more broadly around inorganic growth. So we will continue to do that. Grant's got a very small team that does this, and we'll continue to focus on opportunities if that makes sense.

The next question is a written question from Hugo Nicolaci from Goldman Sacs. Following LG devoting their debt to equity, can you confirm what happens with the capitalized interest so far? Do you have to pay that back this quarter with the issue of new shares?

Yes. Greg here. The capitalized interest also converts and effectively gets repaid in shares. It's not a cash repayment of interest.

The next question is also a written question from Ben Liu from DMT. First off, congratulations to the team on the execution. It's been impressive. Just on tantalum, can you give a brief update on how the byproduct is tracking and how meaningful it's coming on the cost offset as underground operations stabilize?

Yes, Ryan here. So I mean, we made a very conscious decision at the beginning of the project, not to contract our attach to them so that we could focus on ensuring we maximize recovery in lithium, which is the main focus. But we did make the investment in a significant tantalum plant, which allows us to capture that byproduct revenue. We have consistently been selling that on spot and making money from that. And our focus will continue on that basis at the moment, while we make sure that we manage that transition to full ramp up on the underground and steady-state production of 4 products.

Next question is from Tom Lin from BIZB. Tom says: "Congratulations on a good quarter. There has been previous mention of interest in brands as a way to diversify. Given the move to relook at expansions, what's the current thinking is [indiscernible] and M&A more generally?"

Thank you. I'll take that. Look, the demand outlook is very strong. And we believe that all forms of lithium units will have a place. So we believe as a pure-play lithium producer that we need to have an understanding and a skill set in both of those areas. We've got a very strong skill set in hard rock, and we want to build our understanding and skill sets in brine. So the focus is dual.

Any more questions, Michelle?

No further questions.

Okay. Well, I'd like to thank everybody for attending the call. Appreciate your time. And I thank my team, and we look forward to 2026.

Good morning, ladies and gentlemen. My name is Tim Goyder, and I'm Chair of Liontown Resources Limited. I would like to begin by welcoming all of our shareholders and supporters and acknowledge the traditional custodians of the land on which we operate, including the Tjiwarl people on whose land the Kathleen Valley Operation sits.

It is now 11:00 a.m., and I'm advised that a quorum is present. I therefore declare the meeting open. I would like to advise that all shareholders in the room should now have registered to vote and have signed the attendance register. If you have not registered or have not received a voting card, one of those, please do so now at the registration desk. This year, we are webcasting our AGM so people who are unable to join us in person are able to follow the proceedings.

This is not a hybrid AGM, so viewers online will not be able to participate in the formal business. However, for those watching online, the webcast does have functionality to submit questions, which we can address at the conclusion of Tony's, CEO, address.

If you have any questions, submit them online, and we will endeavor to answer them. For those in the room, a roving microphone will be available for you to participate in Q&A.

I would like to introduce my fellow directors, Tony Ottaviano, Ian Wells, Jennifer Morris, Shane McLeay and Adrienne Parker, together with our Company Secretary, Clint McGhie. Our executive team are also here in attendance.

In the front row, we have our Chief Commercial Officer, Grant Donald; Interim Chief Financial Officer, Graeme Pettit. And I also welcome for the first AGM, our new Chief Operating Officer, Ryan Hair; and new Chief People Officer, Lisa Breen. Wendy Turner is here from Computershare to oversee the polling process.

The company's auditors for the financial year ending 30 June 2025, Deloitte, are present and will be available to answer any questions relevant to the conduct of the audit, the preparation and the content of the audit report, accounting policies adopted by the company and the independence of the auditor in relation to the conduct of the audit.

We now move to the formal part of the meeting, which will be followed by my Chairman's address and a presentation by our Managing Director, Tony Ottaviano. As the Notice of Meeting and the explanatory memorandum have been made available to all shareholders, I propose that the notice convening the meeting be taken as read.

I confirm that as Chairman of the 2024 AGM, I signed last year's minutes as a true and correct record of the proceedings at that meeting. I advise that valid proxy totals for each resolution are displayed on the screen behind me.

A number of the proxies received were left open to the proxy holders' discretion. For those that were left to the Chairman's discretion, I intend to vote in favor of all resolutions as stated in the Notice of Meeting.

The first item of business is to receive and consider the company's annual report for the year ended June 2025, which includes the financial report, the directors' report, auditor's report and sustainability report.

The subject of the company's annual report is now open for discussion. Are there any questions in relation to the company's annual report? Are there any questions to be put to the auditor relevant to the conduct of the audit, the preparation and content of the auditor's report, including key audit matters, the accounting policies adopted by the company or the independence of the auditor.

I thought we get one on the fees -- we haven't -- but thank you. Thank you very much for your participation, for your work and the big report we've got these days. We note that there is no requirement for shareholders to approve the annual report.

Ladies and gentlemen, we have 7 resolutions to deal with today. In accordance with the ASX guidance, voting will be conducted by a poll. Wendy Turner of Computershare has been appointed as returning officer for the poll. I will now call on Wendy to explain the voting procedures.

Thank you, Mr. Chairman. We will now conduct the poll on the motions #1 to 7. Firstly, if there's any person present who believes that they are entitled to vote but has not yet registered to vote, would you please raise your hand for assistance. The persons entitled to vote on the poll are all shareholders, representatives and attorneys of shareholders and proxy holders who hold a green voting card.

On the reverse of your green voting card is your voting paper, which details the motions being put to this poll. I will now go through the procedures for filling out the voting papers and if you are a proxy holder, sorry, and have only directed votes for and/or against, as shown on the summary of votes, which will be attached to your admission card.

All you need to do is put your name on the voting paper and lodge it in the ballot box. You must lodge your voting paper for your votes to be counted.

If you are a proxy holder with open votes, you need to mark a box beside the motion to indicate how you wish to cast any open votes. Shareholders also need to mark box beside the motion to indicate how you wish to cast your votes. Please ensure that you print your name where integrated on the voting paper.

And when you finished filling in the voting paper and please lodge it in the ballot box. Please raise your hand if you require any assistance during the voting.

And I should now hand back to the Chair to open the polling. Thank you, Mr. Chairman.

Thanks very much, Wendy. The resolutions will be displayed on the screen behind me. I do not intend to read each resolution in full as they are set out in the Notice of Meeting.

I declare that the polling process is now open. Resolution 1 regarding the adoption of the remuneration report is displayed on the screen behind me.

The Corporations Act provides that a resolution for the adoption of the remuneration report must be put to vote at the company's AGM.

As shareholders will appreciate that the vote is nonbinding, but of course, disuasive. Are there any questions in the remuneration report? So please cast your votes for Resolution 1.

Resolution 2 relates to the reelection of Shane McLeay as a director and is displayed on the screen behind me. Shane is a Non-Exec Director. Further details of Shane's background and experience can be found in the Notice of Meeting and in the company's annual report.

Shane is required to retire in accordance with the constitution and therefore, seeks reelection at this AGM. Shane offers himself for reelection and the directors of the company other than Shane recommend shareholders approve reelection. Are there any questions on the resolution? Please cast your votes for Resolution 2.

Resolution 3 relates to the reelection of Adrienne Parker as a director and is displayed on the screen behind me. Adrienne is a Nonexecutive Director of the company. Further details of Adrienne's background and experience can be found in the Notice of Meeting and in the company's annual report. Adrienne is required to retire in accordance with the constitution and therefore, seeks reelection at this AGM.

Adrienne offers herself for reelection and the directors of the company other than Adrienne recommend shareholders approve her reelection. Are there any questions on the resolution? Please cast your vote for Resolution 3.

Resolution 4 relates to the issue of short-term incentives for financial year '25 to Tony Ottaviano is displayed on the screen behind me. The resolution seeks shareholder approval under Listing Rule 10.14 for the issue of up to a total of 510,636 performance shares to Tony Ottaviano under the company's employee securities incentive plan on the terms and conditions set out in the explanatory memorandum. Are there any questions on the resolution? Please cast your votes for Resolution 4.

Resolution 5 relates to the issue of long-term incentives for financial year '26 to Tony Ottaviano and is displayed on the screen behind me. The resolution seeks shareholder approval under Listing Rule 10.14 for the issue up to a total of 2.6 million performance shares rights to Mr. Ottaviano under the company's employee securities incentive plan on the terms and conditions set out in the explanatory memorandum. Are there any questions on the resolution? Please cast your votes for Resolution 5.

Resolution 6 relates to the increase in the maximum total aggregate amount of fees passed to nonexecutive directors to $1.5 million per annum displayed on the screen behind me. Are there any questions on the resolution? Please cast your votes on Resolution 6.

Resolution 7 relates to the proposal to change the name of the company to Liontown Limited. Are there any questions on the resolution? Please cast your votes for Resolution 7.

There are no further resolutions to be considered at today's meeting. Please place your completed voting papers in one of the ballot boxes circulating the room now.

Would you please indicate by raising your hand if you require more time to complete and lodge voting paper or you need a pen?

[Voting]

It looks like we're done there. So the voting process has now been completed. Thank you very much. I therefore declare the poll closed.

Ladies and gentlemen, that concludes the formal business of the meeting. Thank you for your participation. The polling results will now be scrutinized and be announced to the ASX shortly. I will now move on to my Chairman's address.

So fellow shareholders, welcome. It's good to have you here and there's some familiar faces here and what a day. The stock is now $1.52 and we now capital $4.2 billion, which is fantastic considering what we've gone through over the last 2 years.

I won't go [indiscernible]. Anyway, so they got me on a tight rein. The past year has been one of transition for Liontown. Today, we stand with a strong balance sheet and a world-class operating mine at Kathleen Valley. And last quarter, we had $420 million in the bank. Coupled with a first-rate workforce, the company is well positioned to take advantage of the improving lithium market.

Having completed our first full year of operations, we have shipped over 360,000 dry metric tonnes of spodumene concentrate to customers around the world.

We're currently operating Australia's only underground lithium mine. The transition from open pit to underground mining will be complete by year-end, at which point Kathleen Valley will be 100% underground operation.

The transition will increase productivity and output as we ramp up to full production of 2.8 million tonnes per annum. Underground mining gives us several advantages that open pit mining cannot match. It allows us to surgically target ore, leaving waste rock behind. That means cleaner feed to the processing plant, which in turn delivers higher recoveries and better concentrate grades.

Underground mining is also inherently scalable. In November 2024, we made the decision to adjust the mine plan to prioritize high-margin ore. This allowed us to limit capital and operating costs during a depressed lithium market while retaining the optionality to return to the 4-million-tonne mining rate when market conditions improve.

We believe our process plant is truly best-in-class. In recent months, our operations team have pushed the plant hard, processing highly variable feed at times containing up to 40% gabbro waste rock from low-grade stockpiles.

Despite this variability, the team continues to produce a consistent salable product to our customers. In August, the company strengthened its balance sheet through a 2-tranche institutional placement and a share purchase plan raising $372 million. The capital raising was strongly supported by both Australian and international institutions as well as our retail shareholders.

The recapitalization positions us to complete the underground transition and provides us with the optionality to pursue acquisitions that align with our long-term strategy.

We are not content to remain a single asset company. Our strategy has always been underpinned by 3 key pillars: fulfill the potential of Kathleen Valley, evaluate downstream opportunities and grow Liontown to its full potential by expanding our portfolio.

Bringing Kathleen Valley to full potential alongside pursuing accretive growth opportunities will be central to creating long-term shareholder value. Tony will shortly speak to what this future growth could look like.

But one theme remains clear, global demand for lithium continues to grow. This year, we welcomed 3 new executives to Liontown.

In August, we appointed Ryan Hair as Chief Operating Officer. Ryan brings more than 30 years of mining experience, most recently as CEO of Covalent Lithium. Last month, we welcomed Lisa Breen as our Chief People Officer. Lisa is a highly regarded human resources leader with experience at MMA Offshore and Austal.

And next month, Greg Jason will join as Chief Financial Officer. Greg brings 25 years of C-suite experience across resources, manufacturing, financial services, defense and logistics.

This will be the executive team that leads Liontown through this transition and into our next phase. They are supported by an outstanding operational team across this business.

To our CEO, Tony Ottaviano, thank you for your leadership. It's one of a kind, isn't it? Under this guidance, Liontown has developed into a world-class company, and we are only just getting started.

To you, your executive team and all 317 employees, thank you for your continued dedication. To my fellow directors, thank you for your guidance and support throughout the year.

Your contributions have helped position the company for long-term growth. I would also like to acknowledge and thank the Tjiwarl people, the Traditional Owners of the land on which Kathleen Valley operates. Our partnership is one founded on respect and collaboration.

We value the community support and look forward to continuing to share in the success of Kathleen Valley in the years ahead. I also want to thank both the West Australian state government and the federal government for their support.

During a challenging period, the state government provided a loan and port fee waivers under the Lithium Industry Support program. At the federal level, the Commonwealth equity investment through the National Reconstruction Fund played an important role in supporting our capital raise.

We also appreciate the ministers from both levels of government who visited Kathleen Valley to see our operation firsthand. Finally, to our loyal shareholders, thank you for your ongoing support, commitment and unwavering belief in Liontown.

Absolutely unbelievable. Thank you. Your Board remains 100% focused on delivering and building shareholder returns. The team will be available to answer your questions after the presentation, and we look forward to speaking with you over refreshments once formalities are concluded.

I'll now hand over to Tony for his presentation, where he will provide further detail on our operations and outlook. Thank you.

Thank you, Tim. Good morning, and welcome, everyone, joining us today. For me, I look forward to these AGMs. It's the one opportunity management and the Board get to really engage with the shareholders.

There are companies that see this as a burden, whereas I see it as a positive, no better feedback than that of a shareholder. FY '25 was a transformational year for Liontown.

We became Australia's first underground lithium mine. We delivered on every major commitment, and we did it through one of the toughest periods this industry has seen so far. Today, I will focus on 3 critical areas.

First, our FY '25 execution. We achieved first production in July on schedule. We commenced underground mining on schedule in April.

We generated nearly $300 million in revenue and $55 million in EBITDA in our first year of operations. Second, our FY '26 transformation strategy and transition. We're making strategic investments today that will drive structural cost improvements into the following years, FY '27 and onwards.

Thirdly, our growth vision. Kathleen Valley is world-class, but it's just the beginning of what we're building. By the end of this presentation, you'll understand why Liontown is exceptionally well positioned to create substantial long-term shareholder value.

Let's start with the foundation. Kathleen Valley is a world-class ore body, one of the largest in the world in the top 10 at 155 million tonnes and a 1.3% grade.

This translates to a mine life exceeding 25 years at our planned production rates. But the resource size alone doesn't define Tier 1 status. Location matters profoundly. Western Australia provides political and regulatory stability, world-class mining infrastructure, deep pool of skilled labor and a strong environmental governance.

When Tier 1 customers like LG Energy Solutions, Tesla and Ford evaluate supply partners, jurisdiction risk is paramount. This combination, an exceptional resource in an exceptional jurisdiction enabled us to execute and deliver through the market downturn.

I feel this chart captures the performance story. During FY '25, spodumene prices collapsed 44%. Today, spodumene prices have rebounded to above $1,000 a tonne. But for the past year, prices fell to levels of $600.

They reached this low and at this level, at least 30% of what's in the market is not economic. So 30% of the cost curve is below that price. That's why this is not sustainable. Yet given this backdrop, Liontown's share price fell only 21%, outperforming the commodity by 23 percentage points.

More telling, since June 30, we've surged 110% compared to the spodumene price of 79%. This outperformance reflects growing market confidence in both our operational delivery and the long-term fundamentals of Kathleen Valley.

Some milestones which you see there, first production in July, September, we shipped our first cargo. December, we delivered our first cargo to our foundational customer, LG, who's in the audience today.

April, we commenced our underground mining. August, we did that important capital raise of $372 million, which Tim talked about. And in November, we launched our first auction. The market expects flawless execution. And when the commodity price is not your friend, then the only thing the market recognizes is operational excellence. So that's what we've got to deliver.

Now let's talk to the market. Despite near-term volatility, long-term fundamentals, as Tim said, remain compelling. Electric vehicles sales exceeded 2 million units monthly for the first time in September this year, marking a 23% year-on-year growth based on Rho Motion data. Bloomberg forecast EV sales reaching 39 million units by 2030. That's a CAGR of 14%, and I believe that's conservative. Other forms of transportation are adopting batteries, including commercial and heavy-duty trucks. And we saw this firsthand when a group of us went to China about 4 weeks ago. That segment of the market is growing rapidly.

So it's not just passenger vehicles, it's commercial vehicles. And then you have these low altitude vehicles, which are another segment, the eVTOLs and the drones rely on lithium batteries.

Geographically, China continues its robust trajectory. Europe is rebounding strongly, and the rest of the world, and that is a huge segment is accelerating rapidly. But here's what analysts underestimated in our view.

And we've been saying this for some time, stationary battery. Benchmark [ Materials ] Intelligence estimates that BESS will contribute 25% of the total lithium demand through to 2029, yet forecast vary widely.

And I'd like to sort of draw your attention to this second graph. So the blue bar is what the market, the street consensus is saying around stationary batteries.

The bar on the outside is the biggest battery producer in the world in CATL. So that's their forecast, right? And then there's another forecast there in the middle.

But the point that I want to make here is the difference, the error band between the blue bar and the world's biggest producer is 765,000 tonnes on an LCE basis. That's the error in the forecast. And just to put that in perspective, that's half of this year's production.

So to me, this one is a huge driver, and I think the market is starting to understand this. Where are these batteries used? Well, large-scale grid storage investments are accelerating globally to enable renewable energy penetration but more importantly, to improve grid Reliability.

Data centers are representing an emerging demand vector, and we're getting inbound interest from data centers. There are people that actually construct them, and we'll be having a session with a large player in the coming weeks, just to understand where they're seeing their demand for batteries going.

But as demand grows, the influence of a single mine and particularly a single player will diminish, supply will remain tight because the industry hasn't invested during this downturn. But Liontown has invested. That positioning matters as the market tightens. So if I go to our first year of performance.

Let me walk through this with you. We produced 294,000 tonnes, I mean that's including 6 months of ramp-up in the plant. We had exceptional plant reliability at 89%, and the concentrate sales, we nearly sold 300,000 tonnes of production in our first year.

We had, at the time, $156 million in the bank, $300 million almost in revenue and a good cost structure, not considering that it was in our ramp-up year, where you don't have the economies of scale.

Our sustainability strategy for the long term, this is something we work on every day. Our Sustainability Committee has enrolled. We had a very good meeting around this, and we will continue to prosecute what we think is the right thing to do as a mining executive and as a mining company.

Now FY '26, our transitional year. Why is it a transition year? And what does it mean for value creation? As Tim mentioned, underground mining commenced in April 2025, exactly on schedule. We invested significantly in enabling infrastructure such as life-of-mine ventilation Australia's largest paste fill plant. We did this day 1. We didn't wait 5 years before we built it like some companies do.

We invested in this upfront. We're now ramping up to 1.5 million tonnes by the March quarter with an open pit operation coming to a conclusion in December this year. Why does the underground transition matter? There are 4 fundamental reasons.

First, higher grade ore, the underground material average is about 1.4%; better grade, better recovery. And when you get better recovery, you get better plant performance and you get a lower cost base.

Secondly, the recovery gives us confidence. Our trials that we did with the underground material gives us that foresight to be able to forecast that we'll achieve our design parameter and recovery levels of 70% and then beyond that.

Thirdly, structural cost improvements. As I mentioned, the better recoveries deliver this, but also as we mine deeper into the underground, the larger stopes, and they're very large, will give us economies of scale because if you've got the same fixed costs going into a stope, but you want to mine 80,000 tonnes of it instead of [ 4 ], you can see you can spread those costs over more tonnes.

And lastly, operational flexibility. Underground mining allows us selective extraction, our production rate adjustments based on market conditions while preserving the resource value. As Tim mentioned, our processing plant is performing exactly as designed, reliably producing high-quality, specification grade concentrate at scale.

We've derisked the flow ship, and we continue to do this through our optimization. Now we'll move to the financial strength. Our balance sheet supports the transition strategy, a $420 million cash at the end of September, substantially gives us that operational flexibility as we ramp up the underground.

It gives us our funding arrangements of low covenant and low cost backed by Tier 1 customer relationships. Ford have agreed to defer the loan payment for -- until September 2026, providing additional flexibility for us.

The capital structure aligns perfectly with our strategy, execute the underground transition, optimize the operation systematically and maintain optionality for disciplined growth.

I do want to mention the Australian National Reconstruction Fund, the $50 million investment they made during that raise. I mean that was a fairly profound investment by government that helped crowd in an additional $300 million of private equity into our company.

Now, Liontown to its full potential. I mean Tim touched on it, but it starts with Kathleen Valley. We need to successfully execute the strategy of Kathleen Valley, the most value-accretive path for us upfront is to deliver Kathleen Valley to its full potential.

So subject to market conditions, we want to grow Kathleen Valley to the $4 million and maybe beyond. And we're dusting off those works as we speak to feed into it all the known information that we've got from the operating in the plant rather than theoreticals that we had during the feasibility study, and we'll understand what that expansion phase will look like.

But it's got to go beyond Kathleen Valley. We don't want to stay a single-asset company. We need to grow. We need to give diversity of earnings, and we need to look globally. Now the Board is committed. We had a strategy session only a few weeks ago. We understand what we need to achieve.

We're extremely aligned and we're going to push that. Countercyclical investment is what we need to do. Our vision is to build a diversified globally relevant battery materials business with sustainable participation across the lithium value chain.

Now let me bring this all together. FY '25 proved we can execute under pressure, and we delivered Australia's first underground lithium mine. We shipped 283,000 tonnes generated nearly $300 million in revenue and $55 million in EBITDA, all while maintaining a strong balance sheet, all delivered through a severe commodity market downturn.

FY '26 represents opportunity through this transition phase. We've calculated all the investments we need, we've put them in, and we're going to push the superior recoveries and a lower cost structure. FY '27 and beyond is where the sustained value compounds, consistent production, good margins, growth optionality and strategic partnerships, all give us a competitive edge.

We have every element required for success, a world-class asset, a proven team, Tier 1 customers, a strong balance sheet and a disciplined strategy.

Now before I go on the video, I just want to acknowledge a few people. Firstly, Adam Smits and Jon Latto, both who are instrumental in getting us to where we are today. So I'd like to thank them for their contribution. And Tim's already welcomed Ryan, Lisa and Greg, into our next phase. So I welcome them to the company.

To our Board, thank you. We meet tirelessly and we're very aligned in collegiate; to our stakeholders, thank you for your participation during the year and to our shareholders, for your continued support and commitment.

I do want to do a specific call out to a few shareholders. Tim and I regularly get letters and e-mails from shareholders. And to be frank, they keep us going. There's been some dark times, but those letters from shareholders who are supporting us every single step of the way is uplifting.

And it gives me as a CEO, the ability to then turn to my team and say, they're backing us. People like -- shareholders like the Anisimoff, Dean Oakley, [indiscernible] who's not here today, but they're all -- and there are many people in this room that speak to me regularly. So I thank you.

The support helps me personally to push through. And I do -- I'm not big on quotes, but I do like this one, which I'll end the presentation before we show the video. And it came from Theodore Roosevelt, which I think captures the year perfectly and it goes like this, "it's not the critic who counts, not the person, who points out how the strong man stumbles or where the doer of deeds could have done them better the credit belongs to the people actually in the arena, whose face is marred by dust, sweat and blood." That's our team. That's Liontown. Thank you.

[Presentation]

Now, I will open it up for Q&A.

I have a question related to price. We don't have a lot of transparency. So where do you think as to what your strategy is?

That's a big question. So maybe I'll sort of hear it back down onto a couple of things. When I first joined Liontown, what was obvious to me was the market for the product was very much relationship-driven right?

There wasn't a sort of globally transparent trading platform so that we could get transparency around pricing. The second thing is the actual product we were producing didn't have a price reference. We had to rely on the chemical price of the product, right, chemicals and then back calculate what the product we were selling was worth. So we were tied to the price and the supply dynamics and demand dynamics of another product.

So right upfront, we said, well, let's -- when we sign our offtake agreements, let's leave a certain amount of product available for the spot market. And it's through the spot market and creating that platform to actually trade so that we could get the transparency, we hoped that we could get the proper pricing mechanism for the product we sell.

And therefore, margin, which is important when you look at the battery value chain, where does margin accrue, it should accrue at the point of first salable product, which is spodumene.

Now since then, we have seen a spodumene index develop sufficiently so that we've got confidence that we can now link our offtake agreements to that spodumene index.

Now we have contracts that we need to honor, which are still on the chemical price. But over time, we'll progress to a spodumene index. Grant, do you want to add anything? Grant is our commercial guy. So he's the one that's out there on the day-to-day.

I would just say that part of the auction process that we ran just before the AGM is around getting that transparency. So getting real data points, physical trades that can then inform that index to make sure we get paid a fair price for our product.

So as just Tony said, that's an important part of the journey that we're on, and you'll see us being much more active in 2026 on the...

All right. I just wanted [Technical Difficulty] talk about site every time now -- so I'm just wondering whether you're looking at [Technical Difficulty], are you looking at good last year, so that everyone is here in Australia and then [Technical Difficulty] our shareholders are, so we can actually [Technical Difficulty].

I can maybe I'll address the second part first. We are live streaming at the moment, okay? And so they have the opportunity to hear and ask questions, which are probably coming through as we speak.

In terms of the open pit and its closure plans, as part of our overall commitment to the Tjiwarl and to the government in terms of our permitting, we are looking at ways to minimize the footprint that we leave behind.

In fact, our tailings and our waste dumps basically nonexistent because we've reutilized a lot of the waste for the underground paste fill. And so the footprint is extremely small, but there's an understanding and our permitting is all based on the land form that is currently there now being left as it is.

Tony and the Board are -- congratulations [Technical Difficulty] you guys. [Technical Difficulty] you might comment that [Technical Difficulty] business. I was interested to give us [Technical Difficulty] I just want to ask the question, even in your [Technical Difficulty].

First and foremost, Eddy, thank you for assisting us in our capital raise in August. Secondly, in terms of our growth aspirations, our primary core competence is lithium, it's hard rock lithium.

But we're not going to be closed to just staying in hard rock because we need to understand where battery chemistry is going and there may be a hedge that we have to look at in terms of managing that battery chemistry evolution by possibly focusing on other forms of lithium like the brines.

Now adjacent minerals. The way I look at it is if there's an opportunity and it is value accretive and it is in strategy, then we'll look at it. As Tim would say, if it makes money, it's strategy.

First of all, congrats Tony and Chairman and everyone in [Technical Difficulty] question regarding the cost in the quarter [Technical Difficulty] all-in sustaining costs with the guidance that we gave earlier. It's only you can see how the cost is traded [Technical Difficulty] or relative to [Technical Difficulty].

Now we're holding to our guidance, 100%.

A couple of questions online. First question, I think some [Technical Difficulty]. How is [Technical Difficulty] improvement [Technical Difficulty] in the next 12 months?

We're very strong as a company. As I said, a number of us went to China 3 or 4 weeks ago. And there were 3 key messages that came out of that visit. Firstly, they wanted to buy more product.

So whatever we -- the Ford offtake, they wanted to buy the Ford offtake. They asked us about our expansion plans and when are we going to expand? But the third message was demand and demand is strong, especially in the stationary battery area. So therefore, we believe that this will be a market that will come out of oversupply driven by strong demand.

Another question from [Technical Difficulty] can you tell us what line [Technical Difficulty] more cost transit.

I think between myself and Grant, we've sort of answered that already. Clearly, the auction mechanism that we've adopted is one form, which we will continue to push and then we do sell production that is not on the index or not on that platform, which, again, we will report to the price referencing agencies.

And this one [Technical Difficulty] strategy question from [indiscernible]. Will Liontown be [indiscernible].

Well, we're public in our partnerships with both LG Energy Solutions and Sumitomo on our refining aspiration. We continue to work with these 2 very important customers and partners around the economics of refining.

We know that building something here in Australia has a cost premium, both capital and operating. So we're asking our partners and we're looking globally around where this opportunity can best generate the best shareholder value. So we're continuing to work that.

This is the last question from Shane, [Technical Difficulty] specific question. But has Liontown approached [indiscernible] providing on [Technical Difficulty] markets.

Not -- I wouldn't be that specific. We have had general discussions, and we will, as I alluded to in my speech, we will talk to customers of these data centers to understand their requirements and how we can best create an opportunity between us.

[indiscernible] auction, and you mentioned that there will be more risk, is there any idea at this stage, how [Technical Difficulty]?

We do have a plan for what we see in FY '26. I don't want to give too much away here, but we definitely have a strategy around this, very calculated.

If there's no further questions, once again, thank you for everyone for coming, and thank you, the Board.

Good morning, and thanks for joining us at Liontown September Quarter Results. My name is Tony Ottaviano. Joining me today is Ryan Hair, our Chief Operating Officer; Graeme Pettit, our Interim CFO; and Grant Donald, our Chief Commercial Officer.

So if we can move to Slide 1, please. It's the typical disclaimer and then we move to our highlights slide. I'd like to provide some context today. This quarter was one of execution and we delivered exactly what we said we would. We advanced the underground ramp-up on schedule, maintained a strong and consistent plant performance and strengthened our balance sheet more than $420 million of cash following the August capital raise and also the restructuring of our debt facility with Ford.

Importantly, this quarter represents the low point in our planned transition year, and it sets out the improvement story that unfolds from here. The plan is clear and unchanged. We continue to wrap up the underground production towards a 1.5 million tonnes per annum by March 2026, lift recoveries towards our target 70%, and once we process the cleaner underground ore becomes the dominant mill feed and drive costs down progressively each quarter as we fleet the open pit and move to full underground operations at the desired steady state run rate.

So the key messages for investors today are: first, execution and delivery. We achieved every operational milestone to plan. During the quarter, we executed the scheduled maintenance, as we highlighted in the previous results. We're executing our OSP strategy to manage our contact tools, achieved a 105% increase in underground production, reaching our 1 million tonne per annum rate by September. We also advanced the open pit towards completion, with the final clean ore bench reached in September and full completion planned for December quarter as stated. These outcomes demonstrate once again the strong delivery against plan and the continued validation of both the ore body and the process flow sheet.

Second, our financial strength. Our balance sheet is in excellent shape, providing full flexibility through our transition year. We closed the quarter with $420 million in cash, as I mentioned just earlier, supported by successful $316 million equity raise, and the Ford facility amendment to help us with the debt repayments in the course of the next 12 months.

Thirdly, our operational leverage ahead each quarter from here improves the benefit as we get scale and defray our operating costs, but also our all quality improves. With the underground volumes ramping up, open pit completion imminent and recovery uplift underway, production growth, recovery strengthens and cash generation accelerates. The operational leverage is built on visible -- it is visible in the trajectory ahead.

Finally, the long-term fundamentals. Lithium demand remains robust, underpinned by strong EV and the accelerating expansion of the battery -- sorry, the stationary batteries. Liontown's high-quality asset, Tier 1 partners and the fortified balance sheet helps us capture the full benefit as the market turns. So in summary, the context of today's results, disciplined execution through the trough, a clear path of improving margins and cash flow, and a business built on sustainable performance.

I'll now move to the next slide, please, which is our highlights. The production for the quarter was 87,000 tonnes at a weighted average grade of 5%, and this is in line with us processing the contaminated by the contract ore being the OSP. Contract sales were 77,000 tonnes. Concentrate on hand is 20,000 or nearly 21,000. Our recovery was the 59%, again, as planned, and this will improve as we get the better quality ore. And plant availability, notwithstanding the planned shutdown, of 92%.

On the financial side, I've already mentioned the cash imbalance. The revenue was $68 million, but it was impacted by the lower sales due to port congestion in September and the backward looking and we'll talk about this a little bit later in the presentation. Our realized price on a nausea basis plus our unit operating costs were exactly as planned, given that we had lower recoveries due to the OSP stockpiles.

If we move to the next slide. I'll now move on to -- and introduce Ryan here, who will go through the slide for us.

Yes. Thanks, Tony. So safety, our lost time into frequency rate, roughly in line with the previous quarter. The total recordable injury frequency rates up slightly on the last quarter. And as we've noted in the lead end of this slide, we are focused very heavily at the moment on a back to basic safety drive both on physical and mental well-being. Importantly, our leading indicator safety observations are still in line with our previous quarter, which is in line with our plans. And on ESG, renewable power average of 79% for the quarter. And notably, in September, peaked at 83%. And female workforce participation slightly at 23%.

If we can move to the next slide. So now talking to operational performance and starting with open pit. So performance remains strong in the open pit and continued to deliver to plan. We mined 292,000 tonnes of ore at 1.3% lithia, which is 77% up on last quarter. The final clean ore zone was reached in September, and completion remains on schedule for the end of the calendar year. Focus this quarter is on completion of the pit in preparation to contractor demobilization as we transition into full underground operation, which we'll now turn to the next slide on underground.

So the underground operation, we continue to perform exceptionally well here, and it does remain one of the most important indicators of our progress towards steady-state operation. During the quarter, all mined just over double to 225,000 tonnes, reaching a 1 million tonne per annum run rate in September, which is in line with plan. The pace fill and primary vent systems are now fully commissioned and performing to design, supporting delivery of the plan and improving operational efficiency.

The ordering, power reticulation of materials handling infrastructure are working well, providing strong operating reliability across all levels in the mine. We've mobilized a third jumbo and a fourth production drill, which increases development and production capacity and supports continued ramp-up towards 1.5 million tonnes per annum by Q3 FY '26.

The orebody continues to perform well against expectations. Volumes and grades are reconciled closely with the mine plan. fragmentation, overbreak and dilution remain well within design parameters. A total of just over 1,800 meters of development was completed for the quarter, up 8% on the prior period. To date, 18 stopes have been mined including 14 in the September quarter with an average stope size circa 15,000 tonnes.

Work fronts are expanding across multiple levels, providing flexibility as we scale up production. Our key priorities now are to optimize stope turnover, continuing to increase the rate of development and refine pace fill scheduling to sustain continuous production. In short, the underground is behaving exactly as designed. Infrastructures in place, performance is consistent and the pathway to 1.5 million tonne per hour and beyond is clear and achievable.

So now I'll move to the next slide on the process plant. So the plant continued to perform well and most importantly, exactly in line with the plan we outlined earlier this year with lower recoveries in production when seeding OSP material or our contact material during the early underground transition. We said we'd take this approach to manage all feed during the ramp-up phase, and it's exactly what we did.

Plant reliability remains strong with 580,000 tonnes processed at 92% availability. Recoveries behaved as expected with a range of 5% Lithia processed during the quarter, averaging 59% with the recovery, reducing a 5% lithium concentrate meeting all customer specifications. This confirms the plan is performing reliably and to expectations.

The current recovery is simply a reflection of the range of fleet types processed this quarter. The transition to cleaner underground ore is underway, and as that proportion increases through FY '26, recoveries were lift progressively. Our FY '26 recovery target remains unchanged with around 70% recovery expected by March 2026 as underground ore becomes the dominant feed.

At the same time, recovery improvement initiatives continue to advance. The tails regrind Vertimill has been commissioned and optimization work is ongoing across grind size, reagent dosing and water quality to support incremental recovery gains. In short, the plant is running to design recovery curve is following the planned trajectory and the improvement from here is baked into our guidance.

And with that, I'll hand over to Graeme.

Thank you, Ryan. Next slide, please. All right. Our results for the quarter were consistent with company expectations, reflecting the planned impacts of maintenance and OSP strategy foreshadowed in the previous quarter presentation. Revenue was $68 million, down 29% quarter-on-quarter as a result of lower shipping volumes over due to port congestion and backward-looking pricing mechanisms. Backward-looking pricing for shipments during this quarter resulted in pricing lowers of May and June impacting realized prices for the majority of the quarter. But a closing cash balance of $420 million, but we can look at in more detail on the following slide.

Unit operating costs increased 22% from the prior quarter to $1,093 per dry metric tonne sold due to the drawdown of OSP stockpiles. This increase in unit operating costs was anticipated in form part of our full year guidance. What you'll see going forward is that unit costs will trend lower as volumes ramp up and clean underground ore becomes the dominant part fee. All-in sustaining costs increased 10% from last quarter to $1,154 per tonne reflecting the higher unit operating costs. This was partly offset by lower sustaining capital spend. As with unit operating costs expect to see the trend lower through the year.

Next slide, please. Our tax position strengthened significantly, finished the quarter at $420 million with 21,000 tonnes of salable concentrate on hand. This excludes $20 million of the Zenith cashback guarantee, which we anticipate to receive in the coming quarters. Cash flow operating activities for the quarter was a negative $44 million and was mainly attributable to a $53 million reduction in cash receipts from customers compared to June's quarter. cash receipts were impacted by lower sales volumes and working capital movements, including an increase in the value of trade receivables and concentrates on hand.

Additionally, final pricing adjustments from the prior quarter sales of $8 million further reduced cash receipts. Capital expenditure of $44 million was primarily underground development and the completion of TSF construction. Given the completion of the TSF construction and the completion of open pit mining in the December quarter, you should expect to see capital expenditure reduce in the coming quarters.

Finally, on financing cash flows, inflows of $363 million represents the net proceeds of the August capital raise. The closing cash balance was also supported by the deferral of the commencement of principal and interest payments under the Ford facility, which has now been deferred for 12 months. Overall, we have a strong liquidity position and expect to see improved quarterly cash performance that will ramp up the underground and increased production volumes.

Next slide, please. right. So our debt profile remains low cost, long dated and highly flexible. This slide is an update of our debt position following the Ford amendment completed in August. The effect of the amendment has pushed the first repayment under this facility out to September 2026.

Looking at the maturity profile. Again, it's important to note that while the LG Energy Solution convertible notes are shown in the maturity schedule as a repayment of $414 million. cash repayment can only occur if the facility is not converted into equity before the maturity date of July 2029. Subsequent to the recent equity raise, the conversion price of the LG notes has been amended from $1.80 to $1.62 per share.

And in summary, our debt structure provides a very low cost of capital with no near-term maturities, and this allows us to continue to focus on delivering the ramp-up of the underground mine and deliver the full potential of Kathleen Valley. I'll now pass to Tony.

Thanks, Graeme. So if we move to the next slide, please. We've actually -- when we announced our forward debt restructuring and contract arrangements, we did make some mention around our volume profile going into the future. We've just simply graph this for the market now so that you can see it visually. So there's no new information here, but it just provides a little bit of extra clarity on the contract profile for tonnes. And we are delivering into some of these already. So that's really what this slide is designed to provide.

So if we move to the next one, please. Business optimization. Last year, we made $112 million worth of savings, either directly in recurring or some deferred capital. That pursuit becomes relentless. We need to continue with the business optimization because price is still where it is, and we can't lose sight of that fact. And this next exercise, this next phase is going to be a broad engagement and assessment of priorities across everything. So there will be team-led initiatives. There will be a challenge in everything we do, as I said in the slide, that we will challenge the status quo, and we will focus on our purchasing and contracts. So we will -- we've already said this, and we will continue to optimize our cost structure in the current environment.

So next one, please. So I'm now back on to Ryan for this last -- next slide.

Yes. Thanks, Tony. So this slide, which I think we've presented a couple of times now, recaps how FY '26 is unfolding quarter-by-quarter. In quarter 1, we deliberately executed planned maintenance activities and early technical improvements while implementing the OSP feed strategy to manage transitional ore during this ramp-up phase. That strategy delivered exactly as guided, lower production and recoveries were expected, and those outcomes were fully reflected in our prior guidance.

Moving into Q2 this quarter. The focus shifts to completing open bit mining and increasing the proportion of clean underground into the plant. Recoveries are already improving month-on-month and as underground volumes continue to ramp up, throughput and grade consistency will lift. We also expect operating costs to trend lower as we shut down the open pit operation and those costs fall away and we get productivities through increasing the scale of the underground operation.

By Q4, in the June quarter, we transitioned fully into steady-state operations. The process plant will be operated in design throughput. Recoveries will stabilize at or above 70% and costs were materially lower than in the first half. That's the point where the business begins to demonstrate sustained cash flow and margin that underpins our long-term investment case. So while Q1 represented the planned low point, every subsequent quarter and first year, higher underground production, stronger recoveries, lower costs and greater cash generation, all consistent with the plan we set out at the start of the year.

So next slide, please. So recap on our FY '26 guidance. FY '26 remains a transition with the open pit operations, as we've already mentioned, will conclude in December and the underground ramping up. In the first half, we continue to leverage the investment already made in the rod stockpiles processing the remaining OSP material, which we have always said would be temporarily impact recoveries and production and therefore, outline.

As we move into Q2, production and recovery performance are expected to improve as the proportion of clean ore in the mill feed increases and the influence of OSP material declines. This uplift will be driven by higher clean oil production from the open pit and the growing contribution from the underground. Sustaining capital remains on plan, focused on underground development, maintenance and equipment replacement to support the ramp-up. Importantly, there is no change to our recovery target of around 70% by Q3 FY '26, and we remain on track for 100% underground production by Q3 FY '26.

So in summary, the transition is unfolding exactly as we planned with Q2 marking the start of a steady state improvement across production and recoveries.

We now move to the next slide, please, and I'll ask Grant to lead us through that.

Thanks, Tony. I think it's important to highlight that there are 2 fundamental growth factors driving lithium demand. The first is EV sales and the second is factory energy stationary storage. I'll start with EV demand. As you can see here from the chart on the left, EV sales continue apace. Global sales grew 26% year-on-year from January September. Importantly, September results of the first month we've seen more than 2 million EV sales in a single month. This translated so far this year into over 3 million extra EVs sold versus 2024. And as you can see on the chart on the right-hand side, expectations are for that to continue with a very solid CAGR growth rate of 14% according to Bloomberg New Energy Finance.

I think importantly, it's also very interesting to see the growth of the rest of the world. that continues to grow at very, very aggressive rates off a small base. But we are probably about a quarter away from Rest of World sales equally in total North American sales. And one of the points highlighted to me by Homburg just yesterday was that EV sales in China now exceed total auto sales in North America.

If we go on to the next slide. battery energy storage systems have really come from nowhere and been a strong driver of demand in the last year plus. I think for the last 2 or 3 years, they have exceeded expectations from forecasters. What this slide is demonstrating is that not only is it accounting for 1 unit and every 4 units of growth over the next 5 years. There are also a wide range of views on how fast this market is going. You can see in the chart on the right there from SC Insights that there's a large spread between the investment bank on the left insights in the middle and CATL's prospectus on the right-hand side.

I think it's important to note the spread between the high and the low point is over 765 tonnes of lithium carbon equivalent, and that is around half of the total size of volatile market today. Large-scale grid investments are continuing to accelerate, and these are driven by the rise of data centers to support the shift towards as well as making sure that grids remain reliable with a larger share of renewable power penetration.

And with that, I'll hand back to Tony.

Thank you, Grant. So we don't go to our final slide, please. We end where we started. So we continue to deliver on our strategy. I won't repeat things but effectively, we're executing the plan. We're delivering on the underground ramp up. The compete well comfortable conclusion at the end of the year as we planned. And we've strengthened our balance sheet both with the equity raise in August, but also restructuring the Ford debt facility to give us that further strengthening of that balance sheet in the next 12 months as we see the market recovery.

So with that, I'll open it up for Q&A.

[Operator Instructions] Our first question comes from Hugo Nicolaci from Goldman Sachs.

First one for me just on realized pricing. You called out the impact of the pricing lag through the contract in the quarter impacting that realized price. Now that you've recut some of those offtake agreements after September 30, does that mean that we shouldn't expect to catch up on the pricing balance we saw through the September quarter now if you just realize closer to spot spodumene prices?

Go ahead, Grant.

Thanks, Hugo. I think anytime you've got a large delta from as we saw in May and June, which was the lowest of the year in the 600s versus where we're trading now in the 900s. You have this impact, and it's just a question of when that impact flows through your revenue line. With Q lagging, it just means it's a little bit delayed. So if you go back to last quarter, we actually had the benefit of that where we outperformed index. So we had a 105% realization compared to Fastmarkets spodumene index in the last quarter. Unfortunately, you have to pay the piper and that came through the sales this quarter.

So look, I don't think you're going to necessarily completely avoid any of those impacts because those kind of QP impacts are always there in your portfolio of contracts. And I don't think you should necessarily think that we did a onetime switch where we moved Q lag and we skip out the impact of that in the future. So that's not the case.

And then maybe just on the cost breakdown. Can you just give a bit more color in terms of maybe on a cash basis, the magnitude of spend, let's say, the open pit underground in the quarter?

Go ahead, Graeme.

So during the quarter, they were roughly even Hugo's, so between $10 million and $15 million per month.

Our next question is from Adam Baker from Macquarie.

Port congestion was called out as an issue, which contributed to the delayed shipment during the quarter. Is this something that you're still seeing? And could this resurface during the December quarter?

Adam, the Geraldton Port has an issue they call surge. And as a result, during the quarter, we had a number of surge events which then built up the number of ships on lean. So we have to weigh our turn in the queue for those ships to come in and be loaded. Now the government is putting money in to resolve this issue in the Jordan port. But I think we potentially will see the back of it in the next quarter, but it's really what nature puts in.

Yes. Adam, just for further context, it's Grant here. It's a bit seasonal. So that last quarter tends to be the seasonal high spot where you see more swell events in surge events in Geraldton. And it did perform quite a lot of queuing and we weren't the only ones impacted. In fact, everyone who ships out of the part that we ship all was impacted. And I'd say that going forward, we shouldn't expect that. But there's always quarter-end chase that's on where everyone is trying to get shipment away before the quarter end, and that would continue. So this one was particularly bad just because of those surge events.

Okay. And just secondly, spodumene concentrate grades 5% for the sales in the September quarter. Just wondering is this a proactive decision that was taken by the team? Or was this just a flow-through as a result of the higher propane Gabbro going through the mill? And I'm just wondering what the time line would be to get that concentrate back to 5.2%.

Yes. I think your summary is correct, Adam. It is the latter, which is it's a result of the high gabbro percentage, which we showed in the graph. So we expect that to unwind in the next 2, 3 quarters once we get into 100% underground mill feed -- underground ore for the mill.

The next question is from Levi Spry from UBS.

Yes. So maybe just following up on that. So I mean, this quarter, could it be a bit lower than 5%? And just confirming your guidance is at 5.2% in terms of lithium units?

Yes. So firstly, the latter, our guidance is confirmed at 5.2%. As I said, once we get into more the dominant seed being underground we will see that improve. And sorry, your first part of your question?

Could it go lower in the short term, I guess? What that offset the basis previously?

Yes. No, we don't anticipate it going lower in the foreseeable future. Our contracts specify a certain amount. So we're conforming to our contracts.

So just a little bit more color, sorry. The chart that we included on the process plant, we were endeavoring to then provide a little bit of color on gabbro. We will to try and maximize recovery and still keep within customer specs is great will naturally kind of trend a little bit lower. And what you'll also see on that chart is with the lower gabbro content, grade naturally drips up. So as we stated as the -- both the amount of OSP material, but also the amount of open pit starts to fall away and we get the clear higher-grade material out of the underground naturally gray order to, which is why we are maintaining guidance on both recovery and grade through the course of FY '26 and beyond.

Yes, and it's a blending exercise so there is an exclusion where it does drop. We will blend it with higher-grade material when we do have those better days. So that's -- it's all about managing it within the contractor specifications.

Yes. Okay. And just on the price piece, just as we're seeing spodumene prices improve here, can you just help us with how we're modeling that now? So I think you -- one of the previous questions was pointing to it. But just in terms of you repricing your resetting your contracts, how do we think about now the read-through on this grade concentrate to the spot price effectively?

Sure, it's Grant here. Look, the pricing reference is all disclosed, right? So now we've got 1 contract on Sports mean index. On contract continues to be on carbonate at least until the end of '26 when that deal expires. And then the other contract is on hydroxide.

The next question is from Glyn Lawcock from Barrenjoey.

Just a couple of quick ones. Firstly, you talked about the cost program under Phase II. Do you have any thoughts on the quantum that could yield or is it too early?

It is a bit too early. We're just -- we've kicked it off in the last quarter. We're still trying to assemble all the initiatives. So I can't give you a finger just now.

Okay. No worries. Any orders of magnitude you think similar like half of last year?

It's still too early, Glyn. It will come out.

Fair enough. Okay. And then maybe just -- I know it's very early days in the markets where it is, but it may be starting to show some signs of turn on the back of EFS, et cetera. But the 4 million tonne case, the expanded option, it says in the report you're still doing a little bit of studies towards it. Maybe just an update on where you are on that timing costs associated if you do -- if the market turns enough, you to exercise that option?

Well, the way it works and the way we're thinking about it is as we get more real-time operational understanding of our plant, we want to make sure that the expansion option is up to date with those learnings. So there's work that's always ongoing as to how do we -- how does that process flow sheet look like as we get more information from the existing operation. So that's one aspect of it. And the second one is, well, I think until we see a sustained improvement in the market, the Board will be live to this option, but it won't be a commitment yet.

We next have a text question from a private investor who asks, what do Canmax look to benefit from the recent capital raise investment?

I think we've already made some very good money given that everyone who supported us on the raise at $0.73 is now looking at a share price of over $1. So [ Mr. P ], he came to site and was impressed by the operations that we do, and he wanted to invest all of its financial investment.

Another text question from a private investor who asks, is there any clarity regarding the large tenants recently peaked near Sandstone?

It's an ongoing process. As we look at our long term, as part of that previous question around future expansion, we want to secure access to good water sources -- so we continually look more broadly as to where we can potentially look for the future long-term expansion requirements for water and other infrastructure. So that's part of that process.

Another text question. In your lithium demand forecast chart, which of the best BESS growth scenarios have you assumed?

Thanks for the question. Look, with any company, I'm always wary of single point expectations or forecasts we look at a range of scenarios. You can imagine that in our forward planning, we're thinking about what would the world look like at the low end and what would the world look like at the top end, and we try and make sure that the decisions we make are robust against either scenario.

Another question from a private investor. Did you have an update on downstream feasibility studies with LG Energy Solution and Sumitomo?

Yes. We continue to press work with both Sumitomo and LG Energy Solutions on the potential to pull downstream. I think it's no secret that some of our peers are having challenges in that space. The capital involved is significant. And in the current market environment, margins are squeezed. So for us, we continue to do the work to be option ready, but it's not something that we plan to make a decision on in the near term.

Thank you. That's all the questions we have today. Please reach out to the Liontown team if you have any follow-up questions. We thank you all for your time, and have a great day. You may now log out.

Welcome to the Liontown Resources FY '25 Results call. Following the formal presentation, there will be a Q&A session for investors, analysts and media. 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 screen under asking audio questions.

To view documents relevant to today's meeting, including more detailed instructions on how to use the platform, select the Documents icon. A list of all available documents will appear. When selected, the document will open within the Lumi 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 Mr. Tony Ottaviano, Managing Director and CEO of Liontown Resources.

Thank you, Michelle, and welcome, everybody, to our full year financial results for financial year '25. With me today is our Chief Operating Officer, Ryan Hair. Welcome, Ryan. This is his first results presentation for Liontown. Secondly, there's our Chief Commercial Officer, Grant Donald; and also our Interim CFO, Graeme Pettit. '25 has been a milestone year for Liontown. Our first year of production at Kathleen Valley. Today, I'll take you through the performance for the year, our financial results, our sustainability achievements and importantly, how we are positioned for FY '27 -- '26 and beyond.

So next slide, please, Michelle. It's the usual important information. Okay. So just a quick summary of where we stand at the moment. FY '25 has been a year of delivery. We've successfully constructed, commissioned and transitioned Kathleen Valley into production. We've generated nearly $300 million in revenue in our first year. Despite the tough market and therefore, the softer lithium prices, the impacts of a ramp-up, we still produced a positive underlying EBITDA of $55 million and held an operating cash flow at breakeven. This is a strong sign of the scale and quality of this asset. We've also strengthened the balance sheet with an equity raise completed after year-end, ensuring that we can see ourselves through this current price cycle and transition the underground in FY '26.

Our sustainability foundations remain a key differentiator, a strong safety performance, 81% renewable power penetration, deeper partnerships with our Traditional Owners in the Tjiwarl. So we see ourselves looking forward in FY '26 and then beyond with a lower cost base and a platform for growth.

Finally, with an asset such as Kathleen Valley, it presents a long-term value proposition with scale, quality and sustainability to endure the various price upticks as they go through the cycles. We continue to maintain our optionality should the cycles change to expand the asset.

We can go to the next slide, please, Michelle. So FY '25, it's been a milestone year for us with strong financial outcomes. Firstly, our concentrate production, nearly 300,000 tonnes there of concentrate sales of 283,000 (sic) [ 283,443 ] tonnes, strong plant availability in a ramp-up year of 89%. And again, lithium recovery of 58%. But if you look at it as a tale of two halves, the second half, we averaged 60%.

As I mentioned in my opening piece, our revenue nearly hit $300 million in this ramp-up year. And we finished the year with a strong cash balance of $156 million, which has been further strengthened by the capital raise and about 11,000 tonnes of salable concentrate on hand. Finally, our full -- second half unit operating cost of $800 (sic) [ $802 ] a tonne and our underlying EBITDA of $55 million.

So if we go to the next slide, please, Michelle. I'll now turn the discussion over to our Interim CFO, Graeme Pettit, to take you through the financials.

Thank you, Tony, and good morning to everybody on the call. Starting with revenue and despite a volatile price environment with spodumene prices down 24% in the June quarter, Liontown delivered the $298 million in revenue in our foundational year. The average realized price for the year was USD 673 per DMT, which translated to AUD 10.50 in dollar terms. As Tony mentioned, underlying EBITDA of $55 million demonstrates a positive operating leverage even in weak prices. Our statutory NLAT of $193 million was largely driven by noncash items, including the $81 million NRV write-down of OSP stockpiles and $159 million of depreciation, which includes open pit mine costs being depreciated over a short mine life.

Operating cash flow was breakeven in our first year, which was a great achievement in the context of ramp-up and lower prices. At year-end, we held $156 million in cash, which has since been strengthened post year-end following our $372 million equity placement in August.

Next slide, please. Turning now to the reconciliation of our earnings. We reported a statutory net loss of $193 million, as mentioned. As you can see on this bridge, the majority of that loss reflects noncash and ramp-up related items rather than the underlying operating performance of the business. Touching on some key items. Firstly, NRV. As flagged in the June quarter, where we provided a range of $75 million to $85 million, the write-down came in at $81 million. As a reminder, this is a noncash accounting adjustment and mainly related to OSP ore that is associated with the open pit mine, which is scheduled to end in December this year. Depreciation of $159 million, which was the depreciation of open pit mine assets over the short open pit life as well as half a year of depreciation of the processing plant and related assets. The depreciation of underground-related assets is expected to commence during the third quarter of this year. On that basis, for FY '26, we'd expect depreciation to remain at similar levels before moderating in FY '27 and beyond.

Just a quick point to note on income tax. We expect to commence the recognition of deferred taxes during FY '26 with the commencement likely linked to the declaration of commercial production at the underground mine. Underlying EBITDA of $55 million reconciles to $1 million positive cash flow from operating activities and the key adjustments are related to working capital movements.

Next slide, please. Turning now to cash flow. In our first year of operations, operating cash flow was breakeven, which is a solid result given the 2 headwinds we faced of lower lithium prices through the year and naturally higher costs associated with the ramp-up of an operation. On financing, we received strong support from our partners with $250 million convertible notes from LG Energy Solution and $15 million from the WA government for lithium industry support program. These inflows supported liquidity through our ramp-up.

On the investment side, we spent $331 million of CapEx, the majority of which related to growth and commissioning at Kathleen Valley, completing the processing plant and advancing underground mine development. All up, we closed the year with a cash balance of $156 million at 30 June. And importantly, post year-end, that position has been fortified with $372 million gross proceeds from the August capital raise, giving a pro forma cash balance of $528 million.

Next slide, please. The chart you see here demonstrates the changing composition and quantum of Liontown's CapEx spend. For FY '26, the CapEx spend reflects the continued investment in the underground mine, establishing life of mine infrastructure. We expect total CapEx to remain at similar levels for FY '27 before declining in future years.

Next slide, please for the project capital is now complete. It's now complete? Yes, it's complete. Finally, turning to the balance sheet. At 30 June, cash increased to $156 million, up from $123 million in the prior year. Since year-end, that position has been strengthened, as mentioned before. Property, plant and equipment rose by $142 million, reflecting the completion and commissioning of the Kathleen Valley processing plant and the continued investment in the underground mine. Payables decreased to $88 million, down $40 million year-on-year, consistent with the completion of project construction.

Borrowings increased to $831 million, which included the fully drawn forward facility and the USD 250 million LG convertible notes. The convertible notes are classified as a current liability because LG may elect to convert the debt into equity in the company at their option. The only time a cash payment can occur is at the maturity of the notes in July 2029.

Next slide, please. I'll quickly step through our debt position. So we've deliberately structured our funding to be low-cost, covenant-light and flexible with strong support from our offtake partners. On the left, you can see gross debt position over the past 3 years with the increase in FY '25 driven by the USD 250 LG convertible notes. On the right, the maturity profile shows these facilities are spread out. The chart highlights the maturity timing of the LG convertible notes. In the event that the notes are not converted into equity, Liontown would need to repay or refinance the notes in July 2029. The gearing ratio at 30 June being total debt over total debt plus equity was 59%. The gearing ratio reduces to 47% on a pro forma basis if we consider the impact of the August capital raising.

I'll now hand back over to Tony.

So if we go to the next slide, please, Michelle. I think this is a reinstatement of our prior release around our capital allocation. As a business, we're very early in our maturity, but we're very strong in ensuring that we set the right foundations for how we manage our capital. And clearly, our most recent capital raise will be something we consider in the context of our capital allocation framework. So we're very alive with the requirements and making sure that the capital that we obtain is spent wisely and to the best value for our shareholders.

So if we go to the next one, please. I'll now hand over to Ryan Hair.

So our updated resources and reserve statements show the strength of the Kathleen Valley ore body. Despite the depletion and use of more current assumptions, reserves have increased slightly while resources remain broadly stable. Notably, the first 5 years of the ore reserve align with the updated 5-year mine plan released in November 2024. Also worth noting is that the mining scheduled in FY '26 is predominantly in measured resource and proven ore reserve.

So if we go to the next slide, please, Michelle. So talking around sustainability. First and foremost, safety remains our top priority. We closed FY '25 with a TRIFR of 7.39, which is an improvement on last year, but still an area we know we need to do more work on. Our focus is on continuing to strengthen our safety systems and reinforcing our safety culture with the goal of driving this rate down further. On sustainability, we've embedded ESG into the heart of our operations.

During the year, we advanced our long-term water stewardship strategy, commenced electrification pilots across our fleet and maintained strict environmental compliance. Importantly, with 81% renewable energy penetration, we are setting a benchmark for decarbonized mining. This achievement was recognized externally with Liontown awarded Excellence in Renewable Energy and Mining at the 2025 Decarbonized Mine Awards.

So when we talk about highlights, it's not just about tonnes and dollars. It's also about delivering safe, sustainable operations that underpin long-term value for all stakeholders.

Thanks, Michelle. Next slide. So just to recap previous guidance, FY '26 is a transition year. The open pit finishes up in December, and we moved to 100% underground mining operation. The key thing I want to reiterate from the FY '26 guidance is our strategy in this current quarter. During the quarter, we have executed scheduled shutdowns at both the dry and wet plants, which facilitated several process improvement projects. At the same time, we continue to process directly from lower-grade OSP stockpiles in addition to the open pit and underground ore. That means the current September quarter is planned to have lower production, lower recoveries and higher cash outflow, all of which has been captured in our FY '26 guidance.

If we go to the next slide. This chart tells the same story visually. In the first half, the blend is predominantly lower-grade OSP and open pit ore. By the end of Q2, open pit mining is complete. From Q3 onwards, the feed mix shifts decisively. That's when our larger stopes start coming online with stope sizes increasing from roughly 10,000 to 15,000 tonnes today to over 40,000 tonnes in the second half. Ongoing mine development and access to the thicker ore zones underpins the run rate lift from 1 million tonnes per annum to 1.5 million by the June quarter.

Notably, as we transition to predominantly underground ore, we continue to target 70% lithia recovery in the plant. So half 1 is about managing through the stockpiles, scheduled shutdowns and completing the open pit. Half 2 is about scaling the underground and realizing the ongoing benefits of clean underground feed, higher grade, higher recovery and a clear runway to lower cost production. In FY '27, we expect to be running at 2.8 million tonnes per annum of underground ore, which shows the scale and productivity that's built into the design. So the message here is simple. FY '26 is a bridge year. We're absorbing the transition in the first half, delivering the step-up in the second half and setting the foundation for lower term -- so long-term lower cost production from FY'27.

Thank you, Ryan. We'll now move over to the market outlook and Grant Donald will run us through that.

Thanks, Tony. I think fundamentally, we come back to the demand of lithium being a very strong environment. We've seen continued growth on the EV side. You see -- compared to last year, we've seen an increase of about 2.7 million EVs sold. That strong growth is coming across not just China, but we're starting to see very good growth coming out of Europe and the rest of the world, which is growing at a rate which is catching North America in relevance. And look, I think this sets the scene for continued growth.

Importantly, the second factor that has been a very robust driver of growth outside of the EV space has been battery energy storage. As we see more grid scale systems coming in for renewables, such as Kathleen Valley's own renewable side, there is significant demand coming from batteries to effectively move some of that renewable electricity into periods that can be more fully utilized. That is going to be an increasingly significant driver of lithium demand growth. And what the chart in the middle shows here that out of every 4 units of growth from here, 1 in every 4 will be for stationary storage, which is material. The energy storage systems grew 54% so far year-on-year this year.

If we move to the next slide. Thanks. This is really trying to emphasize that it's been a bit of a roller coaster this year on pricing for lithium. And I would argue that this has been possible because the market is actually quite finely balanced. If you look at lithium inventories, particularly within carbonate, which is what people track in a number of days, we've really traded in a range-bound area for the entirety of this year between 40 and 45 days of inventories on hand.

As the market grows, clearly, those inventories on a number of days declines. And we've actually just started to see again, in line with past seasonal -- seasonality, we've seen those inventories drop below that range bound area and below 40 days. That demonstrates, I think, to me that lithium is quite finely balanced, and that means that it's very open to sentiment and speculative activity changing the pricing quite dramatically, and we've seen that in -- particularly in the last few months as various rumors and headlines have heavily influenced pricing.

So as we sit here today and look forward, I think we're relatively encouraged by the data that we see. We see strong demand both from EVs and from stationary storage. We see declining inventories in China that is clearly a good setup for stronger pricing as we look ahead. Tony?

Thank you, Grant. So if we go to our final slide, Michelle, just to wrap things up. Again, FY '25 to summarize, has been about delivering today, but unlocking the full potential of Kathleen Valley into the future. Again, '25 was about delivery, successfully constructing, commissioning and transitioning Kathleen Valley into production. We had strong underlying EBITDA of $55 million. We've had a balance sheet, which we've improved as a result of the capital raise that we got ourselves in a very strong position to see through this cycle and build on this platform.

And then finally, we're about long-term value. We've got an asset here that is scalable, it's high quality. We've built a foundation from which we can build. We've maintained optionality around our expansion options. So should the market change, we're in a position that we can capitalize on that improvement. And finally, we look as -- in accordance with our long-term strategy, we will look at opportunities to grow the business beyond just Kathleen Valley.

So that brings our presentation to an end. I thank you, everyone, for listening. And now I'll open up for questions.

Thank you, Tony.

And that's a great photo that shows one of our stopes. Thank you, Michelle.

[Operator Instructions] Our first question is a text question from James [ Ballantine ]. Could you please expand further on downstream plans and BHP rumors?

Okay. Let's deal with the downstream first. As the listeners may be aware, we have very -- 2 strong partnerships with both Sumitomo and LG Energy Solutions around looking at our downstream strategy. At the moment, we are progressing those partnerships by looking at various options around where we could potentially locate a refinery, but more importantly the economics of refining. And we're closely monitoring that given the current market. In terms of rumors, I'd rather not speculate on rumors. So I'll leave it at that.

Our next question is a text question from [ Conrad Porter ], who asks, how does LTR see sodium battery technology growth impacting on demand?

Thank you. Look, sodium ion batteries, we do not believe will be a significant player in the mobility thematic, primarily on 3 fronts. Firstly, the economics suggest that at the moment, you have lithium that is very, very competitive. Secondly, we do not believe they've got the performance that's required. They do have an advantage in colder climates. And they might have an advantage in smaller mobility, things like scooters and maybe motorcycles. But in the big end, I don't think they'll play a part.

And the final piece is, if you believe in the circular economy, they don't recycle well. So on that basis, it's only CATL that actually are pushing sodium ion batteries. And when I look at CATL's future forecast, around the battery mix that they are planning to make, they don't feature prominently in their mix. Next question, Michelle.

Our next question is from Glyn Lawcock from Barrenjoey.

We're here, Glyn. We're here. You're uncharacteristically sheepish. So...

Yes, no I'm here, Tony. Sorry, it's been -- I'm having technical issues on my end. So hopefully, you can hear me now?

Yes, loud and clear.

Yes. Sorry about that. I had to dial in, so apologies. So Tony, I had a couple of quick questions, if I could. Just a very quick one. D&A guide for FY '26 because there's a lot of moving parts. And as you say, underground will probably become commercial towards the end of the calendar year. Is there anything you can do to help us with D&A for '26.

Yes, I'll hand over to Graeme.

So Glyn, I think I did mention the expectation is that FY '26 should be broadly in line with FY '25 from a depreciation perspective with the underground and open pit basically exchanging places through the year from a depreciation perspective.

And does it step up then in '27? Or should that then be a reasonable guide for midterm?

We expect to moderate thereafter. So '25 and '26 will be higher than the long-term rate.

Which is driven principally -- sorry Graeme here Glyn. Principally by the fact that open pit has a short life and had to be depreciated quickly.

Yes. Okay. And then you've given guidance for '26 in terms of sustaining CapEx of, I think, it's 45% to 55%. When the underground is fully developed and running towards the end of this year, so what do we think underground mine development is going to run at to keep going? And I assume as you get deeper and the ore body gets wider, that might come down over time. But any sense of what underground mine development is going to run at Graeme.

So again, I think I mentioned that sort of '26 and '27 has the establishment of quite a bit of life of mine infrastructure for the underground mine. So we expect '26, '27 to be slightly higher and then a run rate from '28 onwards, somewhere in the order of $50 million to $70 million.

Thank you for no further questions.

Okay. Well, thank you, Michelle, for moderating, and thank you, listeners, and for the questions. Bye-bye.

Thank you all. That's all the questions we have time for today. Please reach out to the Liontown team if you have any follow-up questions. We thank you all for your time, and have a great day. You may now log out.