BCI Minerals Limited (BCI) Earnings Call Transcript & Summary

Good morning, everyone, and welcome. I'm David Boshoff, and with me is our CFO, Steve Fewster. We're pleased to be joining you today for this June 2026 quarterly update. Before we get underway, I'd like to mention that today's presentation should be read in conjunction with our June quarterly report. This is available on our website. As we move through today's session, please feel free to add your questions to the live Q&A tab on the right-hand side of your screen, and we'll respond to these questions at the end of the session. Our values define us. They guide every decision we make. This quarter, our "how we do what we say" value was in full display. We said we would transition Mardie from filling ponds to operating them, and we have. Salt production has commenced in our crystallizers, and we closed the quarter with salt inventory in the ground. That results belong to our team, our contractors. And as the sun drives the evaporation process, their preparation, coordination, and commitment have made the system perform. Mardie is now firmly established as a working salt operation. And that values-driven approach is exactly what underpins the business we're building at Mardie Mardie is already Australia's largest solar salt operation and the third largest globally. And here's what makes this moment so significant. After years of construction and now literally months away from completion, the heavy lifting is done. The CapEx is largely spent and the risk to schedule and cost has reduced dramatically. What you're looking at is no longer a construction story, it's an emerging production story. Our focus is clear: deliver high-quality salt and associated minerals to our customers. With salt now crystallizing, we focus on achieving a safe and efficient ramp-up. We believe also that salt bitterns represent a valuable opportunity to support additional product streams over time. And that's why our sulphate of potash trial is an important step towards proving this as our next major revenue stream. With its scale, coastal location and integrated port infrastructure, Mardie is exceptionally well positioned to meet expected rising demand across Asia. The port also provides us connectivity to our customers, along with additional upside through its spare capacity, creating potential for additional revenue streams and strategic partnerships over time. Now turning our minds to health and safety. Health and safety remains our first priority, and it underpins everything we do. Safety performance remained strong through this quarter. We completed more than 280 critical control verifications targeted at the risks that are critical, mobile plant and equipment, vehicles and traffic management and fitness for work. Visible leadership in the field remains central to our approach. Our leaders completed more than 480 safety interactions across site during the quarter, and we brought in external coaching through our leadership in the field program. This helped to sharpen our ability to hold effective safety conversations at the work front. At the quarter end, our 12-month rolling total recordable injury frequency rate was at 4.4. Now to the operations at Mardie, where the June quarter delivered a substantial progress across the production system. And let me just start with the headlines. We completed the first fill of Train G. We also commenced filling of Train F. And with the crystallizer brine densities continuing to build, salt crystallization has now commenced. We closed the quarter with an inventory of 49,000 tonnes of salt in our crystallizers. And as of this morning, I had a look at the production report, we are just over 82,000 tonnes in those crystallizers. On a recent site visit, I held the crystallized Mardie salt in my hands. I have to say, after years of planning, construction and pond filling, it's a great feeling to hold this product in my hand. It is real, it's here, and it's exactly what we set out to do. Behind these milestones sits an important evolution. Our operations team has now transitioned from the initial filling phase into a pond management and density building phase. Pond levels across the network are averaging at approximately 98% of design operating height, so nearly at the final height. So our focus has now shifted to maximizing -- from maximizing volume transfer to optimizing brine management, density progression and overall system performance. During this quarter, we also set up a civil maintenance team. This team is focused on integrity, pond wall maintenance, drainage and proactive maintenance across the pond network. We've also built an operations team with exceptional people who chose to be part of Australia's largest salt operation. Collectively, they bring more than 100 years of experience in the salt industry, and they apply this expertise to how we operate Mardie every single day. I've included this diagram to explain a little bit more what we mean by pavement and inventory. The path to first salt is now driven by nature. It's driven by the evaporation process that underpins the production of high-quality industrial salt. Our team is actively managing pond depth, surface areas in order to maximize evaporation and accelerate density growth. And in this slide, you can see exactly what we're building towards. The slide here on the left shows you the layers of -- for the crystallizers and it shows you the part we're able to harvest. So I'll start from the bottom. Once the crystallizer is lined, you can see the black line in that picture, a salt pavement must form of approximately 200 millimeters, which equates to approximately 160,000 tonnes per crystallizer cell. That's the second layer you can see there. That's the hard floor. And on top of that hard floor, it allows us to grow salt, which is our salt inventory, harvestable inventory, and that is then allowing for safe harvesting. That harvestable inventory, that's what we collect and ship to our customers. As we've said previously, weather conditions during the early ramp-up phase will influence the timing of first harvest as well as First Salt on Ship. Under peak evaporating conditions, salt is produced faster, as you can see on the left of that graph. And then while in cooler wetter conditions, it moves to the right. It takes a longer time. We expect to be operationally ready for First Salt on Ship in the first quarter of calendar '27, but our first shipment date remains weather dependent. So just to be clear, the operations will be ready to produce, wash, ship salt by first quarter '27 -- calendar '27, but that first production export date remains weather dependent. Our focus remains on a safe, sustainable ramp-up as we build towards Mardie's designed capacity of approximately 5.3 million tonnes per annum of high-quality salt. Now I'll cover construction. I am pleased to share that the construction required to reach First Salt on Ship is almost complete with the overall progress reaching 85% completion at the end of the quarter. Cumulative construction expenditure now totals $1.185 billion. Every week that passes, construction risk of the project reduces further. As we disclosed last quarter, we are aligning the crystallizer trains to achieve nameplate capacity of 5.35 million tonnes per annum. In total, we will line 7 trains, and each train is made up of 4 cells, so 28 cells in all. At the end of June, 6 of those cells were complete and holding brine. This include Train G, the first full train that has now been commissioned. Since the end of the quarter, a further 2 cells have been lined and the program remains on schedule for completion in March 2027. This is in step with our ramp-up and in line with the operational requirements. And here's why each cell matters. Every one of them will hold approximately 80,000 tonnes of salt inventory on top of the permanent pavement prior to harvesting. Each completed cell is a future production banked. Now to the salt wash plant. Concrete works has passed 90% and structural steel erection has begun. Major equipment continues to arrive, screw classifiers, dewatering screens, centrifuges with the screw classifiers already lifted in position during June. There are some great photos at the back end of the deck, if you're interested. By the end of June, construction of the marine package has reached 95%. The dredging program has commenced, and we shared that with the last quarter, with more than 100,000 cubic meters already excavated by the end of June. This is over 30% of the design volume. Our completion remains on track for early September, and this is well ahead of the environmental blackout period. Piling has also commenced during the quarter. 7 of the 10 navigational aids are already completed by the end of June and the berthing piling installation at the jetty head has begun in early July. I'll now hand over to Steve to talk through the financials.

Yes. Thanks, David. As David said before, total construction costs now sit at over $1.185 billion, having spent $75 million this quarter. The largest packages of work remaining include the dredging, the balance of crystallizer lining and the salt wash plant. The progress being made on these 3 construction areas support our confidence of remaining on budget. And I was up at site the last couple of weeks, and I've had customers up there, and our customers are extremely excited about what they're seeing in terms of the development. As David said, there are some really great photos at the back of the presentation. So I really do encourage everyone to have a look at those. Now turning to funding. During the quarter, we drew $90 million from our syndicated debt facility. That takes us to 11 drawdowns now, totaling $586.6 million at the end of June. The drawdown process operates smoothly. And at quarter end, BCI had available liquidity totaling $423 million. With pre-revenue operating expenditure required of $258 million, BCI has now invested almost $1.48 billion in the Mardie Salt operation. At the end of June, the cost to complete is estimated to be $258 million against available funding of $423 million. As a result, we've got -- at the end of June, we had available liquidity of $165 million to fund our working capital. Subsequent to 30th of June, BCI received the final deferred payment of $12.5 million from the sale of Iron Valley. So that, in effect, gives us increase -- that increases our liquidity to $177 million, placing us in a very strong financial position. In terms of the market, salt prices have been broadly unchanged since the previous quarter with demand outlook remaining positive. Our view is underpinned by numerous meetings with current offtake and potential customers undertaken during the quarter. So during the quarter, myself and our Head of Sales spent quite a bit of time in Asia, including a visit to a chlor alkali plant that's being constructed in Indonesia. And we also had several meetings with other companies that are looking to construct chlor alkali plants in the region. Now these plants are scheduled to come online as Mardie ramps up. Together, these new plants are expected to generate surplus demand for industrial-grade solar salt of approximately 20 million tonnes per annum. And to put that into perspective, that's nearly 4x Mardie's designed capacity. Combined with the long-run growth rates, the demand for salt in the Asian market is expected to increase by 37 million tonnes per annum over the next decade. This is far greater than the forecast supply growth of 10 million tonnes per annum. While we don't predict the salt price, we all know the usual relationship between supply shortfalls and price. And the demand story is being driven by the critical minerals needed for battery storage technology, semiconductor manufacturing and critical mineral processing, water treatment and cooling and other industrial materials. Chlor alkali producers make the essential chemicals needed to process critical minerals destined for these products. So the build-out of AI data centers, battery manufacturing, renewable energy and electrification are all expected to drive indirect demand for salt. As we have forecast previously, the Indian market is going through a transition. There are large new chlor alkali plants under construction, which are expected to be commissioned over the next 12 months. The feedstock for those plants will most likely come from Indian domestic supply, which means that export volumes will reduce over the coming years. And we're already starting to see a shift with exports pulling back -- Indian exports pulling back from their peak in December -- in the December '24 quarter. Now I'd like to discuss a bit more around the Mardie Port. This is a strategically valuable asset for BCI and the Pilbara region. This is a multiuser port designed to export around 20 million tonnes per annum of bulk commodities such as salt, SOP and potentially iron ore. At nameplate capacity, Mardie salt-only operation needs around 5.5 million tonnes, leaving approximately 14.5 million tonnes of surplus capacity. This presents a real opportunity to support resource companies in the West Pilbara who need a pathway to market to be able to get their products out to their customers, and they're able to utilize our port infrastructure. To enable the opening of the Mardie Port to other resource companies, BCI has commenced discussions with regulators on the potential export of iron ore. This quarter also brought a milestone with a real sense of occasion. Construction has officially commenced of the Mardie Spirit. Now this is a 16,000 tonne self-unloading transhipment vessel that is purposely built for the Mardie operation. Steel was cut at the Chengxi Shipyard in China, with David and our Chairman, Brian O'Donnell, attending that ceremony. And that will be delivered by CSL. I'll now hand back to David to talk about SOP.

Thank you, Steve. Sulphate of potash is a key byproduct of our salt operation and an important future revenue stream for BCI. During the quarter, the KTMS trial crystallizers continued to operate under steady-state conditions. Operations did feel the residual impacts of 2 tropical cyclones in the March quarter, together with some heavy rainfall during June. But despite these weather impacts, KTMS production remains on track to deliver tonnages required for the proposed SOP pilot plant trials. During the quarter, we have engaged 2 SOP industry specialists to undertake the preliminary engineering design and the Class 4 capital cost estimate for the pilot plant. Submissions were received and evaluated, and I'm pleased to share with you today that we have confirmed the SOP pilot plant FEED study to be awarded to -- has been awarded to Bluestar Lehigh Engineering Institute in China. While our focus remains on safely ramping up operations and completing construction, sustainability remains an important priority. And I want to share a few highlights from the last quarter. On the environment, all key monitoring programs were delivered in collaboration with specialist consultants and our traditional owners. These programs covered Mangroves, Samphire, Algal Mats surveys, marine water quality surveys and surface water flow studies. During the quarter, BCI and WAC jointly developed a full-time Ranger role at Mardie. It's designed as an accessible entry-level position supporting local employment and participation in land management. The shortlisting for this role is complete and interviews have begun in the September quarter. As a sponsor of the Karratha Kangaroos Junior Rugby League Club, our volunteers joined by myself, Mhairi Cameron and the members of the Board spent an afternoon at the BCI sponsor round, and you can see some of the photos on the screen. We spent that afternoon with players, families and volunteers in Karratha. We also presented at the -- on Mardie at the Pilbara Summit. This was in late June. And this event drew more than 500 participants across the region. And we also -- our team volunteered at the Karratha Senior High School to share in their Positive Behaviours program. This is very much aligned to our BCI values and very passionate support from us. Now as we close this quarter, we do so by consistently applying our values. And particularly this quarter, we shared examples of the doing what we said we do value in action. This quarter, salt production commenced. The balance of the construction is in its final stages, and the project is still within budget and is fully funded. As I said earlier, that holding the first piece of salt in my hand at Mardie was a fantastic feeling. Now it will be even better when we get this product on ship, and I know what this represents for our shareholders. Firstly, the world needs salt. It's used across a broad range of industries, as Steve shared with us, and with a long history of predictable demand and stable pricing. Secondly, it's sustainable. Salt is an infinite natural resource produced from seawater and 99% of the energy used to produce it comes from the sun and the wind. And as we've discussed today, there is potential to extract multiple minerals from the same process. And third, Mardie has the potential to offer an annuity-style return profile. This is a long-life asset with 60 years ahead of it. Salt, both CapEx and working capital are fully funded. And once in production, we expect a strong free cash flow profile with low sustaining capital. So what we have is predictable demand, sustainable production and annuity-style returns. That's the business we're building. Now this brings me to the end of my presentation. I do want to just reiterate, we have some great photos at the back end of the deck. And for those of you able to, please take time to look at those pictures. We'll now move to questions. And if you haven't already, please submit your questions on the live Q&A tab on the right side of your screen. Thank you.

Thank you, David and Steve. The first question is for you, David, regarding the timing of first salt. It's clear from the presentation that you'll be ready. However, it's not clear on when. Can you help us understand why that is, please?

Yes. Thank you for that question. I think it's important for me to reiterate that our construction of the physical assets of the port, the dredging works, the salt wash plant, the crystallizers, the lining of the crystallizers are all on track. And as I said earlier in my presentation, within budget and on schedule. What, of course, is important to reiterate is the production of salt itself is 100% dependent on the surface area you have available and the temperature, wind, the weather conditions you see at site. I shared that at the end of June, we were just over -- we're close to 50,000 tonnes of salt in those crystallizers. Our team measures that every day. And as of this morning, my production report came through and it said we are at 82,000 tonnes. So we are making very good progress in salt production. On hot days, we see great evaporation. Of course, in cooler days or rain days, you see very low evaporation. And that's very important that I want to share with shareholders that we will continue to update you on the progress of the actual tonnes. We shared a bit of the cross-section of what the crystallizers look like, so you can understand what we're trying to share. And as the salt volume produces, we'll be able to provide more and more accuracy of when we expect to be -- to have first shipments. But that's weather dependent. What is in our control within BCI's control is 100% on track.

So David, just -- you spoke earlier and you showed that cross-section. So that first 200 millimeters in each cell, you need 160,000 tonnes of salt, and that's your permanent pavement.

Yes.

And then to get to harvesting, you said we need about another 100 millimeters on top.

That's right.