Liontown Limited (LTR) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen. My name is Tim Goyder, and I'm the Chair of Liontown Resources. I'd 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 Jo 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 [indiscernible]. For those in the room, 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 McClay and Avian Parker together with our company secretary team. Our executive team are also here in attendance. In the front row, we have our Chief Commercial Officer, Grant Donald Interim Chief Financial Officer, Graham Peter, and I also welcome for the first AGM, our new Chief Operating Officer, Ryan Hart; 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 30th of 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 valve to all shareholders, I propose that the notice meeting 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 Bala 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 led 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, audit 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 order rather than to the conduct of the audit, the preparation and content of the auditor's report, including key water matters the accounting policies adopted by the company or the independence of the auditor. I thought we get 1 on -- 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. When the turn of Computershare has been appointed as returning officer for the poll. I will now call Wendy to explain the voting procedures.

Thank you, Chair. We will make up the poll on the motion #1. Firstly, is any present President who believes that they are entitled to vote is not yet registered to vote, would you please raise your hand for assistance. The persons entitled to vote on the poll are our shareholders, representatives and attorneys of shareholders and proxy holders who hold a core voting card. On the reverse of your green voter card is your voting paper, which details the motions being put to this call. I will now go through the procedures for filling out the voting papers and if you are a potholder. -- sorry. and have only directed votes for and/or against, as shown on the summary of votes, which will be attached to your lesion card. All you need to do is put your name on the reading paper and log it in the ballot box. You must lodge your volume 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 way integrated on the voting paper. And when you finished filling in the voting paper and please lodge it in the ballot Avala 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 pole.

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 holding process is now open. Resolution 1 regarding the adoption of the remuneration report is displayed on the screen behind me. The Corporate 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 vote is nonbinding, but of course, dissuaded. 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 that. Shane is a Nonexecutive 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 seek reelection at this AGM. Shane officing self for reelection and the directors of the company other than chain recommend shareholders approve reelection. Are there any questions on the resolution 2? 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 Non-Executive Director of the company. Further details of Adrienne's background 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 Codan other than recommending shareholders approved for 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 and is displayed on the screen behind me. The resolution seeks shareholder approval and a listing will 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, Tony Ottaviano and is displayed on the screen behind me. The resolution seeks shareholder approval under Listing Rule 10 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 [indiscernible] displayed on the screen behind me. Are there any questions on the resolution? Please cast your vote 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 resolution 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]

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 completes the formal business of the. 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 your faces here and what a day -- the stock is now at $1.52, and we now got $4.2 billion, which is fantastic considering what going through over the last 2 years. [indiscernible] North Scripter. Anyway, they got me on a tight one. The past year has been 1 of transition for Liontown. Today, we stand with a strong balance sheet and a world-class operating mine at Kathleen Valley last quarter at $420 million in the bank. Coupled with the 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 only up underground lithium mine. The transition from open pit to underground mining will be completed 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 leaned to the processing plant, which in turn delivers higher recoveries and better concentrate grades. Underground mining is also neatly 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 tranched 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 1 theme remains clear. Global demand for lithium continues to grow. This year, we welcomed 3 new exceptive to Liontown. In August, we appointed Ryan Harris, Chief Operating Officer. Ryan brings forward with 30 years of mining experience, most recently as CEO of COVID-19 Lithium. Last month, we welcomed Lisa Breen as our Chief People Officer. Lisa is a highly regarded human resources leader. We experienced a MMA Offshore and Asta. 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, he is one of a kind, isn't he? 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 save Tjiwarl people, the traditional owners of the land on which Kathleen Valley operates. Our partnership is 1 founded on respect and collaboration. We value the community's support and look forward to continuing to share in the success of Captain 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 planned 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 presentation and we look forward to speaking with you over refreshments once formalities conclude. 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, to joining us today. For me, I look forward to these AGMs. It's the 1 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 Line town. We became Australia's first underground lithium mine. We delivered on every major commitment, and we did it through 1 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, pool of skilled labor and a strong environmental governance. When Tier 1 customers like LG Energy Solution, 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 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 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 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 row motion data. Blue Bird 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 Ebertoles 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 Best will contribute 25% of the total lithium demand through to 2029, yet forecast very wide. 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 rig storage investments are accelerating globally to enable renewable energy penetration but more importantly, to improve rig reliability. Data centers are representing an emerging demand sector, and we're getting inbound interest from data centers. There are people that actually constructed, and we'll be having a session with a large player in the coming weeks, just to understand where they're seeing net 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 tons 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 tons 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, 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 Smith and John Ladder 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, so -- 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 Atmos 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, we talk in the presentation before we show the video. And it came from Theodor Roseville, 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.

That's question 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 approve, 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 1 that's out there on the day-to-day.

I would just say that part of the auction process that we around us 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 that's 27. That's an important part of the journey that we're on and you'll see us being much more effective this.

All right. talk about site every time now -- so I'm just wondering whether you're looking at itself even land as eclectic that. And second question, we post you share on a longer-term way. Are you looking at last year, are you looking at good last year that everyone in Australia and then actually our shareholders. So we can actually post mobile.

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 [indiscernible] 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 to love to be on a you guys. -- more capable we you might comment that does to move on or might comment on your oil relevant bad business. I was interested to give us a seat level, I just want to ask the question, even in your own aspirations just to give further broader machines.

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 by the brine. 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, its strategy.