Mineral Resources Limited (MIN) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for standing by, and welcome to the Mineral Resources investor call and presentation for the half year 2022 financial results. Please be advised that today's call is being recorded, and the presentation contains forecasts and forward-looking information. You should carefully read the disclaimer at the back of the presentation. A copy of the presentation and a transcript of this call will be posted to Mineral Resources website under the Investor Presentation page at mineralresources.com.au. We will be starting today's presentation with a video detailing achievements over the past year. Following this, Chris Ellison, Managing Director; and Mark Wilson, CFO, will present the half year results. At the end of the presentation, there will be an opportunity for institutional investors, analysts and media to verbally ask questions. [Operator Instructions] I'll now start today's presentation by playing the half year video. [Presentation]

Good morning. Thanks for joining. This is the Mineral Resources half year results. So if that's what you're looking for, you're tuned into the right place. I'm Chris Ellison. I'm going to be joined shortly by our CFO, Mark Wilson. We put the video on just to try and give you a little bit of a visual of the size of our operations, the size of the equipment and trying to give you a little more context in what we go through. And I think as I'm talking, you might be able to relate back to some of that. Been a tough first half for us financially. The other side, it's probably been the most secure -- sorry, the most successful half the business has ever seen in terms of business development and locking in the future. I've got quite a bit of detail to go through with you on that down the track. Well, basically, we've locked in 2 major iron ore developments. Stage 1 of both those will give us about 50 million tonnes of run rate. We've renegotiated pretty much all of the lithium business for their JV partners. We've locked in Mining Services contracts. We're looking at double-digit growth over the next 5 years with our services part of the business. We've had a significant gas discovery up in the Perth Basin, and we've done all that while COVID's been continuing to disrupt supply and push costs up and keep our borders closed and keep the labor supply at the lowest it's ever been. But COVID's probably coming to WA. We're as prepared for it as we can. And I think over the last 2 years, MinRes has been well ahead of the game compared to others. We've been kind of leading innovation around how to look after our people and keep them safe through COVID. We're continuing to do that more recently. We've been able to make sure that we know if any of our people have been in contact with others. If we have an outbreak, we can very quickly and efficiently control it. So I'm going to run you through today on the past 6 months' performance, that will be quite brief. Had we made more money, I would have extended that. The plans over the next 2 to 5 years, which is really important, and there's a lot of messaging in there for us to pick up on, and at the end, we'll answer some questions. So highlights in the first half, sort of give you a rundown on the underlying EBITDA and the cash position. We've kept the operations COVID-free, which is good. All our sites are operating and everyone's safety performance in MinRes is simply best-in-class. Financial results, as you can well see, they're substantially down on last year, but we had the worst iron ore crash in history in terms of the pricing. We've had substantial cost increases mainly outside the mine gate around energy and shipping and really volatile and unpredictable conditions. But we've still got return on invested capital of nearly 24%. But as I said, we've been extremely busy securing the next 30 years future for our business, and that's gone exceptionally well. Safety of our people. I mean, as I said, outstanding result considering to the environment we're operating in, tough conditions out there, very difficult securing people. No lost time injuries and our TRIFR is down around about 2.25, which is outstanding for a mining and mining services business when you consider how many people we got out in the field in a very dangerous environment. The results are primarily underpinned by the training that we do in-house. It's substantial. It's intense. We do a lot of it, but that training gives people the awareness. We need to keep them safe. We've recruited and we continue to recruit a lot of what we call our second gen people, second generation. So if you got a son or a daughter or a cousin or someone that's related to someone that's working in the business, we think that people have been in the business for a few years. They understand our culture when they bring their kids and the kids know the culture, and we've been extremely successful with developing this part of our business. During this year, so far, we've trained 197 new entry-level employees and they're a mixture of graduates of all sorts, engineering and accounting apprentices, trainees and operators. And we've opened a state-of-the-art simulated training center, which is producing outstanding results for us. We've got a heavy focus on employee retention. We're looking at making sure that we've got a good environment for them to work in, a great environment in terms of platinum related work environments. We're building out a new office that, thanks to COVID it's been difficult getting it finished, but we hope to be in there in the next few months. Both the mental and physical well-being of our people is a prime focus. It's a daily focus. And we've got people, from top to bottom, making sure that we have the right environment, the right culture for our people. We're also looking, as I've said earlier, all our new camps going forward are going to be resort-style accommodation, much bigger rooms, better facilities and able to accommodate couples. And we've just recently introduced an employee share plan, which has been really well received by a lot of our people. Sustainability. The past 2 years, the business has grown substantially, but our emissions intensity has reduced by 25%. We are committed to 0 emissions. We have a very practical plan in place that we're rolling out continuously. The immediate focus we have is to produce energy from solar wherever we can and support that with gas fired. Innovation in the business is also driving lower emissions. We're bringing in equipment that can move more tonnes at lower operating use of fuel. And the larger hubs around Ashburton and the Pilbara hub that I'm going to talk about, the scale of those will reduce the intensity on a per tonne basis and they'll be powered substantially by solar and, again, supported by gas. And we are heavily reliant on third parties out there to come along with green energy. And when they do that, we'll use whatever becomes available. Okay. Operational performance over the last 6 months. Mining Services, again, it's been a good story. It continues to grow year-on-year. We've always had solid growth in the Mining Services part of our business. Our team are very active in making sure that we're providing a service that's second to none to our customers. And our reputation, our track record and what we do on a daily basis helps us win the future. We're on track for about 15% to 20% growth in this part of our business. The volumes have increased 18% over the last 6 months, EBITDA is up 20%, 4 new contracts added and 3 renewals. The iron ore business, it's been brutal over the last 6 months. We're kind of chasing the price down, managing costs and looking at turning off any high-cost tonnes and dragging out whatever savings we can. Regardless of that, it's the largest price drop in iron ore in history that literally plummeted USD 128 a tonne in 67 days. It cost us, during this half, $631 million in EBITDA. So that's where most of our pain come, in fact, that's where all of it come from. The lithium business, it's going strongly. Mt Marion, at the moment, we've got a high strip ratio in the low-yield region of the pit. So production over this half, we're moving forward in there, likely going to be at the bottom end of the guidance. I'll talk a little bit more about that later. Wodgina, good news coming out of that. We're starting Train 1 and we're well and truly advanced on that. Down at Kemerton on the hydroxide plant with our joint venture partners, Albemarle who are developing that. Train 1 is mechanically complete. They've got some feed going in the plant. We expect first sales coming out of that product. There's some work to do on making sure the product is qualified and set spec and tested. But under the circumstances, the team down there have performed extremely well. And then Train 2 mechanical completion will be about the third quarter of this year, and that will just follow the same process of feed-in, and getting the bags out of it and getting it up to spec. So under the circumstances, that's still going pretty well. I'll let Mark come and talk you through the financials. And then I'll come back to you, and we'll share the most important part of where the business is heading.

Thanks, Chris, and good morning, everybody, and it's a pleasure to be here with you this morning to take you through the interim results from a financial perspective. Consistent with past practice, I'm going to focus my comments on the underlying performance of the business. Sitting outside of the underlying performance is a post-tax gain of $66 million on our disposal of Pilbara Minerals shares during the half. You can find the full reconciliation of our underlying performance of statutories both in the financial statements themselves in the notes and in the appendix to the presentation. I would characterize the half from a financial perspective is challenging. As Chris said, we've had a significant drop in the iron ore price. In addition to that, our discounts on the product have widened from an average of 11% in the prior corresponding period to 35% in this half. So that combined impact with prices had a major driver on our results. In terms of costs, costs have been under pressure, as Chris said. A significant portion of that pressure has been felt outside the mine gate. And it's important to understand that those cost pressures aren't necessarily being embedded into our cost structure going forward. Generally, the operational performance has been good in the business, the underlying performance. And I think the results show the benefit of the diversification that we have in our business model. In terms of the next slide, the underlying profit and loss segment. Sitting in the profit figures for the half, a strong contribution, as Chris said, from the Mining Services business, delivering over $280 million of EBITDA. Lithium has contributed $61 million off the back of a rebound in pricing, and we expect that to continue going forward. The iron ore business contributed a net EBITDA loss of $104 million. Important to recognize that $43 million of that is referable to the prior period in terms of price adjustments. I want to call out, in particular, on the cost side. Over $200 million increase sitting outside the mine gate or past the mine gate. And that's why I referenced to the prior corresponding period. But $151 million impact on shipping. We've struggled with shipping in the half. It's been a very, very tight market, particularly for the sorts of vessels that we're chartering. We're already starting to see some of those costs come back, however. In terms of haulage, post mine gate in particular, $54 million impact against the PCP. That's in large part a function of COVID and the challenges we've had with trying to secure haulage services in Western Australia. Again, I would suggest those cost increases are not going to be embedded in the business going forward. Given the group's investment program in front of it and given the results, the Board determined that there would be no interim dividend paid for the period. The next slide shows the bridge underlying EBITDA on a PCP basis. And you can see on that slide starkly the impact, as Chris said, of the iron ore price decline, $631 million. You can also see the impact very clearly of the shipping. Conversely, on the positive side, you can see the increased contribution from Mining Services as well as the improvement in terms of volume production out of the business. So underlying performance remains solid but hammered by the iron ore price and the costs post mine gate. In terms of the cash flow slide, historically as a business, we've delivered 100% profit conversion to cash. That's what we've typically done over time. This period, we've seen an impact in terms of predominantly a growth in inventories on the various sites as we've adjusted our approach to respond to the pricing and so on. In the half, we also had some sizable tax and dividend payments that were referable to FY '21. And you can see on the cash slide, continued CapEx investment for the future in this period, $403 million. In terms of the CapEx itself, the $400 million largely split between sustaining and growth. Just want to reinforce that from a business perspective, we're absolutely fixed on ensuring that our investment decisions are going to deliver at least 20% return on invested capital after tax. That position hasn't changed. So all the investment we're doing is to support those -- or that objective. In terms of the balance sheet itself, balance sheet remains very strong. Cash position remains solid, and we're well placed to fund the future growth of the business off the back of our balance sheet. The next 5 years remain very bright. And the future looks very promising as we move forward to unlock the investments that we have in front of us. As we develop that cash flow off the back of those strong returns that we expect out of those projects, we'll be able to continue to pay fully franked dividends going forward. Thank you. With that, I'll now hand back to Chris.

Okay. So let's talk about the future. As I said earlier, this period we've been through over the last 6 months, we have worked extremely hard to secure a range of opportunities. Some of them we've been working on for 7 or 8 years, some of them for 3 or 4, and we managed to pull them all together and sort of get them into a position where they are actually locked in, and we know exactly where we're heading. So this development phase I'm going to talk about over the next 5 years, this is not something that we hope will happen or we're thinking we might win it to enter these are all locked in projects. I mean, the business has changed and evolved an awful lot over the last 5 years. The next 5 years are going to be way more radical. We're going to be able to accelerate what we've been doing. We're going to make a lot of changes. It will be a bit of news flow this calendar year coming out of the business as we get things lined up, and we're in a position where we can talk more about them. But look, in short, in summary, the business -- the Mining Services business, it will continue to grow at an average of 15% to 20% year-on-year over the next 5 years. It has a great list of Tier 1 customers. It delivers to them. It has a great reputation in the market. And it also has as good a list of Tier 1 JV partners that we're entering to, projects where we have the management rights and we'll be delivering low-cost products for those partners. So in short, the Mining Services business will more than double over the next 5 years, and that's from projects that we've got locked in there, the iron ore business. So at the moment, we're running a high cost, smaller type pit iron ore operation, the two new zones that we've got through Ashburton and the Pilbara Hub will allow us to move into a low-cost long, long-life operation. So 30-plus years. And each of those, we're going to start Stage 1 on the Ashburton at 30 million tonne a year run rate, looking for first ore in 2 years down the track, 20 million tonnes coming out of the Pilbara Hub. These operations are going to be sustainable through any of the low iron ore prices that we've seen over the last 20 years. The lithium, we've probably got, without doubt, two of the best hard rock deposits. They are actually Tier 1 mines, and they're owned with 2 extremely good joint venture partners. They're in WA. So we're in probably the most socially acceptable mining jurisdiction in the world and probably the best, the safest. We've got the secure government. We're in a great location and the weather is manageable most of the time. With MinRes, we're targeting over 100,000 tonnes of lithium hydroxide production within about 5 years. And we've got -- again, we've got locked-in capability in terms of our joint venture partners are probably the 2 best hydroxide producers in the world. So we're in good company with our Mining Services with our iron ore with our lithium business. We've got great partners. And then the Gas business, it's like would have it. We put our first drill rod down up in the Perth Basin, and we hit a fairly major discovery up there in September, October. We're looking basically in there to secure long life, low-cost energy. That can be the basis of a range of different opportunities that we have going forward if we know that we've got that low cost locked in for 20, 30 or 40 years. And we'll be able to use the gas initially for our own operations, JV partners, clients and areas where we get benefit. And we've got a fairly extensive exploration program over the next 2 years. So I'll get into a bit of detail now on each one of those. But look, in short, in MinRes, we've got Tier 1 assets. We've got Tier 1 customers and JV partners. We've got growth projects over the next 5 years that are locked in, and we can manage most of that in-house. We have that capability. We have a very, very clear funding plan and that will be progressively shared with the market. As we start to get to the beginning of the development stage in each one of those, I do hear some noise sometimes about how are we going to fund all. Let's say over the last 15 or 20 years, we've always had a very clear plan on how we fund our projects. We've had a very firm grip on our balance sheet. And I would say that we're one of the best on the market on return on invested capital. So just to give you the message, it's all well and truly planned on how we're going to fund it. And we're going to continue doing what we've done for the last 20 or 30 years. So nothing's changed, and the recipe will still be the same. So you'll get the returns overtime we're all used to having. So Mining Services growth. Just a little bit more detail around how that's going to work. The Mining Services has always been where MinRes started off from. So that's the foundation of this business, the core where our work effort comes from, our can-do attitude comes from. It gives us the impetus to be able to move when we see opportunity. Generally, out in the industry to our Tier 1 clients, we're out there, we're delivering crushing, mining, processing and haulage services. We're primarily operating through gold, lithium and iron ore. That's where most of our business happens. And we're pretty focused. I mean we will take on any mining or hard rock opportunities, but we just seem to find this as our sweet spot. We've got considerable growth opportunities going forward with all of those range of clients that we've got sitting out there. And as I said earlier, that's primarily based on a range of things, delivery, performance, safety, caring about the outcome for our clients, caring about their profitability to make sure that they get what they're looking for, making sure that we deliver, and there are never any contractual issues between us and our clients. We are just there to get the job done for them and we know what we're doing. I can see a consistent 10% to 15% growth in that area of the Mining Services business over at least the next 3 years. And then when we move into the mining services part of the service, we'll be providing to joint venture partners, so in the Ashburton, we'll have 3 build-own-operate contracts out there, substantial contracts. A lot of capital to set them up. So we'll be doing the crushing 30 million tonnes of our NextGen 2 crushing plants, 30 million tonnes of haulage down about 150 ks of highway. It will be a privately owned haul road. It will only be the big girls on it. They'd be hauling 320 tonnes of payload. That's an innovation developed in-house with the help of Kenworth. They're the only ones in the world like it. We've got about 17 or 18 of them running in the Yilgarn. So we know exactly what they can do. 30 million tonnes of ship loading contracts, so that means that we're going to have 4 transshippers up there, and they're going to be hauling 20,000 tonnes per train shipper, about 22 miles out and putting them on capesize carriers. So ironically, after we do all of that, this is going to be our lowest cost port on the West Coast. So lots and lots of future for the transshipping business and somewhere that we want to progress and grow. So the Pilbara Hub, we've got a life of mine supply chain contract out there. So MinRes Mining Services is responsible for taking the ore on behalf of the joint venture partners from the gate and putting it in a ship in Port Hedland. They're going to do that with a private haul road from Marillana down to the Mulga Downs railhead. Once it's down there, we'll put it into the stockyard and our joint venture partners in Hancock, Roy Hill, take that joint venture that we've formed, and they'll take our ore down and they'll place it into our ships. And that's -- again, it's another great joint venture that we've done with the Hancock Prospecting team and very good friends at MinRes. So the lithium, primarily just on the lithium, we will continue doing what we're doing at Mt Marion on the mining services. That's not going to change a lot, but up in the Pilbara, we're starting up Wodgina again. So we own the big crushing plant out there and the mining -- the catering and airport services. So that's a Mining Services contract that's just starting back up now. So iron ore growth the next 5 years, we're developing 2 transformational projects. We've got the Ashburton Hub. That's known as the Red Hill Iron Ore JV. So we acquired the iron ore rights from Retail Iron over -- during the course of last year. Since then, we've signed an agreement with the joint venture partners. So the joint venture partners are Aquila, AMCI, POSCO and the majority shareholder in Aquila is, of course, Baowu, and we have a 15% shareholding in that entity as well. We've also just been, at the end of January, appointed the manager of the Red Hill Iron JV. So we're going to carry that forward and start getting all the prep work done on that. And the MRL Board has approved FID subject to the JV partners. They're going through the process to do the same, and we expect that all to happen prior to middle of this calendar year. So as I said earlier, Stage 1, 30 million tonne, at least 30-year mine life and 58% FE. We'll have a central hub at [indiscernible], which is 150 Ks from the coast. So one of the closest ore bodies to the coast up in the north. It's a 2-year build, and we're aiming to have first ore on ship somewhere between December '23 and March '24, depending on how we go over the next 3 or 4 months with our COVID. And we've done a huge amount of progress over the last 6 months in terms of port access, approvals, design, engineering, access roads, camps, airports, all of the touch points of -- we even would put an agreement together out there in Onslow with LNG. So we're going to do a 30-plus year rental arrangement with them on renting some land, so we can put our resort on it. So that, in turn, gives them known income for a long, long time, and they'll be able to use that for their people out there. We're very, very focused on working with all of the traditional landowners and the station owners and making sure that the shared benefits going to everyone. And we've also ordered the first 2 transhippers. So they're getting built offshore. Iron ore in the Pilbara hub, it's a 50-50 JV. We've got there with Brockman. Everyone is aware of that with the joint venture managers. It's about a 30-year mine life, and there's probably another 10 beyond that. It's 60.5% FE, 2 years of approval. So this one's going to take us a while to get going and then about 2 years of development behind that. And again, Hancock and Roy Hill are going to be responsible for doing most of that construction work on that supply chain joint venture agreement in terms of rail upgrade and port development. So very experienced team working on that. So the lithium. Lithium business has changed substantially over the last 6 or so months. It's a big business. It's world-class. We are just getting -- as you're aware, we're just getting Wodgina going. But we've sat down with Albemarle, and we've had a look at how we can get the most out of this joint venture. And we're exploring the opportunity of MinRes moving back to 50-50 ownership at Wodgina and we'll take up the management there. It was -- Mineral Resources designed that plant and the infrastructure. We built it. We've operated. It's our core business. So that's kind of where we belong. We can deliver an extremely good operation to the JV for the next 40, 50 years. It's a big ore body. Kemerton remains the same. The hydroxide plant stays 60-40 ownership. And the offshore hydroxide will all -- all those plants have been built to consume all of the Wodgina feed and we'll continually just grow those out as market demands. But again, on the -- all of the hydroxide responsibility of Albemarle to manage those and also, they are responsible for all the marketing and all the sales. The feed for the Kemerton plant, all of that, it's been agreed with Albemarle. That's all coming out of the Greenbushes mine. So good result with all of that, good for both of us, the Mt Marion operation. We're just taking back our 51% offtake. That's been going to Ganfeng since the mine opened. We've taken that back as of 1st of Feb, but we've also entered into a toll treating agreement with Ganfeng in China. So they're going to treat all of the -- that spot that's coming out of Mt Marion for us, and that will be jointly sold into the market. And we're expecting first sales around about May this year. Mt Marion growth. Look, we're running at about 450,000 tonnes a year down there. We're going through a pretty average part of the pit at the moment. We have to do it. We've got to get that out. And we're doing a couple of studies down there. One of them is what we call yield enhancement. So we want to change the gradation of the ore and reduce the ultrafines. That's probably going to give us about a 10% or 15% increase in product. And then the second thing we're looking at doing is installing a plant to treat what we call the contact door. So the contact door, it's found at the outer perimeter of the ore body where the ore body meets the waste. It has a reasonable amount of basalt in that material. So we're going to put a plant and that's probably capable of about 1 million tonnes a year of feed, but that's subject to test work and us getting the results that we expect we will. We'll keep you informed on that because if that goes ahead, and most likely will, it's going to increase the product volume substantially. Lithium growth. As I said earlier, we're starting Train 1. We're well advanced on that. We're looking at our first product on the ground in April. Train 1 turns out 250,000 tonnes of 6% product. Trains 2 and 3 are sitting ready, willing and able to go. And we'll restart them in line with market demand, and it will take us a little while just to get everything cranked up and to get the downstreaming running. But that will all happen under a fairly good management team that we've assembled. Kemerton hydroxide, we're expecting Train 1. As I said earlier, they're putting some feed into that now. We're expecting first sales late '22. There's some work to do on these hydroxide plants. When you get them going, you've got to get the material running through. It takes a while to commission them. And then once you do that, you've got to make sure that the customers are happy with the material. So a little bit of time train too. It's going pretty well and mechanical completion third quarter of this year. And it will just follow the same process as Train 1 and offshore hydroxide. That's going to be jointly developed between Albemarle and ourselves, and we'll proportionately fund that 50-50 each. And those plants will consume 100% of the Wodgina spot. So in summary, on the lithium business, our aim is to be up around about 100,000 tonnes of hydroxide production in about 5 years from now. And then finally, the last pillar of our business, the energy side of the business, we're the largest acreage holder in both the onshore Perth Basin and up in the Carnarvon Basin, up near Onslow. We recently drilled a hole, we call it Lockyer Deep. We hit substantial gas down there. Testing on the well is being slow. We've got to secure a lot of the specialized test equipment and people from both the offshore and in the state. And having the border shut has made it quite difficult. So we're hoping that, that test work is going to be well and truly underway in March when we get everything in, and we'll have a better understanding probably around the middle of this year of what we got up there. We'll keep you updated on that. On the exploration front, we're probably going to drill at least 6 wells up in the Perth Basin. The holes up there go down about 4.25 Ks, so big drill rig and quite a commitment. We're aiming to bring the little Red Gully gas plant that we inherited a few years ago back online. We want to put some another drill rod down there and bring the gas back into that plant. And up in the Carnarvon Basin, we've got a joint venture up there with Buru Energy, and we're planning to drill a couple of wells up there over the next 12 months. So that's basically the onshore region of where Chevron -- so quite a prospective area. Guidance. An update on the guidance. It's a table that's familiar to all of you. We give you is production and tonnes that we expect and unit costs. The tonnes are pretty much the same as the recent guidance that we gave. COVID continues to disrupt our supply chain and it's making life difficult. It's pushing rates up. It's making it unpredictable. Shipping has been a substantial increase over the last 6 or 9 months, and it's causing us a little bit of pain. But the costs that we can control on the sites in the mines with our own equipment are well and truly under control and extremely well managed. So the team have done a great job on that. And the Mining Services, we're going to sit at the traditional sort of 15% to 20%. We're achieving that. And at least the next 3 years, we'll continue to. Okay. So to sum up, it's been a tough period. I mean the whole team has been under enormous pressure to keep the operations running. And while we're doing all that, we're renegotiating or we're establishing all these new agreements. We're out trying to get approvals in a whole range of areas, literally thousands of them. So the team have worked hard and done an amazing job. So don't judge us on the last 6 months. It's been tough with the iron ore price. The iron ore price seems to have stabilized somewhat, but we all know how unpredictable it can be. But we have certainly been focused on making sure that we've got projects in hand that we're going to deliver over the next 5 years. They're going to set the business up for 30 or 40 years out. And there's going to be a good mix of diversity in terms of the type of products we're going to be able to deliver. And as we go forward, more opportunity is going to come up. So I think we've got a great business. We moved up the ranks in the ASX over the last few years, and we probably will continue to do so. So the growth that we have, as I said earlier, we have it locked in. We know what we're doing financially. Our track record speaks for itself. We've got plenty of good advice around us. We've got a very tough, robust balance sheet. Our track record on delivery, managing, innovation, and we have the team to deliver. So look, I'll wind it up at that. And if you got any questions, Mark and I will do our best to answer you.

[Operator Instructions] Your first phone question today comes from Jack Gabb with Bank of America.

The first question is just on your CapEx and balance sheet. I guess you're talking about adding around about 80,000 tonnes of attributable hydroxide capacity and further 10% stake in Wodgina. And I guess even if Albemarle agreed to sell down at cost, I guess I'm unsure why it would, that's over $1 billion outlay. Then you've got 2.5 for Ashburton and potentially another 2.5 to 3 of Southwest Creek before we consider any other spending at Mt Marion or backfilling resources at Ashburton. So I guess it's a significant amount of CapEx, and I'm just curious, given your comments that you will enter plan to fund or how many plan to fund everything, perhaps you can enlighten us as to how much debt you expect to take on and when you expect net debt to peak. And I've got one more.

Jack, it's Mark. Thanks for the question. Chris was pretty clear in his statement that we've got a plan and we're going to release it progressively as we announce the full details on each of the projects. Historically, we've always been conservative with respect to debt. We've been prepared to go net debt for periods of time through expansion phases. But typically, where we've got projects that we'll see the balance sheet return to strength pretty quickly. So we have a plan that will get us through the delivery of all those opportunities, but I'm not going to share the full details of it now. Okay?

Okay. So you're not -- I mean can you say anything about whether equity is part of that plan or whether this is more about standing down [indiscernible]?

Yes, there's no plan to tap the equity markets.

Okay. And then second question is just on the iron ore. Clearly, a disappointing first half in terms of price realizations. Can you just tell us what you're assuming for price realizations for Ashburton given it's 57.5% product? And have you also adjusted your cost expectations at Ashburton in light of the increased transport costs in the half just gone?

Look, I think firstly, in terms of controlling our cost at Ashburton. The transport costs there are very, very different. They are MRL owned, off-highway units. So they are extremely low cost. They -- and they're fixed, there's a fixed capital cost associated with them. The diesel doesn't move the dial on that very much. So those costs, we kind of have them locked and there's not a lot of variation on them. What was the second part, price realization on the material?

Price realization on the product.

Yes. Look, I think we've disclosed that in the past, have we?

I don't know if we've disclosed it. But what I would say, Jack, is that the project is very robust under any sort of assumptions you might want to make around price or discounts. So because of its proximity to the coast, because the innovation that we're bringing through the crushing and the haulage and the transshipping, it allows us to be where we want to be from a cost perspective, and that gives us the resilience regardless of what happens on the revenue line.

I think the attraction to that project is that -- the attraction to that project for us is that it's an extremely low cost per tonne FOB.

Yes, absolutely. And then one last one on Ashburton. Is there much more required to spend on that project, the backfill resources, I guess, to meet that sort of 30-year life of mine. I know there's significant resources in the West Coast, but you're not necessarily 100% owner of those. So just curious whether that's a bit more spending required.

No. What we've disclosed, that gets us -- it gets us to that run rate for that period of time.

Your next question comes from Hayden Bairstow with Macquarie.

Just on the MARBL JV potential change, just keen to understand the metrics of how chemistry will work with Greenbushes being stated to that. We have to pay market rates for that Greenbushes or is there some sort of cost swap agreement likely to be in place on that front? And on the target of lithium hydroxide 100,000 tonnes within sort of 5 years, is that some of these projects, the Albemarle has talked about building in China already that would go into the MARBL JV? Or is this new stuff that they haven't yet talked about either?

So on the -- I don't want to talk too much about on the Albemarle side in China. They'll release the information as they see fit there. They're in control of the hydroxide, the downstreaming both at Kemerton and up in China. But what I can say is that we have got a very solid plan in-house. And the reason for a few of the changes that we're moving around the ditches is that just trying to make sure that we've got an extremely solid joint venture, the way it's operated and managed going forward because this COVID thing has been extremely disruptive. So we've got to make sure that we've got the right people in the right place as we want to be able to guarantee production in these plants and mines operate. So I think we've come up with a really sensible solution. There's probably a little bit more information flow to come out of this, a little bit further down the track, and it will make even more sense. So we haven't given all the information we can at this stage.

Okay. Great. And on the iron ore side of things, just keen to understand, assuming you kick off Ashburton in earnest pretty soon, just on -- how can you move around people within the rest of the business? I mean, if we're not getting a lot of earnings out of Iron Valley to sort of repurpose people to focus more on getting experts going and maybe downright production if we see iron ore has come back again.

Yes. Look, certainly, look, we've always done that. I mean if we see iron ore or any of the commodity prices moving, we react quickly to make sure that we minimize any cash drain. And yes, look, our focus is heavily on Ashburton. But at the same time, I mean, Iron Valley for a long, long time has always sort of produced and it's had more lives than a cat, but it just keeps giving. So it's been a good mine. As has one manner, we've got that online. And -- but no matter what, when you cut it, they're high-cost small mines, but they got us to where we are with our balance sheet. They've got our business to the size that it is. They do carry risk, but we're transitioning into these longer life mines, and they give us the capital and the experience to be able to do what we're doing today. So as we grow as a business, if you look back 10 years ago and 5 years ago and 2 years ago, we kept getting better and changing and we're adding better product. We're adding better mines to our portfolio, and we've been able to carve out on these 2 iron ore mines, these 2 regions we're operating. And we've carved out something fairly serious out of that. And to get a Capesize carrier berth in Port Hedland, it's a big berth, but it's in the biggest harbor in the world and it's a machine to print cash because it gives us that low cost and then our partnership with Hancock is outstanding. I mean, we've got rail and port all of a sudden. We're up there with the same supply chain as the majors have got. So that's -- it's a pretty good deal.

Your next question comes from Lyndon Fagan with JPMorgan.

Thanks very much. The first question is on iron ore price realizations. Obviously, getting around about half the iron ore price for the period and realized there's provisional pricing impacts there. But I'm wondering if you're able to share a bit more detail about whether there's been a step-up in impurities and how that roles going forward, because I guess I'm just not feeling particularly confident about forecasting price realizations over the next few years. And I'm wondering if you can shed any light on whether we get back to where we were pre the half or whether this is sort of the new norm, notwithstanding market discounts are wider. And then the second question was just to maybe talk a bit more about your plans as to Port Hedland. So, some pretty basic questions, the 20 million tonnes, can you maybe clarify whether that's your share or the entire scope of the operation? And whether Roy Hill was planning to ship anything else out of SP3 separate to your project, but to gauge what the capacity of SP3 could be.

So the capacity -- I'll talk about the first part of the second part of your question. So the capacity at SP3 should be around about 40 million to 50 million tonnes. It's somewhere in that range because it has been class allocation. And then beyond that, there is what they call C class, so they're opportunistic tonnes. If you're efficient, you can get more tonnes there. The berth is going to be shared between Hancock and MinRes. So that's 50-50. And then we have another arrangement with them with the rail. So we've got a life of mine understanding on the rail, and we'll have -- of the tonnes coming down, they will be long to the JV to Brockman. And that will be 50% they and 50% us on the price.

In terms of the realizations, Lyndon -- it's Mark, sorry. In terms of the realizations, a couple of factors. First of all, in the appendix, there's a waterfall that helps give you some sort of indication of how those numbers have evolved. But from memory, I think it was something like 83%, 63% on a like-for-like basis in the half on a PCP basis. The prime driver for that has been marked on widening of discounts. And it's less about the impurities. There's been a bit of a move from the lump as a lump premium evaporated at one point through the quarter. And as we've tried to pivot our strategy to respond to the significant fast moving iron ore price. So I wouldn't think that -- I wouldn't, from your perspective, think of it in terms of impurities. That's not where the answer is. It's been more on the discounts and market movement.

Thanks for that. So just to clarify, the SP3 project is a 40 million to 50 million tonne project, of which you own 50% of rather than it being a 20 million tonne project.

Correct. Yes.

Your next question comes from Justin Raja with UBS. Your next question comes from Glyn Lawcock with Barrenjoey.

I just had 2 questions, if I could. Firstly, just on Wodgina. Now that you've wrestled back control of Wodgina, just wondering, firstly, how quickly can you ramp it up? What are the dollars required to say ramp it up? And given Albemarle still has the marketing, can you sell it to third parties or is it only going to ramp up in line with internal consumption? That's the first one. Just trying to understand the Wodgina ramp-up potential, what you could deliver us. And then just on Port Hedland, just trying to clarify Lyndon's question. I mean, 40 million to 50 million doesn't really make sense to me. One berth, one ship loader is 30, joined up to Gina's Roy Hill project would add 60. So what are you assuming in the 40 million to 50 million? Is that a joined up 3 berth, 3 ship loader configuration? Or is it a stand-alone configuration? Or is that still under discussion?

No. So on the SP3, with 1 shiploader, Gina has got -- on the Roy Hill berths, they've got 2 berths and 1 shiploader. This one will have its own dedicated ship loader. But what we're going to do is we'll be able to share all the shiploaders across the berth. It will be run as a fully integrated facility with the Roy Hill existing berths 1 and 2. And the berth 3 is certainly capable of way more than 40 million tonnes. So it just comes down to the efficiency on how it operates. But we're not counting on more than that. We're counting on 20 million tonnes for our share.

Okay. But Chris, you'd agree that if you looked at FMG's configuration, they have 3 berths, 2 ship loaders and they equally do 120. So it's conceivable that Roy Hill could go from 60 and double if you just take what currently happening in Port Hedland?

Yes. I think -- I'm trying to remember, I think FMG get about 185 million, 190 million tonne a year out.

Yes, that's true. But initially, they were 120 when they only had 3 berths and 2 shiploaders, which is what this configuration will be. So I'm just looking at the like-for-like, that was all.

Yes. Look...

That's fine. Yes. And just the Wodgina ramp-up and how much flex you have and the ability to sell third-party things?

So Albemarle is responsible for all of the marketing. We think we're going to have first product on the ground in April. So we're nearly there. And there's no announcements made on sort of where the product is going. I mean we're certainly going to have product going into downstream plants. And Albemarle is sort of working on securing those. So I mean when the time is right, we'll be able to come out and tell you exactly what those plans are. But I'm not sure that we really want to go and have our competitors understand exactly what we're doing.

Okay. But will you be selling outside of the JV or not, do you think? Or you can't answer that yet.

Well, look, they've just -- Albemarle have just made a sale of some of the material. We got quite a bit of material sitting up at Wodgina, and we're due to load the ship out of there shortly in the next week or 10 days. So we've got a cargo of spot going out to a third party.

I think -- Glyn, it's Mark. I think the best way to answer that is to say the preference is obviously to convert wherever possible.

Okay. And could you give us any insight into the price? Will it be that miraculously high $3,500 spot price or something much lower?

There's 2 prices that sort of drift around. I mean, we have us, the other producers, we have long-term models that they basically go out and they use the carbonate and the hydroxide prices from around the world to come back and tell us what we think the market value of this product is. So we're all generally contracted in that way. The prices that you're seeing, those headline numbers, they are very tiny cargoes of spot price. So look, if I had to guess at the moment, I'd think that probably -- the contracted price probably sits somewhere between USD 2,000 and USD 2,400 a tonne. And the spot market price they're quoting, which I don't know if anyone's got any tonnes to sell into that market, we haven't and I don't think the others had, but that's about USD 3,250 a tonne.

Okay. And I guess, Chris, just finally then you worked that backwards. You look at the spot chemical prices of $60,000 for carbonate, that would suggest they can pay $8,000 per spot -- or $6,000 per spot. What prices are you using on the chemicals to work backwards to get to $2,000 contract?

Honestly, quite honestly, I mean, the price has moved quicker than our spreadsheet. So in the last 3 months, the price has just gone from something that we thought was getting out there and we're very happy with, but it's probably doubled. So we're just not doing a lot on that at the moment. I mean we're reasonably comfortable with all the numbers that we've done some years ago do exist somewhere in there. I remember when it last got up to about $1,300 a tonne, and we were extremely happy with that, then it was down below $400. So look, we're not doing a lot of work around that. We're just confident that the -- all of the base numbers that we built Wodgina on and all the numbers we've put the JV together on do exist. But we've all seen commodities that go up like skyrockets, I mean, there's probably only one way for them to go eventually. But I don't think this is going to have a crash landing. I think that's clearly out there since COVID come along. I mean, a couple of years ago, there was a handful of car companies making electric cars. Today, if you're not making electric car, you're not going to be in business. So I think the supply-demand chain is very different to what we've seen. And I don't think there's any doubt that year-on-year for the next 3, 4, 5 years out, the demand for lithium is going to continue to grow. I mean you read that if it gets too high, they'll go and try and find an alternate fuel well. It's taken them probably 30 years to get to where they have with lithium. And I don't think that even if lithium selling at $3,000 a tonne for the spot, it doesn't move the dial that much on the end cost of an electric car. So look, I don't know -- I really don't know, I haven't seen a market like this before move this quick.

Your next question comes from Peter Ker with the Australian Financial Review.

Chris, just on that same topic, in the last 7 years in spot prices, we saw big ups and big downs. We hear you wanting to do more out of Mt Marion, bringing back what [indiscernible] ramping up output. So are you thinking about this period differently to make sure at a month from now, we don't have a sharply falling price, or you can be a bit more conservative than last time? And secondly, is there a time in the future where the spot price irrelevant for you and the hydroxide prices is the most relevant thing?

So first on supply. We're starting Train 1 at Wodgina and we're going to do a watch and see what happens with the market. So we have the capability of turning on 3 trains up there. We're not doing that. We're just going to take this slowly and make sure that we get it ramped up properly. The most relevant for us, I think, long term, I think -- and I've always thought this if you own the rock in the ground, then you own and control your future. We want to get the value out of downstreaming. So our aim is to get all of our rock converted to hydroxide as soon as we possibly can. We've got a plan at the moment, but I think that we'll be able to refine that going forward. A lot's happened in the last 12 months, and we're still playing catch up with our joint venture partners because the uncertainty that's been sitting out there. But look, I think there's no doubt down the track. I mean we're going to have a substantial lithium business. We have one right now. And we probably have the most clearest certain path of any of the lithium producers I know of to get to where we want to because we have 2 operating mines, we have the rock in the ground and a lot of it. We're in the right jurisdiction where we're probably going to have the least disruption. And we've probably got the 2 best hydroxide operators in the world with Ganfeng and Albemarle. So and we are going to build those plants, and we're going to do it as quick as we can. So yes, it's going to be a very big part of our business going forward.

And the reference today to building plants outside Australia with Albemarle, can you name the continent where that's most likely to be? Is that Europe, North America, Asia?

Quite honestly, I mean we still -- there'll be some in Asia, there's no doubt about that. But they're still through their marketing, they're still trying to understand where the best places are to put them for the future.

We will now move to the webcast questions before coming back to the questions on the phone. Your first online question comes from [ Praveen Mani ] who asked, "Could you talk about the use of the offtake from Mt Marion after the tolling agreement with Ganfeng ends?"

Yes, sure. So you'll notice in there that we do have the right to extend with Ganfeng through mutual agreement. And I think they'll be keen to. But look, our first priority, again, is being able to make sure that we changed that part of that business. We wanted to get that offtake back, and then we wanted to get that agreement in place with Ganfeng. That's a starter. And it just gives us some time to breathe because we've had so many different projects and things on our plate over the last 6 months and to be able to cover off on all of these, all of this take a lot of effort and time to be able to get the right agreements in place and get the planning done. But that's basically an interim agreement that will give us some breathing time so that we can work out whether we can extend that with them. Pretty sure we can. They've said they'd like to. But that's as far as we've got so far.

Now moving back to the phone questions. Your next phone question comes from [ Alex Ren ] with Credit Suisse.

Chris and Mark, two from me, please. I guess, first on lithium pricing. So many of your lithium peers have provided forward-looking price guidance. So could you give us some more color on that? And it looks like what I realize is currently it's towards the low-end WAC comparing to peers. And with the new toll agreement -- toll treatment agreement at Mt Marion, how will the pricing mechanism work? Does that mean to see, I guess, much more upside on spodumene price realization? So they're trending towards maybe spot, maybe the $2,400 contract price that you just quoted. I'll be back with a second one.

So let me try and understand that. The pricing for what we're doing at Mt Marion. So all of the lithium, all of the spodumene that goes out of Australia, it has to go -- it has to be sold at market value, whatever that value is. So I mean, that's where it's a little confusing at the moment. I had a discussion some time ago with the Mines Department on how any of us understand exactly what market value is. But we have that model, that formula that we've used for the last 4 or 5 years. So that product goes from the Mt Marion Mine, which we call the RIM JV, and it goes 49% to Ganfeng, 51% to us. And then when it goes offshore, it gets -- simply gets converted, and we have a model over with Ganfeng and we understand what the costs on that are. What was the other part of your question?

He's looking for guidance on price outlook, I think, if I heard the question correctly, Alex. I think Alex was -- on lithium.

On lithium or hydroxide?

On lithium generally, I think, was the question.

I wouldn't mind going back to you guys and getting it.

Alex, it's Mark. If I could just add to Chris' answer. With Ganfeng, we've got a wonderful partner. We've worked very closely with them for a number of years, and we'll work with them on the best structures from a tax and funding perspective to get the right outcome for the business. In terms of the price guidance, we are in the habit of trying to guide on price. In fact, we focus all of our numbers looking forward on volumes rather than price. So we leave it to the market. And you guys obviously understand the challenges, particularly in the lithium space at the moment.

Understood. I guess -- sorry, the second question comes as a follow-up on Glyn's question regarding the pricing structure at Wodgina with Albemarle. At least for the internal consumption part. Are you engaging with, I guess, the ATO on the potential risks around transfer pricing? At least looking at the current market dynamics, most of the margins would be flowing through downstream offshore. Hence, I guess, potentially running into trouble with the ATO?

We are. I mean we are concerned with that. We're very transparent with our concerns around that. But look, at the end of the day, I mean, we continue to manage and use the same models we've always used. And there is no gain. I mean MinRes is 100% Australia, and there's no gain in us trying to lessen the price that we put spodumene offshore for because eventually, it gets converted offshore. It gets sold offshore, but all of the money that we make out of that comes back into Australia. So we pay the tax. So it's not like we can escape but we don't have an offshore arm to the business.

Your next question comes from Stuart McKinnon with the West Australian.

I'll go ahead, Chris and Mark. This question is probably directed to Chris. Just in relation to the borders reopening. Obviously, there's been a lot of talk in WA around this issue and as you'd be aware, the Premier announced a few weeks ago that February 5 wouldn't go ahead. The opening of February 5 wouldn't go ahead. Are you at the stage, Chris, where you believe that it's time to set a date for the WA border to reopen? Or are you quite comfortable with the current settings around that?

No. Look, quite honestly, I think that I've always been very comfortable the way the McGowan government has managed us through this COVID. I mean I think a lot of people love to go on holiday or go out east or the like. But my focus here on the business is to make sure that we keep all our people fit and healthy and keep them employed so that they can keep earning money to take home and pay for their mortgage and their kids' education. So our priority has been trying to keep the mines open. And I think when he made the call to keep them shut to extend the hard borders, I think it was a great call because we were probably going to have in the order of, I think, 20,000 plus people a week coming into the borders. So they're going to bring COVID straight in and everyone was saying, "Well, what happens to all the small business?" Well, they keep operating the way they are now. If you let -- if COVID come in and we just let it rip us outside on east, I think it would have shut in a lot of businesses and people would be doing what they're doing at east, they'd self-isolate. I'm very comfortable doing what -- following the lead that Mark McGowan is following because if we just let the people trickle in and try and keep the curve down, we've got a chance that we might be able to get through this without getting brutalized.

Your next question comes from Lachlan Shaw with UBS.

Chris, a couple of questions here. So just firstly, on the iron ore business. Just interested to understand what the strategy is to bring the upstream assets back in profitability. And also -- just what's happening with current realizations as well given that we're seeing benchmark 63% around $150 a tonne.

It's Mark here. In terms of the realizations, we don't expect them to -- we don't expect the discounts to widen, have come in at touch, but we don't expect them to widen. In terms of bringing them back to profitability, as I said in my comments, slightly under half of the loss was referable to a prior period adjustment and a big chunk of the cost impact set outside the mine gate. So shipping cost impact, $151 million PCP is going to change with the shipping market, and we're seeing signs of that already. In terms of the off-site haulage, that was a $54 million impact on PCP basis. That's primarily driven by access to haulers to transport the product through COVID. We basically had to pay more to get the tonnes moved. So you can expect those numbers to come back particularly on the haulage as we start to get a little bit more flexibility into the supply chain. So turning it around -- it's less of an issue around cost of the mine gate or inside of the operations. There has been some impact there, but not enough to really drive the profitability or otherwise.

Got it. And so just to follow up with the iron ore business. So Ashburton, are you still looking to take FID on that midyear? And just where does that fit in respect of the government approval process? Have you got the approvals lined up or when are they coming through?

So we've got majority of the approvals through in terms -- the big one was in and around the port. We've still got some detail that we're working through on that, but the major approvals are done. And then most of the access we need from port right through to mine site, we've got that -- almost all of that in hand. There's some other stuff in there that will happen progressively. But we don't need it to happen before the project starts, if that makes sense. So all of that sort of gone pretty well. We've also got the benefit now that we've entered into the Red Hill JV with API. We've got the benefit of a lot of the other approvals and arrangements and agreements they had in place. So we kind of -- well, we inherit those.

Got it. And then look, just second question on the lithium business. So just with Mt Marion, obviously, 4% was close to half production in the December half. How should we think about the split between 5.5% and 4% spodumene for the rest of the financial year? And then secondly, in terms of the expansion that you're looking at, at Mt Marion, again, how should we think about modeling 5.5% versus 4%?

I think for the rest of this financial year, it's not going to change a whole lot to what's happened. It will probably sit around that. Look, in terms of -- the 2 studies that we're doing out there right at the moment do nothing at the moment. As soon as we get through those, we'll make a decision. We'll get that announcement out, and we'll tell you exactly what that means to extra product on the ground. And if we're going to do that, we'll obviously change our guidance straightaway.

Your next question comes from Rahul Anand with Morgan Stanley Australia.

Chris and Mark, two for me. Look, you have addressed a few questions already. But firstly, on the mining services, 5-year guidance you've got 50% to 20% CAGR over the next 5 years. I just wanted to understand, is this tonnage guidance, is this revenue guidance? Is this EBITDA guidance? I guess I'm trying to understand whether the construction revenues that you'll get, which are very, very low margin, are part of that guidance for the 15% to 20%?

We will always try and give guidance in tonnes. We're not in the habit of doing it around EBITDA. But so that all the guidance there is based on tonnes.

So that [indiscernible] construction.

Sorry, Rahul, it's Mark. I was just going to add on the construction piece. We don't run the construction business as an external sort of profit generator. And over the next 5 years, that team -- or those teams are going to be very much focused on internal delivery.

Perfect. Just one follow-up there, Mark, if I may. I noticed that in the last full year results, you had about 30% of contracts in terms of revenue coming up for renewal over the next 5 years. That number seems to have risen to about 65% of the Mining Services revenue. Were there a fair few contracts that are sitting on the cost? And can you provide a bit more color as to what contracts are these, internal, external? And how should we think about that revenue longevity?

So Rahul, I think the best way to think about it is we can point to a track record of retention over the last 15, 16 years as a listed company, probably unparalleled. So we've had 100% retention rate through this half. And it's basically because of the relationships we have with the customers and the way that we go to work with them. So I think in terms of the -- trying to get a better flavor for the book and what it looks like going forward, I'd be thinking more in terms of the growth opportunities. The market needs players, us, who can respond with agility and in ways that sometimes difficult for others, right? So we see a lot of opportunity going forward. We've got a great track record in terms of retention that we can point to. We don't expect that to change.

Perfect. No, that's fair. That's fair. Okay. Second question was on Mt Marion. Chris, you talked about 2 projects. One is the ultrafines and one is the [ vessels ]. [ Vessels ] Is pretty straightforward. With the ultrafines, I wanted to understand, are you aiming to basically have better blasting so that your fragment sizes are bigger and the yield goes up in the plant? Or are we talking about a significant CapEx item in any way here for Mt Marion. And then also the timing, how should we think about when this extra production can come?

Okay. So on the timing, we're thinking that we're going to have it sort of finalized so that we can approve it, and that is getting the test results back. But we're thinking that maybe around August, September, we might be able to have that in place. And in terms of CapEx, it's fairly minimal. It's a lot to do simply around changing some gear out down there for some other gear that we've got. Cone crushers will be going in. And it's just basically giving the rock a lighter touch, nothing to do with the blasting. It's all in the plant. It's giving the rock a much lighter touch and trying to minimize the ultrafines generation because once it gets into the ultrafines, I mean it's really hard to recover the lithium units.

Perfect. That makes sense. Can I sneak in one more on [indiscernible] if that's okay. That just relates to the production grade. You've talked about that in the presentation today, 60.5%. It's obviously a bit higher than the resource grade and I understand there might be some beneficiation there. Is it simple web beneficiation similar to 4Q? Or are you looking at something different here?

No, it's pretty simple basic beneficiation. So that deposit out there is sort of -- there's no real drill and blast in it. It's pretty much the whole deposits pretty dig back into the back of a truck. So the in-pit part of it is fairly low cost. Then it goes into -- there's probably about -- between 10% and 15% that needs a light crush. And then it's straight into the [indiscernible] plant, and it separates and the waste goes out in the product in the other stream.

Your next question comes from Paul Young with Goldman Sachs.

First question is on the crushing contracts. Note that you had a pretty decent step-up in external revenue PCP and you took on those 4 new contracts. Chris, what commodities were they, if you can help us? And also were they all crushing contracts or were they some actually -- were some of those mining contracts?

No, look, there's a mixture in there of crushing and mining. We've got a very specialized mining division, and we've got -- we're able to secure high-quality mining equipment and have been able to over the last few years where others can't. But look, it's a combination of mining and crushing, and it's -- we're heavily into the iron ore area. Obviously, I mean, the equipment we run can deal with that. We've got really good experience in that area. But there is also that we recently -- one of the contract we just won recently, there was a little one up in the territory crushing some spodumene. But it's a mix. There's a bit out there in the gold industry. We tend to only be able to work for the bigger gold companies because of the safety regime that we and they run. But look, it's a bit of a mix. And I mean we kind of know where a lot of our clients are headed over the next 3 years at least. We get some good consultation with that. But there's also the element of surprise, things come out of the blue where they need our services. We carry a huge amount. We've had several hundred million dollars' worth of crushing and processing equipment that we keep in stock.

And then a question on CapEx and the guidance increasing by $100 million. Obviously, everyone's wearing inflation at the moment, particularly in WA. Can I actually ask a question around the Ashburton $2.4 billion to $2.55 billion capital estimate, and that estimate's probably a pretty rapid inflation estimate? Are you still comfortable how robust is that estimate?

Yes. No, it's a pretty tough number. Just bearing in mind that there's no real technology in this project. There's no black boxes in it. I mean we've got to build a road, we've got to build a port. I mean, all of that is fairly straightforward. The port that we're building, it's a very shallow berth. I mean the transhippers draw about 6.5 meters of water when they're fully laden. So not a big deal on that. The storage -- everything is under cover on Ashburton. So it's a completely dust-free environment all the way from the mine through to the ship. But I mean, probably our biggest risk on that was the transhippers there. These transshippers are a first in the world. They've been designed in-house using international marine consultants. They would be our biggest risk on the project. But we've just let the first 2, and we got down to the number we're looking for, and we've got them one of the big, big shipyards. So I think we've pretty much got it covered. We're building shades. We're opening up pits, building a road -- the road, if you're going to build a road, I mean, that's the place to build it. I mean, you can almost see the mine site 150 K out. So it's pretty flat.

Great, Chris. Final question just on the CapEx theme. And looking at the Hancock joint venture, when will you have a capital estimate to on a 100% basis and therefore, your share? And it seems to me that's a low-risk project because it's rail versus road versus Ashburton. But how do you compare the IRR versus the 2 in the risk profile?

Look, the risk is -- I consider the risk at Ashburton extremely low. I mean what we've built, I'm going to say we're probably built 400 or 500 Ks of road ourselves in the last 5 or 7 years. So we know what we're doing with that. We've got -- we've got a big bridge to build over the highway, but we've got main roads that are going to build it for us, and we've got a number of them. Building out in -- with Hancock's from the Royal Hill line, I mean, that's a fairly safe operation. We're going to put another berth in the harbor, and that's been done about 17 or 18 times before. We're going to add to an existing rail. We're going to add to an existing stockpile. So it's all fairly low risk manageable in terms of the capital. We're expecting FID to be June this year. So Hancock has got a fairly big team working through right now on getting all those numbers pulled together. We'll have them over the next couple of months. And we'll -- I expect FID will be about mid-June.

Okay. That's great. And then a just a follow-up maybe for Mark around the IRR. Mark, how do you think about the returns of Ashburton versus for Port Hedland?

I'm excited by them. Is that a good answer? They're both -- look, they're both robust projects. They both offer us mining services opportunities with long life. Marillana is obviously a different grade to Ashburton. So in different parts of the market, but I don't have a preferred child if you're asking that question. But come back to what I said earlier, each project we look at has got to be able to deliver at least 20-plus percent return on invested capital after tax. And that's -- that's not assuming $100 or $110, that's assuming sort of long-term guidance prices, given out by guys like you. So both of them are robust, and I'd be I think I'd be excited to have either in the portfolio, a little on both.

Yes. Thanks. I know it's a trail of questions, guys. But just one last one. Chris, just on FID in June, looking presentation, says, 2 years of approvals on the Pilbara, is the FID around the port as opposed to the mines?

Look, it's as a project as a whole. We can't have the mine if we haven't got the rail or the birth. So the whole thing is a packaged deal. We've got to make sure they all line up. We've got to make sure that the cost of the dredging is what we think it is. So we've just got to make sure we lock all those numbers down. And then we relook at the project and make sure we're going to get what we want out of it. Just a little bit more on that question, you were talking with Mark on the difference between the 2 projects is that they've each got some good and bad in them. So if you compare costs, costs are going to be a little more elevated on the Marillana JV as compared to the Ashburton one because we're moving a lot of tonnes there because we beneficiate. We move a lot of tonnes and send some waste back. We have to still road haul probably 100,000 down to the rail head. And then it goes -- once it goes on the rail, we get it down for a fairly low number and into a ship. When we pick it up in the Ashburton, and we're only 150,000 out as opposed to 300,000 out. And those big trucks that we operate, I mean, the cost per tonne kilometer on them is comparable to the trains that we're running in the Yilgarn. So they've all got their plus and minuses, but if all gets down to -- if it's USD 40 a tonne, we're still operating, and we're still making cash.

[Operator Instructions] Your next question comes from Paul McTaggart with Citigroup.

I just want to follow up on the agreement with Ganfeng around tolling. So obviously, you're doing that because you're trying to pick up a bigger piece of that margin -- the hydroxide margin. So can you give us a sense of -- in terms of kind of realized price for spodumene for you, how that might change as you go to a tolling agreement? Because obviously, we've kind of put some tolling costs into our numbers, at least for the 7 months.

What I said earlier was that with Ganfeng, we've got a great partner, we'll work through the structuring. One version is that we're just selling it market price as we currently are. And that picks up Chris' point around the whole transfer pricing issue, but the other extremely effectively do it on consignment. And so that's less likely, right? So we're just working through and part of the consideration is tax optimization. So not that I'm allowed to say that, but that's one of the things we have to think about. So I think to make -- Think about it this way. The best way to think about -- the simplest way to think about it is we continue to sell the spot at market and then we take a clip on the hydroxide down the track.

Just if I can strip a bit more, the commodities, iron or whatever they are always have to go onto a ship at market price because there's 2 things. One is that the state government needs the right amount of royalty. And that's got to be very transparent, so we're very careful with that. We stay in touch with the state government on that. And then secondly, I mean, whether we sell the spot for $1 a tonne going out of the country, and we still own it when it goes out, it gets converted as hydroxide. And regardless of where we make the profit, all of our money is -- comes back into Australia and we pay the full amount of tax. So there is no advantage in trying to even do any price transfer, not that we would, but there is no advantage. The tax department, I think, is very relaxed with us because no matter what happens, they pick it up.

Your final question today comes from Robert Stein with CLSA.

Just a quick one on short-term pickup in iron ore pricing and the recent news out of China relating to pollution restrictions being unwound or deferred. Are you seeing a change in procurement practices by the mills that you're selling ore to and an increased demand for lower grade ore? And the second question I have is more -- is a longer-term one around Brockman, but I can come back to it.

Look, it's hard to get any real transparency at the moment through to in terms of the ore but, look, certainly, there's always a very strong demand out there for the lower grade ore. They -- I think when they get it into the mill and they do their blending, I think they obviously enhance their bottom line using low grade. But I mean, we don't get much visibility over what's been happening in there and over the last 3 or 4 months.

And then just on a longer-term question around strategy around Brockman. So with the FE grades and the announced intention to share infrastructure through Roy Hill, is there any sort of opportunity for blending and optimization of grades across both mines, as you enter into that relationship? Is that part of the current sort of that field of agreement that you're trying to drive with China?

Look, I would think probably not. A lot of the time, there's no real value in blending the ore because if you're blending a good grade ore with a poor grade ore, you almost end up where 2 and 2 equals 1 7/8. So the cost of doing it to start with it is difficult. And then if there's different ownership, that becomes difficult. So it's -- there's not very often a value add in it. A number of companies, they do have blending yards in China like Rio Tinto. I've got one over in China, and I think FMG have got them. So in certain instances, they find value in doing it that way, but not -- I don't think there's any for us. And certainly not -- I don't think we'll be blending on so with Marillana. That's almost certain that, that wouldn't happen. And I don't think that -- sorry.

I don't know, sorry. Even with the [ CR ] deal that forms part of the drop in reserves? Or is that -- are we just thinking that as discrete products with discrete realized pricing?

Yes. Look, I think we'd want discrete products and what we've looked at so far. I mean, our experience tells us that it's a better outcome for us financially.

Thank you. That's all the time we have for our question-and-answer session today. I'll now hand back to Chris Ellison for closing remarks.

Okay. Well, look, thanks, everyone, for joining. I think we had some good questions. We've given as much information as we can. We will have more news flow certainly over the next 3 and 4 months. And as that comes available, we'll make sure we get that out into the market straight away. And as these projects get to a start-up, we'll certainly be all over the funding. So -- I don't want to say just trust us, but our track record kind of suggests that we're more than capable of delivering what we commit to. And it will all become clear, I think, over the next 3 months of exactly how we intend to put all that funding together. So don't stress over it. We will give you a road map on exactly how that's going to work as we go forward. You'll have plenty of time on that. So look, thanks, everyone, for joining. Thanks for everyone behind the scenes and helping me pull this together. It's been a great job from our team as always. And we will talk again probably in about 6 months from now. Thank you.