PLS Group Limited ($PLS)

Good day, and thank you for standing by. Welcome to the PLS March Quarterly Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Dale Henderson, Managing Director and CEO of PLS Group. Please go ahead.

Good morning, and good evening. Thank you for joining us today. I'll begin by acknowledging the traditional owners on the land on which PLS operates, the Whadjuk people of the Noongar Nation here in Perth, and the Nyamal and Kariyarra peoples in the Pilbara. We pay our respects to elders past and present. I'm joined today by Flavio Garofalo, our Interim CFO; and Brett McFadgen, our Chief Operating Officer. Today, we are reporting a record quarter and a step change in financial performance. We will take you through the quarter and then allow time for questions. Now before turning to the results, I'd like to frame what is happening in the lithium market. Lithium remains a young capital-intensive industry that is still scaling rapidly. Demand can move quickly, supply response more slowly and capital is cyclical. That combination means volatility is structural. In that environment, value doesn't accrue evenly. It concentrates in operators with structural cost advantages, strong balance sheets and discipline to pace capital through the cycle. That is how we've built and manage PLS. Through the recent down cycle, our focus was to strengthen the operating platform, lower unit costs, preserve financial flexibility and maintain growth optionality. This quarter shows that model working as designed. We delivered record production of 232,000 tonnes, materially stronger pricing and a significant increase in cash generation, closing the quarter with approximately $1.5 billion in cash. Importantly, this is not simply price leverage. The work undertaken through the cycle is now converting directly into margins, earnings and cash flow. Please turn to Slide 2. Our strategy is consistent. To operate at scale, maintain low costs, preserve balance sheet strength and deploy capital in a disciplined way through the cycle. We manage the business as a system. Operational performance drives margins. Margins convert to cash, and that cash gives us flexibility to control the timing and sequencing of growth. Capital discipline is central to them. We invest only when returns are compelling through the cycle, not in response to short-term price movements. Moving to Slide 3. PLS is positioned to create value through the cycle. First, our asset base and cost position, high-quality 100% owned Tier 1 assets with a cost structure that protects margins in weaker markets and expand them as pricing improves. Importantly, that ownership means our shareholders retain the full benefit of that operating leverage, a distinctive advantage amongst our peers. Second, the balance sheet. With approximately $1.5 billion in cash and approximately $2.1 billion of liquidity gives us control of the timing and ability to act from a position of strength. Third, execution. As you've heard today, record production lower unit costs and strong cash generation reflect a platform that is performing reliably and converting into financial outcomes. And finally, disciplined optionality, multiple pathways to grow, activate it selectively and only when returns are resilient through the cycle. Turning to Slide 4. The March quarter demonstrates strength and operating leverage of the PLS platform. Production was a record of 232,000 tonnes, reflecting strong operating performance across the business. Pricing improved materially with realized prices up 61% quarter-on-quarter to $1,867 per tonne on an SC5.2 basis. That translated directly into financial cash outcomes with revenue lift to 52% to $567 million, cash margin from operations rose 178% to $461 million, and we closed the quarter with approximately $1.5 billion in cash. On growth, the Ngungaju restart remains on track for July and the P2000 and the Colina Project studies continue to progress. Now with that, I'll now hand over to Brett for an update on operations.

Thank you, Dale. Moving to Slide 5. Safety is our highest priority, and we never lose sight of that regardless of our operational performance. During the quarter, we recorded 3 injuries. A total recordable injury frequency rate increased slightly to 3.82. Each injury is a reminder that our work here is never finished. What I do want to highlight is the lead indicator performance. Quality safety interactions reached 4.13 per 1,000 hours worked, well above our target of 1.6 and up from 3.8 in the prior quarter. That reflects continued delivery of our in-field leadership programs and deeper frontline engagement with our critical risk management framework. We remain focused on translating that engagement into improved outcomes. Moving to Slide 6. The Pilgangoora operation delivered a record quarter, and I want to walk through the key drivers. On mining, total material mined increased to 9.9 million tonnes, up from 8.1 million tonnes in the December quarter. This reflects improved operational efficiency and the planned ramp-up in waste stripping to support the Ngungaju restart. Ore mined came in at 1.3 million tonnes, consistent with our mine plan. On processing, plant reliability was strong. Lithium recovery was consistently high at approximately 75%, a reflection of the capability embedded through the P1000 expansion. The ore sorter continued to perform well, providing operational flexibility despite elevated contact ore feed. On costs, FOB unit operating cost of $520 per ton or USD 362 per tonne was 11% lower than the December quarter. That improvement reflects both higher production volumes and the benefit of our continued cost focus. On sales, volumes of 195,000 tonnes were on budget. Moving to Slide 7. Fuel and supply chains, we're monitoring the global supply chain environment closely, particularly in the context of ongoing geopolitical tensions and their potential impact on energy markets and key inputs. Our energy mix at Pilgangoora is deliberately diversified. Our processing infrastructure and site facilities are powered primarily by locally sourced LNG supported by solar and battery systems. Heavy mining equipment runs on diesel. This diversified structure reduces our exposure to any single energy source and diesel represents only 4% to 5% of total historical production costs. At this time, we do not expect any material fuel shortages or supply disruption, and we are working closely with our long-term contracted suppliers to stay ahead of any emerging risks. The same applies to our other key inputs, explosives and processing reagents, where we're currently seeing no supply constraints. I'll now hand back to Dale to cover growth and chemicals.

Thank you, Brett, and well done to you and the full operating team for attracting set of results. Moving to Slide 8. Our approach to growth remains disciplined and unchanged. Staged returns gated and supported by balance sheet strength. Having preserved operational capability and financial flexibility through the down cycle, we are now able to advance growth from a position of strength and timing control. Ngungaju is the near-term step with the restart on track for first draw in July and ramp up through the September quarter. Beyond that, P2000 and Colina continue to progress through their respective study phases, preserving longer-term growth optionality. Across the portfolio, capital will only be deployed when returns are resilient through the cycle. It is an option, not an obligation. Moving now to Slide 9. Our approach in chemicals is consistent with our broader strategy, preserving optionality across the value chain while maintaining capital discipline. For the midstream project, we have materially advanced the project by completing the ownership restructure with Calix securing up to $38.1 million in ARENA grant funding care of the government and secured offtake with Ronbay, a leading cathode maker for LFP. Commissioning has now commenced with first product expected in the September quarter that meaningfully derisks the pathway. At our JV with P-PLS, both trains have restarted and are producing battery-grade material. While downstream conversion margins remain challenging, we have retained the flexibility through an agreed extension with POSCO on our at-cost option to increase our ownership from 18% to 30%. We've moved this through to July '27. And P-PLS continues to engage with additional customers on sales. Taken together, these initiatives provide PLS with staged downstream participation and the ability to scale exposure selectively as returns become compelling. With that, I'll now hand over to Flavio for the financials.

Thanks, Dale, and good morning, everyone. Please turn to Slide 11 for a review of the key financial metrics for the quarter. March was a strong quarter, and the numbers reflect that clearly. Revenue of $567 million was up 52% on the December quarter, driven by a 61% increase in price, while sales were in line with our plan. On costs, FOB operating costs came in at $520 per ton, down 11% quarter-on-quarter, driven by higher production volumes and the benefit of capitalized waste stripping flowing through the cost base. CIF unit costs moved slightly higher to $733 per tonne, up 2%, reflecting the impact of higher royalties on stronger pricing, which is a good problem to have. While unit costs are expected to increase in the June quarter with the restart of the Ngungaju in July, our full forecast remains within guidance underpinned by the discipline of our Cost Smart culture. The combination of stronger pricing and lower unit cost underpins the material uplift in operating cash margin this quarter at $461 million, up 178% on the prior quarter and I'll speak to the cash flow in detail on the next slide. Moving to Slide 12. Slide 12 shows the cash flow bridge for the March quarter. The bridge shows approximately $500 million increase in cash for the quarter, closing at approximately $1.5 billion. This was driven by strong operational cash margin and the receipt of USD 100 million equivalent to AUD 141 million for the Canmax offtake prepayment secured earlier this year. Moving to capital. Capital expenditure of $95 million on the accrual basis comprised of $52 million of mine development, $28 million of infrastructure and projects and $16 million of sustaining capital. Interest, leases and other financing cash flows were $26 million for the quarter. In total, financing activities, leasing and foreign exchange movements resulted in a net cash inflow of $125 million inclusive of the Canmax prepayment, closing the quarter with a cash balance of approximately $1.5 billion. Taken together, it's a quarter that reflects solid execution and strong operational cash conversion, disciplined capital deployment and a balance sheet that continues to strengthen. Moving to Slide 13. Before I close, I want to highlight the bond transaction. As announced yesterday, PLS successfully completed its inaugural USD 600 million, 6.875% senior unsecured notes due in 2031. This is a meaningful milestone for PLS. The bond was competitively priced and extremely well supported by high-quality global credit investors, a clear validation of PLS' credit quality and business outlook. The debut offering is also strategically significant. It aligns our funding sources with the scale and long-term nature of our operations introducing long-tenor unsecured funding into our capital structure and adding genuine depth and flexibility to how we fund the business moving forward. In terms of deployment, a portion of the net proceeds has been used to repay the $375 million drawn down facility of our revolving credit facility. Alongside the bond closing, we have also reduced our RCF from $1 billion to $500 million, maturing our overall funding framework. On a pro forma basis, incorporating the bond proceeds and RCF refinance, our total liquidity position would have increased from $2.1 billion to $2.4 billion as of the 31st of March. PLS' revised debt capital structure provides significant flexibility for future capital allocation decisions and positions us well for the next phase of growth, underpinned by discipline, flexibility and long-term funding certainty. On a personal note, this is my last webcast as interim CFO and what a quarter to close on. I'm proud of the results we have achieved and the milestone the company has delivered with the bond offering. I look forward to supporting Alex as she steps into the role on the 1st of May. And with that, I'll now hand back to Dale.

Thank you, Flavio, and certainly a great quarter. Moving now to Slide 15 to update on the market. Sorry, we are speaking to positioning for growth. This slide highlights the scale of the PLS production platform today and the staged pathways we have to grow it over time. In calendar year '25, PLS produced approximately 100,000 tons on an LCE basis, positioning us among the top 3 primary lithium producers globally and that was with the Ngungaju processing plant in care and maintenance. With the restart of Ngungaju, we will restore P1000 installed capacity. Beyond that P2000 provides a clear brownfield expansion pathway while Colina adds longer-dated portfolio optionality. Importantly, these assets are 100% owned, which means we control the pace and sequencing of development and our shareholders retain the full benefit of future value creation. Because of that growth is staged rather than committed all at once, capital is also sequenced over time across sustaining enhancement and growth which we'll turn to now moving to Slide 16. This is how we translate that into capital allocation framework across a long-life asset base. With more than 30 years mine life at Pilgangoora, it is appropriate to invest progressively over time, sustaining the operation, enhancing it and then growing production when returns justify. We think about capital in 3 categories: firstly, sustain. The capital required to maintain the existing operation, including mine development and sustaining CapEx. As flagged here, FY '27 capital will be more heavily weighted towards mine development. Second, enhance targeted investment to improve the efficiency, reliability and long-term capability of the asset. Importantly, this does not increase production. It strengthens the existing platform at P1000 and positions the operation for future capacity growth. And third, grow, which is strictly production expansion, including P2000 and Colina and remains subject to study outcomes, FID and disciplined return thresholds. This framework ensures capital sequenced over time, sustaining the base, enhancing the asset and only then committing to growth when returns are compelling. We'll provide more further detail on FY '27 capital allocation alongside the June quarter update. Moving now to the market. Turning to Slide 18. Lithium demand remains structurally strong and has continued to broaden across both geographies and applications. Electric vehicles remain the primary driver of global EV sales reaching around 21 million units in calendar year '25 and approximately 7x the level seen in 2020, 5 years ago. Demand is now diversifying across regions. Recent data for March showed global BEV sales up 8% year-on-year despite China being the largest market declining 12% over the same period. This highlights how growth is now being driven more broadly across regions. Now as in China earlier this week meeting with customers, and that reinforce what we're seeing in the data, continued strengthening in EV demand, very strong growth in energy storage and the increasingly visible emergence of electric commercial vehicles. Trucks are a particularly interesting segment. In many respects, they are where energy storage was 3 to 4 years ago. Still relatively small in absolute terms but growing very quickly. Global electric heavy vehicle sales grew approximately 180% between '24 and '25 given the scale of the commercial vehicle market. The segment is developing rapidly. Importantly, battery sizes and heavy-duty vehicles are materially larger, in some cases, around 7x those of a typical passenger vehicle, which increases the intensity of lithium demand. As we have seen with ESS, segments that start small can become a much more material part of the overall demand stack over time. The result is a demand profile that is growing and increasingly diversified. That broadening demand base is important but the market outlook is ultimately shaped by how the demand growth interacts with a much slower supply response. Now moving to Slide 19. This slide brings demand and supply picture together. On the left, you can see that lithium demand is expected to broaden materially over time with both EVs and energy storage contributing meaningfully to the demand stack. Set against that, the middle chart shows the gap emerging between projected demand and high probability supply. And on the right, the reason becomes clear, new suppliers taking longer to bring online with mine development cycles extending further over time. That combination of broadening demand and slower supply response underpins a market where volatility and periods of tightness are likely to persist. In that environment, scale, cost competitiveness, balance sheet strength and staged brownfield growth pathways become structural advantages. Importantly, value increasingly accrues to operators who are already in production and able to deliver tonnes rather than projects still subject to long development time lines and execution risk. The PLS -- that reinforces the strategy we have outlined today: sequencing growth deliberately, maintaining discipline through the cycle and allocating capital only where returns are compelling. So to finish with some closing comments, the March quarter demonstrated the strength of the PLS platform more clearly than any quarter before. We delivered record production, strong margin expansion and a material increase in cash generation with a structurally stronger balance sheet. Importantly, this is not price leverage alone. The work undertaken through the down cycle is now converting into results. This is operating leverage built deliberately. PLS is a business producing at scale with a cost competitive position and strong balance sheet and growth we can sequence from a position of control and a volatile capital-intensive market, value does not accrue evenly. It concentrates in operators with cost discipline, financial strength and control over the pace of growth. PLS is built to do exactly that. Finally, I want to acknowledge Flavio's contribution during his time as Interim CFO, including supporting our debut unsecured notes offering and stewardship of the finance function. As planned, Flavio will remain part of the senior leadership group within the finance team, ensuring continuity as we welcome Alex Willcocks as permanent CFO starting next Friday, May 1. And having worked closely with Flavio this last while, there's not many conversations that don't involve a quick analogy. So to that end, 5-year grade earnings, well done on hitting a 6 at the end it's literally a -- with a 6% coupon rate. I would note that debut bond is the first in the Australian high-yield market for metals and mining since 2019. So a cracking 6 to finish. So thank you, Flavio. And thank you all for your time this morning. I'll now pass to Maggie to open the line for questions.

[Operator Instructions] First, we have Kaan Peker from RBC.

Good morning, Dale and team. First one is on Slide 27 spend. I know you've flagged assessing multi infrastructure upgrades. Maybe if you can talk through what quantum you're considering? And does that imply anything for FID for P2000?

Yes. So thanks, Kaan. We can't offer any numbers at this point. And really, the purpose of today is just to flag, we've got work underway on these particular projects. And as per the release, we will provide more detail with the FY '27 guidance.

Sure. And maybe the second one, on the POSCO JV, is there any additional funding requirements that may come through in sort of the next 3 to 6 months for that?

We're not anticipating anything through certainly this financial year. So we're all okay in that regard.

We have Ivy Spry (sic) [ Levi Spry ] from UBS.

Yes, I think that's Levi. Maybe if I can just push a little bit more on the Slide 16. Is there any reason why the sustaining and mine development would be any different from this year? And then I guess, on the enhanced piece, what have you said there before in terms of particularly those first 2 items, the road and the village?

So in terms of the sustaining CapEx, your mine plan is still being finalized. It will be -- I suspect broadly close to what we had last year, but I can't confirm that until we complete the process. As to the enhancement works. Those investments are abundantly sensible for the future of the mine. In the case of the access road, ultimately, what that unlocks is going from triples to quad, such as obviously a cost reduction. HME facilities is obviously about supporting the owner-operated fleet we brought on the last couple of years and part of the reason we're seeing the strong cost improvement and the permanent village is very much a necessity as we look to move from what's a combination of secondhand camps, which have grown over time, moving to something much more fit for purpose for a 30-plus year mine life. And I should probably just sort of add that when you think back to the journey of Pilgangoora, it's come a long way, the progressive resource upgrades, particularly through 2019, the acquisition of Altura, we've significantly extended the resource. And with that, also significantly extended the tenement package. Now with that, it's abundantly sensible that we've got to move some of the infrastructure effectively to make way for the larger resource we get to develop. So this is what we've got lined up to do over time. And as I say, we'll provide more visibility with FY '27 guidance.

Next, we have Glyn Lawcock from Barrenjoey.

Just on the fuel side, firstly, could you just confirm you've secured the fuel for the Ngungaju restart? And then just when you talked about the diesel as a percent of cost base, 4% to 5% that looks like it's about $10 million per quarter or about $40 million per year you spend on diesel. What's been the cost has that gone up now? Has it gone up 50%, 100% when you look at your cost of diesel. And then I've got a second question.

Yes, Glyn, it's Brett here. Just on the -- I'll take the fuel for Ngungaju and then hand over to Flavio on the cost side. But we've been working with our suppliers for some time and highlighting our return as we announced with the Board for Ngungaju. So we've got that in the works, and we're working with them. Again, our main power is LNG sourced locally for our processing and support infrastructure. So the diesel is for the mining. So we've got to cover it and working closely with our suppliers.

Glyn, you're correct. In terms of the diesel percentage, it is around 4% to 5% of the production costs. In terms of liters, you're pretty close on the mark for that. The majority use obviously for the diesel is on our heavy mining equipment fleet, which provides feed to the plant.

Okay. So I just worked out $40 million per year as your diesel cost, has that gone up, what, 50% with where diesel prices have gone or not? Is it something different?

Yes. No, it's not that significant. As I mentioned, it's around 4% to 5% of the production cost, and it's not a really material amount. In terms of overall guidance for FY '26, we still expect to be within the $560 to $600 per tonne of FOB. So we don't really see it as a material impact.

Yes. And that was a great quarter on costs. And I mean, when I do the numbers Flavio and this is my last question. You take the last 3 quarters, C1 production volume, you've actually been very steady at $120 million per quarter spend from a C1 perspective. If you could call out diesel, you call out the Ngungaju costs that are going to enhance impact you in the June quarter without the volume. What does the $120 do? Does it go up 10%, 5%, but it's been pretty consistent. So congratulations on that front.

Yes. Look, I would probably turn towards the lower percentile quartile that we're in the 5% or less. But as I mentioned, we are very comfortable in terms of our guidance notwithstanding the impact that we're seeing with the increase in fuel costs, we're still very comfortable with our guidance for FY '26.

Glyn, just to round out, just to add a little bit of color. I think part of the success the team has had here is from a production standpoint, there's been some really fantastic progress around mining productivity rates have gone ahead of plan. Recoveries have been -- continued to be strong in a couple of percentage points higher. You might recall as we commenced the year is all about maximizing contact ore feed, that's gone better than expected. So some of that has certainly helped offset where we've seen some of the other cost pressures. So yes, great work by the team.

Next, we have Rahul Anand from Morgan Stanley.

Congratulations on a good result. Look, I had one question on the cost, which was around pre-stripping side. I believe you've got a credit in terms of pre-strip this period in terms of your cost base. Would you be able to quantify that or just give us a feel for movement in terms of quarter-on-quarter or otherwise and how we should think about it in the next few periods?

Yes, Rahul, it's Brett here. So look, our mining, as Dale pointed out to before, is on plan, but we're ahead of price position care of some of the earlier productivity uplift than we expected, getting it in there with a lot of the activities we've done, particularly owner-operator, getting a better efficiency. So the uptick in this quarter in mine movement was also weighted towards some pre-stripping for Ngungaju get ready for that. So it will continue on. We will -- we were starting to increase the pre-strip as we go ahead into cutback in Central Stage VI in the next year or so.

Got it. So I guess, in terms of the capitalization, was there an element that was capitalized and kind of helped you lower costs as a result? I believe Ngungaju, you were going to expense the cost, but is there any element there in terms of P1000?

Yes. Flavio here. Thanks for the question. In terms of Ngungaju, you're correct, the costs will be expensed through the P&L. In terms of some of the capitalized stripping that's reflected in the capital expenditure on the cash flow in that element is around $40 million of mine development contained with that $71 million of cash outflow for the quarter and after the majority of the relation to the stripping.

Got it. Okay. And look, I had a second, but I'll let you decide if you want to take it or you want me to queue back? Not sure how your queue is looking at the moment?

Don't worry, go.

Okay, brilliant. Look, you did talk about the positive demand factors, Dale, at the start on lithium, which is great. And I think obviously, demand surprised everyone positively this year, which is great. There is also a new development in terms of sodium ion batteries that have been released by CATL. And I guess, in the past, when people talked about sodium ion batteries, there was a, I guess, for lack of better words, people didn't take it that seriously because no major player was involved. But now we've had one of the biggest battery producers in the world put out a sodium ion battery, which is quite attuned to colder temperatures and also ESS. Any views or initial views on that or how you're thinking about it? Or any color you can provide, I guess, it might be hard from a market perspective, but anything -- any color would be great.

Sure. Yes, no problem. Yes. CATL is every now and then rebroadcasts sodium ion as a potential battery chemistry and have been doing that probably for at least 2 years. And they touted potential through the work we have done and what we have assessed, it is a battery solution. However, it's very heavy and it's less energy dense. And for those reasons, it doesn't appear to play well for e-mobility and that sort of seems to be the consensus view. The other piece I'd add is to look at actions over words, CATL and other industry, you continue to invest heavily in the lithium-ion supply chain. And I think that speaks volumes as to directionally where they see the market going. So for us, we're not concerned about sodium ion as it ultimately becomes part of the energy storage set possibly but when we look at like the work of benchmark, notwithstanding it's predicted to be a very small component.

Next, we have Matthew Frydman from MST Financial.

Sure. Can I ask on the midstream work that you're doing? You put out a fairly detailed release here this morning. And I guess, specifically on the offtake agreement that you're talking about in terms of your agreement there with Ronbay. Obviously, understanding the volumes are small with the demo plant, but just wondering if you can discuss the pricing mechanism at all for that offtake. How do you determine a price for the lithium phosphate. And I guess, how might that compare to the price that you might have otherwise received for selling that spodumene into your other agreements?

Yes. Thanks, Matthew. Yes, we haven't disclosed that level of detail on -- it's commercially sensitive, so I cannot speak to that. But the -- what I can say is the pricing structure broadly works on the same principle as the way we think about spodumene in terms of utilizing headline chemical references and a proportion against that. We're very happy with the pricing, which will be printed against those, and we think it's appropriate and it is in line with the earlier work as we progressed to the midstream concept in terms of potential expectations around where we might be able to take pricing. But ultimately, as you said, this is a very small volume. But what's more important to us is proving up the process flow and optimizing and getting some volumes out to market and really testing pricing in the market because that will be the true determinant and with no sort of headline lithium phosphate indices or price points out there, we're really going to get real product out there to test that. And delighted to be part of the production profile with Ronbay; they're one of the biggest LFP producers and they're looking to support us technically as we look to optimize this. So we look forward to progressing in time.

Got it. Thanks for the information there, Dale. I guess, ultimately, as a follow-up, I'm just trying to get a handle on whether you're expecting a higher or lower or broadly equivalent price for the spodumene that you're sending to that plant? And then also, you referenced in the release I guess, an intention to kind of get more exposure to the cathode end of the value chain. I'm just wondering, is that part of, I guess, a broader overall strategy in terms of potentially underpinning future offtakes like for example, P2000, if and when you push ahead with that, is that relevant for offtakes there?

Yes, sure. On the first part, so the -- once the plant is fully ramped up, we will acquire about 20,000 tonnes of spodumene concentrate over the course of the year. So really small volume by component of that total production base, and there will be market priced into that demand plan. Of course, we've got 100% ownership now of the plant care of the restructure with Calix, which obviously, we will optimize the economics appropriately. As it relates to where does this ultimately head with the market and LFP and other cathode makers, well, this is the question we're seeking to try and answer. If you step back and you think about spodumene concentrate, it is an intermediate product on its way to achieve a battery-grade product. What we're really circling here is the better intermediate product. Now midstream may be lithium phosphate is the answer, maybe it's technical-grade lithium carbonate or lithium sulfide, et cetera, et cetera. This is really what we're working through to see if there's a superior economic outcome and a different intermediate product. And so yes, we're paving the way there. We'll have to continue to develop it further, test the market, but lithium phosphate could potentially go well in terms of accessing a broader market, given that we see this as a potential product to not only serve the existing customer set who are making hydroxide and carbonate, but if we can also access directly the cathode market that essentially skips a step of the supply chain and access a whole bunch of other buyers. So time will tell, provided you get the right quality, there's a lot to work through, and we're really on a yearly basis of testing this out.

Next, we have Ben Lyons from Jarden Securities Limited.

I just want to take you back to the numbers briefly, if possible, please. And just looking at that differential between sales during the quarter versus production. Obviously aware that there was a tropical cyclone towards the end of March. So maybe that was an influence on the sales being significantly below production for the quarter, and I assume it's just a timing issue going forward, and you'll clear that inventory during the June quarter. And then maybe the second part to it is just if I just multiply out that sales by realized price, again, there's a significant difference between that simple calculation and the revenue number. So just trying to track down whether that's a QP sort of influence or maybe it's about the realized pricing being struck at the 15th of April rather than at the close of the quarter. Just any comments you can provide on that.

Ben, it's Brett here. Yes. Just look, the sales and the production just unmatched was just the congestion around that cyclone at Port Hedland. Nothing else in there. We'll clear the inventory out with shipping through as we get through this quarter.

Ben, Flavio here. In terms of QP adjustments, we had the benefits from December in terms of higher pricing, which reflected through the March quarter. And we did pick up around $70 million worth of QP adjustments as part of those provisional pricing adjustments reflecting through that period.

Next, we have Mitch Ryan from Jefferies.

Just a quick question. As you ramp up the midstream product, can you just talk to any change in continual mix that you'll require? And do you have line of sight on that given the changes to the supply chain distribution we're seeing globally?

Sorry, that part didn't come through clearly. Can you repeat that?

Sorry, Dale. Yes, I was just asking if -- as you're ramping up the midstream product, what should we think about with regards to consumables? Do you have them on site? Is there any risk to those as given all the disruptions to the supply chain we're seeing globally?

Okay. Got it. Look, yes, I guess, bear in mind, this demonstration plant is quite small and in the scheme of business operations. As to consumables, at this early stage, we're not anticipating any issues in that regard.

Next, we have Andrew Harrington from Peter (sic) [ Petra ] Capital.

That will be Petra Capital. Congratulations on a great quarter. I took note of your comments, Dale, on the excellent sort of flywheel of your planning, production and revenue and now sitting on $1.5 billion in cash. I guess, the obvious question becomes shareholder returns, obviously important. What's the thinking on spending or distribution of that cash?

Yes. Thanks, Andrew. Flavio, do you want to take that?

Yes, Andrew, look, we have our capital management framework, which sort of clearly articulates how we allocate capital throughout the business. And we have a targeted dividend payment ratio of 20% to 30% of our free cash flow. And as you can see from today's results, we've got a very strong positive cash flow at current realized pricing. And as part of the distribution, we'll clearly look at this within the context of the capital management framework. And this is going to be clearly influenced by current pricing and operational performance through to now and the year-end. And on the assumption pricing continues at these levels. The Board will be well placed to consider dividend distributions along with the rest of the capital allocation within the framework for the financial year.

I might just add just a broader comment, Andrew, building on Flavio's outline, we're sort of 2 quarters into profitability post the downturn which was sort of circa 18 months. So we're early into -- back into sort of strongly positive financial territory. The question is where to from here. Now the wonderful sort of position PLS finds itself as we've got heaps of stock and the business now keeps a low-cost position, scale our production base. So -- and we're seeing really the start of that revenue generation and look, depending on your outlook for the market and pricing, we could go very well and be well positioned to not only fund projects, but support returns as per the capital management framework that Flavio mentioned. So this is really the key thing that management will be circling with the Board over the next while as we come into the end of the financial year.

That's all from the audio questions. I will now hand James for the webcast questions.

Thanks, May. We have a number of questions regarding dividends, which we just addressed. So we won't reread those ones. This question is, is the increased price of Tantalum making any considerable improvement to revenue or costs?

Yes, I can take that one. Tantalum is taken on as a byproduct to our FOB and it has increased considerably. It's not really that material in the context of things, but we'll take the benefits during the higher pricing environment.

Okay. Is there any talk of listing on the NASDAQ or any other exchange?

Not at this time. We don't see a benefit at this time.

Okay. Given the market cap and the growth of the company, do you even need the debt market? Is the plan to keep raising debt and paying down half year?

Yes, I can take that. The -- I guess, the evolution of the funding for PLS naturally has sort of moved us to that debt capital market with the overall U.S. bond that we took on. At the moment, given the strong cash flows that we have, we really are well placed moving forward to satisfy our capital growth within our capital management framework and more than sufficient at current pricing should they continue into the next financial year as well.

Okay. Thank you. Any plans to introduce electric mine trucks as happening at FMG?

So look, we love the idea of going electric. And of course, we're embracing that where we can. We've started in the base operation with lithium batteries and progressively increasing solar. Obviously, the midstream demonstration plant we spoke about today has an electric calciner of our partner, Calix, which by the way could make a very material impact in terms of carbon intensity for the supply chain. As to mining trucks, yes, love the idea. We're very much in the early phases of exploring that, principally because there's been limited development in terms of available trucks at this point. But of course, we're watching some of the big miners, and it's great to see the progress we're making. And we look forward to being hopefully a fast follower in due course.

Can you please outline what risks you are assessing in regards to disruptors to the lithium market and lithium-based battery usages?

Yes. So we -- in this regard, we keep of course, a close eye on competing technologies, and we study those with interest. And of course, within the industry itself, where we're obviously partnered with scale producers and operators who within themselves, of course, study this as well, and we triangulate with them. Out of all of that, we feel very comfortable about the trajectory of the lithium ion battery supply chain. For a couple of reasons. One is the tech has just got better and better, both in safety, energy density and cost. Second is the scale of the industry is now. And those 2 sort of compound on each other. And what we're seeing is an almost an unassailable lead on competing tech at this point. That being said, it's horses for courses for energy storage and look, e-mobility for lithium ion seems to be a real sweet spot as it relates to mass in use cases. There's lots of other tech competing in that space and time will tell. But as I say, we feel very positive about the trajectory at this point.

Okay. Thank you. How long would it take to scale midstream as compounders demand product?

Great question. And we are yet to sort of do a deeper work on that, scaling it would, to a full extent, would essentially be building quite a large chemical plant to take hold of whole spodumene cost trade product flow. And how long would it take it would be -- no doubt, several years post design. So we're well on the way to assisting them.

Okay. A final question. How important is the low carbon products to our Chinese partners?

So what we've observed over the years is an increasing focus on sustainability outright. Now, of course, carbon intensity is part of it, but it's broader than that. And we've seen increasing interest and focus through our customers. And this is partly because what we see is at the end of the supply chain, it's been demanded through some of the carmakers and the levels of measurement are increasing. So it is definitely part of the consideration in a way that much more present than it has been historically.

Okay. One final question. How is the study with Ganfeng progressing?

Yes. So we're continuing to progress that study with Ganfeng. We revised the study dates for that study, but we're continuing to work together on that one. Okay. With that, that completes March quarter results update. And again, congratulations to the team on delivering record production, a fantastic set of results. Incredibly proud of, and thank you very much to our shareholders for your continued support, and we look forward to updating you again in due course. Thank you for your time.

This concludes today's conference call. Thank you for participating. You may now disconnect.