PLS Group Limited (PLS) Earnings Call Transcript

Good day, and thank you for standing by. Welcome to the PLS June 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.

Thank you, [ Maggie ]. Good morning, and good evening, and thank you all for joining us today. I will begin by acknowledging the traditional owners on the lands in which PLS operates, the Whadjuk people of the Noongar Nation here in Perth and the Nyamal and Kariyarra peoples in the Pilbara, where our Pilgangoora operation is based. We pay our respects to our elders, past and present. I'm joined today by Brett McFadgen, our Chief Operating Officer; and Alex Willcocks, our Chief Financial Officer. Today, we are reporting a solid June quarter operating performance, which supported record quarter sales and some record full year outcomes. We will take you through the key operational, financial and strategic highlights before opening the line for questions. Turning now to Slide 2. This slide highlights why PLS is well-positioned to create value through the cycle. There are 4 key reasons. First, our asset base and cost position. Pilgangoora is a high-quality, 100% owned Tier 1 asset with a competitive cost position that provides resilience during weaker markets and significant operating leverage as pricing improves. Importantly, because we own the asset outright, that value flows directly to our shareholders. Second, our balance sheet. We finished the year with $2.2 billion of cash and approximately $2.8 billion of total liquidity. That gives us flexibility over the timing and funding of growth and allows us to act from a position of strength. Third, execution. FY '26 demonstrated the strength of our operating platform. We delivered record annual production in sales, exceeded production guidance and generated more than $1.36 billion of operating cash margin. Finally, disciplined growth. We have multiple opportunities to grow our business, but we will only progress those opportunities where they are supported by strong returns, financial discipline and, of course, market conditions. Together, these attributes position PLS to remain resilient through the cycle while capturing greater value as market conditions improve. Turning to Slide 3. The June quarter delivered strong sales, improved pricing, and substantial cash generation. Record quarterly sales of approximately 250,000 tonnes, together with a 13% increase in realized pricing to USD 2,107 per tonne on a 5.2 basis drove a strong financial result. Revenue increased 31% to $743 million, while cash margin from operations increased to $579 million for the quarter. We finished the year with $2.29 billion in cash. For FY '26, production reached a record 880,000 tonnes produced, up 17% on the prior year, while sales reached a record 892,000 tonnes. Together with improved pricing and continued cost discipline, the generated cash margin from operations was $1.36 billion. At the same time, we continue to progress our growth options with Ngungaju restarting and work advancing across the P2000 project and the Colina project. Turning to our FY '26 guidance on Slide 4. We delivered across each of our FY '26 guidance metrics, reinforcing the consistency of our operating performance. Production exceeded the top end of our guidance range, supported by strong operational execution and record production in the March quarter. FOB unit operating costs were near the lower end of our guidance range, reflecting higher production volumes and continued operational efficiencies delivered through our Cost Smart Future-Ready program. Importantly, this outcome was achieved while also absorbing mobilization and restart costs associated with the Ngungaju plant recommencement. Capital expenditure was near the upper end of guidance -- excuse me, including early expenditure associated with the Ngungaju restart and increased mine development. Most importantly, we delivered what we said we would. That consistency gives us confidence as we move into FY '27 and to progress the next phase of our growth strategy. And I'd like to, at this point, just thank the team, a shout out to all our great people at PLS. It's been another year of challenges. And despite those challenges, you did it again. Thank you. Thank you also to our contracting partners, our customers, and community stakeholders. You've been integral to our success, both past and what we've just achieved this financial year. Now with that, I'll hand to Brett to take us through an operations update.

Thank you, Dale. Moving to Slide 5. Safety is our highest priority and takes precedence over all operational outcomes. No level of production or business performance outweighs the well-being of our people. Any injury is unacceptable, and we remain committed to ensuring everyone goes home safe and healthy every day. Across the period, we recorded 2 injuries during the June quarter. However, our total recordable injury frequency rate improved to 2.77 down from 3.82 in the prior quarter. Our improvement reflects the work we have been doing on frontline leadership engagement and our continuation with our critical risk management framework. Moving to Slide 6. The Pilgangoora operation delivered a solid quarter with total material mined increasing to 10.2 million tonnes and ore mined increasing to 1.7 million tonnes. This reflects improved operational efficiency and the planned ramp-up in waste stripping to support the Ngungaju restart that commenced on July 1. Plant reliability was solid. Lithium recovery reached 76.8%, consistently high and reflecting the capability embedded through the P1000 expansion. The ore sorter continued to perform well, providing operational flexibility. On sales, record quarter volumes of just shy of 250,000 tonnes were achieved despite the congestion at Port Hedland. Ngungaju recommenced operations on 1 July, and the ramp-up is progressing on schedule. The plant is expected to reach normal production rates within 4 months. I will now hand back to Dale to cover growth and capital allocation.

Thanks, Brett, and well done to you and the team on another strong quarter. Moving to Slide 7. Our approach to growth remains disciplined. We progress opportunities in stages while preserving flexibility over the timing and scale of investment. P2000 is our primary growth option and has the potential to significantly increase Pilgangoora production capacity. As announced in June, the Board approved $175 million of pre-FID expenditure to progress long lead activities and preserve the opportunity to accelerate first ore should a final investment decision be made. We're exploring the additional benefits of potentially incorporating underground mining at Pilgangoora with the PFS underway to explore this. Importantly, this pre-FID expenditure that has been committed is not a decision to proceed with the full project. The feasibility study remains on track for outcomes in the December quarter. Moving to Slide 8. The Colina project in Brazil provides PLS with diversification opportunity, and this project continues to progress through feasibility with study outcomes expected in the December quarter '27 next year. We are assessing investment in some early-stage enabling infrastructure, including access roads, water supply and power to support the project's future development readiness. Turning now to our downstream activities on Slide 9. Our approach to chemicals remains staged and disciplined, providing exposure to downstream value creation without committing significant capital ahead of demonstrated returns. At P-PLS in South Korea, the facility operated on a batch basis during the June quarter using lower cost spodumene inventory from '25. At our midstream demonstration plant, commissioning has commenced and first lithium phosphate product remains expected in the September quarter. Now with that, I'll now hand over to Alex to take us through the financial performance. Over to you, Alex.

Thank you, Dale, and good morning, everyone. Please turn to Slide 11 for a review of the key financial metrics for the period. The June quarter represented a solid finish to FY '26, demonstrating the underlying strength and cash-generating capacity of our operations. Revenue of $743 million, up 31%, reflects record sales volume and uplift in realized price despite FX headwinds. As we previously flagged, FOB unit cost increased to $616 per tonne from $520 in the March quarter. Ongoing benefits from operational efficiencies and Cost Smart Future-Ready initiatives were offset by costs associated with the Ngungaju restart as well as fuel price impacts experienced during the period. Importantly, the Ngungaju restart costs are one-off in nature and will normalize as production ramps up through FY '27. Cash margin from operations was strong at $579 million, up 26%. Record sales and strong pricing underpins strong cash conversion. We finished the year with a cash balance of $2.29 billion, reflecting the combination of operational performance and the retained proceeds from our inaugural bond issuance in April this year. Moving to Slide 12, where I'll step through the key cash drivers. The $835 million increase in cash this quarter was underpinned by 3 things: strong operating cash generation as discussed, planned capital investment, and strategic financing outcomes. On CapEx, we spent $162 million on a cash basis and $124 million on an accruals basis, comprising $53 million of mine development and $71 million in infrastructure and other sustaining. Net financing cash flows of $422 million reflects the USD 600 million bond proceeds, net of AUD 375 million RCF repayment, as well as lease repayments and interest expense. The result is a cash position of $2.3 billion with total liquidity of $2.8 billion, including our undrawn RCF. That positions us well to support strategic investment in FY '27. Moving to full year performance on Slide 13. The full year result demonstrates PLS' strength and resilience through the cycle, generating $1.36 billion of cash margin, underpinned by production performance, disciplined cost management, and pricing recovery. Revenue increased 152% to $1.93 billion, driven by pricing recovery and higher sales volumes, partly offset by FX headwinds. SOB unit operating costs decreased 9% year-on-year to $569 per tonne despite Ngungaju restart costs and cost inflation, reflecting the ongoing impact of our Cost Smart Future-Ready program and the operational efficiencies we continue to embed. On a CIF basis, unit operating cost of $739 per tonne increased 1%, with higher royalty expenses from stronger pricing, largely offset by FOB performance and lower shipping unit costs. Cash margin increased by $1.16 billion on the prior year and underpinned our $2.3 billion ending cash position. Moving to Slide 14, which shows the full year cash flow bridge. The $1.36 billion cash margin from operations included the USD 100 million Canmax prepayment, reflecting counterparty confidence in our business. Capital expenditure totaled $344 million on a cash basis and $328 million on an accruals basis within our guidance range and comprised $146 million of mine development and $182 million in infrastructure and sustaining CapEx, including the Pilgangoora warehouse, tailings storage facility upgrades and Ngungaju capital works to support the restart. Net financing cash flows of $354 million reflects net proceeds from the U.S. bond and RCF repayment, $442 million, partially offset by lease repayments and interest expense. This financial strength is continued evidence of disciplined operations in a challenging cycle and positions us well to execute with confidence in FY '27. I'll now hand back to Dale to walk through our strategic priorities and guidance for the year ahead.

Thanks, Alex. Moving to Slide 16. Turning to FY '27. Our immediate focus is to maximize value and cash generation from Pilgangoora while continuing to progress our growth portfolio in a disciplined manner. Under our operate strategic pillar, the priority is the safe and successful ramp-up of Ngungaju while maintaining strong performance across the broader Pilgangoora operation. Under growth, we will continue to progress P2000 through the feasibility study and the approved pre-FID work program. Any further investment will remain subject to study outcomes and Board approval. Under our chemicals pillar, we will support the continued operational development of the P-PLS JV and progress commissioning of the midstream demonstration plant. Under diversify, we will advance the Colina project through its own feasibility study, targeting completion in the December quarter of next year. Together, these priorities balance near-term operational delivery with disciplined investment in the future growth of PLS. These priorities are supported by a disciplined approach to capital allocation, which is set out on Slide 17, which we will turn to now. One of PLS' key strengths is our balance sheet, but equally important is how we deploy capital. Our approach is straightforward. First, sustain. We invest the capital required to safely operate Pilgangoora and sustain production over the long term. In FY '27, mine development expenditure increases as we progress a planned cutback to access future mining areas alongside our normal sustaining capital and operating infrastructure investment. Second, enhance. These are investments that improve the capability, efficiency, and performance of our long-life asset. This includes opportunities such as road infrastructure, accommodation, and mine services facilities. Finally, grow. Growth capital is directed towards expanding the business through initiatives such as P2000 in Australia and Colina in Brazil. Importantly, these investments remain staged and subject to successful studies, disciplined capital allocation, and appropriate market conditions. Together, this framework ensures we continue to protect the strength of the existing business whilst investing in future growth in a disciplined way. Turning to Slide 18. This slide sets out our guidance for FY '27. Production increases care of the Ngungaju ramp-up alongside continued strong and reliable performance from our Pilgang processing plant, with the 2 plants together forming the expanded Pilgangoora production platform. As it relates to FOB unit operating costs, this is expected to increase modestly on a blended basis, reflecting the relatively higher operating cost of Ngungaju and its ramp-up during the year. We will remain focused on productivity, reliability, and cost efficiency across both plants. As it pertains to base capital expenditure, this is principally weighted towards mine development, including a planned cutback that we progressed over 2 years to provide access to future mining areas. Sustaining capital also increases, reflecting the operation of the 2 plants and the delivery of the suite of future-focused initiatives identified by our Cost Smart Future-Ready program. These minor one-off investments and operational efficiencies are expected to incrementally support Pilgangoora's low-cost operations into the future. As it relates to growth capital, included in guidance comprises the previously announced $175 million pre-FID for the P2000 project. Please note that expenditure relating to potential P2000 full financial investment decision and the broader Pilgangoora infrastructure investment and any Colina early works is not included in FY '27 guidance. These initiatives remain subject to further assessment and Board approval and will be announced separately as required. Turning now to Slide 20. So moving to the market. Demand is becoming broader and more resilient, while meaningful new supply remains difficult to deliver at the pace required. These dynamics increasingly favor established low-cost lithium producers with the financial capacity to invest through the cycle. On demand, the important development is the ongoing diversification. Electric vehicles remain the primary driver, battery energy storage systems are scaling rapidly, and commercial vehicle electrification is becoming increasingly meaningful. Lithium demand is no longer reliant on one single application or geography. Global EV sales were up 2.3% year-on-year to June with particularly strong growth outside of China. In Europe, it was up 27%. Asia, excluding China, up 78%, and the Rest-of-World category stepping up an enormous 122%. Europe is now accounting for more than 1/4 of global EV sales. This demonstrates that lithium demand is becoming increasingly diversified across regions rather than remaining dependent on any particular market. Within China, although vehicle sales have moderated, average battery pack sizes continue to increase. Battery electric vehicle pack sizes were up approximately 15% and plug-in hybrid electric vehicle pack sizes are up approximately 31% year-to-date. This means that lithium demand can continue to grow even when vehicle unit growth moderates because each vehicle requires more lithium. These trends are also being reinforced by government policy. In China, China is targeting EVs to represent 30% of vehicles on its roads by 2030 and electric trucks to reach 40% penetration over the same period. This reinforces that electrification is extending beyond passenger vehicles into heavier transport applications. Battery energy storage remains an increasingly important demand driver. Global installed capacity increased 25% year-on-year, including a huge 96% growth in Europe. We see this as an important structural shift with energy storage increasingly becoming critical infrastructure supporting grid reliability, renewable integration, and energy security. Another encouraging signal comes from the battery supply chain itself. In its recent interim results, CATL reported battery manufacturing capacity under construction is equivalent to around 1.5x its existing operating capacity. That level of investment reinforces our view that the industry's largest participants continue to see strong long-term demand growth. On another point, the U.S. Defense Logistics Agency has also recently gone to market to procure battery-grade lithium carbonate for the National Defense Stockpile. While the demand is modest, it represents another source of competition for lithium units and it highlights the increasing strategic importance of secure lithium supply for defense and national security purposes. On the supply side, the industry is responding to improved pricing through the restart of idle capacity and the announcement of new projects. However, our experience tells us that announced tonnes should not be confused with delivered tonnes. Bringing meaningful new supply to market requires financing, permitting, construction, commissioning, customer qualification, and operational ramp-up, a process measured in years, not months. At the same time, sovereign and policy risks are increasing. Zimbabwe's reaffirmed ban on spodumene concentrate exports from '27 is one recent example, placing approximately 250,000 tonnes of LCE equivalent supply at risk. It demonstrates that future supply is increasingly exposed not only to project execution, but also to government policy. Altogether, these demand and supply dynamics reinforce our view that the lithium market will continue to experience periods of tightness and pricing volatility. This is consistent with Benchmark Mineral Intelligence long-term outlook, which forecasts lithium demand growing at approximately 10% per annum through to 2040, ahead of forecast supply growth of approximately 8% per annum. For PLS, that environment plays to the strengths we have deliberately built, scale, cost competitiveness, financial strength, and control over timing of our growth. Against that backdrop, let me close by summarizing what FY '26 demonstrated and the priorities that will define FY '27. In closing, FY '26 was a defining year for PLS. We delivered record production of 880,000 tonnes, record sales of 892,000 tonnes, and we finished the year with approximately $2.8 billion of total liquidity. Importantly, these outcomes were not simply the result of stronger lithium prices. They reflect the operating leverage we deliberately built through the down cycle and the disciplined execution of our team. In FY '27, our focus is clear: safe ramp-up of Ngungaju, maintained strong performance at Pilgang, and progressed P2000 towards a decision in the December quarter. We entered the year with strong momentum, financial flexibility, and confidence in the long-term outlook for PLS. Thank you to our shareholders for your ongoing support and the belief in this incredible market. And thank you for your time this morning. Brett, Alex, and I will now be pleased to take your questions. And with that, I'll now pass to Maggie to open the line for those questions. Thank you, Maggie.

[Operator Instructions] First question comes from the line of Levi Spry from UBS.

Maybe just starting on recoveries, operational questions. So they've been pretty good in the last few quarters. How do we think about upside to the long-term assumptions there of sort of 75 and 67 across the 2 plants of Pilgang and Ngungaju?

Yes, obviously, with the return of the Ngungaju plant, that plant actually does have a lower recovery that we have been working on through the years. So when you think of the recoveries, think of them as a whole. We look at a multitude of factors such as head grade, plant stability, and levels of contamination. But we're working hard to improve those recoveries. I'd be thinking around the mid- to low 70s for the recoveries going forward, obviously, impacted by that the Ngungaju lower recovery of the ore that we do feed that plant.

And Levi, just to add -- look, it's a great question and one we're wrestling with because, yes, as you say, the team has done a fantastic job with lifting recoveries. So it's natural to say what does this mean for the long-term valuation of the asset. Over the coming months, we will be grappling with this question because, of course, we will -- we've got the P2000 study we're working on. So we'll have to take a view as part of that. And of course, we'll be looking at resource reserve modifying factors as well. So this will all come to a head in due course, but it's exciting to think about the potential adjustment to the valuation of our asset here of an improved long-term lithium recovery parameter.

Nice one. And just on the P2000. So I appreciate the FID is still 3 or 4 months away. But what could we expect then? Yes. How fast can you hit the ground? And part of what I'm thinking about is how much -- obviously, how to model it, but how we think about CapEx? Or is it largely an FY '28 sort of story?

Yes. So the -- yes, the P2000 as per previous disclosure and as part of the pre-FID that we announced, we flagged first ore in calendar year '29. And that assumes, essentially, we're moving as quickly as we can. As part of the full FID announcement, we'll provide a restatement of that time line, and we'll see how the team goes to see if we can bring things to the left. We're certainly pushing for that. But we'll see how we go. So we'll give a new statement on the time line for that one. And coupled with that, of course, will be the capital outlook for the project, which, yes, at this point, we can't give you any visibility until we've completed that study.

Okay. And could I just squeeze one in on the underground. So that was new news to me. So what are the drivers here to looking at that maybe early?

Sure. So as you know, Levi, we've got a burning focus on value creation for our shareholders. And as we think about that, we're looking at what we can do to maximize recovery, but also what can we do to maximize resource capture in the mine. And underground, we think, has potential but we're really at the start of exploring that. So we thought it's prudent to flag the market that we've got PFS underway. We'll see where that takes us. But given the scale of the Pilgangoora system, it's enormous. We're seeing it appears to grow at depth from some of the deeper drill holes we're seeing. So yes, it's a very interesting area for us to explore further. We'll see how we go.

Next, we have Rahul Anand from Morgan Stanley.

Look, I wanted to perhaps start with the base CapEx that [ I think ] is around $450 million to $510 million for next year. Just wanted to understand how should we be forecasting this going forward? Obviously, there's a bit of a step-up there, both in terms of sustaining and then capitalized waste movement there that's ongoing. I believe there's a part related to Ngungaju there as well. But if I look forward, are there components within this CapEx number that will drop out after this year or next year? Or are we just dragging right on this with an inflation component within it? That's the first one. I'll come back with the second.

Yes. Thanks, Rahul. I'll take the first part and then hand over to Alex. But certainly, in the sustaining capital, there's some one-off Cost Smart Future-Ready projects that the entirety of those or the majority of those will probably be done in FY '27. So it's a little bit inflated there, and then it will normalize going forward. So that's why it's probably a little bit higher than what we would normally have, but some of those are very value-adding projects across the operation in cost efficiencies and improving our overall outcomes for the shareholders.

Yes. Thanks, Brett. As Brett spoke around, so there's 3 different components to the base CapEx guidance for this year. The first is the mine development fees that reflects the significant increase in mining activity given the cutback work and that's just tied to the phasing of the mining activity. As you called out, sustaining capital has stepped up. That's a couple of different reasons. First, the assumption that we're operating both plants now. So we've got that normal maintenance capital coming through on both Ngungaju asset as well as the Pilgang asset. We do have a number of future-ready initiatives that we'll be rolling out in the next year that should be completed within the year. Now, those are one-off investments targeting operational efficiencies and reliability improvements. So that will play a part as we move forward then into FY '28, and we'll obviously provide some further guidance as we get to that right point. The other piece within the infrastructure space in FY '27, there are some, I guess, more significant programs of work in FY '27. We have the coarse ore stockpile dome activity underway. There's a number of mine water supply upgrades that we're working through and some works on the camp as well. And so those are, I guess, more significant projects that won't be repeated as we move into FY '28 as well.

Got it. So Alex, if I had to summarize that perhaps, then I guess the sustaining capital side in dollar million terms seems quite sticky in terms of future-looking proportions. And then if I look at the mine development, that's perhaps more concentrated this year and next, and then maybe steps down by some percentage, and then the infra piece is obviously going to be ad hoc. Is that the right way to think about it?

Yes. I think it's a fair interpretation. But Brett, do you want to talk around the mining?

Yes, certainly. In the mine stripping, as Dale mentioned, the next couple of years are heavily intensive on our cutback, then the mine development will step down and then normalize out a little bit more for the life of mine. So it is a little bit inflated for the next 2 years.

Got it. Okay. Perfect. And Brett, one -- second one is for you, mate. I'm just looking at next year's guidance, and I wanted to perhaps touch through some of the key points there. Levi talked about recovery, so I'll leave that one out. But can you maybe share if like maybe some of the back assumptions in terms of that guidance around grade strip ratio. I guess, what I'm trying to understand is, obviously, you finished the year at a cost number, which is already at the top end of your next year's guidance when Ngungaju is producing. I know there was a bit of work going on, on site this quarter, which impacted that cost number for this quarter. But just wanted to understand some of the back-end assumptions in that number just for us to be able to run the physicals and arrive at that cost in our modeling as well and to understand sort of the pinch points, I guess, in terms of energy and some of the other variables around currency, et cetera, so that we can model it appropriately.

Yes. I'll take the physical aspect of that and then, Alex, chime in with some of the financial headwinds that we're seeing in FY '27. But in addition to the resale of Ngungaju, traditionally operating at a slightly higher operating cost compared to the Pilgang plant, the impact is exasperated through the restart and ramp-up period. We should see those elevated costs for the first few months, 4 months, as we ramp up and then they'll drop to a more sustainable level post hitting those production rates at Ngungaju. The quantum of mine stripping this year is elevating up as we go into Stage 6, and we start to use some of the larger gear. We've already got the larger platform rigs, but it really starts to become a volume-based mining activity. So it is an extra 20 million tonnes. That strip ratio does go up from last year to about 5.9, but that is well below the life of mine strip ratio, the 7.7. So those impacts in FY '27 are certainly coming at us from a physical viewpoint. Obviously, a lot of our Cost Smart Future-Ready projects are aimed at those efficiencies and actually getting us down that cost curve. But I'll hand over to Alex for some of the other color on the financials.

Yes. Thanks, Brett. Rahul, you also asked around energy prices. Obviously, when we put the guidance together, it's been one of the key pieces on our minds. Just to sort of remind people in terms of energy, the main Pilgangoora processing plant is mainly powered by LNG and solar battery. So diesel is really used in our heavy mining equipment fleet, which provides the feed to the plant. We have looked at a range of different diesel price assumptions, as you would expect as we've been pulling this together. To give you a feel, in FY '26, we ended up with diesel accounting for about 6% of our production cost. We're looking at that increasing to between 8% to 10% as we move into FY '27, and that's driven by 2 parts. First, we do have some increased consumption of fuel given the Ngungaju plant additional activity on site and also, as Brett has already spoken to, the step-up in mining activity. So there is a consumption component as part of that. And then we've used sort of our best estimates on the outlook for diesel, really taking into account the forward curves and also an allowance for the uncertainty there. So you will see that playing through our guidance numbers as well. That, along with FX are clearly things that we can't control, but we feel that we've made a reasonable allowance within the guidance range that we provided.

Next, we have Austin Yun from Macquarie.

Just a question on the near-term production. Good to know that Ngungaju is going through the restarting phase. Just keen to understand how should we think about the near-term volume ramp-up? And would there be any potential tying activities that could result in lower near-term volume?

Thanks, Austin. No, the Ngungaju plant is quite separate. We -- it's a very well-known plant. We had it in care and maintenance. Obviously, brought it out of care and maintenance, did a lot of prep work to bring that online. So now it's just really doing those commissionings. What we are doing is taking a lot of the learnings that we've had from the Pilgang plant across to that plant and applying them there. So we get the benefits of those as well. So nothing untoward there. I think the schedule that we've got in the plan, we're looking pretty good for the first 4 weeks of that plan.

Second one, just on the P2000. In this update, you highlighted there are quite a few different work streams you're working through as part of pre-FID study. In the event that project is approved, I'm just keen to understand for each of those work streams, would be -- is it a sequence? And how should we think about the CapEx investment profile? Would that be fairly concentrated? Or would that be kind of spread across a few years with some happening even before -- even after the commissioning of the project?

The P2000, we'll provide some qualitative explanation for that as part of the study outcome. But to talk in general terms, the bulk of the capital typically arises when it moves to site execution. And the timing for that will give visibility with the study outcome. But I suspect that the bulk of that would occur something like 1 year after FID -- on the assumption FID occurs. So out of all that, I'd say, mid to back end would be the largest capital draw. But obviously, at the front end, there's -- you have things like earthworks, long lead equipment, steel procurement, et cetera, et cetera. But yes, I can't offer you much more than that description at this point.

Next, we have Lyndon Fagan from JPMorgan.

I was hoping for a bit of a rundown on the stockpile strategy, if that's okay. I can see, obviously, for quite some time, the ore mined is much higher than the ore processed. I'm just wondering, I guess, how big is the stockpile? How much do you need to, I guess, grow them into P2000, and I guess, what happens after P2000 with all of that?

Yes, look, the mining and stockpiling strategy is probably about where we would like it. So we've got a good amount of flexibility ahead of our processing plants, both at Ngungaju and at Pilgang. And the additional color in there is some of the contact ore that now comes up that we are actually blending in. So some of the ore mined actually includes that contact ore as well. So at the moment, it goes through at about a 20% to 25% blend rate. And obviously, P2000 is what we're looking at to look after that contact ore going forward, but really does give us that flexibility and ensures that any sort of upsets in the mine or anything like that, weather impacts, allows us to make sure that we're not impacted at the plant side. But yes.

And Lyndon, just one to add there. Part of what Brett and the team have achieved over the years is to evolve the operation to be more bespokely attuned to different ore characteristics. So there's been quite an intentional strategy by Brett and his team to move to a different stockpile strategy for the purpose of maximizing lithium recoveries. And this is part of the good -- the reason behind some of the good results that we're seeing. So we've moved to a more sophisticated feed strategy, which is flowing through to the bottom line care of those higher recoveries. So -- but as Brett said, not looking to increase those stockpiles at the level. The operating setup is appropriate for the processing capacity that we've got at this time.

And look, follow-up question. So Wesfarmers has obviously approved their project. The capital intensity there looks relatively high. I guess, if the Street is somewhere between $2 billion and $2.5 billion for you guys, there's quite a big difference there. Clearly, P2000 is a bigger project and benefits from some economies of scale. But wondering if you could maybe make any observations on the differences there or whether we need to actually reconsider sort of the all-in spend for you guys?

Yes. Look, I couldn't really make a useful comment on what Wesfarmers is up to. I wouldn't draw a line between what they're doing and what we're doing. And certainly, that's what I've impressed on Paul, our Project Director, not to get any ideas. We are, of course, very focused on making sure that we deliver efficient capital intensity, and we will be deploying every tool available to make sure that we deploy our shareholders' dollars and stretch them as far as we can. And as I said, I wouldn't draw a line between what Wesfarmers announced and where we're heading.