Operator: Ladies and gentlemen, thank you for standing by. My name is Krista, and I will be your conference operator today. At this time, I would like to welcome everyone to the Elevra Lithium September Quarterly Results Webcast. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. If you would like to ask a question, please press star then the number one on your telephone keypad.
Operator: To withdraw your question, again, press star then one. Thank you. I would now like to turn the conference over to Lucas Dow, Managing Director and Chief Executive Officer. Lucas, please begin.
Lucas Dow: Welcome, and thank you for joining Elevra Lithium September 2026 quarterly update. I am joined today by Christian Cortes, Chief Financial Officer, Sylvain Collard, Chief Operating Officer and President of Canada, and Andrew Barber, Chief Development and Investor Relations Officer. As a reminder, any dollar amounts quoted today are in USD, and unit costs and revenues are reported on a FOB basis. The September quarter was a strong start to FY27. At NAL, we delivered record ore mined, a record for mill throughput, and the second highest concentrate production in the operations history. We sold 58,134 tonnes of spodumene concentrate, 71% more than the last quarter, which led to 137% increase in revenue to $74 million. Unit operating costs fell 14% to $780 per tonne sold, and we finished the quarter with $319 million in cash. Beyond the strong operational performance, the NAL expansion moved into execution.
Lucas Dow: We signed two binding offtake agreements, and we further simplified the portfolio by selling our interest in Ewoyaa. Whilst we generally had a strong operational quarter, our safety performance was below our expectations. There were 6 recordable injuries in the September 2026 quarter compared to 4 total recordable injuries in the previous two quarters. This drove an increase in our total recordable injury frequency rate, which has resulted in an enhanced focus across the whole company to improve our safety performance. Across the organization, our team worked 20% more hours than last quarter, largely because of the growing activity around the NAL expansion, and that makes consistent safety standards even more important. In reviewing the incidents, we determined that the appropriate response is to reinforce the fundamentals.
Lucas Dow: More coaching, more visible leadership in the field, consistent application of critical risk controls, and a renewed emphasis on the tools available to every person. I would also like to acknowledge Sylvain and his leadership team at NAL for their commitment to getting this right. Turning now to production. In mining, we moved just over 466,000 tonnes of ore, 25% higher than the June quarter, and a quarterly record as mining moved into areas hosting thicker veins. This increase in ore mined and ore uncovered provided continued flexibility for the quarter's operations and allowed us to adequately prepare for potential impacts associated with weather during the North American winter season. In the mill, we processed just under 365,000 tonnes of ore, which was another quarterly record.
Lucas Dow: The mill continues to operate with sustained high level of performance and achieved a third consecutive quarter where utilization topped 90% despite a planned maintenance shutdown also being undertaken in the quarter. Maintaining a high level of mill utilization, good sorting performance on the ROM pad and crushing circuit, and a modest increase in the mill feed grade helped hold recovery steady at 70% and translated into 54,907 tonnes of spodumene concentrate being produced at an average grade of 5.1%. On costs, unit operating costs were $780 per tonne sold, improved by 14% from $907 last quarter. Two key things drove that. First, volume. Production costs fell 2% while we mined 25% more ore and held concentrate production, which gave us volume leverage across the operation. Second, ore processing costs fell 14% on better crusher performance, stronger plant reliability, and operating efficiencies.
Lucas Dow: A stronger US dollar against the Canadian dollar also lowered our reported costs by about $9 per tonne sold. Capital expenditure at NAL was $9 million, covering planned sustaining capital projects and early work on the expansion, which we will cover in more detail shortly. On the commercial side, we sold 58,134 tonnes of spodumene concentrate, up 71% on the June quarter. The average realized price was $1,276 per tonne FOB, which is $1,524 per tonne on an SC6 equivalent basis. On a per tonne basis, our average realized pricing increased by 39% compared to the June quarter, and we generated $74 million in revenue. After concluding sales with lagged pricing in the previous quarter, we have moved to selling cargoes priced based on prevailing prices, either at the time of sale or with the final price determined after the shipment arrives at its destination.
Lucas Dow: As a result of this change, our sales in September quarter were priced on a provisional basis, as final pricing for the two shipments dispatched during the period will be determined during the December quarter. Accordingly, the reported price may alter once the sale is finalized. While lithium prices have been volatile, the physical market for spodumene concentrate remains tight. Based on the conversations we are having with customers, both current and prospective, the recent softness in pricing looks to be sentiment driven and not a reflection of the physical market, where we continue to see strong demand for concentrate produced at NAL. This is also reflected in our progress against the commercial strategy we outlined with our FY26 annual results, and we were pleased to announce two binding offtake agreements recently.
Lucas Dow: In August, we finalized our supply agreement with Mangrove Lithium for the supply of up to 144,000 tonnes per year for Mangrove's proposed lithium chemical conversion facility in Canada. Then on 8 October, we signed a binding agreement with LG Energy Solution to supply a base volume of 240,000 tonnes of spodumene concentrate over a three-year period. Supply under that contract is expected to begin this calendar year, and we view LGES as a credible buyer for a meaningful portion of NAL's production volumes. We see these two agreements being consistent with our goal of improving our customer offtake terms to deliver greater commercial certainty and better financial outcomes for Elevra. Turning now to our strategic initiatives. In September, we published a pre-feasibility study for the staged NAL expansion.
Lucas Dow: Through further engineering and evaluation of the opportunity, we see a pathway to increasing average annual concentrate production to 373,000 tonnes per year on a post-expansion basis. Compared to the previous scoping study released in May, this is a 10% uplift due to the impact of improved mill feed grades when incorporating the expected benefits of ore sorting. Life of mine average C1 operating costs are projected to fall to $630 per tonne as the benefit of increased production flows through the cost structure. The important item for this quarter is that the expansion project has moved into execution following the late June groundbreaking. Detailed engineering is underway. We have issued procurement packages for long lead items, and we have mobilized teams at site to dismantle NAL's legacy carbonate plant to make room for the mechanical upgrades in the mill.
Lucas Dow: The PFS confirmed that the upfront capital cost of expansion remains unchanged from prior estimates, and the expansion remains on schedule, on budget, and fully funded through the strategic financing package we announced in May. As part of the financing package, shareholders approved the issuance of the upfront tranche of the convertible notes to Canada Growth Fund at the 16 July extraordinary general meeting, and consequently, we issued $46 million of convertible notes in August. At Moblan, our focus is permitting, which remains the critical path. Fieldwork continued through the quarter to document baseline conditions to support permitting requirements. We have also commenced a scoping study building on the 2024 definitive feasibility study to incorporate the project's expanded resource base and evaluate optimal plant sizing and staged development options. The scoping study is expected to be completed in the second quarter of FY27.
Lucas Dow: In the United States, we continue to advance permitting and community engagement for the Carolina Lithium project. The North Carolina Division of Air Quality issued the draft air permit for public comment, and a public hearing was held in October. We also hosted an open community meeting at our Cherryville office to give an update and take questions. We have also continued to focus our portfolio on North America. In October, we completed the sale of our interest in the Ewoyaa project to Huayou Cobalt for approximately $71 million in cash before fees and taxes. The sale simplifies our structure, removes the complexity of Ewoyaa's joint venture and offtake agreements, and eliminates future capital commitments to the project.
Lucas Dow: In Western Australia, we completed the sale of our rights over the Tabba Tabba tenement to Wildcat Resources for a total consideration of AU$16 million, whilst keeping a contingent royalty on any mineral resource Wildcat announces on the acquired tenement. We received AU$5 million as an upfront payment, combined with AU$8 million in Wildcat shares. We have since sold the Wildcat shares for a total of AU$9 million, and the third payment of AU$3 million remains outstanding. We also announced a non-binding term sheet to expand the Morella joint venture, in which we hold 49%. Under the proposal, Morella can earn 51% of four exploration projects by funding AU$300,000 of exploration within 2 years. These deliberate and considered steps reduce the cost of maintaining standalone exploration capability and let us focus capital and management time on our North American projects.
Lucas Dow: We'll be holding our annual general meeting on 19 November. As we previously foreshadowed, we announced our planned board transition, which will take effect at the close of the meeting. Allan Buckler and Jorge Beristain have voluntarily resigned as non-executive directors, which will reduce the board size from 8 to 6. The nomination remuneration committee reviewed the board's composition and confirmed that the board remains well-structured, with a majority of independent directors, and we'd like to thank Allan and Jorge for their contributions over the years. Finally, our financial position. We ended the September quarter with $319 million in cash, up from $255 million at the end of June. That increase reflects the $46 million we received from the issue of the convertible notes, together with $34 million in cash generated from operations at NAL as sales, volumes, and prices both rose.
Lucas Dow: The proceeds from the Ewoyaa sale, approximately $71 million in cash before fees and taxes, were received in October, and as such, are not included in the September cash balance. NAL CapEx for the quarter was $9 million, and we expect this quarterly spend to increase as we progress throughout the year as we ramp up spending on the NAL expansion and Moblan study development work. As we outlined in our FY26 results, we expect to incur between $120 million and $140 million in total CapEx in FY27, with $100 million to $120 million allocated to the NAL expansion and Moblan studies. Between the cash on hand at the end of September, the proceeds from the sale of our Ewoyaa interests, and the remaining capital available through the convertible notes with CGF, we continue to see our near-term growth projects being fully funded.
Lucas Dow: To sum up, the September quarter was a strong operational and commercial start to FY27, with safety the clear area for improvement. We remain confident in the outlook for lithium and in the pathway of set for Elevra. With that, we'll be happy to take questions.
Operator: Thank you. If you would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, again, press star 1. Your first question comes from Max Yerrill with BMO Capital Markets. Please go ahead.
Max Yerrill: Hey, guys. Thanks for taking my question. The operating cost this quarter showed a nice little improvement quarter-over-quarter, and it is trending now below the FY27 guide you gave 2 months back. Do you expect the cost to tick up as you progress through some of the pre-stripping for the expansion? Or does that FY27 guide feel on the more conservative side now? Thanks.
Lucas Dow: Thanks, Max. As we outlined in the commentary, obviously the strong production quarter has helped in terms of driving those unit costs down. From a stripping perspective, the strip ratio is sitting around 9. We forecast that for the full year it will sit around 10. So there is some additional stripping that will occur at the back end of the year, Max.
Max Yerrill: Okay, great. Thank you. I will turn it back over to the queue.
Operator: Your next question comes from the line of Austin Yun with Macquarie. Please go ahead.
Austin Yun: Morning, Lucas and team. Can you take on more color on the provisional pricing? I understand you comment on that in the December quarter. Just keen to understand what is the time lag. When you finalize the pricing adjustment, would you take the point when the product is delivered, or would you be taking the amount of the average? I am just conscious that the market has been very volatile, so these adjustments could be sensitive. Thank you.
Lucas Dow: Thanks, Austin. We anticipated that we would get a few questions around this, so Christian will take some time to walk you precisely through that, Austin.
Christian Cortes: Hi, Austin. Thanks for the question. There are a couple of things to clarify there. Well, firstly, the QP or the timing of when the final price gets settled is effectively the month post-arrival at discharging port. Once it arrives to discharging port, the calculation of that final price is the average of the month in which we are pricing. So we have had two shipments being dispatched from our end during the quarter. They occurred during July and late August. You obviously have a couple of months time in the water. Once they arrive, they effectively get offloaded. The month after they arrive, we are effectively pricing them out.
Austin Yun: Thank you, Christian. Thank you.
Operator: Your next question
Lucas Dow: Austin, probably just Sorry, Austin. The only other point I would add is that that is quite a standard methodology applied across the sector as well, so it is not unique to Elevra, which you are probably aware of, just wanted to share that for the remainder of the audience.
Operator: Your next question comes from Levi Spry with UBS. Please go ahead.
Levi Spry: Yeah. Good day, Lucas team. Maybe just a little bit more time on that. Is it literally 60 days sale and then the average of the month after that, so kind of 90 days?
Christian Cortes: Yeah. Let's take an example of what occurred during the quarter, Levi, just to be more specific. The first cargo left in July. It arrived to discharging port in September. The price that will be set for that cargo will be the average price of October. The second shipment was late August. I would suspect, given that the boat is still in the water, that the price that will be applied to that boat will be the average of November. So it's always 1 month after arrival, the average of that month in these specific arrangements. Now, from time to time, we may deviate from pricing effectively 1 month after arrival to at loading.
Christian Cortes: But the key element that we've effectively communicated previously is we were moving away from lagging prices, i.e., prolonged periods of times where the prices were reflected 6 months prior to us entering into the period in which we were shipping. So that is the key deviation from what we had in the previous agreements.
Levi Spry: Yeah, got it. Thanks for the extra color. Just a little bit more detail. Do we assume they're sort of 20,000 ton ships, so 2 and a half a quarter?
Lucas Dow: Yeah, so we shipped 58,000 tons in that quarter, Levi.
Levi Spry: Quarter 2. Okay, so 30 each is a standard run rate. Yeah, okay. Nothing is happening with discounts or anything like that?
Christian Cortes: No. Just to be specific, every cargo that we are shipping is linked to spodumene prices. These two cargoes are going through Mitsubishi. It is an agent. There will be obviously a commission paid on what we report as FOB.
Levi Spry: Got it. Okay. Thank you. Just on the CapEx.
Christian Cortes: That has been reflected. Sorry, just to confirm. The numbers that we have already published include what we would have expected to receive FOB if we had priced and crystallized the prices at the end of September. I am just giving you additional color there. We have always published when we have this arrangement of going through agents. We publish our FOB prices net of those commissions.
Levi Spry: Yep, got it. Thank you. Just the CapEx profile, so it ramps up through the remainder of the next 9 months. Is that how we should think about it?
Lucas Dow: That is right, Levi. Yeah, we are on track. Savannah and the crew are doing a good job. I was there a couple of weeks back. Demolition works, some of the installs already occurred. Longer lead items are being placed as well, so we are on track.
Levi Spry: Good. Okay. Thank you.
Lucas Dow: Thanks, Levi.
Operator: Thank you. We will now turn to web questions.
Andrew Barber: Thank you. First question is in regard to the LG Energy offtake agreement that has been announced. Can you provide any further details on that, and specifically if there is a floor price and how that would compare against the Mangrove Lithium offtake agreement that you have?
Lucas Dow: Yeah. So obviously the nature of these offtake agreements, depending on the counterparty, are covered with confidentiality provisions and those elements. So there are restrictions on what we can describe. Suffice to say that the strategy that we outlined as part of our FY26 results around commercial strategy is what we have been implementing, and we are certainly pleased with the offtake agreement that we struck with LG Energy Solution.
Andrew Barber: Thanks. There are no other questions.
Operator: We do have one phone question. That question comes from Glyn Lawcock with Barrenjoey. Please go ahead.
Glyn Lawcock: Morning, Lucas. Thanks for taking my question. It is probably just back to Christian a little bit more on just pricing. So if, just so we are very clear, if at the end of the quarter, let us say Platts was at 1,665, that is an FOB Australia price. You have reported, I think, something like 1,524 on an SC6. Is that just you have just taken the price at the end of the quarter, adjusted for freight to what you would get FOB plus adjusted for any commission? Is that what you have done so far? Then we just have to wait for October to finish and November to finish the price.
Christian Cortes: Hi, Glyn. Yes, that is correct. That is what we effectively do when we have variable pricing at reporting periods. Exactly what you described.
Glyn Lawcock: What would that adjustment be then? If you say it is, let us just make it simple, it is 1,600 FOB Australia. What would that equate to FOB where you think about it at Canada? What is the freight differential Canada to China versus Australia, China that you play with?
Christian Cortes: Yeah. In terms of freight rates, currently we all are experiencing higher freight rates. I am not particularly following what the freight rates are going from Western Australia to China. But I would say on a yearly average, rates going from Canada to China are around $75. At the moment, they have been higher than that. So, you could play around, I guess, as an estimate, the rates you can expect to see from Canada are somewhere between $75 and $100, given the cargoes that we are managing. So that would effectively be part of that conversion that you are describing, Glyn.
Glyn Lawcock: Yeah. So it is probably about an extra $50.
Christian Cortes: Yeah. It is about $50 to $60, Glyn. We will typically say around $50, $60 incrementally.
Glyn Lawcock: Yeah. If I take the Platts price or whatever index price you use on the end of September quarter, take off the freight differential, take off what we estimate for your commission to your marketing agency, then that gets you your FOB, and then we adjust it after that.
Christian Cortes: Yeah.
Glyn Lawcock: Yeah. Okay, great. Then maybe just I mean, you are only selling a couple of cargoes at a time and obviously got it contracted, but just your take on the market. I read your release with interest and it is a volatile, very, I do not know if you would call it illiquid or liquid, but it is very small, and there is a lot of money flowing through it. Is that just what you think is happening? It is just a sentiment issue that has pushed us down here. Do you have a sense of any feedback you have got from the customers you do deal with?
Christian Cortes: Well, look, I guess firstly, from customer interactions, Lucas Dow touched on this during his delivery of the report. Nothing has fundamentally changed from what we see. There is ample interest from parties asking whether we have available product for spot. When we talk about potentials of multi-year agreements, nothing has changed. Hence why our belief is that at the level that we are, there is still a strong interest, and it does not seem to be a buildup of inventory. Now, when you start reading through, I guess, the news flow, as you start speaking to people that are active in the market, there is negative sentiments.
Christian Cortes: My take on this, Glyn, is the numbers that are coming out of China on the battery production seem to be less than what people were estimating, and that is driving concerns potentially around higher inventory sitting in the value chain at the end product level. Obviously, we have all seen the report from SMM that came out a couple of months ago that created some of this concern and uncertainty as to whether we actually knew how much product was sitting in the system. I think overall that has plagued GFEX with negative sentiment. Unfortunately, given that a lot of the practices today are linked to GFEX, that is putting pressure on spot prices as well. If I have to sum this up, I do not believe that the supply side of things is causing what we are seeing on rapid price decline.
Christian Cortes: I think that is this negative view that potentially 2027 is going to be not as aggressive growth as some people were expecting.
Glyn Lawcock: You would agree or disagree with that last comment, Christian?
Christian Cortes: Well, to be honest, I don't have a great deal of visibility on the supply chain myself. I would think if there is, at that level of visibility, a view that the numbers may not be as encouraging as people were expecting, I guess I would have to accept that. Now, to my breadth of knowledge, what I followed more closely is the supply side, because there's greater transparency and visibility over what producers are putting out there. You have announcements that are obviously disclosed to the market. I think that there is an element of downside on the supply side that is not currently being built up when you look at the models.
Christian Cortes: I guess we'll have to allow for a month or two to see what the actual numbers look like as the rest of the peers report and provide guidance for the remaining of the calendar year, as well as getting a better feel of what guidance is going to come out from the larger battery producers. I think it's a bit too early for me to tell you whether I agree or disagree. I'm actively and attentively following as much as I can.
Glyn Lawcock: No, I appreciate that. Maybe just a final question then. If you look at your expectations for 2027 demand, have you been changing them much at all recently?
Christian Cortes: Demand? No.
Glyn Lawcock: Yeah, the demand.
Christian Cortes: No, our demand is solid in the sense of the two off-takers that we are working with have already firmed up effectively the volumes, and they are taking as much as we can offer them at this point in time. There could be an option to put more volume into those two customers, but our preference is to basically hold the line for the time being. We could always introduce a third off-taker next year, but we want to see how this plays out a little bit longer since, at the very least, for the next 8 months, we are fully sold.
Glyn Lawcock: All right. That's great. Appreciate all the color. Thanks again.
Christian Cortes: Thanks, Glyn.
Operator: Thank you. Andrew, I'll turn it back to you for web questions.
Andrew Barber: Thank you. Lucas, could you please outline the key decision gate points for CapEx of the expansion project and consider these relative to position at the time?
Lucas Dow: Yeah. As I mentioned, we've actually moved into execution. We'll just take a step back. The reason that we are so positive and encouraged by the NAL expansion project is what it'll do for our unit operating costs. It'll drop in the order of around 150 bucks, close to 160 bucks a tonne, USD, off our unit operating costs. So effectively, it'll drive us down the cost curve. The incremental volume we're bringing to the market is not material, so we're not going to see the market move from deficit or surplus on the back of the NAL expansion. In short, the decision's being taken. We're in execution. The project's fully funded as a consequence of the work that we did with the strategic financing package back in May. So it's all full steam ahead for NAL with the expansion.
Andrew Barber: Thanks. There are no further questions.
Operator: Thank you. Lucas, I'd like to turn it to you for closing comments.
Lucas Dow: Thank you. Once again, just thanks, everyone, for dialing in and also for the questions. We certainly appreciate it. We look forward to engaging with you again shortly. Thank you and have a great day.
Operator: Ladies and gentlemen, this does conclude today's conference call. Thank you for your participation, and you may now disconnect.
