Pilbara Minerals Limited (PILBF) Q4 2023 Earnings Call Transcript

Pilbara Minerals Limited (OTCPK:PILBF) Q4 2023 Earnings Conference Call August 24, 2023 7:00 PM ET

Company Participants

Dale Henderson - Managing Director and CEO

Luke Bortoli - Chief Financial Officer

James Murray - Senior Commercial Advisor

Conference Call Participants

Rahul Anand - Morgan Stanley

Levi Spry - UBS

Hugo Nicolaci - Goldman Sachs

Kaan Peker - RBC

Kate McCutcheon - Citi

Glyn Lawcock - Barrenjoey

Al Harvey - JPMorgan

Robert Stein - CLSA

Mitch Ryan - Jefferies

Ben Lyons - Jarden

Operator

Good day and thank you for standing by. And welcome to the Pilbara Minerals Fiscal Year 2023 Results Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. Please note that Pilbara Minerals will only be taking one question per person with one related follow-up question permitted. [Operator Instructions]

Please be advised that today’s conference call is being recorded. Now I’d like to hand the conference over to your speaker today, Pilbara Minerals’ Managing Director and CEO, Dale Henderson. Please go ahead.

Dale Henderson

Thank you very much and a warm welcome, and thank you to everyone who has joined the call today on our FY 2023 full year results. To start with, I’d just like to acknowledge the traditional custodians of the land on which our business operate, Whadjuk Noongar people and Pilbara head offices and then Nyamal and the Kariyarra people to North where our operations are build up. We pay our respects to their elders past and present.

As to the introductions today, you will be hearing from, obviously, myself and also Luke Bortoli, our CFO; and I have many of the team in the room, including the relative executives.

As to the call outlined, we’re conscious we’ve only got an hour today. So we’ll endeavor to keep the presentation to approximately 30 minutes and have 25 minutes of Q&A from the analysts and 5 minutes for the webcast, and so we do have to keep that within the hour.

Now moving to our full year results. We have had an absolutely incredible year, a breakthrough year, where it’s all come together. It’s about five years of operating expertise combined with production capacity, care of our Pilgangoora Plant and Ngungaju Plant formerly Altura operation, and thirdly it’s about market timing. Those three things have come together and delivered a magnificent set of results, which we’re very proud of and I’ll get to those in a second.

But to start with moving to slide two. Just a quick reminder, for those who are not familiar with Pilbara, we’re located Southeast of Port Hedland, the two plants, Tier 1 location being the Southeast of Port Hedland being the largest bulk export globally.

And we’re developing a Tier 1 asset and that’s been further confirmed this morning with our reserve update, increasing our reserves by 35%, which is an increase in mine life for 34 years, which absolutely reinforces the asset we’re developing is one of the best globally.

And we’re getting on with making the most of that asset with a forecast to bring up outright production by a further 70% in the years to come. So a great spot to be in this burgeoning market.

Moving now to slide three, the highlights for FY 2023. It’s an incredible set of numbers. We’ve got triple-digit percentage increases across the Board, revenue, EBITDA, profit and cash. And because of those strong financial performance metrics, that flow through to enable us to pay a fully franked dividend at the top of the allowance are contemplated in our Capital Management Framework. So we’re, of course, delighted to be doing that and rewarding the many shareholders who supported Pilbara and watch the journey over the years which has unfolded.

So thank you very much to those shareholders for and particularly those ones who have supported us from the start. Thank you for backing the asset, backing the industry and most importantly, backing the team, which we weren’t always delivering our results like this.

Now moving to slide four. These strong results are only possible through strong operational and project performance. What you see here is the headline percentage increases, a massive step up across the Board, 64% of production increased from the year prior, a 68% increase in sales and this was all occurring a strong pricing market and 87% increase on realized pricing.

Separate to the operating performance, we’ve been getting on with legs of growth as it relates to the next legs of expansion P680 during the year is well into construction during this quarter, commissioning has commenced and we’re looking to ramp up P680 in the December quarter. Also, during the course of year, we had the P1000 approved and that project is now in train and being progressed to come online mid-2025.

In the chemicals category, our joint venture with POSCO for 43,000 tonne lithium hydroxide plant in foot down been constructed in Gwangyang, South Korea, and we’re looking forward to getting over there in the next couple of months to see progress and that project is on track.

Moving to Mid-Stream, working with our joint venture partner, Calix, we approved the demonstration plant for Mid-Stream project and approach to that next step down the path on the R&D journey for that project.

Mid-stream, of course, is the concept of onshoring more value-adding of spodumene concentrate into a high-grade lithium salt and more sustainable lithium salt given that we’re targeting a drop in carbon emission intensity and drop out for waste, so looking forward to seeing that project progress.

And lastly, as it relates to expansion, as I mentioned a moment ago, this morning, we released to market our reserve update up to the June, and as I say, 35%, bringing total ore reserves of 214 million tonnes and I’ll offer a couple more comments around that later in the pack.

Before we’ll move forward, I just wanted to say a big thank you to the team at Pilbara Minerals and our contracting partners. This was a huge step up in activity across our business during the last year and it was not easy. There’s been all sorts of growing pains, whether it’s ramping up mining, ramping up camps, procurement.

In the finance space, we’ve had all sort of growth. HR, all sorts of growth, you name it. It is not one part of the business, which hasn’t had to go through a transformational change during the course of the year. And the team has taken that on, head on and work through all those challenges and because of that, here we are today, looking back on what it just has been stellar set of results here of the fantastic teamwork and that fill the spirit which is we have. So thank you to the team.

Moving to slide five. Just to highlight a couple of milestones, which I haven’t mentioned thus far. Quarter two, we reinforced the balance sheet with some Australian Government back debt, fantastic reinforcement and balance sheet there.

Capital Management Framework cost believed that it was only in quarter two, and obviously, subsequently from first dividend and now we’ve just flagged our second dividend, a couple of great milestones.

Also during the course of the year, we built out the executive team. So we’ve got five new execs brought on, not so bright over right now, following this week of releases, and of course, they joined James and I, the two law horses of the executive.

Moving now to slide six. As it relates to sustainability, the year which was one where we’ve started to get on with giving back more. We’re committed to four multiyear partnerships, which is fantastic.

As it relates to indigenous engagement, we’ve continued our engagement programs. As part of that with investors and commission with Strelley Community Solar Battery Project which is addition to our North Strelley operation. We did that in partnership with [inaudible] Pacific Energy. So, great to see that commission and supporting that community.

And then as it relates to climate change, we’ve commissioned our 6 megawatt of solar farm which is now fully on site hoping to display some of our carbon energy.

Moving now to slide seven. Yeah, I mentioned a moment ago, our HR team is busy -- our full team is busy because it’s been a huge year of growth, 78% increase in employee count. As it relates to TRIFR, we did regress from the prior year, slightly striving up to 4.7%.

So unfortunately -- or aggression, as I mentioned, and just a reminder of the necessity for us to keep a burning focus around our safety culture and all of the systems which support the safety such that the team goes home safe and well every day.

As it relates to our lead indicator interactions, we’ve exceeded the target there at 2.9. Safety interactions is a proactive measure around safety conversations and assessments in the field and talk about driving safety culture. So I’m really pleased with the outcome of the team there at 2.9, above 2.

Now that completes the highlights, and with that, I’ll hand over now to Luke, our CFO, to take you through the financial results.

Luke Bortoli

Thanks, Dale, and good morning to those on the call. Please turn to slide nine of the presentation. FY 2023 was a period of strong performance across all key metrics, driven by production expansion and number of mine site, productivity improvements and strong pricing.

The group successfully ramped up production at Ngungaju, we completed several processing improvements across the operation, we further refined our sales strategy and we commenced our two key expansion projects, P680 and P1000.

These efforts gave rise to an increase in production of 64% on FY 2022 to 620,000 tonnes in FY 2023 and total sales of 608,000 tonnes. We also saw a record year of customer demand, increasing the average realized sales price over the period to US$4,447 per tonne, up 87% on the prior year at US$2,382 per tonne. The aggregate of sales and pricing increases resulted in revenue for FY 2023 of $4.1 billion for the group, a 242% increase from the prior period.

In addition to strong revenue performance, EBITDA for FY 2023 was $3.3 billion, up 307% on the prior year.

Moving further down the P&L, statutory profit after-tax was $2.4 billion for the financial year, an increase of 326% on the prior period.

Turning now to slide 10. Slide 10 sets out further detail on our profit and loss, including key metrics used by management to assess the performance of the business. Total operating costs were $776.3 million, up 104% on the prior year. This increase in total operating costs is reflective of higher production and also sales. On a unit cost basis, operating costs were $613 per tonne, an increase of 11% on the prior period.

As mentioned in previous announcements, during FY 2023, the business pre-invested mine site personnel and activities in preparation for P680. There was targeted investment in spare and maintenance to improve availability and productivity, and ongoing enhancements to our facilities on site to cater for the growing operation.

Operating costs, CIF were $1,091 per tonne, up 29% on the prior period. The key driver of this increase was the additional cost associated with higher royalties due to the significant uplift in revenue. As with many businesses across our sector, costs were also impacted by inflationary pressure in the period and this is something we’ll continue to manage closely.

Revenue and pricing growth in the period significantly exceeded the total growth in costs and unit costs giving rise to a lifting profitability. As mentioned earlier, EBITDA for FY 2023 was $3.3 billion compared to $814.5 million in the prior year, an increase of 307%.

Turning now to slide 11. On this page, we’ve shown a step up in revenue, EBITDA and EBITDA margin in FY 2023 versus FY 2022 on a quarterly basis. As shown in the chart, the profitability of the business has increased rapidly over the past two years.

EBITDA margin has expanded to 82% in FY 2023 from a low of approximately 35% in the September quarter of FY 2022. This very strong growth in margins has been driven by the group’s strong revenue growth and also the benefit of operating leverage. It’s also given rise to the strong balance sheet position that we have today.

Turning now to slide 12. On this slide, we’ve set out our summary cash flow statement. FY 2023 was a year of significant growth in cash. Cash increased by $2.7 billion to $3.3 billion, up 464% on the prior year.

Moving down the cash flow statement, cash margin from operations as measured by receipts from customers less payments for operational costs was $3.7 billion in FY 2023. In FY 2023, the business has shown strong growth in cash, but also very high cash conversion when compared to revenue of $4.1 billion.

In addition to the strong cash margin from operations performance, the group had several items which were first for the business in the year. This included $209.5 million of income tax payments and $329.8 million for our inaugural interim dividend payment of $0.11 per share.

FY 2023 also saw a step up in capital investment for expansion and operational efficiency of $385.5 million in FY 2023. This included P680 expansion project spend of approximately $138 million, capitalized waste mine development of approximately $163 million, mine site infrastructure improvements of approximately $34 million and sustaining capital spend of approximately $56 million.

Pleasingly, the ending cash balance in FY 2023 shows that the group has managed continued investment in business expansion, while also ending the year with a cash balance that offers significant flexibility for future investment in growth and dividends to shareholders.

Turning now to slide 13. Slide 13 provides a graphical representation of the FY 2023 cash flow statement and step up in cash in the period, which I discussed earlier.

Turning now to slide 14. Slide 14 shows the group’s quarterly growth in cash generated by a recently very stable cash margin for operations across recent periods, finishing as of 30 June 2023 with cash of $3.3 billion, generating cash from operations of $3.7 billion.

Turning now to slide 15. Quite obviously the group has a very strong balance sheet position. The group has net cash as at 30 June 2023 of $3.1 billion, and cash and available liquidity of close to $3.5 billion.

In FY 2023, the group expanded its loan funding facilities and improved the turns on its existing commercial facility. While we’re in a strong funding position today, we’ll continue to expand and diversify our access to debt capital funding over the coming year.

Turning now to slide 16. On this slide, we set our summarized balance sheet. At 30 June 2023, net assets were $3.4 billion, an increase of $2.1 million or 162% on the prior year. This increase was driven by a material uplift to cash as already discussed.

Investment in property, plant, equipment and mine properties, which rose to $1.4 billion, up 48% on the back of our continued investment in our mine site and an offset for a tax liability at year-end of $894.7 million, the result of a significant increase in statutory profit in the year. Approximately $773 million of the tax payable at 30 June will be due for payment in the first half of FY 2024 and relates to income tax for the FY 2023 period.

Other balances such as inventories, leases and payables have also increased, the result of growth in headcount and a material expansion of our operations.

Turning now to slide 17. Today, we’re pleased to announce that Pilbara Minerals will be paying a final FY 2023 fully franked dividend of $0.14 per share. This payment is in line with our Capital Management Framework as mentioned earlier by Dale and equates to a dividend payout ratio of 30% second half FY 2023 free cash flow.

This is at the top end of the group’s dividend payout ratio range. In dollar terms, the total dividend payment to shareholders will be approximately $420 million. After this payment, it will bring our total dividend payments to shareholders in respect of FY 2023 to approximately $750 million or $0.25 per share.

As mentioned earlier, the strong cash position of the business provides opportunity for us to consider a variety of options in addition to our organic investments, such as inorganic growth opportunities or a return of capital to shareholders.

Any capital management initiative would likely be in the form of a buyback, special dividend or some combination of those two. We’ll continue to monitor these opportunities and provide an update over the next several months.

I’ll now hand it back to Dale.

Dale Henderson

Thank you very much, Luke. Just a comment on the dividends. Yeah, it’s just the most incredible year we’ve had and to be able to issue the full year dividend of $0.25. It’s just remarkable where we find ourselves in this short five-year history and a little anecdote, which I think really captures how rapidly the business changes relates to our -- actually our shipping manager mentioned to me that during the course of the year to buy a new calculator because of the larger volumes, we’re shipping tonnes of -- the strong pricing, the calculator, you can’t put the numbers on the screen anymore. So they had to upgrade the calculator.

The same shipping manager only two and a half years ago was the one who was run, grab the ball when we’ve got a sale for a cargo at $400 a tonne. So we really have more -- amorphous as a company as a function of being early to the party and being out on the water, ready to capitalize on this incredible burgeoning market.

So I will shout out to not only for the new calculator, it’s been a fantastic year, and as I’ve mentioned in my opening comments, we’re delighted to be paying back and rewarding many of those shareholders who, as I said, back the asset, back the industry, and most importantly, back the team. So, thank you, and thank you Luke for that run through.

Now turning our mind to the future, our outlook. Moving to slide 19. FY 2024 as a ramp-up year. We are, of course, bringing on the P680 primary rejection component, which will bring more tonnes on and shortly, thereafter, we’ll have the second component of the P680 has been crushing and ore sorting, which won’t be turned on within the year, but that project is in full flight.

So we’ll be ramping up production, ramp-up years are always present a few challenges. We’ve factored in an allowance that’s part of both the production volume range being 660 to 690 and the cost range of A$600 billion to A$670 per dry metric tonne. So that’s built into that and noting that the midpoint of that cost range will be about $5 million.

As it relates to capital expenditure and stepping through each of these one by one, for the project capital for the P680 and P1000 is on track and consistent with previous guidance. I’ll highlight that the crushing and ore sorting component we placed shipped six months and updated on that as part of the June quarter results.

Mine development is as per plan and that’s really around more mining effectively setting out for P1000 volumes, sustaining capital and alignment in projects and enhancements around additional investment to set up the Pilbara operation for the long-term. And of course, given our reserve upgrade today, increasing our mine life to three-plus decades it makes good sense that we invest in some of the critical elements to set up for the long-term. So within that includes tails facility with flags expenditure around the new camp, some warehouse, and of course, we’ve got the Mid-Stream project, which was FID approved. So that completes a guidance across production, costs and capital.

And I’ll now move to the strategy and market. So moving to 21. Just a quick recap on our strategy. Our aim is to be a leader in provision of sustainable battery materials products that got thanks to that strategy. So we’ll cover much of this actually in the call thus far.

The operating platform is priority one, showing our ships to light out, shipped up to ship quarter-after-quarter, year-after-year, then expanding that operational platform, the reserve upgrade catching point and matching that with commensurate processing capacity subset we can make the most of this incredible tailing asset the work are developing Western Australian Chemicals. This is all about adding more margin for lithium unit flying from the service resource, which I think, in carriage of the POSCO joint venture, there’s one of the initiatives, the Mid-Stream joint venture with our friends Calix another and there’s more to come in this space.

Playing forward diversification beyond the base asset. There’s more to come in this down in the years to come. But within this category includes our partnering process. We were considering partnering with potential downstream partners or other partners for joint development of further downstream facilities.

You’ll note in our update that we have added one quarter to that, taking it through the March quarter. What that’s all about is, we’ve got to take this process really seriously. We’ve got a great problem of some strong interest and excitement around what can be done here. We’re going to give the process due course to really consider this. These commitments around tonnage a multi-decade as was the case and what we’ve done with POSCO. So we have added on a little extra time, so that we can work through that process. We look forward to reporting in due course.

Moving now to 22. This is the resource upgrade that we announced some weeks ago. You can see the Pilbara resources move from the light green to dark green out to the right and you can see with the assets is comfortably positioned as one of the largest in the hard rock lithium universe.

Moving now to 23. The reserve increased 35%, increase 55 million tonnes additional, taking us to 214 million tonnes. That’s a nine-year increase to take except to full year mine life. And of course, because of that, we are underway with the studies to explore that trade-off of more production capacity and a shorter mine life. So we will -- the numbers have been crushed, the studies are underway and we will report in due course on where we take things.

Will we do more? Yes. Absolutely. It’s one of the best ways we can continue to drive and create more value for our shareholders. We’ve got the amazing privilege of telling one of the best assets globally, one of the best locations. So we’ll continue to make the most of the credible assets, more programs of drilling to come.

Now moving lastly to market. It’s the best mine to be in the lithium market, although, it’s volatile. What’s pleasing here is, we continue to see strong signs, which support the long-term prospects for the industry. We’ve highlighted a couple of more recent analyst facts benchmark and detailed recent update around EV increases over 27% growth to 26% and 76% in 2040, at last to Fastmarkets in the last week, in fact, that released some information related to Mass Energy Storage.

And what to note is that the lithium-ion subset -- actually subset to 2023 is a large proportion has been attended to the Mass Energy Storage subsets. So that’s an exciting emergence and it’s a difficult space to get visibility, but it’s exciting to think about if that starts to grow at pace, as well as EV adoption we watch that with interest.

As it relates to pricing, the lithium market has been volatile throughout its short history. Of course, we’ve had this run-up in pricing through the September quarter and December quarter, reaching all new highs. March quarter saw a strong drop and a rebound in stability moving through to June and through to now, we’ve seen a tapering off, but more stability.

So as we think about that, our expectation is probably more volatile in the future. That’s what we’ve had today. What gives us comfort is really in two parts. Firstly, we have our eyes trained on the long gone. The stage is set for more growth was lifting. Supply, we think, will languish and we know that, that view is shared by many of the analysts who study this year, we have some point the graph to the right, which shows the forecast demand versus the forecast supply and the clear here at 2040 between the top of the column and the demand line that is the equivalent of [inaudible] and you would have seen just a moment ago on that bubble chart. there’s not many assets aside of Pilgangoora. So there is shortfall in lithium as for because of the long-term plus, but also assumes that other projects come online. What does that mean to Pilbara? That means we think we’ve got this incredible market and moment in time to capitalize for our shareholders.

So that’s part one. But part two, which gives us confidence is, we’ve got scale, we’re a low-cost operator. So, inevitably, there will be cycles and the defense against those cycles is ensuring that you’ve positioned down the cost curve and that will continue to be our own and as we continue to build out the operation and invest in some of those enabling factors for the long-term, we also gradual decreases in cost, which makes others more offensive for the long-term. So it’s an exciting time here, Pilbara remains excited, we have conversion on the outlook and we are full force delivering as rapidly as we can.

And to finish on the market, a couple of more recent bit of news, which put our interest, the Canadian Government’s commitments of US$11 billion Siemens and LG [ph] on 6th of July to earlier through 1st of May, investing on $2.1 billion in battery plant as well.

We, of course, had the China policy, I think, I mentioned this in the last call, around the tax exemption for EV through 2027 further support. It seems every few days or a few weeks, there are other ones you reinforce that long-term outlook that’s exciting. So as I said, Pilbara continues in full force to make most of our market and capitalize on the position that we have.

And with that, that’s a wrap for our presentation and I’ll hand back to the moderator to move to questions.

Question-and-Answer Session

Operator

Certainly. [Operator Instructions] And our first question comes on line of Rahul Anand from Morgan Stanley. Your question please.

Rahul Anand

Hi. Good morning all. Thanks for the call, Dale, Luke and team. Luke, my one question, I wanted to perhaps focus on the cost guidance for next year. So 60 to 70 unit operating costs. I just wanted to confirm, perhaps, a question for Luke here. Yeah, these costs are benefiting from the pre-strip CapEx. Is that the right way to look at them, i.e., that 150-odd mine development CapEx that’s being spent is probably benefiting the unit cost by about $200 a tonne roughly. So would it be fair to say that the underlying cash cost at the mine site at this point in time would be about $200 higher than the guided number. Is that the right way to think about it?

Luke Bortoli

That is the right way to think about it. So the capitalized waste or mine development for the period of $163 million. We could add that back to have an approximate cash flows.

Rahul Anand

Okay. Perfect. And then just as my follow-up then on the cost piece, Luke. Stepping into next year, which is going to probably have much less in terms of that pre-stripping CapEx that’s benefiting the cost guidance. How should we think about the underlying run rate, because you obviously have two impacts? One would be that your pre-stripping tapers off. But then secondly, operations would be larger and benefit from volumes. So how do we think about those two opposing forces, please?

Luke Bortoli

Sure and thank you for the question. So we’re actually guiding to capitalize mine waste development of between $140 million to $160 million for FY 2024. So that’s broadly in line with FY 2023. Does that answer your question?

Operator

Thank you. One moment for our next question. And our next question comes from the line of Levi Spry from UBS. Your question please.

Levi Spry

Yeah. Good day, guys. Thanks for the call. I don’t think we’ve quite answered that question. So mine development pre-stripping for the production growth into 2025 and 2026, I guess, is what we’re asking now.

Luke Bortoli

Yeah. We’re not providing any guidance, obviously, for FY 2025 and FY 2026, but at least in FY 2024, capitalized waste mine development will be broadly the same as FY 2023.

Dale Henderson

I can probably add to Rahul’s question and to Levi. We should get some stronger head grades the next year, subject to the to the next round of mine plan optimization. So if that eventuates, we’ll get some strong volumes, which, of course, will play through to a good unit cost, but we’ll, of course, disclose all that in due course.

Levi Spry

Yeah. Okay. Thank you. And so just thinking about the expansion beyond a potential expansion beyond P1000, how should we think about the scope? What are the limitating factors? Can we think about literally adding another plant like you’ve just done, is there any limitations in the pit or mining rates anything like that?

Dale Henderson

Yeah. Sure, Levi. So we have limitating factors and that’s the job we need to work through with the studies. But the sort of the top priorities are, firstly, in the mine, understanding what our run rate can be practically achieved as a function of the spatial distribution of the ore, because there are physical limitations as to how much plant and equipment you can get into the area. So there’s a mine planning component to be worked through.

Separate to that then is matching that with commensurate process capacity. Broadly speaking, the limitations here are less and if we’ve got plenty of patic [ph] out there. We -- in which case we can build out our capacity. But then adjacent to that, you’ve got all the normal constraints, which need to be worked through that could include approvals, water, logistics, et cetera, but within all that, we’re not anticipating any issues, but we need to go through the process of the studies to validate that. But, yeah, bringing back to the start, the mine optimization is really the priority here.

Operator

Thank you. One moment for our next question. And our next question comes from the line of Hugo Nicolaci from Goldman Sachs. Your question please.

Hugo Nicolaci

Good morning, Dale and team. Thanks for the update this morning. Just wanted to ask one around the CapEx guidance into FY 2024. Just noting that, obviously, the P1000 guidance you gave us back in March didn’t include tailings expansion and things like that. So I was hoping that you might be able to give us a bit more detail around what the breakdown of that $170 million to $190 million in project enhancements might be? And then how much is left for those items in FY 2025 for things like tailings expansion still? Thanks.

Dale Henderson

Thank you, Hugo. I was looking at Luke to answer that one. We don’t -- I don’t have the breakdown on that one out in front of me, let us take that on notice and we can look at providing that in the future. And certainly, FY 2025, we’ll provide guidance on that.

Hugo Nicolaci

Okay. Thanks. I might follow that one up afterwards then. But I guess maybe just following up around the expansion works and life of mine support. Are you able to give us a guide as to what you’ve sized that to in terms of tailings expansion and other life of mine support work? Have you essentially sized it to the kind of reserve life in P1000 size back in March or have you given yourselves some optionality there to maybe go larger on some of that life of mine support work?

Dale Henderson

The -- yeah. The way we think about it, if you got all around the understanding the economic reserve. So that’s done. The -- so there’s room to move as it relates to the enabling infrastructure, tails, et cetera, we are not anticipating any constraints in that regard, as I mentioned earlier, to Levi’s question, but we do need to go through the studies to confirm that. Does that answer your question?

Operator

Thank you. One moment for our next question. And our next question comes from the line of Kaan Peker from RBC. Your question please.

Kaan Peker

Good morning, Dale, Luke and team. Yeah. Two questions. Just on the exit run rate, given the exit run rate for 2023 and you look at FY 2024 guidance, it does appear conservative. Are there any major shutdowns or times planned for this year and can you maybe give an indication of which quarters they are expecting? And I’ll follow up with a second. Thanks.

Dale Henderson

Thank you, Kaan. There will be sometimes that’s correct. And then there’s the commissioning process and sort of which -- so the assumptions around how rapidly does the 680 bolt-on ramp-up. We have taken a pragmatic approach to that estimate and acknowledge to committing both always presents some challenges.

And broadly speaking, with guidance, we’re wanting to obviously ensure that we deliver well. And so we have taken, I wouldn’t say, conservative, but leaning on the side of conservative approach here, ramp-up years are challenging and hard rock processing is incredibly challenging. We know that well given the years of experience. So that’s folded into the estimate we have here.

Kaan Peker

Thanks. And I know with the life of mine, with the FID of the P1000 that was incorporated into the mine plan, but there’s limited resources that are being delineated there. Is this sort of the next area of upside that’s been?

Dale Henderson

Yeah. There is some more work to do the north. There is some infill drilling that we can to come further south. And the last round of drilling has demonstrated some new loads, which we tend to explore, which is you see some of the cross sections in the reserve release deserves more attention. So it’s not just lines, there is security around lines, but certainly other areas of the ore body. We were positively surprised by the results of this last round of drilling this year. That’s exciting. It’s inspired us to do more and we’ll see where we go.

Kaan Peker

Yeah. Thanks.

Operator

Thank you. One moment for our next question. And our next question comes from the line of Kate McCutcheon from Citi. Your question please. You might have your phone on mute.

Kate McCutcheon

Hello. Can you…

Operator

Yes. We can hear you now.

Kate McCutcheon

Yeah. Okay. Hi, Dale and Luke. Congrats on the results and thanks for your new revenue disclosures that makes our jobs easier. I’m interested in a little more color on CapEx for the year. The $200 million almost for projects, is there any breakdown you can give there? And then the mine development spends. I think that’s just stripping, as you mentioned. And then the last part, that $490 million to $540 million on P680, P1000, does that imply that you’ve accelerated the P1000 CapEx there or to ask it another way, is the bulk of that P860 that you’ve guided for P1000 on this FY?

Luke Bortoli

Yeah. Thanks for the question, Kate. And Hugo asked a similar question, he got cut off. So in respect of mine development, yes, that is just stripping to answer that component. On projects enhancements, these are new items that we haven’t yet disclosed to the market and they are explained in some detail below the range provided there.

But just to provide some more color, we’re commencing work on certain related site. We’re obviously building some tails infrastructure. There’s some work on access roads is being done as well and there’s a whole bunch of other mine site infrastructure, smaller items that are really focused around improving the environment on the mine site to enhance productivity.

As it relates to growth capital expenditure, that really is the rollover of P680 and P1000 CapEx spend that we previously announced to the market and nothing really new there, and in fact, we actually found some savings in respect of P1000 spend.

Kate McCutcheon

So is the bulk of P1000 spent this year or that’s still a lot to come in 2025 as well?

Luke Bortoli

There will still be a follow-through to 2025, that’s right. And same on the projects and enhancement spend.

Operator

Thank you. One moment for our next question. And our next question comes from the line of Glyn Lawcock from Barrenjoey. Your question please.

Glyn Lawcock

Good morning, Dale. I guess we’re all going to get down the same path a little bit. So it just sounds like Luke said there’ll be some follow-through enhancement spend into 2025. I guess that all comes back to what you said, you’re setting the business up for the long-term. Where does that leave us on sustaining capital then as well, $75 million to $85 million? Should you see that continue to step up, because I mean, it sounds like some of the spend that we’re doing is perhaps more sustaining rather than enhancement as well. But any thoughts you can give on where that goes as well? Thanks.

Luke Bortoli

Thanks, Glyn. So sustaining CapEx has stepped up in run rate in FY 2023 and we expect it to step up to this range in 2024 from around about $56 million in 2023. I think that that’s a reasonable assumption carrying forward, if that answers your question.

Glyn Lawcock

Okay. So you wouldn’t do it on $120 a tonne of spot production, you think $75 million to $85 million will carry us all the way through to P1000 as well.

Luke Bortoli

Glyn, we are not -- yeah. We’re not expecting that will increase anytime soon.

Glyn Lawcock

All right. Thanks very much.

Operator

Thank you. One moment for our next question. And our next question comes from the line of Al Harvey from JPMorgan. Your question please.

Al Harvey

Yeah. Good day team. And just looking at the reserve upgrade, obviously, a fairly big increase in the long-term spodumene prices up to $1,450. Just wondering how you guys get comfort around that number and if there’s any guide there on the relative contribution to the reserve upgrade that’s come from that higher price assumption?

Dale Henderson

Yeah. Sure, Al. Yeah. The reserve upgrade US$1,450 per tonne long run for that modifying [ph] factor. How we determine that is looking at the consensus pricing there, so total cost spread and took the average around that.

And of course, we took a close look here what some of our industry peers have done and we note that one of our industry peers as expect the long run price of $1,500. So we took the view that we like the idea of being that more conservative and it’s the same approach we’ve applied previous reserve updates.

To the question of what’s the relative contribution as a function of that. Obviously, modifying factor. I don’t have those numbers on hand on that one. So spodumene, of course, the guys are mentioning that’s been relatively insensitive to price distribution.

Al Harvey

And just before I get cut off, I just wanted to follow up on another question, just the timing for the -- potential timing for the expansion study?

Dale Henderson

Yeah. Good question. We’re working through that and the team to deliver the studies rapidly as we can and we’ll update on that in the next quarterly release [inaudible], I’m going to get in trouble.

Operator

Thank you. One moment for our next question. And our next question comes from the line of Robert Stein from CLSA. Your question please.

Robert Stein

Hi, team. Thanks for the opportunity. Just a question on capital management. So if I look at your cash balance and the liability from tax during the half, the forecast during the half next year. Do you -- are you managing to a level of, I guess, cash on hand at a particular point in time, noting that liability is going out to provide that comfort that you can afford your cash flow, you can afford your CapEx outflows. And then the sort of follow-up question to that would be, perhaps, are you being a bit conservative if you’re looking at the cash coming into the business, is there an opportunity to accelerate capital distributions back to shareholders either by buyback or dividend as your franking credit balance allows?

Luke Bortoli

Thanks for the question. Just on the first part, we do have a minimum liquidity balance that we manage to. That is not a concern any time in the near-term. And in respect of capital management, there is the opportunity, which we’ve highlighted in this presentation today to consider a one-off capital management initiative for shareholders and we’ll come back to the market over the next several months in respect of that.

Robert Stein

And would we be looking to manage potentially more debt on the balance sheet to accelerate that or is it -- are you still going to run pretty lean in that department?

Luke Bortoli

Just based on the cash balance today, there’s no reason why we would need to raise debt funding based on our current projections. The reference to expanding our access to debt capital markets in the presentation really relates to now that the business is at this level of scale and the sector is becoming more mature. There’s an opportunity to build it to be a leader in the space and try to raise large secured commercial debt funding facilities, which really haven’t really occurred. So that’s really what it makes reference to the opportunity to open up the capital markets for lithium as opposed to any needs to do so.

Robert Stein

Okay. Thank you.

Operator

Thank you. One moment for our next question. And our next question comes from the line of Mitch Ryan from Jefferies. Your question please. Mitch Ryan, your line is open. You might have your phone on mute.

Mitch Ryan

Hi. Can you hear me? Luke, can you hear me?

Operator

Yes. We can hear you now.

Mitch Ryan

Thank you. I know with the increased reserve, there’s also an increase to the strip ratio of sort of 7.6% and it was previously running at sort of 5%. Just wondering if that sort of takes effect immediately or what the strip ratio profile looks out over the next year or two?

Dale Henderson

Yeah. Thanks. Thanks, Mitch. We will have slightly elevated strip ratio for this year and next and really setting up for P1000. And then well, I think, broadly speaking, it will average around 7:1. But it also had as we continue to drill, we’ll obviously continue to optimize the mine. So we’re going to continue to do that. So watch the space, we’ll continue to optimize strip ratio function of the ore we mine as we said.

Mitch Ryan

Okay. So that elevated over the next two years, is some of that’s captured in that mine development, the $140 million to $160 million CapEx?

Dale Henderson

Yeah. You got it right.

Mitch Ryan

Okay. Thank you.

Operator

Thank you. One moment for our next question. And our next question comes from the line of Ben Lyons from Jarden. Your question please.

Ben Lyons

Good morning, everyone. Dale another dividend balance question. Again, noting those higher than expected CapEx commitments and also that very significant tax true-up that flows out in the current half. But having a look at the balance sheet, it looks like it’s only got about $2 million of listed investments at the 30th of June, which is very reassuring from my perspective. So I guess the dividend question is a two part one. Is the franking account balance as it currently stands a constraint on going harder than the $0.14 that was declared today or has that listed investments we materially increase since the 30th of June, which might also influence the Board’s thinking around that final dividend? Thanks.

Luke Bortoli

Thanks for the question. The payment of dividends from this point forward is based on estimated franking account balance at 30 June 2024. So it takes into consideration all the taxes we will pay cash tax in FY 2024. On that basis, there’s really no constrain in respect to dividend payments up to a pretty meaningful level.

Ben Lyons

Thanks, Luke. And the listed investments part of the question.

Luke Bortoli

So I might pass it on to Dale, but there is -- as of today there’s no change in the listed investments balance. Dale, anything else to add there?

Dale Henderson

No.

Ben Lyons

Okay. Thanks. Thanks very much.

Dale Henderson

Yeah. Thanks.

Operator

Thank you. I’d like to hand the program back for web Q&A.

James Murray

Okay. Thank you. A couple of questions from the webcast. The first one is the peers enjoyed first-mover advantage. But now there are eventually hundreds of new explorers around Australia, Canada, South America. Others in this fast-changing competitive scenario, what does -- what is Pilbara strategy to protect and indeed grow its market share?

Dale Henderson

Yeah. Thanks, James, and thank you for the online question. The strategy we’ve got to capitalize is the one we have going, which is expanding up that base as rapidly as we can and simultaneously moving down the cost curve so that will open up margins. That’s really the first part of our strategy.

Second part, of course, about other initiatives to increase volume by chemicals participation whilst also turning our minds to diversifying that supply network, because diversification is good business. So that’s principally the -- that principally represents a strategy we’ve got.

And we do think we’ve got if -- I think those moving mines that are around the listing in the market, some of our technical learnings, but we’re not stopping there. And Vince De Carolis and Paul and -- we have one of the team moving forward with the next wave of innovation. So hopefully, put more distance between us and the competition and continue to reduce cost, increase yield, that will play through to benefits for our shareholders.

James Murray

Okay. Next question. If Mid-Stream product is successful, how do you allocate spodumene to that given everything is already allocated with existing offtakes and the hydroxide plant with POSCO?

Dale Henderson

Yeah. Thanks for the question. As it relates to offtake allocation is, a few things to work through here. We’ve, of course, got ourselves set committed to POSCO joint venture in South Korea. And we’ve got some offtakes, some of which spodumene come off. And then, of course, we’re expanding. So -- and all of that, there is actually a significant component of unallocated production.

To the question of well, to what extent gets committed to Mid-Stream or not, that’s an open question. And what we are thinking through is making sure that whatever offtake commitments we have in the future, we have an eye to Mid-Stream, such that if Mid-Stream improved that well, we’ve got to commence by which to migrate to that model.

So certainly something we think about. We don’t have a definitive answer, but if Mid-Stream ultimately proves to be the superior supply chain model will, of course, want to all into our business in that direction from the benefits of full yield. So watch the space and we’ll obviously keep the market updated as that to clarify.

James Murray

Thanks, Dale. Next question, will the dividend payout ratio stay at 30%?

Dale Henderson

Yeah. The good question and the Capital Management Framework is effectively under consideration and between now and the end of the calendar year, we’ll progress the thinking with the Board around that. Ultimately, we can’t make any guidance around any of that at this early stage. But we’re certainly thinking through the scenarios of alternative capital management uses and we’ll go in due course.

James Murray

Okay. Last question from the webcast regarding ESG credentials, what is -- what we’re doing to minimize the impact of our operations and raise our ESG profile?

Dale Henderson

Well, the short answer is, there is a lot going on with that, Sandra McInnes, our new Chief Sustainability Officers come on board. There’s multiple streams of activity underway, ranging from sort of the practical decarbonization efforts, of which we’ve got the 6-megawatt solar and there’s more to come in after that, we now are taking our reporting.

And you will see through the combined annual and sustainability report today, we’ve stepped up a level from previous years with the investment engagement. There’s many, many different aspects which we’re moving forward and we’re moving up that maturity curve. So it will take time, but there was certainly a conservative effort from the business in that regard.

And yeah, thanks, James, for that last question. And for those analysts who got cut off or would like to have further follow-up, certainly encourage myself, Luke and James got today available calls and sort of welcome in the case if anyone needs to follow up that reach out.

And lastly from me, just and the team, thank you again everyone is all and thank you to our shareholders, to team and contracted partners and absolutely monumental year, breakthrough year in every regard. It’s necessary for life. Thank you for those who have gone on the journey and the what’s exciting year is where we’re heading. There’s just so much more to come and we look forward to updating in due course and thank you all for your time.

Operator

Thank you, ladies and gentlemen, for your participation in today’s conference. This does conclude the program. You may now disconnect. Good-day.