Elevra Lithium Ltd (ELVR) Q1 2027 Earnings Call Transcript

Welcome and thank you for joining a Levera Lithium September 2026 quarterly update. I'm joined today by Christian Cortez, Chief Financial Officer, Sylvain Collard, Chief Operating Officer and President of Canada, and Andrew Barber, Chief Development and Investment Relations Officer. As a reminder, any dollar amounts quoted today are in US dollars, 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 all mines, a record for mill throughput, and the second highest concentrate production in the operation's history. We sold 58,134 tonnes of spodumene concentrate, 71% more than the last quarter, which led to a 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 we signed two binding offtake agreements and we further simplified the portfolio by selling our interest in a warrior whilst we generally had a strong operational quarter our safety performance was below our expectations there were six recordable injuries in the September 2026 quarter compared to four 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 organisation, 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. more coaching, more visible leadership in the field consistent application of critical risk controls and renewed emphasis on the tools available to every person I'd also like to acknowledge Sylvain and his leadership team at NAL for the 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. The mill continues to operate with sustained high level of performance and achieved a third consecutive quarter where utilisation topped 90% despite a planned maintenance shutdown also being undertaken in the quarter. Maintaining a high level of mill utilisation, 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 it. 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, all processing costs fell 14% on better crusher performance, stronger plant reliability and operating efficiencies. 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 realised price was $1,276 per tonne FOB, which is $1,524 per tonne on an FC6 equivalent basis. On a per tonne basis, our average realised pricing increased by 39% compared to the June quarter, and we generated $74 million in revenue. After concluding sales with lag pricing in the previous quarter, we've moved to selling cargos priced based on prevailing prices either at the time of sale or with the final price determined after the shipment arrives at its destination. As a result of these 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 finalised. And while lithium prices have been volatile, the physical market for spodumene concentrate remains tight. Based on the conversations we're 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 in August we finalized our supply agreement of mangrove lithium for the supply of up to 144 000 tons per year for mangrove's proposed lithium chemical conversion facility in Canada Then on October 8th, 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 off-take terms to deliver greater commercial certainty and better financial outcomes for a laborer.

Turning now to our strategic initiatives.

In September, we published a pre-feasibility study for the staged NIL expansion. 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've mobilised teams at site to dismantle NAL's legacy carbonate plant to make room for the mechanical upgrades in 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, Shell has approved the issuance of the upfront tranche of the convertible notes to Canada Growth Fund at the July 16 Extraordinary General Meeting, and consequently, we issued $46 million of convertible notes in August. At Mobland, our focus is permitting, which remains the critical path. Fieldwork continued through the quarter to document baseline conditions to support permitting requirements. We've 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. 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've also continued to focus our portfolio on North America. In October, we completed the sale of our interests in the Awoya project to YU Cobalt for approximately $71 million in cash before fees and taxes. The sale simplifies our structure, removes the complexity of Awoya's joint venture and off-take agreements and eliminates future capital commitments to the project. In Western Australia, we completed the sale of our rights over the Tabatabra tenement to wildcat resources for a total consideration of $16 million Australian, whilst keeping a contingent royalty on any mineral resource Wildcat announces on the acquired tenement. We received $5 million Australian as an upfront payment combined with $8 million Australian in Wildcat shares. We've since sold the Wildcat shares for a total of $9 million Australian and the third payment of $3 million Australian 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 $300,000 Australian of exploration within two 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. We'll be holding our annual general meeting on the 19th of November. As we previously foreshadowed, we announced our planned board transition, which will take effect at the close of the meeting. Alan Buckler and Jorge Ferristain have voluntarily resigned as non-executive directors, which will reduce the board size from eight to six. The nomination remuneration committee reviewed the board's composition and confirmed that the board remains well structured for the majority of independent directors. and we'd like to thank Alan 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 back into 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. The proceeds from the AWOIS 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. NIL capital expenditure 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 NIL expansion and mobile and study development work. As we outlined in our full year 2026 results, we expect to incur between $120 and $140 million in total capital expenditure in FY27, with $100 to $120 million allocated to the NAL expansion and MoBland studies. Between the cash on hand at the end of September, the proceeds from the sale of our lawyer interests, and the remaining capital available through the convertible notes with CGF, we continue to see our near-term growth projects being fully funded. To sum up, the September quarter was a strong operational and commercial start to FY27, with safety to clear area for improvement. We remain confident in the outlook for lithium and in the path we have set for Elevra. And with that, we'll be happy to take questions.

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. And if you would like to withdraw your question, again, press star 1. Your first question comes from Max Ural with BMO Capital Markets. Please go ahead.

Hey, guys. Thanks for taking my question. The operating cost this quarter showed a nice little improvement quarter over quarter, and it's trending now below the FY27 guide you gave a few 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, Max.

So 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 about 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.

Okay, great. I'll turn it back over to the queue.

Your next question comes from the line of Austin Yeun with Matt Corey. Please go ahead.

Morning, Lucas and Tim. Just, yeah, can you take a little more color on the provisional pricing? I understand you comment on that in the December quarter. I just came to understand what's the time lag. And when you finalise the pricing adjustment, would you take the point when the product's delivered or would you be taking the amount of the average? I just, you know, conscious that the amount has been very volatile so this adjustment could be sensitive. Thank you.

Thanks, Austin. We anticipated that we'd get a few questions around this. So, Krishna will take some time to walk you precisely through that, Austin. Hi, Austin.

Thanks for the question. There are a couple of things to clarify there. Firstly, the QP, or the timing of when the final price gets settled, is effectively the month post-arrival at discharging port. and once it arrives to this charging port the calculation of that final price is the average of the month in which we are pricing so we've 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 arrived they effectively get offloaded the month

after they arrived we are effectively pricing them out Christian thank you you're an awesome probably just sorry Austin the only other point on that is that that's quite a standard methodology applied across the sector as well so it's not unique to a lever which I mean you're probably aware of it just want to share that for the remainder of the audience your next question comes from a levy spry with UBS please go ahead yeah maybe just a little bit more time

on that so so is it is it literally 60 days sale and then the the average of of the month after that so 90 days yeah so let's let's take an example of what occurred during the quarterly by just to be more specific the first cargo left in July it arrived to port 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 giving 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 one month after arrival the average of that month in this specific arrangement. Now, from time to time, we may deviate from pricing effectively one month after arrival to at loading, 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 six 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.

Yeah, got it. Thanks for the extra colour. And so just a little bit more detail. So do we assume there's sort of 20,000 tonnes ships? So two and a half a quarter?

Yeah, so we shipped 58,000 tonnes in that quarter, Levi. are for the two okay so 30 each is a standard run rate yep okay and then and nothing's happening with discounts or anything like that no I mean just to be specific the car goes every cargo that we're shipping is linked to spudgy mean prices now these two cargos are going to Mitsubishi it's an agent. There will be obviously a commission paid on what we report as FOB.

Okay, thank you. And then just on the...

That has been reflected... Sorry, just to confirm. The numbers that we've already published include what we would have expected to receive FOB if we had priced and crystallized the prices at the end of September. So I'm just giving you additional color there. we've always published when we have this arrangement of going through agents we publish our FOB prices net of those commissions.

Got it, thank you. And then just the CapEx profile so it ramps up through the through the remainder of the next nine months is that how we should think about it?

That's right Levi yeah, we're on track. Sylvain and the crew have done a good job, I was there a couple of weeks We expect demolition works, some of the installs already occurred, longer lead items are being placed as well, so we're on track. Thanks.

Thank you. We will now turn to web questions.

Thank you. First question is in regard to the LG Energy offtake agreement that's been announced. Can you provide any further details on that and specifically if there's a floor price and how that would compare against the mangrove lithium offtake agreement that you have?

Yeah, so obviously the nature of these offtake agreements, depending on the counter-party, are covered with confidentiality provisions and those elements, so there's restrictions on what we can describe. Suffice to say that the strategy that we outlined as part of our FY26 results around commercial strategies is what we've been implementing, and we're certainly pleased with the offtake agreement that we struck with LG Energy Solutions.

Thanks for no further questions.

We do have one phone question. That question comes from Glenn LeCocq with Baron Joey. Please go ahead.

Morning, Lucas. Thanks for taking my question. It's probably just back to Christian a little bit more on this pricing. So just so we're very clear, at the end of the quarter, let's say Platts was at $1,665. That's an FOB Australia price. and you've reported, I think, something like 1,524 on an SC6. So you've 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've done so far? And then we just have to wait for October to finish and November to finish the price?

Hi, Glenn. Yes, that is correct.

That is what we effectively do when we have variable pricing at reporting periods exactly what you describe it so what would what would that adjustment be then like if you say it's let's just make it simple it's 1600 fob australia what would that equate to fob where you think about it at canada's what's the freight differential candidate to to china versus australia china that you play with yeah in terms of freight rates so Currently, we all are experiencing higher freight rates.

I'm 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 know, you could play around, I guess, as an estimate, the rates you can expect to see from Canada somewhere between 75 and 100, given the cargos that we're managing. So that would effectively be part of that conversion that you're describing, Glenn.

Yeah, so it's probably about an extra 50-odd dollars. Yeah, it's about 50 to 60 bucks. Glenn, we'll typically send around 50 to 60 bucks incrementally. yeah so 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 your marketing agency and then that gets to your fob and then we adjust it after that yeah yeah okay great and then maybe just i mean you're only selling a couple of cargos at a time and obviously got it contracted but just your take on the market i read i read your release with interest and it's a volatile, very, I don't know how you call it, illiquid or liquid, but it's very small and there's a lot of money flowing through it. Is that just what you think is happening? It's just a sentiment issue that's pushed us down here? And do you have a sense of any feedback you've got from the customers you do deal with?

Well, look, I guess firstly, from customer interactions, Lucas touched on this during his delivery of the report. nothing has fundamentally changed from from what we see you know there's ample interest from parties asking whether we have available product for spot and you know when we talk about potentials of multi-year agreements nothing has changed so hence why our belief is that at the level that we are there is still strong interest and it does not seem to be a buildup of inventory now when you start reading through you know i guess the news flow as you start speaking to people that are active in the market there is negative sentiment my take on this clin 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've 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. So I think overall that has plagued defects with negative sentiment. Unfortunately, given that a lot of the practices today are linked to GFX, that is putting pressure on spot prices as well. So if I have to sum this up, I don't believe that the supply side of things is causing what we're seeing on rapid price of decline. I think that is this negative view that potentially 2027 is going to be not as aggressive growth as some people were expecting.

Do you would agree or disagree with that last comment, Christian?

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 best of knowledge, what I follow more closely is the supply side because there's greater transparency and visibility over what producers are putting out there. and you have announcements that are obviously disclosed by the markets to the market. I think that there is an element of downsize on the supply side that is not currently being built up when you look at the models. But 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. So 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.

No, I appreciate that. Maybe just a final question. If you look at your expectations for 27 demand, have you been changing them much at all recently? Demand?

No, no, our demand is solid in the sense of the two off-takers that we're working with have already firm up effectively the volumes and they're 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 eight months we're fully sold. All right that's great appreciate all the color thanks again.

Thanks.

Thank you Andrew I'll turn it back to you for web question.

Thank you Lucas could you please outline the key decision gate points for capital expenditure of the expansion project and consider these relative position at the time yeah so as I mentioned we've actually moved into execution we'll just take a step back I mean the reason that we you know so positive and encouraged by the NIL expansion project is what it'll do for unit operating costs it'll drop in the order around about 150 bucks because at $160 a tonne US 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 NL expansion. So 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 NIL with the expansion.

Thanks. There are no further questions.

Thank you. Lucas, I'd like to turn it to you for closing comments.

Thank you. And once again, just thanks, everyone, for dialing in and also for the questions. We certainly appreciate it. And we look forward to engaging with you again shortly. Thank you and have a great day.