@Mujo Getting that breakdown visually is great. Thanks for sharing

I love charts @Mujo. A picture tells a thousands words. The tale of two businesses! I like the predictability of the mining services division.

@Solvetheriddle just off Tikr - well worth the subscription if you don't have one or have a similar tool.

Full Script below:

Mineral Resources Limited, Q4 2024 Earnings Call, Jul 26, 2024

7/26/24

Operator

Thank you for standing by, and welcome to Mineral Resources sell-side analyst call, covering today's release of its June 2024 exploration and mining activity report.

Your speakers today are Chris Soccio, Chief Executive, Iron Ore; and Chris Chong, General Manager, Investor Relations.

A little bit of admin before we kick off. This is a sell-side call with analysts able to ask both text and live audio questions. [Operator Instructions] This call is being recorded with a written transcript being uploaded to the MinRes' website later today.

I will now hand over to Chris Chong.

Thanks, Josh, and good morning, everyone, and welcome to the June quarterly conference call. I have Chris Soccio, CEO of Iron Ore with me. I will first run through a few highlights, and then we'll be happy to take questions at the end.

Firstly, in summary, it was a huge quarter for us, particularly at Onslow. We delivered first ore on ship in May, which is just 11 months after breaking the first ground at the mine. And clearly, it was one of our biggest moments in our 32-year history. We also sold a 49% interest in the Onslow haul road for $1.3 billion. And pleasingly, we had a solid quarter across the board with FY '24 numbers largely in line with guidance.

On safety, TRIFR was 2.74. It inched up slightly and largely reflecting the significant construction work occurring at Onslow. Importantly, there were no significant incidents, but as always, safety remains a key focus.

In our Mining Services business, volumes were down marginally to 61 million tonnes mainly due to lower development activities at Wodgina and at Marion. Overall, we hit the midpoint of guidance with FY '24 volumes of 269 million tonnes, up 9% year-on-year.

In the quarter, we commenced our first haulage contract in Queensland [ with ] now about 330 tonne road trains deployed. It's our first contract there, and we hope to expand in that region.

Now the outlook for the Mining Services remains very strong. Not only is growth underpinned by Onslow Iron projects, but we're also pursuing many huge opportunities with [indiscernible].

In our iron ore business, it's all about Onslow. Commissioning on all fronts has gone very smoothly, which is amazing given the scale of this project. We successfully shipped 319,000 tonnes across May and June via 3 minicapes. Our first Capesize vessel has arrived and we actually just started loading it and expecting fleet loading in early August.

Our first 2 transhippers have performed well. We couldn't be happier and the crews are filling in. Our third transhipper is now at Dampier and will head to the port next month to undertake commissioning and through training. The fourth transhipper is due to arrive in January and the fifth in March. And as we flagged previously, we've already turned our attention to expand into [ 50 ] million tonnes per annum, and we've already ordered transhippers 6 and 7 to support this.

At the mine, we broke ground in June 2023, and we're now moving well over 1 million tonnes a week. Our first NextGen crusher has been commissioned and the mine stack is operational. As we know, the haul road remains the critical part of our ramp-up, but we've made great progress. We've completed all major infrastructure works, including 2 bridges and 4 crossings. And we sealed 35 kilometers of the road so far and expect to fully seal fence and complete the road in October.

In terms of our road trains, we have 6 of our 300-tonne road trains now operating, and we fitted out 50 of these with autonomous hardware to date.

Our port systems are fully operational, including the truck unloading circuit, the product handling shed, bridge reclaimer and transhipper loader.

And you can see in the pictures on Page 4 of the quality that this transformational long-life, low-cost project is coming to life.

In short, we are very happy with the progress, and we look forward to providing more updates as we continue to ramp up.

At our existing sites, shipments and cost across Yilgarn and Utah hubs were in line with FY '24 guidance. At Yilgarn, we shipped 7.6 million tonnes at a FOB cost of $108 a tonne. At Pilbara, we shipped 10.4 million tonnes at a FOB cost of $74 a tonne.

Our average realized price during the quarter was $94 a tonne, representing an 84% realization. And discounts for lower grade remain around 14% to 16% today.

As announced in June, we will ramp production down at Yilgarn and we'll see shipping by the end of the year.

Going forward, we'll continue acceleration into early next year with some good DSO targets. We'll also continue to rehabilitate some parts of our mines. In the meantime, the focus is on redeploying equipment and as much of our workforce as possible, and that process is well underway now.

In the Pilbara Hub, we acquired the Iron Valley assets from BCI. Firstly, that reduces the mine gate royalties paid to them. Assuming we have completed the acquisition this quarter, the royalty rate would have been 15% versus circa 9% now. Secondly, it also provides greater flexibility going forward.

Now just touching on our lithium business. We delivered a good quarter, which was broadly in line with guidance. FY '24 production and shipments at Wodgina and Mt Marion were records. Our marketing team did well as well. Our [ receive ] price across 3 sites increased 15% over the quarter, averaging USD 970 a tonne or, on an SC6 basis, over $1,200 a tonne. However, the current market is not as strong as we had thought. Prices have been impacted by softer EV demand from U.S. and Europe, and we're in a seasonally weak period for China car sales right now.

Having said that, we believe current prices are unsustainable over the medium term, and we expect cost cuts to [ support ] around here. The long-term fundamentals remain strong, and we're just in the early stages of global EV adoption.

We've operated through 2 pricing cycle downturns before. We will continue to watch the market closely. While focused on improving performance and generating cash, we wanted to return the flexibility back to the market. We are cognizant of bringing on too much production into the current market, particularly, if there's no benefit. We want to preserve value.

At Mt Marion, we had a solid quarter. We shipped 95,000 tonnes of SC6. FY '24 SC6 shipments were 218,000 tonnes, at the upper end of guidance, up 46% year-on-year. FY '24 SC6 FOB costs were below guidance at $740 a tonne (sic) [ $750 a tonne ], while production was in line with the prior quarter at 89,000 tonnes. The product grade was a bit better than expected largely due to higher-quality feed and improved plant performance.

Now as flagged in the March quarter, our focus remains on reducing costs, and we're also continuing to study further plant improvements, such as [ wins ] and a flow plan to boost grade of 3% product and improve recoveries.

In regards to our underground work, we completed the box cut and the decline is now down to about 100 meters. Our underground studies are ongoing. And meanwhile, the exploration results that we reported in the quarter continue to support the underground mine plan. So we're very pleased with that.

At Wodgina, the quarter was impacted by a crusher failure in June, which saw the plant shut down for 6 days. Despite this, quarters production was a record, up 28% quarter-on-quarter, as recoveries improved with higher-quality feed as expected.

FY '24 SC6 shipments were 201,000 tonnes, up 41% year-on-year, but 4% below the end of the guidance. And consequently, SC6 FOB costs were $974 a tonne, 3% above the top end of guidance.

As we had mentioned in the last quarter, we did not tow any Wodgina spodumene into chemicals. And we've now sold all of our lithium chemicals [ entry, ] and across FY '24, we sold 24,000 tonnes, which was above guidance. In terms of Train 3, and as flagged previously, we will need to see sustained demand and higher prices before turning it on.

At Bald Hill, we had a good quarter, with production increasing 19% to 35,000 tonnes. We're continuing to optimize and reduce costs there, and we will come out with production and cost guidance at our full year results in a month's time.

In our energy business, we flowed the North Erregulla-2 oil well. We saw average production rates of 675 barrels of oil per day, which is a good flow rate for onshore wells in Australia. The oil assays indicate that it's a medium to light crude oil and with negligible sulfur.

We progressed assembly and upgrade of our MinRes' rig, which is in the field now, and we're preparing to drill the North Erregulla-3 oil appraisal well in August, which will go down to about 3,500 meters.

For the Lockyer gas development, we're waiting for WA government's decision on the partial exports into LNG. In the last quarter, the parliamentary inquiry was delayed to mid-August now, and so we'd expect the WA government to resume sometime after that.

Turning to the balance sheet. In relation to the sale of our 49% interest in the Onslow road to Morgan Stanley Infrastructure Partners, we expect to receive further approval soon. So the first payment of $1.1 billion will be received this half.

We expect FY '24 net debt to be around $4.4 billion. And I'd like to take the opportunity just to remind people that our unsecured U.S. bonds have no financial maintenance covenants of any kind, and the earliest maturity is in May 2027. Overall, we have significant liquidity of $2.8 billion at 30 June. This includes cash of $900 million.

We entered into a $600 million iron ore customer prepay, not dissimilar to what FMG has done in the past, and we see this as a good diversification of funding. It's non-dilutive, it's a non-debt form of capital, and will be treated as such in our accounts as well other peers, and that's how our rating agencies view it, too. It's cost competitive and unsecured, and we restructured the repayment profile to align with our cash flows, with amortization over 3 years starting in FY '26, which is when Onslow would be at the 35 million tonne run rate.

As previously announced, we entered into a $1.1 million bridge facility with JPMorgan, and we expect that to remain undrawn, and we will cancel it upon receipt of the first $1.1 billion of payment from the road sale.

We also upsized our undrawn revolving credit facility from $400 million to $800 million, reflecting our larger business size.

I'd also like to highlight our Onslow carry loan receivable of around $500 million, which we will earn interest on. This gets paid back from 80% of our JV partner's free cash flow. So effectively, we will receive 92% of MineCo free cash flow.

We know we are at peak leverage over the next 6 months, and that will start to deliver very quickly as Onslow ramps up and cash flow grows. Our Onslow ramp-up targets are unchanged. We are targeting 20 million tonnes per annum by the end of the year and 35 million tonnes in June next year. And to highlight the earnings potential for Onslow for us, at the 35 million tonne run rate and at spot prices today of around USD 100 a tonne, Onslow generates EBITDA for MinRes of $1.3 billion. So clearly, the payback on our capital is very rapid.

So with that, I'll hand back to Josh to queue questions. And just as a reminder, we've got Chris Soccio, CEO of Iron Ore, on the call, so feel free to ask him any questions on Iron Ore.

Operator

[Operator Instructions] Our first question today comes from Kate McCutcheon from Citi.

Kate McCutcheon

Just your comments on not bringing online new lithium supply onto the market now, how should we think about Train 3 now? Should that sort of be on [ ice ] for the foreseeable future? And volumes at Mt Marion and Wodgina, both, year-on-year, how do we think about that in line with those comments of being disciplined?

Christopher Chong

Yes. Thanks, Kate. Thanks for the question. We'll come out with guidance in relation to FY '25 clearly in a month's time at our full year results towards the end of August. In terms of Train 3 at Wodgina, I sort of mentioned that in the remarks that whilst we have that capacity available, we're cognizant of the current market, and so we don't want to necessarily add supply into the current market with no overall benefit. So depending on where prices go, we'll make an assumption, but assuming today's prices, it would be reasonable to expect that we wouldn't turn it on. We just don't want to impact the market.

Kate McCutcheon

Okay. And while we've got the other Chris on the line, just about Onslow, it seems like you pulled forward that 50 million tonnes. What sort of work needs to happen next year to get ready for that?

Chris Soccio

The 50 million tonne case is still under development at the moment. So a lot of it is going to be around approvals. So to move above 40 million tonnes, we need to seek new mining approvals, and there will be some investment in capital that needs to be done. So really the next 6 months is around defining those pieces of work and ensuring that all of the time lines line up to deliver the 50 million tonne per annum case.

Operator

Our next question today comes from Rob Stein from Macquarie.

Robert Stein

Quick question on the net debt figure that you quoted, just to confirm that doesn't include the prepayment liability. And I've got a follow-up.

Christopher Chong

Yes, thanks, Rob. Yes, it does include the $600 million repayment.

Robert Stein

It does.

Christopher Chong

It does. Yes.

Robert Stein

Yes. Okay. Cool. And so then in terms of just some further information around that prepayment, can you give us tonnage and potential discount just from a modeling point of view, so we can adequately reflect the cash flows across '26 to '28?

Christopher Chong

Yes. Thanks, Rob. So the way to be thinking about the modeling of it, we can't divulge anything around tonnages, et cetera, we've got confidentiality agreements in place, et cetera. But the way to be thinking about it is from FY '26, if you took out iron ore revenue and you took out $200 million in '26, '27, '28, you'll get a reasonable basis of where we'll land in relation to that. Does that answer the question, Rob?

Robert Stein

Excellent. Price assessment, if that's okay, of which this was done?

Christopher Chong

What was that question? Sorry, can you repeat that, Rob? I just missed it.

Robert Stein

So what sort of pricing should we think from an iron ore price point of view? So do you need to make an adjustment on price? So for example, if it's done at $100 and the price is $80, you'd potentially leak a bit of money back to the customer. How do we think about that?

Christopher Chong

Yes. No, we're fully exposed to the market spot prices, Rob. So if, say, it was $100, and we received $100 million or, as an example, $500 million of revenue in FY '26, you take out $200 million of revenue in our Iron Ore business.

Operator

Our next question comes from Rahul Anand from Morgan Stanley.

Rahul Anand

I've got two questions. I'll pick up the first one and then come back with the second. First one is around pricing. So obviously, good performance on the iron ore price. So just wanted to check a couple of things. Firstly, is this all driven by mine control, grade control in the mine and the lump mix? Or are there any QP impacts here that we need to be aware of? And then also, how many tonnes in the iron ore sales and the lithium sales are currently subject to quotational pricing adjustments? That's the first one. I'll come back with the second.

Chris Soccio

So with regards to the pricing, it has actually been around good quality control and mine planning and presentation of the material. So there's been good variability and good physical characteristics. So there's been nothing else that's been driving those realizations other than good operational discipline. With regards to the QP pricing, look, the mechanisms are pretty standard. So there's nothing untoward in that space.

Rahul Anand

So just on perhaps -- sorry, yes, go ahead, Chris.

Christopher Chong

Sorry, Rahul, I just want to add in terms of provisional pricing impacts, they're pretty negligible for both lithium and iron ore in the quarter.

Rahul Anand

Okay. So there's no strong volumes to finish off sales in the end of the quarter, which would need to be repriced in, say, August?

Christopher Chong

No.

Rahul Anand

Okay. Brilliant. Okay. Look, my second question then is on Wodgina. Obviously, you had costs coming out there to be above guidance. And you had a small crusher failure that you talked about, but I doubt that, that took very long to fix. I just wanted to get a bit of a baseline and an understanding on how we should be thinking about Wodgina costs going forward? I know there's a bit of ramp-up there still to come into next year for the 2 trains. But how should I be thinking about this year's cost and where you finished? Is that the run rate that I should be thinking is the right one?

Christopher Chong

Yes. Thanks, Rahul. It's largely dependent around our recoveries. And you've seen our recoveries improve from Q3 to Q4 as we've gone into more Stage 2 fresh [ fleet, ] so I expect that recoveries to continue to improve. Clearly, the decision around Train 3 is important. So just on a fixed cost basis, if we don't turn on Train 3, costs will be elevated. But I'm not going to give you a guide to where it is today or what it will be next year. We'll come out with that in our full year result, Rahul.

Operator

Our next question comes from Ben Lyons from Jarden Securities.

Ben Lyons

I really need to clarify the net debt amount, please, if we can get that out of the way upfront. Further to the question earlier, it appears you've included the cash from the prepayment but not the debt in your net debt calculation of $4.4 billion. Is that correct? So it would be $5.0 billion, if you actually reflected the fact that you have to repay this facility just in iron units rather than cash.

Christopher Chong

Ben, thanks for the question. Yes, to clarify, the $900 million cash, we have a $600 million cash of the prepayment in that. And as for the opening remarks, it will be in the current liabilities as a prepayment, but it won't be in the borrowings or net debt, and that's how it's accounted for.

Ben Lyons

Okay. Fascinating accounting treatment, but moving on. Can you please clarify how much CapEx remains at Onslow given you've only sealed 35 kilometers of the haul road to date?

Christopher Chong

Yes. Look, again, we'll come out with that detail in our full year results, Ben, but we've given guidance for FY '24 in relation to CapEx, and that's not going to be too far away off the mark.

Operator

Our next question comes from Paul Young from Goldman Sachs.

Paul Young

Chris, another question on the prepayment, just to clarify a few things. I guess, first of all, seeing you've upsized the credit, your revolving credit facility, to $800 million and then you put the prepayment in place, can I just confirm why you're putting this prepayment in place or what have you? Is it just a downside scenario you're preparing for? Or is it more the fact that you need these additional funds for the Stage 2 of [ Ashburton ]? Just trying to clarify why we put this prepayment in place.

Christopher Chong

Paul, thanks for the question. It's really around diversification of funding, right? We've got growth ahead of us, as you know, and we can fully fund it now, right? We've got a significant liquidity ahead of us. As you know, we don't want to dilute equity to shareholders, and this is another non-dilutive way of raising capital for us, right? We're in a growth phase. And as I said, we're going to be at peak debt and leverage over the next sort of 6 months. But post that, and as we ramp up towards potentially 50 million tonnes, we're going to be delivering very quickly as Onslow starts to turn on. Then we expect it to be free cash flow positive around towards the end of the year in terms of Onslow.

Paul Young

Yes. Okay. All right. And then maybe further, Chris, sorry to interrupt, just further to the accounting treatment. It sounds as though this is being classified, say, FMG, a decade ago, when they did the prepayments as deferred income on the balance sheet. We're effectively recognizing the revenue, but not the cash receipts from customers through the cash flow statement. That's simply how we're accounting for this.

Christopher Chong

Yes, it's exactly the same way to be treating it. Yes, we might not call it deferred income, we'll just call it prepayment in the accounts, but yes, it'll be the same accounting treatment as done by FMG and others.

Operator

Our next question today is a text question, which is coming from David Feng from CICC. David says, "It's great to see that your lithium pricing performed much better than your peers. Could you remind us of the pricing methodology for lithium, e.g., what referencing indices should we refer to? And is there any provisional adjustment terms?"

Christopher Chong

Thanks, David. Thanks for the question. Yes, I think the best way to be thinking about our realized pricing in our lithium business is there are 5 index prices around spodumene. And if you took an average, that shouldn't be too far off the mark. Now there might be times where we might try to link it to chemicals, but that will be a dynamic, and we'll take a view on that. But I think for now, the best way to think about it is just look at the spot indices as a diverse reference.

In terms of discount to the like, as you know, with Mt Marion, you need the grade adjusted. But for our 3% product, there is an additional discount there that you need to take into account. But beyond that, just look at the indices that you can see in the market.

Operator

Back to audio questions for the next one. We have Mitch Ryan from Jefferies on the line.

Mitch Ryan

My question relates to the Mining Services volumes. I'm just trying to reconcile the numbers to the commentary. So on my back of the envelope rough calculation, Onslow should have added at least 14 million tonnes of volumes in the quarter, but yet that declined by 8 million tonnes. So that's sort of a 22 million tonne decrease on your sort of ledger. You called out Wodgina and Mt Marion, they clearly can't account for all that 22 million tonnes. Can you provide some more color around that, please?

Christopher Chong

Mitch, thanks for the question. In relation to the Mining Services, the change quarter-on-quarter was really largely mainly Wodgina. We had CSI doing development work around the cutback of Stage 2. That completed in May. So it really drove the business there.

Mitch Ryan

That decreased by 22 million tonnes?

Christopher Chong

Not 22 million tonnes, no.

Mitch Ryan

Didn't you add 14 million tonnes at Onslow? You added 14 million tonnes at Onslow. You moved at least 13 million tonnes of waste.

Chris Soccio

Mitch, it's Chris Soccio here. I think you'll find, and I'd ask you to check your numbers, I think you'll find that, that 14 million tonnes could be mining movement, and that's not attributable to the Mining Services business.

Mitch Ryan

Okay. I'll take it off-line, but yes, obviously, I thought that went through the Mining Services division. My second question relates to how we should be thinking about the Onslow capital intensity to take it to 50 million tonnes per annum. I think to paraphrase Chris Ellison, it was sort of just only a matter of adding a few transhippers. So should we think of the capital intensity steps down materially to take it to 35 million tones, the capital intensity per tonne, but it should be materially lower than that for the next step?

Chris Soccio

So he is accurate in terms of the complexity of delivering the project from 35 million tonnes to 50 million tonnes, it will be simpler. However, the capital intensity will be roughly in line.

Operator

Our next question today comes from Kaan Peker from RBC.

Kaan Peker

Since we've got Chris on the line, just wondering if I could ask a few on the iron ore Onslow. At Ken's’ Bore, from memory, there's meant to be 3 NextGen crushers. When are the other 2 expected to be commissioned?

Chris Soccio

So the second crusher will be starting up within a month, so that's Train 2. So we started Train 3, it's already operational. Train 2 will be within about 6 weeks. And then the next crusher, Train 1, will come about another 6 or 8 weeks after that.

Kaan Peker

And that would essentially get crushing capacity up to around that 45 million tonnes, 50 million tonnes?

Chris Soccio

It won't get us to the 45 million tonnes, 50 million tonnes. There will need to be some minor modifications to those plants to get the additional volumes, but it's definitely more than sufficient to get us to the 35 million tonnes.

Kaan Peker

Sure. And I think Chris mentioned the transhippers that were ordered, the additional ones, for the expansion. When are they expected to be received, just sort of a timing that you can point to?

Christopher Chong

Kaan, it's Chris C. here. It's towards the back end of 2026.

Kaan Peker

And just another one there on Onslow. Just with the infrastructure, I think there was sort of 2 bridges, 1 passover, that was needed. Are both the bridges complete and it's just waiting for the passover to be completed now?

Chris Soccio

Yes. All of the major infrastructure is basically coming to a conclusion. So from the truck maintenance facility into the port, the road has been completed and all of those major pieces of infrastructure have been opened in actual fact. So it's really from the truck maintenance facility back to the mine now that we're in the largest construction phase.

Operator

Our next question comes from Matthew Frydman from MST Financial.

Matthew Frydman

Can I ask a couple of questions on Onslow to Chris Soccio? Firstly, on your price realization at Onslow during the quarter. Obviously, at 20% discount, that was the biggest discount across your book. Obviously, Onslow doesn't benefit from any lump product there. But is that maybe also reflective of some early discounts for that product given it's a new product in the market? Or are there other factors driving that? And do you expect that to improve as the asset ramps up?

Chris Soccio

Thanks, Matthew. Look, it's just a new product into the market at the moment. And so we really do need to start to get this into the blast furnaces and see how it performs. We are confident that we will start to see better price realization with the Onslow product as the super mill start to realign with [ goose ]. There's not so many tonnes in the market with good, quality CID. We've had our first feedback from the blast furnaces. And so far, we haven't had any negative feedback, which is actually quite positive. Sometimes they tend to overstate any difficulties they've had. So from the first test, it's been interchanged in the blend and centered wells. So a lot of these prices were [ sight unseen ]. So it's going to be a process as we establish this product in the market, and we do believe that we'll improve the realizations as we go.

Matthew Frydman

Got it. And then secondly, Chris Chong made some comments in his opening statements around the, I guess, the benefit to the Onslow ramp-up that's being provided by reallocating resources from the Yilgarn. Can you give us any sort of quantitative measures around the movement of people or equipment or the actual benefit on the ground that that's given to the ramp-up of Onslow? And was that a driving factor in terms of making the decision to shutdown down Yilgarn? Do you expect it will provide a material benefit to the ramp-up of Onslow in FY '25?

Chris Soccio

The ramp-down of the Yilgarn and ramp-up of the Onslow project has kind of been coincidental. It wasn't planned or staged. It's really the Yilgarn coming to appointing its mine plan and resource base that has really driven the timing of the announcements and the suspension of exporting in the future. Moving capable people out of the Yilgarn, and we've got a number of long-term employees working in that region, so the Onslow project is only going to benefit from those people moving from the Yilgarn into Onslow. And also, they'll start to get quite a different on-site experience at Ken's Bore with the resort-style accommodation as well. So it works quite well to be able to reward some long-term employees as they move from the Yilgarn into the Onslow project.

Operator

Our next question comes from Lachlan Shaw from UBS.

Lachlan Shaw

Two from me. Firstly, on Onslow and just on the sort of FOB cost guidance. We're seeing a number of your peers guiding to sort of 4% to 5% inflation in the next 12 months. Just wondering, are you still comfortable with the AUD 45 per tonne FOB, including infrastructure charge, at Onslow at 35 million tonnes per annum?

Chris Soccio

At the moment, we are. So we've been able to control our costs, and we're performing well within the operations. Obviously, we need to get to nameplate to obviously realize those prices, but we're still confident that it's an accurate guidance.

Lachlan Shaw

Okay. My second question then, just on Wodgina. So what's the update on Train 4 studies? I'm assuming that, if Train 3 ramp-up is delayed, then Train 4 is, too. And then secondly, can you just confirm that the pre-strip to enable in theory full Train 3 operations, when does that pre-strip complete? Has it completed yet?

Christopher Chong

Yes. Thanks, Lachlan. In terms of Train 4, the guys actually meeting up with Albemarle in London over the next couple of weeks to actually map out a longer-term plan around Wodgina and what we'll do there. So wait and see in relation to that. But we're still wanting to do sort of early works and approvals around train floor, sort of low-cost options and we want to be able to respond to the market in time because, going forward, we still see deficits over the longer term, and we want to be able to capitalize on any price slacks going forward.

And don't forget, when we make a [ discount ] on Train 4, when that happens, it will still be sort of an 18-month construction build and time frame. So it's some time away. In relation to the cutback at Wodgina, yes, a large majority of Stage 2 is actually being done now, and we're continuing to open it up. And we'll match that opening with our decisions around Train 4, et cetera, going forward, too.

Operator

Our next question comes from Matt Chalmers from Bank of America Securities.

Matt Chalmers

Just one quick question for myself, just regarding the haulage constraints that you flagged at Yilgarn Hub, heading towards being shut by the end of the year. But I just want to understand if you foresee any continued issues with haulage going into the first half of '25 and whether that 4 million tonne target is at risk at all?

Chris Soccio

Obviously, the movements along the great Eastern Highway have always got some restrictions, and we have to cross the rail line running from [ Kalgoorlie ] down to [ Esprit ]. So look, there are some challenges, and these are ongoing and have been present since we've opened the Parker Range operations. So there may be some challenges to that 4 million tonne. However, we continue to run multiple scenarios. And in each of these cases, the Yilgarn is still cash flow positive and contributes until we suspend the exports around the end of the year.

Operator

Our next question comes from Glyn Lawcock from Barrenjoey.

Glyn Lawcock

Firstly, just on the prepayment again. My parents always told me there's no such thing as a free lunch. So on the $600 million prepayment, like what is the gentleman on the other side, the company on the other side, getting in return? Is there a bigger discount? Or are you paying interest? There must be a rub on the other side. I'm just trying to make sure I understand what it is.

Christopher Chong

Glyn, thanks for the question. Look, there's nothing we can disclose in terms of who the other party are or is. As I said, we've got commercial agreements in place. It's not similar to other prepayments, Glyn, and the terms are not dissimilar as well. That's all I can really say.

Glyn Lawcock

But there must be something.

Christopher Chong

Yes. No, no. And it is very cost competitive. So if you look at where our bonds trade, et cetera, it's not materially different, I'd suggest.

Glyn Lawcock

Okay. So there's some rub on the other side. And then maybe just a question on Onslow and the build-out. Chris, you mentioned similar capital intensity, which is AUD 85 a tonne on the first 35 million tonnes. That would suggest another [ $1.3 billion ] for the remaining 15 million tonnes to get to 50 million tonnes. Is that about right? It seems like I would have thought you've already built the hall road, so that $500-odd million should come out. You have to repeat that. So I would have thought the capital intensity be cheaper. And is that sort of -- we should expect that over the next couple of years, spend?

Chris Soccio

Yes. So the capital intensity is generally pretty low. So when you compare it to our peers, it's pretty hard to go beneath about $85 a tonne. And we will need to build out capacity on the marine side at the port as well. So there's still a couple of significant pieces of work. Despite the fact that it's low complexity, there is still some investment that we need to make to get it to the 50 million tonne per annum rate. And so I don't see any substantial expenditures occurring in this first half while we still work out all of the approvals and what we are going to execute to deliver the 50 million tonne per annum case. And we'll be in a much better position in about 6 months' time to give you clear guidance around the investments and execution.

Operator

[Operator Instructions] Our next question is from Paul Young from Goldman Sachs.

Paul Young

Chris, just a question on -- back on the approvals for Stage 2 at [indiscernible]. Can you step through what approvals specifically are required do you need further heritage approvals, and where you are in that process in just the time frame about when you might expect to receive those approvals?

Chris Soccio

So the 2 main critical path items are going to be on the marine side approvals. So obviously, to go and build the second loading point and any associated dredging that is going to come with that. And then it's going to be the expansion of the mine plans above the 40 million tonne per annum rate that we've got today. So they are the 2 key ones. So that's going to come down to mine plans and which areas that we'll open up and then obviously generating those plans and submitting the request for approval.

Paul Young

Okay. Just to expand on the timing then. So it sounds like you worked through those mine plans you haven't submitted yet. Can you just maybe give us some color on the time frame around these approvals?

Chris Soccio

There's a couple of moving parts depending on what we execute. So it's going to be pretty difficult to give you any sort of concrete guidance. And so in the annual results and in the FY '25 guidance, we'll be able to give you a lot more detail then. So we are getting quite close to determining the execution pathway, and then we'll be able to give much better guidance around the associated approvals with that.

Operator

Our next question comes from Mitch Ryan from Jefferies.

Mitch Ryan

A question of clarification. Chris, you said the company will be peak net debt in the next 6 months. I just wanted to clarify. Does that assume the capital spend to take it to 50 million tonnes per annum on Onslow or because that has not yet received Board approval, that's excluded?

Christopher Chong

No, I hadn't received what approval, Mitch. So look, we'll wait just give us some time to work on that and we'll wait for our full year results in a month's time, and you'll get more color around that. I don't want to front run what our CapEx might be for next year now. And obviously, it's all dependent on market prices. But overall, we do see, and I would say is we see our leverage reducing quite significantly over the next 12 months.

Operator

Our next question comes from Kaan Peker from RBC.

Kaan Peker

Just on the expansion to 50 million tonnes, will that be using that Onslow haul infrastructure? Would there be additional CapEx required for that? And I'll circle back with the second one.

Chris Soccio

So the only additional capital required on the haul road would be more rolling stock, so more road trains. So in terms of the road itself, it will be completed and will be sufficient from the 35 million to the 50 million tonne per annum case.

Kaan Peker

Sure. And then just on lithium changing tack a bit, but on the gold field process hub, can you just provide an update on this. Is the strategy around regional consolidation and that hub-and-spoke model for targeting regional deposits still stand?

Christopher Chong

Carl, it's Chris. Yes. Absolutely. That hub-and-spoke approach hasn't changed at all for us. We clearly picked up a large package around the gold fields, and we're exploring and seeing some pretty good results. But we'll come out with more detail in the full year results. At this point in time, today, we've got Bald Hill running. We are running 100%, and so we're looking at ways of using that potentially as treating other third-party ores. But the hub-and-spoke approach is more of a medium-term plan. I think the nearest term plan is optimizing our current assets and expanding as efficiently as possible.

Operator

Thank you all. That does conclude today's call. Thanks for your time, and have a great day. Please reach out to the MinRes team if you have any follow-up questions. You may now disconnect.

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@Mujo thanks much appreciated

Cheers for posting.

Anyone fancy a drinking game for each time an analyst says ‘obviously’??