Lynas Rare Earths Limited (LYSCF) Q2 2024 Earnings Call Transcript

Lynas Rare Earths Limited (OTCPK:LYSCF) Q2 2024 Results Conference Call January 21, 2024 6:00 PM ET

Company Participants

Jennifer Parker – VP Corporate Affairs

Amanda Lacaze – CEO

Gaudenz Sturzenegger – CFO

Pol Le Roux – COO

Daniel Havas – VP Strategy & Investor Relations

Sarah Leonard – General Counsel & Company Secretary

Conference Call Participants

Chen Jiang – Bank of America

Daniel Morgan – Barrenjoey

Austin Yun – Macquarie

Al Harvey – JP Morgan

David Deckelbaum – TD. Cowen

Dim Ariyasinghe – UBS

Paul Young – Goldman Sachs

Operator

Good day, and thank you for standing by. Welcome to Lynas’ Quarterly Results Briefing Conference Call. [Operator Instructions] Please be advised that today’s conference will be recorded. I would now like to hand the conference over to Lynas. Please go ahead.

Jennifer Parker

Good morning, and welcome to the Lynas Rare Earths investor briefing for the quarter ending December 31, 2023. Today’s briefing will be presented by Amanda Lacaze, CEO and Managing Director; and joining Amanda are Gaudenz Sturzenegger, CFO; Pol Le Roux, COO; Daniel Havas, VP Strategy and Investor Relations; and Sarah Leonard, General Counsel and Company Secretary.

I’ll now hand over to Amanda. Please go ahead, Amanda.

Amanda Lacaze

Thanks, Jen, Good morning, everybody. For those of you who are on the East Coast of Australia or indeed, even the West Coast in the top half, I hope that you’re staying healthy during this incredible heat wave that we’ve got just at present. For those of you who are in cooler climates, I trust you’re enjoying it.

This quarter which has just passed has been a very productive one for our business. About midway through the quarter, we received the very welcome news that our Malaysian license had been varied so that the conditions which were quite difficult for us with respect to management of that facility in Malaysia have now been removed. And we are able to continue to operate on all areas of our Malaysian facility through the duration of the current license, which takes us through to the March 2, 2026.

As part of this license variation, it’s only been one further variation from us which is to dedicate 1% of our gross sales revenue to research aimed at developing a residue which is less than 1 Bq per gram of radioactivity. That process, that research process which is being conducted under the supervision of the Malaysian AELB, but in partnership with a number of different tertiary institutions, both in Malaysia and also using some of our relationships in Australia is already scoped and in progress.

Of course, by getting this variation in the license conditions, it gave us confidence to make some of the investments that we have been planning to make in our Malaysian facility including those which see us reconfigure our flow sheet and solvent extraction. And make further investments in product finishing which will allow us to increase our downstream capacity in Malaysia to approximately 10,500 tonnes per annum of NdPr.

In addition, during the quarter, during periods that we were shutdown to complete those works, we also undertook significant works in our cracking and leaching and [indiscernible] areas, both on ongoing maintenance, but also, some enhancements in operations, given that we now have extended operation of those facilities. This was indeed, as you would have seen in the report, the largest, most significant work that we’ve undertaken on our Malaysian processing facilities’ construction plant. We had 600 subcontractors mobilized on site. And we are very pleased to say that all planned modifications were completed without any injuries.

So at the same time, during the quarter, we were delighted that we had — we were able to announce feed on in Kalgoorlie in early December. That certainly takes the pressure off some of the issues with respect to — the change in license takes some of the pressure off in terms of the speed of the ramp up in Kalgoorlie, and also has given us the opportunity to demobilize some of the subcontractors on site, which has a beneficial cost impact.

And then, at Mount Weld, we were delighted because we received the ministerial statement on, which reflects basically supporting the Mountain Expansion Project Plaza, which Australian PPA and John made some great progress with them without early work. And separately from the quarterly report, we’ve also announced some of the results we’ve had from the Cabana [ph] tight exploration program which we’ve been conducting over the past at 18 months or thereabouts. And these are highly prospective, we’ll run a future resource development of NetVault.

So really, the Coles has been very focused on ensuring that we have and setting up our operations progressing our various projects to ensure that we are both able to support capacity growth. The market grows but also that we are undertaking efficiency initiatives to ensure that we can preserve and indeed, in some instances, improve our cost position because in a market, which I’ll talk about shortly, which is on it’s cyclical in nature, intense pricing. It is important that we retain on a low cost and competitive. It helps position in the market.

So let me turn a little then to sales and also the market. And I would point out that despite being shut down for 50% of the water management expects the 12, and we had very good production rate, production during that that quarter was absolutely in line with that package 7,000 tonnes per annum. And as sales notwithstanding the very low pricing environment, we also at a respectable levels, which reflects the fact that we are able to sell down some of the safety stuff that we have been holding. Just in case I guess that’s what safety stock names isn’t just in case, we have not achieved to the outcome on the Malaysian license that we did.

Of course, everybody who is — even occasionally for the railroad market any time generally the critical minerals market numbers, the alpha out [Indiscernible] in the market. We know that the market is not helping us at present and yes, I’m sure you’ve heard that from many of the producers is that being that releasing their quarterly results.

It really is all about the subdued environment in China and generally speaking across various markets, we continue to see automotive is pretty strong. Japanese customer demand remains resilient, but really inside China and particularly, when it comes to them in those areas, which into the real estate market, we are seeing very soft demand, which is translating to conservatism in terms of inventory holdings and sales in the regulated markets. And so the price is back at the sort of pre-COVID levels. We see this is being a part of it.

So all those sort of cyclical things within the market. And as I said, our objective is to ensure that we have our operations operating safely and in a cost effective way to ensure that we are able to continue to compete and be well placed. We’ll watch the market up to and it happens that I’m sure many of you who’ve been investors in non-U.S. for many years would know that this was exactly what we were saying about 2020, and that so we saw the benefits of being in that strong position when the market really picked up in 2021, 2022.

So generally speaking, I think we’re all fairly pleased with the progress that we have made during first half. And I’m pleased also with that the way that we have been able to manage the business through this time and through sort of having an extended shutdown and we look forward to this calendar year, continued — continuing to be an exciting one as we continue to develop each of those projects.

So with those as sort of opening remarks, I am, as always, happy to take questions.

Question-and-Answer Session

Operator

[Operator Instructions] Our first question comes from Chen Jiang from Bank of America.

Chen Jiang

So congratulations on NdPr production despite the shutdown, sorry to the temporary maintenance work. I’m just wondering, NdPr capacity, you note mentioned that in the quarterly 10.5 by the end of December ‘24. So that’s end of first half FY ‘25. Could you please remind us the plan up to the 10.5 tonnes to achieve 12, tensely, you mentioned is core line of our growth plan 2025. So that would you please remind us if the line of ‘25 growth plans still intact and in the plan after that.

Amanda Lacaze

Ideally, you would recall the original line is 2025 growth plan was to get to 10,500 tonnes per annum. In addition to that, we have plans to construct a separation facility in the U.S., which is about is it 1,300 tons per annum. So that really takes us up to given it’s sort of that 12,000. We’ve got the opportunities to do some further optimization works in Malaysia as well. But essentially, it will be a combination of the Malaysian facility with the U.S. facility is dedicated to the 12,000 which is and the capacity that we’re installing at Mount Weld. And now with the two cracking and leaching facility in Kalgoorlie and in Malaysia. That’s clearly we have sufficient on cracking and leaching capacity to be able to take that downstream activity.

Chen Jiang

Maybe a question on Kalgoorlie, please. So Kalgoorlie and we’ll start to see the mix on the covenant to on to your Malaysian plant from the March quarter. If you could give us any color on the cost as an average for the [Indiscernible]. I know it’s very hard for us to and will your cost question will increase include including Kalgoorlie by that, if you can give us any — how should we think of your cash cost to income in including Kalgoorlie in the next three years?

Amanda Lacaze

So certainly in this financial year, we have always been very clear that it is sort of an adjustment here we’ve got because it’s affected the sort of long shutdown days and a number of initiatives that we’ve had to take that we’ve chosen to take in Kalgoorlie to facilitate sort of the start-up there, including using track gas rather than on piped gas because of as there is issues around the gas pipeline, we also will — with some cost penalties in the early stages, it’s where adjusting and particularly operations, their reagents, we’ve got more people on site to ensure that we’re getting the commissioning and ramp-up process, right?

So as we move through over the next two to three years, I’ve had it right and I understand that this is a challenging target is to keep our cost of production within the same sort of range as we have it now, will we be able to do that? It means everything I have to look at efficiency because by definition issue, right, adding at the side, it’s going to at those costs, so may need to look for further efficiencies in both our Mount Weld and Malaysian operations. And so that when we look at the cash cost on a combined basis, we will not be significantly increasing that cost.

Now, I can’t give you really what it — what the exact profile of that is going to be. But that’s certainly our objective because, as I said, preserving a low cost position is crucial to our ongoing fleet.

Chen Jiang

And last question from me, please, on Kalgoorlie. I’m just wondering how — well Kalgoorlie has started processing the concentrate from Mount Weld. And at end of last year, any challenges have the center started? And are you expecting? Are you expecting any technical challenges from well processing the cabinet for the rest of, we sent the Kalgoorlie cabinet to Malaysia.

Amanda Lacaze

Yes, there are challenges in stock price. We’ve got a big complicated. We place some challenges and we certainly have been yes, as we introduced paid. I mean, of course, this actually showed us areas that all of our team had, yes, sort of hypothesis on where we might face those challenges. Well, you don’t know until you figure that’s all theory until you actually introduce the material side.

There are some areas where it may be improving in line with the any [Indiscernible] you that show that Dan is data that we have each data that showed that. And these works and all those things. I’m not sure that it really reporting made it to [Indiscernible] health. But has been a very, very significant issue with power in Kalgoorlie over the last week, it was taken out completely by lightning strikes an absolutely amazing and a huge talent which would take it down.

And for us, fortunately, we actually, were not operating the plant at the time as we were doing some of the enhancements because I think that the Southern disturbance power could have been problematic for us as it was, having that have was definitely an issue, but by no means is great for us running an industrial facility is because some of the other residents accountability. And we did our best to contribute and help within the community.

So I think that our latest forecast is that we should have power back onto the plant by the end of this week in the main time we had two hits, which are providing power, which allows it to be able to continue with certain of our construction activities that as we’ve said, the heat right light. We’re really sort of focusing on things which are under cover. So we had plenty of challenges, but we also have plenty of skills and capabilities to make those talented. And I think we’re all feeling that we can continue with the ramp-up in good order.

With respect to processing the enrich in Malaysia. Fortunately, they were not in situation where we’re trying to do something with no experience and skills impact, if not a decade of it now. But as well as that we had, the ability to actually produce a rare earth carbonate in our plant, which we have then been able to test it focus, this pays off here or there and a great deal of confidence that the circuits have been designed will work. And so we think that that’s a lower risk change from others that we may sort of put in place at various times.

Operator

Our next question comes from Daniel Morgan from Barrenjoey.

Daniel Morgan

My question just relates to demand. I mean, obviously is disappointing. The commodity price has been tracking how it is. I just wanted to hear what thoughts you can give us on your customers like obviously you’ve called out air conditioning as being weak in other property related sectors. Is there any shift in demand from wind customers? I understand that’s been pretty weak over the last 12, 18 months as well. And I guess broadly the point, is there any reasons to be optimistic on a turnaround in demand may constant.

Amanda Lacaze

[Indiscernible] type that question. Suffice to say that, certainly, we have seen some wind projects, but the good cultures to hand over to Pol. He is actually being in each of the major markets relatively recently meeting with customers and [Indiscernible], I’ll give you a bit more color than I can.

Pol Le Roux

Yes. Good morning. That mentioned that — the — I think mainly the interest rate increase has postponed or some wind turbine projects just in Europe, but that’s not really major and electric car growth is there and is overall doing pretty well. And the key factor is definitely the economy in China, was so warm up since you are voice put the need to forecast how fast the economy will recover in China. I’m just really told the risk guy, your finance experts for that. That’s the key point when we have China recover.

Daniel Morgan

And maybe how do you think Amanda team, about bringing on your own supply in the next 12 to 18 months? I mean, you’ve got the potential to add a lot of supply to the market versus what you have. And how do you anticipate sequencing that given the demand for the product has been a bit weak recently.

Amanda Lacaze

So demand for our products remains resilient and we continue to have, everything that we produce funding on that contract, I mean, we have a very clear look through that in terms of ongoing demand and our major customers continue to forecast increases in demand. Having said that, with any business, we were any businesses dependent upon events such as the general economic environment or in our case, some specific sectors.

And so building optionality into our business ways that they can make fixed costs, be able to make choices to dial up or dial down that particular time. It’s something that we’ve actually worked on pretty hard for probably the last six years to be able to give us a bit more flexibility in the business it compared to the days when we just — had this in our mind to add as much as we could as fast as we could and sell at any price. So our customers still got. So clear growth trajectories in the full task and function, and that’s the reason why we continue to invest with confidence and increasing at capacity.

Operator

Our next question comes from Austin Yun from Macquarie.

Austin Yun

During the December quarter can see the product mix has shifted. How should I think about the product mix to a — for both production and sales for the next two quarters, please? And just quickly, it’s also to confirm that the 1,500 tonnnes of production for the March quarter, it’s for NdPr only.

Amanda Lacaze

Yes, the 1,500 tonnes is the NdPr production. The very big thing. I think this is one of the things that we spent a fair bit of time thinking through and particularly through the shutdown and as we’ve done some of the testing in the circuit, as you will recall, last quarter, we took to having a very soft first quarter this year. And then, you know, sort of having the ramp up to the new capacity occurring in the June quarter. We have chosen a smooth ramp up profile, which will actually see us produce more than six months, which we think is [Indiscernible] not a good thing. And the in terms of the mix, I think as we move back into full production, we will save the mix actually fell back to normal profile.

Austin Yun

And just a one quick follow-up. Given the revised ramp up profile, would there be additional working capital expected? How should we think about any potential cash flow impact of anything that we need to be mindful?

Amanda Lacaze

While I say that it will be as at April, it will resemble much more of a normalized Florida with the exception that this Cordis navigate the benefit because yes, and I think depending on the day, we get the benefit of some of the reductions in costs that came and production costs came during our shutdown in the December quarter, but no nothing significant.

Operator

Our next question comes from Al Harvey from JP Morgan.

Al Harvey

Just follow-up on the supply and demand outlook. So I guess — maybe a couple here. Just thinking through what your views are on the additional production quotas announced by China late last year, what the motivations there might be just given prices have already been soft and then perhaps on the demand side, just wondering if Lynas has any exposure to the growing IoT and robotics industry and whether you’ve done any research on that potential total addressable market there in terms of rare earth sort of things.

Amanda Lacaze

And once again, I think I’m on track that across to Pol’s but that staff on saying is we see automation and factory automation as being one of the key growth drivers, as you know, as we go forward. But Pol can speak, particularly to production, but it is on — he was in China towards the end of last year. And can you give a bit more color on that [indiscernible]

Pol Le Roux

Yes, the so the worth is surprising announcement until the end of the calendar year for additional quarters. And I understand that this was required by one Chinese major display. You had the consumer base for your product. Does that I mean, obviously lead to a bit of oversupply, given that it is the mood and the demand was very strong and that explains the substitution we are seeing at the moment and the key elements is always to understand. I mean, China remains the biggest by far we are supplying the tenant, how much the increase production comparison reflects their overall strategy?

Two points on this one. I have to do recently an exercise for long-term demand of NdPr. And actually, if you forget the quarter but projects are 10 years ahead. There is so much need for it that actually this came on production and could that might not be the main driver of growth.

And the second is remain of the same position that actually China has developed downstream, a clear leadership deleveraged their risk for the firm position to do that. Today, they have the downstream leadership established developed this not knowing this and then paying so much attention about where the supply comes from until downstream down maybe having the lead being said, we’ll see what will be the quotas after the Lunar New Year. So on February 9th, I think is Lunar New Year. And so we expect some seem to be announcing that second half of February.

Al Harvey

And just when you just mentioned that if you did a bit of work on it, are you willing to share kind of where you see the Chinese production quotas or their production capacity capping out in Europe assumption there?

Pol Le Roux

I don’t think that’s sorry [Indiscernible] you can as well ask me what the price would be tomorrow and that factor completely that supply so far?

Amanda Lacaze

No, I won’t. But it would be foolish of us to speculate on China government policy, and it’s not something over which we have control and we’ll come back to, as I was saying. And what we do control is the ability to operate at our facilities costs effectively and to develop strong, robust relationships with our strategic customers who are going to pay us is it driving demand over the next three to five years?

And that includes now that we have a very clear pathway to increase production. The ability to engage with some of the cuts in this thing seeking sort of additional product from us on long-term contracts, but some time now that those new rates not being in a position to be able to make that commitment until we have this overall competence and the capacity upgrade.

Pol Le Roux

And just adding up to that and sharing with you a little bit of my trip to China. I hadn’t been to China for four years, so from December 19th for COVID, and it was interesting to different aspects. First is that you really feel the economic difficulties. You can see that industry. The second is that we will – surprise it is saying that Lynas is now the world’s company Seabreeze producer, which means two things. One is the idea of killing Lynas is off the shelves.

And second — secondly, to, as you know, we always said that minus our cost of our missiles. And so and it’s important that the efforts have been delivered unrecognized. So it was rigid very interesting takeaways from our two channels.

Al Harvey

Pol, thanks for that. And I do appreciate that it is hard to know what’s going on with China. I just thought given you’d done a little cap itself, but maybe be willing to share that. So we’ll move on.

Just wanted to get a sense of how you’re thinking about our longer-term messaging around the total capacity system capacity for Lynas, given you’ve got call it 15,000 to 16,000 tonnes of cracking and leaching capacity and notwithstanding the weaker market conditions, what kind of work have you done on looking at right beyond 12,000 tonnes? Perhaps maybe you can talk us on when you might go about stepping out those kind of plans.

Amanda Lacaze

I just love you guys — I mean, we are still in the process of finalizing this significant next step. And now you want to know what I’ve got more, but actually what Moore’s Law is, one of the reasons why we have continued the significant drilling campaign at Mount Weld to notably and are undertaking real exploration and each infill drilling that allows us to better understand the ore body is as it is. And so we are not in the convert to the Cabana [ph] type drilling program to mineral resource at this stage and expect to be able to do that over the next several months.

And so yes, as lies the value starts with what’s under the ground and really understanding that we have sufficient material to be able to be highlight to production capability is critically important and the results are really very positive for two things. One is yes. So the additional grade is NdPr and as we’ve looked at it closely. Hello, I am back.

Al Harvey

Get back. I can hear you again Amanda.

Amanda Lacaze

I’m not sure where I have to impose what…

Al Harvey

That’s all right. You were on a bit of a roll about the Mount Weld exploration results. So I might just finish with one more on that, if I can. I guess, I just wanted to kind of clarify the wording in there in the release around the grade. So let us say that total rare earth oxide grade in the fresh components hot is averaging up to 3.3%. So I guess I’m just trying to understand if that paid or is the average? And I just how you kind of think about that with risk perspective, the reserves that are currently approximately 8% and then yes, just wanted to get a sense of what kind of gives the team out there a view that it could be the fresh component type could be a simpler and lower cost process, thus the high-grade saprolite material at surface.

Amanda Lacaze

Okay. I did actually cover some of that when I was speaking into the EBIT, but certainly the work which is being done at present on multiple ways to process this material, I think is you know that yes, the saprolite timing has its own set of challenges with respect to the float circuit and the very fine particles and the ability to use a Simplot and separate to that prices for the coarse grained material. We see as being prospective bearing in mind that this is early as we look forward, we are not — we have not converted this material to a mineral resource.

In that way is that it’s having it does make sense. The ability to be able to cost effectively. Pricing is even though it’s has, yes, it sort have on average a lower grade and I think is very positive for our business going forward.

So, I think the other thing, which was one-time gains that were not good, then on top, that is some of the additional information that we have been able to get as we’ve conducted the drilling campaign and particularly on the distribution and availability of heavy, it is really important because as you know, high performance magnets need a combination of both NdPr and also on [Indiscernible] prospect of being able to mine for an element, not just mine grade. It is also very positive traffic.

Al Harvey

Just sorry, just really quickly on that it does look, though, like the dysprosium grades three to four times lower in this — in the fresh rock zone versus the saprolite zone that you’re already mining. So just how do we reconcile that?

Amanda Lacaze

As I did raise the same results that we have seen are actually related to the — are actually related to areas which don’t fit within that count not mine and even in the saprolite zone. So that’s what we’re actually doing. More work on is to understand in those areas which demand side, given that current month nine plan is primarily focused on grade and above, but of the whole NdPr is actually looking at the areas outside of the [Indiscernible] where we can see further enrichment on the heavy [Indiscernible] I think that way, we are at a stage at this stage, we’ve got some good prospective results and it’s important for us to share those with the market. We need to do some more work of bill [Indiscernible] codes convert this into proper mineral resource and subsequent have been enormous for macro.

Operator

Our next question comes from David Deckelbaum from TD. Cowen.

David Deckelbaum

I wanted to maybe ask a high-level question is obviously, this quarter there’s a bit of a transition. You all are endeavoring and multiple growth initiatives. I don’t necessarily need to know what’s next, but I am curious in the context of the cash burn that’s probably foreseeable for the next several quarters. How do you kind of square your capital initiatives right now with the uncertainty of the market, as you pointed out earlier is highly contingent on the broader Chinese economy recovery, which no one seems to have the answer to right now. So how do you think about sort of that risk management right now? And how far away are we from any modification to timing of capital outlays? Are we sort of kind of two pregnant with some of the projects that are ongoing now? So it’s more of a let’s finish those up commission and then wait and see.

Amanda Lacaze

It’s an excellent question, David. And I think you would not be surprised to know that we have done, have they been working on this, you cannot just keep spending money blindly or bankers would say, well, why don’t you take on some debt and slight well to the it down. The dumbest thing we could ever do is actually spend borrow money. So therefore, what are the profiles that allow us to be able to preserve cash if we need to? At this stage, we don’t see that in the short term because we have been able to — developed such a strong balance sheet.

And really the key priority in terms of our capital consumption over the next 12 months is going to big Mount Weld expansion. And we see that as being able to be accommodated within our current balance sheet and highly desirable to complete within that period. But we have a watching brief on that and we have identified what we can earn through. We just don’t need to do it at this stage.

David Deckelbaum

Maybe a little bit more in the winds, but just — when I look at this past quarter’s results, it appears unless I’m incorrect that maybe there the your absolute total costs are increasing right now. And I’m curious if any element of that is a function of commissioning or downtime at facilities that you would deem to be more 1x in nature as opposed to obviously just total operating costs increasing on a unit basis as you bring on Kalgoorlie?

Amanda Lacaze

All a bit complicated. But I guess one of the important things here to recognize is that, as I said, in terms of what we report here is cash flow not a normalize we will report as at half year, we will get an accounting costs associated with production and the cash cost of coal versus spot. It lags production during the quarter. We effectively had very close to a quarter’s worth of cash costs associated with production, but 50% per quarter of production. We will see some of that benefit come in during this quarter. But as you identified and as I mentioned earlier, it is an adjustment here and we will see some increases during this year associated with operation and the Kalgoorlie facility, which once we’ve got it, I’ve been running stably, we will then look to optimize.

Operator

Next we have Dim Ariyasinghe from UBS.

Dim Ariyasinghe

Just on the ramp up, can you maybe let us know in terms of optimization or give us a little bit more color on how, you could potentially manage a ramp up of Kalgoorlie with regards to lower prices like [Indiscernible] elasticity in how much some how much production you can have, how agile is a facility versus them low prices.

Amanda Lacaze

Yes, probably not a huge demand of elasticity in the ramp up phase to the extent that as we that would facilitate we need to be testing and pressing its capability. So yes, I mean it is inexpensive yes, it’s a tough cost inflation period as we produce during that phase. And once we have the view of operating capability and we are operating safely there and at the same time. We are operating with stability in Malaysia, things that may we have an opportunity to look at how do we best optimize that and we may do things differently. It according to market conditions. But during the ramp up phase, probably not a lot of room to normal of a frequent.

Dim Ariyasinghe

The head off questions, maybe one or two more blue sky gives us remind us on your heavy growth strategy on some of the more exciting, and that’s now AUD50 NdPr price?

Amanda Lacaze

Where every day is exciting in AUD50 NdPr price gives us plenty of exciting things to deal with. And that I think that the original exploration of [Indiscernible] Japan about well, who’s really very much about like TVs were a happy coincidence that we go along with it. The processing in a suite of end-to-end processing was absolutely designed to optimize recoveries for lights and didn’t necessarily optimize recovery preparedness. And we take that we have opportunities to improve.

As I said, we’ve got the opportunity to add to mine in areas that were within our current life of mine plan, which could see us produce more heavies as well and to be so important in terms of then looking at alternative sources for heavies, I think every one of you has written the vast sort of ionic clay deposits and prospectivity from those. And yes, and certainly for us, very close to home ventilation, ionic clay deposits, which are being progressively developed the Malaysian government has nominated, sort of development of railroads, industries, upstream and downstream is one of their important economic focus areas.

And so working with a potential and supply sources in Malaysia to complement the material that we have available out of the network ore body is clearly a priority. And then looking further afield that other heavy sources of courses and it is, of course, sort of on the agenda. But I would say that those yes, it developing now well, looking to partner and develop Malaysia at the two things that I think have nice perspective at this stage.

Operator

Next we have Al Harvey from JP Morgan.

Al Harvey

I just wanted follow-up Amanda, when should we expect the resource update?

Amanda Lacaze

Probably midyear, year-ish. Yes, we generally provide an update around that. It arrived at that time that we reduced our annual results. And we would think that we will aim to do it no later than that. It will assist the team can do it earlier. We’ll build rates have acted accordingly.

Al Harvey

Yes. And just finally, a bit more of a follow-up. Just thinking about that potential again beyond 12,000 tonnes. But how do you think and in the context of Pulse and Quest analysis, how are you thinking about whether or not the market could tighten? I suppose did mentioned that things there is a requirement for more material, but how do you think about phasing in more material longer term?

Amanda Lacaze

Well, I think once again, it’s one of the reasons why we’ve been dedicating sort of time and effort to better at the same Mount Weld ore body. We continue to sort of engage with various different perspective. They’ve had its suppliers. None of them have actually come to market yet, but does that mean that we might over time be able to take them. Yes, they have to do it with others who may have been able to develop resource to be able to process that resource and as states with a particular focus on some of the upstream and resources, which have we do expect to come available, particularly in Malaysia.

Yes, it at [Indiscernible] and it’s a jurisdiction where we already know what we’re doing and understand sort of the potential sources of additional material. In terms of our processing capacity, as I said, crushing and leaching, we’ve now got plenty of capacity. And so downstream, waive that if there is no constant uplift from the second half tonnes to the 10,500 tonnes capacity in Malaysia, one of the great benefits of brownfields expansion. And I think we’re relatively confident that we will be able to take further steps there. But it will be sort of done, yes, sort of based appropriately with what we do with capacity in the other stages.

Operator

Our next question comes from Paul Young of Goldman.

Paul Young

I just want to dial at designing a few specifics. And the first is around the slight upgrade in production for NdPr for the June half. Just want to clarify, you’ve done the expansion works of de-bottlenecking on the cracking and leaching and front end. Have you actually completed the expansion of the solvent extraction, the two solvent extraction trains, is that still ongoing?

Amanda Lacaze

That is done. What we need to do now is to stabilize and increase to date right through to those as we bring Emrich [ph] from Malaysia as well. Bear in mind that we’ve got ahead with Ghana had both the feedstock from Malaysia — sorry, and they Emrich [ph] from Kalgoorlie to be able to face the increased production and the upgrade went really well. And we are very confident about those circuits, which is the raise of my stated service. As you know, we’re being conservative in what we’d said previously, which was to hold sort of production level, so also that stabilized and things working very well for Australia.

Paul Young

Yes, that’s amazing. World of tanks, sorry, that the fastest expansion outside of the backend refinery in the industry. So well done to the type second question, I mean, just on the on that wells I noticed it was running at 80% nameplate in the quarter. What would you be running it as hard as you can? I know it was running at basically nine plus a couple of quarters ago. Was that just auto changes or something else?

Amanda Lacaze

No, just because we were shut down for six weeks because we’ve been able to build the inventory and because we are always mindful of costs.

Paul Young

It’s more working capital management that Mount Weld running out of [Indiscernible] throughput in the quarter?

Amanda Lacaze

And it’s now back to 100.

Operator

Thank you. I would now like to hand the conference back to Amanda for closing remarks.

Amanda Lacaze

Thank you, and look, thank you, everybody, for joining. I think that it is always, when demand is failing, so that it’s easy for us to feel like having a little bit of a wave. But generally, we see this market continuing to be highly prospective. It’s growing. It’s important and we are about making sure that we are in the best possible shape to win in all circumstances, whether market conditions are really, really positive over that as they are today, maybe not so positive. But you know, we need to be focused on making sure we can be successful across all stages of the cycle.

So thank you very much. And we look forward to a very exciting 2024 calendar year. And I’m sure, I’ll talk to you all again on finish as we another half year results.

Operator

Thank you. This concludes today’s conference call. Thank you all for participating. You may now disconnect.