BCI Minerals (ASX:BCI) Q1 2027 Earnings Call

0:00 Good morning everyone and welcome. I'm David Bossoff and with me is our CFO Steve Fuster. We're pleased to be joining you today for our September 2026 quarterly update. Before we begin, please note that this presentation should be read together with our September quarterly report, which is now available on our website. If you have any questions, please type those into the live Q&A tab. that'll be on the right-hand side of your screen and we'll answer those questions at the end of the session. Our values define who we are and they guide every decision we make. This quarter, our values of Winners One Team and We Do What We Say were again on full display.

0:48 This was led by our projects team. We have completed the dredging and the marine packages for the Māori Port on time and on budget. as promised. This is a massive milestone that significantly de-rifts the construction schedule and the cost of delivering Māori salt to business. It has been achieved through collaboration with BCI and with our contractors across all the teams. I do want to thank everyone involved in making that happen. That values-driven approach support the business we're building at Māori. Māori is on its way to becoming Australia's largest solar salt operation and the third largest in the world.

1:36 After years of construction, we are now just months away from completing that work. Despite much of the heavy lifting being done so far, we remain laser focused on delivering the construction of Māori salt business on budget and on schedule. With salt-air crystallizing, our priority is on a space and efficient ramp-up. Product quality sits at the center of this ramp-up. Our customers are relying on us, and we are determined to deliver exactly what we said we would. We also see KTMS mittens from our production of high-quality industrial salt as a valuable opportunity to add new products over time.

2:22 This is why our sulfate of potash trial is so important. It's a key step towards proving that potential as a future revenue stream. With its scale, its coastal location and our own port, Mardi is well placed to meet the growing demand across Asia. Safety remains our first priority and I'm pleased to report good progress this quarter. A 12-month rolling total recordable injury frequency rate has improved to 2.7. That's down from 4.4 last quarter. That improvement reflects the continued work our teams are doing to strengthen safety across the site. We completed 316 critical control verifications and 620 field leadership interactions.

3:21 Our verifications are aligned with the key risks on site, fitness for work, mobile appliance and equipment, and vehicles and traffic management. We use what we learn in these verifications to close any gaps in our controls and to target coaching where it's needed. In the September quarter, we delivered continued progress across the Māori production system. Through the winter months, our team prepared the system carefully for the summer season ahead. These cooler months are when salt forms a bit more slowly, ahead of an expected warm summer. We made deliberate decisions to accelerate the movement of brine to maximize surface area and to prepare the pond system ahead of the summer months.

4:13 By the end of September, around 266,000 tons of salt had crystallized in these crystallizers. That's an increase of 270 17,000 tons on the 49,000 tons we reported in June. At the end of the quarter, we had 12 crystallizers lined up from eight at the end of June. Since then, a further two crystallizers have been lined. The remaining 14 crystallizer cells will be lined progressively through to the final quarter of FY27 as we ramp up toward our mandate capacity. And as the filling continues, our attention is turning to how well the crystallizer system is performing. This quarter we continue testing our salt internally and those samples being provided to customers for their own independent assessment.

5:05 The results continue to meet the specifications in our off-take agreements which supports our customers' confidence as commissioning progresses. Looking ahead, this summer is critical for Māori Our goal is to enter the summer evaporation period with as much brine in the system as possible. The system brings the strongest, the summer brings the strongest evaporation that should support further salt growth in our crystallizers. But the summer heat also makes the system move faster and our team will be closely managing pond heights and brine densities while we continue to fill the newly lined crystallizers. The path to first salt is driven by nature, by the evaporation process that produces high quality industrial salt.

5:57 As you can see from this sliced view on the slide, the layers of the crystallizers is what make safe harvesting possible. Once the crystallizer is lined, the permanent pavement must form around 200 millimeters before we can start harvesting. That pavement becomes a stable operating base and allows safe harvesting of future salt crops. Everything that grows above pavement is what we harvest, wash and ship to our customers. As more crystallizer ponds are commissioned and evaporation increases through the warmer months, we expect the rate of salt crystallization to keep building. As we said previously, the timing of first salt on ship remains subject to weather and evaporation conditions in the next remaining months.

6:51 Turning now to construction. At the end of the quarter, our construction was at 90% complete. We're only a few months away from completing construction for the SALT project. The project team continues to deliver as they promise to construct the Māori SALT on time and on budget. With 10% to go, our focus is on disciplined closeout and successful commissioning. That's why we have detailed commissioning plans in place and remain laser focused on budget and on schedule. For the salt wash plant, stockyard and the port, the last pieces of the major infrastructure to be completed. I'll now provide more detail on these assets.

7:42 The salt wash plant is now 70% complete. Key milestones last quarter included the delivery of major equipment, and including screw classifiers, centrifuges, dewatering screens and elutriators. All of the fabricated steelwork of the wash plant is also on site. Site work continues with the installation of structural steel to level 1, as well as the product conveyor and the screw classifiers. This quarter, our structural, mechanical and piping contractor will be completing the erection of steelwork, as well as installing the centrifuges, dewatering screens and the elutriators. Our electrical contractors will also be busy installing switch rooms, cabling and instrumentation ahead of commissioning. Our current project schedule has construction completed to be done by the end of December, with dry commissioning commencing ahead of wet commissioning when the salt is available to run through the plant.

8:43 The construction of the port continues to progress strongly and this has reached 98% completion at the end of the quarter. Through September 2026 quarter, the dredging of the berthing pocket for our con-shipper and the channel to the ocean-going vessels anchorage area was completed. The remaining marine works including catwalks, navigation aids and dolphins were all installed as well. Both the dredging and marine works were now complete marking the end of the marine campaign and eliminating any major timeline or project risk for the port. During the next quarter, we will be installing the conveyor belt on the jetty, which is already well advanced. The stockyard conveyor and the belt will also be installed, and the switch room and cabling to the stockyard, and then we'll commence with dry commissioning.

9:37 The CFL Osprey, which will support our first shipment, is currently being converted and is on schedule to arrive at Māori ahead of the wet commissioning of the jetty. Construction in our new consulate and vessel, the Mighty Spirit, is also progressing well. So the design flows out, production, design and whole fabrication. Together, these milestones significantly reduces the risk in our remaining port scope and gives us a solid foundation to close out construction and commence commissioning. I'll now hand over to Steve to talk through our financial position and the stock market.

10:13 Yeah, thanks, David. Total construction costs now stand at $1.265 billion, following spending $80 million during this quarter. That leaves around $178 million to spend to complete construction. The largest packages of work remaining include the balance of the crystalliser line, finishing off the salt wash plant, the stockyard conveyor and the PPA road. With almost all of our costs now committed, along with the progress on these final construction areas, we remain confident that we will complete construction on budget. During the quarter, we drew $119 million from our syndicated debt facility.

10:59 We've now completed 13 drawdowns, taking the total amount drawn to $706 million to the end of September. The drawdown process continues to run smoothly and at quarter end, BTI had total available liquidity of $316 million. Including our pre-revenue operating expenditure of $321 million, BTI has now invested $1.586 billion in the Marty Salt operation. With available liquidity of $316 million, and approximately $178 million to spend on the construction, BCI has ample working capital funding of $138 million for the ramp up of the salt business.

11:52 In terms of the market, BCI remains positive about the outlook for salt prices in our region over the medium term. With a forecast 27 million tonnes per annum shortfall in supply through the Asian region, continuing to be forecast by Wood Mackenzie. We continue to engage with all of our off-take partners during the quarter and they remain both engaged and supportive. A highlight for the quarter was hosting a delegation from Soges together with a Japanese salt customer. Both parties are extremely impressed with the progress being made at our operations. They're able to see firsthand our commitment to salt quality and how we're focused on delivering to a high standard. And that matters to us because delivering on our promises to our customers is how we build lasting relationships.

12:48 We're also broadening our engagement with chemical companies that are positioning for growth in major megatrends, including the new energy markets. In particular, the growth of battery storage is driving investment in new caustic soda plants. The Coptic Soda market, the Coptic Soda is needed to process the critical minerals used in rechargeable batteries. During the quarter, our team also visited new regions within China, which we see as strategic growth precincts. We're also monitoring closely new energy projects that continue to shape the industrial growth across the country. Thank you. I'll now pass you back to Darwin.

13:33 Thanks, Steve. Sulphate of Potash or SOP is a key value add to our salt operation and important revenue stream for BCI. In August we awarded the construction contract of a 150kg per hour SOP pilot plant to Blue Star Lehigh Engineering Institute. SOP is a premium fluoride free fertiliser used in high value crops in Australia and internationally. This pilot plant is an important step towards confirming whether SOP can be produced at a commercial scale from the Māori feedstock. Bluestar was the principal designer for the world's largest brine-based SOP plant. They will design, supply, assemble and install the pilot plant, which will be built and delivered to Māori in containerized modules.

14:25 Our engineering consultant, Accelerate, which has supported our SOP work since 2024, will provide independent oversight across design, risk, procurement, and commissioning of the pilot plant. Commissioning is targeted for the start of the second quarter of financial year 28, with piloting expected to run approximately 12 months. The pilot plant will be funded from our existing debt facilities, and it sits within the approved Mighty Capital budget of $1.443 billion. This quarter, Bluestar completed the front-end engineering design study for the plant. We have since issued the scope for the detailed design and supply. Detailed design is expected to be finished by the end of March 2027 quarter, with procurement and modular construction starting at the same time.

15:18 We also completed further test work this quarter to support the design of the SOP process. We expect the final report of that work to be available in the December quarter. Meanwhile, our trial crystallizers for the production of KTMS salts continue to operate at a steady state and production remains on track to deliver the required volumes needed for the pilot plant trials. Alongside safely ramping up operations and completing construction, sustainability remains a priority and I want to share a few highlights from the quarter. On the environment, we delivered on all our key monitoring programs, working alongside specialist consultants and our traditional owners.

16:06 This included our quarterly monitoring of mangroves, samphire and algomats, which is an important habitat along the coast at Māori. We also continued on this heat control program to manage this invasive weed across site. We completed a lighting audit to help protect marine turtles at nest on the islands and we monitor marine water quality throughout the dredging and offshore disposal process. Together these programs help us understand our environment and manage our impact as we move into operations. In the community, I'm proud to share that our partnership with the Karratha Senior High School has been nominated for the AMEC Award in the Community Contribution category.

16:53 Through this partnership, we support the school's Positive Behaviour Support Programme, which is helping to improve student engagement and behaviour. We have also renewed our community partnerships for 2027. That includes continued support for the programme at the Kaurava Senior High School, scholarships through the Paul Brock Kimberley University Centres and the Kaurava Kangaroos Rugby Club in Kaurava. These long-term partnerships reflect Our commitment to building trackability and supporting the communities where we operate. As we close out this quarter, we do so by living our values and doing what we said we would do. This quarter, salt production increased, our newly lined crystallisers were filled and our port moved to 98% completion.

17:44 Construction is in its final stages and the project remains within budget and is fully funded. This coming summer is critical for us. The final stage of construction can be the hardest and the commissioning needs to be done with care and patience. We are prepared well and will stay focused on what we can control, safety, plant management and diligent testing of our product quality. We remain on track as we work towards first salt on ship in FY27. with a final timing dependent on weather and evaporation conditions. Our investment fundamentals are underpinned by the world's need for salt.

18:29 It's used across a wide range of industries with a long history of predictable demand and stable pricing. It's also sustainable. Salt is a renewable resource produced from seawater and 99% of the energy we use to produce salt comes from the natural evaporation from wind and sun. And with our Salford of Potash pilot plant now underway, we are taking the next steps towards unlocking more minerals from that same process. Thirdly, Māori has the potential to offer an annuity-style return thanks to the long life of our assets, our salt and port capital costs, and our working capital requirements being fully funded.

19:17 And once we ramp up to production, we expect strong free cash flow to build with low sustaining capital and surplus capital lending to annuity style returns for shareholders. This brings us to the end of our presentation. We will now move to questions. If you haven't already, please submit those questions in the live Q&A tab on the right-hand side of your screen. Thank you. Thank you, David and Steve. Now we've had a couple of questions that's come through, particularly on the timing of the first salt shipment. So can you let us know when is the first shipment of salt from Marty now expected and what has caused the revised first salt on ship timings compared with previous guidance?

20:07 Thank you for the question. We remain open that with the average weather conditions that we will be able to have first salt on ship in the first half of the next year. As we mentioned during the presentation, this is subject to weather. So if we have a dry, hot summer with minimal rain, I'm expecting that will be earlier in that half. And if we have a very wet summer with multiple cyclones, I'm expecting that will be later. The construction itself is still on track to be done by December regardless of the weather. So that is where the cost risks and what you want to make sure you control in close out of that. Thank you, David. And another question on timing.

20:54 With 12 or now 14 of the 20-day crystallizer ponds lined, will the lining program limit how fast we can ramp up?

21:07 Well, at the moment it is not, and I'm not expecting that to be the case. We are currently lining ahead of our crystallizer feeding process, and we are able to put brine in at the right density through the system. And here in the summer months, I expect that it will become more challenging, and we'll continue to monitor that as we go. Of course, having a very hot summer is a good problem to have, and I'm looking forward to solving those things as they come.

21:34 The only important piece on that is for the number of crystalliser cells lined today, that gives us ample production capacity to heat their cells in the timing that you talked about earlier. And we're very confident that it doesn't limit our ramp-up process

21:59 at all. Yeah, 16 cells is more than enough to produce the self-reliance of any ramp-up product. Thank you for that. Now a question on pricing, Steve. How have pricing conditions tracked over the past quarter and what is BCI's outlook for the salt market over the next 12 to 24 months?

22:20 Yeah, thanks. We talk about price, salt price being a relatively stable commodity and looking at the price over the last 12 months in and out of global uncertainty and the way different commodities have moved around five-siders. So that same period, salt has moved within a band of about plus or minus 5%. There's not been a lot of movement one way or another. So it has been fairly stable and one of the things I'm pretty trying global conditions. Our outlook, or our view in the medium term, continues to be that the price of salt will move in an upwards trajectory.

23:08 Underpinning the reason for that really is around the supply and demand metrics. There's not a lot of supply coming into the market, but at the same time, demand within the Asian region is growing at a much faster rate. So we see that shortfall in supply probably in the next, in the next couple of years of these new plants come online, the new plastic sowing plants that I spoke about earlier. As they come online and demand steps up, then we're probably going to start to see that tension, that price tension coming in. And so prices start to rise above where they are today. Thank you, Steve. And then another question on the pricing.

23:54 When is BCI expected to set the costs of pricing?

23:59 Yeah, we're looking at the moment. We're working fairly actively with Japanese customers and I'd expect over the coming months we'll start to be in a position where we set those prices. For the remaining two off-take agreements, we'll start talking to, well, at the moment we're talking to OneWire around pricing So I'd say that will probably get settled around January or February next year. And similarly, with the offtake agreement for January, early in the next time of year. Thank you, Steve. Now, David, a question here for you on conditions. What are the foreseeable effects, if any, of cyclonic conditions, extreme weather or extreme weather events on productivity here?

24:52 and product security, and is there any mitigation strategies in place?

24:58 Well, I think I'll point to the last couple of seasons we've had. The highest risk, in my view, of a salt operation is during the ramp-up period, construction and early ramp-up stages, the weather. We have had four cyclones, and the last most severe was actually just last season. So we've been thoroughly testing on whether these assets have been built to stand these conditions and as we reported in a number of quarters so far and I'm really happy with the results and the assets, life departments, the pumps, OJT and all the other constructed assets, village included, as would suit those tests that we've been through. Now during the ramp up, the challenge with weather is not so much the wind, in fact the wind is great, because wind improves evaporation, but it's more the rainfall, and the effect that rain has had in previous events is dilution, and it's the same for any other source of erosion. The good news for us is the amount of evaporation we've had, the amount of dilution we've had, was exactly in line with the amount of rain we've had. What that means is we have no rain water flowing into our ponds from other catchments. Only the water that's fallen on the ponds has taken dilution.

26:16 Now that's just part and parcel of running a salt evaporation, and those assumptions have been included in our modelling and production forecasts. Thank you, David. And now another operational question. Are you expecting to contract further salt volumes and a follow-up? What is the potential timing of further offtake?

26:40 I mentioned earlier we were in China, southern China in particular, earlier in the quarter. I think the discussions there are progressing well. We've got 2.2 is about 3 million tonnes, about 5.3 million tonnes of capacity contracted today. We're certainly working at the moment towards bringing some additional term sheets in place that will then be a precursor to off-take agreements. So we'll steadily work on those over the next coming 12 months as we work through RAMPA. Thank you, Steve. Now, David, I've got a question here on the crystallizers.

27:28 So as you mentioned, we've completed about 12 crystallizers and there's about 16 left. So this would appear to leave an additional eight crystallizers unlined. Can you let us know what the plan is for these?

27:44 Yeah, so there's two trains of crystallizers that we've got to get into line this stage. Our modeling is indicating that those crystallizers additional crystallines can be used for additional capacity that is not required to heat main plate capacity and that is at average weather conditions. Of course in warmer months or hotter months we produce more and in cooler seasons we produce less. So my view is that in the future we can look to use those crystallines as what we call pickling ponds to accelerate volume but that will be part of our debacle at the work down track. Thank you, David. Now on to the port. We've previously spoken about excess port capacity.

28:29 Are discussions still continuing with potential users?

28:34 Yes, the last update we gave, we talked about the need to work through the approvals process to be able to export iron ore through our port. So that's certainly the major... precursor to being able to formalise any type of agreement with a third party. Pleasingly, the work on the approvals process has continued positively and we'll get that firstly in place. We'll continue to have discussions with interested parties but that will be a precursor. Completing that is a precursor to bringing in place any agreements for access. Thank you, Steve. And then I've got a question here on the sulfate of potash plant.

29:22 So assuming the SOP trial goes well and then moves into full-scale production, will there be a need to raise more capital or will this be fully sourced from the existing funding?

29:35 Yeah, we've been pretty consistent on this point. Given the timing of when we're likely to make an investment decision on a commercial scale plan, the salt business itself will be generating positive operating cash flows. So that gives us the ability to make some decisions on how we apply that cash, whether it's used to pay down our debt or whether it can be directed towards the investment in SAP. We certainly have... There's a lot of discussion, a lot of discussion in almost every country globally about security of supplier fertilisers.

30:22 We already have two leading government agencies in our debt facilities. So I feel confident that between the cash we generate and our very supportive lender group, that we certainly wouldn't be looking at a capital raise. And that's been our position for the last two years, that we would not be raising capital, would not be issuing any new shares to fund the SAP. Thanks, Steve. And I just have a follow-up question for that. In the near term, if you go through a rampart, what's your view in terms of your working capital position and is there any risk thereof of a capital raise?

31:09 Yeah, we finished the quarter with $316 million of available funding and capex funds. to spend off around $178 million. So that leaves around $138 million to support the business before revenue kicks in. On the expected use of funds for operations, that probably takes us towards the back end of next year, assuming no revenue. So we feel pretty comfortable Given the sort of F-SOS timing that Dad had talked about, then we're well and truly funded from a working capital position.

31:59 And just to clarify, that's end of calendar year for that?

32:03 Yes. So, it's a buffer. Thank you, Steve. And just on that EFSOS timing, David, we've got a bit of feedback here that was difficult to hear you in that first question. Can you just reiterate, when is the first shipment of salt from Marty now expected?

32:19 Yeah, no problem. And apologies for the audio. Hopefully, you can hear me now clearer. So I mentioned during the presentation that the weather drives the production process. All indications from the Bureau is that we'll have a hotter than usual summer. If that turns out to be the case and we have minimal rain, rain being the key indicator, we expect first salt on ship to be earlier in the next half of this financial year. If we have a very wet summer or multiple cyclones that dumps a lot of rain on the operations, then that will push to the right. Now, modelling indicates that there's a range of plus minus six months in that. and that remains to be seen. I'm very satisfied with the self-crystallization process so far, but the summer period really determines how fast we're going to grow. What we don't want to do is put our crystallizers at risk.

33:15 So I mentioned during the presentation the 200 mil of pavements. We're really keen to stick to that and to ensure that we can safely and productively ramp up and not incur additional costs. Thank you, David. Now we've got time for two more questions. I've got one here. Given the current increased cost of diesel, has BCI considered installation of solar power as an alternative for its operations?

33:42 Yeah, I can answer that. Certainly the increased diesel is something that we are carefully monitoring and Steve can talk to us about some really positive or good hedging processes to ensure that we minimise the downside risk of the renewal price escalation, and I'll let Steve talk to that in a minute. Certainly, the requirement for efficient power supply is something that's been on our radar for a little while. My view is that once you have the SOP plant, which will be a key, almost half of our solar power demand will be from the SOP plant, that's the ideal timing to add a renewable source from a power station, that provides a power station-like supply to both the port facilities, the self-wash plants, the SOP plant, and potentially also the village.

34:37 So that's still our objective, and that's in our forecast to do so. At that point in time, we expect it will improve power costs. I'll let Steve just talk about the hedging ideas and wonders.

34:48 Yeah, I want to first start with we actually don't use a lot of diesel. Yes, we've got the diesel pumps. We've got the pumps around site which rely on the use of diesel, but we don't actually consume a lot of diesel. Having said that, we did see an opportunity early this year when oil prices were much lower than what they were or what they are today, and we did put in under a forward contract, pension contracts have been placed. which means we're paying, our diesel price is substantially below what you would see at the pumps today. And that's been a real positive strategy this minute. Our budget assumptions around diesel prices have held all the way through despite what's happened with the oil prices and how that's been slowed into diesel prices.

35:43 Thank you both. And then we've got a final question here on the port. Just want to follow up on what you shared earlier, Steve. In regard to the port, when are the approvals expected to be received?

35:57 In all likelihood, it'll be sometime during the course of the next calendar year. Approvals generally take a little bit of time. But we're actively in active discussions with the regulators. I think realistically, it'll be during the course of the next calendar year. Wonderful. Thank you so much, Steve and David, and thank you to everyone who styled in today. That wraps this session up.

36:27 Thank you.