Mineral Resources Ltd
ASX:MIN
Earnings Call Analysis
Q4-2023 Analysis
Mineral Resources Ltd
Investors might raise an eyebrow at the current negative free cash flow position of MinRes, noted as the only one among its peers to be in such a state. However, a forward-looking story unfolds as the company reveals plans to double in size by the end of 2024. This growth is underpinned by an additional 35 million tonnes of iron ore production capacity, as well as expansions at both the Mt Marion and Wodgina projects. The Mining Services business expects to follow a similar growth trajectory, anticipated to double from its levels in 2022 to 2024.
In alignment with a philosophy of self-sufficiency, MinRes has consistently eschewed external fundraising, preferring to fund its growth from within, a practice maintained over the last 17 years with one minor exception. This approach underscores management's commitment to using its own cash reserves to achieve growth and reflects a strong balance sheet that has been attentively managed since the company's inception. Looking ahead, the company aims to catapult returns on invested capital north of the current 21% average to greater than 25% by the end of the next year, positioning the cash currently idle in iron ore and lithium to come online and further drive profitability.
Key to MinRes' operational strategy is its focus on ethical and sustainable practices. This focus is driving demand as customers increasingly prefer Australian-sourced hydroxide due to its ethical, environmental, and labor standards. It appears that international changes such as the shift to electric vehicles and a serious global stance on climate change have only amplified the desirability of MinRes' ethical business model. Given the complex tax environment in China, the company has decided to avoid setting up operations there, instead focusing on partnerships in Europe and North America for a more favorable economic and stable long-term outlook.
The management exudes confidence in its production abilities, forecasting that by the end of the current calendar year, Trains 1 and 2 at the Wodgina project will be fully supplied with fresh rock. By June of the following year, Train 3 is expected to follow suit, with discussions already underway regarding the future of Train 4 and potential approval processes for Trains 5 and 6. These projections are set against the backdrop of elevated current costs due to logging equipment stationed in the mountain, but these are clearly seen as temporary measures on the path to achieving the company's aggressive growth targets.
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Thank you for standing by, and welcome to the Mineral Resources June 2023 Quarterly Sell-Side Analyst Call. Your speakers today are Chris Ellison, Managing Director; Mark Wilson, Chief Financial Officer; Joshua Thurlow, Chief Executive Lithium, James Bruce, EGM, Corporate Development; and Chris Chong, Investor Relations Manager.
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. To ask a text question, select [ missing ] tab, type a question in the box towards the top of the screen and hit the arrow symbol to send.
To ask a live audio question, press the request to speak button at the bottom of the broadcast window. Follow the instructions on screen to join the queue. If you prefer to ask your question by the phone today or have any issues connecting via the web, dial-in details can be found by selecting the help joined by a phone button within the audio interface or on the homepage under asking audio questions. Text questions can be submitted at any time, and the audio queue is now open. I will now hand over to the Minerals team.
Thanks very much. Good morning, everyone. Chris Ellison speaking. Look, I'm just going to run through a few of the highlights of the quarter and I'm going to give a little bit of an explanation around where we're heading in terms of strategy on our lithium business. And I'll make a few comments about where I think the market is sort of heading. Mark Wilson and I have joined this morning because obviously, a lot of changes in the business. The business is moving very quickly. We're doing a lot of development work. We're growing very quickly.
So we just wanted to make sure that everyone is trying to clear on what our strategy and believe it or not, some of you guys, we do have a strategy and we've had one for about 31 years. So look, I'll kick off.
First of all, I just want to mention, we're building out the Onslow project, 35 million tonnes nameplate capacity. We had a tragic loss of life up there recently. One of our contractors that we brought into [ Layolabitumen and Ashbelt ] on the runway of our new airport at [ Keno ] loss of their young people. And our focus has been sort of wrapping around the contractor and their team and supporting them and all of the people, friends, colleagues on-site. I went up with our senior management, our medical staff psychologist was up there to crack the door the following morning, and we were there to support our people, and we've done that moving forward.
I'm in constant contact with the family and his wife and we're supporting them financially and the funeral is actually on Friday morning. So there'll be a group of us attending that. But one of those things that's memorable forever. Investigations are ongoing, police and the mines department are handling that. We've done our own internal and that will take some time to get the information. But when we do, we'll certainly let everyone know.
Our safety in the MinRes business has always been at the top end of the mining industry our first quarter this calendar year, we had a TRIFR of 2.21. And we've reduced it slightly for the June quarter, we're down at 2.18. It's the sort of results that you generally expect to see in factories in controlled environments, not where you've got [ 700 to 1000 people with Ross. ]. Look, I'll just move through Mining Services is performing well. We've had another good quarter in the mining services that was reported, I think, in the first quarter this calendar year that -- there was a drop off in the mining services wasn't really reported properly.
We simply had high productivity in one of the projects that we had a lot of equipment on and we got that finished earlier than the client expected and we're able to transfer most of the equipment through to Wodgina, which I'll talk about shortly.
A crushing plant during the quarter for an external contract, and we extended 1 of the big haulage contracts at the jumbo road trains for another couple of years. So this year, in total, just to remind everyone, I said I think at the end of last year, over the next couple of years, I expected to bring on about 5 new external crushing contracts. So so far, we're into July, and we've got 3 in hand. Mining services also finished the Mount Marion upgrade. There's some more work to do there and they're tidying up on the commissioning and ramping up.
And we've got a huge demand for these 330 tonnes jumbo road trains that we've got, and that's sort of right across the country. So we're building them as fast as we can, all of them being built here in Australia. -- all the trailers are being built right here and part. So I mentioned a few years ago, everything that we were doing offshore, we're pulling all our manufacturing back into Australia and we've really got it here, not all of it, but most of it. So we run the largest workshops probably in Australia now and we're about to double them over the next 12 months.
Iron ore business is going pretty well. We've set around guidance had a few issues up at Utah Point in Port Hedland, Cyclone and they had some issues out there with the ship loader, which hurt us a little bit. Pricing is going reasonably well. The low-grade ore is only around about 10% or 11% on discounts. So we're very happy with that. Costs at the moment are running at the upper end of guidance. There's some pressure out there is the whole world knows around supply chain, labor costs and everything you can imagine, but we're handling that pretty well, and we've always managed our costs well and we continue to do so.
Gas caught a bit of criticism a while ago. We drilled on hold and got one of the best onshore discoveries. The second hole was a Fraser. We then went down and done [indiscernible] that appears to be better than block here as good as Lockyer was. And then about 10:00 last night, we were down in Lockyer 3. We call it about 4.6 case down, and we hit another motherload of gas. So unsure how much is there. Obviously, a lot of work to do around measuring it, but about 17 meters of [ pay zone ] and no water down the hole. So it's going to be a high-quality producing wells. So 3 out of 4 wells. If we keep that up, we'll be more than happy.
Lithium business, running pretty well. I mean that we're in a growth phase, and I think everyone needs to recognize that. So we doubled the plant nearly down at Mount Marion. We've done a lot of work in getting the Wodgina site restarted after we shut down in 2018, '19. And we're playing catch-up on both the sites. So we've got 2 trains running up it Wodgina. It will take us to the end of this year until we complete them 100% with fresh rock. Train 3 will be coming online. I think we've said this before around December, January. It will probably take about 6 months to ramp that up and get fresh feed to it.
Same is happening down at Marion. So a lot of rock to move down the to play catch up and get at that [ free share. ] So about 80 pieces of the [ logos ] down there, and about 22 drill rigs. So we're moving it as fast as we can. So it will take us still about Christmastime until we're getting good fresh feed coming at Mt Marion. And again, same at Wodgina, about 100 pieces of gear. We've got up on the hill. We're literally taking the top off of that. And once we get that done, of course, the strip ratio will be down to the life of mine average. The costs will come down substantially. So they're adding a lot of cost per ton of spot going out the door. That's why we're unusual -- by the time we get through to the middle of next year, about June next year, I mean, we'll have fresh feed going in all the plants, and we'll probably have some more news flow for you around Wodgina. Just to touch on a few of the things that we've done over the last period, when the price of spod comes from sort of 8,000 to 4,000 a tonne, it's always followed by carbonate and hydrooxide. Sometimes that falls even quicker. So we had an arrangement with Ganfeng. It got to a point where we're simply better off just selling the spot. So just for those of you that don't understand if it's running around 6% spot, you need about 8 tonnes to converted to a ton of hydroxide. So if you're getting 4000 a tonne for [ 8x, 32,000. ] And if you're selling carbonate for 36, 38 or hydroxide, you can see that you're really not if you own the plant, you would be forced to keep running it. We have the advantage that we don't so we can go wherever we get the best return.
Great partnership with Ganfeng and we had that discussion with them when we just simply said we're going to pause and not do that for the next sort of 6 or so months. But if prices turn around, we'll be back doing it again. Generally, the lithium market out there is strong. The demand is generally stronger than supply. You don't just find a deposit and turn it on. If you're finding deposits outside of Australia is sort of somewhere from 8 to 12 years before you can get them permitted and get them online in Australia, 3 to 4 years to get them permitted. Then when you go build the supply chain out, there's probably another 3 or 4 years.
So bringing lithium into the market is expensive, it's a long time. All of the approvals that are required from the TLAs, from the mines department are getting harder and harder because it appears that after people have disappeared off the planet. So it's just taking longer.
The supply in our view, is going to lag demand going forward over the next sort of 5 to 7 years. The average lithium price was setting out at the moment is around USD 40,000 a tonne. If you go back 3 or 4 years ago, I mean we're extremely happy if we were getting 13,000 or 14,000 a tonne for hydroxide. And I mean, when we got to 1,000 a tonne for spod, we thought that it was on a role that wouldn't last. So I think supply/demand, if you have a look at that, always surprised with what the analysts come out, Goldman Sachs, I mean you guys come out in '21 and you thought that spod was worse rigs the tunnels in fact, it was 6x higher than that.
Halfway through '22, you expect that hydroxide to be around 48,000 a tonne. It was actually 1.5x higher than that and 23 -- you're talking about 23,000 a tonne, and we're sort of sitting at 60%. Next year, you're actually forecasting 13, so the Western world's demand which lags behind China, it took the Western world for quite a while to work out. They needed to make electric cars and do power storage. They're getting on to it over the next 12, 18, 24 months, we're going to see a lot more vehicles coming out of the Western world, Europe and the U.S. So as that demand is getting stronger and supply is getting tougher to get in the food chain, Goldmans, were predicting 13,000 a tonne of suggest if anyone wants to bet their house on Goldmans, they're going to be a winner.
I'd say let's talk about the MARBL JV, a little bit of commentary out there, and I can see that there's a few out there that don't really, really understand the deal. So we had an agreement with Albemarle, and we were able to amend it going back some time ago, discussions were ongoing for quite some time. While those discussions are happening, the market is changing. I mean the market is changing pretty much every 3 months in the mining industry. And we're able to react to those changes. But discussions with Albemarle got us to a point where we were lessening our involvement in China. And for those of you that don't know, when Australia is trading with China and Australia doesn't go along with some of the social decisions that are made in China, then they go and ban our coal, they ban our wine, which is not a big deal. We all enjoy that. But they ban a whole bunch of stuff. They don't ban the U.S. and that play with the trade in the U.S. They're much too large and it would affect them too much. But I mean, the risk for Australians in China is high and we don't want to trap money in China in capital. That's the first thing.
So the second thing is that the smart thing for us to do is if we can build some downstreaming here in Australia, I'm strong and wanting to do that. We're running a study on it. We don't exactly want to build hydroxide here. That is difficult and it's expensive. But we can take our spodumene out to sulfate at 25%, 30%, where we can get rid of a lot of the bulk, and our intention is we're going to send that directly into Europe and the U.S. We're well advanced on discussions around that. And we want to have long-term contracts direct with the OEMs, and we are advanced on those discussions. So I mean, basically, I think the world is waking up, but if you want surety of supply, you're going to own spend billions and billions of dollars on assembly lines to build cars You've got to be able to go and have a deal direct with the owners of the rock. and they're kind of starting to figure that out now. There's not a lot of value in having a contract with a battery manufacturer because if they can't get the rock, then there is no surety of supply for the OEMs.
So it's really trying to simple. That's where we're heading. Having an interest down in Kemerton, because Albemarle was supplying the rock out of Greenbushes, most of the value was being captured in the rock. So our return on invested capital down diminished to a point where it didn't meet the hurdles, and it just simply had to go. It was a win-win for us and for Albermale, so they've got 100% of their site back, and they're expanding down there. So we're not testing capital in China at the moment and probably not at all. What we're going to do is we're going to toll treat over there for those of you that don't know. It's actually a little cheaper for us to toll treat what the tollers than it is for us to own our own plant.
The Chinese are very good at being able to build a plant for a low cost. Their equity is good at being able to operate it. There'll be million a long time. There's a lot of capacity sitting in China. They simply go out and build plants without supply agreements. Currently, there's about 1.6 million tonnes of spod going into converters that is not going to be heading in that direction within the next 18 months to 2 years. So the 2 plants here in WA, all the spod coming out of Greenbushes is going into China and getting [ toll treated. ] That will come out as these plants ramp up in Kwinana and Kemerton, 800,000 tonnes there. There is at least 50,000 tonne plants that we now are getting built in China, and they'll be coming online, I think is 12 to 18 months. And all that rocks currently again going to the toll treaters that will go to those owner-operated plants. So there's going to be a bigger shortage over there. So the market for us over the next couple of years of toll-treated is going to be pretty good. So -- and the plants are all qualified. Why would I want to go out and try and just keep hiring people and growing polling or growing the chemical business in a foreign country. So it's really simple.
The other thing that you may not real it,it's cheaper to build a plant in China in terms of capital value, no doubt about that. Probably about half what you could do it for in Australia, if you're a normal mining company with no construction or design experience like we have. We could actually go buy a plant out of China, put on a ship bring it over here, and we can use the expertise we've got with our construction people and design engineering office. We have for the last 25 years, at least, we've designed and built every plant that we've got in the business. We even make our own cone crushers and dual crushes nowadays. So we have that in-house capability and we have all our own mining.
We can generally get it done for about less than half the capital cost that normal mining companies will spend when they go out and get those EPC companies that they hand their checkbook to. So we can do that. As I said earlier, the risk of the geopolitical risk is too high for us. The incentives through Europe and the U.S. got huge if we can take us there. And if we're aligned with the U.S., huge incentives. We have been talking to the government and my expectation is that I believe that the federal government will come to the party they'll offer some help. They're very, very keen on trying to keep downstreaming in Australia, if it's possible. I mean, we're famous for being a one-trick [indiscernible] just -- we're primary biggest. We got to dig the [indiscernible] and sell it for a few hundred dollars a ton. And then Japan and others said that back to us for about $50,000 a tonne of the Toyota badge on it. So we've got to get better at downstreaming, and we will.
I think I've probably said enough on that. Just a few comments that I want to make around some of the comments that I've read lately that really sort of bothered me a little bit. I mean if you never run a business, I mean, a business has got to make money. It's got to turn a profit if it doesn't and you go break. So we're forever managing and looking at what we're doing, I mean the market at the moment has been very focused on free cash flow and our balance sheet, rightfully so, none more than me on doing a Ben line.
Some of the comments you made recently adjust I mean total rubbish it's MinRes is the only one of the 4 large caps that's negative free cash flow over the next couple of years. Well, I think I've said a number of times, I mean, our business probably from end of '20 through to calendar year -- end of calendar year '24 is literally going to double in size 35 million tonnes of iron ore were adding to the business. We're increasing production at Mt Marion. We're increasing production at Wodgina. The Mining Services business from '22 to '24 will again double. So you know what the EBITDA is that it was making a year ago. That's going to make double that in a couple of years' time, and I've said that a lot. What else can I say if the business is doubling we fund the growth internally. We never go out and ask our shareholders to reinvest back in the business. We think that's the management's job, and we do that. We've done that for the last 17 years. I have one small raise once, I was reminded of a while ago for, I don't know what it was, so I can't even remember what time it was about, about 12 or 13 years ago.
I have used where I have to script to be able to bring shareholder site Northwest Energy on board. They made it plan to me that they wanted to be around, and they wanted to enjoy any benefits going forward, which I was happy with. So we've done that. Our balance sheet since we listed, so '17 heading into 18 years, has always been very strong. We have always paid attention to it. We're one of the very few companies that pay -- 2 things I pay attention to return on invested capital and the total shareholder return. So making sure if I invest money, I get at least 20% return with average 21%. I've also said over the last 12 months that my aim is to take that out to 25% and better. So by the time we get to the end of next year, all of the cash that we got sitting out there that's not earning a living at the moment in iron ore and lithium, that comes online.
I expect that return on obesity capital to bounce up north of 25%. Total shareholder return 33% average over 17 years. So making sure I invest properly and get the right return and making sure that I am paying my shareholders both capital growth and a dividend 33% over 17 years, not too many that have done better than that. And you can see that I don't go [indiscernible] to shareholders for money. So look, please bear that in mind when you pick up the pen and you made some of those comments because a lot of them are simply unfounded and they're damaging to our business. So I think that's probably enough, James. Throw it open. And if you've got any questions, we welcome them.
Thank you, Chris. If you have not yet submitted your text question or joined the live audio queue, please do so now. I will introduce each caller by name and ask you to go ahead. You will then hear a beep indicating your microphone is live. Our first question today comes from Kaan Peker from RBC.
Just a couple of questions, if that's okay. Just wanted to get a bit of understanding around how you plan to realize i from the downstream? And how the conversations have changed with downstream partners I know Albemarle and Ganfeng a bar, but is there any other parties that are currently in conversations with? And I'll come back with the second
Yes, so the situation has changed an awful lot over the last 6 months. And -- but we used to -- I'd certainly look at my business every couple of years and just figure out where we should be steering it. I'm doing it quarterly basis because it changes that quick. If you have a look at the incentives that have come out -- well, let me go back a step. So if we go back, it's only about 3, 3.5 years ago, 4 years ago, most of the car manufacturers were going to double in electric cars. COVID come along and it changed the world. And we're reporting on our ESG and everything now like we report on our safety. So 4 years ago, we were doing that. This is all to do with climate change. This is the first time the world has actually got serious on it. So the Chinese got very, very serious on making electric cars, much, much quicker than the Western world. Detroit and Europe are sort of sitting back going here, we're interested, but not really. Now they've figured out that at least half their production has to be electric, a ramp between 2030 and 2035. I mean there are a whole bunch of different parts of the world that are saying, "We're not going to register up to 2035.
So that's a dynamic that has changed rapidly then the incentives that have come out from the U.S. on anyone that's willing to invest capital and they're aligned with the U.S. So you don't actually have to be in the U.S. I mean it's better if you are, but there, Europe, we're expecting a lot of incentives to come out of Europe and the Australian government is also trying hard the Australian government obviously doesn't have the balance sheet of the U.S. or Europe, but they are trying hard. We're talking to them. So -- when you go into China and makes to realize you go build a plant in China, that's fine. Once you start operating it, it's far more expensive than operating in Australia, and that's where the real cost is. So these plants are going to be running for 40 or 50 years plus. So you go into China, you got like 13% VAT on your spod. You've got to make a minimum profit over there. You've got to -- if you sell your hydroxide in China, you pay the Chinese tax, obviously, but then your money is caught there for a year. And when you bring it out -- if you bring it from China direct to Australia, there's another 10% withholding tax that disappears. And if you send your hydroxide out of China and sell it here, there's another 4.5% VAT add all that up and you got to operate.
So that's half the reason we're not going to be in China. I mean if I operate here in Australia, we know what the taxes are, we know what the quality workforce we've got here. That's where we're going to be. And we're going to partner up with Europe and North America. So much more economic for us, the stability going forward, I mean, anyone out there right now that wants to buy hydroxide, and they want it to come from Australia. That's their first choice in the world because it's ethical and they know that environmentally and the way we look after our people, we do it right. So we're a sought after product, and we want to keep that sanitize if we can. So that answered your question.
Sure. The second one is on Wodgina. Just want to confirm, so you're expecting clean ore Wodgina for [ Train ] 1 and 2 in 1Q FY '24, and then sort of a 6-month ramp up for all 3 trains having clean ore. And just the confidence around getting that clean ore in 1Q and sort of moving that top of the mountain as you sort of alluded to, is that 40 million tonnes? And is the additional equipment required to achieve that?
Yes. So right now, again, the reason our costs are elevated on the ton of spot going out is about 80 pieces of yellow [ gear down ] in about 100 bps sitting up on the mountain [indiscernible] high degree of confidence, we know how much rock we're moving up there every 24 hours. We've obviously built a bit of fat in so that we don't get it wrong again on when we're going to get fresh rock. But highly confident, trains 1 and 2 will be 100% fed with fresh rock by end of this calendar year. And by June of next year, train 3 will be fed with fresh rock, so be in good shape there, and we're starting to talk about what we're going to do with train 4, and we're thinking about what approvals look like for trains 5 and 6.
One other thing sorry, I'd just like to add one other thing. So the -- we'll rejig the joint venture, what we used to call the MARBL joint venture with Albemarle, I mean, I just want to -- it's a real win-win situation for both. I mean they got Kemerton back. They know what they're doing in China. We know where we want to be. They're American, we're Australian. They got more horsepower and longevity in China. They're not putting too much capital at risk.
The partnership with both Ganfeng and Albermale is incredibly strong. And the 1 thing MinRes is good at is that we operate -- we grow up operating in others backyards, BHP, Rio, Hancock. I mean we are good at managing and operating joint ventures, but the partnership with Albemarle is incredibly strong. And right now, I mean they are screaming for rock in China. So -- there's no pushback on us. It's simply we've got to get at. We've brought those plants online quickly. And we've got to get at the ore body that Albemarle need more rock in China. So I really commented this morning that there's some what was it potential that Albemarle is pushing back and not taking Wodgina volumes to process into chemicals that, I don't know, [indiscernible].
Yes. I appreciate it. And just a follow-up on the Wodgina approvals. I just wanted to see if train 3 and 4 approvals have fully been attained?
Train 4 -- sorry, train 3 was approved a long time ago. what actually happens train 3 is actually operating now. So we're rotating the 3 trains. We might have 1 and 3 running or 2 and 1, and we're rotating them. And we're doing a lot of work up there. We've actually got Curtin University engaged. We've got a whole range of different things happening, and we're incrementally increasing the -- so a lot of work going on there. And we've got the luxury while we're ramping up and being able to swap those trains around and experiment is one of them is a big land.
And I'll pass on a congratulations on the quarter,
Our next question today comes from Paul Young from Goldman Sachs.
Chris, a question on Wodgina to begin with just a reflection and listen, I really appreciate the passion and so want to clock back to, I think it was 2017 when or is it a Wodgina with yourself. And that's when you just picked Wodgina for what it was $50 million as being a great success story for the company. And at that time, you're talking about selling down 50% of the asset and obviously, Albemarle came into the fold there. And I think you sold that original 50% for $1.2 billion. We've had a lot of changes to the joint venture center and out of chemicals, so to speak, and now how about pays you another 600. So overall, give or take with been a lot of working capital and CapEx movements, but you end up getting $1.8 billion pre capital gains tax to be 50% Wodgina. In reflection. I mean how do you all said and done and how this has played out? Do you think it's been a great good transaction for MinRes?
Yes. Paul, look, thanks for that too. I forgot we were standing up on that rock in 2017. Yes, it's been outstanding. I mean there's nothing that I've done that I'd regret because it happens then. I mean we had a market cap of $2.16 billion for Wodgina back in 2018, and the whole world thought it was out of control. And the price is ridiculous. I mean I wouldn't part with it now for USD 15 billion. But -- no, it's been successful. I picked the right partner. No doubt about that. We've got the piece in mining hard rock designing and building plants, which is exactly what Aldar wanted there on the downstream. So what I've done, we've basically gone from where we were 60-40 to 50-50, as you know. The other key thing that we did, we've taken the marketing back. So when the spod comes out the gate of Wodgina, we can send it wherever we like now before it was all locked in the joint venture, so having the marketing and the [indiscernible], I think the uptake is worth more than the mine because that's all the OEMs want.
So yes, look, we're really, really happy with where we've got to and really have just spent 9 days up in London with Kent Masters and his team and we really sat down and we really got some good plans for where we're going in the future, and we'll be able to publish them somewhere down the track once we sort of get them in writing.
And the next question is on the downside strategy. It's -- to be honest, it's hard to actually describe any value to the downstream at this point just based on, I guess, the history and track record of what we've seen out of China, China docks few things up in 9 months commissions and ransom up in 2 months, and we struggling in Australia. And there's a range of factors there, which you know that with respect to underspend in bad design and COVID impacts, et cetera. But you've been very good at crushing mining screening, et cetera, more on the upstream.
So I guess the challenge I've got is that -- I mean the strategy was has changed so many times. I mean how do we actually back to you guys to actually put a sulfide process in and actually put the [indiscernible] and the leaching and then all that back end in place. Until we actually see you align yourself with the EPC firm that actually hazard credential. So I'm just really striking to see how we actually back this new strategy.
Yes. Paul, it's don't get caught up in too much detail and try and figure out how to make a [ mechano ]. I mean, our job here, we're simply here to make money, I mean, we happen to have lithium and iron ore and gas on less to do it, but I'm focused on return on capital, shareholder return, I keep saying that. So we're going to -- I'm going to say for the next 2, 2.5, 3 years, we'll be seeing all the spod we make out of Marion and and Wodgina, so I will be going to China and they'll be going into toll treaters, the only subtle difference is that we don't have capital and own the plants out there. And why what I want to, I mean, -- the average plant out there, those guys are up there for $150 million to $180 million. They can build 50,000 tonnes. So if it's Chinese branded, so I go out there with that capital value. And all they want is through toll free and they're struggling to find rock to toll free because most of them have built plants, and they don't have it's crazy to own -- you guys get carried away and you go everyone owns their own plants. That's the only way to go.
Well, if you want to take a [indiscernible] you pull, you don't own it. You know what I mean, it's much cheaper to get in. And that's the case with with us tolling in China. I mean we can put it into high-quality plants, plug it and pay them a fee, get it out the back end and then we can sell it in China or we can pay the 14.5% PAT and send it out of China.
And right now, that's sort of the only choices. And I'm certainly not going to go up there. I can go out there and buy some plants if I want for a couple of hundred million, I could add 50,000 tonnes for $400 million. I can have 100,000 tonnes. But as I say, I don't want to be doing it in China. And you will see a couple of years here on the track, rRemember, it 6 as years ago, Paul, we set up at Wodgina. And about 3 years from now, we'll be standing on plan. You've got nothing to do with China, and we'll be making more money.
So we will make more money, I'd say over $1 billion of cash going into China. And so get your head around this and do this in your spreadsheet. My sales will go up, my bottom line will be more and I got no capital invested and what do you think I'm going to do with that capital that I'm safe. I want to go and put it somewhere where I'm going to get 25% return plus.
Yes. again, to the point, it's all about the spreadsheet and assumptions. And I just think that you need to stay upstream and not take the risk on of the downstream investment? No matter how many governments and OEMs want to throw a you all they want is cheap and products. But you've built this business over the last 20 years, staying upstream. And that's probably just what I'd like to say?
Okay. Well, let me just remind you something to you. So when I built the very first crushing plant 31 years ago, I had no idea what I was doing. We're the largest crushing contractor on the planet. Can you believe that? And I mean, I'm adding more and more tonnes. We've added 30 million tonnes this calendar year so far to our crushing alone.
We've just built the largest haul trucks, off-highway haul tracks on the planet, 330 tonne may move. When we built Wodgina and we built Mountain Marion, we've never ever built a spot plant in our life. We had no idea what we're doing, but you couldn't find -- there was no EPCM contractors out there still to this day, but now you had to build a hard rock spod plant, and that's because the industry is so young. We've built -- we have the best spod plant on the planet sitting at Wodgina designed and built by mines -- now believe me, if I want to go and do sulfate, it's not rocket science. There's actually one Design engineers sitting in China that has actually designed every hydroxide and carbonate plant in China. W e've got them on the payroll and they're doing the design on ours. And all we need to do is pick it up, we're going to ship, bring it out here and concrete it to the ground. So Paul, I can do it. It's not that difficult. I mean let me think even more not too far down the track from now, I'm going to be building and operating a gas plant.
Okay. Thanks, Chris. I'll leave it there. I'm looking to [indiscernible].
Okay. Well, next time we're going somewhere. And 2 years from now, I want you to be with me.
I'll be there.
The next question is from Kate McCutcheon from Citi.
It's good to have you on the call this morning. I just wanted to clarify the strategy for downstream integration. So you were talking about the game being speed to market in offtakes for the chemicals. So your comments are interesting. Can I clarify, firstly, you said you were seeing OEMs interested in the midstream products. So presumably the refining themselves. And then secondly, is midstream and interim strategy or a final strategy per se or it's subject to some of the moving parts like the government's appetite to help out?
Yes. Look, thanks, good questions. So our intent and what we're aiming to try and do is instead of -- so if you go -- we send rock to China at 6%. What we want to do is we want to refine that a little bit more on the mine site. We want to take that to about 30%. So that gets rid of most of the bulk, and we've got the tailings facilities on site to clean that up and do that, reduce our shipping costs and unlike hydroxide, it doesn't ever shelf-life fit all last forever. Hydroxide got a shelf life of probably 6 months or a bit longer. So we take 30% and sitting over in Germany and the U.K., they have chemical parks over there. And a lot of the the industry in those parks has fallen over, so steelmaking urea, anything that's energy intensive because the cost of energy as we all know, has gone through the roof and they're going break. So we've had substantial interest in being involved in those hydroxide plants sitting in those parks and at the moment, the discussion is that we wouldn't be putting any capital and then we'd be getting a shareholding.
We can toll through there and all our contracts and long-term offtakes, we will have direct with the OEMs. So that is our intention. And unless something better comes along, that's what we'll be doing.
Kate, it's Mark Wilson here. But there's one point I'd like to add, which is in this market Chris alluded to it earlier, with the revised Albemarle deal, we're completely free now to deal with all of our spod in whichever way we wish. There is another player in the market that has access to that flexibility. And it's that flexibility that I think the market is missing because the demand is there, and we have choice now to set our own destiny, and that's what Josh and the team are working through.
Yes. Okay. And just a quick one on Mount Marion. Any comments on the driver in the -- will that -- are you still thinking about a 50-50 split between the low grade and high product on high-grade products moving forward on that asset? Is that just dependent on getting more fresh oil?
At it's Josh. Yes, that's right. It will be a 50-50 split go-forward as we move through different parts of the ore body that will change slightly. But generally, it's a high-quality product. It's cost, it's quite unique in the market. Ganfeng you like it and they produce a good -- it works well through their plants and they produce a good end product from the Mt Marion 50-50 split so.
Okay. And then my final question. Thank you for breaking the news on Lockyer Deep 3 on the call. How are you thinking about that business now? Any comments you can talk to around how you're thinking about the size of an operation, timelines for that? Any other comments?
Yes, sure. I mean, look, we started out. I like that Perth Basin, I thought it had a lot of potential, and it was underexplored, and it turned out to be right. So I mean, our capital and getting into there has been pretty low how we spent a little money trading shares for Northwest Energy, and I'm very happy -- I was happy with the outcome at the time and happy now. So what am I thinking originally we wanted to be self-sufficient and be able to control our energy costs going forward for the next 20 or 30 years. We've done that in spades, but we've now got a lot of gas. So what I think I'll be doing is we'll be building a plant out there, and we've already started a study on it. We've got external engineering engaged.
We pretty much know what size we want to build, and we're going to get that underway probably come out towards the end of this challenge year with exactly what we're going to do on that. But it's going to add a huge amount of value to the business, and it will be welcomed by the WA government. They are a bit concerned about gas supply going forward, and I think that's going to be a big help in balancing it. So yes, look, I'm very happy with that, but we'll be -- and we see gas as a nutritional fuel. We're trying as hard as we can. We want to get out of diesel. We want to get out of being connected to any coal-fired power, and we're doing all those things. But unfortunately, until someone comes along with green juice where we can go down to the browser and buy it and put it in our equipment. We've just got to use the sun and the wind and gas to be able to minimize what we're doing. So yes, certainly, it's going to be a significant contributor to the business 18 months, 2 years out from now.
Our next question is from Glyn Lawcock from Barrenjoey.
Chris, I'm still a little bit struggling to understand it's great that you've got out of the MARBL JV downstream in China. You got out in 4 months, not 4 years as you said to be back in February, so well done. But you also said on the call Albemarle going to have to divert 800,000 tonnes of spod from Greenbushes is a [indiscernible] defeated. So they're going to be short. How do they feed their parts in China? I mean, how -- I know you said you're not committed to selling to them. But how long are you actually committed to sell to them before it's completely free because I mean, to me, they now facing a thing short. And so they've walked away with feels like the rock side of this deal?
Yes, no, they're not. They're certainly not short because -- but right now, I mean, they've got their own plants in China, and they've been feeding those plants out of China for years. When they built Kemerton they probably ordered the rock to come out of Greenbushes about 3 years in advance. That happened a couple of years ago, and Greenbushes produces the rock. So they have to -- and I don't want to talk too much about Albemarle's business, but I mean, they've had to divert it out to China. There's plenty of capacity there to free up. But and it's a high-quality plant they built at Kemerton, I mean they take a bit of work to get them to go, but they got a good team down there in that plant starting to fall. So eventually, that will -- that plant down there. It's a 50,000-tonne plant -- so that will consume about 400,000 tonne of spod, 6%. And the guys down here at [ Tianqi ] and Kwinana have got a plant that's 50,000 tonnes or thereabouts. And that's about 400,000 tonnes of ore coming out of Greenbushes and currently being coal treated. So when those plants go, there's 800,000 tonnes. There's 2 other plants that we know that are getting built in China, both 50,000 tonnes. So there's another 800,000 tonne that comes out of the toll treaters. But right now, most of our ore going to China is being toll treated. And it's got capacity. I mean the toll treated is very, very concerned. They're going to run out of rock to toltreat even with us sending all ours out there, it's going to be a problem. So just -- I don't know why you were in so fixated on the fact that you got to own your own plant. I mean, our crushing business, don't forget, we're toll-treated. We toll free rock for the largest mining companies in the world. And why do we do that? Because we can do it for less than them because they're running their whole mine. We're just running a crushing plant. So that's why we're good at it. So toll treated is a good way to go. Uber got really big, really quick because -- you don't have to own your card if you want to go for a drive.
I fully understand, Chris, and I'd like [ Paul ] believe you want to say upstream and the margin downstream will get competed away as we get overcapacity in the conversion side. But just so I'm clear, come middle of next calendar year if you want to take your spodumene away from Albermale's plants in China because someone offers you a better tolling deal, you have that capability. You're not committed to an Albermale plant beyond middle of calendar '24, you can toll anywhere. I just make sure I want to know you can get your spod, your 50% share of Wodgina spod out of China. Like can you effectively get it out of China if there's an alternative option from the middle of calendar.
Absolutely. Look, and I may not have been totally clear on this. So we're simply for the deal to close, we're waiting on FIRB approval to come through, so Albemarle get that to move to 100% ownership of Kemerton. Once that happens, that's settlement date. So we will settle and all things that will happen, and I get my check up to $600 million, but $700 million in the bank. Albemarle graciously have said that they will sit with us and will work together and continue toll treating MinRes as dirt up there. And just so you understand, none of our dirt has been going to Albermale plants at all to toll trade is always has. Albemarle plants out there have always been filled with production out of Greenbushes. So as the plants, they're building new plants up there and down here at as they ramp up. They will just divert some of this away from the toll trades. We'll continue with the toll treat that Albemarle in some areas, they'll simply pass us a more deal direct with the toll treaters.
We're assembling a team up there now, remembering that we've been selling iron ore into China for about 15 years, and we're well connected with that. We've got a very good marketing team, wrapped around iron ore and they've sold manganese. -- they've sold spod. So transitioning into that is not a biggie and we're starting to put people. We've got people on the ground up there now. So we will simply step in and take over with some of those toll traders. Other areas we're working at the moment, and we're identifying other quality plants. We've got to do audits, and we've got to put persons through them. That will all happen between now and Christmas, and then come January, we'll slowly be up there beside Albemarle and we'll be taking over and dealing with our own product.
Okay. That's clear. And just maybe a follow-up for Mark, if I could, just quickly. Just the change of everything now, even though you're going to tolling from your own plants, I assume we still have the 6-month lag on cash receipts, I mean we've now almost finished the working capital adjustment for Wodgina's [indiscernible] across the tolling downstream?
Glyn. Yes, the I mean, obviously, the deal with Albemarle changes the capital piece of the business and just going off piece for a second. We've said consistently for some time that we've had a lot of flexibility in the business to be able to to move to respond to what we need to do to protect the balance sheet. Chris has been very clear on that as long as [indiscernible] in terms of the working capital, I'm comfortable with where we're at with the working capital and the impact on the business. This tolling arrangement is better for us on the balance sheet because we can direct whether where the sales go. We've got more control over that end transaction and where the cash ends up.
And sometimes -- sometimes it's prudent to go and just sell the odd cargo of spod depending on where the market is sitting. So we can make that choice. But we will control the supply chain now. We're much more agile, and we are flexible around. We're happy to sell the odd cargo spod if we're going to make more money than running it through the toll treaters and converting it.
And the other point, Glyn, is that we've also got more flexibility with the commercial terms that we transact upon. So totally, it was Albemarle was controlling that process and they've been doing it for a long time. They do it in their way. We've got the flexibility to do that in the mines going forward.
Yes. Look, twofold. So the market outside and internal mining services nowadays, but on the internal, basically, what we do will go out there and find an ore body set up a joint venture and that's what we've done with Onslow. So we own 60.3% of the ore. But we've got up there, so but MinRes owns the supply chain. So the road from the mine gate all the way into Onslow the port, the Wharf, the outlied facility, the big transshippers the tracks. So that's all mining services. So that's getting added to the business progressively as we ramp up from next June going forward.
And we -- how do you say this because we're -- we export commodity, we can do things with our contracting business that our competitors can't do. So the level of training that we put into our people that results in those figures over a 2.2 triple rate, I mean, almost unheard of in the mining industry, but all of those come off the back of the fact that we are a conglomerate, where we're doing commodities and the commodities training plays in onto the mining services business. So that gives us a lot of horsepower also to develop innovation. So these trucks we've developed them in-house.
The transshippers if you have a look at them, I'm going to go I'm going to load ships at Onslow for 40% of the cost of what I love them for in Port Hedland over Utah Point. So just to give you a sense of my cost in Onslow on tracking is, again, it's about 40% of what it is in the top of the Pilbara. So the big trucks give us real benefits. So the big trucks are similar to a medium gauge railway line. So a huge interest. I mean, look, we're building the trucks as quickly as we can. We've probably got about 60 of the big jumbos running now. And as quick as we build them, they're going out to third parties.
And then when we take that to them, it's much better that they have us doing the crushing because we're the safest contractor in Australia. We've got the best technology, the crushing plants we put on the ground, these next-gen plants, so we call them. There's nothing in the world like them. So we've got a huge advantage. But -- and we keep multiplying that advantage. So I know it's kind of hard to explain it, but we win most of those jobs because we deliver such a high-value product to our clients.
Look and it's mark, there's 1 further point over other, and we've talked about it previously. The external environment continues to get more difficult for everyone in the industry. The regulatory framework gets more challenging. And so that ability to be agile and flexible is why the clients keep coming back, and that's what's creating the opportunity for us they need a group that can actually pivot and help them quickly. And we can do that because of our structure, our supply chain, our workshop, our workforce, the spares that we carry. So what I'm saying is that the external environment is helping us with our mining services.
Understood. That's great color. And maybe then just a follow-up. So just on tolling, a great Chris, it makes much more sense than investing downstream to lithium hydroxide right now. Certainly, China is getting better and better and cheaper at converting to chemical. But maybe just the previous Ganfeng arrangement at Mt Marion was a sensible decision to account for that given the commerciality. So a couple of questions. Will there be -- just to confirm, will there be any financial impact in FY '23? And then secondly, going forward, and if you're looking at tolling going forward and the cost of conversion in China, the very, very low CapEx, very low returns on invested capital there. How do you see toll charges evolving over time as we get that build and excess capacity in China, clearly, the starting point would be that toll charges would likely fall, but I just wanted to get your thoughts on that.
Yes. Look, I think they will fall somewhat. But we're not. Again, what we're looking for here is a good relationship with the tollers. I mean -- we've built our business on that on being fair and reasonable. We don't want to go in there and try and cut their threats. I mean we want to have that right sort of partnership. We want because we want quality product coming out of a consistent quality products. So look, there might be a reduction in the charges, but I mean we're not looking to go and do anything significant on that we're all about building that right relationship with them and making sure that what we're getting works. And that's exactly what we've done with all of our clients over the last 30 years. That's why -- they keep coming back to us. I mean if they're in a market where it's really hard to get crushing down or get haulage done and that happens all the time. We're like McDonald's. We serve the big Mac at the same price wherever we go. We're consistent with our pricing, our service.
So we're going to be the same up in China. We're going to be well behaved out there. We're going to be respectful because that's the way we behave in Australia, and we're going to do that worldwide. And we hope that, that has an impact as well.
Right. And then just 1 final one, super quickly. So just Onslow look, well done with getting all the approvals and permits. Great to see that now on the critical path to first hand mid next year. Can you just talk to, I guess, maybe specifically in terms of this project, but also more generally CapEx industry-wide, we're seeing a lot of inflation still and still delays. So just interested to understand how you're seeing perhaps the risk around CapEx and execution at Onslow maybe any more broadly as well.
Yes. No, look, -- so we had a timing issue down at Marion, that run on a little bit longer. But again, because we build and do everything in-house, if there's a hold up on supply chain and getting equipment out of Europe or where it's coming from, we just don't mobilize those people to site. We'll move them somewhere else. So we got Marion done. We were out of time, but we got it done under budget. And the 1 thing that we are reasonable one of the many things we're pretty good at is, I mean, we know how to build and we know what the risks are. We can adapt very quickly. So regularly monthly reviewing where we're going up at Onslow. I sat down around, had a couple of sessions on that only a couple of days ago.
Now I'm going to say, and I've said this before, I'm going to say it again, there is no risk about succeeding the budget. Mark hates me saying that, but we're not going to exceed the budget up at Onslow and I want to make a couple of other comments as well. So the federal government helped us up there to get those approvals done. We got them through in 11 months. So I'd like to and we've acknowledged the federal government for doing it, they've done it because they want to add value to Australia. The state government was right in there with us as well. And I'm just a status on that project, they had a [ gitty ] person assigned to the project.
And like I think, 13 months with the state. So outstanding results we've got, and we are managing that budget extremely well. Other areas -- look, I don't see any other areas we've got where there's risk out there. But look, I can see why the others are running over because sitting inside MinRes, I mean we've got all our own costing and here, our engineering, our design, our innovation, everything happens inside. And if something happens out there, we can stop, we can adjust and there's no doubt -- I mean our team have built the right factors into their model. Going forward, we recognize the issues around supply chain. But it's -- look, let me say this, it's all under control if it's not you can come back at me. But we're not going to run over budget onslow.
Our next question comes from Hayden Bairstow from Macquarie.
Chris, I just want to touch on Marion and just with the sort of underground drilling you've been doing. Is it getting to a point now where underground economics are looking pretty attractive versus where that pit is given strip ratios and where the cash costs are already? I mean is that where you're thinking with -- and getting ahead around underground costs? And you've obviously got -- you've had equity stakes in some of these other regional players. Are you thinking about making making Mt Marion more of a hub, making it bigger over time. Just keen to understand what the overall strategy is there?
Yes. Look, I'll just make a couple of comments and pass that over to Josh. First of all, Hayden, congratulations on you do your homework well and you're coming the business pretty well and you pretty much know it every time. It's so well done on that. The -- both those deposits on Wodgina and Mount Marion, when I drilled out Mt Marion originally back in 2010, I had to spend a certain amount of money to earn a 30% equity interest. The day I spent that cash, I turned the drill rigs off, and we never put another drill hole in the ground. So that's open in all directions, and it certainly Josh has proved its open at depth.
I did exactly the same with Wodgina. It was a little different. I own Wodgina. I got up to about 270 million tonnes of resource and I told them to stop spending money. So again, Wodgina is open in all directions, and we probably haven't gone any deeper than about -- I think I've mentioned this a few times. We've never gone any deeper at about 500, 550 meters out there. But Josh puts some down and at Marion a while ago, and I'll pass it over to Josh and he'll explain to you the detail that I don't understand.
Yes, the potential for underground at Marion is excellent. The numbers that we sort of work on once you get to a strip ratio between 9 and 12 somewhere in that area. It makes sense to go and look seriously at the underground based on the operating costs. The geometry of what we're seeing come through on the drill holes, it lends itself really well to underground. There's a big vertical, nice wide, long trader zone. And we haven't reached the bottom of it yet. So it lends itself really well in terms of a cost perspective.
In terms of a hub, we've got a really strong foot in the [indiscernible] fields here, like you said. We do want to build a hub in that region. It makes sense for us. We know the region well. We've already invested significant capital there and we're in a great spot to leverage the capital, the people and the know-how we've got in that region. So it makes sense for us.
Okay. Great.
So just adding on that. I mean we'll be open pit mining down at Marion. I'm thinking for the next 20, 30, 40 years, but we'll be running underground in parallel West open pit just to give us different or a more balanced blend, if you like, going into the plant. And we've got some numbers -- touchwood the numbers set for us to put a portal in it a drive down.
All right. you're talking about an exploration decline that's going to be under $20 million.
Yes. So I mean, to get to the ore underground, it's not a big number. I mean, it's I would think that we'll be looking at doing that in different areas going forward just to give us the more fronts we can get to the ore body, the more consistent we can get the blend going into the plant.
The next question is from Ben Lyons at Jorden Securities.
Chris, Mark, Josh. Chris, firstly, thanks to your feedback on my free cash flow forecast. I guess, the fixation with owning conversion facilities in China and building in the requisite capital expenditure into our forecast I guess that largely comes from that being the clearly an unseated strategy, which has been communicated by your company to the market over the past year. But as you yourself have just pointed out, you've removed over $1 billion of cash that's now being directed at China. But we've got no clarity on the likely amount of CapEx that will be invested in downstream conversion capacity elsewhere, whether it's Australia or Southeast Asia or somewhere else. So -- just to be clear, are you expecting to be free cash flow positive in fiscal '24 despite the bulk of the remainder of that $3 billion in [ Ashburton ] CapEx going out the door?
I would think when we're growing the business the way we are. And look, Ben, I mean, look, if you've got -- and I'm pretty much available to everyone. If you've got some queries or issues, pick up the phone and call me before you put pen to paper because the relationship we got with our joint venture partners is second to none. And to [indiscernible] that in the person and have to came down, wake up and read that over in Charlotte. It's just not good. And -- the other thing is that you've got to understand, I mean, if you've never business understand how it works because -- I mean, I started this business of 31 years ago, I had $10,600 in the bank. We're now in the top 2 or 3 on return on invested capital on the ISX, and we're probably in the same spot on total shareholder return. And I don't go out there and tap shareholders for it. I go out there, I borrow it or I generate dot of earnings. So not a bad track record.
So I just don't like getting kicked in the balls. And I apologize if I've been a bit strong on that. But -- the -- yes, I did. The circumstance the deal that I have with Albemarle when I've done a $2.16 billion market cap on watching, it was that I had to suck it up and I let them do the marketing. That was in the state, and I put my hand up for it because the best deal going forward is their market, their own and our own, and we have a different way of doing things. Australia, is vulnerable in China and the -- they can lock China out of Australia out of China, and it won't affect them too much, excluding iron ore, of course.
So the dynamics for us are very different and they're fluid. I had the opportunity to be able to get our marketing back and to be able to increase our market share of Wodgina and to do that, Albemarle said, "Well, if you want to do that, give me Kemerton back. " and I said, "Well, I'll give you 25% back. And then eventually, we found a way of getting to the whole thing. So it was an evolution and you have to have market change for them to start thinking differently to the way they were 2 or 3 years ago. And as the market changed, I was able to get into a better position for MinRes, but at the same time, Albemarle got in a really good position with their own assets. So that's kind of how it evolved.
Now I can't -- I mean everyone is screaming that I'm going to have a problem with my balance sheet to go, how do you think of that? [indiscernible]. I haven't had a problem with that. And all of a sudden, because I can't go and announce to the market what I'm doing until I get it done until the intros, I can't tell you what I'm doing. But I knew 6 months ago where it was going to be come June, July. And I kept telling everyone don't worry about the balance sheet, I have it under control. So I don't know if that answers your question, but I mean -- and we're running a business here that's doing iron ore and it's doing lithium, doing gas. We're doing mining services. And we're kind of at the top of our game with all of them. So I think we're doing -- and I've got the best management team in the country.
And I mean the business is pretty well run, and that's not patting me on the back. That's the team that I've got to run it.
Yes. Okay. Thanks for the comprehensive response. Maybe Mark, can you address the free cash flow question for fiscal '20, please?
Ben, I'm not going to give any guidance in '24, we've got results in a month. We'll take you through the plans. And we're always very open around what we're doing. You understand the aspects of the business we're working on, but I'm not going to put numbers out now in terms of 24. And you'll understand why.
Yes, absolutely, Mark. Maybe just 1 more. Certainly, Chris, I respect the returns that you've generated and absolutely not going to try and advise you how to run your businesses, maybe other participants on the call might have tried to do. But I'm concerned also about the recent decision to terminate both the conversion agreements with 2 of the most technically proficient participants in the lithium industry globally. So maybe just a simple 1 on the lithium sulfate strategy. Are you wedded to going that alone? Or would you still consider bringing in a partner who might bring some technical capability to that process?
Yes. Okay. Let me be a little bit clear. The terminatin that everyone use it. It's no termination. I mean we've got a great relationship and partnership with Ganfeng. I mean it was a team score. We rang him out and said, "Guys, the price of selling spod is about line ball with trying to turn it into hydroxide when you add the cost. Why don't we -- we'll just go sell our our spod. And they said, [indiscernible] that, but when you sell it to us. And we should course at market price. That's the extent of the cancellation of contract. And then a couple of months from now, if the price of hydroxide goes up, we'll have charge back on the phone from Ganfeng, we say, let's start making hydroxide, again, that's kind of how it works. And there's no cancellation with Albemarle, it's just we took our marketing back that because we want to go and market it and set up long-term arrangements with OEMs and we -- in the short term, short to medium term, we're working to get us [indiscernible] work either in China and we're coal treated ore has always gone to the toll treaters over the [ inhibitor ] and Albemarle plant. And by the way, Albemarle are very, very good at what they do with hydroxide, but up until 2015, they were doing anything to do with lithium. I mean there's a point in time when everybody is new to something. And look, we have the skill set to go and to -- I mean, we've got the best in the world doing the design on the plants now for us on the study. And look, and the opportunities there, if I wondered -- if I said to Albermale, why don't we do a joint plant up at Wodgina. And I've spoke to Kemerton about that, they would certainly consider that.
And I said to Ganfeng, you want to do one down at Calgary, that would be up for it. So we just haven't crossed that bridge here. But look, when we do, we'll come up with like we always do, we'll come up with the best, safest way of being able to add the value to our list, whether that's here in Australia And I've said we'll build in Australia, but I need the government to help and support us. If they don't help and support us, we are screwed, we will be going offshore. But we'll go to a safe zone.
My preference is to I want to head to the OEMs. But to get there, I've got to have [indiscernible] powder to sell them.
Okay. Just one last thing. The other thing I can do is, I mean, I can go buy a plant out of China by the -- this organization that puts them together. I go buy it, put it on a boat and bring it out here. MinRes has got a very good track record of being able to build plants here in Australia at the right capital cost. And look, as I've just said earlier, we will not run over budget on Onslow. It's a $3.25 million build, and we've had that price on the table for a couple of years, but we got it right. We knew what to put around that price to make sure that we can get the right and to get the -- I need to be able to get my 21%, 22% return out of that, and we will.
So look, we can do what we say. I mean -- and granted, we overrun our time at Marion on the upgrade. That's about the first time we've ever done it.
Yes. Nobody is questioning the engineering capacity and the best of free technical capability that you're bringing within the business, Chris. It was more just questions about the downstream strategy and the free cash flow generation in the short term.
Yes, sure. Ben, next time, drop around heavy cup of coffee, and we'll see if we can have a good discussion around where we're going.
On [indiscernible], Chris, so I look forward to catching up for cup of tea shortly.
Our next question comes from Rahul Anand from Morgan Stanley. -- the
Chris Mark and team, look, perhaps if we switch gears a bit and go to Mt. Marion. Chris, congratulations, obviously, on completing the project within budget. I wanted to touch upon how does it look now in terms of going into perhaps the next year? How does that ramp-up profile look? And then also, how should we think about the costs as well? When can we start seeing some of the benefits come in of perhaps an improving strip ratio, improved volumes? And then just to follow on from that, when are you expecting some of the drilling results as well from Marion?
Well, I'll hand it over to Josh on that one, Rahul, but I mean there's a few little questions in there the cut acrossing the line. So we're not going to talk about costs and and look, as we said, I mean, it's -- we're pulling the top of the mountain down there as well. We've got over 80 pieces of yellow goods down there. We've got a plan. We got a budget -- and Josh's team watch that every 24 hours, and it's going pretty well so far. But look, I'll let Josh.
Rahul, look, the main focus down at Mt Marion now is opening up -- Chris touched on earlier, opening up new mining areas. So getting as many mining fronts open as we can to make sure that we have that consistency of fee and ramping up the plant now that it's constructed. It's tied in. I'm really happy with the way the time and the commissioning weight. And it was as smooth as it could be. It was a really good time. So we'll give you guidance in the coming months. So I won't touch on exactly what the production profile or the cost profile will be down there. But I'm happy with the way it's going.
We're focused on opening up new mining fronts and ramping the plant up. It's a quality plan. And as I said earlier, it's a quality product as well. There's not many places that produce that really cost product that's sought after by the converters.
Okay. And Josh, just quickly on when are you expecting some of the results to start coming through in terms of drilling, et cetera, the potential there?
Yes. So we're already releasing those results. You would have seen so I think it was low that we released on month before. We released some of the results from the underground, some of those deeper holes. So we've now drilled over 500 meters below the bottom of the life of mine pit, and we're still getting good intercepts of nice wide pigmented zones, mineralized as and good grades of lithium. So we're really happy with that, and that's only encouraging us to to do more. We're going to have more drill rigs down there. We're going from -- we're going to be ramping up the number of drill rigs down there to 12 that that will -- from 6 at the moment, that will include some resource definition rigs, but there's a lot of exploration potential down at Mt Marion. And we're systematically preparing that place. And as we do, we continuously find more [indiscernible] and more lithium, which is fantastic.
Okay. So I mean in terms of the resource update, any sort of time lines you're working to? Or is it more as you progress and as you get more meters in.
No, as we progress and we build the resource out, you'll know it served we'll go through our process. We'll do our studies and we release the updates as they come.
Okay. Perfect. Chris, 1 for you. And apologies, I mean you've talked a fair bit about your lithium strategy today, and I'm sure it's perhaps erring on the side of irritating to keep repeating yourself. But there's one thing that I wanted to cover specifically. In your comments, you have talked about potentially thinking about a plant in Australia given the assistance of government and potentially looking at other downstream options, not just the sulfate group. So what I want to understand is, obviously, at chemist, you initially had that 40% ownership, that was then down to 15%. And obviously, now that's gone down to 0. Was there an opportunity to hold on to that? Why was that let go? And I mean, do you want to be a majority owner in a plant? Is that why? Or just trying to understand if there was potential to hold on to some of that downstream capacity at all?
Yes. No, Rahul, the commercial decision, purely. So when when the rock is going into the hydroxide plant, the hydroxide plant buys the rock, and it's buying it from Albermale. So Greenbushes rock to Kemerton, and I'm going to go 80% of the value, was going to he who owns the rock. And I've always said, if you own the rocky [indiscernible], I mean, everything else, you can go buy hydroxide plants or car manufacturing plants or battery factories, but it is very, very limited on the planet who owns the rock and controls the lithium. So we've got 2 Tier 1 well, Wodgina certainly a Tier 1 asset when Josh finish is filling out Mt Marion, that will get reclassified as well. But I mean, we've got 2 of the best hard rock deposits on the planet. And we want to make sure we manage them responsibly and get the best value out to our shareholders. But my return on capital coming out of Kemerton was awfully low because I don't own the rock that was going into it. I could have taken Marion rock there, but then you got the difficulty of blending with the Greenbushes rock and it wasn't going to work.
So I can take that cash out of Kemerton and I can go and reinvest that in other areas. And look, we'll talk about that in 3 months' time, what we're going to do with that money. We'll show you what we've done with it. But I can guarantee a better than 20% return on that and sitting down the road there, it was getting less than half that.
Okay. Perfect. Look, last 1 for me, Chris. You've spoken a bit about Onslow obviously, congratulations for the approvals to have them come through. And you've talked about the CapEx that you're expecting to stay within budget. So perhaps another way to look at it, what are the critical items now that are currently in process that can potentially be risk factor. What are you looking at closely to make sure you are within that time and CapEx budget?
So what are the risk factors? Look, all of the long lead items are in place, and we've got them nailed down with time and they're all getting built offshore for those proprietary products. We've got teams over there that are sitting, watching them getting built. So all of the -- as we speak right now, we've got a heavy lift ship alongside the birth. All the piles and dolphins are driven, they're dropping the tops on the bid right now, come in late last night. The road from the port out to the Northwest [ Taiwan ] is a bit tricky, we sort of masked that. We've been working on that for some time. And now we're onto the main haul rates, so that's about 130,000. That's probably our biggest risk at that rate. But look, we've built hundreds of kilometers of haul road over the last 5 years. So no issue there.
CSI putting there all of the processing out on site, that's sort of a walk in the park. It's all the big next-gen plants. All the mining gears ordered. So because of the nature of the -- it's not like building a hydroxide plant or the like. It's all around, there is really no -- the other thing, too, there is, I mean, the dredging was about [ 20 million ] bags we've done that months ago. So no risk there. And we've got -- I'm going to go -- there's very few construction companies left in Australia. I'm going to say, we would have the best construction output in the way by miles. I mean -- the guys that lead my construction, I get Nixol which is leading it out on site, and I got John Roth and Darren Calin, do a pretty amazing job. And they've got a great team of people. So I mean, they get stuff done on time and they get it done under budget.
So there is no -- I don't see any risk out there unless there's a sinkhole that opens up and swallows half the road was something, but highly confident. We are -- our program tells us at the moment that it's going to be first ore on ship next August, and they've got a program they're running where they're pulling that back into June. But you don't build 35 million tonnes and the time we've gotten approved and the ambitious date of next June getting it on. I mean, if I get it on them, big pat back from my team.
Okay. Brilliant. That's excellent color.
The next question today comes from Matthew Frydman from MST Financial.
Sure. Chris and team. And yes, thanks very much for your time on what's been a pretty extensive call. I don't want to risk trading over covered ground on the downstream strategy, but maybe trying to think about things through a slightly different lens in terms of taking a multi-view on the business and I guess, the balance of the 4 pillars of the business, obviously, lithium iron ore mining services, energy. So I guess the question is, do you think about your capital allocation decisions in terms of that concentration or exposure to certain commodities or certain business units, clearly pursuing a solo or unilateral downstream strategy in whatever form you choose would require a significant further capital commitment to lithium specifically, when maybe you'd actually prefer to create more earnings diversity in the business. So -- does that factor into your decision-making and the timing around those decisions? Or is it purely your view on the returns of those projects, the relative risk of those projects and obviously, the best returning projects in the business will get prioritized on that basis?
Yes. Matthew, wait, I call that the beauty lineup. We've got all the opportunities. And look, as a matter of interest, the opportunity we got sitting in front of us now is the best that we've ever had I said that a couple of years ago, but it's so much better today. But we've got a very clear plan on where we're going on lithium. We're on a growth strategy with that. There's no doubt about that, and that will continue.
We've got a lot of eyes on -- we're looking for better ground all the time, and we're sort of looking in Canada. We're looking right here at home. I mean we're scaring all of that and securing more land. Big focus on lithium. Gas is coming at us. But again, the return on gas is going to be good. Iron ore, we're having a good hard look at where we're going on that and what our strategy is going to be. But again, the lithium business, I mean, we're going to make sure that we focus on that. It's a 50- to 100-year business. I mean we got at least 1 great Tier 1 asset and probably Marion's going to fall into that category. So -- we're going to make sure we're setting that up for the long term, but we want to get the returns quickly.
Our mining services happens naturally, but it just keeps it growing. It grows at about 20% a year. So last year, this year and next year, it's going to grow quicker than 20% a year. I mean next year, it's going to have a rocket under it. So yes, do I think about capital allocation, every day. I mean we're looking at it. I mean I've got meetings every week that look at projects that we're developing or we got in the beauty lineup, whether we have to trim back yes.
Yes, Chris. And I guess the question was more alluding to do you see a risk of over concentrating on lithium as a business unit or as a commodity exposure specifically, particularly if you need to allocate a significant amount of additional capital to that business over the coming to 3 to 5 years to build out a downstream strategy. Does that run the risk of over allocating capital to lithium as a commodity?
No. Look, we've got a plan in the -- and if all goes as we suspect it's going to go in the supply chain. I mean we've underestimated the demand over the last few years. I mean I wish I had him known it was going to grow as quick as it has and probably listening too much to consensus, but we're chasing -- we're going to grow that lithium business, and we know how we're going to fund it over the 3, 4 and 5 years. We've got a solid plan on that. We know how we're going to do the same on the gas, the same on the mining services. And we've already -- the iron ore, we know where we're at with that until the end of next year. And once we get the -- just you need to remember, too, if you have a look come end of calendar year next year, the cash that the business will be generating will be incredibly significant.
Matt, if i could...
Yeah, sure.
Just if you went back 5 years ago, no one would have predicted the growth that we've had in that business. We had about 1,500 people in the business, but planning to [ go over 7000 ] or more in the next 5 years, I think you're going to be -- we're going to -- Chris has said it a number of times, we've got to double each of our businesses and more -- so I don't think we're going to be -- we've got growth in all of our businesses. Yes, lithium looks particularly attractive, but each of our businesses has a solid business plan and significant growth ahead of it. I mean what it's going to constrain us is, quite frankly, the ability to execute on all of this.
I think 2 of the other thing to add to that. I think you guys run a standard model on mining companies. And we are far from that standard. I mean if you have a look at what we've done over the last 5 to 6 years, how we've been able to fund the growth and get to where we are. I mean I do think you need to adjust your model a little bit if you want to kind of figure out how we're going to keep growing the business. But I give you as much information as I'm able to at least on a 6 monthly basis. And look, the reason that Mark and I have come on the call this morning is that we wanted to just get it really, really clear. That number one, we've got a plan and we manage our balance sheet. We're focused on return on capital. We're making sure that we look after the shareholders because actually we're working for. So I mean, there was lot of commentary coming into the market and do we kind of figuring out where it's coming from, but I hope this is helping to get everyone a little more focus than what we're doing.
Yes, sure. Thanks, Chris. I mean 4 to 12 MinRes model is already my most complex model. So yes, I look forward to adding more complexity to that model over time. Just picking up on your comments around the cash flows in the business at the end of CY '24, I guess, leads me into my next question around -- you've talked about how lithium sulfate in terms of the midstream product might be a potentially attractive starting point. And you also alluded to the fact that you expect to continue tolling for at least another 2 or 3 years, which, as you say, makes sense from a timing perspective in terms of the ramp-up of Onslow and the cash flows coming out of the business. So just wondering, specifically around midstream product or a lithium sulfate product. Could you move -- in your view, could you move forward with that kind of a strategy without having those downstream refining and battery chemical facilities in place -- in places like the U.S. and Europe, as you mentioned.
Could you push ahead with a midstream strategy in isolation and is there a market in your view for that product -- for a sulfate product, does that market exist and would it deliver attractive margins?
Look, the answer is that they are -- they're starting to build up in Germany and Europe, but we could also take that product over to China and keep doing what we're doing while we're getting built out on that next stage. So there are no gaps. I mean, we can do it, yes, the answer is, yes, I'll kind of keep it short. I think the other thing, too, is that I'm pleased that you've got a much more complex model for us than others because as Bill Wiley used to say some time ago, the harder you work, they're lucky you get. So you keep making it more complex and keep working on us and you'll make a lot more.
Okay. I appreciate the answers.
That is the last question we have time for today. That concludes today's call. Thank you for your time, and have a great day. Please reach out if you have any follow-up questions, you may now disconnect.