Release Date: May 09, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- North American Lithium achieved record quarterly production, lithium recoveries, and safety performance.
- Carolina Lithium received its state mining permit, marking a significant milestone.
- Ewoyaa project in Ghana is progressing through the approvals process with attractive economics.
- Piedmont Lithium is on track to achieve $10 million in annual cost savings identified in the first quarter.
- The company expects spodumene shipments to more than double in the second half of 2024 compared to the first half.
Negative Points
- First quarter GAAP net loss was $23.6 million, or $1.22 per share.
- The company reported a first quarter adjusted net loss of $11.9 million, or $0.61 per share.
- Capital and investment spending was heavily weighted to the first quarter, impacting cash flow.
- The rezoning process for Carolina Lithium is expected to be a lengthy and costly endeavor.
- There are uncertainties regarding the timing and ramp-up of customer shipments, which may impact revenue.
Q & A Highlights
Q: Keith, I wanted to start maybe just on some of the micro stuff for the balance of this year. Is there any color that you can give us to inform what your expectations are for pricing relative to what we're seeing on the index for the rest of the year as you ship more to some of your offtake partners? Or maybe just contrasting the shipments to date that have gone to your offtake partners and what the go forward is the rest of the year and how that might tie back to some better pricing?
A: Yeah, David, thanks for the question. So as you know, our first shipments were all in the spot market, and the spot market evolved during 2023. So we were really receiving pricing and plus one or post-delivery, as opposed to the convention, which had been to receive pricing based on the shipment date. That ended up being a two, four, in some cases, six-month difference, and prices were falling rapidly. So it had a big impact on us and some others. Our contracts are, and I won't go into the specifics of them, but they're more traditional in that they're based on market reference prices on a lagged basis. In one case, it's based on the concentrate price. In another case, it's based on the hydroxide price. The lags are a little different. So I think what you'll see is pricing that'll be smoother. Certainly, as the lags look backward, right now, and going forward the next month or two or three, we would actually be negatively impacted by those lags, with prices having fallen from 2023 into early 2024. Hopefully, going forward, that'll reverse with things. Our customer requirements are really back-ended this year. As we build into those shipments, we'll see considerably more shipments in the second half of this year. It'll be a unique half, and I think you'll see things be more steady from there on out. We'll still have some spot shipments, probably, later this year. In the spot market, that market's evolving. Just some other people, as you may have seen, have achieved better spot pricing in the last month or two than had been experienced two or three months earlier, partly through the approach to the market. So that's something we're considering as well.
Q: Helpful color. I wonder if the shift here is just talking, Carolina, from a strategic perspective. You discussed, obviously, that Tennessee's fully permitted. I know that you're pursuing, I think, an ATVM loan application for Tennessee. You talked about financing options for Carolina, and then, obviously, funding options for Ewoyaa. But I guess, just to back up, obviously, the intention was to feed Tennessee lithium with Ewoyaa feedstock. Can Carolina be a project that you pursue as upstream only, or do you see a requirement to have a vertically integrated plan there as well that would FID or at least come online and coincident with the upstream side?
A: We're at a point now where the mine permit received was a massive achievement for the team. It's really got us thinking about what the right timeline for development of the two big US projects is. They're both large capital projects. It wouldn't be prudent for us to try to develop them simultaneously. We'll be thinking about doing that sequentially. Carolina obviously has a significant advantage over Tennessee in that it has its own ore body. As we've had strategic conversations with people around Tennessee and around Carolina, the Tennessee project is exceptional. It's a great location, great infrastructure, great people in that location, surrounded by customers. A lot of the same benefits as North Carolina, but it's not on a spodumene belt. It relies on imported spodumene, and we've contemplated bringing that material from Ghana. Carolina has its own spodumene right on site. The cost savings benefits of doing everything together are pretty substantial. We have submitted an application for an ATVM loan at Tennessee. We formerly had applied for an ATVM loan for Carolina that we put that on hold when we proceeded on Tennessee. We'll make a formal decision in the communication here in the coming weeks and months as to what the cadence of these projects will be. But certainly, we're excited about Carolina just because it has its own ore body and becomes a superior project. And when you think about project economics around the world, it’s really interesting. We’ve gotten very close to this being in Quebec. NAL is doing really well, but for the time being, there’s nowhere to send spodumene concentrate in North America. There’s a customer of ours who’s developing a facility, but there are no existing plants, which means you’re sending material either directly or indirectly into China, because that's where all the conversion capacity is. The transport cost involved and VAT involved average around $300 a ton. In Carolina, it's going to be about $1 a ton to convey material from the concentrate plant to the chemical plant on the same site. It's just massive savings. It'll be the only site on the planet where the chemical plant is on the same site as the mine. We may do the same thing at NAL. As you know, there's a dormant partially built facility there, but that has a huge strategic advantage. It's something we'll be thinking about.
Q: Just one quick question from me, please. Firstly, congratulations again on the approval of the mining permit. I'm just wondering if you could share some comment on the funding options. I understand you are trying to get some government support. Just wondering any comments on the potential debt and equity split? That would be very helpful. Thank you.
A: Thanks, Austin. It's a great question. We were happy for our friends at Lithium Americas. They announced a loan package from the DOE several weeks ago. It was approximately 75% of the total funding package was an ATVM loan. They have corporate level equity coming in from General Motors and from the market. Ioneer, as had secured an ATVM loan commitment a year or so ago. We've been looking at those and others. Getting debt funding in the range of 65% to 75% of the total capital would be something we'd like to target. In an ideal world for us, the equity coming into the project would come from a partner or two and it would come at the project level rather than at the corporate level. If our market cap was what LAC’s market cap was when they first brought in General Motors, we might happily do something at the corporate level. With our current market cap, we’re far more focused on project-level funding. We’ve had conversations with a number of really substantial people. The A-list of people you think might care all care about Carolina. It’s one of two significant US spodumene projects. We talk a lot about location. We think in Ghana we have the best-located Lithium asset in all of Africa. We think NAL is by far the best-located Lithium asset in all of Canada. We think Carolina is the best-located Lithium asset in the world. People are looking at the project, they are interested in the project, and it’ll take time. Realistically, the ATVM process has been a two
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
