Paul Graves: Yeah. Look, the answer is very different depending on what future pricing is. Today, we’re seeing spot concentrate in the second quarter moving at about $1,200 maybe a bit more per ton on an SC6 basis, so 20%, 25% higher than we saw in Q1, which is obviously good news for Mt. Cattlin, but it’s not high enough to justify the significant capital that will be needed to move to the next phase of mining at Mt. Cattlin. We hope to and we’re hoping to see the pricing increase and I think it will be good news for everybody if we can do that. But as things stand today at least, it’s quite likely that we will not be — at today’s pricing environment, Mt. Cattlin is unlikely to be operating when the current mining plan ends, which is sometime towards the end of 2025 into early 2026.
And so that’s really why we leave it out of these numbers because today, we don’t have any visibility or any confidence at today’s prices that Mt. Cattlin will be expanded beyond where it is today.
Operator: Your next question comes from the line of Christopher Parkinson from Wolfe Research. Please go ahead.
Harris Fein: Great. Thanks. This is Harris Fein on for Chris. So, for a good portion of the quarter, and I believe still today, hydroxide is trading at a little bit of a discount to carbonate, I guess, just due to differences in EV demand by region. Now that you have a lot more carbonate capacity coming online, has your thought process changed on how you’d like to allocate those tons? Or is there any more flexibility in how you can fully optimize the value per ton that you’re realizing?
Paul Graves: So, look, first on your point, I struggle with the statement that hydroxide is trading at a discount to lithium carbonate. There’s no doubt the indices point to that data. You’re absolutely right, but that’s not the case in our portfolio. I can assure you that the hydroxide price in our portfolio is not only not at a discount to carbonate, it’s a significant premium to carbonate. But that probably reflects that it’s qualified material, qualified into supply chains and largely outside China. So, while ever we see that premium and that customer commitment for ex China lithium hydroxide, frankly, we’re going to continue to pursue it. We do like the fact, especially in China, that we have that flexibility to not sell the hydroxide if we don’t want to.
We don’t have to run those plants, because the way they’re structured, they don’t carry a large fixed cost and they’re not particularly capital intensive to us. So, we can choose to sell carbonate in that place and we will as we need to. We’ll meet the customer commitments. But frankly, the China assets are swing assets to allow us to take advantage of what customers need in China, but also price opportunities and the commitment will continue to be to maximize value per LCE in that carbonate and hydroxide chain.
Harris Fein: And for my follow-up, I don’t think we touched on this yet. Just do you — what’s your view of where inventory stand right now at the cathode producer level? And are you seeing any signs of restocking right now?
Paul Graves: So, I think it’s really interesting question, because one of the characteristics of today’s market in my view is almost no lithium held in the supply chain, but no great appetite to rebuild inventory at this point in time. I think there were two reasons for that. I think the two place — the places where you build inventory is really in carbonate. You’re not building a lot of hydroxide inventory for the long run just because of the nature of lithium hydroxide. And we’ve certainly seen intermediates step in and be willing to hold that carbonate inventory, [GFEX] (ph) and others, there’s certainly some carbonate being held there, which has given some of the supply chain more confidence that there is some slack in the system for them if they need it.
I think the second bigger factor, though, is, the cathode producers don’t really have yet the visibility, therefore, the confidence they need as to what the technology roadmap looks like for the next 12 to 18 months for many of their customers. There’s sort of three different flavors out there. There’s LFP, there’s high-nickel, and there’s mid-nickel. And you’ve got sort of — LFP is obviously predominantly lithium carbonate, high-nickel is all lithium hydroxide, but in the middle there, they can kind of swing in different directions. And we’re tending to find that there’s just not a lot of confidence to build in advance because there’s so much variability today in that OEM to battery to cathode part of the supply chain as to exactly what’s going to be needed.
So, I think we need more clarity there first. And I think when that clarity starts to appear, then we’ll get the restocking that everybody is looking for.
Operator: Your next question comes from the line of Pavel Molchanov from Raymond James. Please go ahead.
Pavel Molchanov: Thanks for taking the question. Two regulatory questions. First one on Argentina. You had the press release in March about the court ruling. I know it does not affect any existing operations, but could it affect any future expansion plans?
Paul Graves: Look, I think Argentina has got lots of moving pieces to it. I think there’s a very low likelihood that it impacts future expansion plans, too, because most of what we do in expansion plans is part of existing operations being expanded rather completely new environmental permits that have to be issued. I think there’s a lot of debate about how enforceable that ruling is or was, and there’s a lot of changes being made by the province of Catamarca by the political authorities to, if you will, fix that ruling. It requires them to take certain actions and require certain things, which they frankly largely do anyway and will do. They’re very focused on making sure that investment continues to happen. I mean, particularly under this administration, with less funding going from the federal government into the provinces, direct investment by companies such as us is even more important to provinces like Catamarca and Salta and Jujuy.
So, we think it’s a very low risk that it will impact the expansion plans.
Pavel Molchanov: Okay. Kind of a broader question about the industry. We have seen some headlines about the Chinese lithium players looking to acquire more and more overseas assets. How are you looking at kind of at that whole dynamic?
Paul Graves: Yeah. It’s a difficult one. I think you know as well as anyone that, being a Chinese buyer in some key lithium jurisdictions is not easy. You’re not going to be able to buy in the US, not going to be able to buy in Canada, very low likelihood that you can buy much in Australia, too. So, there aren’t many places for them to go. Argentina, we’ve seen them going. Chile is complicated, as some of our friends know. Not saying they won’t do it, but it’s complicated as well. So, there really aren’t that many places to go. It frankly explains why they’ve invested so much capital, in my view, in lepidolite and in Africa, too, because really high-quality assets that they would prefer to have just aren’t available to them.
Pavel Molchanov: Thanks very much.
Operator: Your next question comes — sorry, your last question comes from the line of Aleksey Yefremov from KeyBanc Capital Markets. Please go ahead.
Aleksey Yefremov: Thanks. Good evening, everyone. I just wanted to clarify on your 170 kilotons target by 2026, is this a high confidence approved project where you have visibility into sources of capital? Or should we think about it as your aspiration, which is conditional on finding capital at attractive cost?
Paul Graves: So, I guess there’s two answers to that. I think the projects themselves are very well advanced. These are not speculative projects. If you think about how far advanced they are, and it’s always a gray area about the numbers I’m about to throw out to you, but largely speaking, the projects are between 30% and 70% complete, and the engineering for most of these projects is much more advanced than that. And so, these are projects that are well, well underway, very high visibility as to what the project looks like, what the timing is, there’s a lot of contracting being put in place, construction is underway in pretty much all of them as well. So, the projects themselves and therefore the 170,000 tons is a very high confidence.
I would state the same frankly with regard to the financing as well. I mean, clearly, some of the biggest financing that’s going to be required is up there in Canada, but Canada is a really interesting place for many reasons. There’s a lot of potential government funding available, because particularly the downstream assets are seen as really important to a broader Canadian battery supply chain that they’re trying to encourage to be built. Also, frankly, an easier place to get funding from customers and from other potential partners who feel confident in investing in Canadian assets and Canadian resources. So, we are clearly still working through what is the best actual way to finance it, and a big chunk of that depends on where the price goes and therefore, how much cash we generate internally.
But we have a really high confidence in the ability to fund those expansions.
Aleksey Yefremov: Thank you. And as a follow-up, your $15 per kilogram low-end scenario, this is where I understand the market to be right now, yet your ASP was $20-plus in Q1. So, should we take it as you’re outperforming the market and low end of your own EBITDA scenario by about $5 per kilo, or should we just look at you being at the low end with you at $20 in the market or $15?
Paul Graves: Yes. Look, it’s an interesting question. A couple of points, a couple of observations. You can’t really judge the market on a quarterly basis, which is why we look at it on a full year basis. I mean, we touched upon things like quarterly lags in pricing that can distort things on a quarterly basis. I think the second is that our exposure to market prices in Q1 is much lower than it will be in the rest of the year as more volume comes online. The market today is below $15 by the way. I think generally, if you’re just going to try and sell non-qualified product into the market, that’s largely going to go into China and it’s going to be below $15. Not a long way below, but certainly a touch below $15. So, I think we did outperform in Q1, but it’s not necessarily because we were able to achieve a different market price.
