Joseph Eaker: Okay. Fair enough. And then shifting over to NAL, given the improvements you guys have made, what’s the long-term goal in your guys’ mind for annual production rate and cash operating costs on a per ton of spodumene basis?
Keith Phillips: It’s a joint venture operated by Cyana. To some extent, we’re limited on what we’re comfortable saying to get ahead of them. They’re the operator. I’m on the board of the joint venture. We’re very active in the joint venture, but fundamentally, we rely on them to provide guidance and we follow it. They did publish a Feasibility Study. We’re optimistic that costs will trend toward that, whether they achieve DFS levels. That’d be hard in an inflationary environment like we’ve been in. We think costs will improve meaningfully with some of these capital projects that are being completed, particularly the dome. We think production levels will increase meaningfully. The DFS targeted 226,000 tons a year. That’s probably a stretch in my own view, but I think exceeding 200,000 tons a year is something the JV hopes to accomplish.
I think we hope to get to that run rate in the second half of this year. That’ll be more tons at lower unit costs. It’ll make the asset quite competitive. More tone we have to get — the greater of 113,000 tons a year or 50%, up to 226,000, the JV benefits the most from increased production, but that’s good for us. It makes the JV that much more viable. We own 25% of the JV, so we’re excited to see production ramp up. There’s been a lot of drilling going on with NAL. There was a big announcement last fall. I think you’ll see future announcements from Cyana and the joint venture. This is a very large potential mineral resource. I think the opportunity for future resource and reserve increases, mine life extensions, perhaps even production increases, in the medium term is pretty interesting.
I think NAL is going to go from an asset that has been misunderstood, given its history, to being a very highly strategic asset. We think it’s by far the best located asset in Quebec. It’s 40 miles from rail, it’s 40 miles from the town of Val d’Or [ph]. Every other project is in some version of the hinterlands in the frozen tundra of the north. It’s really advantaged. We think it’s going to get bigger and better, and we’re very excited about it.
Joseph Eaker: Okay. Thanks for the call. I’ll turn it over.
Keith Phillips: Thanks.
Operator: Your next question comes from the line of Gregory Lewis of BTIG. Please go ahead.
Gregory Lewis: Hi. Thanks, and good morning, everybody, and good afternoon. Keith, I did want to touch a little bit more on some of your comments. You’ve been talking about the give and takes between going forward with Tennessee and obviously North Carolina, and congratulations on that. I guess my question is around because the ATVM loan is in process already in Tennessee, how does the sequencing adapt if we have a better line of sight on securing financing for the ATVM? I think you mentioned for North Carolina, it might take 18 to 24 months. How do we think about that pool of money going to both projects in terms of making that decision to move forward?
Keith Phillips: We need to make a decision reasonably soon as to which project we’re going to advance first. We’ll articulate that reasonably soon, not today, but hopefully by 4th of July. We’re doing a lot of work on different scenarios, but fundamentally, the ATVM process is very involved. The government does exceptionally deep diligence work, as you’d expect. A lot of the work that’s been done in Tennessee benefited from the work that had earlier been done by the DOE team on Carolina. It’s the same chemical plant, so a lot of the technology work is the same. The work that’s been done is largely transferable from a technical perspective. We haven’t advanced so far in Tennessee that we’re weeks away from a loan commitment and giving up that’s a big deal.
It’s not that far along. For strategic reasons, we’ve been optimistic about the Carolina mine permit for some time. I think we’re in an environment where we think lithium prices are still at I would characterize a depressed level, a level where building a billion dollar plus project is something that even if you could do it, it might not be the right time to do it. We’ve seen other companies announce similar things. So we’re not in a hurry. We think there’s massive strategic value. As we think about our business we were a joint venture partner and the biggest spodumene producer in all of North America. We have an offtake agreement associated with that. It’s very favourable and sort of an asset in its own right. We have Ewoyaa which is relatively near-term production at low-CapEx and then we have these big strategic projects which are realistically second-half-of-the-decade kind of production.
It’s really important to get it right. It’s really important to get the funding right, get the right partner or partners to come in to help with off-take and help with funding and to do it on the basis that’s least dilutive. We’re going to be patient. We’re not in a hurry, but I think our timing is excellent because we expect to see positive momentum in lithium market and the strategic interest remains very strong. I think our timing might end up being pretty darn good to bring this all together over 2025-26 from a funding perspective.
Gregory Lewis: Okay, great. And then I did want to touch on – thanks for the macro higher-level slides. Despite what a lot of people say EV penetration continues to increase. Just under that backdrop, has there been any change in cadence? I feel like, obviously, you’re having multiple customer conversations, multiple off-take around multiple projects. Has that kind of cadence changed at all over the last couple months just simply as lithium pricing has stabilized, kind of recovered? EV demand has slowed, but it’s still up. Has there been any kind of change or is it kind of, hi, the conversations that we were having six months ago are kind of the same ones we’re having now?
Keith Phillips: Yes, I would say I think it’s changed — with different parties it might have changed. There are one or two parties who think they’ve kind of achieved a lot of what they need for lithium in the next several years. I’m talking about customers here and customer funding. There are others who have arisen who are making big investments who need supply, but on a macro basis I would say demand from big blue-chip customers for substantial amounts of lithium, way more than we can produce or any one of these projects can produce remains very strong, strategic interest is very strong. It hasn’t wavered at all. To some extent, it’s more active now with prices lower and people trying to be opportunistic, but we’re in a position to take our time and bide our time and we will.
Interest is, I would say, frothy, particularly for an asset like an American or Canadian asset where there’s only so much North American material that’s really going to get developed on a meaningful timeline of that, very little of it, frankly, is spodumene. I would say just about everybody has come to the realization that while there are some other things – some other things that are pretty interesting that the probability of success with this spodumene operation is basically 100%. You may have execution issues, but anybody with a good spodumene ore body can produce a material that can be turned into battery-quality hydroxide or carbonate. That’s still to be proven by a lot of other people with a lot of other projects. The strategic guys get that and I think they’re increasingly focused on spodumene where they can find it, particularly in good locations.
Gregory Lewis: Super helpful. Thank you very much.
Keith Phillips: Thank you. Thanks, Greg.
Operator: Your next question comes from the line of Mahima Kakani of JPMorgan. Please go ahead.
Mahima Kakani: Hi, everyone. This is Mahima Kakani on for Bill Peterson. Maybe starting with Carolina, what is your latest thinking on pursuing rezoning of the land for mining purposes? Is that sort of a 2024 story, or is it 2025? Then can you maybe also touch on any estimated costs associated with this process?
Keith Phillips: Great question. The costs associated with it are pretty modest. There are some engineering studies we’ll be doing as part of that process, but through the life of the rezoning process it’s in the single-digit millions of dollars. I think from a timing perspective, we’re looking at the project kind of holistically and as we think about a funding timeline that’s really 18 months to 24 months from the time we commenced it and we’re just now really sort of commencing it. The rezoning process we think of as a 6 months to 9-month process. The question is when’s the right time to do that? We’ve reached the conclusion that the right time to do that is probably during 2025. We’re in an election year. We’re in May. We’d be bumping up against timelines if kind of rushed it.
We don’t think it’s the right thing for us to do or for the county, frankly for us to rush what’s a pretty important process. This is the biggest economic development project in the county in years and years and years if not ever from a capital perspective. So our plan with that is to really prepare ourselves properly over the course of this year to kind of embark on that formally in 2025.
Mahima Kakani : Okay. Thank you for that, Cully. Maybe a second question on NAL. Do you expect to get to your internally projected normalized cash cost level in the back half of this year considering you’ll get to full run rate production or is there room for costs to move even lower in 2025 and beyond?
Keith Phillips: I’ll give you my answer. Patrick can pipe in if he has a different view. I think we’re going to see pretty substantial progress this year. I think Patrick mentioned the inventory adjustments that affected price costs in Q1 that Dayana had reported. I think those are reversed and kind of worked their way average out over time, but I think on a cash cost of production basis, we hope to see substantial improvement in – we hope to see improvement Q2 and meaningful improvement the second half of the year and I would think we should be at kind of run rate and then it’s really a question of are you in a quarter or two where the ore is of higher grade or quality and maybe there’s movement. I think we expect to hit those targets our internal targets by the end of the year. Do you agree with that, Patrick?
Patrick Brindle: Yeah, I agree with that. We would expect as production increases we do see meaningful improvement in unit operating costs on an unproduced basis. I think we mentioned last quarter we’re still working through some of the old underground works in the pit and that will persist through the greater part of 2024. So I think even going into the first half of 2025 there’s still some room for some level of cash operating cost improvement as we get through those old works and we’re back into kind of fresh rocks in operation.
