So, obviously, the Chinese plants don’t benefit from the IRA from a 30D pricing perspective. And there’s a significant VAT paid in bringing material into China. So the spodumene everyone in the world is producing is worth way more to them and to us going into a place like Tennessee than is going into China. And the people in the industry know that, the car companies, the battery companies and other spodumene suppliers. So it’s really interesting, we’ve been really gratified to kind of the more we learn, the more strategic where confident Tennessee is for a lot of people.
Chris Kapsch: Got it, that’s helpful. And just as a follow-up, and also based on your engagement with these players. That’s obviously public equity markets right now and sentiment is sort of subdued to say the least. But just curious and I know your answers will be biased. That’s fine. But just curious, if your engagement with these players if there’s any indication of some of the perceived negative that’s feeding into sentiment like slower EV demand or maybe pushback on the IRA, and the spending associated with that. Is there any sense of that adverse sentiment feeding into those conversations you’re having with those strategic things?
Keith Phillips: Thanks, Chris. No, I would say not at all. I mean the strategics, who are long in this business are committed and they may or may not adjust their timelines going forward, but they’re committed, they’re very supportive, they understand the strategic imperative and the strategic attractiveness of a project like Tennessee. So very positive.
Chris Kapsch: Thank you.
Operator: And we will take our final question from Noel Parks with Tuohy Brothers. Your line is open.
Noel Parks: Hi, good morning.
Keith Phillips: Hey, Noel.
Noel Parks: Just had a couple of things. One is, thinking about the processing business, in particular, and maybe earlier in the Piedmont’s story, the mining looms particularly large contents either the standalone processing business part of that fully integrated vision that you have. So, as we look at the ramp up in demand and then ultimately production, I just was wondering if you could talk a little bit about how you see the margin evolving? And I’m wondering, is it a case when you look at scenarios that sort of when we hit that peak under supply point, is that sort of going to be sort of like a more like bulging in margin right there with prices? Or is it more? – do you look more to further out when you are really at full built with scale. The industry is closer to production scale. So just wondering how you think about that?
Keith Phillips: Yeah, Noel it’s a good question. We’ve gone through a few cycles here since I’ve been in the lithium business and down up and now prices have come down again, and certainly a year ago, everybody in the sector was collecting very substantial margins, really, especially on the upstream side. And so for a lot of people questioned our strategy, but ultimately going downstream. We have a view that in the long run, downstream margins will be substantial and more stable, and certainly more stable than upstream margins. We think being a provider of the specialty chemical lithium battery quality, lithium hydroxide will earn us a premium multiple in time once we’re at that stage, it’s obviously several years away.
I will say, in today’s market, and this is an important consideration as you think about supply, anyone modeling supply in today’s market to build a 30,000 ton hydroxide plant, if the capital in our DFS was $809 million, and that was some time ago, you just think about roughly $1 billion capital project, to spend $1 billion, to raise $1 billion to build that plant today with the current margins implied by prices, people talk about the incentive pricing required is very tough. I mean, it’ll happen in Tennessee, because of the ATVM program, and because of the strategic nature, I don’t know how you would do it in some other parts of the world where you didn’t have those two things, would just be really tough. So, what that means to me is, margins in the downstream side have to expand.
They just have to. I mean, especially if the world is going to demand material from China, they’re going to have to expand. China margins for the CapEx in China is considerably lower. And thus, you’ve seen some global, including American companies invest heavily in China in the past. We think in the long run, we want to be in the US, but we think those margins have to expand, we think they will. And but it’s going to be volatile and lumpy between now and then. But we think that there has to be a higher margin business than it is today.
Noel Parks: Great, thanks. And then I wanted to come back to NAL. I wondered if you could drill down a bit more on the new drilling up there. And was curious, the good results you’ve had recently, I think you said to the northwest. Were those just in line with pre-drill expectations or somewhat of a surprise? And also wondered if you could talk a little bit about how the construction projects on site like, for example, the DEMLR are coming?
Patrick Brindle: Yeah, thanks. This is Patrick. I would say that drilling results were pleasantly surprising. We had indications from earlier data that there may be positive drill results trending in a northwest direction from the existing pit shell. Of course, over 2023, we’ve undertaken a broad drill campaign to do two things, one, continue to upgrade mineral resources within the existing pit shell from inferred to indicated category, and then convert them to ore reserves. But, I think based on the discoveries to the northwest to-date, we’ll expand the drill campaign going into 2024 and probably reevaluate the design on a long-term basis. I would say, what we’ve seen thus far probably does not impact operations over the next one to three years, but is really medium to long-term potential to either expand capacity or increase mine life at NAL.
Shifting to capital program. Again, the two main things that we are focused on over the next six months are completion of the tailings storage facility lift before the end of this year that will give us several years of tailings storage expansion at the mine. And then the completion of the crushed-ore-dome, which we hope is completed in April of next year. This is the most significant capital project that remains from the NAL restart program. This will allow us to disconnect the operations of the crushing plant from the mill, which ultimately then should result in increased mill availability. This is the main driver for both improvements in product quality, as well as improved run rate on production target.
