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Edited Transcript of GXY.AX earnings conference call or presentation 21-Feb-20 12:30am GMT

·26 mins read

Full Year 2019 Galaxy Resources Ltd Earnings Call West Perth, WA Mar 20, 2020 (Thomson StreetEvents) -- Edited Transcript of Galaxy Resources Ltd earnings conference call or presentation Friday, February 21, 2020 at 12:30:00am GMT TEXT version of Transcript ================================================================================ Corporate Participants ================================================================================ * Alan David Rule Galaxy Resources Limited - CFO * Simon Hay Galaxy Resources Limited - CEO ================================================================================ Conference Call Participants ================================================================================ * Nick Herbert Crédit Suisse AG, Research Division - Research Analyst * Rahul Anand Morgan Stanley, Research Division - Equity Analyst * Reg Spencer Canaccord Genuity Corp., Research Division - Mining Analyst * Warren Edney E.L. & C. Baillieu Limited, Research Division - Equity Research Analyst ================================================================================ Presentation -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- Ladies and gentlemen, thank you for standing by, and welcome to the Galaxy Resources' 2019 Full Year Results Conference Call. (Operator Instructions) Please be advised that this conference is being recorded. I would now like to hand the conference over to your first speaker, Simon Hay. Thank you. Please go ahead. -------------------------------------------------------------------------------- Simon Hay, Galaxy Resources Limited - CEO [2] -------------------------------------------------------------------------------- Good morning, everyone, and welcome to the call. Joining me today is Alan Rule, Chief Financial Officer. The format of this call will follow the full year results presentation that was released on the ASX this morning. I'll begin the call by touching on the operational highlights for 2019 then pass to Alan to discuss the financial results. I'll then come back and provide a short update on what we can expect to see in the coming months. As usual, we'll follow the call with a Q&A session for analysts and institutional shareholders. However, we recognize the ongoing interest of our other investors and stakeholders. And so we'll be setting aside 2 hours immediately after this call to address their questions. For those who want to take up this invitation, please ring our Perth office line between 9:30 and 11:30 Perth time, where Phoebe and I will be available to field your questions. Before we begin, just a reminder that today's discussion will include forward-looking statements that are subject to various risks and uncertainties concerning specific factors. Information presented represents our best judgment based on today's information. Actual results may vary according to those risks and uncertainties. So firstly, to sustainability on Slide 3, which is a key focus in all our operations and our corporate strategy. In 2019, we started to align our environmental, social and governance practices with international frameworks. The preparation of our first sustainability report is well advanced, and we will be releasing this in April. From our -- from a safety perspective, our operational mine at Mt Cattlin still remains LTI-free. And in 2020, we'll be refreshing our safety programs with the objective of improving our safety outcomes. Our efforts to create positive relations with leaders in neighboring communities in Catamarca, Argentina is advancing. Our CSR projects are on track, and the local communities are very engaged with and grateful for our initiatives. Also, I recently met with the new Governor of Catamarca and the new federal Mining Secretary, where we discussed meaningful ways in which they can support the development of the Sal de Vida project. And we're quite hopeful of positive advances in that front in coming months. Moving on to Slide 4, strategy. In November last year, we released our corporate strategy that focuses on accelerating our growth plans, and we remain on track with the timings communicated at that time. Mt Cattlin's new operational plan kicks off this week, and Sal de Vida's pilot program and works required to reach a final investment decision on stage 1 are progressing well, and I'll touch on both of those subjects later in the call. Market and financials on Slide 6. Galaxy performed well in areas within our control. Mt Cattlin achieved records across many key performance indicators in 2019, including record spodumene production of 191,000 tonnes, a 22% increase compared to 2018. And unit costs at USD 391 per dry metric tonne were a 13% reduction year-on-year. This reinforces that we're a low-cost producer and have the operational capability to deliver robust production volumes of high-grade lithium concentrate. Looking back at the year, it's fair to say it was a challenging -- challenging market conditions prevailed in the lithium sector, particularly in the second half due to lower-than-expected demand in China coinciding with an increase in supply of lithium from both brine and spodumene producers. Due to the declining market conditions, our financial performance deteriorated significantly compared to 2018, and our net loss of USD 283.7 million is disappointing. The major contributor to this loss was the declining spodumene price, which necessitated the write-down of inventory, impairment of Mt Cattlin carrying values and derecognition of deferred tax asset, leading to a combined negative impact of USD 284.8 million. Pleasingly, our balance sheet remains very strong with cash and financial assets of USD 143.2 million at year-end. In addition, we hold inventory of 65,000 tonnes of final product, and we'll seek to monetize this across 2020. I'll now hand over to Alan for the review of the financial results in more detail. -------------------------------------------------------------------------------- Alan David Rule, Galaxy Resources Limited - CFO [3] -------------------------------------------------------------------------------- Thank you, Simon, and good morning, everyone. Before looking at the financial performance in detail, I would like to provide some background to 2 items that are key components of the financial performance for the year, namely the write-downs and impairment and the fixed rate note. If we look at Page 8 on the write-downs and impairments, the accounting standards required a noncash write-down and impairment due to subdued spodumene prices. Looking at the inventory on hand, due to current weaknesses in spodumene prices, the forecast net realizable value of the inventory on hand at the end of December, when it is sold, is forecast to be less than the total cost of goods sold, which includes both cash and [noncash] impairments. As a result, a further impairment at the end of December of $10 million is required, taking the total impairment of inventory or total write-down of inventory for the year to $23.6 million. Looking at property, plant and equipment and right-of-use assets. I'd like to clarify what is meant by right-of-use assets. Galaxy adopted the new lease accounting standard at 1 January 2019, resulting in the right-to-use underlying assets within a lease being recognized as an asset on the balance sheet. At Mt Cattlin, the leases that form part of these right-to-use assets include the power plant and crushing circuit that are provided by contractors. A liability for future lease payments was also recognized. Thus, an asset and liability for each qualifying lease are recorded on the balance sheet that almost offset each other. The balance sheet was grossed up by $31 million at 1 January 2019. The right-to-use asset forms part of the Mt Cattlin cash-generating unit when assessing any impairment. Therefore, under the accounting standards, we are required to pro rata any impairment across the entire Mt Cattlin cash-generating unit, including right of assets. As you are aware, we impaired the Mt Cattlin cash-generating unit by $123.5 million at the half year. At the end of December, the current forecast spodumene prices for the remaining life at Mt Cattlin from a basket of analysts and forecasters were lower than the spodumene prices used at 30 June 2019 in the impairment assessment. This resulted in an additional impairment of $65.4 million of the Mt Cattlin cash-generating unit at 31 December 2019. Interestingly, if we'd used the price forecasts that we had at the 30 June impairment assessment review, the impairment at the end of December would have been less than $10 million. The deferred tax assets would be recognized at 30 June due to insufficient forecast taxable income available to utilize previously capitalized carryforward tax losses. In summary, each of these items is noncash. And if, in future periods, prices improve and medium-term forecasts return to stability, then a reasonable portion of this impairment to property, plant and equipment and the right-of-use assets may be reversed through the P&L. And if there's a forecast tax payable amount, the deferred tax asset would be re-recognized to the extent required to offset any taxable amount. Moving on to Page 9, the purchase of a fixed rate note. In August 2019, Galaxy Sal de Vida purchased a 12-month Argentinian peso or ARS-denominated USD 50 million fixed rate note. The primary drivers of this purchase were: firstly, to generate stronger returns from funds held by Galaxy Sal de Vida to fund monthly cash requirements in Argentina; to retain a principal amount of about $50 million within Galaxy Sal de Vida to show commitment to the project; thirdly, to eliminate the risk of any tax leakage in Argentina at 30% on any unrealized FX gains on U.S. dollars held. The equivalent amount on this USD 50 million of tax would have been USD 4.5 million. Also, to prevent any further dividend withholding tax of 7%, equivalent to about $3.5 million in Argentina if this amount had been paid as a dividend within the Galaxy Group. During the year, Galaxy Sal de Vida paid a dividend of $107 million before withholding tax to its Galaxy parent company in Canada. That resulted in a dividend withholding tax of $7.5 million being paid to Argentina. So we left $50 million in Galaxy Sal de Vida and moved $107 million out via our dividend. The key commercial terms of the fixed rate note is set out in the presentation, but it includes a coupon of 45.62% paid monthly on the ARS principal in U.S. dollars at the prevailing exchange rate on the date of payment. The accounting treatment of the fixed rate note is not a traditional mark-to-market valuation of the fixed rate note, as it does not take into account the interest to be received from 1 January 2020 until maturity of the note in August 2020 nor does it adjust for the forward curve exchange rate. The accounting treatment that we have applied in these financial statements is to recognize interest every month in the profit and loss on an accrual basis. We have thus recognized $6.7 million in interest income from August to 31 December, of which $5.8 million had been received by early December, with the next interest payment received around 10 January. We revalued the principal of ARS 2.2 billion at the spot rate at 31 December, which was ARS 59.92 compared with ARS 44.08 on the issue date, which resulted in an unrealized FX loss of USD 13.2 million. Thus, the net impact through the P&L is a net loss of $6.5 million made up of the unrealized FX loss of $13.2 million and the interest received of $6.7 million. Depending on the ARS/U. S. FX rate on the date of payment each month, for the period 1 January to 10 August, we will receive between $9 million to $10 million in interest income. If the interest rate stays at around 60, we'll receive about $10 million. If it moves to 70, we will receive about $9 million. When Galaxy Sal de Vida made the initial purchase in August 2019, it was not expected that the exchange rate would collapse to the extent that it did, from 44 at the time we purchased to 59 within the space of 2 weeks. In summary, Galaxy will receive $9 million to $10 million in interest income during the period January to August 2020. That will be used to fund a substantial portion of expenditure at Sal de Vida during the period. If we move on to Page 10, the P&L. The key items to note is revenue was impacted by a 46% reduction in the average realized selling price and a 17% reduction in sales volume compared to 2018, EBITDA of $6.8 million before inventory write-down. And as a result of this significant impairment, our future earnings will be positively impacted by materially lower depreciation and amortization in coming periods. Page 11 has got the cash flow analysis. There's a fair amount of detail on this page. I would prefer to focus on the next page, which is the waterfall of the cash from December last year through to the cash and financial assets at December 2019. The key items to note are the receipt of proceeds of $271 million from the POSCO transaction less income tax paid during the period on the sale. As we've said previously, we've got a significant inventory buildup of 65,000 tonnes of spodumene concentrate. The cash component of that build-up is $27.6 million. That will be monetized as these stockpiles are drawn down in 2020. The closing balance of $143.2 million includes the closing balance of the fixed rate notes at $36.8 million, which is included in financial assets. Moving on to the balance sheet on Page 13. You can see the impacts highlighted there of the adoption of the new accounting standard, AASC (sic) [AASB] 16 leases, that has effectively grossed up the balance sheet and the impact of impairment in fixed assets, property, plant and equipment. Finally, Alita. As you're aware, after purchasing the debt, Galaxy undertook a detailed assessment of Alita and proposed a Deed of Company Arrangement to the administrator. Competing third-party DOCA was accepted by the administrators, which provided the funding required to repay the debt facility to Galaxy. This was completed in December after Galaxy was not prepared to amend the offer terms of its proposed DOCA. Galaxy's debt was subsequently repaid in full, leaving the company debt-free at the end of December. Thank you, Simon. -------------------------------------------------------------------------------- Simon Hay, Galaxy Resources Limited - CEO [4] -------------------------------------------------------------------------------- Okay. Thanks, Alan. Look, it's worth reiterating on all those financial results that the write-downs and impairments are due to the impact of pricing, whereas the controllable areas of production and unit costs had positive outcomes in 2019 and made no contribution to the write-downs and impairments. Moving on to the outlook, Slide 16. Firstly, to James Bay. This week, the Cree Nation and the Québec provincial government signed a CAD 4.7 billion alliance agreement, which is to cover road, rail, power and port infrastructure in the James Bay region. Whilst we are awaiting further details in regard to timing and project specifics, this is bound to be a positive development for the James Bay project. Our relationship with the Cree Nation and negotiations on the impact benefits agreement are both on a very sound footing. Elsewhere on the project, site geotechnical works are gearing up as part of the value engineering phase, which will run for the remainder of this half. Mt Cattlin, Slide 17. Last month, we provided guidance on our operational settings for 2020, which attempted to adapt to current market conditions. Our new operating plan complements our current inventory levels, prioritizes low-grade stockpiled ore and can be swiftly ramped up in response to increased market demand. Plant operations recommenced earlier this week, on plan, after a scheduled break over the Christmas period. And our new mining contractor is mobilizing to site with load and haul operations to commence early next month. Construction of the ore sorter project is mostly complete, and commissioning has commenced. And a reminder that this project enables the upgrading of low-grade stockpiled ore for processing. Moving on to Sal de Vida, Slides 18 and 19. Our focus this year will be on the staged development of Sal de Vida, and the project remains on track to meet the major milestones required to arrive at an investment decision on stage 1 in early half 2 2020. Front-end engineering and design on major packages is gearing up, with tenders out on ponds and wellfield package, and the process plant package will follow shortly. Other work fronts like logistics and energy are advancing through the definition phase. On site, the camp upgrade has been completed and works on the ponds is advancing rapidly. 14 of 31 ponds have been lined, and 4 are being filled with brine. Installation of the pilot plant is also going well, and commissioning will start next week. This will enable the refining of operating assumptions and allow for customers to trial the primary lithium product. On the sell-down process of a minority stake in the project, this continues on schedule. Counterparties remain fully committed to the process, and we're at final due diligence stage. Moving on to the market. The start of 2020 has seen our customer base in China affected by the impacts of the coronavirus. In January, we reported that a number of sales negotiations were at an advanced stage. This continues to be the case. However, customers are not in a position to conclude purchases due to the constraints on many aspects of their business. This includes the shutdown of most of the conversion facilities in China, and there's little visibility on when regulators will allow restarts, although we do note positive recent comments on other industries resuming work this week and next in provinces other than Hubei. Port and logistics functions are also hampered due to a large portion of the workforce in quarantine or not having returned to work. The situation is changing daily. And therefore, we will not be providing sales forecasts at this time until some clarity returns to our customers and the market in general. A reminder that our 2020 production is fully contracted in terms of volume. And once clarity returns to the market, we expect customers to confirm shipping schedules. Prices will continue to be on a spot basis for half 1 2020, at least. On macro industry trends. We've seen further positive demand indicators to support the long-term growth of the lithium sector. For example, it was widely reported that Britain brought forward the banning of the sale of new petrol, diesel and hybrid cars by 5 years to 2035, one example of many new programs underway. On the supply side, we continue to observe rationalization. Yesterday, Eramet announced their Centenario-Ratones project in Salta Province was placed on hold. And earlier in the month, Tianqi reported the commissioning at Kwinana was delayed. I think most supply/demand models would have banked both these projects in. So we expect these delays to have a positive impact on medium-term pricing forecasts. And for Galaxy, both developments continue to support our approach, which is to invest countercyclically in the belief that when we bring Sal de Vida online in approximately 2 years' time, it will be in far more positive market conditions. So with that, I'll now hand back the call to the operator for Q&A. Thanks, Eva. ================================================================================ Questions and Answers -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- (Operator Instructions) Your first question comes from the line of Rahul Anand from Morgan Stanley. -------------------------------------------------------------------------------- Rahul Anand, Morgan Stanley, Research Division - Equity Analyst [2] -------------------------------------------------------------------------------- If I can just start with mine life at Cattlin and what your focus is going to be going forward post-Alita. How do you view the assets and the longevity? That's the first one. Second one is around costs at Cattlin. Are there any other actions that can be taken or have been identified already that could potentially help the cost base lower on a permanent basis? And then third and last question is related to the markets. In terms of inventory levels, how are you viewing the markets? And I know it's a bit early, especially given the coronavirus, but have you had any conversations outside of that in terms of how demand is evolving for the rest of the year? -------------------------------------------------------------------------------- Simon Hay, Galaxy Resources Limited - CEO [3] -------------------------------------------------------------------------------- Okay. Thanks, Rahul. Taking your questions in order. Longevity of Mt Cattlin, so this year, we're operating at half rate effectively. So that does obviously push out the mine life by the same amount of time. We have -- this year, as you know, we're bringing in the low-grade stockpiles that have already been mined. So that helps our mine life. And also, we have an exploration program that we've talked about a little bit last year. We've fine-tuned the program. We have a couple of targets that we'll be going after probably this year. So -- and we'll start communicating a little bit about that once we've finalized our program. But overall, the mine life, no real change. In regard to costs, I think... -------------------------------------------------------------------------------- Rahul Anand, Morgan Stanley, Research Division - Equity Analyst [4] -------------------------------------------------------------------------------- I have a follow-up on mine life, sorry, if I may, Simon. -------------------------------------------------------------------------------- Simon Hay, Galaxy Resources Limited - CEO [5] -------------------------------------------------------------------------------- Yes. Sure. -------------------------------------------------------------------------------- Rahul Anand, Morgan Stanley, Research Division - Equity Analyst [6] -------------------------------------------------------------------------------- So you said you've identified some drill targets, et cetera. So that's not part of your current budgets, right? You're going to provide those to the market as and when you've identified an appropriate target set? -------------------------------------------------------------------------------- Simon Hay, Galaxy Resources Limited - CEO [7] -------------------------------------------------------------------------------- Correct. It will be moderate expenditure, less than -- well less than $5 million. On costs, as you know, we've had a strong focus, certainly, in my time but pre that as well. There's -- we have a range of successes that we've managed to achieve with contract renegotiations across the board, from marketing through to the other services that are provided at Mt Cattlin. That work will continue. We -- the best thing we can do about our unit cost this year is get more of the low-grade stockpiles through the ore sorter. And that's going to be our key focus area, is running that aspect of the project really hard and running the rest of our plant really hard in that restricted time frame that we have, where we're approximately 2 weeks on, 1 week off on the operating side of things. In regards to the market, look, we haven't seen any price deterioration since last year. The contracts that we were very close to signing with were at the same price or even marginally above where we were at the end of last year, which is quite positive. Certainly, the shipping costs have come way down before the coronavirus impacts. We're navigating through that because it comes with extra conditions. However, net price to shippers seems to be coming well down. And demand, we -- as I said, we remain fully contracted in terms of volume for all our production. The discussions with the customers remain positive outside of the coronavirus. So we have to navigate that through over the next few months, we believe. But longer term, and when I say long term, the medium term for this year in front of us, our volume commitments from the customers appears steady. -------------------------------------------------------------------------------- Rahul Anand, Morgan Stanley, Research Division - Equity Analyst [8] -------------------------------------------------------------------------------- Okay. Fair. And then just I guess finally, before I pass it on, in terms of James Bay, it seems to be quite welcome news. When do you expect to hear more about this infrastructure program and sort of what parts of the region are covered? -------------------------------------------------------------------------------- Simon Hay, Galaxy Resources Limited - CEO [9] -------------------------------------------------------------------------------- Well, firstly, on the region, it is all around James Bay and Québec. So -- and in -- if you read some of the announcements, they specifically mentioned lithium projects, and we know ours was one of those that they mentioned. So we are pretty certain that it will be beneficial. We know the road that they're talking about upgrading, that goes right to our site. The railhead is 380 kilometers south of the mine site, and they're talking about pushing that further north. Again, in all our preliminary planning, we expect to use that railhead. So if that comes closer to the mine site, again, it can only be beneficial. Power is a key input into the mine site, and that was also mentioned in the infrastructure package. So look, too early, Rahul. We'll be paying close attention to further detail around those announcements and the specifics around the projects, the infrastructure projects that are to be covered. And once we understand those implications, we'll be communicating that further. -------------------------------------------------------------------------------- Operator [10] -------------------------------------------------------------------------------- Your next question comes from the line of Reg Spencer from Canaccord. -------------------------------------------------------------------------------- Reg Spencer, Canaccord Genuity Corp., Research Division - Mining Analyst [11] -------------------------------------------------------------------------------- So firstly, how do I get my hands on one of these Argentinian fixed rate notes returning 45% just in 12 months? I am being a little bit facetious about that, but it looks like it could be a pretty useful mechanism for you in Argentina. So just confirming that the coupon or the interest from that fixed rate note remains in Argentina and that's not going to change. You're not going to look to repatriate any of that. -------------------------------------------------------------------------------- Simon Hay, Galaxy Resources Limited - CEO [12] -------------------------------------------------------------------------------- No. That's right, Reg. And that's what's used every month to fund the in-country cash requirements. -------------------------------------------------------------------------------- Reg Spencer, Canaccord Genuity Corp., Research Division - Mining Analyst [13] -------------------------------------------------------------------------------- Okay. Just a question on the market. I suppose, look, everyone's talking about coronavirus. I'm not sure if you caught the news or there is discussions or speculation, if you will, around China extending subsidies for new energy vehicles in China. Have you heard any more about this from your customers? And could that, let's call it, post-virus stimulus, but could that -- do you think that's going to have a meaningful impact on demand at any stage here in 2020? -------------------------------------------------------------------------------- Simon Hay, Galaxy Resources Limited - CEO [14] -------------------------------------------------------------------------------- Look, we haven't heard specifically, Reg. There's -- we're reading lots. We're staying in touch with many people inside the country. There is a range of stimuli that have been suggested. But look, nothing that we've heard confirmation of, and it's a very fluid situation. It's changing daily. So no, nothing specifically on EV subsidies. -------------------------------------------------------------------------------- Reg Spencer, Canaccord Genuity Corp., Research Division - Mining Analyst [15] -------------------------------------------------------------------------------- Okay. And just lastly, the fluid situation that you referred to, you haven't made any concrete changes to your production plants this year. But given the uncertainty that's prevailing, would it not be better to extend the processing shutdown and look to monetize some of those spodumene stockpiles that you've got? Or you're still playing it day by day, and that may be a decision that you could make at some point in the not-too-distant future? -------------------------------------------------------------------------------- Simon Hay, Galaxy Resources Limited - CEO [16] -------------------------------------------------------------------------------- Look, we're monitoring the impact on a regular basis. We're in daily communication with a number of our customers, and their volume requirements remain the case. So they're not trimming back anything. So at this stage, we're not going to trim back anything. Of course, there will be a short-term interruption with Q1 shipments. But longer term, the customers are not -- they're not in panic mode by any stretch. -------------------------------------------------------------------------------- Reg Spencer, Canaccord Genuity Corp., Research Division - Mining Analyst [17] -------------------------------------------------------------------------------- Okay. And none of your customers are in Hubei? -------------------------------------------------------------------------------- Simon Hay, Galaxy Resources Limited - CEO [18] -------------------------------------------------------------------------------- No. They're in surrounding provinces. But no, they're not in Hubei Province. -------------------------------------------------------------------------------- Operator [19] -------------------------------------------------------------------------------- (Operator Instructions) Your next question comes from the line of Warren Edney from Baillieu. -------------------------------------------------------------------------------- Warren Edney, E.L. & C. Baillieu Limited, Research Division - Equity Research Analyst [20] -------------------------------------------------------------------------------- Probably a question for Alan. If I just wanted to normalize the profit or the results for the write-downs, what sort of tax rate would I use? Because last year, it was -- the tax rate was -- I think the tax rate was around 36%. This year, it's sort of 22%. So if I wanted to back that out, Al, can you give us any guidance on that? -------------------------------------------------------------------------------- Alan David Rule, Galaxy Resources Limited - CFO [21] -------------------------------------------------------------------------------- The effective tax rate on normalized earnings should be 30%. -------------------------------------------------------------------------------- Warren Edney, E.L. & C. Baillieu Limited, Research Division - Equity Research Analyst [22] -------------------------------------------------------------------------------- Okay. And so I can just apply that to the $245 million? -------------------------------------------------------------------------------- Alan David Rule, Galaxy Resources Limited - CFO [23] -------------------------------------------------------------------------------- Yes. -------------------------------------------------------------------------------- Operator [24] -------------------------------------------------------------------------------- Your next question comes from the line of Nick Herbert from Crédit Suisse. -------------------------------------------------------------------------------- Nick Herbert, Crédit Suisse AG, Research Division - Research Analyst [25] -------------------------------------------------------------------------------- One for me also, please. Just after some CapEx guidance for the coming year, I think in the -- sorry, the December quarter, you mentioned around $2 million to $3 million for Mt Cattlin and sounds like potentially up to $5 million for exploration. You've talked to today, Sal de Vida was $20 million to $25 million, subject to any investment decision. So just wondering if there's any changes to that. And also, what's allocated to James Bay? -------------------------------------------------------------------------------- Alan David Rule, Galaxy Resources Limited - CFO [26] -------------------------------------------------------------------------------- Yes. Nick, no change to that. James Bay is $4 million to $5 million. -------------------------------------------------------------------------------- Simon Hay, Galaxy Resources Limited - CEO [27] -------------------------------------------------------------------------------- And sorry, Nick, exploration, that would be over 2 years, and the upper end would be $5 million. You'd probably put a number like $2 million in for this year. -------------------------------------------------------------------------------- Alan David Rule, Galaxy Resources Limited - CFO [28] -------------------------------------------------------------------------------- But no decision's been made on that yet. -------------------------------------------------------------------------------- Simon Hay, Galaxy Resources Limited - CEO [29] -------------------------------------------------------------------------------- Correct. Yes. -------------------------------------------------------------------------------- Nick Herbert, Crédit Suisse AG, Research Division - Research Analyst [30] -------------------------------------------------------------------------------- Okay. Great. And then sorry, do you mind just reminding me on that $4 million to $5 million on James Bay [probably just there too] in terms of studies there and just timing around those? -------------------------------------------------------------------------------- Simon Hay, Galaxy Resources Limited - CEO [31] -------------------------------------------------------------------------------- Yes. So in regards to timing, by the middle of the year, we will complete the value engineering phase. We'll complete the ESIA and hopefully have that signed off with the government. We're well advanced in that. We're in the second round of queries at the moment. And also, we expect that the IBA with the Cree Nation would be close to being finalized, if not finalized, in a provisional form. So that puts the project on a much firmer footing in regard to making an investment decision. So it's really around developing an outlook for what the project looks like. So I'm not saying we're going to update a feasibility study or do anything like that, but we'll have -- we'll certainly be much closer to final capital and operating costs. -------------------------------------------------------------------------------- Operator [32] -------------------------------------------------------------------------------- (Operator Instructions) We have no further questions from the telephone lines. I would now like to hand the conference back to your presenters. Thank you, and please continue. -------------------------------------------------------------------------------- Simon Hay, Galaxy Resources Limited - CEO [33] -------------------------------------------------------------------------------- Thanks, everyone, for your time today. And a reminder to our other investors, we'll be taking calls for the next 2 hours and to call our Perth office line. We'll answer calls in the order received. Should we have a lot of interest, we'll record numbers and get back to people promptly. So thanks very much, everyone, for your attendance today. -------------------------------------------------------------------------------- Operator [34] -------------------------------------------------------------------------------- Ladies and gentlemen, that does conclude our conference for today. Thank you for your participation. You may now disconnect.