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Edited Transcript of ORE.AX earnings conference call or presentation 28-Aug-20 12:30am GMT

·46 min read

Full Year 2020 Orocobre Ltd Earnings Call MILTON, QLD Oct 26, 2020 (Thomson StreetEvents) -- Edited Transcript of Orocobre Ltd earnings conference call or presentation Friday, August 28, 2020 at 12:30:00am GMT TEXT version of Transcript ================================================================================ Corporate Participants ================================================================================ * Martin Perez de Solay Orocobre Limited - MD, CEO & Director * Neil Kaplan Orocobre Limited - CFO & Joint Company Secretary * Tara Berrie Orocobre Limited - Commercial Executive ================================================================================ Conference Call Participants ================================================================================ * Bria Murphy BMO Capital Markets Equity Research - Associate * Glyn Lawcock UBS Investment Bank, Research Division - MD, Head of the Australian Mining & Energy Team and Research Analyst * Levi Spry JPMorgan Chase & Co, Research Division - Research Analyst * 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 ================================================================================ Presentation -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- Thank you for standing by and welcome to the Orocobre Limited FY '20 Results Conference Call. (Operator Instructions) I would now like to hand the conference over to Mr. Martin Perez de Solay, CEO. Please go ahead. -------------------------------------------------------------------------------- Martin Perez de Solay, Orocobre Limited - MD, CEO & Director [2] -------------------------------------------------------------------------------- Thank you, Rachel. I would like to welcome you all to Orocobre's 2020 full year financial results presentation. Let me begin with a summary of today's announcement and discussion of COVID-19 before Mr. Neil Kaplan takes us through the full year financials in greater detail. As you're all aware, the lithium market has been challenging for producers over the past 18 months. And while soft market conditions persist into the September quarter, we are seeing signs of increasing volumes and some indications both prices are improving. During the year, we demonstrated strong production and cost management capabilities when faced with difficult market conditions, which were further destabilized by COVID-19. The company acknowledges the need to continue Stage 2 expansion plan despite these short-term challenges. Therefore, we're undertaking an AUD 120 million equity raising and share purchase plan to deliver balance sheet flexibility required to operate and expand during these volatile market conditions. The equity rate will also ensure the Stage 1 operations and Stage 2 are fully funded, taking into account capital contingencies from a range of extended COVID-19-restricted scenarios and allow us to take advantage of opportunities as they arise. We understand the importance of providing confidence and supply security to our existing customers as well as those who we are progressing negotiations with. In this regard, we announced the completion of an nonbinding MOU for long-term supply to the Toyota and Panasonic joint venture Prime Planet Energy & Solutions. In response to COVID, COVID has meant that we have been adapting how we do business while supporting our communities and people. From the start, we established an emergency committee to coordinate our response and future actions. We have also worked closely with local authorities while maintaining open-ended communication with our employees, suppliers and communities, despite it is not being possible to meet face-to-face and with limited communications in some areas. Regular meetings with the management team have worked to implement a comprehensive biosecurity protocol, change rosters, reduced staffing and adapt operating practices to minimize the risk of COVID infection. So far, we have been relatively successful, but are under no illusion that COVID-19 will continue to affect how we operate in our markets for some time to come. Over the last year, a weak product pricing has been the key driver of our financial results, which have seen the Orocobre Group post a consolidated net loss after tax of $67.1 million including impairment of inventory and other assets. The underlying loss was significantly less at $22 million. Despite this, the cash position of the company remains at $171.8 million with a net cash position of $44.6 million at 30 June 2020 and before completing the equity raising. Safety, productivity and quality remain our key focus areas, and I believe safety is the foundation to improve performance. At Olaroz, the lost time incident frequency rate has improved from 3.3 in financial year '19 to 1.9. During this period of weak lithium prices, we have been working on controlling the controllable, and we have achieved a 22% reduction in costs between Q1 and Q4 financial year 2020. This has been done by reducing the number of contractors we use and eliminating all nonessential spend. During the year, we produced 11,922 tonnes of lithium carbonate. This was only 5% down from the previous year, and a testament to the improvement of operations, considering Olaroz was completely shut for 36 days, including a 3-week maintenance and operating at a reduced rate for a further 113 days to meet a subdued demand. Olaroz sales revenue for the year was $58 million from sales of 10,514 tonnes, which was achieved with a (inaudible) price received of $5,520 per tonne. This resulted in gross cash margin of $148 per tonne for the year or 21%. I will now pass on to our corporate CFO, Mr. Neil Kaplan, to run through the financial with more detail. -------------------------------------------------------------------------------- Neil Kaplan, Orocobre Limited - CFO & Joint Company Secretary [3] -------------------------------------------------------------------------------- Thanks, Martin, and good morning to all. First up is the consolidated profit and loss. Lower revenues of USD 77.1 million have been mainly affected by lower pricing with an average price of USD 5,520 per tonne being received versus $10,322 per tonne for the prior corresponding period, a 46% drop. Tonnes sold also reduced from 12,080 tonnes to 10,514 tonnes, a 13% reduction, mainly related to the effects of coronavirus. Olaroz cash cost of goods sold of $4,372 a tonne is higher than the same period in FY '19 of $4,302 a tonne, excluding royalties and export duties and head office costs, mainly due to lower production volumes, the reduction in the export incentive due to lower sales and a warranty provision related to packaging costs. Over the year, from September quarter 2019 to June quarter 2020, there has been a 22% reduction in cash cost of goods sold per tonne. Corporate office costs reduced by approximately 24%, excluding restructuring costs. A bridge of Olaroz' EBITDAIX from FY '19 to FY '20 can be seen in an upcoming slide. In spite of the soft market conditions, gross cash margin remained positive at $1,148 a tonne or 21% cash margin. EBITDAIX for the year was a loss of USD 3.9 million, which includes approximately USD 3.6 million related to export duties, restructuring costs of $1 million and $2 million incurred while production activities were halted due to coronavirus. Net finance charges of USD 12.9 million was the result of interest income of USD 5.6 million being offset by net finance costs of $18.5 million related to the project finance facility, working capital facilities, interest on noncontrolling shareholders' loans and a noncash interest expense on lease liabilities and changes in fair value. The noncash impairment charge of $33.1 million relates to finished goods and brine inventories being written down by $18.1 million, the AAL carrying value as an associate being written down by $10.3 million prior to consolidation and other assets of $4.7 million. The income tax benefit is mainly due to the loss for the period, which resulted in an increase to the carried forward tax losses. This resulted in a statutory loss on 100% basis after tax of $67.1 million. Moving to the next slide, this slide details the underlying profit. Moving from the statutory loss after tax of $67.1 million on a 100% basis to an underlying loss after tax of $22 million, we have made the necessary adjustments as detailed on the slide, the main adjustments being the impairment charge of $33.1 million and ForEx losses of $11.7 million. The underlying loss of $22 million for FY '20 is mainly due to lower average lithium prices received, higher depreciation and higher finance costs at Olaroz as well as a reduced interest income at corporate level. Moving to the next slide, this slide details the bridge between Olaroz' EBITDAIX for FY '19 of $54.1 million and FY '20 negative EBITDAIX of $3.9 million. The main components of the reduction are related to lithium pricing of $58.3 million, reduced volumes sold of $9.2 million and coronavirus restructure costs of $3 million, offset by a reduction in OpEx due to a reduction in volume of $7.8 million and cost reductions of $3.2 million. Moving to the next slide, this slide details what the consolidated balance sheet looks like for FY '20 versus FY '19. The key points on the balance sheet are: cash has mainly reduced given the funding of Stage 2 Expansion, reduction in working capital facilities and net operating outflows at SDJ. PPE has increased mainly as a result of the Stage 2 Expansion. The exploration and evaluation costs have increased due to the consolidation of AAL, which has also resulted in a decrease in investment in associates. Current external borrowings reduced as a result of a repayment of a portion of the SDJ working capital facilities due to a changing Argentine regulation, whilst the noncurrent external borrowings increased due to shareholders' loans from TTC, largely offset by repayment to Mizuho for the Stage 1 project finance loan. The outstanding principal on the Stage 1 project finance loan has reduced from $191.9 million to approximately $88 million at 30 June, and in less than 2 weeks (inaudible) would have reduced to approximately $76 million. A reduction of the deferred tax liability is mainly due to the loss for the period, which resulted in an increase to the carryforward tax losses. The finance lease liability of $28.7 million is the effect of adopting AASB 16 related to leases. Moving to the next slide. Cash generated from operations resulted in a negative $6.9 million due to the substantial drop in revenues mainly related to sales pricing and volume. In detailing some of the main movements, purchase of property, plant and equipment relates mainly to expansion as well as sustaining CapEx. Proceeds from borrowings related expansion drawdown on the Mizuho loan, TTC shareholders' loans to SDJ and a drawdown of Argentine peso working capital facilities. Repayment of borrowings is the reduction of the principal for the Stage 1 project finance loan and repayment of U.S. dollar working capital facilities. Moving to the next slide. If we look at the cash cost of goods sold, as reported in our quarterlies, we have reduced from over $5,000 a tonne in September quarter to $3,920 a tonne in the June quarter, a 22% reduction. This is the result of focusing on controlling the controllables which we will continue to do. In summary, despite a soft lithium market and coronavirus, Olaroz continue to be operationally profitable with a positive cash margin and positive EBITDAIX of USD 5.7 million, and we continue to pay down project finance debt for Stage 1 with circa $115 million we paid by September 2020. Moving to the current quarter. This quarter will be impacted by a 3-week scheduled maintenance shutdown and costs for the quarter are expected to be between $3,900 and $4,100 a tonne. Approximately 3,800 tonnes are expected to be sold in September quarter with realized pricing of between $3,000 and $3,200 a tonne. A little less than 50% of these tonnes were sold in July into the spot market, resulting in lower pricing with an intention of reducing inventories and ensuring cash flow. Thank you, and I will pass you back to Martin. -------------------------------------------------------------------------------- Martin Perez de Solay, Orocobre Limited - MD, CEO & Director [4] -------------------------------------------------------------------------------- Thank you, Neil. Operating within the COVID-19 environment has its challenges with Stage 1 currently operating with a reduced workforce, and Stage 2 expansion activities slowing down given staff restrictions. We have sized our equity raising to ensure that we have sufficient contingencies and unrestricted cash to fund our corporate costs, Stage 1 ramp up and Stage 2 CapEx in an extended downturn scenario. Additional funds have raised beyond this requirement could be used to expand the production capacity of the hydroxide plant or further develop all our other resources, among other opportunities. With improving visibility delivered by the buildup of our long-term customer order book and decisions regarding our product mix and expansion plans will be made with regards to needs of our customers. The management and improvement of the Olaroz Stage 1 performance remains focused on safety, quality and productivity. Despite operating with reduced staff as a consequence of current COVID-19 restrictions, plant stability and reliability has improved, resulting in a decrease of upfront plant maintenance event and repair turnaround time. Plant yield and lithium recovery have also been improved. During the year, we implemented HAZOP safety systems and completed new medical facilities. We also saw quality improvements with all product deliveries made within required customer specifications. Kaizen activities have been implemented in coordination with the Toyota team by applying the Toyota production system. Kaizen is a highly successful continuous improvement process utilized in the Japanese manufacturing industry. While it is early in the implementation process, results have been positive with a noticeable change in the mindset of our operational personnel. The Olaroz Stage 2 expansion will increase total expected lithium carbonate production capacity by 25,000 tonnes to approximately 42,500 tonnes per annum, of which 10,000 tonnes will be used at feedstock for the Naraha Lithium Hydroxide Plant. As we outlined at the June quarter, the capital expenditure estimate is now $330 million. Key areas of cost escalation included COVID-19-related delays, more robust technology related to the carbonation process, management of impurities in the brine and soda ash systems and improved flexibility in the lining process. With current COVID restrictions, we are aware that this project will be delayed with first production expected to commence in financial year 2023. Over to 2020 financial year. Including working on brine transportation systems, rail diversion channels, commissioning of the secondary lining plant, together with road and camping upgrades and new evaporation ponds. Stage 2 will result in a significant step-up in capacity and consequent reduction in cash costs from $4,000 per tonne to around $3,200 to $3,500 per tonne. First production to be in financial year 2023 and ramp-up until full capacity of 25,000 tonnes per annum by financial year 2026. Stage 2 volumes are expected to be fully contracted with strong demand for both lithium carbonate from Olaroz and hydroxide from Naraha from a range of cathode manufacturers including the PPE joint venture between Toyota and Panasonic with whom Orocobre has signed an MOU to supply lithium hydroxide from Naraha and battery-grade lithium carbonate from Olaroz. PPES are developing a battery manufacturing business to which we will supply up to 30,000 tonnes per annum of lithium carbonate and equivalent from a combination of battery-grade hydroxide and carbonate. The strategy will be to feed non battery-grade lithium carbonate from Olaroz Stage 1 and 2 into Naraha to produce battery-grade hydroxide, which will then go to supply PPES. We would expect to expand Naraha into Stage 2 to support hydroxide volumes required by PPES. At the same time, battery-grade carbonate producer Olaroz Stage 1 will also supply PPES. This MOU with PPES, along with other existing contracts, will mean Olaroz Stage 1 and 2 and Naraha will be fully contracted by 2025. Moving on to a Naraha Lithium Hydroxide Plant. Since construction commenced, there have been no LTIs recorded. Construction activities have progressed very well with more than 70% of planned works now completed. As of June 30, approximately $40 million have been spent on engineering, civil works, electrical, instrumentation, fabrication and procurement at the Naraha plant. Site operations have continued throughout the period, however, equipment delivery from overseas are expected to be delayed due to COVID, which is currently projected to delay final project completion by approximately 2 months, and we'll see commissioning comments around mid next year. We are well funded and have sufficient contingencies in place to complete the projects given total CapEx of $86 million, which compares to our funding in place of $92 million, plus a $27 million subsidy to be received from the Japanese government once the project is completed. Neil, if you could please go with the equity raise details. -------------------------------------------------------------------------------- Neil Kaplan, Orocobre Limited - CFO & Joint Company Secretary [5] -------------------------------------------------------------------------------- Sure, Martin. We upsized the equity raising to ensure we have sufficient funding to support Stage 1 and Stage 2 throughout an uncertain operating environment. There remains approximately USD 85 million of equity funding requirements attributable to Orocobre, which we need to spend on Stage 2 and an additional USD 50 million of cash will be restricted to support any unforeseen additional cost requirements for Stage 2 as well as any funding requirements Stage 1 may have. The unrestricted cash on balance sheet represents an additional contingency to weather a range of possible pricing environments and any unforeseen costs or delays that may arise due to coronavirus. In addition, any part of the unrestricted cash balance not put towards Stage 1 or 2 can also be used to fund a future Olaroz/Cauchari or lithium hydroxide expansions. The capital raise is also positive action in response to and in ensuring the ability to deliver into customer demand, as evidenced by the signing of the MOU with PPES. Thank you, and I'll now pass you back to Martin. -------------------------------------------------------------------------------- Martin Perez de Solay, Orocobre Limited - MD, CEO & Director [6] -------------------------------------------------------------------------------- Thank you, Neil. On Slide 23, the equity raising will be in the form of a fully underwritten institutional placement to raise AUD 126 million at a 13.1% discount to last close. We will also be offering an SPP to eligible shareholders of up to AUD 30,000 to provide an opportunity for our shareholders to participate in the equity raising. Here, on Slide 24 we have provided an indicative time table for placement through to commencement of normal trading and dispatch of holding segments early October 2020. Now I would like to hand over to Tara Berrie to discuss the lithium markets. -------------------------------------------------------------------------------- Tara Berrie, Orocobre Limited - Commercial Executive [7] -------------------------------------------------------------------------------- Thank you, Martin. After a subdued start to FY '20, several promising signs emerged between September 2019 and January 2020. The Chinese market began the year in a state of malaise following further reductions to EV subsidization in July 2019. However, sentiment in China began to improve in November 2019, with the opening of Tesla's Shanghai Gigafactory and the prompt ramping of production to meet pent-up demand. In January 2020, the Chinese government announced the EV subsidy will be extended and provinces followed with supportive local policy. However, the accelerated spread of COVID-19 mid- to late-January halted early signs of momentum and further slowed China's economy. As the largest lithium demand market, China's economic situation and EV demand has had a significant impact. As a result, it is the company's view that 2020 lithium demand will be between 3% and 5% lower compared with 2019. Ex battery segments, including glass-ceramics and specialty products are expected to be hit hardest as end users are strongly linked with GDP and industrial production. Whereas the battery segment and its end-use markets are increasingly tied into technology adoption and sustainability efforts and can be targeted directly through subsidization, as demonstrated by EU. These factors form the foundation of strong growth expectations driving battery segment's lithium demand to account for approximately 78% by 2025. In the second half of FY '20, Europe surpassed China as the largest EV market in terms of sales units. From September 2019 through to February 2020, the European's EV market rallied, achieving consistent month-on-month growth on the back of more stringent carbon emissions policy. While this momentum temporarily stalled in April 2020 due to COVID-19, Europe rebounded strongly as several governments extended or increased EV subsidization by up to 50%. Beyond this financial support, Europe's long-term growth prospects have been weighed down by heavy taxation on gas and diesel, doubling the impact of recent oil price declines. With these short-, medium- and long-term measures, confidence has grown in Europe's battery chain development and EV sales potential. While financial support outside of Europe has not been as strong, continued reductions and bold predictions regarding battery costs suggest that price parity with internal combustion engine vehicles is in reach without the need for subsidization. This is increasingly becoming a reality through elimination or substitution of unnecessary and/or costly materials, while still maintaining or even improving key performance traits like range and power. Economies of scale, large efficiencies and technical improvements have enabled cost and capital intensity reduction, shifting the EV industry closer to self-sufficiency. However, the same cannot be said with regard to the lithium industry. Technology improvements downstream have demanded tighter lithium chemical specifications, adding to production costs through further purification to remove impurities. Capital costs have also been driven up by the purchase of additional purification-related plant drawing capital away from volume expansions. While downstream time lines compress, upstream time lines continue to extend. This misalignment is expected to drive a shortfall in battery supply ahead of the overall market. Variability between lithium resources, concentrated IP and experience is expected to limit the lithium industry's ability to keep up with demand. And now I will pass it over to Martin to conclude the presentation. -------------------------------------------------------------------------------- Martin Perez de Solay, Orocobre Limited - MD, CEO & Director [8] -------------------------------------------------------------------------------- Thank you, Tara. Regarding ESG, at Orocobre, we are recognized as sustainability (inaudible) integrated business and being successful and that will lead to stronger results. During the June half, we released our third sustainability report with a significant enhancement to the sustainability section of our website. This now includes material information on how we approach sustainability across the business and performance data. Pleasingly, this focus on transparent reporting of our sustainability performance has been recognized by ASCI with a sector-leading rating. In summary, market conditions remain difficult. But our operations are making significant progress in terms of safety, productivity and quality. We see the current quarter pricing to remain soft, but there is some improvement in spot pricing. Subject to external influences such as coronavirus, we see that demand fundamentals will have a positive impact on market conditions later in the year and into 2021. Thank you. Rachel, we will now take the questions. ================================================================================ Questions and Answers -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- (Operator Instructions) Your first question comes from Nick Herbert from Credit Suisse. -------------------------------------------------------------------------------- Nick Herbert, Crédit Suisse AG, Research Division - Research Analyst [2] -------------------------------------------------------------------------------- Two questions for me, please. I might just start with the lithium MOU, the new offtake you've announced. The comment you made there saying that it will appear to minimize all of these exposure to spot prices. Can you just expand on that? And whether that's referring to the hydroxide or the battery-grade carbon or the pass-through price. And then just interesting understanding, how does it actually reduce exposure to spot pricing? And presumably, it's set with a reference to a spot price. That's question one. -------------------------------------------------------------------------------- Martin Perez de Solay, Orocobre Limited - MD, CEO & Director [3] -------------------------------------------------------------------------------- Yes. Thank you, Nick, for your question. The agreement with PPES will mean that we will have a long-term pricing agreement, which will be based on market benchmark prices, but will eliminate the need that we have been facing to sell into the Chinese spot market, taking whatever price was at that moment. That we have seen as one of our largest deficiencies so far. And this agreement should help us to improve in that regard. The agreement will also -- will not only encompass lithium carbonate from Olaroz, but will also encompass the lithium hydroxide produced from Naraha. So it encompasses both production. The 30,000 tonnes will be made out of carbonate and hydroxide. -------------------------------------------------------------------------------- Nick Herbert, Crédit Suisse AG, Research Division - Research Analyst [4] -------------------------------------------------------------------------------- And next one, just on Naraha. Can you talk through the economics of that a little more, please? You've given the cost of $1,500 a tonne. What sits below that line in terms of royalties and taxes just to get to a win-win cost? And could you also just talk to the trends for pricing broadly so we could get to a clearer picture of what that opportunity looks like, please? -------------------------------------------------------------------------------- Martin Perez de Solay, Orocobre Limited - MD, CEO & Director [5] -------------------------------------------------------------------------------- Well, I will ask Neil to give you more detail on the cost. What I can tell you is on the trends from pricing. Olaroz will be selling on market price to Naraha. And Naraha based on a low cost of conversion, should profit from the lithium hydroxide it sells into the PPES joint venture. Neil, if you have some more details on the taxes and structural cost that... -------------------------------------------------------------------------------- Neil Kaplan, Orocobre Limited - CFO & Joint Company Secretary [6] -------------------------------------------------------------------------------- Yes. And Nick, on specific Japanese taxes, I don't have any information on hand. We can take it off-line and I can come back to you on that. But don't have specific Japanese taxation rates. Obviously, the products sold would be taxed in Japan at the company rates that are currently applied in Japan. But I don't have any other detail on that. -------------------------------------------------------------------------------- Nick Herbert, Crédit Suisse AG, Research Division - Research Analyst [7] -------------------------------------------------------------------------------- Okay. Is there anything else you're aware of outside of taxes that would be below that $1,500 per tonne cost you referred to? -------------------------------------------------------------------------------- Neil Kaplan, Orocobre Limited - CFO & Joint Company Secretary [8] -------------------------------------------------------------------------------- No. I mean there'd be obviously noncash you'd have depreciation. That's exclusive of depreciation. So you'd have to include depreciation. You'll have to obviously include interest, which is very low, very low interest rates on the facilities there. But as far as the operating cost, we'd be looking at $1,500 a tonne. -------------------------------------------------------------------------------- Nick Herbert, Crédit Suisse AG, Research Division - Research Analyst [9] -------------------------------------------------------------------------------- Okay. And then just moving on to the price realization and the comment that you've seen the improvement and material improvement in August. In order to just put some numbers around that, if you're looking at that price on the similar product mix as to what has gone into your September quarter price guidance, based on what prices you're seeing in the market today, where that realized price would sit? -------------------------------------------------------------------------------- Neil Kaplan, Orocobre Limited - CFO & Joint Company Secretary [10] -------------------------------------------------------------------------------- Yes. Nick, we're not going to get into individual monthly pricing. Suffice to say that July was a big tonnes month. As we mentioned on the call, in the presentation that was just below 50% of the forecast 3,800 tonnes that we're going to sell. The pricing is right down. We did take advantage of some very low spot pricing to relieve warehousing and inventory congestion as well as ensure cash flow. So that -- those were the 2 key drivers of that. So we're going to have the September quarter, which is very low in pricing. It's probably our lowest pricing -- price quarter for a very long time now, I don't know how many years. But we will step out of that in the December quarter. But certainly in August, the pricing was a lot better than July. -------------------------------------------------------------------------------- Nick Herbert, Crédit Suisse AG, Research Division - Research Analyst [11] -------------------------------------------------------------------------------- Okay. And then final one, just for you as well, Neil, if that's okay. Just wondering, 100% clear on the funding position now for Stage 2. So you've got the $85 million remaining equity contribution. And then in reference to the $50 million in restricted cash needed for contingency. I guess 2 questions out of that. One, are you comfortable with that $50 million contingency would essentially cover all of -- well, most of the sort of the reasonable downside scenario that you could see play out under sustained COVID delays and pricing pressures. And two, just in terms of unencumbered cash, post the placement available with Stage 2, is that around that $193 million mark though it's excluding essentially what's committed to Naraha. -------------------------------------------------------------------------------- Neil Kaplan, Orocobre Limited - CFO & Joint Company Secretary [12] -------------------------------------------------------------------------------- So I'll start with your first question. The $85 million plus the $50 million makes up the $135 million that we've been talking about continually. Originally, $135 million was earmarked as the guarantee, 75% of the $180 million loan that will be taken that we've been drawing down from Mizuho. As we draw it down, we've got to put those funds aside as reserve funds. The point is a month ago, as advised in our quarterly, we looked into and soon we agreed that $60 million of it could also be used for Stage 1 in case of any shortfalls due to pricing, due to principal repayments to Mizuho, et cetera, et cetera. So the $85 million that are in the sources and the uses of funds, is basically to fund Stage 2 for the various costs of CapEx, working capital and VAT. That's a base case you're seeing there. We then have another $50 million of reserve funds that are available for Stage 2 as well as for Stage 1, if there's a requirement. So that makes up the $135 million. With the capital raise, we've gone in the number, the $101 million of unrestricted funds. So in a downside case where we did stress downside cases in terms of reduced pricing for extended periods, increased CapEx due to coronavirus delays, et cetera, and we'll be well funded with $101 million. So that provides us flexibility, a robust balance sheet if there is ongoing weakness in the market as well as the uncertainty of coronavirus. Sorry, your -- I spoke for so long and I kept on. What was your second question? -------------------------------------------------------------------------------- Nick Herbert, Crédit Suisse AG, Research Division - Research Analyst [13] -------------------------------------------------------------------------------- No, that covered it. It was more around whether you're confident that contingency, $50 million, covered most downside scenarios, but it sounds like it does. -------------------------------------------------------------------------------- Operator [14] -------------------------------------------------------------------------------- Your next question comes from Reg Spencer from Canaccord. -------------------------------------------------------------------------------- Reg Spencer, Canaccord Genuity Corp., Research Division - Mining Analyst [15] -------------------------------------------------------------------------------- I'd just like to start with a follow-up question to Nick's on that expected September quarter pricing. Can you maybe provide a comment on how that $3,000 -- or circa $3,000 a tonne figure might relate to similar quality or similar spec product in China today. Is there anything different about that material that sees that price so low relative to what I can see via various price reporting agencies? -------------------------------------------------------------------------------- Neil Kaplan, Orocobre Limited - CFO & Joint Company Secretary [16] -------------------------------------------------------------------------------- We're just assigning who's taking the call -- the answer, Rich. I mean, basically, the low pricing -- it's not to do with the material. Yes, we're competing with the Chinese market in that aspect. But it's a spot price that was taken, as I mentioned, too. So nothing to -- there's no issue with the quality. It's our standard prime industrial grade. No issue with the quality. We just took advantage to turn inventory into cash and relieve excess inventory at Olaroz. -------------------------------------------------------------------------------- Reg Spencer, Canaccord Genuity Corp., Research Division - Mining Analyst [17] -------------------------------------------------------------------------------- Okay. Neil, and then on -- just on that inventory... -------------------------------------------------------------------------------- Martin Perez de Solay, Orocobre Limited - MD, CEO & Director [18] -------------------------------------------------------------------------------- But we were producing at a higher rate. -------------------------------------------------------------------------------- Reg Spencer, Canaccord Genuity Corp., Research Division - Mining Analyst [19] -------------------------------------------------------------------------------- Okay. Sorry, through the first half of this calendar year? Is that what you mean by that? -------------------------------------------------------------------------------- Martin Perez de Solay, Orocobre Limited - MD, CEO & Director [20] -------------------------------------------------------------------------------- We are producing at a high production rate, which we then reduce to meet the demand. We are forecasting sales in the range of 13,000 tonnes, which ended up being only 10,500. So we not only have to reduce the production rates at the plant, but also we kept a lot of inventory that we sold down in the month of July, taking these low prices that Neil just mentioned. -------------------------------------------------------------------------------- Reg Spencer, Canaccord Genuity Corp., Research Division - Mining Analyst [21] -------------------------------------------------------------------------------- Okay. That's fine. And just where that inventory might stand now, remind me that inventory number at the end of the June quarter would have been circa 3,000 to 3,500 tonnes. And given your expected sales for this quarter, that should drop to circa 1,000 tonnes. Is that where we stand now? -------------------------------------------------------------------------------- Martin Perez de Solay, Orocobre Limited - MD, CEO & Director [22] -------------------------------------------------------------------------------- [It's probably around more,] between 1,000 to 2,050. Yes, it's closer to 2,000 tonnes. We usually keep 2 months of sales and inventory with an average quarter sale of 3,000, 2,500, that's it. It was slightly higher than that in the June quarter. -------------------------------------------------------------------------------- Reg Spencer, Canaccord Genuity Corp., Research Division - Mining Analyst [23] -------------------------------------------------------------------------------- Understood. I might just jump across now to the supplier arrangement with -- or the MOU with PPES. Are you able to say what the split would be between battery-grade carbonate and hydroxide. And then as a follow-on question for that, clearly, the scale of that supply contract necessitates even -- potentially even a significant expansion of what you have outlined is building at Naraha. And can you maybe comment on the timing of any subsequent expansions at Naraha at this time? -------------------------------------------------------------------------------- Martin Perez de Solay, Orocobre Limited - MD, CEO & Director [24] -------------------------------------------------------------------------------- Well, that -- those things will have to be yet discussed and agreed. A significant portion of the 30,000 tonnes would be hydroxide over time. So increasing our hydroxide production capacity is something that we now have to focus on and start working. Also, the -- all of the production from Naraha will be devoted to PPES. And I said before, I guess, since the requirement of hydroxide -- battery-grade hydroxide is going to be larger, we are planning to -- we will have to expand that capacity, and we'll have to start this with discussions and agreement with TTC and PPES going forward in order to be able to meet those needs. -------------------------------------------------------------------------------- Reg Spencer, Canaccord Genuity Corp., Research Division - Mining Analyst [25] -------------------------------------------------------------------------------- Okay. And so with the -- from the capital raising, then, it's a bit early to say what capital requirements there might be for subsequent expansions at Naraha and timing from that but suffice to say that the amount that you'd be looking to raise would -- there may be a provision in there to cover some of those costs. -------------------------------------------------------------------------------- Martin Perez de Solay, Orocobre Limited - MD, CEO & Director [26] -------------------------------------------------------------------------------- Indeed. -------------------------------------------------------------------------------- Operator [27] -------------------------------------------------------------------------------- Your next question comes from Glyn Lawcock from UBS. -------------------------------------------------------------------------------- Glyn Lawcock, UBS Investment Bank, Research Division - MD, Head of the Australian Mining & Energy Team and Research Analyst [28] -------------------------------------------------------------------------------- Martin, just sort of going back to the joint venture offtake. Just wondering, could you maybe help me understand, are there any penalties or issues around that ramp up that you've given us? Is it a take-or-pay from their perspective, but from your perspective, if you don't deliver, are there penalties to you? Just trying to understand. Or is it just the best endeavors contract? That's the first one. -------------------------------------------------------------------------------- Martin Perez de Solay, Orocobre Limited - MD, CEO & Director [29] -------------------------------------------------------------------------------- At this point in time, it's just an MOU that doesn't have any penalties, no take-or-pay or deliver-or-pay clauses. We will now sit down to negotiate a binding agreement that will get into those type of usual chance of a commercial contract. -------------------------------------------------------------------------------- Glyn Lawcock, UBS Investment Bank, Research Division - MD, Head of the Australian Mining & Energy Team and Research Analyst [30] -------------------------------------------------------------------------------- Okay. Do you envisage it being a take-or-pay? Is it something what you'd like to see? In exchange, I guess, you then have to promise to deliver? Or will it just be a best endeavors. What do you think it could end up like? Or where would you like it to end up? -------------------------------------------------------------------------------- Martin Perez de Solay, Orocobre Limited - MD, CEO & Director [31] -------------------------------------------------------------------------------- No. We envision a commercial contract. Well, I would like to end up in a contract that will give us reliability on our ability to place the product. And at the same time will give enough flexibility for our customers to be able to accommodate their needs. So most likely maybe a take-or-pay or deliver-or-pay contract with the standard provisions of makeup inventory and be able to advance or delay deliveries of products so as to minimize the costs from straight take-or-pay or deliver-or-pay clauses, taking into considerations that these companies with very good intentions. And we know each other very well. So the objective of this is to improve the commercial [profitability] for both parties rather than to impose penalties on the other. -------------------------------------------------------------------------------- Glyn Lawcock, UBS Investment Bank, Research Division - MD, Head of the Australian Mining & Energy Team and Research Analyst [32] -------------------------------------------------------------------------------- Okay. The second question is just the $5 million per month cash burn you quote, just -- I assume that's just Phase 1, if you had to put Phase 1 into care and maintenance. And does that include or exclude the principal repayments as well, that $5 million per month? -------------------------------------------------------------------------------- Martin Perez de Solay, Orocobre Limited - MD, CEO & Director [33] -------------------------------------------------------------------------------- That is... -------------------------------------------------------------------------------- Neil Kaplan, Orocobre Limited - CFO & Joint Company Secretary [34] -------------------------------------------------------------------------------- Yes. So what that number is, Glyn, is basically, we have a look at if we shut down completely, what would it cost per month to just hold, if we had a big coronavirus outbreak or something, to shut down Borax, shutdown SDJ, put it into care and maintenance. Obviously, we've got our corporate offices as well as finance to pay the interest. So that's interest. The $5 million a month basically covers that care and maintenance for corporate, Borax, SDJ and interest payments. It doesn't include principal repayments. -------------------------------------------------------------------------------- Glyn Lawcock, UBS Investment Bank, Research Division - MD, Head of the Australian Mining & Energy Team and Research Analyst [35] -------------------------------------------------------------------------------- Okay. So it excludes the principal. Okay. Then I guess my next question is just if we go back -- it's only 4 weeks ago, we were on a call with you for the quarterly. At that point, you would have already known you'd sold volume at a very low price in July because it was the 30th of July when we met. You've done a deal with your joint venture partner to access restricted cash. Yet 4 weeks later now, we're raising money at a lower share price than what it was back then. What changed in 4 weeks? I mean 4 weeks ago, we thought we had a company that could weather the storm. You've done a deal. You knew about the low price, and prices are now actually improving as you said. I'm just trying to understand what's moved you to do this? Is this a contingent to get the offtake agreement signed? Did you need to raise may provide more liquidity? Or what's changed in your mind? -------------------------------------------------------------------------------- Martin Perez de Solay, Orocobre Limited - MD, CEO & Director [36] -------------------------------------------------------------------------------- No. Glyn, what happened if we started looking into what could happen if the current scenario continues to be longer than expected, if the upturn that we saw in August, it's only a month. And in that event, if COVID restrictions continue and if prices do not improve significantly, we would have been with a skinny cash company [without] -- has to have enough cash flow -- excuse me, enough cash reserves and flexibility. The market is evolving. We are starting to think of increasing hydroxide production capacity for this new MOU. And we can't -- we have to derisk the company and run the company on short cash position despite its enough to cover our needs. It's quite risky. If anything happens different from what we expect, we would be in trouble. We thought it was the right time to do it. When we don't need being forced to do it when we run out of cash and we're forced to take anything, then it's up to you. -------------------------------------------------------------------------------- Operator [37] -------------------------------------------------------------------------------- Your next question comes from Rahul Anand from Morgan Stanley. -------------------------------------------------------------------------------- Rahul Anand, Morgan Stanley, Research Division - Equity Analyst [38] -------------------------------------------------------------------------------- Look, I might start with the achieved pricing, and apologies, I know it's been talked about a few times. Should I reconfirm that 3,000 to 3,200 number that's been flagged is basically assuming all primary product, and there's no battery-grade in there? -------------------------------------------------------------------------------- Neil Kaplan, Orocobre Limited - CFO & Joint Company Secretary [39] -------------------------------------------------------------------------------- Yes. That's mainly exactly, Rahul. That's mainly prime grade product industry. -------------------------------------------------------------------------------- Rahul Anand, Morgan Stanley, Research Division - Equity Analyst [40] -------------------------------------------------------------------------------- Okay. Perfect. And then if we move to Slide 18, there's a couple of things there that I wanted to talk about. So the first one being the Stage 2 to significantly improve cash costs. So it talks about Stage 1 being at $4,000 and then 1 and 2 combined being at the $3,200 to $3,500 per tonne mark. Does that sort of indicate that Stage 1, $4,000 a tonne is basically the best you can do without Stage 2 coming on? Or is this basically just today's production, and once you get to the full ramp-up capacity that this $4,000 number looks better on a stand-alone basis for Stage 1 as well? -------------------------------------------------------------------------------- Martin Perez de Solay, Orocobre Limited - MD, CEO & Director [41] -------------------------------------------------------------------------------- Well, the number is calculated, assuming a mix of Stage 2 full primary product and Stage 1 will lead more on to purified than what it is today and still to this in some primary depending on the need for further conversion into hydroxide. So that assumes that production of primary from the Stage 1 should increase from the current -- purified from Stage 1 should increase from current percentage. -------------------------------------------------------------------------------- Rahul Anand, Morgan Stanley, Research Division - Equity Analyst [42] -------------------------------------------------------------------------------- Right. So then, I guess, so $4,000, if I read it correctly then, is the ramp-up production cost of Stage 1, producing a mix of battery in primary? And what percentage of battery grade does that assume, the $4,000? -------------------------------------------------------------------------------- Martin Perez de Solay, Orocobre Limited - MD, CEO & Director [43] -------------------------------------------------------------------------------- The cost that we have had this year with an average of roughly (inaudible). -------------------------------------------------------------------------------- Rahul Anand, Morgan Stanley, Research Division - Equity Analyst [44] -------------------------------------------------------------------------------- Sorry, I didn't get that, Martin. Could you say that again, please? -------------------------------------------------------------------------------- Martin Perez de Solay, Orocobre Limited - MD, CEO & Director [45] -------------------------------------------------------------------------------- The $4,000 is a current number, and that is based on the percentage of (inaudible). The $4,000 is based on the current production and it's based on the roughly 30% purified product that we've been producing throughout 2020. -------------------------------------------------------------------------------- Rahul Anand, Morgan Stanley, Research Division - Equity Analyst [46] -------------------------------------------------------------------------------- Okay. So 30%. Okay. Perfect. And then the top of the slide talks about the 15,000 tonnes per annum to 17,500 by FY '22. Is that sort of -- can we take that as guidance in the sense that you're planning to get there? Or is that a rate that you hope to achieve at some quarter as an exit rate in FY '22 for Stage 1, please? -------------------------------------------------------------------------------- Martin Perez de Solay, Orocobre Limited - MD, CEO & Director [47] -------------------------------------------------------------------------------- There's a range there because it will depend on the amount of purified product that will run through the plant and certain improvements that we are doing on plant. If we run primary product output of the plant, it's larger than if we run the purified stuff which runs at a lower rate than the primary could. So that's the hypothesis on the range of different primary and purified product outcomes from Stage 1. -------------------------------------------------------------------------------- Rahul Anand, Morgan Stanley, Research Division - Equity Analyst [48] -------------------------------------------------------------------------------- Okay. Perfect. So I mean if you're doing just primary, then you can be at -- or you're expecting to be at 17,500 tonnes in FY '22 for the full year? -------------------------------------------------------------------------------- Martin Perez de Solay, Orocobre Limited - MD, CEO & Director [49] -------------------------------------------------------------------------------- Rahul, I did not get that. What? -------------------------------------------------------------------------------- Rahul Anand, Morgan Stanley, Research Division - Equity Analyst [50] -------------------------------------------------------------------------------- So 15,000 to 17,500, Martin, that's basically your expected range for FY '22. It's not an exit rate, that number? -------------------------------------------------------------------------------- Martin Perez de Solay, Orocobre Limited - MD, CEO & Director [51] -------------------------------------------------------------------------------- Yes. We should be able to get there. Yes. -------------------------------------------------------------------------------- Rahul Anand, Morgan Stanley, Research Division - Equity Analyst [52] -------------------------------------------------------------------------------- Okay. Perfect. Coming back to the Naraha Stage 2 question, Martin. I mean if we do the numbers on where the current battery-grade production is from Stage 1 and what you're expecting from Naraha, and also the flagged delivery schedule... -------------------------------------------------------------------------------- Martin Perez de Solay, Orocobre Limited - MD, CEO & Director [53] -------------------------------------------------------------------------------- Rahul, I'm going share to you all of that detail later. -------------------------------------------------------------------------------- Rahul Anand, Morgan Stanley, Research Division - Equity Analyst [54] -------------------------------------------------------------------------------- I'm sorry? Hello, Martin? -------------------------------------------------------------------------------- Neil Kaplan, Orocobre Limited - CFO & Joint Company Secretary [55] -------------------------------------------------------------------------------- I'm not sure if he's lost. I'm not sure, Rahul, if he's lost. Martin, are you there? -------------------------------------------------------------------------------- Martin Perez de Solay, Orocobre Limited - MD, CEO & Director [56] -------------------------------------------------------------------------------- Rahul, yes. Yes. Can you hear me? -------------------------------------------------------------------------------- Neil Kaplan, Orocobre Limited - CFO & Joint Company Secretary [57] -------------------------------------------------------------------------------- Okay. Yes. -------------------------------------------------------------------------------- Martin Perez de Solay, Orocobre Limited - MD, CEO & Director [58] -------------------------------------------------------------------------------- Hello? -------------------------------------------------------------------------------- Rahul Anand, Morgan Stanley, Research Division - Equity Analyst [59] -------------------------------------------------------------------------------- Okay. Yes, I think we're all back on. Can everyone hear me now? -------------------------------------------------------------------------------- Martin Perez de Solay, Orocobre Limited - MD, CEO & Director [60] -------------------------------------------------------------------------------- Yes. Is it my line or is it Rahul's line. -------------------------------------------------------------------------------- Rahul Anand, Morgan Stanley, Research Division - Equity Analyst [61] -------------------------------------------------------------------------------- I'm not 100% sure. I'm on a landline, Martin. I would assume that I'm probably audible. -------------------------------------------------------------------------------- Neil Kaplan, Orocobre Limited - CFO & Joint Company Secretary [62] -------------------------------------------------------------------------------- Go ahead, Rahul. -------------------------------------------------------------------------------- Rahul Anand, Morgan Stanley, Research Division - Equity Analyst [63] -------------------------------------------------------------------------------- Okay, perfect. Look, the question is really on the delivery schedule that you flagged into this potential MOU on Slide 19. So if we look at Stage 1 capacity to produce -- Neil, are you still there? -------------------------------------------------------------------------------- Neil Kaplan, Orocobre Limited - CFO & Joint Company Secretary [64] -------------------------------------------------------------------------------- Yes. No, I'm listening. -------------------------------------------------------------------------------- Rahul Anand, Morgan Stanley, Research Division - Equity Analyst [65] -------------------------------------------------------------------------------- No? I just heard some music. -------------------------------------------------------------------------------- Neil Kaplan, Orocobre Limited - CFO & Joint Company Secretary [66] -------------------------------------------------------------------------------- Yes. I also did. -------------------------------------------------------------------------------- Rahul Anand, Morgan Stanley, Research Division - Equity Analyst [67] -------------------------------------------------------------------------------- Okay. Should I continue? Or should I wait for -- I'm not sure if Martin's there anymore. -------------------------------------------------------------------------------- Neil Kaplan, Orocobre Limited - CFO & Joint Company Secretary [68] -------------------------------------------------------------------------------- Martin, you're there right? -------------------------------------------------------------------------------- Martin Perez de Solay, Orocobre Limited - MD, CEO & Director [69] -------------------------------------------------------------------------------- I'm here. Yes. Yes, Rahul. -------------------------------------------------------------------------------- Rahul Anand, Morgan Stanley, Research Division - Equity Analyst [70] -------------------------------------------------------------------------------- Yes. Okay. Perfect. So Stage 1 battery-grade production capacity, I guess, is doing 20% to 30%. And then you've got the 10,000 tonnes hydroxide coming on in Naraha. If you look at the delivery schedule for the potential new MOU, this would suggest that you'd basically be required to start thinking about Naraha Stage 3, pretty much in calendar year '23 and have that up and running basically by calendar year '24. So is that sort of how you're viewing this chart as well? Or are there some other levers you can pull? And then how should we perhaps think about potential CapEx spend for Naraha Stage 2? -------------------------------------------------------------------------------- Martin Perez de Solay, Orocobre Limited - MD, CEO & Director [71] -------------------------------------------------------------------------------- It will all depend on how the next 6 to 9 months we will devote to transforming this MOU into a commercial agreement. That would tell us a lot about the volumes and the different products that would be required to meet those volumes and help the ramp-up those. So Naraha would start with 10,000 tonnes of lithium hydroxide, which should be enough to cover the first 2 or 3 years of the MOU. After that, yes, we will plan to improve hydroxide capacity, and we will do that well in advance. If we have made any plan already? The answer is no. If we are providing to have cash to invest in that. The answer is yes, we are getting ready for that. -------------------------------------------------------------------------------- Operator [72] -------------------------------------------------------------------------------- Your next question comes from Bria Murphy from BMO Capital Markets. -------------------------------------------------------------------------------- Bria Murphy, BMO Capital Markets Equity Research - Associate [73] -------------------------------------------------------------------------------- Most of my questions have been answered. So just one from me. Can you talk about why you've decided not to curtail production given negative margins? Is there a risk that lithium price recovery maybe slowed down if capacity is in closing even with loss-making? -------------------------------------------------------------------------------- Martin Perez de Solay, Orocobre Limited - MD, CEO & Director [74] -------------------------------------------------------------------------------- Yes. -------------------------------------------------------------------------------- Tara Berrie, Orocobre Limited - Commercial Executive [75] -------------------------------------------------------------------------------- Sorry, Bria, could you just repeat that? I'm going to... -------------------------------------------------------------------------------- Martin Perez de Solay, Orocobre Limited - MD, CEO & Director [76] -------------------------------------------------------------------------------- Tara to answer your questions when she's... -------------------------------------------------------------------------------- Tara Berrie, Orocobre Limited - Commercial Executive [77] -------------------------------------------------------------------------------- Sorry, Bria, would you mind repeating that? -------------------------------------------------------------------------------- Bria Murphy, BMO Capital Markets Equity Research - Associate [78] -------------------------------------------------------------------------------- Yes. So just wondering if you could talk about why you decided not to curtail production, given negative margins in the September quarter? And then is there a risk that the lithium price recovery maybe slowed down if capacity isn't closing even when it's loss-making. -------------------------------------------------------------------------------- Tara Berrie, Orocobre Limited - Commercial Executive [79] -------------------------------------------------------------------------------- Sure. So I guess, the decision was made because we were in advanced discussions with our customers to -- even though it is on a spot basis, we had existing negotiations with our customers. So even with that foresight on price, we needed to continue production. In terms of price, we believe that it reached the bottom. And so the best decision for us was to continue into production and fulfill those customer orders. -------------------------------------------------------------------------------- Operator [80] -------------------------------------------------------------------------------- Your next question comes from Levi Spry from JPM. -------------------------------------------------------------------------------- Levi Spry, JPMorgan Chase & Co, Research Division - Research Analyst [81] -------------------------------------------------------------------------------- Still lots of questions, I suspect. Maybe just been more of a helicopter. So you said you raised enough to cater for an extended downturn sort of scenario. Can you run me through the assumptions for that, particularly given that you're also waiving the potential for another round of CapEx at Naraha Stage 2? And maybe you can talk through exactly what needs to be ironed out for the MOU to be converted into a firm contract. Is it actually firming up in the Naraha Stage 2? -------------------------------------------------------------------------------- Neil Kaplan, Orocobre Limited - CFO & Joint Company Secretary [82] -------------------------------------------------------------------------------- Are you there Martin? Martin is talking but it's not coming through. There's no voice. -------------------------------------------------------------------------------- Martin Perez de Solay, Orocobre Limited - MD, CEO & Director [83] -------------------------------------------------------------------------------- Sorry, I was in mute. I was telling you that there is no detailed calculation of expansion of the hydroxide capacity. We are planning that we will have to do that and start moving and spinning our wheels in that direction, and that's why part of the excess cash that is being raised in this equity raising would be devoted to that project. However, there's nothing yet firmed up. And yes, now, we enter a 6- to 9-month period to format the MOU international binding commercial contract. -------------------------------------------------------------------------------- Levi Spry, JPMorgan Chase & Co, Research Division - Research Analyst [84] -------------------------------------------------------------------------------- Okay. So can you give us any detail on what the key items you're negotiating on are? -------------------------------------------------------------------------------- Neil Kaplan, Orocobre Limited - CFO & Joint Company Secretary [85] -------------------------------------------------------------------------------- Martin, you're muted again, I think. Martin, we can't hear anything. -------------------------------------------------------------------------------- Martin Perez de Solay, Orocobre Limited - MD, CEO & Director [86] -------------------------------------------------------------------------------- Yes, sorry. I was telling you that the negotiation would be around the actual split between different products, the testing of the Naraha product. The Olaroz product has already been tested. My line is not working properly, then Neil, maybe, if you can answer that for me, please. Can you hear me? -------------------------------------------------------------------------------- Neil Kaplan, Orocobre Limited - CFO & Joint Company Secretary [87] -------------------------------------------------------------------------------- Yes. -------------------------------------------------------------------------------- Levi Spry, JPMorgan Chase & Co, Research Division - Research Analyst [88] -------------------------------------------------------------------------------- Yes. Okay. And maybe just the assumptions around... -------------------------------------------------------------------------------- Martin Perez de Solay, Orocobre Limited - MD, CEO & Director [89] -------------------------------------------------------------------------------- I hope you can hear me. Neil, why don't you answer that. My line is not working properly, it seems to be... -------------------------------------------------------------------------------- Neil Kaplan, Orocobre Limited - CFO & Joint Company Secretary [90] -------------------------------------------------------------------------------- That's okay, Martin, and I'll pick up the questions. Levi, sorry, are you good with Martin's response on the one before? -------------------------------------------------------------------------------- Levi Spry, JPMorgan Chase & Co, Research Division - Research Analyst [91] -------------------------------------------------------------------------------- I guess. And maybe, Neil, just talk me through the assumptions behind how much runway you have if prices don't recover? -------------------------------------------------------------------------------- Neil Kaplan, Orocobre Limited - CFO & Joint Company Secretary [92] -------------------------------------------------------------------------------- Well, the runway is probably -- we've looked at what we did with the stress testing, Levi, was we looked at extended low pricing as well as increases in CapEx for an extended period. If you look at that sources and uses of fund, it's a little over $100 million. That would get us through for at least about 3 years in really a real downside case of long extended weak pricing and increases in CapEx due to COVID. So we stressed that quite heavily. So basically, yes, that's -- I mean those are the main assumptions, and we looked out to 3 years, and that was it. -------------------------------------------------------------------------------- Operator [93] -------------------------------------------------------------------------------- That does conclude the question-and-answer session. I'll now hand back to Neil for closing remarks. -------------------------------------------------------------------------------- Neil Kaplan, Orocobre Limited - CFO & Joint Company Secretary [94] -------------------------------------------------------------------------------- Martin, can -- you want closing remarks or do you want me to close it out? Well, thank you very much to everyone for listening in and calling in. -------------------------------------------------------------------------------- Martin Perez de Solay, Orocobre Limited - MD, CEO & Director [95] -------------------------------------------------------------------------------- Line is not working properly here, Neil, if you can do that. -------------------------------------------------------------------------------- Neil Kaplan, Orocobre Limited - CFO & Joint Company Secretary [96] -------------------------------------------------------------------------------- No problem, no problem. Thank you, again, all for calling in. I think we've achieved a milestone there with a very large contract. We do have other contracts in place. We expect to be sold out possibly beginning 2023 financial year, certainly by 2025 with the other contracts we have plus this PPES. It's a key milestone, what we're raising now, just in terms of setting us up for the future in these uncertain times. And we still remain big believers in lithium EVs and the future of it. So thank you all for attending the call and we look forward to -- well, I can't say a road show because I think we're all sitting in the home, a lot of us. But we'll talk soon. Thank you.