Welcome back. It's a pleasure to host this Fireside Chat with Paul Graves, CEO of Arcadium Lithium. I've known Paul a long time, and he was previously CFO of FMC. And years ago, he was investment banking, Goldman Sachs Natural Resources, so lithium's a good fit for him. So we'd like to maybe start off with you, Paul, on Arcadium. It's been two years since that deal concluded, and would like to just hear your general outlook, how have things been going in the last couple of weeks? It's. There's a lot of moving parts these days, but as far as the, you know, the value proposition that you conceptualized when you pulled these two companies together, has that changed? Well, let me start by saying, it may have felt like two years, but it's been two months. That's lithium year, the lithium months. Did I say two years? You did, but that's okay. Look, I think it's... You know, the deal, as you know, was designed to be a merger of equals. And a big piece of that was no part of the deal was designed to be a bet on the lithium price, right? This was really about creating a larger, more stable, more diversified business, resource diversification for both of us. It certainly accelerated Allkem's move downstream into value-added processing, and I think we all recognize that it gives us a better opportunity to have scale, and especially scale with customers, and also a greater opportunity to be fully integrated. So, you know, our view, and we'll talk more, I'm sure, is that full integration of resource all the way through the chemical process is really the model for the future. So it's going well. Now, despite it not being a bet on the lithium price, you know, the market is different today, and what it does is, it forces us to take a look at a couple of things, really. One of them is the pace at which we make changes internally. I think it's always important to run a business, whatever the environment, with cost discipline, and so accelerating synergies. If you followed closely, you'll see that we announced our earnings a week or so ago, and our stated synergies for this year are probably about twice what we'd originally announced, and frankly, that's taking advantage of an ability to move faster in this environment. The second thing that it requires us to do is to have discipline around our balance sheet and around our spending. If we just added together the investment plans of Livent and Allkem, would have been over $1 billion of capital spending this year. As it is, we're closer to $650 million. We focused really on two specific areas of investment, Canada and Quebec, specifically, and then Argentina, and we've focused on the projects that we think fit most closely with what the long-term strategy of Arcadium Lithium is. Would you say that there's potential now that you've had two months to see more revenue synergy or more cost synergy? I think in the short term, it's cost synergy, in the longer term, it's revenue synergy. The cost synergy is really straightforward. We all know how cost synergies work, right? It's headcount reduction, it's overlapping offices, it's more efficient procurement, and making sure that we're getting the best deal everywhere we go, and that's pretty straightforward stuff. I think in the longer term, you know, there's an interesting dynamic where really, because of the processes that we've each chosen to use, in Argentina, Allkem really made technical-grade lithium carbonate, and in most market conditions, including today, that sells at a discount to battery-grade lithium carbonate. Livent, because of its process, always made battery-grade lithium carbonate, but because of our strategy, what we've done is taken most of that, and we put it into the hydroxide network and make lithium hydroxide with it. The longer-term benefit, really, from a revenue perspective, is to take all of that battery-grade legacy Livent material and sell it, and take all of that legacy Allkem technical-grade material and put that into the hydroxide network. And so you're certainly gonna get, you know, $1, $2, maybe more, sometimes, premium for battery grade over technical grade. Won't make a difference to hydroxide at the end of it. Hydroxide's the same when we're done, once we're qualified with customers. It'll take us a little bit of time to do that. We have to get re-qualified through the network. We also have to reach an agreement with Toyota Tsusho, who have some rights over that material coming out of the legacy Olaroz facility. But given they want the same thing that we do, which is to supply the battery-grade market, and in their case, particularly the Toyota Motor Company supply chain broadly, we're pretty confident that they'll be aligned in wanting to do the same. Given that product is transferred to an internal operation rather than being sold, does that affect the tax on that? You know, look, it does. The Livent model has always been that Argentina is a manufacturing site, and so we transfer all that material overseas, and so it is. We recognize revenue, costs, et cetera, in Argentina as a manufacturing site, which is clearly different than if you're selling out of Argentina and recognizing revenue. We wouldn't. Clearly, we don't do this stuff for tax reasons, but it's important that we do get the transfer pricing structures in place and operating correctly to really reflect the way that we're actually doing business and where the value is added through the supply chain. Have you come to any more of an assessment of whether or not you could relatively easily upgrade Olaroz to produce battery grade? Is that not really- Yeah, it's an interes- Part of the objective. It's an interesting question. I mean, what you find always, and if you have any doubts, go look at some of the problems people have with some of the hydroxide plants that are being built. Once a process is designed and built, it's quite difficult to retrofit them. What I would say is, we do think there are. You can clearly purify lithium carbonate. It's easier to do that offsite rather than doing it at elevation, but it's not cheap, and it's not entirely clear that you get the capital back or even the value back from a purification circuit. We also are at very early stages of taking a long, hard look at the Olaroz conventional pond-based systems and see if there's a way that Livent's legacy DLE or even the ILiAD technology that we recently invested in with ESM has a potential application to improve the quality of the brine and therefore ultimately the quality of the carbonate. Very early days, certainly not making any statements that we will be able to do that, but it's certainly something we're looking at. How about the other asset that they have that's close to your facility? That's still something that you'd be working towards some kind of an integration there? Yeah, Sal de Vida in Argentina is interesting. It's about 11 or 10, 11, 12 km away, depending on where you measure from, from Livent's legacy Fenix operations. It's in a different part of the same salar, so it actually draws brine from a different basin. It's reasonably well advanced and designed. It's a more conventional pond-based system. We're definitely looking very carefully and very closely about infrastructure, shared infrastructure there. One advantage of going a little more slowly in Argentina this year, as we think about our capital spending, is it gives us the chance to take a look at Sal de Vida and Fenix and the expansion plans and work out what we can do with things like natural gas access, fresh water, the carbonation facilities, the carbonate facilities, sorry. So, you know, you look at all those, those infrastructure matters. We also look at something as simple as the construction plan. We only need one camp. We can share resources and people, phase the work in that way. So there's definitely opportunities, given that they're so close, to optimize both the construction, but then ultimately future operation and future expansion between those two. Would it make sense to expand the carbonate asset at, you call it Fenix? Fenix, yeah. Is that a new- We're giving new names. Yeah. It's always been called Fenix- A lot easier ... but we never used it externally. I don't know why we never used it, but now we do. I appreciate it. I guess we never needed to because it was just Argentina, but now we have three locations in Argentina. That doesn't work. But that, the conversion of the chloride to carbonate, would does it make any sense to do all of that at Fenix? It does. It could. Again, it's just a cost trade-off, right? If we're moving concentrated chloride brine from Sal de Vida, it's not far, like I said, and so, either trucking it or maybe a pipeline could absolutely make sense because that way we already have, as you know, all of the energy infrastructure necessary to run that, and frankly, all the people and all the expertise in that one location. We have a runway there. It's easier to get people in and out, so it's absolutely possible that we do that. So let's talk through the 15 million tonne, kt expansion this year. What, what's the pace of that? Yep. Is any of that, you know, potentially gonna get slowed or what, what's the outlook for that? Yeah, so the construction needed to bring on that capacity is complete. So it's two, it comes from two areas, two different locations. Let me start with Olaroz. Olaroz is a 25,000 tonne expansion that was completed in Q4 by Allkem. It is a conventional pond-based system. It is designed, as we mentioned earlier, to make just technical grade carbonate. Being a pond-based system, it takes a lot longer to ramp that up. So we're expecting about 40% or so of that 25,000 tonne to be saleable, to be produced and sold this calendar year, 2024. So that's 10,000 tonnes. As I said, it's in the process of ramp-up. It's a you can always have some ramp-up issues, you can have weather issues, but reasonably high probability and certainty around that one. And then at Fenix, in the Hombre Muerto resource, we've completed a 10,000 tonne expansion. This is a DLE-based process, just as our legacy is. Advantage with DLE is it starts up much quicker. We don't, you don't have that same slow ramp-up. You're still gonna have a few, you know, leaky pipes and the like that need to get fixed, but once you're through that phase, it'll be up and running and at full capacity pretty quickly. So we're expecting about 7,500 of those 10,000 tonnes to be available into the network this year. Those new tons, how long does it take before you would get that volume contracted where you could have- Right You know, price floors and so forth? So, you know, it's interesting. Let's do the Fenix expansion, the volume from the legacy Livent. This is carbonate that largely is already spoken for into our hydroxide network. And you saw on our earnings slides, Slide 10, for anyone who's looking, we disclosed what our contracted volume in hydroxide was, what our uncontracted volume in hydroxide was, and it's about 16,000-18,000 tons of contracted volume and 10,000-12,000 of uncontracted. But almost all of that uncontracted volume in 2024 is already spoken for in 2025 into contracts that expand. So somebody maybe had 5,000 tons in 2024 and wants 8 in 2025, is just gonna move in there. That's all fed by that Fenix expansion, and so that's sort of all already contracted in the form of hydroxide. The stuff coming out of Olaroz, the technical-grade carbonate, I'm not convinced that there's a similar contracting opportunity for a product like technical-grade carbonate. It's not a specialty. It's easier to switch and to substitute. It's a market that's more comfortable with sort of unbound, unranged, variable price structures. So I think that is likely to remain not contracted, at least not in the same way with contracted floors and ceilings. If you get that qualified to be converted, the technical-grade carbonate to be converted into your hydroxide, how long does that take? Well, it often depends on the customer, but generally, depending on who it is, somewhere between three-six months for a requalification. Probably six- months for if it's a new customer and a new qualification. Okay, so you might go down that path, but it- Yeah, look, I think we'd like to. Again, as I said, we'd like to start substituting technical grade for the battery grade that we have. We also have... Don't forget, we have about 15,000 tons of hydroxide capacity in North America today. We have 30,000 tons in China. We just brought on another 15,000-ton line in China, taking it to 30,000 tons. That is not fully utilized today, and so as we add more lithium carbonate to feed it, the expectation is that will also look to contract. So we'll have in the region, we would expect, of 40,000 tons or so of contracted hydroxide, you know, in the coming year or two. Do you get a return on that conversion? We do. Even though, like, some spot prices for hydroxide are lower than carbonate? Yeah, and, look, I'm not sure I- Just not relevant. I'm not sure I believe that. I don't, we don't see that. It's an interesting one. We always see these spot prices, but the problem with spot hydroxide is it cannot be the same product that we're making 'cause it's not sold spot, right? It's qualified material. There is no spot market for it. It's only sold under long-term supplier agreements. So that hydroxide is really lower quality, lower grade hydroxide, sold in competition to lithium carbonate in various applications. You know, LFP can switch between the two. It has slightly lower lithium content. It's slightly harder to handle. It's not a big surprise no one's paying a premium for that hydroxide. We certainly get a premium for lithium hydroxide over that spot price, so it's a little difficult for me to, without disclosing stuff I can't disclose, to sort of rebut the argument that hydroxide sells at a discount, 'cause it really doesn't t o us anyway. Okay. Are you looking at increased demand to fill that 15 kt of hydroxide capacity in the U.S.? You know, the U.S. facility is full and sold, the 15,000 tons that we have, so that's fully contracted and committed already to customers. You know, I think it's probably fair to say that if we could add another 15,000 tons of hydroxide capacity in the U.S., that would be sold, too. I think if we could add 30,000 tons of hydroxide capacity in the U.S., that would be sold, too. The push, the demand, the drive for more IRA-qualified material is very much hydroxide-focused. It's not really carbonate-focused today. You know, the high-value supply chains and the high- the most difficult material for people to source is IRA-qualified hydroxide. There just isn't enough capacity out there because most hydroxide today is made in China, which is never gonna be IRA-qualified. Whereas there's a huge pool of carbonate coming out of Chile that is IRA-qualified. So the focus is very much on getting more IRA-qualified lithium hydroxide. It's why the Nemaska facility is a really hot topic with most of our customers in terms of what- where that volume will go in the future. What led you to the 15 kt expansion in China and not in the U.S.? Okay, so a couple of reasons. One is, despite Western OEMs' desire to move their supply chains outside China, they're not yet. So t here's a lot of demand there from our customers for more material in China. At a more financially driven level, that facility took us about eight months to build. The one we built in the US took about two years to build, a little bit less. It's 15,000 tons. The one we built in the US is 5,000. The one in the US cost us $105 million. This one cost $21 million. If we were to build a 15,000-ton line in the US today, it's probably a $200 million investment, compared to $21 million in China. Those are hard economics to argue with. Incredible. Okay, maybe tapping into your view on the overall market. Yep, yep. So, okay- What do you see, any signs of bottoming? Anything that you would be looking for? I don't really look for bottoming or peaking, if I'm completely honest. Now, what I'm trying to figure out is, you know, what is the state of the market in terms of supply and demand balance? Because, you know, if you've got a balanced market, you know that at some point, prices will stabilize and maybe climb a little. With demand growth the way it is, which is still incredibly strong, you know, we still feel very confident that, that whatever the supply-demand balance looks like today, it's gonna look better tomorrow. How much better depends on what happens on the supply side, and so there's a big focus, clearly, on trying to understand what is going on the supply side. I think, you know, this is. I've been doing this way too many years, so I've been through too many lithium cycles, but every one's a different flavor, and this one's definitely a different flavor. What's interesting about this cycle on the way down is it isn't obviously driven by an excess supply situation or a pullback in demand, and so it's also characterized by somewhat what looks like quite unusual economic behavior, particularly in China. What do I mean by that? There's a pretty significant expansion happened in China of either African-sourced spodumene or Chinese-based lepidolite conversion capacity. This is really high cost. There's no debate, $20-$25 per kilo of conversion cost. With the market prices where it is, that should be coming out of the market today. It's so far out of the money that it's not like we survive a week, few weeks while we wait for the market to recover. So what the challenge is understanding why it's not coming out of the market. And I think the best conclusion I can come to is that a lot of that material is actually not, and this may sound counterintuitive, is not new supply into the market. What do I mean? It's largely controlled by supply chains that are themselves controlled by the large Chinese battery makers, and so it's captive production of lithium. But what it's really doing is taking demand out of the market. So if CATL was buying 100,000 tons of carbonate and it's now making it in-house, what it's actually done is taken 100,000 tons of demand out of the market. And when you look at it that way around, it makes a bit more sense. They're just gonna run these plants always as a base load, right? Why? This is all geopolitical reasons. You know, if you're gonna make a lot of statements around the world about circumventing China, you know, making it a foreign entity of concern, you know, not allowing people to get subsidies if you source from there, talking about building a competitive position against China in battery technology and in EVs, shouldn't be surprised if China reacts. And the biggest way, the easiest way to choke off the Chinese EV industry would be to choke off their access to raw materials. There isn't a huge amount of cost-competitive raw material in China, and so the fact that they, you know, they struggle with Australian supply, with the geopolitics, struggle with Canada, with geopolitics, it's not a huge surprise that even if it's expensive, they're securing supply through non-conventional means. I think that's what we're working through right now, and I think the demand growth is still huge, 200,000-250,000 tons of year-over-year growth. We'll work through it. It, it, it just means that maybe the net demand pattern for an independent supplier of material is probably a little lower this year than we thought it was, not because of EV demand, but because of this additional capacity that's gone online. A long answer to a short question, I'm sorry. No, but it's interesting. I hadn't thought about that. That could take more time. It could. Really, it's the growth in the market is just gonna have to absorb that, rather than pricing forcing it to shutter. I think it also pushes this regionalization of supply chains to happen a little more quickly as well. I think it... You've, you know, you've got an incentive, in my view anyway, from my conversations with OEMs. They understand, regardless of government subsidies, the importance of not being entirely dependent on a single country. You know, 90% of all the pre-chem chemicals are in China. 80% of the cathode materials are in China. That's a pretty risky concentration, whichever way you look at it. It could be any country. That's a pretty risky concentration. So I think it will accelerate that desire to diversify supply chains. And it's an interesting challenge, right? Because if you look at where lithium today is produced and you take a broad view of lithium, so a lot of it's produced in Australia. That's not lithium any more than iron ore is steel. It's got to be processed somewhere, and the only market for that today to be processed on a merchant basis is China, and so it's hard to separate that quickly. And what it pushes you to, particularly in hydroxide, is the very small number of us that have already built and are continuing to invest outside China for hydroxide capacity. But it's not enough, it's nowhere near enough for the industry as a whole. So it's an interesting challenge for the consumer of lithium that's not a Chinese battery guy, too. How long is that gonna take? I think it'll be a constantly evolving process. I think it'll be—it'll improve as we go through 2024. I don't see any evidence that this lepidolite and African source material can grow at the same rate as the market. I think it will require a little bit of discipline and capacity additions, particularly in Australia, the spodumene feeding those Chinese converters. There needs to be a little bit of discipline. But even with what we see today, it's probably a 9-12, maybe 15-month process based on the demand and what we see on supply. But the really, again, the challenge is not so much the supply of product, it's can we build conversion capacity quickly enough outside China to support that regionalization of supply chains, and that's harder to do. Have others slowed capacity expansion in as, as you have, Albemarle has, consistent with what you might have been expecting? Yeah, pretty much. Look, I think what we've seen is in Australia, Greenbushes clearly is not expanding as quickly as it said it would. MinRes is also not doing the same. I think Pilbara maybe takes a slightly different approach, but that's just the one. We've seen Core Lithium shut down. From our perspective, we've cut down the spodumene that we'll produce at Mt Cattlin, and frankly, by the end of this year, early next year, Mt Cattlin will likely be closed, unless we have a real surprising increase in spodumene prices. That's a mine that's almost at the end of its life anyway. So capacity is coming out of the market for sure. Is it more than I expected, what I expected? You know, I've been in the lithium industry. I try not to have expectations. Are you seeing any... You made a comment about the lepidolite not slowing. Are you seeing any operating rates slowing? It's not a particularly visible market to us because of the nature of it. So it's hard, that's a hard one to answer. I don't see it slowing, but I don't see it not slowing. It's, you know what you see? You see a lot of noise around environmental inspection, environmental permits. They are generally around lepidolite because it is quite a messy process to run. I think there's also been quite a strong push to get the message out there that there is no slowing of production rates, but I can't verify that. Anybody wanna jump in here with a question? One at the front. Thank you. Your two scenario price guide or EBITDA guidance for 2024 suggests an average increase of about $60 million in EBITDA per $1 per kilogram increase in LCE. Just wondering how we should interpret this when considering market prices within or outside of the lower to higher end price range, and if you could provide any color to what the realized LCE price was in the second half of 2023, as well as exiting 2023. Okay, yeah, the, your math is right, which you would expect. We have about 58,000, 55,000 LCEs in that chart, plus some spot concentrate. So clearly, a 55, 60 times a dollar, would be 50-60 of straight to the bottom line. You know, just to be clear, I wanna make sure that you understand exactly what is happening in that chart and what we're trying to do. We're not saying all of our LCEs are sold at $15 in there, right? Because you'll see that we sell about 3,500 LCEs in butyllithium, but we generate, yeah, $150-$200 million of revenue there. You also know that we have contracted volumes with floors. And so some of those are already above that fif... Well, all of those are already above that $15 price. We're also not saying that everything gets sold at $15. Technical grade carbonate, we apply a discount to it, right? Because we know it sells at a discount in today's market. The hydroxide that we're selling outside contracts is probably at more of a premium than you might think. So that's what we're trying to do with it, with the, you know, and I will call them outlook scenarios, not guidance, 'cause I, I don't know what the price will be. I mean, I genuinely don't know what the price will be. You know, the market today could... I mean, you've seen what's happening with the share price today, and, and you've seen how people are looking for guidance. One thing we know in this market, pricing moves quick when it moves in both directions. It just does. And so I think there's a very real risk to me today is asymmetric. It's not gonna drop $10 more. It could certainly jump $10 more in the next year. But there's also a pretty reasonable and maybe a high-ish probability outcome that it stays reasonably stable for a couple of quarters as well. I'm making no predictions around that. I think what we're trying to say is, you can see, even in today's price environment, we'll generate over $400 million of EBITDA, but we have a lot of upside if the price does in fact go up. We've sized our spending on capital to essentially say that over the next two years, we will generate enough cash, plus cash on the balance sheet, to essentially complete the projects that we have out there, which will lead to another 25,000 tons of product coming out of Argentina and another 32,000 tons coming out of Nemaska in 2026, and then potentially even another 50,000 LCEs in spot concentrate form coming out of James Bay. It's all financeable at today's market prices. If today's market prices go down, that's not all financeable, so we'll take a look at it. Thank you. Quick question on the midstream inventories. I think for the last two years inventories have been coming down, but can you perhaps share a little bit of what you're seeing in that market? Yeah, you know what? If you think where inventory can be held, we have varying degrees of visibility to it. At competitors, lithium held at competitors, I don't have a lot of visibility, but I don't get a sense that a lot is being held. You got to be careful, when I say a lot, it's got to be relative to demand. You know, if we have 50% more inventory out there, but demand's 50% higher, it's kind of roughly the same ratio in terms of impact on, on supply chains. We definitely don't see any at the cathode producers, and I think that really, there's a lot less held at cathode producers today, which really reflects how the supply chain has changed. It, it used to be the cathode producer bought the lithium. Today, they don't. It's just sent to them as they need it by either a battery producer or an OEM. I think if there is any excess inventory, it's not in lithium form straight up. It's either in battery cells or in vehicles, sat around waiting to be moved. Again, it's hard to count that. It's hard to measure that. I don't see anything that's been going on this year as being inventory driven. I don't see a lot of evidence that this is a stocking or destocking issue. I don't think the price spike was excessive stocking by customers that then needed to be destocked. I think it was excessive production of battery cells that haven't been sold, but I don't think there was a stocking phenomenon, if that makes sense. Maybe one more for you, Paul, and it's: do you have a view on when the market might really be short capacity expansions, as you and others are throttling back on investments in longer-dated expansions? Yeah, I think a lot of the expansions that you'll see that are maybe not, you should take out of your forecast, are probably 27, 28. Volume is when it would be expected, and some of them are pretty large, right? You mean... And maybe that's just the nature of our industry. Anything that's a long way away, we, we inflate and say it's gonna be really big, even though there's no history it ever is. But I do think that if there's gonna be supply shortages... Again, if you go through the last few cycles, there's something comes along and surprises every single time. So assuming there is none in the next cycle, then I think we're probably two or three years away from a meaningful shortage. I don't think we're oversupplied at any point in, from later this year onwards. I think we're a little oversupplied today, but not massively oversupplied today. Very helpful. Please join me in thanking Paul for the presentation.