David Deckelbaum: Thanks for the color, Paul. Good luck with everything.
Paul Graves: Thanks.
Operator: Your next question comes from the line of Matthew DeYoe with Bank of America. Your line is open.
Matthew DeYoe: Good afternoon, everyone. If I look at, well, I don’t know, I hate to kind of ask this. But if I look at the S-4 and some of the disclosures around the agreement with Allkem and the path laid out, we get a lot of questions around some of the projections that were put out there. And there was a forecast for $1 billion of EBITDA on 2024 based on $25,000 or $20,000 $35,000 of ton lithium hydroxide, etcetera. I mean, it’s well ahead of the consensus and perhaps some of the numbers that people were playing around with. So as it looks like from an OpEx perspective or from a contracting adjustment perspective, is there anything there? Is that just a difference assumption?
Paul Graves: Yes, look. It’s important to understand exactly what that is, right? When we’re looking at measures of equals, one of the first conversations we have to have is putting a sense in both our business and Allkem’s business on to a similar thought into a comparable analysis. And so the starting point was to agree a price date. And that price date doesn’t necessarily have to be the prediction of Livent all the prediction of Allkem. Sure, you can imagine we have published different views in slightly different areas. It just needs to be a reasonable one, that is based on market conditions at the time, based upon a range of forecasts by independent forecasters, doesn’t look completely crazy. I think 35,000 tonnes today certainly doesn’t look completely crazy at the average price.
And by the way, that price is called third party, uncontracted volumes, right? It doesn’t include anything that we already have contracted or committed. So, yes, it maybe a little bit ahead of where consensus is, but I think it was designed to be a reasonable approximation of where we thought the market would likely be in 2024 and doesn’t seem a long way off. If mathematically to get live upto $1 billion of EBITDA is not that complicated when you do the volume increase that we just talked about. You see a step-up in our average realized price is which by the way in 2020 we will not reach $35,000 per ton of hydroxide. And so it’s not. It is a particularly heroic stretch to see $1 billion of EBITDA next year. That’s not our forecast. So yes, our document doesn’t represent Livent forecasts or an Allkem forecasts.
But certainly I think those assumptions in there today, at least, still a pretty reasonable to me.
Matthew DeYoe: Understood. And I was a little late during the call, so maybe I missed a little bit. But the conversion facility, obviously these numbers are perhaps a bit more normal these days as it relates to CapEx intensity and what we’re looking at dealing with the West, but if you were to kind of highlight some of the big buckets for inflation between I think what was originally maybe 700 million for the downstream and now it’s 1.2 where you kind of ran into pockets of higher spending.
Paul Graves: Yes, where do I go?
Matthew DeYoe: Yes, I have too much long.
Paul Graves: I think the stuff I’m frankly is. I make this comment as a broad one, but it certainly applies to a degree to Nemaska as well, which is, I think there’s a lot of learning and engineering for these projects. I think a lot of people are overly simplifying the engineering and coming out with forecasts before that engineering has been really fully battered and tested. And we’ve seen some of the challenges of not fully engineering these projects rushing to get them built more quickly. Well, there’s a couple out there that just don’t work because they were not engineered and you can’t retrofit them, so you have to get it right. I think some of the forecasts that were out there and I would sort of a Nemaska forecast into this bucket would probably premature.
