Electra Battery Materials Corporation (ELBM) 2022 Q2 法說會逐字稿

Thank you for standing by. This is the conference operator. Welcome to the Electra Battery Materials Corporation Q2 results conference call. (Operator Instructions)

I would now like to hand the conference over to Joe Racanelli, Vice President, Investor Relations with Electra Battery Materials Corporation. Please go ahead.

Thank you, operator. And good morning, everyone. This is Electra's first conference call and we'll be making this a regular occurrence, and it's a reflection of how we continue on growing as a company.

Before we begin and turn the call over to Trent Mell, Electra's CEO, I want to point out that we filed our materials. And they're available both on SEDAR and EDGAR, as well as on our website. Today, we will be using a presentation. That presentation is also available on our website for those who called -- who dialed in on under the events section of our website at electrabmc.com.

We will be making forward-looking statements. And the Safe Harbor provisions of those are outlined in our presentation on page 2. At the end of today's call, we will have a Q&A session for analysts with accredited firms. And for investors who do want to have follow-up questions for Trent or myself, please let us know. We'll be happy to reply afterwards.

So with me today are Trent. As you can see on slide 3 is Trent Mell, the company's CEO. We have Mark Trevisiol, who's VP of Project Development; Craig Cunningham, who recently joined us as Chief Financial Officer. And in Idaho today is Dan Pace, our Principal Geologist. Mark is at the refinery. And Trent, Craig, and I are here in Toronto. So we've got an indication of how we are growing and how we are spread out as a company.

So with that, Trent, take over, please.

Thank you, Joe. And good morning, everybody. Thanks for joining our call today. And before we open the call up to questions from the analyst community, I do want to highlight here on page 4 some of our highlights. And then we'll do a round-robin with the people that Joe has introduced.

So some key developments for us listed here. It's been a busy one. We've hired four new executives to the senior leadership team. Many, many more through the ranks, particularly under Mark's watch, building out the refinery. And obviously, commissioning of the refinery project has remained the big focus and the primary focus of our cash resources as well.

In tandem with that, though, we've got other developments that are outlined on the next slide, in slide 5. I'll cover in a moment our ESG strategy that's come to the floor for us. And it's also worth noting the exploration work that we've been doing at Idaho, which is finally getting the attention it deserves. In addition to that, we've got development on recycling at the net site as the cobalt plant.

We've got news on our nickel study. And of course, potential expansions, expected expansion to my opinion, in Bécancour, Quebec. So I think this progress you can see here in the summary makes it pretty clear we're executing against the strategy as laid out. And let's get into it a little bit further. So slide 5, if we may.

ESG, it's got to be part of our DNA, right? We're making zero emission vehicles and it's our duty, it's our imperative to make the production process as low carbon as possible. And so, we've hired Renata Cardoso. She was a sustainability leader at Vale, known around the world. She joined as a VP of Sustainability Low Carbon in Q2. And she's already implemented quite a few initiatives for us.

Working currently on a sustainability report, it will be report first, and we'll have that towards the end of the year. And I think towards the end of the year, you'd also see a little bit of a roadmap for us on how we expect to attain net-zero ourselves.

Other achievements. The signing of the benefits agreement with the Métis Nation of Ontario, one of our neighbors up near the refinery. I hope and expect that's the first of many. And then the point of these benefit agreements is to ensure mutually beneficial opportunities. There's development jobs contracting and the like. And we've also got a new suite of ESG policies that can be found on our website.

So if we turn from there over to slide 6, I'm going to -- there's the picture of the refinery. Mark Trevisiol, VP, Project Development is now going to take the call and lead you through the status of that project.

Very good. Thanks, Trent. At slide 7, I'll just highlight some points and our progress at the refinery. For those of you who have been up there, there's an existing footprint there that has over 64 vessels. So this refinery operated in its past history. And we're utilizing a lot of those vessels in our new process. And about 80% of that brownfield equipment has now been recommissioned and it's been a pleasant story commissioning the vessels and the pumps that are there.

We've had very few surprises. And so, that brought a lot of smiles to us. And with that, there's also about 80% of our procurement that has been completed. And about 80%, 85% of our detailed engineering. The main activities at site, and we're not only commissioning the brownfield equipment for the solvent extraction plant.

Construction continues. We have a picture of that in the next couple of slides. And we've had zero lost time incidents. And that's not only in 2022. That's going back to when we started construction and started building our team back in April of 2021. So, well over 12 months without a lost time incident, which is, again, part of something that is a culture that we're trying to cultivate and work with every employee who gets hired and every contractor who comes on-site.

And most recently, we've launched our operational and commercial readiness, which focuses on how we're going to start to operate this plant. It's going to be a different mode than construction. The key performance indicators that you're measuring during construction are not the same ones for the most part that you're running when you're on operating plant. You're looking at uptime when you're operating. You're looking at the recoveries. Certainly, health, safety, and environment follow suit.

But there's a number of other key metrics that we have to develop. And for that matter, a little bit different roles on the senior executive team. When you have an operational facility versus one that you're in a building [op]. And the operational readiness plan, it captures all of these tasks that have to be done and what's the schedule to completing them.

And this is a picture of our existing refinery footprint. You can see a number of filter presses and tanks there, as I alluded to. And generally, what you're seeing there is in fairly good condition. There was and is some refinements that we're making to some of these vessels. But having a footprint that we have here not only saves us on capital, but it was an operating facility at one point. And that in itself means something in terms of being able to move fluids around, and the vessels operating, and performing leaching functions like what we're going to do in the future.

And this is a picture of the construction of the steelworks for our solvent extraction facility. You've got two base being constructed here. If you would visit the site today, all 10 base have been constructed. And they're actually starting to put on the outside sheeting of the shell of the plant. So a lot of work has been done over the last few months.

With that, some of the challenges that we've had to navigate, we're not in any way immune to what's been going on in the world. The issues, the geopolitical issues in Europe, the supply chain issues out of Asia, direct result of having a domino effect on prices and pricing pressures for us. And we've seen a number of items that -- last year, when we did the final budget for this project, nobody saw a $100 oil price. And the effect of that we have throughout the world and throughout transportation and materials acquisitions.

So those things, coupled with some supply chain issues that we're seeing out of Asia have certainly been a challenge to work and manage. But our team has reacted fairly quickly to these. And we've been able to work with our suppliers to try to reroute things where we can and sort of getting them made in a certain country [can we] make them somewhere else, can we make components, source components from somewhere else. So our people have been on top of it.

Most recently, we've seen a delivery delay from some of our tanks that were being manufactured. Something that -- it was a quality inspection by the manufacturer that caught a problem with the tank, the tanks being manufactured. And the number of these tanks had to be scrapped, unfortunately. It's a good thing that we caught it, but the downside is that it has resulted in a delay. And these tanks were on our critical path.

So we're now expecting a project completion in the spring of 2023 and have probably some announcements that we last discussed in down and talk to investors on -- we were looking at starting commissioning in December of this year. That isn't impossible given the delay with some of these OEM components.

And our project costs, again, we talked about the inflationary pressures. Something that certainly wasn't --were seen in our Canadian inflation rate of over 7%. Announcements in the US, [several] were 8% and 9%. So these costs were not in our original budget and at $67 million, which was our original budget. We are now seeing a final completion cost in the range of $76 million to $80 million.

Some other initiatives that we are working on, as I mentioned, we're continuing to work on the commercial and operational readiness. We've also are working on a nickel study with our partners Talon Metals and Glencore. That study is looking at producing a nickel sulfate product. Again, another key component in the battery supply chain and producing that here in Ontario at our sites up North.

And as well, in parallel, we're doing a pre-feasibility study on a potential plant in Bécancour, Quebec. And that plant would be similar to the one that we're currently building. So maybe a lot of the heavy lifting. So to speak, we've done by that time on our current process and cobalt sulfate facility. And hopefully, it's more of a twin to what we currently have. So there's some synergies there with going into Quebec and building something similar.

And this is getting a lot of attention recently. Our black mass recycling demonstration is also planned the next few months. We are looking to --

And that's on slide 12.

Okay. We're looking to make several products from black mass, including nickel, cobalt, and lithium. This is a high-level process flow sheet on slide 12. So this is -- black mass is a recycled material taken from electric vehicle batteries and other electric batteries. And we plan to put them through a leaching process, similar to what we're doing with the cobalt sulfate plant. But instead of just having the one product out of the cobalt sulfate plant, we would have several in terms of nickel, cobalt, lithium, and potentially copper.

And with that, I'm going to turn it over to Craig Cunningham, our CFO who'll go through the Q2 financials.

Thanks, Mark. Good morning, everyone. As many of you will have or will know, I joined Electra in Q2 after spending more than 10 years in the gold industry with Kinross Gold in various roles and various locations around the world. And I look forward to meeting our stake -- our shareholders and the various members of the investment community.

As a pre-production company, we don't yet have revenue. And we aren't yet in operations. We did, however, generate a net income of $7.5 million, or approximately $0.23 per share in Q2. As you'll note in slide 14, that is primarily driven from the $12.7 million fair value adjustment on the embedded derivative liability that exists on our convertible debt.

We closed Q1 at $5.47, which was -- and we closed Q2 at [$3.60], which has caused the valuation of the derivative liability to go down with the resulting adjustment running through income. This was a non-cash adjustment, which means you don't see any change in our actual cash position related from this. However, as you look at our current share price, we may see a reversal of this in the future as that liability is sensitive to the share price.

At June 30, our cash and marketable securities position combined was $41.8 million, which was down from $51.9 million at the end of Q1. This is primarily from the drawn funds as we continue to advance construction and exploration, as well as G&A throughout the company.

As Mark noted, we are in a inflationary price period with a number of pressures on the cost of our capital projects for the refinery. We have revised our previous estimates for approximately USD67 million to between USD67 million and USD80 million for the refinery. We see that as CAD100 million to CAD105 million. As a result of that development, we're going to be continuing to explore ways of strengthening our balance sheet and meeting the funding needs for that project as we go forward.

Given our extended timeline, you can see on page 15 for the completion of the refinery project, as well as the volatility of the cost inputs and uncertainty around inputs into refineries related to the global supply chain difficulties that we see. We've updated our guidance. We now believe -- so we're providing guidance for 2023. We have, however, removed guidance for EBITDA from 2024 and 2025. And our range for EBITDA for 2023 is expected to be $9.5 million to $10.5 million, with a production range of 1,800 to 2,100 hundred tonnes.

Our production ramp-up will continue through 2023. And we anticipate steady-state production of 5,000 tonnes to be achieved in 2024. The retraction of our EBITDA guidance for years beyond 2023 reflects the volatility that we are seeing, as Mark mentioned earlier. Additionally, we're focused on the construction and completion of the refinery, and the near-term ramp-up of the operations, which we have adjusted our guidance to match that focus. We do anticipate providing updated guidance when that's appropriate.

I'd also like to point out that our EBITDA forecast on page 15 is based solely on the sale of cobalt sulfate and does not consider any potential income from our black mass recycling projects.

That concludes my remark or my comments, and I will turn it back over to Trent.

Thanks for that, Craig. And yes, just on the guidance, those of you who follow the commodity will know that currently, cobalt price is lower than in our forecast. But important to point out that the cobalt product that we sell, the sulfate and the cobalt hydroxide that we buy, they do tend to move in tandem. And so, our guidance is reflected at a view of a prevailing price. But that margin is fairly -- somewhat fairly insulated over time by virtue of this -- the other correlation between the two prices.

All right. Let's turn to slide 16. Just the Bécancour expansion in my home province of Québec. And the exciting development early days, but very exciting development for us, frankly, to be approached given our expertise. We're building, I believe what is the very first cobalt -- battery-grade cobalt refinery outside of China in some 30 years.

And so, Mark and his team having gone down this path now for the last couple of years, we put together a collection of people and a knowledge base and a flow sheet that puts us in a really good position to be replicated. This is the first and maybe not the last instance of being able to try to leverage that.

So page 17, you can see a picture of the brownfield site, the deep-water port. A lot of industry there, just a light rail, hydroelectricity, gas lines, and you're about an hour and a half from Montreal and or Québec City on the St. Lawrence River. So a really, really good location for us and for the battery supply chain. And it is developing very quickly as an important hub for the North American onshore. And that's a theme that we are seeing the chemical process.

So that midstream between mining and cell production is drawing a lot of attention in Canada as a location for these facilities, including refining -- refiners such as us. And the reason for that is just our permitting regime and our mining know-how were one step removed in a lot of the permitting and technical know-how that comes with refining is really amenable to the Canadian regulatory regime.

So if you look at Bécancour proper, it's attracted thus far more than USD400 million of announced investments from a number of companies that you would know, BASF for the cathode plant, GM and Posco with another cathode plant, Vale pursuing nickel. Wouldn't be surprised to see another chemical company coming into play there. And eventually, probably, some precursor production as well.

So the co-location for us makes a lot of sense, as Mark indicated. And by starting a new, it might give us some flexibility as well. Not just to leverage what we have, but to bring in some flexibility in how we design it and the type of fees we may want to bring in. And its location in Montreal that is great for workforce, logistics, shipping, and whatnot.

Part of the success here, frankly, has been some really strong investment support both by the government of Canada and the government of Québec. And I would say the tenor of these investments across the country has picked up over the last 24 months since we started down our endeavor. And it's something we're actively looking at ourselves for own expansion plans. So, very excited.

Next steps for us are going to be led by Dave Marshall. Dave joined us as VP of Engineering about a month ago. He spent 29 years at Vale project. And I guess project execution, project lead kind of being his expertise. Strong base and nickel as well. He'll be leading this pre-feasibility for us. And we'll anticipate to give you an update by the end of the year about the final study. We'll let you know where we're at -- about where we're at on that.

So next slide, over exploration update. I'm going to turn the floor over to our Principal Geologist, Dan Pace. As I said earlier, we've had a lot of attention on the refinery. At Idaho, the things are looking exciting for me, at least, at Idaho with what we're seeing not just at Iron Creek, but at Ruby. And sometimes I think in the last couple of years, this asset's been a little bit overlooked. But I would put forward that there is a strong renewed interest in what we're doing there as the onshoring movement picks up steam.

There is a growing interest and grow in the domestic supply of minerals. And there are a few places in the world you can find cobalt. Idaho, I think, holds a special place for the North American strategy.

So with that, I'll hand it over to you, Dan.

Thanks, Trent. Yes, so we recently provided an update on our exploration program that's summarized there on slide 19. Highlights to that program included a really strong open-ended chargeability anomaly that was defined by an IP survey we ran late in the spring. That geophysical technique is really effective at identifying sulfide minerals in the subsurface. And the anomaly you see here is similar in size and strength to the Iron Creek deposit, which is located about 1.5 kilometers to the Northwest of Ruby.

Drilling on the eastern margin of the Ruby target intercepted pyrite mineralization. And that pyrite mineralization is textually similar to the cobalt mineralization that we see in the resource at Iron Creek. Additional drilling is ongoing on the project, testing the Western and strongest portion of that geophysical anomaly. And we're looking forward to the results of those next hole.

We have set drill samples from the first two holes to a third-party lab and expect those results before the end of Q3 2022. Although as Trevor said, this is still the early days for Ruby, the first drill holes that we've put into it and the first drill holes at quite a long time. The similarities to Iron Creek copper and cobalt deposit validates our view that Electra's large land package and the Idaho cobalt belt overall remain really underexplored. And there's a lot of prospective opportunities for new discoveries within this belt.

As we continue to work through those projects and those targets, we believe that Idaho could play an important role in the onshoring of the EV battery supply chain by providing a domestic supply of cobalt in America.

With that, I'll turn it back over to Trent to discuss the outlook and near-term milestones.

Trent, you may be on mute.

Indeed, I was. Thanks for pointing that out, Joe. Yes, thanks, Dan. Before I move on, I do want to congratulate the entire Idaho team. The very first hole they put into that Ruby target hit mineralization exactly where they predicted it would be. That's not an easy feat in Greenfields. Second hole the same. So this will be an evolving story. We don't have assays yet. So we can't say more. But let's stay tuned, it's a -- it's an encouraging development in the belt that I think remains very prospective.

So if we go to page 21, let's talk a little bit about the market outlook. Kind of [writ] large, lots going on. I think the exciting one in the news today exciting for us and for any of our shareholders would be the Inflation Reduction Act, which is expected to pass through the House tomorrow. $400 million -- $400 billion going towards climate and energy programs, including the $7,500 tax credit. And it includes vehicles that are manufactured, or components manufactured here in Canada as well. So our cross-border North American strategy plays perfectly into this.

And clearly, this bill is only going to ignite a further interest in the onshoring strategy. And our recent travels to potential downstream clients across North America told us that the onshoring strategy is on. It doesn't stop itself. It doesn't stop at CAM. They want to go all the way up the supply chain. And it's a marked change in tone from two years ago where it was a step approach. It's all hands-on deck. And this bill is only going to help further that, amongst other regulatory changes that we've seen out there.

So the commodity prices nickel, cobalt, there has been some softness in Q2. The entire Nasdaq was down in Q2. We don't worry too much. It's a transitory issue. It is commodities. There will be some volatility. The COVID lockdown in China was just one of many factors. Outlook, supply, demand, particularly in our industry, the EV industry remains strong. And we think that's going to buttress some strong prospects in our part of the market.

And then equally encouraging, of course, is the EV sales. In addition to that, credit projections are [for a] 27% growth per year through to 2026. And if you translate that by -- and if you look at Bernstein and other analysts, we've got projections of 27 million cars -- electric cars being sold by 2030. And that's up from 6.8 million in 2021.

So going to ForEx, again, there's a lot to be done. The supply chains got to keep up. We heard the CEO of Ford talk about his expectations that commodity prices are not going to drop in the near term given that bullish backdrop.

And then to tie it all up, how -- what it all means to us is where are we on the commercial side. We're getting close to production. And we're starting to -- start with working at this for a while. But the efforts of our commercial endeavors led by Michael Insulan, our VP, Commercial are starting to bear fruit. We did sign two commercial MOUs. They are non-binding, so we're not going to say more about it today. But I would say we've got others in queue and certainly selling our products both to Ontario and future projections of Bécancour production is not going to be difficult.

For me, as CEO, though there's a strategic advantage to looking at what a bigger relationship might look like beyond cobalt to include recycling and nickel as part of a North American strategy. So stay tuned. We'll provide more details as the negotiation's events.

And then last, I think this is our last slide here, upcoming milestones on page 22. So starting with -- I mentioned our DNA has to be ESG. So we already know, believe that we're going to have the lowest carbon footprint of all the cobalt sulfate producers in the world. And that's got to be backed by sustainable initiatives across social, health, safety, and an ongoing journey to always work at lowering that carbon evermore. And I think that's something we could replicate across our battery materials plant, not just the cobalt.

So we're still commissioning the brownfield's plant and we've got recycling that's coming. And an important note, even with the delay into spring, Mark and his team are going to be running that recycling facility in the fall. And that's going to entail commissioning a number of circuits that are going to comprise the cobalt facility, [feed] handling leach neutralization. And so, you'll see more of that as the year progresses, that there's going to be construction and yet commissioning as is just the nature of brownfield operation.

A lot of milestones coming up. As you can see here in this list, I won't go through them because we already have. And with our new NASDAQ listing, I think we can leverage that to bring our story to a larger shareholder base. We are a North American story after all, and it's bringing more attention to who we are and what it is we're doing. So we look forward to providing more updates through the course of the quarter and again, at the end of Q3. And at that point, I will turn it back to Joe and the operator to see if there are any questions from our analysts.

(Operator Instructions) Matthew O'Keefe, Cantor Fitzgerald.

Thanks, operator. Hi, everyone, welcome. Craig, just -- I guess the big question here would be focused on your CapEx increase for the refinery. Can you just tell us where you stand with respect to the cost sunk on it already, sort of an outstanding budget over the next, I guess, six or nine months?

Sure. Thanks, Matt. Good to hear your voice. Craig, why don't you take the first stab at that and walk him through the -- where we are in our spend. And then I can just follow up and give you my thoughts.

Okay. So we've spent -- at Q3, we spent about CAD21.3 million out of the revised Canadian range, which is CAD100 million to CAD105 million, which leaves us between CAD79 million and CAD84 million left to spend. On -- at June 30, we had commitments related to the refinery of approximately CAD30 million.

Okay, okay. So -- and you have [$45] million in cash plus additional funds coming. I mean, are you -- how comfortable are you, or how comfortable are you with your balance sheet at this stage?

Yes, I'll [add to that, you're on that]. [So, we absolutely] -- I feel -- look, I feel very comfortable. If you look at the replacement value we're building, we haven't had it officially audited. But it's going to be a $200 million, $250 million facility. And so, we've got funds available to us. The federal governments got another $300,000. The province, I think it's [4.8].

We've got couple of million in HFT refunds. We've got 1$7.5 million available on our ATM. Our convertible debt that we raised last year as kind of the base funding for the project, we've had early conversion. So it went from [USD45] down to [USD36]. And yes, there may be an opportunity to bring that back up.

So when I look at sources of funding available to us, potential strategic investor, can't say too much about that. Potential government support for recycling and some projects, we've got the ATM, we've got the debt, our debt providers, and then we do have a $50 million base shelf prospectus available to us as well.

Okay. Thank you. That's helpful to clarify that. If I could ask another question while I'm on the floor here, that'd be great. Just on the other initiatives. The battery recycling, I might have missed that you might have mentioned on this. But -- so can you just remind us sort of where we are in that process and what kind of news and the timing of news that we'll get on that?

Sure. I'll hand it over to Mark.

Yes. Hi, Matthew. Yes, so we are currently making some modifications to some of the vessels that we will use in the battery recycling demonstration plant. The whole purpose is to prove out the process, which we've developed through SGS labs in Peterborough and to show that we can recover the metals from black mass and make a decent profit of it. And at this point, we're probably about 75% to 80% there.

There's a few reagents that we have yet to procure and the equipment for that. But the suppliers have been identified and were close two awarding those orders. So from an execution point of view, we're not very far away, maybe two or three months. And looking forward to making our first products.

Now, this isn't going to be a facility that's going to at this point and will deliver so many tonnes a day for the next 365 days. This is demonstrating our process. And at the end, we're going to pivot from there. So we demonstrate it. We look at opportunities to improve it. We look at opportunities where we can accelerate the production rate. And then come back to you guys and say, okay, this is what we've done, and these are our next steps. So that's where we're at right now.

That's good summary, Mark. And maybe I'll just add to that for the benefit of our investors. Keep in mind the recycling. There's really two steps to recycling a spent battery, whether it'd be a phone or a car. The first step is the logistics are collecting and disassembling the battery and then crushing its content into the powder into the black mass.

We've got about -- I think we've got 31 different potential partners that Michael has been in touch with that could provide the black mass. A lot of private companies and a lot of companies have been doing it well for many years. And so, our focus is on the next step because most of that black mass in North America today, almost all of it goes to a single processor. And it's a pyrometallurgical processor, which [keep] based a bigger carbon footprint. You don't get the lithium; you don't get the graphite.

We want to be the first to do lithium --sorry to do the hydromet processing on a commercial scale. And as Mark said, our focus, if not to do it at scale, it's to do it well. If we can demonstrate the process to be early and do it well, then we can scale up to there -- from there.

So as you'll see, I know you're coming on the [website] because it's the end of the month. The focus is going to be on producing a top product that we can then market to end users.

Okay, thanks. I just want to hit on with what [if I can just] what Trent just said and reinforce that there's nobody currently in North America that is producing a lithium product, a graphite product, a nickel product, cobalt product, and a copper product. So the full gamut of recycling from a black mass [feed] source. They may be doing one or two, but not the full spectrum. And that's going to be a first for North America.

All right. Okay. No, thank you. That's definitely something to look forward to. And if I could just ask one more quick question. And I apologize, I think I missed it when you were speaking about Bécancour and your potential nickel -- sorry, your second cobalt refinery there. You said there was about $400 million of investment. What kind of companies are -- or investment? Is that in precursor manufacturing, or battery plants? I didn't quite get all that.

Yes, thus far what's been announced formally has been two can plants -- cathode plants. So that would be POSCO and GM being one of them. The other is BASF, and then Vale with their nickel. Now kind of being close, I know there's a lot more going on. So expect more, maybe more of the same and more upstream because, of course, the next step up from the CAM would be the PCAM, the precursor, which ultimately is where our product goes. And so, our discussions with Quebec, our interest presupposes that that is that is in queue.

Jake Sekelsky, Alliance Global Partners.

Yes. Hey, Trent and team. Thanks for taking my questions. Just building off one of Matt's questions a bit. Can you just provide any color on what percentage of that $79 million to $84 million cash left to be spent at the refinery is locked in? I'm just trying to get a handle on any potential for further cost escalation.

I know that's Mark or Craig. Do you want it -- Mark, do you want to talk about where we are on our commitments? It could be residual, or it could [the remaining]. Yes.

Yes. So we're switching between CAD and US. We've got about roughly CAD50 million that is committed. So the remaining is yet to be committed. But -- and most of that is with two big contracts that we see coming up. And I was in discussions with third parties yesterday, and that is the piping. Contract, significant amount of piping has over like 12 kilometers of piping going into our facility. So lots of piping.

And then the other one is the electrical instrumentation contract. So we're reviewing those right now. But the big spend items outside of that have been solvent extraction cells and the crystallizer plant. Those two big spend items are in our commitments because some of them -- some of the items haven't been received as yet, but they've been in the works in manufacturing for over three quarters, almost a full year of manufacturing. So that's where we're at.

Okay. That's helpful. And then just looking at Iron Creek, you guys have announced some strong exploration results at Ruby in particular. I'm just curious, do you have any plans to work toward a scoping study or PEA over the next year? Or is exploration really the focus over the medium term?

Yes, good question, Jake. Maybe I'll grab that. And Dan, you can jump in if you'd like.

My view of Iron Creek -- if I look at Iron Creek proper. So we've obviously got a bigger package, and the resources, what we refer to as Iron Creek, although Ruby -- fingers crossed could become a potential new target area for us. Iron Creek has been -- yes, this had been a bit of start-stop.

As explorers, you drill when the commodity prices are strong and when the market interest is strong. I see that changing a bit. I see a more steady spend on Iron Creek and a more steady focus because our partners, frankly, want us to do that. And so, we've got a lot of -- we've got a number of opportunities before us in terms of how we advance that, whether it's alone or in partnership with an ally. And we'll see how that nets out. So I guess where I'm going with this is a more steady spend. We should be working our way to at least a PEA.

My view of Iron Creek, 5 million tonnes of mineralized material, given what we see, opening to the east opened at West. Not only it open at depth, but it seems to get better at grade. I wanted to try to double that before we did a PEA. But we may do something a little bit sooner until we've got internal models and internal views. And I think it would only be fair to the market and maybe give them a glimpse as to what we -- what we're seeing there. But it might be still another year before we can do some drilling and add the tonnage we think the asset can get before we wrap economics around it. Dan, anything you want to add there?

No. Just following up from the exploration side, it's a large land package. And the vast majority of the drilling has been done on the Iron Creek resource in the near area. So there's -- there are also just a lot of really good targets there. So are we dealing with how many Iron Creeks could exist within that land package I think is still an open question as we want to push both together kind of in parallel just see how much cobalt could be within that land package.

Got that, sir. And then just lastly, Trent, you mentioned the Inflation Reduction Act. And I'm just curious if announcements like that are starting to push OEMs and potential partners to look further down the supply chain to the mine level. Obviously, Iron Creek's in the portfolio, and I think that might be attractive to some of the partners you're in discussions with.

Yes, I think what it does -- I think that the talks were already happening. But the -- I guess the impact and [we'll see what the regs say], but the impact of that $7,500 credit on parts and materials sourced out of China is going to act as a lightning rod. And to the extent, OEMs were already thinking we got to onshore the whole supply chain.

I'll tell you, there are teams of people go into Korea and Japan and their partners saying, hey, where are you on your plans? Because we can't be sacrificing this credit opportunity with an overreliance on China, which has been a hallmark of the EV market from day one. So yes, I think it helped as it could be. The intensity of the discussions has picked up.

But what's interesting, Jake, is that I would say the conversations we're having with some of the OEMs and their partners is it's not just about a supply contract. It's about a more strategic, longer-term vision of how many ways we can work together and where we put the supply chain. Recall our vision is -- our lane if you will is refining and recycling. And so, for our Temiskaming Shores facility to be complete, we would want to attract our precursor manufacturer and basically co-locate where we're producing nickel, cobalt, and recycling. And so, I think yes, Inflation Reduction Act and some of the measure we are seeing is just shining a bit of a light that might accelerate some of the decisions.

Gordon Lawson, Paradigm Capital.

Hello, everyone. And thank you for taking my question. Can you further comment on your capabilities or flexibility to produce various end products for nickel and any associated OpEx adjustments or constraints related to these items?

Good morning, Gordon. You want to talk specifically about nickel or about cobalt? Just to be clear.

Well, we'll start with nickel. But I am also curious about cobalt.

So I guess -- and maybe sorry, one more question for Gordon. Recycling or primary feeds.

Primary feeds.

Primary feeds. Yes, okay. So, thank you. We are nearing completion of that. I think we've talked about it much on this call, but you'll hear about it shortly. Nearing completion of Phase 1 of a joint study that we undertook with both Talon Metals and Glencore just as steady partners. We'd want to understand what a nickel sulfate would look like adjacent our cobalt plant as part of this integrated facility, CapEx, permitting, OpEx, and whatnot. And moreover, where is the nickel coming from?

We know that the 811, or even a 622 cathode with EV projections and tails were going to need a lot more nickel supply. North America has got a lot of it. But a lot of it remains undeveloped underground. And so, the first phase is a scoping study just about done. So we'll have news on that pretty shortly.

In terms of final products, Mark, I know we've got Dave leading that study, but have not been on the line. Do you want to talk about where the study is pointing?

I guess at a high level, we're looking at different options of supplying nickel feed to produce a nickel product, nickel sulfate in this case.

The next phase, if I can jump to that, would be to set up a PCAM facility at our site so that we're crystallizing the salt -- the nickel sulfate, nor crystallizing the cobalt sulfate. We're feeding directly into a facility that will make a PCAM product. But as far as the nickel sulfate product independent of having a of PCAM plant, it will be similar to what we're doing with Cobalt sulfate. And you'll have a -- and that's [ex] the solvent extraction facility and you'll most likely have a crystallization plant, which will make the nickel sulfate powder. That's kind of the design for it.

And I'd add, Gordon, so we'll have a scoping study out soon and then move to pre-feas. And so back to the point about -- with Jake about strategic -- discuss our strategic relationships, our long-term relationships. This is where having our partnerships outlined becomes really important because we can maybe manage on our own to build a certain size of nickel plant to support a certain quantity of PCAM.

The industry needs a lot more than we can produce on our own. And that's going to entail a bigger discussion around partnerships and new sources of supply. And so, that is an important kind of the [thought] behind-the-scenes strategic component of our strategy that we're pursuing throughout the balance of the year.

Okay, thank you. So that is completely rules out like a Class 2 nickel. The pig iron or ferronickel, anything like that. But that's off the books, right?

I would say you it's something we'd -- we look at it. When you got to look at all the supplies, I think the challenge you have with the ferronickel, of course, is the carbon footprint is huge. Products out of the out of Indonesia's got a carbon footprint that's about seven times higher than the product produced from a sulfide in North America. So it's not ideal, but we are seeing some tough decisions being made in the sake of short-term supply to turn to Indonesia. So, certainly not my preference. And it's something that we may roll out, but I would say we haven't yet.

Okay, okay. Thank you very much. That's it for me.

Thanks, Gordon.

That is all the time that we have for questions today. And this concludes the question-and-answer session. I would like to turn the conference back over to Joe Racanelli for any closing remarks.

Thank you, everyone, for joining us today. And as mentioned, we will be following up on a regular basis with quarterly calls. And in the interim, we'll be providing updates on the progress of our efforts. If you do have any further questions, please reach out to us. We're happy to try to respond to you directly. But thank you, everybody for joining us. And we look forward to providing updates on an ongoing basis.

This concludes today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.