{"id":40969,"date":"2023-07-27T00:58:54","date_gmt":"2023-07-27T04:58:54","guid":{"rendered":"https:\/\/ifintechworld.com\/news\/jervois-global-limited-jrvmf-q2-2023-earnings-call-transcript\/"},"modified":"2023-07-27T00:58:55","modified_gmt":"2023-07-27T04:58:55","slug":"jervois-global-limited-jrvmf-q2-2023-earnings-call-transcript","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=40969","title":{"rendered":"Jervois Global Limited (JRVMF) Q2 2023 Earnings Call Transcript"},"content":{"rendered":"<div data-test-id=\"content-container\">\n<p>Jervois Global Limited (OTCQX:JRVMF) Q2 2023 Earnings Conference Call July 26, 2023 7:00 PM ET<\/p>\n<p><strong>Company Participants<\/strong><\/p>\n<p>Bryce Crocker &#8211; Chief Executive Officer<\/p>\n<p>James May &#8211; Chief Financial Officer<\/p>\n<p><strong>Conference Call Participants<\/strong><\/p>\n<p>Adam Baker &#8211; Macquarie<\/p>\n<p>Tim Hoff &#8211; Canaccord<\/p>\n<p>Mitch Ryan &#8211; Jefferies<\/p>\n<p><strong>Operator<\/strong><\/p>\n<p>Thank you for standing by. Welcome to the Jervois Global Q2 2023 Results Investor Call. [Operator Instructions] I would now like to hand the conference over to Mr. Bryce Crocker, CEO. Please go ahead.<\/p>\n<p><strong>Bryce Crocker<\/strong><\/p>\n<p>Thank you very much. And it\u2019s a pleasure to be here today with James May, Chief Financial Officer. We have the usual disclaimers on Slide 2, which I would encourage you to review. And I will move on to Slide 3 just running through the Q2 2023 highlights.<\/p>\n<p>We had a $50 million capital raise, which is now being completed and with the exception of the second tranche of the unsecured convertible note of $5 million, the funds have otherwise settled with Jervois receiving proceeds. This injection of liquidity provides Jervois with the financial strength to navigate the price cycle and ensure we have the runway to take and implement the right long-term decisions for the business in the coming year.<\/p>\n<p>At the last quarterly results, we have set out our needs and priorities. And I am pleased to report we made initial progress on all fronts during the second quarter. At Jervois Finland, the focus was on maximizing margin and cash flow and delivering the site\u2019s return to a positive economic contribution with $2.6 million positive EBITDA represented. We are particularly pleased by quarterly operating cash flow generation of $31.9 million during the quarter as our commercial team delivered on the targeted inventory reduction significantly earlier than guided.<\/p>\n<p>Moving on to Idaho, we safely and cost effectively transitioned to<span class=\"paywall-full-content invisible\"> suspension phase with our focus now on commencing the partnership with the U.S. government via initially drilling and subsequently a future reopening. At SMP, the financing and partnering process continues. We have also commenced the formal sales process for the Nico Young nickel-cobalt development project in New South Wales, Australia. We have received inbound interest<span class=\"paywall-full-content no-summary-bullets invisible\"> on our other assets and continue to review with our bankers the potential of this interest.<\/span><\/span><\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">Turning to Slide 4 please, just noting the cobalt market. Normally, we don\u2019t specifically focus on cobalt prices, but the recent strengthening from below $13 per pound in early June to $16.50 per pound today is encouraging. Forward prices are in sharp contango reaching almost $20 per pound by the end of this calendar year and continuing to rise into the mid $20 per pound across 2025. The cobalt alloy grade for higher purity metal market is driving much of this on the back of rising aerospace and defense spending.<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">I will now pass across to James for him to talk around the balance sheet.<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\"><strong>James May<\/strong><\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">Thanks, Bryce. In late June, we announced a $50 million capital raise and concluded execution during July. The capital raise comprised $25 million of unsecured convertible notes that were priced at a 40% premium to the ex-rights price issue with the entitlement offer. The second part of the financing was a $25 million fully underwritten entitlement offer that was well supported by existing major shareholders. Funds have been received by Jervois, with the exception of settlement of the second tranche of the unsecured convertible notes that lasts $5.1 million expected to receive in \u2013 we expect to receive in late August following the associated shareholder meeting.<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">The capital raise renews our financial strength and provides us with enhanced flexibility. It provides us with the platform to accelerate our financing initiatives of SMP with potential partners and will have confidence in our financial position as we advance that process. We have taken steps to do leverage via debt repayments of the Mercuria working capital facility, totaling $21 million, with payments made across June and July. The resulting loan balance of $49 million is in a zone that is sustainable for this part \u2013 for the cobalt price cycle and our inventory management plans over the next 12 months.<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">Jervois Finland unlocked significant cash flow for the period with cash flow from operations of $31.9 million in the second quarter. This included release of working capital resulting from inventory reductions, optimization initiatives and the residual working capital benefits of cobalt price declines since the beginning of the year. The cobalt inventory unwind was in excess of 500 metric tons as we continue to execute on the inventory reduction program. The decrease represented a reduction of around 34 days to around 100 days inventory at June 30. We are now sitting within our previously communicated target range of 90 to 110 days.<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">We have retained a sharp focus on identifying and delivering initiatives that will enhance our liquidity moving forward. An example is our decision to divest the Nico Young nickel-cobalt project in New South Wales, which as Bryce indicated, is a process that has now commenced. The priority focus for the second half is the continued performance and optimization of the Jervois Finland business and the pursuit of debt and partnership funding options for SMP. This is aimed at delivering the path that brings SMP into production in line with our goal of delivering a multi-asset and multi-commodity cash-generating portfolio.<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">Cobalt sales volumes guidance for Finland for 2023 remain unchanged. For the 6 months to 30 June, our sales volumes totaled 3,160 metric tons. For now, we are prudently maintaining our current guidance range consistent with the prior quarter.<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">Our inventory reduction plans have been successful in Jervois Finland and we reinforced our product guidelines for target range of 90 to 110 days and we expect to remain within this range for the remainder of 2023. At ICO, the total project cost remains at $155 million with the final residual vendor payments associated with its expenditure incurred prior to suspension continued in the quarter as shown in the cash flow reconciliation included in the appendix of this presentation.<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">The estimated monthly costs, while ICO is in suspension mode continued to be approximately $1 million a month. Costs are focused on environmental compliance and maintaining asset health to preserve restart optionality. At SMP, while the project has been paused, the total forecast project cost remained $65 million. As part of our ongoing restart readiness efforts, we have continued to identify and implement opportunities to optimize the project cost and schedule. The estimated monthly site cost at SMP is $0.5 million and first production is forecast 12 months following the full reactivation of the restart project, which is to be expected once we have a confirmed funding pathway.<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">Bryce, I\u2019ll hand back over to you to summarize.<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\"><strong>Bryce Crocker<\/strong><\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">Thanks, James. Clearly, it\u2019s been a difficult year for all shareholders of Jervois, including the Board of Management. We are extremely disappointed with our equity markets currently valuing our whole portfolio of assets. The balance sheet has been part of that overhang and the recent $50 million equity injection provides us with flexibility and runway to now deliver on our strategy and improve the situation that management was earnestly looking forward to deliver on our singular focus to return the company valuation back towards fair value.<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">Operator, I\u2019ll close then and I\u2019d open it up to questions from analysts. Thank you.<\/p>\n<p id=\"question-answer-session\" class=\"paywall-full-content invisible no-summary-bullets\"><strong>Question-and-Answer Session<\/strong><\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\"><strong>Operator<\/strong><\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">Thank you. [Operator Instructions] Your first question comes from Adam Baker with Macquarie. Please go ahead.<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\"><strong><span class=\"question\">Adam Baker<\/span><\/strong><\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">Good morning, Bryce and James. Just a question on Jervois Finland if I may. Just wondering you follow us with cobalt prices, there is things similar to what they are now. Now that you got the inventory levels back to your normalized levels, what do you expect the adjusted EBITDA to be for that asset in the second half of this year? Thanks.<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\"><strong><span class=\"answer\">Bryce Crocker<\/span><\/strong><\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">James, do you want to talk of that?<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\"><strong><span class=\"answer\">James May<\/span><\/strong><\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">Yes, sure. So as you know, we don\u2019t give formal EBITDA guidance, but a reasonable guide to what the business should and can deliver at this part of the price cycle as our prior historical published numbers, so in 2020 when the cobalt price averaged sort of $15 a pound for the year. Jervois Finland delivered $20 million EBITDA annualized. And so that\u2019s a reasonable run-rate that we are looking to get back to you now. Clearly, there has been other factors that mean that, that journey is not wholly smooth. We have seen normalization of various costs, which are helpful. And so we are targeting getting back close to that runway, but degree of caution in terms of how we progress back to that sort of full run-rate that I just referred to. Bryce, anything to add to that?<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\"><strong><span class=\"answer\">Bryce Crocker<\/span><\/strong><\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">No, I think you covered it clearly, James, unless Adam had other questions.<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\"><strong><span class=\"question\">Adam Baker<\/span><\/strong><\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">No, that\u2019s all for me. I will hand it on. Thanks, guys.<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\"><strong>Operator<\/strong><\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">Your next question comes from Tim Hoff with Canaccord. Please go ahead.<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\"><strong><span class=\"question\">Tim Hoff<\/span><\/strong><\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">Hi, thanks for the questions. I was wondering if you might highlight how the cobalt production is tracking at the moment from your end to products, just noting that it\u2019s been ticking up on a few different price areas that I am watching?<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\"><strong><span class=\"answer\">James May<\/span><\/strong><\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">Yes. I mean, as I said, during the presentation, normally, we don\u2019t comment on the cobalt price specifically, but it has been ticking up. And it\u2019s quite a significant tick up when you consider that in early June when we were starting the financing process, we are kind of sub-$13. So now we are at close to $16.50 today. There is a significant spread between the low and the high. The alloy spread is significantly higher than that. Chinese metal prices are around $18. And so certainly, there has been a significant drawdown on higher purity metal and that\u2019s flowing through the various grades. Certainly, and if we translate that into the way that we have been looking at our book and the way that our commercial team is managing and pricing the business, the uptick that we\u2019ve seen, and you can see even selling over 3,100 tons of cobalt in the first half, I think is a good outcome. And certainly, we have seen a significant uptick in our ability to move products on attractive terms and that\u2019s accentuated in the last 2 or 3 weeks. So again, we are always cautious. We are not pretending that we are back to Q1 2022 in terms of demand and pricing, but certainly we are in a much better space from a markets perspective than where we were 6 weeks ago.<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\"><strong><span class=\"question\">Tim Hoff<\/span><\/strong><\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">Yes, excellent. Thank you for the insights. Do you have anything on stockpiles inside the back burner that was an issue weighing on the market floor?<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\"><strong><span class=\"answer\">Bryce Crocker<\/span><\/strong><\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">I think if you look at type of hydroxide payables are a good barometer, so when people talk about stockpiles, they are generally talking about the intermediate stocks that are held either within DRC, or within the logistical chains out of the DRC through South Africa, or in China of the large intermediate hydroxide stocks. And obviously, there were also political discussions across the course of the last couple of years that led to increased stock sitting in the DRC. Now, you can see that the coated hydroxide payables today are 65% to 67%. Many of the large producers wouldn\u2019t be selling at those levels, they would be requiring a price that is higher than that. The physical market is tighter, then you have seen it flowing through the final metal price. You are also seeing it flowing through the intermediate hydroxide price. And I think what that is a reflection or the reality of is the \u2013 it\u2019s not that easy to get product out of DRC. It is coming out, but the logistics of the logistics, and it\u2019s just taking time. And we are also seeing an uptick in demand. It\u2019s not an exponential roaring uptick, but it\u2019s certainly a pickup in demand across the key market in China. But also particularly, as I mentioned, metal demand across the West, as we have seen an uptick in aerospace, and obviously the situation in Ukraine doesn\u2019t improve. And so that is flowing through into a heightened level of metal demand, which is flowing through other grades. And we are seeing that picking up into the sulfate, which is obviously the battery chemical that comes out of our finished business in terms of the liquidity there that we are seeing now is vastly different to what the liquidity for that product was even four weeks, six weeks, eight weeks ago. So, we are constructive on the outlook. And I think we have also looked to touch on the CMA forward prices. And again, the forward prices are forward prices, we don\u2019t necessarily transact on those, the OEMs are, and there is significant buying, going out. The price is approaching $20 by the end of the year. And then if you look into 2025, the price is up in the mid-$20s. So, that\u2019s quite significant from where we are today. I mean that\u2019s, there is not many commodities, you get that level of Contango, and importantly, now it\u2019s not just to pay for Contango. There is theoretical. There is a lot of OEM buying that\u2019s occurring on that forward curve, which gives you an idea in terms of where the largest buyers in the market see the future price trends, which again, were constructive on.<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\"><strong><span class=\"question\">Tim Hoff<\/span><\/strong><\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">Excellent, hopefully we see some positive momentum there. Thanks guys.<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\"><strong>Operator<\/strong><\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">[Operator Instructions] Your next question comes from Mitch Ryan with Jefferies. Please go ahead.<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\"><strong><span class=\"question\">Mitch Ryan<\/span><\/strong><\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">Good morning Bryce and James. Thanks for taking the question. Just at the time of the raising you talked to considering partnerships with strategically aligned investors and customers across all assets. Just wondering if you can provide any updates on or timelines of when we should expect any commentary on that from the company?<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\"><strong><span class=\"answer\">Bryce Crocker<\/span><\/strong><\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">I think we have been clear on with regard to San Miguel Paulista. It\u2019s certainly 2023, we want to have a pathway forward by the end of 2023, that provides definition and confidence. My view is that the asset is important, not only will obviously be generating significant cash flow in the current market, both with nickel prices, input costs and nickel metal premier. But from \u2013 what the last 18 months has taught us is that single assets and single commodities, particularly when combined with an inappropriate balance sheet, and the downturn can carry risk. And that\u2019s what we really need to go about fixing. In terms of the other assets, I think that, again, we have had imbalance on each. I think that what \u2013 nothing is automatically staggered in the portfolio, if we were quite rational now, in terms of how I think we look forward to growth. And we have to \u2013 and I do want us to come into return to growth, I think that that\u2019s important. But I think it\u2019s also important that occurs in a way that\u2019s protective of shareholder interest, so without further dilution at the parent level. And I think it\u2019s also important as a benchmark, clearly there is a disconnect, what we perceive to be fair value of the assets and the way that equity markets perceived to be fair value. And typically, the smarter and smarter people recite on your side of the ledger on the equity market, so it\u2019s not a problem, I want to sit here and say that markets are wrong. But the way that we can demonstrate that the assets has more value than what is currently being priced in our share price is simply to demonstrate by selling a share of an interest at a price that\u2019s disconnected from what the sell through value is, and doing that repeatedly. And introducing partners, which are then going to de risk the development of those assets, because that\u2019s how we begin to rebuild and repair the shareholder value back to where we were. And so that\u2019s what we are specifically focused on. So, no specific timeframes that we are going to publicly commit to, but constructively impression would be how I describe where we are at as a management team, and certainly where the Board\u2019s perspective is. James, is there anything you would add to that?<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\"><strong><span class=\"answer\">James May<\/span><\/strong><\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">No, I don\u2019t think so, Bryce. I mean I think my point there is, yes, we will be guided by value and strategic logic in terms of the assets, nothing else to it.<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\"><strong><span class=\"question\">Mitch Ryan<\/span><\/strong><\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">Thank you. I appreciate the commentary.<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\"><strong>Operator<\/strong><\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">Okay. There are no further questions at this time. I will now hand it back to Mr. Crocker for closing remarks.<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\"><strong>Bryce Crocker<\/strong><\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">Okay. Well, thank you all for your time. Again, difficult periods for the company, but I do believe that Q2 is the start of a turn for a better future and look forward to providing you updates in subsequent quarters. Thank you.<\/p>\n<\/div>\n<p>Read the full article <a href=\"https:\/\/seekingalpha.com\/article\/4620302-jervois-global-limited-jrvmf-q2-2023-earnings-call-transcript?source=feed_all_articles\" target=\"_blank\" rel=\"noopener\">here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Jervois Global Limited (OTCQX:JRVMF) Q2 2023 Earnings Conference Call July 26, 2023 7:00 PM ET Company Participants Bryce Crocker &#8211; Chief Executive Officer James May &#8211; Chief Financial Officer Conference Call Participants Adam Baker &#8211; Macquarie Tim Hoff &#8211; Canaccord Mitch Ryan &#8211; Jefferies Operator Thank you for standing by. Welcome to the Jervois Global [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":613,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"gallery","meta":{"footnotes":""},"categories":[236],"tags":[83],"class_list":["post-40969","post","type-post","status-publish","format-gallery","has-post-thumbnail","hentry","category-news","tag-featured","post_format-post-format-gallery"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v20.6 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Jervois Global Limited (JRVMF) Q2 2023 Earnings Call Transcript | iFintechWorld<\/title>\n<meta name=\"description\" content=\"Jervois Global Limited (OTCQX:JRVMF) Q2 2023 Earnings Conference Call July 26, 2023 7:00 PM ET Company Participants Bryce Crocker - Chief Executive\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/ifintechworld.com\/?p=40969\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Jervois Global Limited (JRVMF) Q2 2023 Earnings Call Transcript | iFintechWorld\" \/>\n<meta property=\"og:description\" content=\"Jervois Global Limited (OTCQX:JRVMF) Q2 2023 Earnings Conference Call July 26, 2023 7:00 PM ET Company Participants Bryce Crocker - 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