Liontown Limited (LTR) Earnings Call Transcript & Summary

Good morning, and thank you for joining us. This morning, we are announcing that the loan Liontown Board has approved the final investment decision to expand our Kathleen Valley operation. This is a major step in the company's growth. I am joined by 3 members of our leadership team: Chief Operating Officer, Ryan Hair, Chief Financial Officer, Greg Jason; and Chief Commercial Officer, Grant Donald. Over the next hour, we will cover the decision itself what it delivers operationally, how we will fund and execute it and the market outlook that underpins it. We will leave some time for questions at the end. Next slide, please, Ethan. Before we begin, I draw your attention to the important information and disclaimer on the slide and the cautionary statement on all reserves in the forward-looking statements. This presentation should be read with in today in conjunction with the ASX announcement. Next slide, please. Okay. Now to the decision itself. Our Board has approved an expansion of Kathleen Valley with $389 million of expansion capital to lift targeted production of around 780,000 tonnes of spodumene concentrate per annum at a 5.4% rate. That is 5-year average basis from FY '30, peaking at more than 800,000 tonnes in FY '34. Time to market was critical, and this objective was facilitated by the fact that the plant was designed and built to scale. So this decision takes advantage of the built-in optionality, supported by improved market conditions and in line with our strategy of developing Kathleen Valley to its full potential. The Board's confidence in this investment was grounded on the following key points that I want to outline this morning. First, efficient capital at $1,619 per dry metric ton, our capital intensity is among the lowest of recent plant field expansions in the sector. Second, speed to market. We are targeting first oil in the first quarter of FY '28, ramping to full 780,000 tonne run rate by the first quarter of FY '30. Thirdly, scale, which brings 2 advantages. We are lifting capacity from around 500,000 tonnes per annum to around 780,000 tonnes, a 56% increase or 53% on an LCE basis, which makes Kathleen Valley one of the most significant hard rock operations in the world. And with that scale comes the ability to have different conversations with our customers and with market more generally. Scale also reduces our unit cost, we expect our unit operating costs to improve to a range of $8.40 to $9.20 per dry metric ton once we're fully ramped up, giving us further resilience that positions Liontown for sustained performance through the cycle, not just in the good years. Fourth, compelling economics, we expect a payback of around 2.5 years from the end of construction. And the other key valuation metrics such as NPV and internal rate of return were also compelling to the Board to make this decision. From the broader economic standpoint, this expansion will support around 400 full-time roles and work to many supporting businesses and enterprises. Finally, favorable market exposure, the additional volume is uncommitted. It can be sold into the spot market or into potentially new offtakes priced with reference to the spodumene index. Before I hand over to Ryan and Greg and Grant, we will touch a little bit on this section, and we concluded by saying that the internal analysis we used to do this assessment was based on market consensus forecast for pricing which then supports our intention to fund this expansion from our own balance sheet and operating cash flow. Now I hand over to Ryan.

Great. Thanks, Tony. So Ethan, next slide, thanks. So over the next few slides, I'll walk through what we're building and when we'll deliver all of that. As Tony has indicated, what we're targeting is a 50 -- or over 50% increase in spot con production from around 500,000 dry metric tonnes a year to 780,000 tonnes over the 5-year period from '30 to '34, and all of that is on a SC 5.4% basis. Notably, the grade in FY '27 at the target of 5.2% is unchanged. And similarly, FY [ '28 ] '29 is expected to be around at 5.2%. But of course, we will continue to optimize both great recovery and production through that period and beyond. To enable that increase in concentrate production, we will ramp up the processing capacity of the plant from which is currently around 2.8 million tonnes to around 4.2 million tonnes per annum. We have provided an indicative ramp-up profile through the period. So production does step up through '28 and '29, in line with the mine output ramp-up and the plant capacity increases over time. Notably, the profile includes scheduled nonproduction days given that we are debottlenecking an existing plant. By way of overview, there are 3 main scope areas for the expansion. Number one, is the mine expansion by developing the Kathleen's corner underground. Number two, with debottlenecking the plant; and number three, there's a related expansion of nonprocess infrastructure. Next slide, thanks, please, Ethan. And turning now to the mine. In previous announcements and reports, we refer to the Northwest plants. This is now being renamed Kathleen's corner underground. In the November 2024 mine plan, we focused on high-margin tonnes from Mount Man and deferred Kathleen's Corner underground to FY '31. The expansion brings this forward to run alongside Mount Man. Image shows 2 ore bodies side by side, and it's worth stepping through what this shows. Starting on the right with Mount Man, gray is what we've built to date, the as-built development and stocks. Red is the development still to come, and the blue shading is the Mount manned production stopes. On the left is Kathleen's corner underground. Green is the development underground capital development and the pink shading are the production stopes. At the top end, the completed Kathleen's corner open pit and the Man box car. You can see the green development tying back into the open pit, which is our primary access for Kathleen's corner underground. There's a couple of things to take from this. The first is the gray, as built is a small part of the picture. Most of Mount Man is still in front of us, and we are now starting to get into the bigger parts of the ore. Second, the green and red are largely separate networks, each with its own development. This is what gives us 2 indeed independent mining fronts. And 2 fronts are better than one as they provide flexibility in how we sequence or extraction over time and allows us to maximize productivity. We've continued to optimize Kathleen's corner and the new design reduces underground development by around 45,000 meters compared to the previous design. This not only saves cost, but also decreases the amount of waste needed to be not once. I'm on covered in the expansion of funding covers preproduction development, resource definition drilling and fixed infrastructure, including electrical substations and primary bank large sheets. That is $145 million of the expansion cost. The result is an ore mining rate that increases progressively to a sustained rate of about 4.1 million tonnes per annum by the end of FY '29 through a combination of Mount Man and Kathleen's corner underground. Next slide, please, Ethan. On processing, we are debottlenecking a plant that was built to scale. The main item is a near door mill in the grinding circuit. We ordered it during the early works process as a long lead item, which reduces schedule risk. In the rest of the plant, we upgraded Magnet separation, upgrade the tailings lines, pumps, piping, and make targeted improvements to crushing and screening. Both plant is upgraded to dial crane operation, additional binder store, upgraded mixes and a third base bump. So both pace processing trains can run sometimes. You can see in the 2 images, the colors tell the story. On the left, at the top is the ball mill installation in gray is the existing plant and everything in color is new. The ball mill itself in yellow with its supporting infrastructure pumps and services around it. It stops in alongside the existing SAG mill. On the right is the debottlenecking scope across the rest of the plant. Again, Gray is existing rent is existing equipment that we're operating, mainly pumps and piping and purple is the new equipment. The thing to draw from these images is the same. They're most of the grade. The additional capacity comes from one major new in the ball mill and targeted upgrades at the bench points. That is why this is efficient capital to Tony's earlier point. On nonprocess infrastructure, more tonnes means more demand on power, water and accommodation. We're operating power distribution and working with our power provider to add thermal, solar and battery storage. Keeping us aligned with our target of more than 60% renewable energy as demand grows. On water, we're extending our bore fields and upgrading storage. And of course, we'll upgrade the accommodation village with an increase in the permanent workforce as well as a temporary camp for the construction workforce. Together, that is $137 million for processing and $107 million for nonprocess infrastructure. Next slide, please, Ethan. So bringing that all together, this is the delivery schedule. The 3 work streams are sequenced to phase activity across FY '27, '28 and '29. Happens corner preproduction development and infrastructure is underway now. an expansion in capital development runs through the first ore in Q1 FY [ '28 ]. The plant upgrades run the full length of the schedule because we're tying new equipment into a live plant. -- non-process infrastructure runs through to Q1 FY '29 and practical completion of the expansion is targeted by the end of Q2 FY '29. We are delivering with a dedicated owners team -- and an owners team, we've -- was heavily involved in the construction of the original Kathleen Valley project. Construction on-site has already started under the early works program and the long lead times are in order. With that, I'll hand back to Tony.

Next slide, please, Ethan. Thanks, Ryan. Now I want to step back and show what this expansion means that Kathleen Valley's position globally. As I mentioned in my opening slide, this chart shows that the top 10 forecast lithium producers in 2030 on a lithium carbonate equivalent basis. Pre-expansion, Kathleen Valley is already a meaningful producer Post expansion by FY '30, our attributable production growth by around 53% to approximately 102,000 tonnes of lithium carbon equivalents and that consolidates our position among the major global lithium producers. The key point here is the trajectory. Kathleen Valley is relatively young operation, and this expansion accelerates our rise up the global production ladder at around 100,000 tonnes of lithium carbonate equivalent a year, we moved further up the ranks of the major global producers. And as I said in my earlier slide, this scale does 2 things. It drives our cost down, but it also gives us a meaningful role with our customers and across the battery value chain. I'll now hand over to Greg Jason.

Thank you, Tony. Good morning, everybody. I'm starting on Slide 9, which is around the capital expenditure for the expansion Left-hand chart shows you 2 things. The first 3 columns give you the time phasing across financial years '27, '28, '29. '27 is an update from the guidance we gave previously, and I will deal with that on the next slide. And then the right-hand column of that first chart gives you the breakdown across mining, processing and adding to the $389 million as described by Ryan. The right-hand chart depicts capital intensity. Tony talked about that early on in the presentation. We have looked at the announcements of recent spodumene brownfield projects, and the intensity is worked out as the capital expenditure divided by the annual production tonnes concentrate. You can see Kathleen Valley sitting number 2 from the left there, so very favorable on an intensity basis. Our intention is to fund the CapEx through both the cash reserves that we started with the year. and with the operating cash flow that we're going to generate. We've done a range of modeling. The intention to fund in that way is based on consensus pricing. And we have looked at a range of scenarios. And depending on where price moves, of course, we could modify our project accordingly around the time phasing to manage that accordingly. Next slide, please. This slide is giving you an update on the FY 2027 CapEx guidance. The first blue column, $320 million to $370 million is the range that we broadcast at the end of July with the Q4 announcement. And that contained $60 million to $70 million of all works on the expansion, just shown here in orange. We are updating our '27 guidance CapEx for the full year to [ 4 and 5 to $495 million ]. And so that's got an increase of [ $115 million to $125 million ] for Kathleen Valley expansion. I'll talk briefly about nonexpansion CapEx for the years ahead. Obviously, sustaining capital recurs year-by-year. We'll have a couple more years of ramp-up capital development both the Mount Man and Kathleen's Corner underground. And we are executing or planning several previous third and optimization projects across FY '27 to '29. Some of the midpoints of the nonexpansion categories in FY '27 is $280 million. If you copy that right, the '28 to '29, you'll be a bit on the high side, maybe in the range 10% to 20%. And but we will firm up those numbers year-by-year when we give guidance around July of each year. Moving to the next slide. talking about the investment parameters and the economics. Penny's talked about the payback, 2.5 years and the job creation, the around 210 jobs created during the construction phase and 185 jobs created on an ongoing basis across both live town and our contractors. We have forecasted the 5-year average unit operating cost from the first year of full production after a ramp-up is complete and that $840 to $920 per tonne on a real FY 2027 cost basis. We've got the CapEx there on sustaining of $90 million to $100 million. Average production over those years of 780,000 tonnes per year at 5.4%. And we've included there at the bottom, the long-term consensus sponge price on the C6 basis, [ 495 ]. I'll now pass you to Grant, who will talk you through the market context for this investment.

Thanks, Greg. As Greg just mentioned, you can see on the left-hand side here, our unit operating costs reduced, reduced the midpoint here for the purposes of the chart, but that's a 23% reduction through economies of scale and efficiencies. You can see where this places us on the SC Insight's hard rock cash cost curve on the right-hand side saw that in the middle, this boost is in a much stronger competitive position for the long term. If we look at the next slide, in terms of the market context for this expansion, you can see that this is a fast market forecast for demand and supply gaps. You can see the market continues to grow strongly, driven by both stationary storage and EV demand. We continue to see forecasters measuring a gap into the future in terms of supply first demand. And as we've said before, using this chart, brownfield expansions are typically quicker to market. This makes us with KV expansion very competitive and timely in terms of bringing new tonnes to market, as we've already covered. We will be a ramp-up, but we get early tonnes in '28. And this means that new operations, which take 5 to 8 years will obviously be in the market well after we've already been in the market for some time. If I move to the next slide. Well, that's the macro long-term view. The next slide covers the short-term view. You can see here what we've done is a couple of candle sticks with the range of forecasts from various market forecasters. So we've got fast markets, mines DLS and M&S insights here. The point that we really want to emphasize here is that actually, we're talking about relatively modest deficits and surpluses in the context of a 2 million-ton market in 2026. And an even more modest surplus in 2027 versus a 2.4 million tonne expected market. This means the market is extremely close to balance, which leads to high levels of volatility as people take views on whether it flips to a deficit or a surplus. But ultimately, we are talking about average deficits of less than 50,000 tonnes in 2026 and a surplus of 15,000 tonnes in 2027. That's about 0.5% supply and that should be weighed against the expectation that there's an additional 450,000 tonnes of LTE coming into the market in 2027. Any of those are delayed or deferred that could have a very material impact on the balance. The other thing I'd like to flag is that none of these forecasters really take a view on inventory movements, there are assumptions around inventory staying broadly flat. This means any inventory rebuild could magnify the move to a deficit and copilot oversupply very easily. We also want to just comment on the short-term volatility we've seen over the past month or so. We do see a slightly softer sentiment in domestic China at the moment based on their own numbers not growing as fast as they have been historically. However, we believe this miss is the broader demand of base across other markets, both across stationary storage and EVs in the rest of the world. If you look at Rest of the World, EV sales, for example, they've grown 90% over 90% over the past year-to-date. And that is now close behind Europe in terms of total EV sales. Europe is also growing strongly. And we continue to see those trends play out, particularly driven by higher petrol and diesel prices. And with that, I hand back to Tony.

Thanks, Grant. Let us bring us back now to FY '27 and pull the guidance together in one place, now that it's inclusive of the updated expansion of capital. For FY '27, we are guiding to concentrate production of 390 to 440 at a 5.1% grade unit operating cost of 1,050 to 1,250 tonnes sold on an FOB basis and now total capital expenditure of 435 to 495, which Greg has already covered. On the first quarter look ahead, our mining rate has been held constant at 1.5 million tonnes run rate before ramping up in the second quarter of FY '27. That's consistent with the guidance we've been giving the market for over 6 months. Our recovery product file stays consistent with the second half of FY '26 and given the feed mix as we process the remaining open pit stocks. And first quarter shipment timing reflects planned maintenance and some weather-related disruptions at the Geraldton port mainly due to these surge events. And just to explain that, these surge events are created in the Geraldton Port due to the design of the actual harbor. As we get title movement based on seasonal variations, it creates a fairly significant sucking effect. And therefore, it makes it difficult for the ships to stay birth. So when these events occur, the ships either stay out at sea or the ones that are loading have to move back up to sea. This will be fixed over time as the government of Western Australia has put funding into the Geraldton Port. Now finally, costs associated with the next quarter will track accordingly with the production. Can we go to the next slide, please, Ethan. Now finally, bringing this all together, Kathleen Valley is the most value-accretive project in our pipeline. And this is a low-risk expansion. It gives us more tonnes at a lower cost with execution flexibility. 4 numbers capture it. We're lifting production at around 780,000 tonnes per annum, up 56%, as we previously mentioned, but peaking at 800,000 tonnes in FY '34. We're doing this at a capital intensity of 1,619 per dry metric ton amongst the lowest of recent brownfield expansion announcements. Our operating cost falls to $840 to $920 per metric dry metric ton. And the total capital expenditure is $389 million, the first ore targeted in the first quarter of FY '28. It's a brownfield expansion built on infrastructure already in place funded from our balance sheet and it's intended to lift production in tight markets over the next 24 to 30 months. It gives us flexibility to manage execution if prices move lower, with a mine life of more than 20 years, this is a sustained performance through the cycle. And once again, to close on the funding piece, Greg's already spoken about this. And our intention is to fund this from our own balance sheet and operating cash flow based on the consensus pricing we've seen. And the capital is phased over 3 years. That's again a very important point to note. We're not doing this on the basis that we need the extra funding. We're doing this because this is a value-accretive project. And we've got the flexibility to adjust the pace if conditions change. That is what it gives us confidence for the Board to commit to this. And on that basis, I'd like to thank the team for doing a tremendous amount of work to bring this to a conclusion. We're very happy with the outcome, and we're ready to execute. Now I'll open it up for questions. Thanks, Ethan.

[Operator Instructions]. Our first question comes from Elaine Fabris from Bank of America.

.We're just updating our model. And in November 2024, when you originally deferred the 4 million-ton case, it looks like you pulled out the development CapEx that corresponds to the development meters that you deferred. And today, the upgrade of the camp and power infrastructure seems to be new. Was the NPI upgrade always considered or what has changed?

Thanks, Elaine, and good morning. I might hand over to Ryan.

Yes. Thanks, Elaine. So the power upgrade was always going to be required as you step up from circa 2.8 million of processing to 4 million. And that's -- goes with, for example, installation of the boiler, which at what is a substantial load on the power network. Similarly, the mine when you're now building additional ventilation, et cetera, again, that adds additional loads. So that was always intended to be part of the story. And the accommodation, similarly, was always going to be required again at going from 2.8 million to 4 million tonnes, given that the equipment increased equipment that you require to move that amount of material. scale somewhat linearly. That said, there's limited additional wells required in the processing because the processing plan is fundamentally not changing. Again, it's upgrades of individual pieces of equipment and a ball mill, which doesn't have a huge load. But short answer your question, those we're always going to be requirements and what we've done, I think, quite prudently is staged the investment so that we didn't have to pre-invest in either the Village or the power any earlier than we needed to.

Elaine, I will touch on the development question. So in November '24, we deferred, I think, at the time, 36,000 meters of development to preserve cash. based on the mine plan there. What the team has done now, having looked at the life of mine have been very effective in further optimizing this plan to remove the 45,000 meters. So this is in addition. So one was a deferral. This is actually a removal, and elimination of 45,000 meters of development. I hope that clears it up.

Yes. And then can I ask one more question? Compared to the 5.2% previously at guidance, was the long-term great assumption of 5.4% driven by customers? And would you mind talking me through the trade-off there?

Okay. I'll take that one. On -- that we're currently guiding is basically a value-maximizing optimization we've done that see us right at the moment. We're the best option for us in terms of recovery and maximizing lithium units is to target 5.2%. When the team did the life of mine plan and looked at the optimization that the new plan upgrades provide, it came up to 5.4%. That would decide that, that is set in concrete. We will review year-by-year what we believe the optimal grade is to maximize value and extract the best lithium units from the organization. It is not driven by the market. The market will accept the 5.2% or the 5.4% because the price is adjusted by grade. So that's the price and the grade piece. Now how that value trade-off is done well is clearly an issue around the recovery curve that you have in your operation and what grade gives you the best recovery. And the middle urges will optimize this on a annual basis to determine based on the feed type, what that will give us.

Our next question comes from Hugo Nicolaci from Goldman Sachs.

Tony and team, firstly, congrats on the decision. No doubt being a rollercoaster to get back to this point. So congrats plenty of questions, but maybe starting firstly on the strategic side. You previously flagged the potential to do this expansion in staged incremental pieces to say sort of your 3.2 million, 3.6 million before 4 million to give you the flexibility of lithium prices decline and you need to go slower or we could look to accelerate the listing prices are higher. Is the plan still to keep that optionality in the build-out? Or does the relatively low capital intensity versus your current liquidity? I mean you're comfortable doing it all in one big go.

Yes. So Hugo, Ryan here. So look, broadly speaking, that strategy is one that we are still executing. So as we continue to debottleneck the plant, effectively, we're unlocking incremental capacity as we go. Obviously, some of it becomes a bit lumpy. So a ball mill, for example, adds more certainly grinding capacity than other kind of minor debottlenecking through the plant. Tony alluded in his remarks, about if the market does turn that we've got flexibility to make some decisions. And so at any point in time, we've got an option to defer, slow down the upgrades, and we'll end up at that capacity as we go. So if you have a look at that chart we provided about the spend over 18, 24 months at any point in time, we can slow down at that point, and we'll end up maybe at the 3.2, 3.6 or close to 4 million tonnes as you've alluded to. So that strategy hasn't changed. It's just that our intent with what we see ahead of us at the moment in the market is to execute that plan, but bake in that delivery flexibility as we go. Hope that makes sense.

Yes. And just to further reinforce what Brian is saying, you will get that as the ball mill gets installed and commissioned and the mine production meets that capacity, we will get that incremental tonnage out the door. So that's why you see the step-up in production from FY '28, '29 and ultimately to '30. So it's inherent in the ramp-up.

Got it. That's clear guide. And then maybe using that as a segue into the mining piece and maybe a little bit more in near-term, but we've seen a number of WA underground miners recently flagged productivity impacts from undergo mining perspective this quarter. Have you seen any similar impacts or have you been able to hit the 1.5 million tonne run rate this quarter? And then into that sector backdrop, how confident are you, you can get the people to not only ramp up to the 2.8 million tonne exit rate this year, but then build a new underground at the same time?

Yes. Hugo, I'll take that one again. So first of all, as Tony reiterated in the guidance, we are maintaining that [ 1.5 ] run rate for this first quarter, which is what we committed to 6 months ago, we're still very comfortable with. So that's the first point. The second point is that, again, we reiterated this in our full year results. The plan to go from 1.5 million to 2.8 million tonnes by the end of the financial year. which is underpinned by ramp-up in equipment, opening work fronts, et cetera, is all still part of the plan. And clearly, as part of getting new equipment, then our people need to come into the business. Part of the reason that we are partnering with mining provider that we have is that they are a Tier 1 provider. This is what they do for a living. They've got very deep reach both in terms of being able to get access to equipment, but also access to good quality people. And so again, broadly speaking, still very comfortable with that and their ability to kind of execute the plan we're working on together. Furthermore, we are -- as we go into the opening up of the Canam Corner underground, again, it's effectively executing that same strategy. And again, we're working closer to the department that. Now more broadly, we do note that the WA market is hot. And you've seen those comments from underground miners and those challenges do exist. But our big focus at the moment is around making sure that we are both by design and in practice, increasing productivity. So again, at our full year results, we spoke about the level design that we're doing in Mount Man to maximize productivity. So we're doing that as part of the design, if you like, but also in terms of in practice, making sure that we are streamlining processes, training people well, onboarding them well to maximize productivity is what all about because the -- because those headwinds, as you noted, to exist, let's say, 2 the design, the practice and the partnership that we have, and we are very comfortable that, that plan is executed.

Next question comes from Austin Yun from Macquarie.

And just 2 questions from me. The first one, just around the port situation, like I understand when there's adverse weather condition does impact your throughput and you did comment on that the government is looking to that. I'm just keen to understand if there is any role that the company can play to deconstrain or debottleneck. And also, how should we think about this logistic constraints given that you will be ramping up volume, should we anticipate a bit of a more pronounced swing quarter-by-quarter going forward more into '28 and '29?

Thanks, Austin. I'll get Grant who manages our logistics to comment on that.

Thanks, Austin. Look, I guess the surge that Tony talked about has been identified as an issue. It's been in the plan for general support to do some construction of a seawall to try and mitigate this impact that is underway and scheduled to complete I think 2028. So they are doing things to address it. I would say while the port is used to doing with surge events, August was unusually high in terms of the interruptions caused by surge where effectively the port was closed for 60% of the month. that is not normal, even in this period where you typically get more surge events. So what we can do is try and use the whole logistics chain that we've got to try and buffer to some degree. But ultimately, this is something the ports addressing, you think we can -- this is a kind of one-off and we should be back to normal in the future. But it does have not an impact, right, which takes a little bit of time to work its way through because it is a multipart user. So there's more than us on the path. But if you look at it, big picture. Bear utilization still remains quite low. So we don't really see any constraints there in terms of ramping up our volumes through that bit. However, we do have other options. So we're relatively consistent from Geraldton and Esperance. So there is some optionality there. Should we choose to explore that in the future. But at this point, we're comfortable with Joe.

Thanks, Grant. The second question is just around the portfolio. Don, you mentioned you're interested inorganic, so announced at the farming in South America. And now this brownfield expansion has finally settled. Just keen to understand from a group level perspective, it is the end of the CapEx cycle you a looking forward to further build up and build out new lithium platform?

Austin, good question. We've got a full agenda at the moment. Our focus is very much now going to be the successful execution, safely of the expansion works, which we're very confident about. Our investment in Argentina will have a very measured and disciplined ramp up. We've got a great partner in mix lithium and we will make some announcements around progress on that in due course. So at the moment, the focus is Kathleen Valley to its full potential opportunistic look at inorganic growth like the Centenario opportunity, and we continue to focus on what we can control.

Our next question comes from Lyndon Fagan from JPMorgan.

Just wanted to ask about the sustaining CapEx over the 5 years post expansion of $90 million to $100 million, does that include development spend? And if not, are you able to sort of shed some light on what we should be factoring into that?

Thanks, Linda. It's Tony. I'll get Greg to answer that question.