Graham Tanaka

Graham Tanaka with Tanaka Capital Management asked for a summary of factors influencing gross and operating margins over the next two years, potential cost increases or supply issues related to semiconductors, and the expected percentage of business from military spending, including defense margins.

Answer

CEO Raj DasGupta stated that margins improved in the current quarter and are expected to be maintained, with larger improvements anticipated when Jamestown cell production comes online due to vertical integration and 45X tax credits. He noted that input material price variations, like lithium carbonate, have a nuanced impact and can be offset by pricing adjustments. Raj DasGupta clarified that defense margins are expected to be higher, but the qualification and scaling process is slow due to rigorous testing and certifications.

Graham Tanaka with Tanaka Capital Management asked for a summary of the main factors influencing gross and operating margins over the next two years, including any impact from semiconductor content and cost increases. He also inquired about the potential percentage of Electrovaya's business coming from military spending, whether it will rise, and if defense margins are expected to be lower.

Answer

CEO Raj DasGupta stated that Electrovaya expects to maintain modest margin improvements (from 30% to 32%) in the coming quarters, with a more significant change anticipated from Jamestown cell production due to vertical integration and 45X production tax credits. He noted that input material price variations, such as lithium carbonate, have not had a noticeable impact on margins, and semiconductor content is not a major factor. Mr. DasGupta expects defense margins to be higher, but emphasized that the qualification process is slow and meticulous, leading to a gradual scaling in volume.

Graham Tanaka of Tanaka Capital Management asked about potential delays to NexGen's approval process due to a peer's hearing, the construction timeline post-approval, and the potential to accelerate Patterson Corridor East (PCE) production. He also questioned the logic of contracting any uranium at current prices given the bullish long-term supply deficit.

Answer

CEO Leigh Curyer viewed the peer's hearing date as a positive sign that NexGen's is imminent. He reiterated a 42-month construction timeline post-approval. On PCE, he confirmed it's 'absolutely possible' to accelerate development to meet market demand, subject to regulatory processes. Critically, Mr. Curyer clarified that NexGen is not contracting at current prices but at future market prices at the time of delivery, thereby preserving full upside exposure for shareholders, which is a key differentiator.

Graham Tanaka of Tanaka Capital Management asked about Michael Smith's current role, the timing and resolution of the Wabush mine situation, updates on other assets like Pea Ridge and China, the company's debt strategy, and the expected costs and returns of the planned bank acquisition.

Answer

CEO Gerardo Cortina and CFO Sam Morrow confirmed Michael Smith is highly active, focusing on the bank acquisition and Wabush. Regarding Wabush, they explained the focus is on retaking the mine through the CCAA process, which has an uncertain timeline. IR Rene Randall noted Pea Ridge is on hold due to prices, while the China medical business is performing well. CFO Morrow stated they are comfortable with current debt levels and will prioritize reinvesting in the trade finance business. CEO Cortina could not disclose bank acquisition costs but reiterated a long-term company-wide ROE target of 15%.

Graham Tanaka from Tanaka Capital Management asked for clarification on the quarter's tax rate, the nature of a reported gain on sale, the expected value of assets being liquidated, and the impact of foreign currency fluctuations.

Answer

CFO Sam Morrow explained the tax rate was impacted by intercompany transactions and a $7 million pre-tax gain on the sale of non-core hydrocarbon properties. President and CEO Gerardo Cortina stated they could not give a value for assets being sold due to low gas prices, hence the 18-month timeline. Sam Morrow added that realized natural gas prices were C$2.97 per mcf and that a $1.3 million FX gain resulted from a fully hedged euro-denominated loan.