Limoneira Co

Greetings and welcome to the Limonera second quarter fiscal year 2021 financial results. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Deirdre Thompson with ICR. Thank you. You may begin.

Good afternoon, everyone, and thank you for joining us for Lee Manera's second quarter fiscal year 2021 conference call. On the call today are Harold Edwards, President and Chief Executive Officer, and Mark Pelham Mountain, Chief Financial Officer. By now, everyone should have access to the second quarter fiscal year 2021 earnings release, which went out today at approximately 4 p.m. Eastern time. If you've not had a chance to review the release, it's available on the investor relations portion of the company's website at www.limanera.com. This call is being webcast and a replay will be available on Limanera's website as well. Before we begin, we'd like to remind everyone that prepared remarks contain forward-looking statements and management may make additional forward-looking statements in response to your questions. Such statements involve a number of known and unknown risks and insurgencies, many of which are outside the company's control and could cause its future results, performance, or achievements to differ significantly from the results, performance, or achievements expressed or implied by such forward-looking statements. Important factors that could cause or contribute to such differences include risk details in the company's 10 Qs and 10 Ks filed with the SEC and those mentioned in the earnings release. Except as required by law, we undertake no obligation to update any forward-looking or other statements herein, whether a result of new information, future events, or otherwise. Please note that during today's call, we will be discussing non-GAAP financial measures, including results on an adjusted basis. We believe these adjusted financial measures can facilitate a more complete analysis and greater understanding of Limonera's ongoing results of operations particularly when comparing underlying results from period to period. We have provided as much detail as possible on any items that are discussed on an adjusted basis. Also within the company's earnings release and in today's prepared remarks, we include adjusted EBITDA, which is a non-GAAP financial measure. A reconciliation of adjusted EBITDA to the most directly comparable GAAP financial measures is included in the company's 10Q and press release, which have been posted to its website. And with that, it's my pleasure to turn the call over to the company's president and CEO, Mr. Harold Edwards.

Thanks, Deirdre, and good afternoon, everyone. We are very pleased with our 14% second quarter top line growth and bottom line improvement. These results were driven by record second quarter lemon volume and improved pricing as well as strong avocado volume. Our focus on retail food and club grocery business continues to perform well. and we are beginning to experience an improvement in domestic food service and export sales as dining out increases from COVID-19 vaccine distribution. Additionally, due to our continued focus on cost improvement initiatives, our adjusted EBITDA improved to $6 million compared to a loss of $100,000 for the same period last year. Also, our real estate development project, Harvest at Limonera, continues to perform very well and I will discuss that in more detail in a few moments. I'll now discuss each of our business divisions performance for the second quarter starting with our agribusiness. Our agribusiness revenue was $44 million compared to $38.4 million in the second quarter of fiscal year 2020. Fresh lemon revenue was $28.7 million and compared to $25.3 million during the same period of fiscal year 2020. Our stronger results were driven by volume and price. Overall pricing was $18.79 average price per carton compared to $17.14 average price per carton. Fresh lemon utilization rates were 75% to 80% compared to 50% to 55% in the prior year period. Avocado revenue improved to $2.7 million compared to $2 million for the same period last year. Orange revenue was lower in the second quarter as higher prices of oranges were partially offset by the timing of our harvest. The orange season has had a slower start than anticipated. However, it is our expectation for fiscal year 2021 to have similar profitability on fewer cartons and acres dedicated to oranges. Specialty citrus and other crop revenue was similar to prior fiscal year period at $1.2 million. Turning now to our real estate development segment. We have now closed 524 lots since inception, including 66 lot closings in the second quarter of fiscal 2021 and 60 new lot closings so far in the third quarter of fiscal year 2021. The pace of home sales has been increasing this year, and as each quarter closes, we gain confidence in the timing of the expected $80 million of cash distributions from Harvest at Lima Nera over the next six years, beginning in fiscal year 2022. In addition, we believe there is the potential upside to our stated cash distributions due to increased number of housing units at Harvest at Lima Nera, as well as the potential opportunity of a medical campus in our East Area 2 development. As we enter our third quarter, we are very confident we will achieve improved year-over-year results due to our expanded footprint in retail, as well as the early signs of improving food service coming back online, both domestically and globally. We are encouraged by the record fresh lemon volume during our second quarter and the continued improvement in our cost structure. We expect positive cash flow towards the end of fiscal year 2022 from Harvest at Lima Nera and look forward to updating you on our agribusiness and real estate progress in the coming months. And with that, I'll now turn the call over to Mark.

Thank you, Harold, and good afternoon, everyone. For the second quarter of fiscal year 2021, total net revenue was $45.1 million. compared to total net revenue of $39.6 million in the second quarter of the previous fiscal year. Agribusiness revenue was $44 million compared to $38.4 million in the second quarter last year. Other operations revenue was similar to the prior fiscal year at $1.1 million. Agribusiness revenue for the second quarter of fiscal year 2021 includes $28.7 million in fresh lemon sales compared to $25.3 million of fresh lemon sales during the same period of fiscal year 2020. Approximately 1,528,000 cartons of fresh lemons were sold during the second quarter of fiscal year 2021 at an average of $18.79 per carton, compared to approximately 1,475,000 cartons sold at a $17.14 average price per carton during the second quarter of fiscal year 2020. The company recognized $2.7 million of avocado revenue in the second quarter of fiscal year 2021 compared to $2 million in the same period last fiscal year. Approximately 2.1 million pounds of avocados were sold during the second quarter of fiscal year 2021 at a $1.26 average price per carton compared to approximately 1.2 million pounds sold at a $1.64 average price per pound during the second quarter of fiscal year 2020. The company recognized $1.4 million of orange revenue in the second quarter of fiscal year 2021, compared to $2.7 million in the same period of fiscal year 2020, primarily attributable to decreased volume partially offset by higher prices of oranges sold. Approximately 154,000 cartons of oranges were sold during the second quarter of fiscal year 2021 at a $9.12 average price per carton compared to approximately 356,000 cartons sold at a $7.49 average price per carton during the second quarter of fiscal year 2020. It is our expectation for the second half of fiscal year 2021 to have similar profitability on fewer cartons with less acreage dedicated to oranges. Specialty citrus and other crop revenue was similar to the prior fiscal year at $1.2 million. Total cost and expenses for the second quarter of fiscal year 2021 was $42.7 million compared to $42.4 million in the second quarter of last fiscal year. Operating income for the second quarter of fiscal year 2021 was $2.4 million compared to an operating loss of $2.8 million in the second quarter of the previous fiscal year. Net income applicable to common stock after preferred dividends for the second quarter of fiscal year 2021 was $1.8 million compared to a net loss of $5 million in the second quarter of fiscal year 2020. Net income per diluted share for the second quarter of fiscal year 2021 was 10 cents compared to a net loss per diluted share of 29 cents for fiscal year 2020. Adjusted net income applicable to common stock for the second quarter of fiscal year 2021 was $1.8 million compared to an adjusted net loss of $1.5 million in the same period of fiscal year 2020 which excludes the loss on stock in Colabo. Adjusted net income per diluted share was 10 cents compared to adjusted net loss per diluted share of 9 cents for the second quarter of fiscal year 2020. A reconciliation of adjusted net income or loss to net income is provided at the end of our earnings release. Adjusted EBITDA was $6 million in the second quarter of fiscal year 2021 compared to a loss of $100,000 in the same period of fiscal year 2020. A reconciliation of adjusted EBITDA to net income or loss is provided at the end of our earnings release. For the six months ended April 30, 2021, revenue was $83.4 million compared to $81.2 million in the same period last year. The company recognized $2 million of lemon and orange sales in Chile by PDA and San Pablo and $2.6 million of lemon sales in Argentina by Trapani Fresh in the six months ended April 30, 2021. Operating loss for this first six months of fiscal year 2021 was $3.3 million compared to an operating loss of $11.3 million in the same period last fiscal year. Net loss applicable to common stock after preferred dividends was $2.5 million for the first six months of fiscal year 2021 compared to a net loss of $11.6 million in the same period last fiscal year. Net loss per diluted share for the first six months of this fiscal year was 15 cents compared to a net loss per diluted share of 66 cents in the same period of fiscal year 2020. For the first six months of fiscal year 2021, adjusted net loss applicable to common stock was $2.6 million compared to adjusted net loss of $6.6 million for the same period in fiscal year 2020. Adjusted net loss per diluted share was 15 cents compared to adjusted net loss per diluted share of 38 cents for the same period in fiscal year 2020. based on approximately 17.4 million and 17.6 million respectively weighted diluted common shares outstanding. Turning now to our balance sheet and liquidity, long-term debt as of April 30, 2021 was $128.2 million compared to $122.6 million at the end of fiscal year 2020. In December, of 2020, the company received $5 million of federal tax refunds related to the CARES Act and expects an additional $900,000 of California state refunds in fiscal 2021. Now, I would like to turn the call back to Harold to discuss our fiscal year 2021 outlook and longer-term growth pipeline.

Thank you, Mark. The COVID-19 pandemic continues to affect our food service business on a global basis. but we are seeing signs of improvement in the states and beginning to see early signs of improvement outside of the United States. The company believes it is prudent to not provide lemon guidance at this time until the COVID-19 vaccine is widely distributed and we begin to see consistent openings of the food service market. We expect the improved year-over-year results we experienced in the second quarter will continue with improved year-over-year results for the third due to slowly increasing demand from food service and export marketers, as well as improving cost control measures. We also have an additional 1,200 acres of non-bearing lemons estimated to become full bearing over the next four years, which will enable us to achieve strong organic growth for many years to come. The company expects 200 of the 1,200 acres to become full bearing in fiscal year 2021. Beyond these 1,200 acres, we intend to plant an additional 250 acres of lemons in the next two years that we believe will further build our long-term pipeline of productive acreage. We anticipate this additional acreage will increase domestic supply of lemons from our 2020 level by approximately 50% or about 900,000 to 1.3 million additional fresh cartons as the non-bearing and planned acreage becomes productive. We also expect to have a steady increase in third-party grower fruit. Also, due to continued steady improvement in the development of harvest at Limonera, we are confident we will generate cash distributions from harvest as follows. Fiscal 2021 is expected to be neutral. Fiscal 2022 is expected to generate $3 million of cash to Limonera. Fiscal 2023 is expected to generate $15 million. Fiscal 2024 is expected to generate $27 million, fiscal year 2025 is expected to generate $25 million, and 2026 is expected to generate $10 million. This will be $80 million of cash back to Lima Nera in the next six years. These expectations from harvest do not include the potential upside from increased density and housing at harvest, as well as the potential opportunity of developing a medical campus in our East Area 2 development. We expect to be in a position to provide greater transparencies on these opportunities later this year. And with that, I'd now like to open the call up to your questions. Operator?

Thank you. At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. Our first question is from Vincent Anderson of Seafull. Please state your question.

Yeah, thanks. Good afternoon, fellas. Hey, Vince. Hey, Vince. So, you know, I really don't have a more nuanced way to ask this other than, you know, we just saw lemon prices shoot up over 20% in the last couple of weeks, and I'd like to get your thoughts on that.

We saw it too. In fact, we're enjoying it. The price has gone up approximately $2 average per carton over the last month, and we right now are sort of averaging somewhere between Oh, sorry, Marshall has gone up $2.

That's $22 now.

Yeah, and it's at $22 right now is the average price. And as you know, Vince, embedded in that is a sort of assumed product mix between the fancy and the choice and the standard grades. But I think the real story for us, at least to date this year, has been the significant improvement in our fresh utilization, which is allowing us to keep our costs low while we're enjoying this – this rapidly inflating pricing environment.

All right. That is perfect. So then let's turn over to Argentina a little bit here. So, you know, your operations just still look exceptionally advantaged compared to what the rest of the country is dealing with. But now that we're seeing kind of labor and weather both impacting logistics as well as your competitors' yields, are you finally starting to see some pressure there? and maybe just what your outlook is for Argentina in general this year.

Yeah, so our game plan this year, as you know, there's three different production areas in California and Arizona that gives us the majority of our supply chain. So we finished the desert and we finished the valley, and now we're into the coastal lemon. And that used to be the lemon that carried us all the way through the spring and the summer. But what we've done is we've accelerated our harvest and our sales of that fruit. We're about 77% harvested now here and on the coast here in California. So now all of our attention will be down to the southern hemisphere out of Argentina and Chile. And we expect 1.2 million cartons to come in from Argentina and Chile. 50% will be our own produced fruit and 50% will be outside grower fruit. But we believe that fruit is coming in to hit an underserved market because of the smaller crop that we're dealing with here on the coast. So we believe, and to sort of the essence of your question, that we're really in perfect position this year to see the full benefits of our one world of citrus business model, where that southern hemisphere fruit will be filling a void of that's been created by the lack of certain grades and sizes that the market wants. And that's part of the reason that the price is driving up so fast is there's actually a shortage of certain grades and sizes.

And Vince, I might add, just so you know, in March and April, we had the rains down in Argentina, which really caused us delays of getting in. And we had a recent lockdown for, I believe, nine or 10 days. Just this last week, we got into our Santa Clara ranch and harvested 40,000 cartons. So it should play pretty well into the summer pricing increase. And I think we just have to be careful to get the fruit off by mid-August, which will have us still have stuff on the water through September. So it feels like it's going to play out correctly.

Okay. Excellent. And if I could just ask one more, and I'll hop back into the queue after. If we could talk hypotheticals, how do you feel about availability through the end of the year if food service were to come back strong? Now that you have all of this retail exposure, could you handle that demand coming back without potentially having to burn bridges by passing on business either on the retail side or the service side?

That's a great question. I think we're about to be in a supply side challenge versus a demand side challenge. You know, we've just come through 24 months of demand side challenges. So certainly the nature of your question is spot on. And if there are challenges in the next six months, it will be on having the adequate supplies to stay with our customers. But that said, I think our team has a pretty good handle on the actual supplies that we have access to, and we've just tried to be very realistic with our customer base so that we don't disappoint any of them. So I expect it to be, you know, a good scenario for all of us. You know, I think we'd always, you know, in these situations, you always wish you had more fruit, but we will, you know, we work very hard to not burn any bridges by making commitments we can't keep.

Perfect. Yeah, it'd be a great problem to have, so. All right, best of luck. I'll hop back in the queue.

Thanks, Ben.

Our next question is from Ben Bienvenu of Steven Think. Please state your question.

Hey, guys. Good evening. Hey, Ben. Good afternoon for you guys, I guess. I want to start maybe with Harvest. You made some comments in your press release and your prepared remarks about, you know, potential upside there. It seemed like potentially both in magnitude of the distributions and in timing. I guess maybe the best way to ask it would be, what do you need to see to confirm that potential upside and make it more formal versus informal at this point? And what should we be mindful of from our side of things?

So there's a little bit of a story that goes behind the answer to this, Ben. But as you may know, across the highway from the residential development harvest at Lima Nera, we had been working very closely with a number of different potential retail partners in the city of Santa Paula to get a big box retail investment to serve the residential needs of the harvest development. And just because the profile of big box retail has changed so significantly because of the internet's impact on retailing and big, big box retailers like Walmart or Target rethinking their physical plants and their physical buildings around the country and the world for that matter, it became pretty clear that a big box retail offering across the highway was probably not possible. And that then changed the attitude of the city of Santa Paula who were depending on those sales tax revenues to drive city funding. So the city has actually approached us and asked for additional ways in which they can generate more benefit from the harvest at Lima Nera project. And because the Lima Nera company is no longer going to build an elementary school because the student generation was a lot less than anticipated when we first started the development and also just student generation in general across the entire community has been much lower so that the unified school district didn't need to build a new school. It freed up 12 acres of property in the middle of the harvest development, and it also then allowed a 17-acre parcel that Lima Nera has that's within the Harvest at Lima Nera development plan for those to be contemplated as potential expansion areas. So the city is open to entertaining the idea of increasing more supply and more housing to the tune of potentially up to 500 new units as a way for the city to generate additional fees for them to meet some of their future financial obligations that they're trying to manage. So it seems like there's a pretty good opportunity for the city, and it seems like it'll be a great opportunity for the harvest at Lima Nera Project. But what's interesting about all that is because 17 of those acres is exclusively owned by Limonera, a big chunk of that benefit would come directly to Limonera versus coming through the approximately 50-50 joint venture that we have with our development partner, the Lewis Group of Companies.

I see. Okay, very helpful. My second question is on the fresh utilization rate. I think you mentioned that you were trending in kind of the 75% to 80% range on lemon fresh utilization. Is that where we should expect to be for the balance of this year in a tighter supply environment? Does it create the opportunity for higher fresh utilization? Or what should we be thinking about for the variables that determine kind of getting to the higher end of that range versus lower end of that range? Because I think if I recall, that's a fairly normalized kind of utilization rate range.

It's actually an excellent rate, but you're right. We target 75% and we've been trending at 75 to even a low 80% range. But the answer to your question is there's two pieces to it. There's the market demand piece, like do we have the right fruit for the market for the right for the fruit that the market wants? And as you know from the prior two years, the answer to that question has not always been yes. But the other side of it is the physiological impact that Mother Nature's had on our fruit. And as you recall, we had some really severe east winds earlier in the year that created a downgraded supply of our fancy or our first grade fruit and given us much more choice and standard grade fruit. And the challenge that that created initially was that most of that fruit's outlet is through food service. And so with struggling food service demand, which is now improving as the effects of the pandemic are becoming less and less, we're optimistic and I think very excited to see that demand returning back to normal. So given that, we fully expect that these fresh utilization levels should be maintained and continue, with the one caveat that when we get in and actually harvest the remainder of this fruit, it just is all going to come down to how much of it is sellable and how much of it is not sellable because the impact of the wind makes us have to send it to the juice plant. But I think it's realistic for us to think in terms of 75% to 80% for the remainder of the season.

OK. Yeah, I understand. OK, great. Thanks, guys, and best of luck.

Thank you, Ben.

Our next question is from Ben Cleave of Lake Street Capital Markets. Please state your question.

All right. Thanks for taking my questions this afternoon. A couple from me. First of all, it was really encouraging to see the gross profit you guys were able to command here in still relatively light pricing environment. I'm wondering, you know, beyond the fresh utilization rate being, you know, being so good, Can you talk about how your cost structure has evolved given the restructuring efforts that you guys have taken on and how much of the benefit of those efforts was seen on the cost of production versus SG&A in the quarter?

I'll take that one, Ben. Start with the SG&A side. SG&A, we've done an incredible job. As you know, through the pandemic, we've kept all of our people We've gotten everyone 95% vaccinated, and we've continued outside of conferences and travel to really support our employees. And year over year, our GNA has been down, which we feel really proud of. We went through a series of cost-cutting initiatives last year to the tune of north of $2 million from that side, and it really, really is showing now. From the production side, I think you'll note in the packing operations, our cost in the same current period versus prior period was approximately similar. on similar units, right at the heels of minimum wage increases here in California, which were a dollar or more. And we don't even keep our people at minimum wage. And then the opportunity to run more units through the house. We've had some of our biggest months in the history of the company. And as you know, as you run more units through there, it just completely adds on to hitting against those fixed costs. So I think the team, we're really proud of the team and everything they've come together, and it's nice to see these improvements coming through.

Got it. That's helpful. 95% vaccination rates. Congratulations, and may I suggest if you guys are looking for a side hustle to get into public health.

That's great. Okay.

A couple other quick ones for me. Harold, you talked a lot about the international opportunities and the return of the export market. I'm wondering if you can elaborate at all on this. Where have you seen the real improvements in this market? And then to what degree are you still seeing supply chain challenges driven by COVID versus that market really getting back to normal? you know, I know it's hard to consider kind of where this is going to be, but, you know, what ending do you think we're in here in terms of moving the export market back to a state of normalcy?

Yeah, I think we're still in the early innings because, you know, our primary markets, as you know from our prior discussions and conversations, are the Southeast Asian markets, and they've been extraordinarily cautious and continue to open and then pull back, open and pull back. So, Our Japanese demand is just beginning to get back to sort of pre-COVID levels. We had a little spike in demand that was caused by the container issue. You know, you've been reading about the challenges that the ports around the world have had and the challenges of containerized shipping. And the Japanese market really took it in the chin during a lot of that and created some supply chain disruption that artificially created some – some challenges for them on the supply side, which then resulted in us having to go back out and pipeline fill, which was really helpful for our business. But as it relates to just true demand in the Japanese market and even the Korean market, they're just now getting back to what we might have seen pre-COVID. We haven't seen that sort of euphoric spike in purchase behavior like we're seeing here in the United States. But we're hopeful that we will. And then, you know, we're moving quite a bit of fruit into Hong Kong and some of the other Asian markets as well. I'd say sort of anecdotally, we're probably at about 60 to 70% of what we would call normal export levels. But every week that's improving. We're the biggest spike in our business has been here domestically in the North American market. in the U.S., where we're just seeing just every week dramatic improvement and increases in volume as more and more people are going out to eat and drink in bars again.

Got it. Got it. Got it. It's all very encouraging. My last question, and we'll get back in queue. is regarding water. So, you know, with a, you know, looks like to be a pretty terrible setup for this year regarding drought conditions across the Southwest. You know, how does the current environment affect your outlook on your water rights? You know, anything you can elaborate on there would be helpful.

Well, I think the first thing to maybe say is that We're in great shape as it relates to our own ability to continue to irrigate and keep our agricultural production at full capacity with no cutbacks in any of our assets envisioned. Where the opportunities are beginning to crop up, and we're studying them very, very carefully and staying very close to them, but as you know and you've been reading, the scarcity that's coming around the Colorado River and sort of the systemic over-allocation of some of that water, and now with the pervasive drought really putting more and more pressure on certain parts of the constituents that the Colorado River serves, it's creating sort of an interesting new dynamic for the potential monetization of some of those water rights. So we're studying that very, very carefully. I would characterize our position in California as we're just making sure that we have ample access to our own water to continue to irrigate and keep our agricultural production in business. But there are certain parts of the state, and fortunately we're not as impacted as others that we know and farm around, but there are certain parts of the state that the allocation has gone to literally zero. So this is going to be a very, very difficult year for the state of California agriculturally. And you'll really get a, you know, you'll have a front row seat to view sort of the winners and the losers in that whole scenario. I would say that we're in great shape, which fundamentally, I guess, puts more and more value and intrinsic value on the value of that water resource. But we'll just have to see how it all plays out because There literally are allocations of 0% coming out of just a severely impacted, negatively impacted snowpack and rainfall that was just a fraction of normal for all of us in California this year.

Gotcha. Gotcha. Very good. Well, I appreciate all the color. That does it for me. I'll get back in queue.

Thanks, Ben. Thank you.

As a reminder, if you would like to ask a question, please press star one on your telephone keypad. The confirmation tone will indicate your line is in the question queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. One moment please while we poll for additional questions. Our next question is from Vincent Anderson of Stiefel. Please state your question.

Yep. Thanks. Hello again. So, you know, I'm not sure how much you can share, but, you know, with Lehman Air shares up nicely here year to date, I think it's just worth asking if you have anything you're allowed to, you know, communicate in terms of a lot of those intentions for their stake in the company.

No, not at this, at this point, we don't, we don't know of anything. And, you know, I guess originally I was, I guess we were under the impression that they would, were thinking that they would liquidate their position. But, you know, recent discussions I've had with board members and management at Colabo, I think they see a significant upside in their ownership of the asset. So the last communication we had with them is that they really were not intending on liquidating their position at this point.

So I think the only thing to add publicly is that they, in their most recent filing, I think was December or January, I can't recall, but they show adding shares actually. I think it was nominal in the 42,000 or something like that. But as far as we know, they're holding.

Okay, thank you. That's actually more than I expected to get, so I appreciate it. And then just a quick follow-up on the earlier question about exports and your comments on Chile. You're trying to build a footprint in China, and with the U.S. kind of getting more and more positive as the days go by, coming back to that same question about being able to serve all of the demand, How do you think about the priorities between building up demand in China now that Chile has access versus just getting it up to the U.S. where you kind of know what you'll earn?

No, that's a great question. And we're very optimistic and bullish on that Chinese demand. And the reason being that fundamentally, if every production area in the world is firing on all cylinders, we sort of exist in an oversupplied situation. So if that Chinese demand improves to a level that's material so a certain amount of the southern hemisphere can be diverted into that market, it just means that's less imported fruit that comes into the US market, which will give us a much better balance between supply and demand and give us more pricing power. So we think that Chinese demand is really significant and really important to develop and work. So we're doing that out of Chile and very hopeful that a large part of our production can find its way into the Chinese market.

All right, perfect. Thank you again. Great. Thanks, Vince.

There are no more questions at this time. We have reached the end of the question and answer session, and I will now turn the call back over to Harold Edwards for closing remarks.

Thank you very much for all of your questions and for your interest in Lima Nera. Have a great day. Thank you again.

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation, and have a great day.