AMG Advanced Metallurgical Group N.V.

Good day and welcome to AMG's full year and fourth quarter 2021 earnings conference call. This conference is being recorded. At this time, I would like to turn the conference over to Ms. Michelle Fisher, Vice President of Investor Relations. Please go ahead, ma'am.

Welcome to AMG's fourth quarter 2021 earnings call. Joining me on this call are Dr. Hein Schimmelbusch, the Chairman of the Management Board and Chief Executive Officer, Mr. Jackson Dunkel, the Chief Financial Officer, and Mr. Eric Jackson, the Chief Operating Officer. AMG's fourth quarter and full year 2021 earnings press release issued yesterday is on AMG's website. Today's call will begin with a review of the fourth quarter 2021 business highlights by Dr. Schimmelbusch. Mr. Dunkel will comment on AMG's financial results, and Mr. Jackson will discuss operations. At the completion of Mr. Jackson's remarks, Dr. Schimmelbusch will comment on strategy and outlook. We will then open the call to take your questions. Before I pass the call to Dr. Schimmelbusch, I would like to comment on forward-looking statements. This conference call could contain forward-looking statements about AMG Advanced Metallurgical Group. Forward-looking statements are not historical facts, but may include statements concerning AMG's plans, expectations, future revenues or performance, financing needs, plans and intentions relating to acquisition, AMG's competitive strengths and weaknesses, reserve, financial position, and future operations and developments. AMG's business strategy and the trends AMG anticipates in the industries and the political and legal environment in which it operates and other similar or different information that is not historical information. When used in this conference call, the words expect, believe, anticipate, plan, may, will, should, and similar expressions and the negatives thereof are intended to identify forward-looking statements. By their very nature, forward-looking statements involve inherent risks and uncertainties, both general and specific, and risks exist that any predictions, forecasts, or similar projections contained by such forward-looking statements will not be achieved. These forward-looking statements speak only as the date of this conference call. AMG expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in AMG's expectations with regard thereto or any change in events, conditions, or circumstances on which any forward-looking statement is based. I would now like to pass the floor to Dr. Schimelbusch, AMG's Chairman of the Management Board and Chief Executive Officer.

Thank you, Michelle. With regard to COVID, we continue to apply all safety measures at our disposal with the highest degree of attention in order to ensure our employees are working in the lowest risk environment possible. Fortunately, AMG has not experienced a facility closure or operational interruption. AMG continues to sequentially improve EBTA in the fourth quarter. All segments performed well during 2021 relative to the prior year, most notably our clean energy materials segment, where presently our major strategic projects are clustered. This segment continues to deliver strong EBTA, which increased more than three times over the prior year. Our critical materials technology segment was up 77% relative to prior year as an aerospace began its recovery. We continue to progress our key strategic projects. The construction of AMG Venelius' second ferrovenelium plant in Ohio, which will essentially double our recycling capacity for refinery residues, is nearly complete. Shell and AMG Recycling BLE continues to pursue circular refinery residue opportunities globally as project advances the goals of circular economy. To close the loop between fresh and spent catalysts is another building block for achieving the societal benefits for reducing global CO2 emissions compared to the mining of vanadium. At EMG Brazil, we are under construction expanding the lithium concentrate production from 90,000 tons per annum to 130,000 tons per annum. Our products are sold under long-term contracts with index-related price formulas. AMG's first lithium hydroxide production facility in Germany will have its groundbreaking ceremony in May. The design capacity is 20,000 tons of battery-grade lithium hydroxide, the first of five such modules. AMG's first LIWA lithium vanadium battery for industrial power management applications is proceeding as planned. The first AMG industrial battery has a power of 0.6 MW and will flatten the electricity demand curve of our traffic processing operations. A second Weaver battery is planned for Ohio with four times the power. These innovative Weaver batteries will be turned into a product line to compete with diesel engine power units for industrial applications. The environmental advantages are obvious. During AMG's Capital Markets Day on January 11, we explained our full lithium value chain. Several lithium resource projects are under valuation, leveraging our mining and processing expertise in Brazil. We have indicated that as regards to the expansion of EMG's lithium business, we are studying a partial sale to a complementary partner or alternatively an IPO. Obviously, any such dilution has to be justified by an increase of EMG's long-term shareholder value. I'd now like to pass the floor to Jackson Dunkel, AMG's Chief Financial Officer. Jackson?

Thank you, Heinz. I'll be referring to the fourth quarter 2021 investor presentation posted yesterday on our website. Starting on page three, this shows an overview of the financial highlights of the quarter. Revenue for the quarter increased by 30% to $330 million. This increase was mainly driven by the improving price environment, which led to higher sales prices across all three of our segments, particularly in AMG clean energy materials. On a full year basis, revenue increased by 29% to $1.2 billion in 2021, driven by higher demand across the business, positively impacting both prices and volumes. Q4 2021 EVA DA was $44 million, a 95% increase versus prior year. As you can see in the lower left corner, AMG continues to sequentially increase EVTA each quarter, which we have done since Q2 2020. On a full-year basis, EVTA in 2021 of $137 million was more than double the full-year 2020 EVTA. This increase was driven by increases in all three of our segments. Net income to shareholders for the fourth quarter of 2021 was $5.7 million compared to a loss of $2.8 million in 2020. Earnings in the fourth quarter of 2021 were impacted on a net of tax basis by three large non-cash charges. First, a $3.7 million write-off of unamortized financing expenses from the 2018 financing. Second, a a $4.7 million charge related to 2019 share-based compensation awards, which I will explain later in my remarks. And third, a $2 million foreign exchange charge due primarily to intercompany debt balances. Excluding these non-cash charges, AMG would have had net income to shareholders of $16.1 million, or 50 cents diluted earnings per share in the fourth quarter. and $24.2 million, or 77 cents per share, on a full year basis. Now I'll turn to a review of our three segments, starting with AMG Clean Energy Materials on page four. On the top left, you can see that Q4 revenues increased by 72% versus the prior year. This increase was driven mainly by higher prices in vanadium, tantalum, and lithium concentrates, offset by lower sales volumes, which are mainly due to the timing of shipments of each product. Gross profit before non-occurring items more than tripled compared to Q4 2020, mostly due to the improved price environment. Q4 2021 EBDA increased by $18.7 million versus the prior year due to the improved gross profit, and the $25.8 million result represented clean energy materials seventh straight sequential quarterly increase. Clean energy materials is the segment which is and will continue receiving the most capital investment within AMG. And the capital expenditures shown on the bottom left of $31.5 million mainly reflect our investment into the Zanesville Venetian Facility as well as our lithium hydroxide plant in Bitterfeld, Germany. Turning to page five and critical minerals, AMG critical minerals revenue increased 43%. to $79.4 million, driven by strong sales volumes of antimony and improved sales prices across all three business units. Gross profit for non-recurring items decreased by 2% in Q4 due to the continuing rise in energy and shipping costs. The segment was only able to partially pass these increased costs through to its customers. EVA DA during the quarter was $2.4 million lower than Q4 2020 due to higher estimated costs timing of shipments, and lower profitability driven by the higher energy and shipping costs. Moving on to AMG Critical Materials Technologies on page 6. Starting on the top left, you can see that Q4 2021 revenue increased by $4.5 million, or 3%, versus Q4 2020. This increase was due to higher sales volumes of titanium alloys and higher prices of titanium alloys and chrome metal, driven by stronger demand from our aerospace customers. As a result, Q4 2021 gross profit for non-recurring items increased by 46% to $22.4 million. AMG Critical Materials Technologies' Q4 EBITDA of $11.7 million increased $5.1 million from Q4 last year, primarily due to higher profitability in chrome metal titanium alloys. The company signed $85 million in new orders during the fourth quarter of 21, driven by strong orders in remelting, induction, and heat treatment furnaces from China, representing a 1.6 times book-to-bill ratio. This represents the strongest order intake since Q1 2020, when engineering received very strong aerospace furnace orders. In contrast, the current order intake is broad-based across engineering's product range. Order backlog was $188 million as of December 31st, 21, 21% higher than $155 million as of September 30th. On a full year basis, the company signed $227 million in new orders representing a balanced one times book to bill ratio. Turning to page seven on the presentation, On the top left, you can see that AMG's Q4 21 SDNA expenses were $39.5 million versus $26.1 million in Q4 2020. This increase was mainly driven by the reinstatement of the 2019 PSUs that I'll explain in a minute, as well as increased strategic project costs and higher share-based and variable compensation expense. On a full year basis, 21 SDNA expenses were $139.6 million. This was an increase of $21.8 million versus the prior year, but it was 3% lower than 2019. $10 million of the $22 million increase in SG&A from 2020 is due to expenses associated with the 2019 PSU Awards. AMG's PSU Awards vest over a three-year period, and as a result, the company expenses the awards over that three-year period. However, in 2020, AMG did not believe the 2019 PSUs, which vest in March 2022, would pass the ROCE hurdle due to the low performance that year. As a result, in 2020, the company reversed the expense, reducing SG&A by $4 million. The company's exceptional performance in 21 caused AMG to meet the ROCE hurdle, and therefore in 21, we reinstated those 2019 PSU awards creating a $6 million expense. Removing these two effects would have reduced the year-on-year SG&A change to $12 million, which is a 10% increase versus 2020. Importantly, AMG's adjusted 21 full-year SG&A expense is 7% lower than 2019. That 10% adjusted annual increase in SG&A from 2020 was due to higher variable compensation expense, travel and entertainment, and higher insurance costs. AMG's Q4 21 net finance costs were $12.6 million compared to $4.9 million in Q4 2020. This increase was mainly driven by the write-off of prior unamortized debt issuance fees during the quarter associated with the November refinancing and foreign exchange losses during the quarter. AMG recorded an income tax expense of $8.7 million in 2021 compared to 11.2 in 2020. This variance was mainly driven by improved financial performance offset by movements in the Brazilian REI versus the U.S. dollar. The effects of the Brazilian REI caused a 3.5 million non-cash deferred tax benefit in 21. Movements in the Brazilian REI exchange rate impact the valuation of the company's net deferred tax positions related to our operations in Brazil. AMG paid taxes of $9.9 million in 2021 compared to $12.9 million of cash tax payments, net of $3 million of refunds. In 2020, AMG paid $8.6 million in taxes, which was comprised of $18.5 million of cash payments, net of $9.9 million of refunds. The higher cash payments in 2020 were largely a result of payments of taxes owed from profitable prior years and the refunds in both years resulted from overpayment in prior years. Turning to page 8 of the presentation, you can see that on the top left that cash from operating activities was $30.2 million in Q4 21 compared to $11.4 million in the same period of 2020. Moreover, cash from operating activities was $90.8 million on a year-to-date basis, more than four times the total cash from operating activities for all of 2020. This underscores AMG's continued focus on cash generation as well as the increased profitability during 2021. AMG's return on capital employed for Q4 was 11.9% compared to 3.5% in Q4 2020, due to significantly higher profitability in the current period as the global economy continues to recover from the coronavirus pandemic. AMG ended 21 with $284 million of net debt. And as of December 31st, 21, AMG had $338 million of unrestricted cash and total liquidity of $508 million. In January 2022, AMG entered into $140 million of long-term bilateral unsecured performance-based guaranteed facility agreements. These guarantee agreements support expected customer advance payments, and replace the existing guarantee arrangements. In November, AMG entered into a new $350 million seven-year senior secured term loan B facility and a $200 million five-year senior secured revolving credit facility, which together replaced AMG's prior credit facility and extended the term loan maturity from 2025 to 2028. and revolver maturity from 2023 to 2026. Further strengthening AMG's commitment to environmental, social, and governance principles, we incorporated annual CO2 intensity reduction targets into the revolving credit facility, making it a sustainability-linked loan. We expect capital expenditures for 22 to be between $175 and $200 million. mainly driven by the finalization of construction for the Vanadium expansion in Ohio and expenditures related to the construction of the lithium hydroxide plant in Germany. That concludes my remarks. Eric?

Thank you, Jackson. Demand and prices of our products are fundamentally strong, driven by their criticality in the global transition to a lower carbon economy. Global logistics and energy costs are challenging, However, our hedging programs, contract terms, and end market price increases are, to a very large extent, covering these additional costs. We continue to focus on safety, operational improvement, risk management, and delivering our strategic investments on time and on budget, with the overriding operational and commercial objective to be the low-cost producer and sell at index market prices. Our spodumene production in Brazil continues to operate at full capacity and at costs below our initial estimates at the time of our investment decision. We delivered more than 91,000 tons of spodumene in 2021. Market index prices moved up in the fourth quarter and continued to do so in 2022 even more sharply. As we have stated, our spodumene production is fully sold at market index prices with a three to four month revenue recognition time lag due to contract and delivery terms. We are working to expedite the expansion of our annual capacity from 90,000 tons to 130,000 tons of spodumene. Our ferrovanadium spent catalyst processing business continues to perform very well and is the global environmental leader in this space. Ferrovanadium prices weakened in the fourth quarter due to year-end inventory positioning. However, index prices have increased by more than 25% since year-end and are presently $18.98 per pound in the United States. Our Zanesville facility is progressing as planned and commissioning has begun. The plant is forecast to achieve full run rate capacity in the fourth quarter of this year. The impact of the coronavirus was most significantly felt in the end markets for AMG critical materials technologies. However, the aerospace market continues to improve. illustrated by Airbus' recently projected 20% increase in deliveries in 2022. AMG Engineering's diversified portfolio enabled the business unit to sign $84.9 million in new orders in the quarter, 1.6 times book's bill. The chrome, metal, and titanium aluminide businesses are also benefiting from improvements in aerospace, and in the case of chrome, its diversified end market position. The three business units in AMG Critical Minerals continue to perform consistently well, although year-end seasonality and energy costs... AMG anticipates the company will increase overall staffing by approximately 5% to 10% in 2022 from 3,300 employees at year-end, with the full ramp up of the vanadium expansion in Ohio and continued progress in our lithium investments in Brazil and Germany. All of our businesses continue to operate with the highest focus on safety and without interruption from COVID. And in 2021, continue to deliver safety performance far superior to our relevant peer groups. I would now like to pass the floor to Dr. Schimmelbusch, AMG's Chief Executive Officer.

Thank you, Eric. In October 2021, we announced that we expected to exceed 150 million for full EBTA for full year 2022. In December 2021, we increased EBTA guidance for full year 2022 to a range between 150 million and 200 million. At the beginning of February, AMG increased its EBITDA guidance from full year 2022 to 225 million or higher, based on significantly improved market conditions in this year. We today reaffirm this guidance. At our coming annual general meeting, we will comment on the updates of our five-year EVDA guidance. In addition to our comments on future profitability, let me comment on our environmental ambitions. On our version of E in ESG, we are pleased with our E-Corp segment in 2021 enabling 79 million tons of CO2 reductions, 40% more than the 56.6 million tons of enabled CO2 reductions in 2020. Our CO2 reduction commitments. Our long-term direct scope one and scope two CO2 reduction targets are twofold. One, AMG commits to reduce its direct CO2 emissions 20% by 2030 from the baseline of 2019, that's before COVID, adjusted for the startup of our Sainsville facility. This is a total reduction of 125,000 tons of CO2. Two, AMG commits to increase its enabled CO2 reduction by 10% per year from 2021 levels through 2030. Substantive contribution will come from what we refer to as circular economy projects. Operator, we would like now to open the line for questions.

Thank you very much. Ladies and gentlemen, if you would like to ask a question, please signal by pressing star 1 on your telephone keypad. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. We will take the first question from our participants. Time to minister from ING. Please go ahead.

Good morning to you and thank you for the opportunity to ask questions. I have three, if I may. The first one is on spodumene pricing. What feasibility do you currently have with regards to spodumene pricing? Can I try and ask what kind of pricing scenario is currently baked into the guidance or the lower end of the guidance being the 225 million? And secondly is on the German hydroxide conversion facility. To what extent do the current dynamics in the lithium market alter the return expectations of this facility? In other words, if you would do a return assessment on current pricing, would it substantially differ from your base case scenario that you are forecasting or that you have been forecasting so far? And then the third question may be a bit premature, but so far do you see an impact of the current geopolitical situation on any of your metals? I'm thinking of, for example, vanadium. Russia has a sizable position in the supply chain. That's it for now. Thank you.

On spodumene pricing, I want to refer to our traditional policy not to comment on future commodity prices. But the visibility element in your question, we of course have delayed price implementation in our contract. So we we look forward pretty safely three months. From then on, we have to make assumptions. So that's a general statement. It's not exactly right because those contracts are different and not identical, but that's a general statement. The profitability of our hydroxide project or our hydroxide project is significantly positively enhanced by the recent price developments and of course recent price developments have to be continuing or stabilizing on that level in order to realize those positives As regards to vanadium, or as regards to Russia in general, Russia is a very large exporter of raw materials, metal-containing raw materials, and Russia-related areas, too. So vanadium, of course, is a, you know, I would say, originating from Russia. So, vanadium is a big item. Titanium is a very big item. Nickel is the same thing, but we don't see any interaction here. I'm not a sanction expert, but Sanctions rarely touch physical streams.

Thank you. If I may follow up on the first question. Can I assume that you have applied your typical conservatism to the 225 million? For example, for the second half.

We as an organization and in principle never deviate from conservative principles.

Thank you.

Thank you so much. We will take the next question from Faisal Qureshi from Jeffries. Please go ahead.

Hello. Yes. Thank you for taking my questions. So I think maybe just to raise Stein's question in a different way. So your prior guidance of $175 million at the time was assuming a, I think as you disclosed, a spodumene price of $1,600 per ton. So, I mean, do you think now that you would be conservatively assuming, let's say, somewhat higher than that, but not in line with the current spot prices. Then I think the second question I had was, given where spot gemini prices are now, are you seeing any elements of cost inflation? And also, will you invest a lot of or any working capital this year, given rising prices and given the fact that you released working capital last year?

When you mention 175, let me just simply make the correction and say 175 to 200 was the guidance at that time. So it was a range. And now we replace that range by... a number with an addendum of 4 higher. Now our formula pricing, our contractual pricings have several elements which include a minimum price and include index elements and it's a rather complicated calculation and it's very competitive how we do that so when you look at the spot prices of carbonate or hydroxide for example which are of course very divergent then they work themselves through to our formula and end up with a spot of wind price so we will benefit from, to a certain extent, of course, from those pricing cases. As it comes to the working capital, I would refer to Jackson, please.

Thank you, Heinz. And I'd also like to make the point, we've never tied guidance to a lithium price, so I'm not sure where you got that information from. On working capital, we... We'll have investments in working capital associated with the startup of our Cambridge II facility, so in Vanadium. But we will not have significant working capital investments because we're already shipping and producing et cetera in our spodumene, other than price increases, of course. But we'd expect to catch up on that over the year. So the only significant working capital investment really is in Vanadium.

Thank you.

Thank you. We will take the next question from Hank Vierman from CanPen. Please go ahead.

Yes. Hi. Good afternoon, all. Thank you for taking my questions. My first question is on the second vanadium recycling facility. You state that you plan to achieve full production run rate in Q4. Can you provide some more color on how this ramp up will look throughout the year and can you help us maybe a bit like around the contribution of that second facility already to your results this year? Will that be a loss also given that you are hiring people or How should we think about that?

Alex, you want to take this?

Sure. Well, I think we just simply said that we will be capable of producing at full capacity by the end of the first quarter. We are in the commissioning phase right now, so it's difficult to give you specific numbers, but I don't believe we will have any losses with regard to the startup. We've We've completed a significant amount of the hiring. So we look for Zanesville to be a very significant contributor, primarily in 2023, but near the end as we achieve close to full capacity in the fourth quarter.

And you might also remember that the plant has two complexes. The one is the hosting facility and then the melting facility. And the hosting facility will be commissioned first. Subsequently the melting facility. So the whole commissioning is a sequential procedure as usual in such situations.

Okay. And then on the critical minerals segment So you book substantially higher revenue in that segment, but your gross profit basically is flat year on year in Q4. And you state that that relates to higher shipping and energy prices. Given that energy prices have only moved up in 2022, and I think I've not checked for shipping costs, but I assume that they remain quite high. Do you expect this segment to maybe report results flat-ish, or maybe do you expect a declining gross profit in 2022?

Jackson? Yeah, so Hank, I'd point you to our revenue and EVDA graph that we have on page five, which shows that You know, despite the drop in gross profit versus Q4 of last year, it's flat versus Q3. So we think this is roughly the operating environment that we're going to be in. We're passing through increased pricing on shipping and energy. But, you know, our expectation is basically flat-ish quarter by quarter around $7 million. Okay.

Okay, clear. My third question is on your lithium. Yeah, you state again that you plan to, at least you are looking to potentially sell part of your lithium operations here to a third party or via an IPO. And in your comments, you stated that this might, under all conditions, it should benefit shareholder value creation. Could you maybe provide some more color on how such a sale of a minority stake could or potentially could create shelter value creation?

We have our five-year plan, which is very ambitious. But given our cash flow generation, is well financed without any outside infusion. That's partly true for increasing cash flow contributions. Now, as we have stated, we have modules. to go through to build in the hydroxide area given the demand in Europe for hydroxide and there are five and we are constructing the first and that is 20,000 tons each and therefore the execution of that exercise is very much dependent on resource availability. Consequently, we are involved in various stages of negotiations and evaluation, exploration activities in the area of lithium resources. these projects require partly substantial investments. And as we add those investments to our otherwise balanced five-year plan, it is logical to think about how to finance those. we have reduced our debt level and we are not intending to increase our debt level strategically and therefore the question is if there are very attractive expansion possibilities defined how do you finance them and And logically, one alternative or the main alternative is to dilute on the lithium side and invest that money into the lithium side. And that investment, that strategy can only be done or should only be done if the value created by those investments out-dilute the dilution. That is the complicated evaluation which we are in. We approach this now on a very focused basis because we want to have discretion behind us rather quickly in order to focus on execution and not be tied up in alternative organizational models. That's why we said we would announce that relatively quickly. Presently, we are discussing this with several financial institutions.

Okay, so just so I understand it, 100% understand it, is, so you, I mean, you raised capital last year, and now you've refined to debt. and you state in your press release that with your current liquidity, you can finance all the approved extension projects. So the way we should think about it is that if you decide to, let's say, sell part of your lithium business, it would be to pursue or to finance, let's say, new lithium projects. and possibly related to more, let's say, capacity on the supply side or, yeah, on the factory input side.

Exactly.

Okay.

Okay, that's clear.

Thank you.

Thank you so much. If there are no further questions at this time, Michel, I would like to turn the conference back to you for closing remarks. My apologies, we have new questions queuing. We will take the next one from the Standard Minister from ING. Please go ahead.

Yes, thank you, thank you. Two follow-ups, if I may. First one is maybe to give us a little bit more color on Bitterfelt and the nature of the price exposure that that operation will have. Will it be exposed to sort of the naked lithium price, or will the operation be sort of hatched to the margin between technical and battery-grade lithium? And my final question is more sort of philosophically, and partly catches up on Henk's question on the partial sale of a lithium stake. You will agree with me that AMG's current valuation is not in line with lithium peers. who are often more junior, and this might be partially linked to the complexity of the group. When you mention a partial sale of a lithium stake, is it not an option to monetize other business units, for example, in critical minerals, which, yeah, by the way, could also enhance your CO2 footprint? These are my two follow-ups.

Yeah, the difference between... The difference between storage materials and energy storage or electricity storage or battery materials and other materials is that there is a tendency to value those storage materials high, highly, relatively high. The reason for that is obvious. It is one, as we got to lithium, the energy transition in the car industry, but also beyond the car industry, in the energy storage area, in the stationary field, which is a huge area. And that relates to vanadium. And that ultimately also relates to vanadium and lithium in combination. So here you have a price discrepancy because there's a huge continuing sustainable demand shift because many, in my view, many environmental policies have forgotten about storage in the stationary area. So the multiples, if you want to shortcut this, the multiples applicable in lithium, for example, much higher than the market is applicable to certain other critical materials, areas. And that is, of course, an interesting observation as regards to allocation of capital. The sale of other portfolio elements is not on our strategic priority because they are very balanced producers of cash flow and it is rather difficult to think that we would sell excellent low-cost industry-leading niche producers at a very high price, which would then portfolio members, so it would be in a way financially silly. So that is not on our priority list. Should there be an extraordinary opportunity, we never say never. But that's not a very logical route. In the lithium area, of course, there's a very high-priced scenario happening, as you have stated. And therefore, it is a legitimate question if you have attractive acquisition opportunities to raise money in the lithium space in order to increase the lithium space and enjoy the high-priced lithium area by additional lithium assets.

So that's what we are doing. That's what we are studying.

And on the nature of the German exposure to lithium prices or to the margins?

I forgot that. I'm sorry. Our input and output contractual arrangements, we have a high priority to match those and to, as far as possible, have a conversion philosophy where you stabilize converters by the contractual arrangements being linked to certain index so that you reduce your long or short exposure.

Thank you. This is helpful.

Thank you. We will take the next question from Martin Verbeek from The Idea.

Good afternoon, it's Martin van Beek of the IDM. Firstly, I'd like to get briefly back to A&G Lithium. During the CMD, you mentioned that there were three strategic alternatives. During this call and the presentation, I only hear two. So does that imply that maintaining 100% ownership is off the table? And then attached to that, you mentioned that you would like to make a decision before the AGM. Is that still what you should expect?

Yeah, we want to be able at the AGM to clearly indicate where this journey, where the destination is. And you just mentioned something which is wrong. The 100% alternative is not off the table.

Okay. Then secondly... In the press release you also mentioned that you and Shell are still pursuing opportunities globally. According to me there are still two outstanding. Could you inform us about the status?

Very active.

And that means?

That the projects which we are pursuing are high-intensity projects which will lead to focused reports over time. And we are, there's a lot of activity ongoing in terms of preliminary feasibility studies, engineering work, travels, negotiations because the market for spent catalysts and the interest to link fresh catalysts to spent catalysts as a closed loop as a circular concept is the future of this refining industry Essentially, the refining industry is centered around catalysts because catalysts are the heart of a refinery. So if the fresh catalysts appear in the refinery eight months, 18 months later, very average statement, but 18 months later, you have spent catalysts. Spent catalysts typically are hazardous waste. So it is logical to have a loop. In an ideal world, you take the materials which you have in the spent catalyst, such as vanadium, molybdenum, and nickel, back the molybdenum and nickel part, for example, to take back into the production of fresh catalysts by refining those products accordingly and then making them able to be reused. Now, vanadium, that's different because vanadium originates from the oil, not from the catalysts. But vanadium, again, is an upcoming key material for the future of the renewable energy, because the stationary battery alternatives, the vanadium battery as a stationary battery route is a very competitive route. And it enables then this renewable energy, in particular the solar energy, to double its capacity utilizations. Because one of the major limiting factors of a low-capacity utilization is, of course, the intermittency, because the sun is not shining at night. But the battery can bridge that. And therefore, and it's a long story, but the pump hydro storage, the traditional storage namely the pump hydro power plants, out of various reasons, are not anymore very competitive. So therefore, the battery-based storage is a big future growth area, and nobody doubts, when you look at statistics and predictions and so on, that the vanadium battery plays a key role here. So these are the words that is an interesting observation that the oil industry by the very nature of vanadium appearing in oil in commercial quantities by recovering that oil and producing better materials helps the renewable energy to be more efficient. And that is a very big trend And therefore we are very active negotiating such structures with the refining industry.

So it's a matter of when these final investment decisions will be signed. But is it, because you have announced the initial talks for quite a while, is it something we should expect in the next six months, that you will sign one of those contracts for FID?

My personal judgment is yes.

Okay.

Thank you very much. Thank you. We will take the next question from Andreas Marko from Barenburg. Please go ahead.

Yes. Hi, everyone. Thanks very much for the presentation and for taking my questions. Two from me. The first one is can you comment on your hedging policies and how much of your energy costs are actually hedged in 2022? And the second one is on aerospace. I think that's probably a topic we haven't spoken a lot today, even though the technology division result was actually quite good, but also the intake of new orders. Can you comment on the outlook for FY22 and if the order intake for Q4 was more of a one-off rather than a continuation?

Thank you. The first question, if you... I didn't hear it quite well. What was the first question?

Yes, yes. So on your hedging policies, so how much of your energy costs are actually hedged today?

Well, our energy, our electricity costs in Germany are hedged in 2022.

At group level?

Well, I mean, there are a few... a few smaller energy things, but the major consumers of electricity, we have brought the electricity forward.

Okay, great. And then on aerospace?

On aerospace, we are very happy to announce By the way, we are also happy to announce that we are hedged. We are actually happy to answer both of those questions. We are happy that we are hedged because of the obvious movements in the electricity markets. We are also happy that, as Eric has touched on, the capacity utilization of our aerospace deliveries are creeping up rather satisfactorily and during 22 for example the titanium aluminide production which is our most innovative and very competitive material in the LEAP engine and other engine programs is fully utilized very soon So we are back in full production soon. And the other aerospace areas enjoy activities that, for example, the coating product line. It is generally known that we are the world market leader in coating of turbine plates in order to enable the turbine plates to operate under higher temperatures. and therefore reduce CO2 emissions materially. And that trend is ongoing. If I may say that the long-term trend in the operating temperature of the jet engine is of course advancing, going higher. There was a time when the operating temperature the future it might hit 2000 degrees Celsius and the difference between those developments is material science and the material science relates to the basic materials such as for example high performance steel being replaced by ceramics and and then whatever is the basis material has to be coated. And that is a big area. And we are deep in that area. One of our key areas in aerospace. And that's why our areas are so massively CO2 relevant.

So aerospace is in good shape.

Okay, that's good to hear. Thank you very much.

Thank you. That concludes today's question and answer session. We shall now like to turn the conference back to you for closing remarks.

This concludes our fourth quarter 2021 earnings call. Thanks, everyone, for joining and for your questions.

Thank you very much.

This concludes today's call. Thank you for your participation. You may now disconnect.