AMG Advanced Metallurgical Group N.V.

Good day, everyone, and welcome to today's ANG Q4 and full-year earnings release. At this time, all participants are in a listen-only mode. Later, you'll have the opportunity to ask questions during the question-and-answer session. You may register to ask a question at any time by pressing star 1 on your touch-tone phone. Please note, this call may be recorded. It is now my pleasure to turn today's program over to Michelle Fisher. Please go ahead.

Welcome to AMG's fourth quarter 2022 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 2022 earnings release issued yesterday is on AMG's website. Today's call will begin with a review of the fourth quarter 2022 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 expressly refer you to our statements on forward-looking statements and the meaning thereof. as we have used at all previous occasions and we will use at this earnings call, and which explanatory statement has been published as part of our financial presentation and at our website, all in connection with this earnings call. I will now pass the floor to Dr. Sherman Bush, AMG's Chairman of the Management Board and Chief Executive Officer.

Thank you, Michelle. AMG's full year 2022 EBTA revenue, cross-profit, operating cash flow, return on capital employed, and net income were the highest in the company's history by significant margins. This result was driven by the AMG clean energy materials segment, specifically AMG Lithium and its Brazil operation, and an EBTA contribution of 215 million or 63% of AMG's total EBTA for the year. We have been able to increase our enabled CO2 reduction portfolio from 79 million metric tons in 2021 to 99 million metric tons in 2022. In addition, we reaffirm our two-branched commitment to reduce our CO2 emissions and increase our enabled CO2 savings through 2030. We have brought AMG's largest investment project to date, the Sainsville, Ohio, Vanadium Recycling Construction Project to completion on time and on budget. and we expect to reach full production in the second quarter 2023. The spodumene production expansion from 90,000 tons to 130,000 tons in AMG Brazil is on schedule, and the objective is to be full capacity in the second half of 2023. The AMG Lithium Refinery in Bitterfeld, Germany, Europe's first lithium hydroxide refinery is under construction, and commissioning for the first 20,000-ton module in the battery-grade lithium hydroxide upgrader will commence in the fourth quarter of 2023. It took us several years, more than five, to build a lithium business. In 2022, obviously, we made significant progress. We expect that progress to unfold as we gain access to additional resources to support additional hydroxide modules. We have integrated our tantalum operations in Brazil into a joint venture with Nippon Mining and Metals, the world leader in the tantalum downstream market. Our tantalum operations are an important contributor to the Mibra mine being such a low-cost spodumene producer. With the expansion of spodumene, our tantalum production increases from 2,060 pounds per year to 370,000 pounds per year. Shell AMG Recycling PV is advancing its project in the Middle East, in particular the first phase of the Supercenter project based on a long-term supply agreement with Aramco. Plant design, optimization, site selection, and permitting activities are progressing, and the so-called FEL3 partnering with Hatch Engineering began in December 2022. Lever Power Management Systems, BV, a new company, has built and successfully commissioned the first AMG hybrid energy storage system and the battery for industrial peak shaving application and it is expanding at the same location to provide an internal grid to rooftop solar energy integration. We also sold our first HES battery in December to WipoTech GmbH Several HES projects are in various stages of implementation. LIWA Power Management Systems has contracted the building of these batteries with AMG Engineering. Before I pass the floor to Jackson Dunkel, AMG's Chief Financial Officer, AMG reaffirms its guidance for the full year 2023 to exceed 400 million EBITDA. Now, Jackson.

Thank you, Heinz. I'll be referring to the fourth quarter 2022 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 18% to $390 million. This increase was mainly driven by the improved price environment relative to Q4 21, primarily in our AMG clean energy materials segment. Q4 22 EBITDA was $104 million, 137% increase versus the prior year. As you can see in the lower left corner, AMG continues to sequentially increase EBITDA each quarter. As for our full year, EBITDA was $343 million, or 151% higher than in 2021. Net income to shareholders increased substantially to $61 million for Q4 22, yielding $1.85 of diluted earnings per share compared to 18 cents in Q4 21. On a full year basis, AMG's 22 diluted earnings per share were $5.73 versus the 44 cents in the prior year. AMG intends to declare a dividend of 70 euro cents per ordinary share for 22. Deducting the interim dividend of 30 euro cents paid in August 22, this results in a proposed final dividend per share of 40 cents. Now I'm going to review our three segments. Let's start with AMG Clean Energy Materials, which is shown on page four of the presentation. On the top left, you can see that Q4 22 revenues increased 53% versus Q4 21 to $176 million. This increase was mainly driven by higher prices in vanadium, tantalum, and lithium concentrates, as well as increased sales volumes of vanadium and tantalum concentrate. The higher prices and volumes in full year 22 propelled revenue for the segment to 75% higher than in 21. Q4 22 EBITDA increased to $80 million from $26 million in the fourth quarter of 21. The segment's full year 22 EBITDA of $259 million was 289% higher than 2021, largely driven by the lithium business. On a sequential basis, Vanadium profitability was impacted in Q4 22 by a 16% drop in index prices from the third quarter and the impact of startup costs for Zanesville. As you saw, we disclosed four new key performance indicators for our Brazilian lithium facility. The figure I would like to highlight is the cost per ton delivered to China, which was $461 per ton for 2022. This is a world-class result, and it is partially due to having a very strong tantalum business. As we have previously discussed, the tantalum revenues are used as a cost offset to the cost per ton of spodumene. This effect was particularly noteworthy in Q4, where the cost per ton figure was positively impacted by very high shipments of tantalum. On a sequential basis, as we foreshadowed in the third quarter, our spodumene volumes were down in Q4 versus Q3-22 because of shipment timing. We recognize revenue when our product reaches port in China, and our control over those schedules is limited. On a profitability basis, the lower shipments were offset by a higher sales price in Q4 versus Q3. And finally, the quarterly capex shown on the bottom left of $33 million mainly reflects our investment into the Zanesville Vanadium facility, but also the investment into a battery-grade lithium hydroxide plant in Bitterfeld, Germany, and the expansion of our spodumene capacity in Brazil. Turning now to page 5 of our presentation, which shows AMG Critical Minerals. AMG Critical Minerals revenue for the quarter decreased 13% to $69 million compared to Q4 21 due to lower volumes across the segment. On a fuller basis, revenue increased by 18% compared to 21. Q4 22 EBITDA increased 117% compared to Q4 21 to $14 million due to low energy costs at AMG Silicon. Improved prices during 22 led to a 23% increase in the full year EBTA for the segment compared to 21. The low energy costs in silicon in Q4 were driven by the shuttering of two of our four furnaces in silicon. Because we had purchased 100% of our power for 2022, we were able to sell a portion of that power contract back and reduce our costs significantly. As noted in Q3, we also sold silicon's 2023 power purchases These sales created a gain in Q3, but this gain was excluded from EBITDA. And finally, although we have decided to restart run furnace in March of this year in order to satisfy outstanding customer contracts, we're not intending for this to be a long-term decision, and we'll decide quarter by quarter whether to continue to run. Due to these interruptions in the silicon business, the financial results will be excluded from EBITDA during this period of abnormal operations. To be clear, our guidance to exceed $400 million of EBITDA in 2023 assumes zero EBITDA for silicon. Moving on to AMG critical materials technologies on page six. Starting on the top left, you can see that Q4 22 revenue increased by $9 million or 7% versus Q4 21. This improvement was due to higher sales volumes of titanium aluminides and higher chrome metal pricing. Full year 22 revenue was 19 percent higher than in 21 due largely to the improved price environment versus 21 associated with the continued recovery of the aerospace market. As noted in the press release, there was a market dislocation in the chrome metal supply chain, which caused a $1.6 million inventory write-down and negatively impacted margins for the quarter. We do not anticipate any further impacts on earnings as a result of this market disruption. EBDA was 10 million during the quarter compared to 12 million in the fourth quarter of 21. The decrease is due to the aforementioned chrome market dislocation, offset by stronger profitability from our engineering business. Full year 22 EBDA of $45 million was 15% higher than 2021. AMG Engineering signed $67 million in new orders during Q4 22, driven by strong orders of turbine blade and induction furnaces, representing a 1.28 times book-to-bill ratio. In January of 23, there was $44 million of new orders, largely due to turbine blade coder sales. Order backlog at the end of the year was $220 million, the highest since March 21, 2020. Turning now to page 7 of the presentation on the top left, you can see that AMG's Q4 22 SG&A expenses were $37 million versus $40 million in Q4 21, with the decrease due to lower share-based compensation expense associated with the reversal in 2021. Full year 22 SG&A expenses were $148 million, 6% higher than 21 due to increased professional fees associated with our strategic projects offset by the lower share-based compensation expense. AMG had net finance income in Q4 22 of $4 million compared to a cost of $13 million in Q4 21. This variance was mainly driven by foreign exchange gains of $10 million during the quarter, which were due to non-cash intergroup balances. AMG capitalized $1 million of interest costs in Q4 22 versus $4 million in the same period last year, driven by interest associated with the company's tax-exempt municipal bond supporting the vanadium expansion in Ohio. This decrease is due to a portion of the municipal bond interest costs, which are no longer being capitalized due to the ramp-up of production at our Zanesville facility. AMG recorded an income tax expense of $84 million in 22 compared to $9 million in 2021. This variance was mainly driven by enhanced operating results in AMG lithium at its Brazil operation, coupled with movements in the Brazilian REIA. The effects of the Brazilian Real caused a $7 million benefit in 22 compared to a $4 million tax benefit in 2021. AMG paid taxes of $42 million in 2022 compared to tax payments of $10 million in 2021. The higher cash payments in the current period were largely a result of improved operating results. Turning to page eight of the presentation, on the top left, you can see on the top left that cash from operating activities was $57 million in Q4 22 compared to $30 million in the same period in 2021. This increase in operating cash flow was due to the higher profitability during the current period. AMG's return on capital employed for 22 was 30.8%, more than double the 11.9% achieved in 21 due to significantly higher profitability. AMG ended the year with $330 million of net debt with the increase versus 21 due to the significant investment in growth initiatives. As of December 31st, 2022, AMG had $346 million of unrestricted cash and total liquidity of $532 million. It is important to note that we increased our unrestricted cash balance year over year despite spending $190 million on CapEx, $34 million on debt reduction, $20 million in dividends and $67 million in working capital. CapEx for 23 is expected to be between $175 and $200 million, mainly driven by the lithium concentrate expansion in Brazil and expenditures related to the construction of a lithium hydroxide plant in Germany. That concludes my remarks. Eric?

Thank you, Jackson. AMG's operations continue to perform exceptionally well during the fourth quarter of 2022. especially in the context of today's volatile and challenging global markets. Ferrovanadium index prices in North America fell from $23 in the third quarter of 22 to $19.50 in the fourth quarter of 22. Today's spot index price is $19.25. However, prices in Europe and China, which led to global weakness, have stabilized and, in fact, increased in the latest reporting periods. We see the adoption of vanadium flow batteries, including our LEVA batteries, as being a significant positive for the global vanadium market. Our spent catalyst processing facility in Zanesville, Ohio, started melting operations on October 29, 2022, and we expect to achieve full production capacity in the second quarter of 2023. We are completing the hiring and training of the additional staff required to operate the facility on a 24-7 basis. As noted last quarter, this means that our 2023 production volumes will be somewhat back-end weighted for the year. The spodumene production expansion project in Brazil is proceeding on schedule. We expect to be operating at the 130,000 ton level in the second half of this year. We believe, net of co-product credits, we are at or near the lowest end of the global spodumene cost curve. As announced, AMG Brazil has entered into a strategic partnership with Nippon Mining and Metals for the production and supply of tantalum concentrates from our Mibra mine. All tantalum concentrate will be sold at market prices, providing long-term certainty and stability in tantalum sales volumes. and corresponding byproduct credits to our lithium production costs. This further solidifies AMG's low spodumene production position. Over time, the tantalum expansion will increase, as Heinz mentioned, from 260,000 pounds to 370,000 pounds per year in line with the spodumene expansion. AMG Lithium's battery-grade lithium hydroxide refinery in Germany is under construction, and commissioning for the first 20,000-ton module will start in Q4-23. In January 23, we announced approval for a vanadium electrolyte plant expansion at AMG Titanium in Nuremberg, Germany. The target capacity is 6,000 cubic meters of vanadium electrolyte produced from secondary feedstocks. Basic engineering for the plant was completed in November, and production is expected to start near the end of 2023. Total energy costs were $16 million higher in 2022 versus 2021, with the majority of this increase being at our silicon business in Germany. That business benefited from fully hedged power costs for the year. while other business units benefited from long-term electricity contracts that did not have price escalation clauses. The business units that did experience energy cost increases were substantially able to pass the increases on to customers. AMG Silicon Metal Plant in Germany, which has been on care and maintenance since the beginning of 2023, will restart and operate one furnace in March, And as Jackson mentioned, we will continue to review operational parameters of the silicon business and adjust as appropriate in line with market conditions. In terms of our critical materials technology segment, AMG Engineering had a book-to-bill ratio of 1.28 a year end and is presently experiencing very strong order intake in the early part of the year. As Jackson noted also, our chrome metal supply chain was impacted by the Ukrainian crisis during the first half of 2022, requiring us to secure additional raw material volumes at fixed prices. In the fourth quarter of 2022, the disruptions to the supply chain were alleviated and chrome metal prices fell dramatically. We anticipate increasing overall staffing by approximately 5% in 2023 due to the hiring associated in Zanesville and the lithium expansion in Germany. We continue to focus on safety, operational improvement, risk management, and delivering our strategic projects on time and on budget with the overriding objective to be the low cost, highest quality, and most environmentally responsible producer in all of our businesses. I would now like to pass the floor to Dr. Heinz Schimmelbusch, AMG's Chief Executive Officer.

Thank you, Eric. Summarizing all of this, as I previously stated, AMG reaffirms its guidance for the full year 23 to exceed 400 million EBITDA. On occasion of the May 4th Annual General Meeting, we will update our five-year EBTA guidance. Lastly, we invite you to join our Capital Markets Day, as announced earlier this week, in person next month. The day will focus on AMG Lithium and include a tour of our lithium laboratories in Frankfurt. We will also highlight our commercial industrial battery hybrid energy storage system. Please see the Capital Markets Day flyer available in the homepage of our website for more information on that event, which will take place on March 30th. Operator, we would now like to open the line for questions.

Absolutely. At this time, we will open the floor for questions. If you would like to ask a question, please press the star key followed by the one key on your touchtone phone. Questions will be taken in the order in which they are received. If at any time you would like to remove yourself from the questioning queue, please press star two. Once again, to ask a question, please press star one. And we'll take our first question from Stijen Benister From ING, your line is open.

Three questions, and I will ask them one by one if that's okay.

The first one is on the outlook. What gives you the confidence to reiterate the guidance noting that Chinese carbonate prices are currently in decline, which I expect to impact European allies of the second quarter? Is it based on your expectation that lithium prices will stabilize at some point, or are there other elements that I'm missing that should safeguard your profitability amidst this softening price environment? Maybe it's also useful here to remind us how your lithium contract pricing mechanism works, being linked to carbonate prices and not to spotting market prices, as there still seems to be some misunderstanding in the market on this one. That's my first question.

Well, our statement on supporting the guidance given earlier is based on the particular, of course, assumptions on prices for our lithium products and the prices below the present prices and are conservative. we don't have any reason to reflect the changes, the somewhat softening of the prices in lithium in changing our guidance stance.

Okay, understood. Second one is on Brazil. I'm assuming that the ramp up towards the 130K tons could cause some disruptions. So how should we see quarterly phasing of volumes for 2023 as to spodumene?

Well, the switch from 90,000 ton to 130,000 ton production level requires a certain shutdown for a few weeks. And that occurs in the twilight between the second and the third quarter. And it's difficult to exactly... So whenever that occurs, it will affect maybe a little bit the second quarter and will also affect the third quarter. However, even given the lower prices, the third and the fourth quarter will be coming back to very strong performance. Let me reiterate what Eric Jackson has said earlier. We are a low-cost producer in spodumene. So our hedge against softening prices, if they do soften, is mainly that we are very profitable at whatever prices.

Understood. And then a more open-ended question before I put myself back into the queue. We see an increased push from auto OEMs and battery manufacturers for vertical integration into lithium mining and lithium refining. Would AMG be open to such a construction whereby you sort of have a longer-term commitment than sort of the MOU and off-stakes that are currently in place or being planned?

That is a very interesting question. There's a lot of movement in the market on this. Every week you have another announcement of a prominent OEM company buying something or who is rumored to buy something. We are a very well-structured lithium strategy operator. We execute a very well-structured strategy. It's not in question. It is defined and it's being executed. And I several times have said, that we have a very low cost and stable and expanding mine. We are exploring in Brazil. We are operating on several resource projects, not by buying them, but by leveraging our technology know-how, helping development exercises of miners, which don't have that know-how, and by long-term contracts into Germany, which we, of course, can do because we have a refinery strategy, and then by executing, if successful, on the resource side, by executing the module strategy in Germany, up to 100,000 tons presently infrastructure enabled. So that's a given. It's a very attractive strategy. It has attracted the curiosity of many OEMs. And we are very friendly to everybody because, of course, we are looking for customers. And that is what we are doing. We are observing happily that the prices of lithium assets are very healthy as regard to the rumored acquisitions and also to the acquisitions which have been executed, for example, by General Motors. So everybody has, all the OEMs are apparently developing their M&A strategy because it has now dawned on everybody that that maybe is a hedging strategy against a continuous scarcity of lithium in the market. Let me quickly add something. The idea that the that suddenly this lithium thing is over, this lithium scarcity is over, is understandable. There is a trend which might be interrupted temporarily by things like a standstill of COVID nature in China, temporarily interrupted, but the basic trend in demand is very strong as the automotive industry globally, and in particular in China, is irreversibly geared to the e-car movement. And by the way, the motivation of the e-car movement in China is based on an irreversible desire to clean up cities and to relocate the CO2 emissions associated with fossil fuel power plants outside the cities in order to make them livable. And that's a necessary condition of the future of China and therefore it is irreversible. That's the demand side in China, the demand side in the rest of the world I don't have to comment on as every automotive OEM is announcing the end of its traditional engine over time. That is the trend on demand. I think it's irreversible. The trend on supply has also a very specific characteristic, which is that it is more complicated than analyzed. It's more complicated to bring additional lithium projects online than analyzed. We know that firsthand. And I mentioned it took us five years. So it was also much longer than we believed it would take. It is a complicated business. The chemistry of each of the resources is individual, and the technologies have to be adapted. We are one of the most... We invested enormously in our technology, in our intellectual properties, as regards to Li Xiong. We are a leader in those fields, which includes the solid-state batteries. So we know that the development is challenging and will lack the building of downstream facilities. It's easier to build a downstream facility than to build a mine. I just wanted to take the opportunity to say this.

Thank you.

That's indeed very helpful.

That's it for me now. I'll put myself back in the Q&A before to other analysts.

And our next question comes from Martin Dindriver with ABN AMRO. Your line is open.

Yes. Thank you. Good morning, afternoon, gentlemen. I would like to come back to Stain's question. what's happening in terms of vertical integration. I'm going to rephrase the question a little bit differently. An IPO seems less likely. You said that the strategic sale is still under consideration. But if an OEM were to value not only the current operations, but also train two, train three, train four, and the Brazilian conversion plans, would you then change your opinion in terms of your strategic options or will you remain in control? That's question one.

The future of AMG is that we will, and we will announce that I think more specifically in the annual general meeting period or at the annual general meeting, the future of AMG is a parent company with three particular subsidiaries. And these particular subsidiaries will be not segments, but subsidiaries which are commanding management. One of them will be AMG Lithium. AMG Lithium has been formed. It is a company, it has a board, it has a management. And the other parts, vanadium and technologies, to be announced later, will be then following as the other two subsidiaries. You should note that at one point in the past, we were planning to take technologies public. It was running into the COVID war and was therefore put on ice as the aerospace industry was practically going to a standstill. The aerospace industry is far from a standstill right now. We experience a very strong recovery. So I want to say this not in order to predict something, revitalization of such an IPO. I want to say it because we are wide open to utilize valuation discrepancies in the context of such big trends the aerospace trend which was interrupted the lithium trend and the vanadium trend which is now emerging in light of the vanadium battery surge so that's the background we are wide open to now this is all a very complicated question you know I don't want to hypothetically say what, I don't want to comment what would happen if somebody comes and has a wonderful price on one of our assets. And if, then we would do all sorts of calculations, yes, but we wouldn't have a dogma. We wouldn't have a dogma. We are opportunistic people, all guided by that we want to increase the long-term value of AMG critical materials as an enterprise which has shareholders we want to make happy.

Got it. Got it.

I'll move on. In this quarter, there was an $11 million cash-in described as advanced contributions. Is that for the Tantalum deal with Nipple? And if so, how did you account for that in the fourth quarter? Did that have a P&L impact in the fourth quarter? And on top of that, is there more to follow or is this it? That would be question two.

Yeah, so you can see it in our cash flow statement. We put it, carved it out, advanced contribution of $11 million. There is $14 million left to come, which will come in the first quarter.

but it does not have a P&L.

It has no P&L impact.

Let me add, please. Let me add something because it's an interesting question. Behind that question is that when you look at the past, our tantalum marketing strategies were variable and risky because the contracts were limited in time and limited in quantity and it was changing customers and it was customer risks involved and which also were impacting at certain years our EBTA. So we are extremely happy after years of negotiation to have entered into this joint venture with a very prominent company in Japan. which is, among many other things, a world leader in downstream tantalum products and is very interested also in higher volumes, which we have to produce as a byproduct of higher volumes of lithium. So not only is that now a very significant contribution to the low-cost nature of our lithium operation as the tantalum part takes a more stable and larger and growing part of the mining expenses. But it is also stable and predictable and de-risking the whole by-product sales credit for the lithium business. So it is a major achievement in the year 22. It shouldn't be overlooked as another little announcement. This is a very major joint venture with one of the world leaders in the industry.

And just to come back on what you said on Tantalum being a cost credit to the lithium business, Jackson, did I understand you correct that when you were talking about those production costs for lithium at the 460 that you mentioned, that's after the 10th of them credits or it's before the 10th of them credits? After.

After.

After.

Okay. Would you be willing to share with us what... No. Before you finish the question. But... This is a standard way to calculate cost per ton. No, no, I'm just saying it's a standard way to calculate cost per ton that we include all byproduct credit against the production of spodumene.

You see, I could foresee your question. I'm prophetic.

It was easy, this one. It was easy, this one. Okay, and my final question is on liquidity. You mentioned the 532 that you have available that includes all approved capital expansion projects. Just to be absolutely sure, that excludes further trains in Germany and that still excludes the Brazilian conversion plant, right?

Sorry, you said 532 liquidity, and then you switched to CapEx. CapEx 175 to 200, that includes Germany. No, no, no, no. Yeah, go ahead. Repeat the question.

It said in your press release, yeah, it said in your press release that your liquidity is 532, and that covers all required CapEx for all the approved capital expansion projects.

And I just wanted to make sure that I understand. So technical grade is not approved. Correct.

In Brazil.

Got it.

Technical grade in Brazil. Technical grade carbonate is approved as regard to the feasibility study work and the basic engineering. Right. So which is presently underway.

Yes. And just to make absolutely sure, train two and train three are not officially approved yet.

No, they are not.

They are awaiting resource development.

Thank you very much, gentlemen. Thank you.

And our next question comes from Richard Hatch with Barenburg. Your line is open.

Thanks. Yeah, thanks very much for the call and your time. A few questions. The first one, just on the lithium business, you talked about moving down the cost curve as you increase volumes. Would you be able to put a number on what your targeted cost is per tonne, please, as you increase up to 130,000 tonnes, please?

No, we'd rather not.

Okay. Do you want to give me a ballpark or no?

No, this is highly competitive question.

Okay. Thank you. Okay, and then perhaps just on Vanadium, I mean, how do you see the profitability of that business over the forthcoming financial year versus the fourth quarter?

Well, as a general framework, we are doubling our capacity in Cambridge, Ohio, through the Sainsville, Ohio, upgrader. our recycling facility. And that is, in general, a very good guide because the historical profitability of Cambridge is analyzed in the correct way, including you. So that, in general, is doubling. So therefore, the question is, when does Sainsville ramp up to full production. Sainsville, we are very happy with the process of getting this $320, $30 million project online. So that goes as planned. The biggest hurdle in order to ramp up safely is the hiring of and the hiring and training of the operational personnel in Ohio. And that is guiding the ramp up. And that has guided us to say that we will be in full production during the second quarter, depending on this hiring. This hiring is a complicated process because we are operating a melt shop here at 2,000 degrees Celsius. And when you do that, safety is an enormous issue. To be clear that the whole cadre of employees are fully trained, and that is what guides the ramp up. It's completely unimportant whether this is a month early or later. We want to be absolutely sure, according to our value statements, that we are very responsible as regards to the training. So that is available. We are extremely happy with the commissioning and the commissioning procedure of the process and the thing works. We have reached in the roasting area, we have already reached 100%. and we can produce 100%, but we are, of course, harmonizing that with the Melchop, and the Melchop is producing high-quality ferrovenadium with only very minor technical glitches. So we are in full production, safely set in the second half, but maybe earlier.

Okay. Very helpful. Thanks. Just a couple more, sorry. The first one is just on the bringing on of the first module at Bitterfeld. I appreciate the market generally gets quite excited when you're bringing something on and then starts thinking about the next module. So on the second module, I appreciate you bring the first one on towards the tail end of this year. Can you just remind us the targets? or time frames for the second module and any sort of ability to accelerate, or it comes when it comes?

Internally, if you were an associate with AMG and were under a secrecy agreement, we could tell you a lot about it. But since you're not, And since we are in NDAs on the other side, non-disclosure agreements, on the other side with our partners with whom we are working on joint ventures and joint operations in the resource side, we cannot comment. So we are working very, very intensely on finalizing certain, it's not one, It's not one, it's more than one, meaning it's not two. So we are working on a number of progressed resource projects with a common denominator in a way. They always involve a long-term contract into Germany. They always try to involve government-backed financing. available for such things into Germany. They also always involve technical assistance program utilizing our very large team, our very large team, which we have in our lithium operations assisting potential additional productions. So that goes, I think, well. But it is still, of course, a zero-one because we need signatures. And once these signatures happen, which we are, I personally am an optimist because I'm also heavily involved in those negotiations. So that goes, I think, well. And in the moment we have a signature, we will instantly activate the relevant additional module and we'll announce it. But please be patient a little bit. It won't take too long.

Okay, understood. And the last one is just on engineering. Just with regards to your comments around the order backlog being the highest since early 2020, are there any levers you can pull to address that backlog and capitalize on it or not? Thanks.

Well, the engineering, we just got the largest order we ever got in the history of engineering. That was last week from the US. So I see a very strong revitalization of the value chain in the US. And I think that is not a one-time event. also when you read the order intake by the large aerospace producers. But we are not servicing the large aerospace, Airbus and Boeing. We are servicing the aerospace engine industry. And the aerospace engine industry, of course, has to follow the general trend in a very big way. And we see very positive signs there. And that affects all our products, some of which we have absolute world-leading positions, in particular, of course, the coating of turbine blades. And we are also benefiting from the trend that many regional centers want to now switch into a more of, want to have a more domestic supply chain, and that includes quotas, that includes other furnace-related technologies. So we see a very positive, our engineering people are in very good mood, I wanted to tell you that. Cool.

Nice work. Keep it up. Thanks very much, Vitan.

Thanks, Richard.

And our next question comes from Krishan Agarwal with Citibank. Your line is open.

Hi. Thanks a lot for taking my question. And I see an additional disclosure on, you know, this time around. where you're saying the real life price is around $3,700 per 10% in the Q4. If I look at the pricing profile for the last four quarters, that pricing is more closer to the spot pricing averaging in the Q2. And that makes me think that the largest tag in the business is more like six months rather than the three months understanding we had earlier. Is that something good understanding to have in terms of this lag effect? And I think this is important because when you say 400 million exceeding EBITDA, I would assume that the stronger prices in the Q3 and the Q4 would also be contributing for that very strong outlook for Q3. That's my first question.

Thanks, Krishnan. So the lag is definitely there. It's not a six-month lag. You need to take into account the structure of our contracts, whereby we try to share the margins that our customers get to create long-term volume certainty and flexibility around pricing. So these are long-term contracts. They're not spot contracts. You're comparing to spot price. We're always going to have a discount to spot price. We would direct you, however, to that. We would compare our 3,800 in the fourth quarter to the prices evident in the third quarter. So we would direct you back a quarter or even a little bit longer, but not a full six months.

Okay. Thanks a lot. So that would mean that because of the long-term contract, the spot is not a fully reflective for your pricing, right?

No.

Yeah. So how do we model it? I mean, from an earning point of view, that in the, for example, Q4 has been strong. So how much of the discount we need to put on that spot to better focus your earning or have a better visibility on your earning potential in the business?

Well, we would direct you, instead of looking at spot amine, we would direct you, as we've been trying to do, to look at lithium carbonate pricing. And the movements in lithium carbonate pricing will show up in our prices three to four months later.

So, in other words, the visibility of the – under that argument, the visibility of the first quarter, 23, is already very, very high. A portion of the second quarter is also already within reach. Yeah. And when Jackson has said that we are participating in the margin of the customer, then that means you should look at the product which the customer produces, and if he produces carbonate and hydroxide, then that governs his profit in which we share.

Yes, okay. Understood. And my second question, and it may sound a little bit selfish on my part, But you have alluded to the resegmentation from 2023 onwards. Do you plan to give some flavor to the analysts in terms of historical data, restated historical data, I mean, just to make our life easy?

Yeah, we always do that. So when we did the 21 restructuring, we gave you a full year of history so that you could figure out what it looked like.

You did not, you did, the policy of resegmentation, not restructuring. Excuse me, resegmentation. Because resegmentation has such a negative, resegmentation is much better. And if you say, of course, we will do that exactly according to what you expect. And because we would expect the same thing. And resegmentation is changing the strategic structure of the company. And because resegmentation is a reporting exercise, what we have in mind is to deepen the management of the company in a big way by separately managed large entities, which are then strategically directed by the parent company. it is necessary to do that because we are in a big exercise to deepen management. And this structure gives us a much bigger attractiveness for hiring people who are competitive in the world scale.

Yeah, understood. And then I think the final question is, if you can remind us, the capex outlook for 2023. I'm not too sure if I have missed that earlier.

Yeah, $175,000 to $200,000.

Fantastic. Okay, thank you. A million dollars. Thank you.

And our next question is from Frank Klassen with DeGoof. Peter Cam, your line is open.

Yes, good afternoon or good morning. Two questions, please. First of all, on the Venetian profitability, you've indicated that Q4 was impacted by startup costs at Zainfield. Could you roughly quantify this number? How much were these startup costs?

And then secondly... Not material.

Not material, okay. Then a second question, a more general question on cost inflation. How much is there still to come? Could you elaborate, for instance, on energy costs, but also on labor costs?

No. Our forecasting incorporates, of course, whatever we expect. And in general, we... we can pass on certain costs such as energy costs and labor costs. We are very well-paying. AMG is a very well-paying company. So we have no reason to expect here any major impact on anything. It's not a big concern, what you said.

Okay. And then my final question, could you remind us, the refinery in Bitterfeld is commissioning end of 2023, but how long will roughly be the ramp-up before we will see the full contribution of this new plant? Can you remind us?

The usual commissioning period to full production and qualification and certification as we got to the customers is the usual one is six months. And we will be much more in detail on this at the capital market stage to make sure you don't miss that because then management will be very detailed on that refinery. Yeah. because that is exactly, that is a long story. We will be, and we did the capital mistake practically in order to address that question. To really understand how bringing online of such a complex company conversion plant happens. It's not, it's, It is the first European battery-grade hydroxide refinery, and we have a very deep management on it, and we are feeling very good about it. So in that, we will be in detail explaining on the Capital Markets Day. By the people who really know what they are doing. Because, you know, what is not in the bottle cannot be put out. What's not in the bottle cannot be put out of the bottle. I cannot explain to you the certification process with EcoPro, for example. That's beyond me. But on the capital markets day, we will go deeply into it.

Okay, looking forward to that. Okay, thank you.

And our next question comes from Hank Berman with Kempen. Your line is open.

Hi, all. Congratulations with the record results, and thank you for taking my questions. I do have some remaining questions, follow-up questions on what has already been discussed. Firstly, on hydroxide in the Bitterfeld plant, In the court, you announced an MOU with fair batteries for 3,000 to 5,000 tons of lithium hydroxide. As I understand that you already sold for module one, can you please confirm that this contract relates fully to the second module? And to what extent are you already, yeah, let's say booked for the second module at the moment? Can you give us some flavor as to the discussions that you might have for the remaining capacity for Module 2. Thank you.

When we announce an MOU, we are highly confident that that will be turning into a sales contract. We are negotiating in a variety of ways with a variety of people. The only contract which has led to a legally binding sales procedure is the contract with EcoProc. We are confident that this additional conversations which we have is practically the industry will be leading to a full sold picture when we are starting up. I think that's a very low risk. The second module is only be addressed in this regard with the same people, more or less, when we have the resource, when we have the feed. So the bottleneck is the feed, not the market. Presently, people who need battery-grade hydroxide in Europe are importing that better create hydroxide from overseas. And you rank China, Australia in that. And we are changing that by having a local source. And that's a significant advantage. And therefore, the downstream issue is not really a complicated issue. The second module needs, however, in order to be credible, we cannot offer something where we have to then negotiate the fee. We can only enter into credible sales communication if we are long. We only can sell something. We only can go short if we are long. Previously, not... So the investment decision is awaiting the clarification on the feed side for the second module and the further module. And of course, there are also conversations further down the road, talking about further down the road of modules to share a module with customers. some customers indicate interest to be somewhat vertically integrated upstream and to partner a module. We are not targeting this, but we are open to such structures because the key in this whole business is there quality harmonization between the cathode production and the hydroxide production. That is the guiding light in this industry because you're changing certain quality levels into a much higher quality level, thinking about the outcome of the cathode production that might be parts per billion qualities. So you need to have this upgrading process has between hydroxide and cast iron production has to be harmonized. That's the key risk element in this industry. And that's the basic logic of why we are going into battery grade hydroxide in Europe. Because such a harmonization over the ocean is rather difficult.

But to be clear, Frere is part of module one.

Okay, okay, Claire. Second question is on the CMT segment. I think we previously indicated that you believe that you will be back, let's say, to pre-COVID levels in the period around 2023, 2024. Is that still your base case expectation that we should see EBDA grow towards these levels in the next two years?

aerospace recovery? Is the aerospace recovery back to 2019 levels by 23 or 24?

Yeah, I think it is racing towards pre-COVID levels, if not exceeding, because there's a certain catch-up to do in the value chain. And we see value chain changes. As I said earlier, It is obvious that many people think about how to localize or how to draw value chains into a neighborhood, into operational vicinity, and that is very interesting. We never sold a quota outside a very limited amount of customers in the United States and in the Far East, and we are now selling quotas decentralized.

that will these kind of things are very good for us right clear um then last question is more of a strategic question so so you guys for about 400 million of ebda in 2023 uh in my model let's say critical mineral minerals like now constitutes less than 10 percent of that 400 million this year and consists of many different smaller operations. And I can imagine as a management team, sometimes it must be quite hard to also give those businesses some attention. And I appreciate, you know, you have local management teams that are fully dedicated to these businesses. But to what extent could you consider, let's say, divesting some of those smaller operations, especially given now in an environment now where selling prices have moved up a lot? I can imagine the attractiveness of selling some of these smaller operations is higher than it was in the past five to ten years. Thank you.

You, of course, when I listen to you, I'm reminded that you have a high quality of server of AMG. And since we have a high quality management, we, of course, have similar thoughts.

Okay.

And any further comment you might want to give on that?

No, we will let you know when it's happening.

Okay. Okay, well, that's clear. Thank you.

Okay.

This is all the time that we have allotted for Q&A. I would now like to turn the call back to the presenters for any additional or closing comments.

Thank you, everyone, for joining, and please join us at our Capital Markets Day on March 30th, and you can find more information on our website.