AMG Critical Materials N.V. (AMG) Earnings Call Transcript & Summary

Good day, and welcome to the AMG Q1 2021 Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Ms. Fischer. Please go ahead, ma'am.

Welcome to AMG's First Quarter 2021 Earnings Call. Joining me on this call are Dr. Heinz Schimmelbusch, the Chairman of the Management Board and Chief Executive Officer; Mr. Jackson Dunckel, the Chief Financial Officer; and Mr. Eric Jackson, the Chief Operating Officer. AMG's first quarter 2021 earnings press release issued earlier today is on AMG's website. Today's call will begin with a review of the first quarter 2021 business highlights by Dr. Schimmelbusch. Mr. Dunckel 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 acquisitions, AMG's competitive strengths and weaknesses, reserves, financial position and future operations and development, 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 expects, believe, anticipates, plans, 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 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 will now pass the floor to Dr. Schimmelbusch, AMG's Chairman of the Management Board and Chief Executive Officer.

Thank you, Michele. AMG's highest priority is the health and safety of our employees. Out of over 3,000 AMG employees at 33 sites in 15 countries, AMG has 9 active confirmed coronavirus cases globally. As previously announced, AMG has adopted a new segmental structure for '21, which will provide investors increased transparency into our business and enable them to track the strategic differentiation more accurately within the portfolio of our activities. We now report 3 segments: Clean Energy Materials, Critical Minerals and Critical Materials Technologies. Each of these segments address similar markets, apply similar business models and each segment has its own set of peers. Most importantly, each segment has products, which enable CO2 reduction, and each segment is targeting growth in its contribution to the so-called enabled CO2 reduction portfolio, or ECORP. As such, the first quarter press release and our discussion of the first quarter earnings will be in the context of this segmental alignment. All 3 of the energy segments performed well in the first quarter. The AMG team Energy Materials and AMG Critical Mineral segments has recovered from the pandemic more quickly than anticipated. These segments outperformed the same period in the prior year despite the -- that of the prior period occurring before the major economic implications of the global pandemic. Both demand and prices for many of our key product offerings for these segments continue to improve. AMG Critical Materials Technologies is still experiencing the effect of the downturn in the aerospace industry as a result of the pandemic, which is reflected in the financial results compared to the same period in the prior year. However, the segment displayed significant resilience over the past year. Our diversification in product offerings have allowed for the segment to remain EBITDA positive, even during the most severe period of the pandemic. Additionally, the segment has delivered remarkable sequential recovery from the second quarter of 2020 forward with EBITDA increasing 47% on average per quarter over the period -- over that period. Despite these considerable gains, there continues to be a substantial opportunity for the segment's continued growth in profitability as the aerospace market regains its footing and begins recovery. Last year, we communicated that we believe that the second quarter 2020 would be content low, and our financial results have proven that to be true as our EBITDA has improved sequentially each quarter since then. Based on the realization of our strategic projects, the anticipated recovery of the aerospace industry and the strengthening global demand for critical materials, especially for products which enable CO2 reduction, we expect that trend to continue. AMG's strategic projects have all advanced during the quarter. Our major vanadium recycling expansion in Zanesville, Ohio is continuing on time and on budget. All major contracts for this quarter has now been finalized, and we are proceeding to project completion in less than 1 year. Our lithium plant in Brazil is fully operational and exceeded nameplate design capacity in the first quarter of 2021. Additionally, preliminary engineering for the expansion of this plant, known as SP1+, Spodumene 1+, is underway. Our lithium hydroxide upgrader project in Germany commenced detailed engineering as well as the purchase of long lead items and purchased a site. Our pilot plant for solid-state battery materials is operating on a laboratory scale, and multiple patent applications are important. We also made progress in our comprehensive strategy to advance our CO2 reduction activities. AMG has progressed its methodology to achieve verified carbon units, VCU, credits. AMG's proposed carbon VERRA carbon standard for processing metal waste has passed through public comment and is currently being reviewed by an appropriate third-party verification body. Finally, in April '21, AMG issued 3.1 million new shares, generating $119 million of net proceeds and increasing liquidity to approximately $500 million. With this equity raise, in combination with cash on hand and strong projected cash flow from operations, AMG believes it can fully fund its current strategic projects while maintaining strong balance sheet and liquidity positions. I would now like to pass the floor to Jackson Dunckel, AMG's Chief Financial Officer. Jackson?

Thank you, Heinz. I'll be referring to the first quarter 2021 investor presentation posted earlier today on our website. The picture on the cover shows our Zanesville vanadium facility, which is currently under construction. The completed raw material storage building is on the left, and a conveyor belt connected to the roaster and the flue-gas desulphurization facility behind it. Starting on Page 3. This shows an overview of the financial highlights for the quarter. Revenue for the quarter decreased by 5% to $264 million. This decrease was mainly driven by lower revenue in the AMG Critical Materials Technologies segment as a result of the aerospace slowdown. Q1 2021 EBITDA was $28.3 million, a 27% increase over the $22.3 million in Q1 2020. It was driven largely by higher sales prices, and sales volumes in most of our commodities in the Clean Energy Materials and Critical Minerals segments. These stronger volumes and prices, combined with the lower operating costs across our business as a result of cost-cutting, led to the improvement versus Q1 2020. Net income attributable to shareholders from Q1 was $5.1 million versus a $13.6 million loss in the prior year. The loss in the prior year was primarily due to an $11.7 million noncash deferred tax charge in Brazil. Now I'll return -- I'll turn to the review of our 3 segments. Let's start with AMG Clean Energy Materials, which is shown on Page 4 of our presentation. Clean Energy Materials comprises our vanadium, Brazilian and lithium businesses. On the top left, you can see that Q1 revenues increased by 2% versus the prior year. This increase was driven mainly by higher sales volumes of tantalum and lithium concentrate and higher prices in vanadium, tantalum and lithium concentrate. Gross profit before nonrecurring items more than tripled in Q1 due to the strong volumes and improving price environment experienced in Q1 2021. SG&A expenses in Q1 21 were $9.6 million, 3% lower than Q1 2020 due to nonrecurring legal expenses in the same quarter. Q1 2021 EBITDA increased by $11.3 to $10.3 million due to the improved gross profit and SG&A noted above. Clean Energy Materials is the segment, which is receiving the most capital investment in AMG. And the capital expenditures, shown on the bottom left of $40 million mainly reflect our investment into the Zanesville vanadium facility. Turning now to Page 5 of our presentation, which shows our AMG Critical Minerals segment. AMG Critical Minerals revenue increased by $15.2 million, or 26%, and to $73 million, driven by higher sales volumes and higher sales prices across the graphite, antimony and silicon business units that comprise this segment. Gross profit before nonrecurring items increased by 27% in Q1 due to increased revenue noted above. SG&A expenses in Q1 2021 increased slightly by $0.5 million to $6.6 million, primarily due to higher personnel costs and insurance expenses in the current period. Q1 2021 EBITDA increased by 32% due to increased revenue, as explained above. Moving on to AMG Critical Materials Technologies. This segment comprises our chrome, titanium alloys and engineering units. On Page 6 of the presentation, starting on the top left, you can see the Q1 '21 revenue decreased by $31 million or 20% due to reduced aerospace activity and volume reductions. These declines were partially offset by higher revenue for remelting and nuclear waste recycling furnaces. This development highlights AMG Engineering's diversified technology base outside of its aerospace activities. As a result of these factors, Q1 '21 gross profit before nonrecurring items decreased by $8.3 million, or 29%, to $21 million. SG&A expenses decreased by $2 million or 11% in Q1 '21 compared to the previous year due to lower personnel expenses, lower professional fees and as a result of cost reduction efforts across the business. AMG Critical Materials Technologies Q1 EBITDA decreased by 45% to $9 million from $16.6 million in Q1 2020 due to lower profitability related to the pandemic-impacted aerospace market, partially offset by cost reduction efforts. However, as you can see in the graph, EBITDA has increased every quarter since Q2 2020 and Q1 '21 EBITDA was 37% higher than Q4 2020, demonstrating continuing recovery in this segment. Order backlog was $191 million as of March 31, '21, a 4% decrease from $198 million as of the end of the year. The company signed $58 million in new orders during Q1 '21, representing a 1.03x book-to-bill ratio. The quarter benefited from strong orders of remelting, induction and heat treatment furnaces. Turning now to Page 7 of the presentation. On the top left, you can see that AMG's Q1 '21 SG&A expenses were $33 million versus $35 million in Q1 2020. This is primarily due to lower professional fees and continued cost reduction efforts across the business. AMG's Q1 '21 net finance costs were $8.7 million compared to $5.4 million in Q1 '20. This increase is mainly driven by higher foreign exchange losses during the quarter, which were partially offset by lower borrowing rates versus the prior period. AMG capitalized $3.8 million of interest costs in Q1 '21 compared to $2.8 million in the prior year, driven by interest associated with the company's tax exemption municipal bond, supporting the vanadium expansion in Ohio. AMG recorded an income tax benefit of $0.9 million in Q1 '21 compared to an income tax expense of $16.5 million in the same period in 2020. This variance was mainly driven by movements in the Brazilian real, offset partially by higher pretax income compared to the prior period. The effects of the Brazilian real caused a $14.2 million lower noncash tax expense in Q1 '21 versus Q1 '20. Movements in the Brazilian real exchange rate impact the valuation of the company's deferred -- net deferred tax positions related to our operations in Brazil. AMG paid taxes of $2 million in Q1 '21 compared to tax payments of $0.9 million in Q1 '20. Turning to Page 8 of the presentation. You can see that on the top left, cash flow from operating activities was $19.9 million in the first quarter of '21 compared to cash used in operating activities of $3.7 million in Q1 last year. This increase was mainly due to a $20 million advance payment received for future spodumene sales as well as AMG's continued focus on cash generation in a quarter that usually experiences seasonally negative operating cash flow. AMG's return on capital employed for Q1 was 9.4% as compared to 7.7% from the same period of 2020, reflecting increased profitability during the quarter. AMG finished Q1 '21 with $317 million of net debt. This increase was mainly due to the significant investment in growth initiatives during the quarter, especially in our vanadium expansion in Ohio. AMG's balance sheet is sound, and the company enjoys significant liquidity. As of March 31, '21, AMG had $211 million of unrestricted cash and total liquidity of $381 million. In April '21, AMG issued 3.1 million shares, generating $119 million of net proceeds and increasing our current liquidity to approximately $500 million. With this equity raise, in combination with cash on hand and strong projected cash flow from operations, AMG believes it can fully fund its current strategic projects while maintaining strong balance sheet and liquidity positions. That concludes my remarks. Eric?

Thank you, Jackson. AMG's first priority is to provide its employees with a safe working environment. AMG's lost time incident rate and total recordable incident rate continue to substantially outperform our peers. Additionally, and as Dr. Schimmelbusch mentioned, 9 of our more than 3,000 employees in 15 countries are presently COVID positive. In addition to safety, our operating priorities continue to be to maximize cash flow, lower our cost structure, manage risk and deliver our major strategic initiatives and investments on time and on budget. In regard to the general market conditions, with the exception of the aerospace market, demand and prices of our products bottomed in the second and third quarters of 2020 and continue to improve throughout the first quarter 2021. We believe that these market index prices reflect strong supply-demand; dynamics as the economy continues to normalize. We are well positioned to continue to capitalize on price improvement going forward. And as we have previously stated, the significant parts of our business, especially in Clean Energy Materials and Critical Minerals is priced on a prior month or prior quarter average index basis. In addition to our continued focus on cost reduction and working capital management, we progressed a number of important initiatives in the quarter. We're progressing our spodumene production expansion project in Brazil, and it's worth noting again that our spodumene facility set a quarterly production record in the first quarter as we exceeded nameplate capacity on a run rate basis. The construction of AMG's second ferrovanadium plant in Zanesville, Ohio, AMG's largest ever capital project is proceeding as planned with commissioning slated to start at the end of the first quarter in 2022. AMG vanadium also signed a new long-term multiyear agreement in March to process and recycle spent catalysts for a major oil refinery operator in North America. As Dr. Schimmelbusch noted, AMG purchased the site on the premises of Chemie Park Bitterfeld-Wolfen in Germany, advancing its strategic expansion project for a battery-grade lithium hydroxide production plant, which will reliably supply the European battery industry. The impact of the coronavirus continues to be most acutely felt in our aerospace-related end markets. However, our engineering order backlog remains strong, and we are seeing improved activity, especially in the super alloy sector in Asia. We have rightsized this business to reflect today's market, and we're well positioned to capitalize on aerospace-related market opportunities as they improve. Again, operationally, we continue to focus on those parts of the business that are under our control and progress operational initiatives and strategic growth projects. I'd now like to pass the floor to Dr. Heinz Schimmelbusch, AMG's Chief Executive Officer.

Thank you, Eric. Due to improving market conditions, AMG's financial results for the first quarter were above previous expectations. We believe that these improvements will continue as we advance in 2021. And as such, we are updating our outlook for the full year to exceed $120 million EBITDA. AMG's long-term guidance will be detailed at the Annual General Meeting tomorrow at 1500 CEST. Operator, we would now like to open the line for questions.

[Operator Instructions] Okay. So we will now take our first question from Krishan at Citi.

Can you hear me?

Yes.

Yes. Okay. I mean congratulations for a great quarter. I have 3 questions. Firstly, for Eric. You mentioned that in the Critical Minerals and Clean Energy Materials, there is a lag of 1 quarter. So just to clarify, I mean the prices of spodumene and the ferrovanadium are the largest on this exposure. Those were like circa $400 and $10.5 in the fourth quarter of '20. So is it fair to assume that the results in the first quarter are based on those prices? While that $50 and $18 spodumene price and ferrovanadium increases significantly, those numbers are going to flat in the Q2 '21 earnings?

I didn't hear all of that clearly, but the -- you're right, really, the lag in prices mostly impacts spodumene and ferrovanadium, but in some case, there's 1-month lag and in some cases quarterly lag -- but maybe if you put your phone on mute, just we're hearing a lot of background -- so prices have continued to improve and as prices improve, generally, they'll be reflected in our results.

There's a certain time lag.

Yes. Hope that answers your question.

Okay. Okay. Okay. Yes, yes. yes. Got it. The second question, it's sort of including me, is that in the Critical Minerals, the revenues have gone significantly 30% in the quarter, in the last quarter while the EBITDA is sort of flat. So is there something we should know about the division in terms of the product pricing time lag? Or it's just that the cost base is moving up, limiting the profitability?

I'm sorry, in Critical Minerals, you're saying?

Yes.

So I see revenue going up, the same percentage roughly as EBITDA is 30 -- and it's gross profit. So it's roughly 30% across the board. It's actually very consistent.

Yes. I mean so that's where the diversion is. I mean you're looking at gross profit increase and I was looking at EBITDA increase. Is there any SG&A plane that falls the spot here? Or am I missing anything?

No. So I'll just read you, the revenue increase was 26%, gross profit before nonrecurring items was 27%, so track along. And then increase in EBITDA was 32%. But if you look at it, it's a $2.8 million increase in gross profit and a $2.2 million increase in EBITDA, which is basically because we had a slight increase in SG&A. But when you work the numbers through it, it shows up a slightly higher growth in EBITDA just because of the highs and lows, right?

Yes, Yes, yes. I was directing more to the quarter-on-quarter comparisons. And I understand you are referring to year-on-year comparisons. Nevertheless, it's okay fine with me.

Sorry, were you looking -- I was looking Q1 '21 versus Q1 '20.

Yes, yes, yes. Nevertheless -- my last question is on the VCU. So just to refine my understanding, in the detailed presentation you have made in April, you have said that $81 million of revenue come from ECORP-enabled projects -- ECORP, sorry. And then you've given a number close to 57 million tons of carbon reductions. So is it fair to assume that once the process moves May 2022, you will be able to get the carbon credits equivalent to that 56 million tons, and then you will be able to sell those units into the market?

No. No, no. Look, this thing goes step by step. We announced that for the first time, we have made substantial progress in pilot -- a pilot project of establishing a methodology, which is accepted for trade on the voluntary exchange for carbon credits for recycling in metals. And that methodology will be used by us and hopefully, also by other people who then contribute to that thing. And we are in a period of public comments and further scrutiny because these exchanges have a very solid scrutiny procedure. Now that's a pilot. We will -- if we are trading, maybe in August also, but this is a forward-looking statement, we don't know when exactly that happens, but we assume we will trading our carbon credit potential later this year. And then we will expand that to other recycling products in AMG, which are obviously part of the enabling carbon CO2 reduction portfolio. And step-by-step, we will increase hopefully that trading volume. We don't believe that would go fast. We think it's extremely significant for us to be -- to making progress here step-by-step because eventually, we then will have a much higher volume here. But as I said, we are realistic, it is a very complicated procedure to register such products, and it is very innovative and it's a new category that everybody has to learn.

Got it. Understand. So is there any way -- I mean we can sort of know -- work out that how much of these million tons of CO2 credits you will be able to get in next 5 years or so?

No, we cannot reliably make that projection. We -- the 67 million tons in '19 and 55 million tons of CO2 in '20 has enabled reduction number. It's very much on our mind as regard to putting it into a formalized planning system. We have, as we say, we have a lot of candidates joining that so-called enabled CO2 reduction portfolio. So that will grow. And presently in a very rough way, it's on the website, roughly 30% of our sales are coming from that portfolio. It's growing. We are strategically intending to no time frame to have the majority of our sales in that category as the next big target because we have proof that our long-term profitability in this portfolio exceeds the long-term profitability of the rest of the company. So as these materials and product lines join -- additional materials and product lines join this portfolio, the portfolio will grow, but also, it is certainly cyclical as we have seen in 2020 because of the aerospace, which is a massive indicator of the aerospace market is very important for this reduction portfolio. So not only are we growing faster in this portfolio, but also the gross profit ratio is better in that portfolio than in the rest of the company. So we have all reasons to do that. It is interesting to note that the financial performance is better and the CO2 reduction performance is better. So that's a great alignment and it also substantiates our strategy because our strategy targets innovative green, if you want to say so, products. And we are very pleased that these green products are more profitable business in the rest of the world.

We'll take our next question from Martijn den Drijver from ABN AMRO.

Yes. Well, I didn't get that you actually mentioned my name. Martijn den Drijver, ABN AMRO/ODDO. A couple of questions. First of all, Dr. Schimmelbusch, would you be so kind as to provide, you sometimes do that, an overview of the developments in vanadium in terms of supply and demand and what you see in the competitive space? That would be my first question. The second question is with regards to the lithium hydroxide plants in Germany. You've now purchased the land. You already indicated that you're ordering the long lead items. Can you update us on where you stand on the offtake agreements? Is there any progress that you would like to mention? And perhaps, if possible, if you're going to go for a 40,000-ton train 1 and 2, which could be a possibility, which seems logical, could you tell us a little bit more about possible synergies and cost savings if you go for a somewhat enlarged project planning? And then I have 2 more household questions, but let's deal with these ones first.

So the structural situation of the vanadium market is positive. Historically, the market was characterized by undersupply in the -- outside China, which was then filled by exports from China. The picture has changed. It seems everything is, of course, to be obviously affirmed statistically, but it seems that China is importing -- net importing vanadium. That was certainly the reason for the slight correction of the vanadium price upwards towards the long-term averages. You can be very positive on the capacity utilization of the United States steel industry, which has, of course, a much higher specific consumption of vanadium per ton of steel than the rest of the world. You can also be -- it is also clear that the Chinese steel industries are trading, not only quantity wise, but also quality wise. And the famous legislation is the framework for that. But it is only in the economic interest of the steel producers to upgrade. So that, quantity wise and quality wise. So that is underpinning the long-term solidity of the vanadium market. We are the world's largest green side here. We will double our capacity. We're very, very happy about the quarter of this project, which is a big statement because it's the largest project we ever undertook. I mean, by far. And of course, we will -- as the only producer of vanadium in the United States, we are having an advantage vis-à-vis the competition. You asked about competitive situations. We have an advantage vis-à-vis the competition in 2 ways. First of all, we are local. We are in trucking distance of the customers. And secondly, we are a recycler. We are fitting very well in the sustainability report for our customers. So I think it's a very good situation. We are a low-cost producer as we receive fees to take the material and as we work for that, we share certain portions of the sales with our supplier. That is a harmonious situation. And so life is good in vanadium country.

Can I ask a follow-up on those remarks. You mentioned high utilization levels of steel production in U.S., and there is an executive order that, as far as I understand, prohibits imports of vanadium, but also there's regulation against exports of vanadium. So if utilization levels in the U.S. steel industry are high. And next year, you are going to bring additional vanadium capacity onto the market, even though you have an offtake agreement already, what does that imply for the vanadium price?

The vanadium price is strong. And I don't think that this will have any significant influence on the vanadium price. We have not -- compared to the market size, not a significant number. And by the way, your statement on import restrictions and export perspectives is wrong. There are none. We are not, in any way, restricted to export. And we are not in any way restricted -- or U.S., United States, is not in any way restricted to import. But there are, of course, natural hurdles because when it's a long logistics route to import such things from Latin America, for example.

I understood that the Executive Audit acquisition by Trump was to protect the U.S. vanadium industry, so that would limit imports?

There's no regulation in effect. There is no regulation in effect that I know of, and I should know. So now let's talk about lithium. In -- our project is proceeding as planned. Our discussions with a variety of potential customers is proceeding as well. This is a very, very intensive process because we are -- this is a highly sophisticated product, like, the chemistry has to be harmonized with the chemistry of the potential buyers, and that implies lengthy tests, and we are prepared for that in a way because we have invested a lot in the Hoechst laboratory scenery in Frankfurt where these harmonization happen. So we are in the middle of this, and this will be taking time. There's -- on the other hand, there's very high demand. So we will inform when we have affirmative agreements on that. But as we say, the demand is very strong. We have also in mind -- and you're right, we have in mind the first module -- it's the first module of a series of additional modules. We are estimating and other people are estimating that the conservative number for the total demand in Europe for a lithium battery-grade hydroxide is in 2030, 600,000 tons. Our first module is 20,000 tons. There will be a strategy to add other modules. We cannot -- we don't want to say in what sequence and in what time plan. But we are not intending to build a 20,000-ton plant because that would be insignificant player in this area, and we don't want to be an insignificant player. And I want to quote one customer who we approached quite some time ago. And we said 20,000 tons. And he said, "We'll, that's my demand next year." So we said, "Okay." So that's the situation. So let me mention that your next question, of course, will be where does the spodumene come from for an additional module. But we have very definitive plans how to approach other resource owners or we are in progressive discussions with such resource owners who are most happy to join a long-term relationship with us. So that is in parallel, that is in pari passu, as they say, in letting. Okay?

Yes. And then just 2 small household questions, and then I'll go back into queue. The -- how much did you spend on the land, that would be a question for Jackson? So we have a pure CapEx that can be calculated from other strategic projects.

Let me answer. We don't disclose that.

Okay. Then I'll go to the final one.

We have agreements with the seller, which prohibit us to.

Okay. Okay. Can you say something like low single digit, low double digit?

Yes. Exactly. Very, very -- not enough to disclose. Let's put that way. I don't want to give you a good guidance.

All right. Got it. And then my final one, the $20 million prepayment from the lithium spodumene customer. Has that been paid in Q1? Or is that going to be received by AMG?

It has been paid in Q1.

We'll then take our next question from Stijn Demeester at ING.

Yes. My first question is on the spodumene pricing. On Slide 11 of the presentation, you provide a spodumene spot price of $6.30 per ton versus about $4.50 per ton in the first quarter. My question is whether it's fair to assume that your 2Q selling price is above that level, the $6.30, given the stronger rally in carbonate prices where your contract is based upon. Is that a fair assumption?

Well, I don't have those numbers actually right in front of me. But clearly, our resale step, China and in our pricing -- we won't go through the details of the contract -- but our pricing is based on lithium carbonate prices with approximately a 3-month lag. That's what our pricing is.

And so the answer to your question is because these are Chinese spodumene prices, a lot of these Chinese contracts are related to lithium carbonate so it tracks the lithium carbonate price. So it's a good approximation.

With the time line.

With the time lag.

But the $6.30 -- the $6.30 that you mentioned here, is that Australian spodumene or benchmark minerals? Or is that the price that you assume based on the lithium carbonate price?

Benchmark minerals.

Okay. So that's Australian spodumene then?

No, it should be Chinese.

Okay. Okay. Understood. So there's no real discrepancy...

We'll put that in the next one so that you can follow it along. Yes. It should be...

Okay. So there's no real discrepancy between the prices that you mentioned here in the chart and what you're actually seeing in your sales? Second question is also on lithium...

Stijn, you would follow the time lag, all right?

Time lag...

Yes, yes, yes. Understood. Understood. So my second question is on -- again, on lithium. There is an increased focus on the CO2 footprint of battery metals because that is now also taken into consideration by the auto OEMs. Can you elaborate if and how the German lithium plant plays into that theme, by, I think, local conversion, for example, this is probably more CO2 efficient than Chinese capacity? And then secondly, on your spodumene plant in Brazil and also related to that topic, am I right in thinking that this plant use the low-carbon energy source in the form of this hydroelectric power plant? Or is this no longer valid?

First of all, this is a very complex environment. The CO2 discussion about footprint of lithium. We, of course, start with the fact that our spodumene is produced partly from tailings residues, which are stored from previous mining activities, where we did not process the lithium, we only possess the tantalum. So partly, we feed our operation in Brazil from that. Therefore, it's a recycling activity and -- partly. And we are actually, right now, calculating the third-party expertise, how much CO2, we are saving by the way of comparing to somebody who adopts -- 100% feeds its operation from mining instead of from partly tailings. That's a considerable number to start with. Then, of course, the lithium travels long distances. And it ends up in Germany. And in Germany, we are building a plant which is completely optimized as regard to latest efficiency and latest emission controls. So it is -- and that is corresponding with the fact that the Castle plants, which are our customers, which are being under construction around us in Germany, also have the highest environmental standard. So thirdly, you -- the dominating idea is that battery materials are inert electricity storage materials. And the electricity storage is enabling a higher capacity utilization of the renewable energy anywhere, but in particular, in Germany. That is a consequence of the fact that the capacity utilization of solar in Germany, for example, was around 10%. And the wind -- that's solar. The wind was around 15%. So it's an enormous -- and that is -- there's curtailment of wind and solar. And if you reduce curtailment, you enable a higher production of renewable energy, and that is a massive impact on CO2. So it's a CO2 reduction because your percentage of renewable energy goes up and depending on measuring against substituting coal or substituting gas, you can calculate very accurately the CO2 reduction. So this is all -- these are all activities in the electricity or energy transformation phase and are net positive as regard to execute.

Okay. Understood. Helpful. And so to come back to the spodumene plant, is this using a hydroelectric power source, as I found in a 2015 presentation? Or is that no longer the case?

Well our hydropower plant is very important for us. Now we are hydropower, and we are selling the hydropower, and we are buying electricity. I'm personally not able to address which electricity portion goes into the grid and which portion goes out of the grid from our -- so I cannot prove to you that the electricity, which we use comes, from the hydropower, but it is a net balance. So you understand what I mean.

Yes, understood. A follow-up on lithium Germany. In the past, there has been a route to convert technical grade chemicals, hydroxide to battery grade. Is that still an area that you're looking into? Or will you simply be processing spodumene concentrates into lithium products? Is it conversion?

The value chain is converting spodumene to technical-grade and technical grade into battery-grade. And so that's a chain.

Okay. Understood. And a final question, a housekeeping question. Objection, I think. Will you no longer be disclosing the sales for subsegment in the company presentation? Or was this slide accidentally forgotten this quarter?

No, it was not accidentally forgotten. So the sales were not actually per subsegment. They were per metal, and they led to a lot of confusing conclusions on the part of our investors. And so we've replaced that with our 3 segments which are a lot easier to understand because you really only have the volatility and, of course, the investment in our Clean Energy Materials group. And we will, of course, give you guidance on the price moves within that. But this is the disclosure we think will make it easier for us to have a dialogue about our future projections.

Okay. Understood. So a plea to insert it is futile?

Yes. Unfortunately, unfortunately.

[Operator Instructions] Okay. So it looks like that's all the questions we have in the queue. So I'd like to turn the call back over to Michele Fischer for any closing remarks.

Many thanks, everyone, for joining the call, and we hope you're able to watch our webcast tomorrow for Annual General Meeting on our website. Thank you.

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