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

Welcome, everyone. Thank you for attending AMG's Capital Markets Day. I'm joined at the table today by Dr. Heinz Schimmelbusch, our CEO and Chairman of the Management Board; Fabiano Costa, our CEO of AMG Brazil. Next to Dr. Schimmelbusch on his left is Dr. Scherer and then we have Dr. Kölln. So those are the order of the presentations. And thank you, everyone, for attending virtually as well. After the presentations, we'll do a Q&A and followed by lunch. So Dr. Schimmelbusch, you'd like to get started?

Yes. Perfect. I also, ladies and gentlemen, want to welcome you. I want to include in the list of people who are present here for -- also available for conversations is my colleagues on the Management Board of AMG, Eric Jackson, Chief Operating Officer; and Jackson Dunckel, Chief Financial Officer. They are both Jackson, the one is first name and the other is last name, so I address them summarily as Jackson square. Then we have our legal brain here, not for any particular reason, but you never know. And [ Dr. Vitze ], who is our senior legal brain for -- very active in when we go after acquisitions or so. I speak English here, although I'm not used in Frankfurt to speak English. I actually know German. [Foreign Language] It's a very complicated material, the technical expertise is not broadly distributed and we were lucky enough to be able to attract fairly substantial amount of people when Chemetall the originator of lithium in the world, a German company, was bought by Albemarle. The decision to go into lithium in AMG dates back to 2016 where we decided to ultimately invest $75 million to build this spodumene facility in our Mibra mine in Brazil. In 2022, that investment in our lithium operations in Brazil produced 63% of AMG's record-breaking EBITDA in '22 of $343 million. This percentage of 63% is estimated or expected to grow to 70% and 80% of the total of AMG's EBITDA, which is also supposed to grow in the next years. And this is the same percentage as lithium activities in Albemarle. Albemarle is a lithium company. So nobody questions that. Although Albemarle has substantial other activities in [ catalysts and in bromine ]. The strategic question for AMG, therefore, is to whether this is a difference -- whether the difference between 70% or 80% and 100% is a difference large enough to separate lithium from the rest of the company. That needs very careful decision-making. But until we have made the decision, we are a lithium company like Albemarle, so this question has been under careful consideration, and there's no haste. We also have certain decisions, which are in the making as regard to the expansion of our business, and they will be very important for this decision also. The 3 presentations today highlight the dynamic nature of lithium value chain in AMG for mining to battery-grade hydroxide. Our underlying strategy at AMG in everything we do is to interpret market dynamics and dissipate long-term needs and position AMG's expansive capabilities to generate value for you, and the lithium value chain is a shining example of that execution -- of the execution of that strategy. Please note that the word lithium was not mentioned in the IPO prospectus filed by AMG in going public in Amsterdam in 2007. We operate 2 lithium business units, the upstream mine in Brazil and the downstream processing business in Germany. Each of these businesses will be described in these presentations by Fabiano Costa to my right, who built the mine in Brazil; and Dr. Stefan Scherer to my left, the CEO of AMG's downstream operations and who is building the refinery in Germany. We have included into this presentation because we were asked to and we are most happy to include Dr. Kölln, who is sitting here, the young man to my left, he is managing one of the biggest growth aspects of AMG, LIVA, the lithium vanadium battery unit which we formed fully management team, and we are building batteries. Stationary batteries, and we will come to that. And he will present it. It will be a substantial unit of AMG over time. The presentations today are fairly comprehensive. What is left to me is to add a few remarks about the strategic thinking behind all that. I will explain the strategic thinking, and I will comment also a little bit of LIVA. The Mibra mine, which you see is in Minas Gerais, Brazil has been -- in the -- Mibra mine has been a tantalum mine for quite some time. The lithium contained in the ore was not processed, it was stored in tailings. We started to invest in processing of lithium in 2016 and started to produce spodumene lithium concentrates in 2018. In addition to technical and other challenges of this diversification in Brazil, we had to find a customer for the qualifying of the product. We found that in a contractual tolling partner in China. This leading lithium refiner has become a very valuable long-term partner. The Mibra mine is a low-cost producer of spodumene. Historically, that has been also or partly the result of the processing of tailings, so it's a circular economy aspect and the credits from the production of tantalum. As Fabiano will detail, the tantalum production is under long-term contract and partly thanks to the tantalum production, the spodumene costs at the Mibra mine are below $500 per tonne. CIF China. This low-cost position will be further enhanced when we expand the production from 90,000 tonnes to 130,000 tonnes of spodumene, which is underway and going operational later this year. We are determined that they are -- to fill the empty space in Europe where there is a battery-grade hydroxide refinery is missing. There's not 1 hydroxide refinery in Europe. It's strange, but there's also not 1 hydroxide refinery in the U.S. We have acquired an infrastructural framework of building 5 units, 5 modules as we say, 20,000 tonnes each. The first module is under construction and you have a model there in the hall, 20,000 tonnes. We expect and everybody else expects, that's a consensus, that in 2030, the European market needs 600,000 tonnes of battery-grade hydroxide. The first module is based on spodumene from Brazil, converted into technical grade or technical grade hydroxide in China. Prior to an upgrading plant being operational in Brazil, we are in basic engineering for building a carbonate plant in Brazil. We selected Bitterfeld as a location and groundbreaking was in May '22. We estimate our capital expenditure, $140 million, including the infrastructure for the expansion and excluding the investments to make the refinery feed agnostic, feed agnostic. This was not project financed, it was financed from cash flow, this investment. You see a picture of the refinery. It's fairly advanced and commissioning will be around September -- August, September. The downstream strategy was designed starting 2019 in the context of building extensive lithium team in Frankfurt. Chemetall GmbH, Chemetall, the world's leading lithium company at that time was sold to Albemarle that happened in 2015. Chemetall had been a 100% subsidiary of Metallgesellschaft and actually have invented lithium in 20 -- in 1922, produced the first lithium salts. Albemarle apparently was focused on the overseas production assets of Chemetall when they did this acquisition in Nevada, Chile and Australia. The intellectual property in form of a large team, obviously was noncore and available to be integrated to AMG. In the meantime, we have over 20 former Chemetall employees, including the management and the research team in our AMG family, led by Dr. Scherer, Head of Lithium GmbH. At the time, Dr. Scherer pointed out that we also should do fundamentally research and -- in order to target solid-state batteries. We were most happy to be able to attract a world-leading name here, Dr. Vera Nickel and she's one of the persons in the world who have a chance to be the leader in that materials for solid-state batteries. That is materializing in a pilot plant around the corner here. And we are in basic engineering for a larger semi-commercial plant in order to keep our leadership development intact. The main point is that in addition to feeding additional modules, by the way of additional resource projects for the refinery, there is a great deal of optionality to arrange feed through commercial contracts with producers of a variety of lithium-containing materials. In a way, it repeats the business model of the custom smelting industry in copper. Dr. Scherer will explain this. The lithium sector is transforming itself from a small niche to a major industry. The liquidity of these various markets contained along the value chain of lithium will rather radically change over time as happened in all the development of large metal industries in the past. The central role in all of this is the last step of the value chain. The link to the end market. And that is battery-grade hydroxide, and that's the refinery. The revenue potential of the Bitterfeld battery-grade hydroxide refinery complex fully built 5 modules is in the range of $5 billion per annum and due to our flexibility in feed material, we believe this operation will provide a very strong return on investment under any market conditions. We are active in searching to develop new lithium resource projects. And we have a variety of things we offer, the AMG lithium to mine -- to resource owners, junior miners, for example. The AMG lithium value chain gives our lithium team, the ability to participate in the development of lithium resources beyond our Mibra mine. This slide tries to illustrate that. We provide mining expertise in hard rock or brine resources, engineering support, object management services through our Brazil-based plant engineering group, which has 35 engineers and support staff with global reach. Spodumene processing now ability to sign long-term bankable offtake contracts with or without German government support, upgrading such contracts into project financing structures. And finally, to provide the missing equity. Fabiano will comment further on our resource development strategy, which cannot be detailed any further beyond our nondisclosure agreements, which in this -- we, of course, cannot comment too much. A great example, however, of developing additional resources is our investment last week, I think it was of Zinnwald Lithium announced last week. As a partner with Zinnwald, together we will pursue a definitive feasibility study for the project in East Germany. Establishing a raw material base in Germany, close to our Bitterfeld operations has obvious attractions. The global lithium demand is pointing into the right direction. My perception is that the lithium demand and supply forecasters are far apart in their predictions, both in demand and in supply. The demand forecasts are driven by the ECA forward statistics. Forecasts of the ECA intensity in each country, announcements of transition by companies and states and so on. That doesn't sound too difficult. The supply forecasts are more challenging, relying on a large extent on the announced projects, including their announced time lines and complemented by some assumptions about the production in China. Some of these announcements must be taken cautiously because many projects who are announcing time lines have announced the parallel shifting time lines over quite some time. Resource developments frequently lack the expertise of how to access lithium process technology. After all, the lithium industry was a very small industry. Additionally, recent dramatic increases in interest rates, combined with global unrest in the banking sector will restrict access to viable capital to only the most attractive projects. This dynamic will reduce the rate of new lithium projects coming online. That is already happening. I do not envy junior miners trying to raise project financing in today's market conditions. Conversely, AMG has about $350 million in unrestricted cash and over $500 million in liquidity, and no near-term maturities, principal maturities. Combine this with our substantial operating cash flow generation, and we are in a uniquely strong position to finance our strategic initiatives while maintaining very reasonable conservative leverage. Additionally, we have fixed interest rates at around 5% for our main credit facility through 2026. And are close to net debt 0 excluding our 30-year maturity fixed rate municipal bond in America, where actually a 30-year bond at 4.5% is better than equity. To summarize, we are quite satisfied with our enviable balance sheet position. We believe that there is a clear and undisputable fundamental energy shift happening globally built on energy storage materials. That is the demand side. On the supply side, our low-cost position combined with the vertical integration strategy we are currently executing puts us into an advantageous position under all market conditions. Every realistic scenario of supply and demand we have analyzed results in a dramatic return on investment in lithium supply chains. We believe that based on these factors, our lithium strategy will result in extraordinarily high profitability potentially for a generation or more. As regard to lithium -- as regard to the LIVA battery, I want to confine my remarks to the origin of the idea of a stationary battery combining instant power with low-cost storage. One of our plants was operating a hot gas mill with highly volatile electricity demand. This led to the penalties from the utility and unusually higher electricity costs. Management planned to lower its electricity costs by installing a small island diesel engine power plant for peak shaving and a vanadium battery was considered as a green alternative, but this did not solve the issue since the vanadium battery would not handle instantaneous electricity demand when operating a hot gas mill. The idea was [ born ] to let the lithium battery handle the fast discharge part and then activate the low-cost vanadium battery. Artificial intelligence software was required to manage this LIVA structure. We ended up buying the firm in -- the artificial intelligence firm in conjunction with AMG Engineering built the battery within 12 months, the first battery. The system works as planned. The supply storage capacity enable us to build rooftop solar energy facility, integrating the electricity generated in our internal grid that fits to whatever manufacturing plant. The first LIVA battery for third-party customers is under construction. Others are in negotiation. Indications are that the demand for such solutions is very large and global. The vanadium electrolyte, which is, of course, the raw material for the vanadium part of the battery is supplied by AMG Titanium, a traditional producer of vanadium electrolytes in Nuremberg. To manage all of this properly, we formed LiVa Power Management Systems with Dr. Kölln as CEO; Dr. Gruenberger as Chief Operating Officer, and he was the project manager of the first plant. And we also already have a CFO in that company, which is fast growing, as I said. Finally, let me make a few remarks on AMG in '24, if that is of interest. We have just completed the fiscal year '22 and surpassed the EBITDA guidance from "$320 million or higher" with a final EBITDA of $343 million. So we surpassed that guidance. We have posted our '23 guidance as "$400 million or higher." Looking at our year-to-date February 2023 results, we had a very good start in '23. In May '23, we will have our AGM in Amsterdam. Traditionally, we publish at that occasion, our new 5-year EBITDA guidance, which in May '22 was stated as "$500 million or higher in 5 years or earlier." We presently are working on a variety of scenarios, which is necessary to come to such long-term guidance statements in a responsible way. At the AGM in May, we will formally update our 5-year guidance as we annually do. Looking at our scenario planning, my comment on the present long-term guidance statement to reach an EBITDA of $500 million or higher in 5 years or earlier is that earlier could be as soon as '24. Thank you for your kind attention. Alongside is [ Mr. ] Costa, Scherer and Kölln, we will answer the questions once the presentations are completed. So I will now ask Fabiano to talk about his mining operation.

Thank you very much, Dr. Schimmelbusch, and good morning to everyone. It's a great pleasure for me to be here. Let me just share a little bit of the background of the mine in Brazil. As Dr. Schimmelbusch mentioned in his introduction, there has been initiatives of mining in the Volta Grande pegmatite since 1945. At the very first beginning as a artisanal mine essentially focused on the cassiterite to support the tin industry in Brazil. At mid-80s, beginning of the '90s, the focus of that particular ore body shift to the tantalum, as the tantalum was demand for the electronic industry. And that has been pretty much the focus until the beginning of the years 2000. Now the interesting part of this is the ore body there is covered by something around 7 to 8 parts of waste. And in average in the ore body, there is 350 to 400 PPMs of heavy density materials, meaning cassiterite and other minerals bearing tantalum in it. So converting this into wage units, you essentially have to remove 6 to 7 tonnes of waste to uncover 1 tonne of ore. And then in that tonne of ore, you have 400 grams of something of heavy density. This is obviously a challenge for a company like AMG. We want to maximize the mineral resource and that's essentially where the lithium come from. At the very first beginning, we were making feldspar, a feldspar concentrate. A major part of this lower density minerals of that particular ore body, they are -- they form a good concentrate for the ceramic industry with feldspar, albite, quartz and one of these minerals happens to be spodumene. And we start producing that feldspar concentrate for the ceramic industry and around the year 2010, 2011, we start research and development to try to concentrate that spodumene part into a spodumene concentrate without obviously jeopardizing the ceramic industry in Brazil, where AMG is the major supplier for [ sealants ] in Brazil. So we were very successfully developed that route to concentrate the spodumene out of that. And in around 2014-2015, we started engineering that plant. The plant that we built from 2016 to the end of 2017, plant starts running in '18. The project was implemented on time, on budget. And we are now producing at the nominal capacity of 90,000 tonnes per year. Grace, can you flip through the last -- the first slide? Now the first one first, just out of curiosity. This is a picture of the mine. And I'm going to show you guys a little bit, but just want to show this first. The next slide, which is a 3D, it shows the operation. So from the former operation, it is interesting to see that we have the pegmatite coming feeding to a comminution circuit. The comminution circuit is essentially formed by a crushing circuit, followed by a grinding circuit, where we adjust the particle size. There's an interesting factor in this way that we're doing things differently on the lithium producers around the world, we recover the tantalum first, which give us the ability to maximize the potential credits on tantalum because the degree of deliberation of these 2 elements in the ore are different. And if you recover the lithium first that demands that you mill your ore so fine that the tantalum gets unrecovered by normal simple chip gravity concentration. So if you want to concentrate the tantalum after you mill, your particle size to a final size to recover lithium means that you either are jeopardizing your tantalum concentration or you have to use very expensive methodologies to concentrate that tantalum. That's a good differential of AMG so we recover the tantalum first, and then we keep grinding our material to a particle size that is feasible to concentrate the lithium. So I am already showing there in that picture the expansion that Dr. Schimmelbusch has just mentioned. We are going through right now, and I'm going to in a little bit more details on this expansion in the next slide. Sorry, Grace, can we keep on that one for a little bit? Just out of curiosity, in this slide, you see already that we have real estate prepared for the next phase of this expansion, which includes a technical-grade chemical plant construction at the site, which will give us a huge advantage in terms of logistics saving costs. Since that we are converting that in China nowadays and we will convert that 100 meters away from our operations. That will be a great advantage in terms of cost. Now we can go next. So the expansion is essentially a 45% expansion from today's capacity going from 90,000 to 130,000 per year. And the interesting future about this expansion, it's a very low technological risk since that we are essentially focused on debottleneck and increasing the recover capability of the plants by what we learned with this plant operating that since 2018. So there's a lot of opportunities that we can implement some small processing chains that will give us the ability to increase the metallurgical recover. Yes, there will be enlarging on the same process that we use nowadays. So again, very low risk because it's similar mineral process that we -- what we are doing, but a little bit bigger. And of course, some new technologies, which will help us in terms of mass recover to recover some of the coarse particle size that we were not able to recover in the first -- in the first phase of this plant. So as well as we are embracing what we call the robustness of this plant, it's essentially to deal with the natural mineral or variations that we face in the mine. So this is happening right now. We are scheduling the shutdown to do the [ tide-ins ] so we are building everything without stop the plant. And in the end of Q2, beginning of Q3, we do the shutdown to do the [ tide-ins ]. so the startup around this date and ramping up towards the end of the year when we expect to have new nameplate capacity already in place from the fourth quarter onwards. Next, please. So Dr. Schimmelbusch mentioned, lower than $500 million. He was being conservative. Our cost is $461 million nowadays delivered to China. And that is -- thanks to the maximization of the tantalum grades, not only the tantalum, but as I mentioned before, we have kept -- we have successfully kept our feldspar consumers in Brazil, and we also do [ some team ] similar to what people were doing that in that mine in the '45s. As I was mentioning before, the Mibra mine, it has been a long-term tantalum concentrate. It's one of the largest conflict-free producers of the tantalum industry. The tantalum is what gives us the ability to be a very low-cost spodumene producers in the world. I would dare to say that we are probably leading this cost race at this moment. Together with the expansion that we are doing in the spodumene because it will be more ore feeding that comminution circuit, we also have the ability to increase the tantalum capability. Nowadays, we have the capacity to produce 300,000 pounds and that will be increased to 370,000 pounds by the second quarter of next year 2024. Now the good thing is we have recently announced a partnership with one of the largest players on the tantalum industry around the world, JX Nippon. JX is in this industry has, in the past, incorporate the power to produce here in Germany in Göslow, Taniobis that's the name nowadays, and we have a life of mine contract which considers that we deliver 100% of our capability to that plant. It's a kind of a take or pay. So there's a marketing derisk in this very strategic partnership that guarantees that low-cost spodumene producer for life of mine. Next, please. So I have previously mentioned that as the next stage of our expansion of the upstream -- growing strategy of AMG in Brazil, we will build chemical plant converter to convert our spodumene into technical-grade lithium to be used as a feed in Bitterfeld. So we are at the FEL3 phase. This is -- in simple terms, it's basically engineered done. So there is a little bit of plus/minus in the number that I'm presenting here, but the investment is in the ballpark range of $250 million. The commission expected at the end of 2025 to produce 16,500 of tonnes of technical-grade lithium per annum -- per year, which is similar to the 130,000 capacity. So we will be able to convert 100% of the throughput of the spodumene plant today. Delivery cost to Germany, it's less than $10,000 per tonne. And the technique in this, as I was mentioning before, it gave us a huge saving in terms of logistics of about 90,000 metric tonne reduction in CO2 by not converting that in China. Next slide, please. So just a few remarks on our ESG initiatives in Brazil, which is a very important principle for us. Starting with safety. I just want to present some of our safety parameters. Our lost time rate is 0.14 and recordable rate of 0.42. When you compare that to the Bureau of Labor Statistics Industry Benchmark, we are 88% and 90% better, respectively. This is something that we are very proud. We have been putting a lot of effort and focus on the safety of our own people in Brazil. Mining is not a simple operation, it's dangerous, and we are quite happy to present these kind of numbers, the safety culture and the safety value is really practicing in the mine in Brazil. So we are also very well recognized by the industry, our suppliers and our customers. I just mentioned there one example that in 2021, we got this prize from Novelis, which is one of our customer and supplier. This is a very important prize, this award in Brazil. There's others to be mentioned. There's another initiative for us, which is we produce nowadays around half of the energy that we consume in our own hydropower plant. So the number in 2022 was 48% of total consumption that was produced by ourselves. And above of all, the responsibility of us to preserve the environment and the developing communities around us, it's one of the main objectives of AMG Brazil. Talking about local community. We also do very, very dedicated programs in Brazil to work together with the communities in our neighborhood. We obviously prioritize local culture and build a relationship of mutual respect with them. Over the last 10 years, we have managed to increase the number of people who work from us from 45% back in 2011 to 70% that lives in the area around us. This is thanks to a lot of programs that we do with the Brazilian authorities and ourselves to develop the people around us to be capable to work with us. This is something that we're very proud of. We can go next, please. Just talking a little bit on our mineral resource. These numbers have been updated back in the end of 2021 which we are showing around 22 -- actually 21.2 million tonnes remaining in the resource. We do consider the inferred. And for those who have geological background that might be a little bit interesting. And I just want to mention the numbers that we had before. This number has been stated back in 2017 when we have announced our Canadian Code 43-101 classified resource was [ 24.5 ]. Out of that [ 24.5 ], we have 4.2 million tonne in inferred category. And nowadays, we are showing 3.7 million which means that 500,000 tonne which is about 15% of our production since 2017 have been actually mined from that inferred resource, which in other words it is reserved to us. So the numbers that I'm showing to you, it essentially gave us an expectation of about 18 years of life of mine already considering the expansion which will increase the ore consumption from 850,000 tonne per year to 1.2 million per year. As Dr. Schimmelbusch mentioned, we have several resource increase initiatives around the world. I'm just showing to you guys the ones that we are doing in Brazil. The point that you see down below in the Southeast of Brazil, Minas Gerais state. It's in our concession, there's a possibility for us to get another ore body just down below the ore body that we are mining, we are seriously investigating it now. And there is 2 other opportunities we have. Although in Northeast of Brazil, 17 mineral rights or concessions to explore, to do exploration, geological exploration. So we start doing that by geochemical analysis, and the geochemical results has been pretty good, indicating that we have presence, anomalies, if you want, of lithium, tantalum and tin. This is the initiatives in Brazil. As Dr. Schimmelbusch has mentioned in his introduction remarks, we do have knowledge to develop areas around the world, something that we are covered by NDAs, so we cannot go into the details here, but the increase in the mineral resource base is just one of the targets and the main objectives of the upstream strategy here. I think I'm finishing here. I'm happy to address questions after the presentation.

Very good. Thank you, Fabiano. Now back to Germany.

Yes. Thank you very much. I just want to spent a couple of seconds on the slides as Dr. Schimmelbusch has already shown before. So on the left corner, below, you see the utility building. The one with the dark roof, this will be the fully automated warehouse with the goods received and the dispatch area. The lighter building, this is the heart of the refinery, which is the production building. And at the very end of it to the right, you can see the place where we unload the big bags in an automated way. So later on, you can have a bit more detailed view on the model we've put around. And on the monitors, there is more photos running and animation show on how the construction was progressing. Let's go to the next one. This is from inside of the plant. So we have not only the cover, we are also doing work inside, which is quite important. Next slide, Grace, please. And on this slide, let me give you a short recap on the current activities in Bitterfeld. Our module 1 has a capacity of producing around about 20,000 tonnes of highest quality of lithium hydroxide battery grade. We are talking here in purity levels of down to 5 digits behind the comma or PPP, that's the level we are talking here. And our idea is at the end to have installed a total of 100,000 tonnes of lithium salt production in Bitterfeld by 2030, which is fully supported by the available infrastructure and services provided at the Industrial Park in Bitterfeld, which was one of the reasons why I've selected this site. Although we, as many others, have seen impacts of the Ukraine war, COVID and especially this year of low temperatures on supply chains, steel prices and availability of construction services, we are convinced to start up the plant as communicated all the time in Q4 this year. We are also very confident, given all the circumstances that we are able to stay within the $130 million budget for completing this. Next slide. Continuing on Dr. Schimmelbusch's comments before. Let me give you a bit more detail on the lithium supply chain for our module 1. I apologize if it's now getting a bit technical, but that's the nature of it. So module 1 represents our base scenario, I call it, and can be fed to a very large extent by our Mibra mine in Brazil. In order to derisk synchronized construction and commissioning of 2 new plants in 2 different places, one of them converting spodumene to technical-grade lithium carbonate in Brazil, as outlined by Fabiano; and the other one taking this carbonate and converting it into lithium hydroxide solution in Bitterfeld. We have signed a binding toll conversion agreement with our valued Chinese business partner, General Lithium, a well-established name in the lithium industry since many, many years. So I personally know these guys since 12 years now. This will pave for us the path to transition from a pure spodumene seller as of today to a fully integrated lithium hydroxide producer in a flexible, smooth and most important profitable way. The 2 plants required for such transition are shown in the dotted boxes and are supposed to start up in '25-'26. Fabiano just talked a little bit about the Brazilian plant. The German part is right now in FEL3 stage. And since we are waiting on test work results and final process design, it is a bit early to give a CapEx number. But for those who necessarily want to hear one, it will be round about $80 million for the part from carbonate to hydroxide. The primary customers for us are always the cathode paste producers. And the reason for this is simply because this is the final instance together with cell producers, whether decision is finally made, whether a battery-grade material is suitable and therefore, qualified for cathode making or not. A very important point, and for sure, something not to be downplayed or even neglected. Next slide. Some words on the sourcing for this module. Again, this year is our start-up year. So that cannot be in Q4, you cannot expect any significant volumes coming out of this plant. So we will not need much feedstock to be able to do the commissioning, and we plan to purchase such small volumes on the market, which is right now going on. 2024 will be a transitional year for the production and is clearly driven and impacted by the course and outcome of the qualification process of our product at the cathode side, which will take place in the first half of the year. And half a year, I would say, is a sound and typical period needed for qualification of the performance chemical like lithium hydroxide. In order to smoothen the qualification process, we are already qualifying lab samples. That's one of the purposes apart from solid-state batteries why we have established the laboratory here. So we are already qualifying lab samples, developing, validating and exchanging analytical procedures with customers and setting up a fully fledged quality management system for Bitterfeld from day 1 on. And 2025 will be then our first year of full production. As you can see here, about 50% of the capacity is fed by lithium equivalents coming from Brazil at this point. The remaining volume is purchased from the market while coming from strategic partners, we call them. For us, a strategic partner has access to LCEs today. So LCE is a lithium carbonate equivalent, it's the lithium world currency. But the restriction in converting them and no footprint in Europe, be it in production and/or sales. AMG Brazil will supply up to 17,000 tonnes of LCE for this module. So this is almost the complete volume we need for module 1 and I will get back to the flexibility of the plant in digesting different types of [ feeding ] to sales and offtake for module #1. Our key client for Module 1, as already published and also for further growth is EcoPro, I would say the most dynamic cathode producer in Asia outside of China. As you know, we have an executed binding offtake agreement in place with them. Base volume is 5,000 tonnes of hydroxide with a possibility to purchase up to another 5,000 metric tonnes. So in '24, basically, we can utilize EcoPro to support our sales of the majority of our product. We are also in discussions for having MOUs in place already with almost all of the cathode producers around in Europe. We are more than confident to be able to turn these into binding agreements soon, especially when the refinery materializes more and more in the next month. One of these customers is FREYR, a new very interesting and diversified cathode in cell producer in Norway. Most of these customers will start purchasing significant volumes in 2025 according to their forecasts. Next slide, please. So some comments on how we expect the margin for what we are doing to develop over time. So our Bitterfeld plant is currently an upgrader from technical-grade to battery-grade hydroxide. Since there is always a price differential between these 2 grades, the plant will always be profitable, but the level of profit will depend on the spread. We show this on the first bar on the left, utilizing today's battery-grade price and today's technical-grade price. So you can see it's -- the green is the margin, the blue is the cost. As just said, we've negotiated a tolling contract with General Lithium to produce the technical-grade hydroxide for us, utilizing the spodumene from Brazil. As you can see from the middle bar, this is much more profitable for us than purchasing on the open market, and therefore, we go in this direction, logically. The final bar represents Bitterfeld receiving technical-grade carbonate at the cost of production from the plant we are building in Brazil and starting up in 2026. So this represents the fully back-integrated picture. This graph assumes that Brazil has no profitability. This will obviously not be the case, but the graph does show you the enormous profit available for all of AMG Lithium at today's prices. This opportunity is, of course, driven by the combination of Brazil's low-cost operations, plus AMG Lithium Germany's ability to produce battery grade quality for its customers. Next slide, please. Okay. So let me now move more to the strategic and growth considerations for our downstream activities. AMG has chosen a new and game-changing approach for lithium in 2019. Admittedly, not really new, as Dr. Schimmelbusch already pointed out, since it established already in other industries, for example, in copper. I'm noting here that Albemarle has just announced the so-called Mega-Flex facility in Chester County in South Carolina, which has more or less the same concept as ours. It should have 50,000 tonnes capacity at the end of the day. Today, most mining places do also have a production of battery-grade materials very close to it. This is how it traditionally has been built up in the last decades, especially most of the new junior mining projects are still showing these plans. Now in this context, there are coming along several issues: a, realizing the whole production chain from mining up to producing battery-grade materials requires a long breadth and good financial backup to overcome the numerous technical and regulatory hurdles. Examples are legion. B, 1 mine feeds 1 plant, bears an intrinsic supply risk. Even for a well-established productions like in the Atacama, it happens every couple of years with El Niño that you face heavy rains resulting into reduced production output. And last, Point C, shooting directly for battery-grade offtakes is risky, since such offtake agreements are always subject to successful qualification. And the time required to reach this battery-grade quality is very, very often underestimated. As pointed out already, we have hired over time, a number of people in Frankfurt and Bitterfeld, round about 20 out of 45 today, having collected lithium experience across all boards of skills and professions and all aspects of the lithium business. This high level of lithium know-how distinguishes us from many other new lithium players around. Now therefore, AMG has developed a lithium refinery concept. Basically, we will be able, at 1 point, to digest all different kinds of lithium feedstock. And we have established a network of tolling partners helping us in realizing such flexibility until we have built our own production. So already today, we could accept lithium sulfate or carbonate hydroxide and get it converted into feedstock for our module 1, very important point. What AMG offers to partners is to enable their projects generating cash on an accelerated time line through offering a robust, low-risk and long-term offtake which is the base for getting a solid project financing. It also gives an advantage to our clients at the end since we significantly derisked the lithium supply chain by being independent from only 1 lithium source. Next. I will not go into details on this slide because it's a lot of little words here. So let me summarize. There is different possible ways we have identified for securing feedstock for further modules. I mean number 1 doesn't need any further explanation. That's AMG Brazil. You can tick this one off. Number two, same for purchasing. Although off-grade materials are an interesting aspect here. So materials, which are out of spec and cannot be used in the cathode manufacturing process. Since there will be tons of hydroxide produced which do not fulfill quality requirements and which cannot get absorbed by the relatively small technical grade hydroxide market. So you have to find a place where to get it rid. We just have an example of 200 tonnes of hydroxide sitting in a European port and degrading over time simply by picking up CO2. Points 3 and 4, spodumene and lithium carbonate can get toll converted as I already pointed out. And one huge and important factor is the ability of our refinery to digest lower-grade materials coming from recycling of spent batteries. This is a little bit more down the road on a time line. But I would say that we are well prepared for helping the circular economy in lithium also here because we can simply take the materials from these recycling activities. And building a battery plant close to a recycling place doesn't make sense in most cases from a volume and again, a technical risk point of view. Points #5 and 6, strategic partners. I've pointed this out already a little bit. There are established lithium players with no production footprint in Europe today. And for those, for example, a tolling arrangement can be attractive as well for us, and the fast-track to realized sales and access the market in the European Union. The second category are junior miners or new projects where AMG can significantly contribute by its know-how and experience in reducing time to market. We are having already quite a lot of advanced discussions here with different projects worldwide. Each such partnership can support the construction and operation of an additional module or even more, depending on the size of the resource. Next slide. This slide is an attempt to summarize a truly complex matter and I apologize for it and it is supposed to illustrate to use the complexity of the lithium supply chain and how AMG is planning to handle it. It further explains why lithium will likely never be a commodity like copper, zinc or iron. There is just too much process chemistry involved, and each source requires special attention to details and impurities. Next slide. So leaving now the AMG-specific sector and giving you some comments and views on the lithium market, we see it today in general. Dr. Schimmelbusch has already talked about the growth of EV and energy storage markets and what it means. So why Europe is a focal point for our downstream business? There is now a cathode manufacturing footprint emerging in Europe, which was not the case in the past years. It was a wide spot. Just to mention here, again, EcoPro in Hungary or also Yumiko in Poland. If you count all announced cathode capacity together, we can expect around 300,000 tonnes of lithium salt required by 2025 already for Europe. Being sited in Europe has advantages, short distances for transport, quick delivery and substitution of materials amongst others. The picture on the left shows the supply gap for Europe in 2030. Even if all announced European mining projects would get realized, there is a huge supply deficit in the order of magnitude of 300,000 tonnes. So Europe needs to continue importing lithium, and we need to form strategic sustainable partnerships with other countries and partners in order to support the market. Having support from governments and finance institutes like KfW is, for sure, big plus here. These are the reasons why we believe in our European setup. And remember, AMG is the first European lithium hydroxide battery create producer on European soil and therefore, the #1 partner to be contacted on lithium in Europe. Next slides. Now why lithium hydroxide? I need to keep this a bit short. High nickel cathode chemistries will show the strongest growth spurred by the fast-growing demand in Europe and in North America. One needs this cathode materials for driving reach and power battery targets, something especially people in Europe and the U.S. request. Of course, this is nothing AMG can influence. At the end, each individual decides which type of car he buys. There is a lot of pros and cons for lithium iron phosphate and/or high nickel. You can have endless debate on this. So even as striving to produce 100,000 tonnes of hydroxide per year in Bitterfeld, we do have the flexibility to change our view and our production footprint on the way. And if market requires, we could also produce lithium carbonate battery grade. Next slide. So coming a little bit to the fuse on the current lithium salt price development. There is a lot to read in different journals and press releases. I mean, Dr. Schimmelbusch just shared his skepticism on reliability of long-term price forecasts and demand-supply curves. So let me share some of our thoughts on things happening around lithium prices right now. Generally, the music still plays almost exclusively in China today. And lithium carbonate, which also a general statement, is much more prone to price reductions than hydroxide. Reason for the latter one is the low cost of producing battery-grade carbonate from brine. Spodumene cannot compete with this. And therefore, you have the pricing flexibility for producers to push their material into the market, especially the Chilean brine expansions end of last year and also this year, might be showing this effect, might be one of the reasons why we have this prices declining right now. Some other reasons for the price situation in China for carbonate is that there are almost no long-term contracts in place. And that there are inventory reduction efforts going on along the whole value chain right now. And naturally, at the end, purchasers will restart buying only when they have to and wait for the prices to fall further until the very last moment. On top of that, we have a slight increase of domestic carbonate production in China. So this is the mix of reasons why we believe in this development and something which just came to our attention is that by end of June this year in China, there will be -- it's not fairly new, but it's a new regulation from that point in time on that combustion engines have to show a 50% reduction in CO2. And when you think about the car industry there, it's logical that they try to sell their old engine technology, maybe even at special offers, so this could be also one good reason for why we see this dip in pricing at the moment. Hydroxide is following this trend slowly, not to the extent on hydroxide, but slowly. And there are 2 reasons. One is the contracts for hydroxide are usually running longer. And once carbonate get cheap enough, you can produce hydroxide from carbonate, that's what we plan to do in Bitterfeld, which will lead to an increased production on top of the spodumene base 1 and following then to a slight price correction. Logically, there should always be a premium for hydroxide, which again means that hydroxide is the sweeter spot to be at compared to carbonate. Given what I have just said, especially this Chinese regulation issue, prices might get back to a higher level again in the second half of the year once the market gets settled and back to regular conditions. Next slide. So finally, I wanted to give you some comments on our all solid-state batteries activities. We firmly believe, in line with industry experts, by the way, that in the next years, a new generation of battery technology will be rising, namely the solid-state battery. The chart here on the left shows you the expected EV growth, which we all know. The chart on the right, the portion of it applying to solid-state technology and resulting in a volume for solid electrolytes, which is the subject we are working on. Such new battery technology will come. It's already in the R&D labs and in small series at the OEMs, especially in Asia. Since this technology is needed to achieve energy density targets, just to mention again, driving reach and charging time, especially, and improved safety targets for batteries. We are working since 2018 on making materials available to this market on a commercial scale. Next slide. Again, apologies, it's getting technical now. We are having a team of experts here in our laboratories, namely Dr. Nickel, which you will have the chance to meet and talk to later during the lab tour. From talking to major developers of such solid-state batteries, we are convinced that sulphatic-based materials are the ultimate development target for this next generation of batteries. They simply provide the best set of properties. As you can see, we have 2 product groups in our portfolio today. One is a sulphatic-precursor being produced from hydroxide battery grade. So we are back-integrated on the feed for this 1 also. And the second one, the solid electrolyte, which will replace the environmentally problematic liquid electrolytes and is produced by taking the precursor, the sulfate and other chemicals like phosphorus pentasulfide. This type of chemistry, and we call this in the chemical community World War II chemistry and the natures of the reagents requires enormous focus on safety and safe handling on chemicals. This is definitely nothing you can do in a backyard somewhere. This portfolio is also backed up by a series of patents we have filed. For developing this kind of materials, you need to be able to speak the same language as the people at the customer end and to be able to test the performance of your materials developed. A significant part of our laboratories is set up for exactly doing this. At the end, it is all about designing specific material properties in close exchange with the clients. Next slide. This slide shows you the customer base for us for solid-state materials. Unsurprisingly, Japan and Korea are spearheading the market here. And we are having collaborations with all significant solid-state battery technology players across the globe. And based on their expectations, we foresee a demand for our materials in the range of 6,000 tonnes per year by 2028, to be, again, reliably produced maintaining quality standards and a safe production environment. Also, OEMs are an important part of the game here. Since they are at the end, driving time to market for a new EV battery technology. And now my last slide. We have developed a road map for bringing on production capacity for precursors and solid-state electrolyte materials based on the market forecast and the customer needs. Again, it's important to stress out here that this chemistry is delicate and requires careful step-by-step upscaling and learning in order to not end up a fiasco. So it would not be wise to immediately jump into building a 20,000 tonnes plant without having gathered experience to regular, good old traditional chemical scale-up. Currently, we do basic engineering for 100 metric tonnes per year demonstration plant exactly for this reason. And this plant will be built here in [ Hurst ]. And after some time of collecting experience and operational know-how, we will invest in the next step and if market requires into a commercial plant, which from today's point of view, will be producing some time in 2028. So I'm now at the end of my part, and Volker, sorry, for waiting so long. I think now stage is yours.

So good morning. So just the next slide, and we step in. Okay. So LIVA is active in the B2B market for stationary large-scale energy storage systems. What we are doing is we are managing the fluctuating power demand and the fluctuating power supply. We are integrating and shifting unsteady renewable energies, namely from solar and wind. So how are we doing this? We have a technical approach, a concept called hybrid energy storage system. So we've taken high power unit, we've mostly used an lithium-ion battery or even a super-cap, and we combine this high power unit with a mass energy storage unit. And here, we use a vanadium-based redox flow technology. And we combine those units with a sophisticated software solution driven by artificial intelligence. So then we create a kind of an artificial virtual battery. So the software also controls further energy assets on the supply and in the demand side of energy like power to gas, power to heat facilities for producing hydrogen, oxygen, even process heat and cooling or compressed air. So also, part of the strategy is that we have an environmental-friendly battery. So we have a low carbon footprint of the energy storage system. We have a green mining strategy. I will explain. We do not use any problematic raw material, and we have fully closed recycling. So next, please. So here on the left side, you can -- so just a few words to the technical advantage in the battery of our hybrid energy storage system. And here on the left side, you can see that's a performance profile of virtual HESS compared to standalone lithium battery and redox flow battery technology. And what you can see here with the red and the orange line is one technology is not better than the other. It's just different. And that's exactly our approach. We use the respective advantage of a technology, the key performance indicators. And also partly, we [ heal ] the disadvantage of a battery technology. And so when we improve the properties of the battery, starting from that, we could increase the spectrum of application. So we could achieve a broader range of industrial application and grid scale application. We could optimally use those KPIs. We increased the overall system efficiency to power supply and energy storage. Also, we could improve the safety. We have an increased reliability. So we could achieve an availability of more than 99.9%. That is very crucial for an industrial application. And also, we have a long lifetime of the batteries of up to 20 years and more than 20,000 full cycles, charging and discharging of the batteries. So using those cycles, we could achieve the lowest total cost of ownership or levelized cost of storage. It's the same concept. It means we calculate the real cost of each kilowatt hour charge and discharge with the battery or each used kilowatt of power used with the battery. Also, we have the lowest carbon footprint at life cycle. Next, please. So here, you can see the application of our HESS systems. So we have energy application, and we have power application. With our HESS, we have both. We can do both. On the side of the energy application, we have the so called prosumers, that means we produce renewable energies from solar and wind and also we consume those produced solar and wind energy locally. So with our batteries, we optimize the self-consumption and the self-sufficiency. We could realize efficient off-grid in island solutions. And doing so, we could reduce the carbon footprint by up to 80% by the replacement of fossil fuel-driven gensets. We could reduce the electricity costs by more than half. And with power application, we could reduce the power grid cost by up to 80% by doing peak savings. We use the battery for grid stabilization and power quality improvement, namely frequency containment reserve and grid peak load management. It's a long word. But basically, it's all the same concept. We have a fluctuating power supply, and we have a fluctuating demand of electricity when we are flatting those curves. We bring the supply side and the demand side together, we match them. That is actually what we are doing. Also, we use the system for emergency or even uninterrupted power supply with black starting capabilities, which is crucial also for industrial applications. And we see new applications like for electric vehicle infrastructure. We integrate renewable energies in the infrastructure. We integrate high power charging capabilities. And we see rising potential for opportunity charging and discharging. So we make arbitrage in the spot market of electricity. So next, please. So here you can see the markets behind those applications. We could be on the supply side and the demand side. So on the demand side, we see energy-intensive industries like the heavy industry, the metallurgical sector, like the AMG groups. So AMG is basically our first priority customer. Metalworking, chemicals, automotive, aerospace, glass, ceramics and papers all where we -- we use a lot of energy. We consume a lot of electricity, we have a large carbon footprint. So on the supply side, we can be behind the meter or on the grid side in front of the meter. Behind the meter, also, we see energy in terms of industries. But also in addition, we see facilities in the field of mining and exploration. So facilities were we are not directly connected to the national power grid. On the grid side, we see markets in the field of electricity and infrastructure, utilities, transportation (sic) [ transmission ] grid operators, local electricity suppliers, even cities and community, they invest in infrastructure like charging station, I hope so. We see investors, private investors, private equity investors in the field and a focus of infrastructure and private-public partnership investors. Okay. Next one. So here some words to the value chain. As you know, is that LIVA's part of the AMG Group, and we strictly focus on our core competencies. Blue area here. So the nucleus of LIVA is software. So we have the software to simulate those facilities with all the batteries and the energy assets. We have the software to control those plants. We have the software for monitoring, for grid application. Also here on the right side, as we are part of AMG. With AMG engineering, we have an access to a large pool of engineers. So we build those batteries in Germany. We assembled them here locally in Germany. And we have a very close strategic partnership with global suppliers of all key relevant components, anything else, any standard parts and components resource globally worldwide. Okay? And also, as crucial is that we produce in-house our own electrolyte here in Germany in Nuremberg, and with it also the active material that's vanadium solved, vanadium pentoxide, and also the vanadium itself we produce within the AMG Group. And we received the vanadium, not from a classical mining process. Instead, we harbor still in process of spent catalyst and gasification ash from the petrochemical industries, from the oil and gas industry. So while we're doing this, so we see a cost benefit. Other hand, we could achieve a much lower carbon footprint so we reduced by up to 80%, okay? And this is part of our core strategy within AMG. So just a few words. That's a brief overview of our current projects. Starting with Hauzenberg, that's our running system with AMG Graphite, it's a 3.5-megawatt hour system. We use it for peak shaving in emergency power supply. Currently, we make an upgrade on the system. We install large solar battery for energy shifting and also for grid service for frequency containment reserve. Then under construction, there is in the southwest of Germany in Kaiserslautern with a customer, it's a 4-point megawatt hour -- 4.0 megawatt hour system. And interesting is that they have already a large solar plant and they have an existing geothermal power plant, and they intend to install wind mills. So we use then the system for energy shifting, for peak shaving and also for grid service. Then we have a couple of internal projects with AMG Titanium in Nuremberg, AMG Chrome in the U.K., AMG Vanadium, where they recycle those spent catalysts in United States, and they use the systems for peak shaving, for energy shifting, for grid service and for emergency power supply. And then there is a very interesting project. It's really a large-scale project. It's in customer, they produce electro steel, it's a pretty large system. It's a 28-megawatt hour lithium battery combined with more than 80-megawatt hour vanadium redox flow battery and we use then the battery for peak shaving. We could reduce the grid cost by up to 80%. We replaced the existing diesel gensets. So we use it also for emergency power supply and also for grid service and innovative is that we also integrate in very large power to gas facility, electrolyzing plant. So we produce large amount of oxygen and hydrogen. And the oxygen then is used in the large electrical arc furnace to put out the carbon impurities. And the hydrogen is used for a reheat treatment process and also to fill unmanned transportation vehicles driven with fuel cells. So this is very an innovative project. Okay? So that's it. That's an impression that's in for megawatt hour project in Kaiserslautern. And so you can see in the front that are the energy to power converters, the 6 in stack cabinet units, then in the back, you can see that's the energy filled with -- the tanks filled with electrolyte. And then on the left side, you can see the high power unit, the lithium-ion batteries with the power electronics. That is how it looks like. So thank you.

Thank you very much, Volker. It was exhaustive presentation. I'm sure there will be questions. And if you just simply -- do we have microphones? Yes. There's a gentleman here and then here.

Martijn den Drijver, ABN AMRO ODDO. You mentioned when you talked about the medium-term 5 trains up and running, $5 billion in sales, profitability at healthy levels under all market circumstances. You've also provided the insight in the production cost for the Brazilian converted plants. Now to judge whether you can actually be profitable under all market circumstances, it would be worthwhile if you could give something of a range of the production cost of the German conversion plants in Bitterfeld as that would play a major role and also the tolling agreement that you have with that binding agreement. That would be question one.

Can you -- I don't know whether I got it. Are you talking about the conversion costs of the carbonate plant in Brazil, the estimated conversion costs of the carbonate plant in Brazil and of the conversion cost of the German refinery?

That is correct, specifically the German refinery plants and also the tolling agreement for which you have a binding agreement in place. So that we have a picture, we can form a picture of the overall profitability.

Well, we do not disclose contracts with customers tolling contracts.

But this is not with customer contracts. This is your own production cost.

Yes. Look, are we talking about the tolling agreement or...

Both.

Why don't you comment on conversion costs of the refinery in Germany, generally.

I mean, a, it's not even started up, right? So it's a conversion cost model. And if you want to compare it with other things which are out there already simply not possible because such a plant is nonexistent. So when I give you now a cost, it's only a portion of what you can see in other places, right? So we are foreseeing something in the range of high digital 3 -- 3 digital numbers in dollars. Third one...

You'll say -- say something, say a number.

Something between $800 and $1,000...

Dollars per ton.

$800,000 per ton.

$800 to $1,000 per ton...

$800 to $1,000 per ton.

Not $8,000, $800 to $1,000, okay? So that's the one thing and carbonating Brazil conversion costs.

Yes, I think that was in the presentation. Again, it's an early stage. It's a FEL3 for the carbonate plant, but we are quite comfortable to state that the carbonate will be out of Brazil for less than $10,000 per ton of carbonate to the plant in Germany.

So that's the raw material cost of Germany with carbonate from Brazil will be $10,000 per ton. So the difference between that plus the conversion cost is then the -- we'll make the profit to the market price of the particular product...

That is after 2026. But prior to 2026, you still have that tolling agreement?

We are talking about either, we're talking about the tolling agreement or we're talking about later on the carbonate plant in Brazil. About the tolling agreement, we cannot unfortunately tell you what that is because it is subject to nondisclosure agreements, obviously, okay? So there was a question -- there was a question over here that -- Yes, to the -- let me do the ranking here, yes, because that guy was second.

Okay, Stijn Demeester, ING. Thank you for the extensive presentation and for taking my questions. 3 questions, if I may. The first one is indeed Martijn's question. I think it would be helpful to return to the slide with the yellow bars on the net hydroxide margin to give some comfort on the minimum profitability of the early-stage refinery, where you have the tolling agreement in place to give some idea on what you could expect in the first phase of the development. And the second question is -- so just to get some color on what you see as minimum profitability or what we could like model for '24 when it's still in this early phase where I got all the tolling agreements in place. And the second question is maybe more for Mr. Scherer. I'd like to hear your thoughts on sort of recent news flow on novel technologies in sodium ion in China, bottom end of the market, and whether this could present sort of a risk to the developing lithium supply chain globally. And then the third question is also near term. That's on the pricing structure. Today, your contract in Brazil tracks Chinese lithium carbonate prices, which, as we've seen, are very volatile. Would you consider moving to different contract structure, more long term to reduce that volatility in your P&L? Or would you stick with the current setup and accept the volatility, which has large upside as we've seen last year, but potentially also some downside. So these are my 3 questions to start with.

As regard to the profitability of the refinery, depending on prices and a lot of other things, our scenario planning has a range of $60 million to $200 million per module that has a lot of assumptions behind. And of course, the $200 million reflects a price of $70,000 up and the $60 million is the conversion -- is the spread. The spread of $3,000, which is a very, very established spread x 20,000 tons, give $60 million.

The $3,000, that is the difference between technical grade, battery grade minus the cost of production at your end. So this directly translates into...

That's correct.

Okay. That's very helpful and I think that is what Martijn was after. And then the potential, given that diverging spreads is quite substantial.

Yes.

Indeed. Okay.

And then the second question was?

Well, sodium ion is not really new. And CATL is basically promoting this technology in China. And sodium ion, for sure, has not the performance criteria or cannot fulfill the performance criteria of lithium-ion battery. Now having said this, for passenger EVs, I think it is unlikely that you we'll see this, a, it has not proven in a -- even in a small series of batteries that it's actually usable. And I think CATL has announced this, working on this some time last year or even 2 years ago. And since then, you haven't heard anything new about it. So it's kind of a sleeping beauty, I would call it. So I mean you never know. Maybe there is some niche applications, markets where size and weight doesn't matter. But again, giving the chemical and physical properties of lithium-ion for small compact applications like you need in a passenger car, lithium-ion, in my view, is the only mass market app technology. And at the end of the day, OEMs of this world do not tend to change their technology platforms every 2 years. So once they are set for lithium-ion, it will take a lot of time to make them changing their mind and maybe investing in another battery platform, which still has to show that it can deliver. But you know from time to time, you have -- this technology is bumping up and you have to take a hammer and get them back again. E-fuels is now a new one, right? Extremely high cost, CO2 reduction is one thing. NOX is the other thing. When you have been in China, you know what I mean, right? When you walk through a yellowish fog to the street and it's extremely expensive. It's just using masses of electricity for producing a synthetic food, which is also not new. It has been established 100 years ago already. So that's a little bit on technologies.

As regard to the third question price formulas, there is always a philosophy difference between spot pricing and long-term pricing. In the long-term pricing, you tend to have a formula mixing several components. In our long-term pricing, we have mixed the certain components estimating or drawing on the profitability of the customer, mixing the profitability with the customer on a theoretical -- on a negotiated basis of negotiated parameters with spot prices. And you're never correct. There are times when the spot price is -- would have been better, especially in very high situations where [ Pilbara ] gets auction prices which are, of course, above the general index prices and is benefiting from that. And we have always done a very conservative mixture of prices negotiated with our -- peacefully negotiated with our customers. So as I said, you're never correct. In low price scenarios, we benefit. In high price scenarios, in very high price scenarios, we give something up. It's a trade-off. We are still optimizing these things. And right now, we are entering, of course, throughout the value chain to a lot of contracts, and we are learning here. But that are the basic philosophies. There was a question here. No, no. There was -- you, sir, and then you're fourth.

Good. Yes. Just a follow-on from -- 2 questions. One follow on from the pricing question. You sounded very confident that prices actually may go up again in the second half of the year once these particular Chinese.

No, no, no. We don't do confidence here. The future is the future, we are not confident or not confident about the future. It's very different. We are a low-cost producer yes. That's important.

That was my question.

We are making money and there is a base. Our focus in this whole thing in each element and in the total value chain is we want to be the low-cost producer and that then stabilizes our profitability forecast. Now that confidence, let's try to do something confident. I said that all the forecasts of, for example, Benchmark or Wood Mackenzie or people like that show [ slide ] of the lithium prices, medium and long term, very steady. They also show a production deficit in 2030 of considerable literature. So you get a book of 40 pages in Benchmark and that -- and in this book, you read that the price will go down. And then you read about the substantial production deficit in the end of 2030. So it can be -- it cannot be true because if that production deficit is the case, then people will buy, and therefore, the price will correct itself. So I think it is very difficult to do this forecast, and we will have to do it. Because it's analytically and otherwise very complex. We believe in a delay of -- and a delay and a complex road towards additional production. And that delay will be cementing the intrinsic. It will be volatile, but there will be an intrinsic lack of production because it's easier to build a capital plant or a gigafactory than to build a mine. The difference between building times of a mine -- a mine, you have to do 5 to 10 years and then you have a mine, a plant -- a conversion plant 2 to 3 years. So I think we are living in a time where there will be -- it will be volatile, but there will be a scarcity of supply as a major issue of this industry.

I'd agree with that. And I'm just looking just to this year in terms of how your pricing works compared to the spot market, you're looking from this current level of weakness potentially to recover. Other forecast is suggesting that lithium prices may go down to 30,000 a tonne before recovering again. How in that type of environment, how does your revenue fluctuate with lithium pricing, let's say, lithium pricing goes up and down, up and down.

What you're asking is what will be the first quarter of AMG. I tell you it will be okay. And I can't tell you what it will be because we don't want to do guidance on a quarterly basis.

Yes. No, my question is, is how does the revenue receive relate to the fluctuations in spot? So how much have you got knocked in at fixed prices versus how much do you...

There's a certain time lag. Involved, but we are not disclosing what the time lag is. You have to wait until the first quarter and then you have to wait until the second quarter. And then I think you can simulate once you have those 2 numbers, you can pretty well simulate what the time lag is by which this -- once formulas kick in, but we started well, I said. It's a very important statement for the...

We started very well.

Yes, very fortunately, that is not quantified. Okay. So we have here gentlemen.

[ Frank Henge ] from Deutsche Bank. I have 2 questions. First, regarding the hybrid energy system. What is the potential? How do you develop the business until the end of the decade partnering? And second question, I missed your -- some comments regarding your 25% participation in the mine in Eastern Germany, what your ideas regarding this new site?

Is the first one is a question of the market potential of the LIVA battery? Well, we are, as has been said, we are right now in the business of building batteries for urgent use in our own plants. And we have a few customers outside and all these plants are under construction in our own engineering capabilities, and they are very profitable. As because, for example, there is a huge potential of solar roof installations, which has not been done in plants. It has been done in Bavaria on the farm houses, but it has not been done in the production plants because it doesn't pay -- you have to then make a contract with the utility and sell to the utility, the intermittent electricity production from the rooftop, and this is not profitable. However, when you have a battery in-house, then you create an internal grid, then you produce, you feed the grid by the solar roof and you reduce the electricity imports from the utility. And therefore, you can apply the electricity price to that calculation and the higher the electricity price, the more of the money you make on your solar rooftop. That's a very interesting mechanism because it is very, very green. It enhances so the high electricity price enhances the rooftop in the industry. But further, you need a battery for that. And the battery in industrial applications has to be fast, instant availability. So that's where we add to the peak shaving, the solar application. And our demonstration customers then have a mix of uses and that central -- is the central idea is to create your own grid within the plant and manage the electricity streams within your plant as an internal grid, and that's the attraction of this. So you reduce your electricity consumption. We are now using those batteries as demonstration plants and building a marketing system. And the key competitor is the diesel engine. The diesel engine is our competitor. It sounds good to me. A diesel engine is a competitor -- we have [indiscernible] in this [ graphite ] plant who happily came and said we will reduce our electricity cost by flattening the volatility and, therefore, we will reduce the penalties which we have to pay to the utilities. And we said, "how will you do that," and they said, "we have a team, we will offer for a diesel engine." And then we said, "Well, a diesel engine doesn't fit very well into our sustainability report." If we announced that we now have a great idea, namely to burn diesel in order to -- that AMG is not made for that. So that was the origin of this LIVA battery idea, and it's spreading very fast. Another application, which is very interesting is for grid management. We are working on several large projects for grid management, where large entities -- [ that they can airport ] take a -- want to have their own grid for grid management purposes to optimize their grid management. And that is the batteries in the neighborhood of 50-megawatt to 100-megawatt hours capacity or $100 million investment. So we are talking about -- this will be a separate market. The industrial market is the first market and it's very widespread in its applications. In one of our own plants, we are installing a solar supported -- as a rooftop solar, we had to peak shaving, but also applied for solar. And we, in this plant, also produce green energy because we import hydrogen in that plant, and we buy hydrogen, and we want to produce now our own hydrogen from solar energy on the rooftop. So they're incredible where the liability of applications. The other question was?

Around the [ 35% participation -- participation in Eastern Germany in new mine ]?

We have a project, you mean [ SINBAD ]. Yes, [ SINBAD ] is the one and only lithium property in Germany. When you disregard geothermal ideas from water. This is a very complex projects and we wish everybody luck from that deep water, geothermal. Lithium projects are futuristic ideas. We will see what happens. This lithium project in East Germany is very old, has been mined, has a considerable reserve to be mined and has an ore body which reaches into Czech Republic under the order. So it's 1/3 in Germany, 2/3 in Czech Republic. The Czech Republic portion is owned by the utility in C-E-Z, CEZ, called CEZ, at 51% and 49% by an Australian Junior. And the German part is owned by a London-based, London-listed junior company in which we took a significant minority stake. The rationale for this minority stake is to be combining our know-how in an optimal solution. And the very alternatives, the one alternative is to go for the German -- to develop the German part separately. The second alternative is to develop the German part in conjunction with the Czech Republic part, which has implications for where to put the plant, the chemically upgrading plant, either in Germany or there. And the third one is to start with the German plant and then make it in such a way that you can combine it later on with the Czech part. That all is beginning thing. We have a very definitive idea what the optimal solution is. We believe in rationality because the difference -- economic difference of these various alternatives is very significant. And we will convince everybody as we are optimistic people that our ideas will then be implemented. And if they are implemented, we will feed 1 or 2 modules from Germany and from Czech Republic, modules in Bitterfeld.

[ What about the time line and the CapEx ]?

I cannot say because we first have to convince everybody that our ideas are the best ones. And you know convincing process is a combination of technical arguments, patience and many things. So we are entering that process.

Just a follow-up on that question. Convincing the shareholders of the junior miner, would that include potentially also making a bid for the whole company? Is that one of the strategic options you could consider?

That hasn't crossed our mind.

Okay. And just a follow-up on the flexibility of the German conversion plans. You mentioned it might require some investments to make it agnostic. You mentioned recycling lithium carbonate. What kind of investments are we talking about to do that roughly.

I don't want to -- I don't want to answer for, Dr. Scherer. In my view, the critical quality of the German refinery will be modeled after the successful custom smelters in the metal industry. And the biggest example here in Germany is our Aurubis in Hamburg, conventionally called Norddeutsche Affinerie, which I had the privilege of being Chairman for a long time. Aurubis in Hamburg is, I think, the largest copper smelter in the world and is highly successful in a high costs -- in a high-cost location. And why? Because they can take any copper-containing material. All sorts of scrap, including electronics scrap, copper concentrates in what high arsenic copper concentrates, low arsenic copper -- any, the German word is [Foreign Language]. Can -- so then, of course, you have a wide variety of optionality. And when Dr. Scherer says agnostic, then that is our intention. We want to be taking all -- we want to be able to take efficiently, all sorts of lithium-containing raw materials. As said, there will be low-quality materials. There will be starting production. There will be off-grade materials. There will be recycling, and we want to be -- and we are investing in this. Of course, you have to be technically capable of doing it. And that requires investments upfront and we are going through that. And that was -- it was mentioned -- you mentioned $80 million for...

The carbonate to hydroxide.

So of being able to tap into the carbonate market worldwide because we see when we travel around even in...

Exhibitions.

In exhibitions in [indiscernible] exhibitions, you are being offered carbonate. And so the carbonate market seems to be a very liquid market relative to -- in the present times. I also said that the liquidity, not liquidity in financial terms, the liquidity in these markets along the value chain will be highly different over time. Mimicking what happened to, for example, the good thing about me is I have been several generations in that industry. So I've been watching the aluminum industry. And the liquidity in the aluminum -- alumina and for various states of aluminas highly different in the development phase of that industry. And that will replay itself. And there is a large new producer coming on stream with spodumene. There will be a spodumene overcapacity for a moment, and then there will be -- and that will happen to all these stages and the liquidity will be very variable, and we want to be completely able so maximum flexibility to benefit from that different liquidities in the different markets, carbonate, technical grade hydroxide, technical carbonate, spodumene and interim products.

My final question is on a follow-up on that point of Mr. [ Henge ]. If you look at the LIVA opportunity and also your solid state, what kind of opportunity do you see there? Should we think about that as a $100 million plus the LIVA plus the solid state activities. Should we see that as a $100 million plus activity? Or how should we view that?

LIVA? It's too early to tell. The solid state doesn't have anything to do with LIVA.

No, I know, but it's 2 projects that you hold intentionally to generate revenue...

Most questions I can -- look, don't you understand we are early stage. In early stage, it's not very -- it's not very prudent to make quantitative -- you only can say that what we see is a substantial amount, you can say what is the size of the diesel engine market in the world for industrial applications. I don't know I heard that is between $50 billion and $100 billion a year. We are competing against industrial diesel engine applications.

But also we rely improving technologies because we go in the industrial sector. So this is very important to us that we have the availability of the system and with new technology that's a huge risk for us and for the customers. But what happen in the future, we don't know. We use the lithium battery for a high power units. And if the properties are good using a solid-state battery, so then we easily could change them, but that's far in the future.

I'm also thinking about grid management applications in a very different way. In Germany, for example, the energy storage was -- the energy storage in Germany, electricity storage, rested 99% on hydropower and pump [indiscernible]. The [indiscernible] are leading of availability of low-costs electricity in the evening because the coal-fired power plants and the nuclear power plants are in the evening, trying to sell their electricity, low cost. So you pump it up from a lower [ lag to a higher lag ]. And then in the morning, when the industry starts again happily you need electricity and then you let it down to the lower [ lag ] through a [ flow ] power plant. 99% of energy storage was [indiscernible] in Germany. The problem is it doesn't work anymore because in the evening, the nuclear is closing, the coal fire is really not in the -- so now the low-cost electricity availability in the medium term, long term in the evening is not there. Therefore, it doesn't make sense. However, in the evening, you need a lot of charging of e-cars. So now in the evening, there is no low cost. And therefore, in the morning, when you let it down, the sun is shining, and there is no good market for -- so in both sides, [indiscernible] are not something you should invest in, and nobody is investing by the way. So therefore, we have a [indiscernible] problem. [indiscernible] problem, however, in Germany, is not -- has an automatic correction because you import from France or from Czech Republic, it's a connected system. So in countries, where the grid is not connected to enabling saving box, the neighboring reserve. The grid management is of central importance. And it is more complicated daily because as these countries add solar energy and intermittent energy, the grid management problem becomes more and more acute. We have found such a great management situation, which has where the utility has abandoned the expansion into solar and wind over and above a certain degree because of the grid management problems. So that's an ideal customer for large-scale grid management back up. And of course, in grid management, you need instant availability of the electricity because the basic task of a grid manager is to match a large number of suppliers with a large number of customers and nobody is forced to shut down. And that, of course, is a very precise situation, and a battery is a necessity answer to make that job efficient. So I think energy -- electricity, I have studied this for a long time. Electricity storage is the biggest overlooked success criteria for renewable energy logically. And that is, of course, now everybody knows that. And since the [indiscernible] as a national thing as a standard solution doesn't work anymore. Battery solutions are necessary. Elon Musk, for example, has built a lithium battery in Australia for such stationary applications is, of course, extremely expensive, and it's the one and only, I don't think there's another one. So the vanadium battery has this enormous advantage of being cheaper, much more cost effective. However, it is -- when you look at the one picture you saw the tankage, when you see a tankage, there are pipes and there's electrolytes going through pipes and there's -- the vanadium battery is a little lazy to come up to stream. It takes time, a minute or 2 or 3. So you need instant reactability. That's where lithium comes in. Expensive but instant, milliseconds. So the combination has enormous advantages.

So I do want to thank everyone for your questions. We can ask more questions during the launch, but we do need to start the lab tours now. So everyone with a green tag on their name tag will be first for the lab tour. And I thank everybody for your kind attention and your questions.

And by the way, I come back to my initial advice, we have [ Goulash soup ] and we have Viennese sausages. And I have done great efforts to convince the host here to try to upgrade the quality of those sausages since I come from Vienna.