Sociedad Química y Minera de Chile S.A. (SQM) Earnings Call Transcript & Summary

Can everyone hear me? I'm Kelly O'Brien. I work as the Head of Investor Relations for SQM, and we're really happy to have everybody who's joining virtually and to have a room full of people here finally after 2 years of no travel and COVID. So we're really excited to be here in New York today. Just a little bit about the agenda. We are going to be hearing from 3 people, and we're going to be hearing about Chile's constitutional reform. We're going to hear about our financial situation, and we're going to hear from our CEO about the future of SQM and where we're going from here. The speakers are Ricardo Ramos, our CEO; Gerardo Illanes, our CFO; and we have [ Patricio Navio ] here, who is a professor at NYU, and he's going to be speaking about the Chilean political theme, which is always evolving. So we're going to start with Ricardo Ramos. He has been -- I know he's very familiar for most of you. He's been with the company for over 30 years and he's been CEO since 2019. Since he became CEO, I feel like, amongst other things, he's really been leading the charge for our sustainable operation efforts. And in 2022, underneath Ricardo's lead, we announced our sustainable development plan. And then just a few days ago, we put out an announcement related to our Salar Futuro or our future solar plans. So Ricardo, with that, I would like to invite you to the podium to give your thoughts on SQM.

First, thank you for being here. I had a presentation that used to be short, but I tried to put some slides about [ Salar Futuro that was informed 2 days ago or just one day ago. That is very important in our long-term plan, and I really want to review some issues regarding this great, great project we have. First, we are really proud in SQM to -- of the clear link between our products and their effects in a better life. That's something very, very important in the company, and we're really proud about it. As you can see, first, the specialty plant nutrition, water soluble, increased productivity, our fertilizer, improved quality, at the end, reduced the consumption of water in the fertilization process. That's very important because it does not contaminate groundwater lakes and rivers. Means, it's a product oriented to a better [ water-related ] life. Second, this is a very nice picture of a project close to our facilities in the north. It's a beautiful project using our solar salts technology. And solar salt technology is efficient in thermal storage, very, very efficient. And the power generation, you can have this power generation day and night. This means it's an answer to have using the sun energy in order to produce electricity the full day. That's a very good project. We have kind of products we develop in SQM. Finally, you have the other 2, finally, is iodine and lithium. In the iodine, we are very proud to be the most important supplier of iodine to the x-ray contrast media. Just due to know, x-ray contrast media today is the most important tool in the early detection of cancer. And they have been developed this technology all around the world, and we are working with the big supplier of the technology. You need to have the iodine for this new technology. We're working very hard. It's today 30% of the demand of iodine worldwide, goes to x-ray contrast media. And instead, demand that is growing more than 6% per year, and we are working very hard with the supplier. Again, [ better ] oriented to a better life of the people. And finally, you know the story, electric vehicles, it means zero pollution. It means this is going to be the standard of the mobility in the future. [Presentation]

The video was much better than my presentation. Let me go to the sustainability commitment. This -- it is very new for us. It means no more than 2 years but probably we will change in the near future because we say there are reduction of continental water consumption, 40% by 2030, 65% by 2040. You will see my presentation, probably we will change in the numbers. It will be 65% in 2030, means we're working very aggressive in order to be much better than that. Reduction of brand extraction from the Salar, we are moving in that direction, but we are doing much more [Technical Difficulty] the salars you will see due to the Salar Futuro project. We are very proud about that. That's when it's going to change in the real near future. Finally, emission reduction, carbon neutral. We want to be in lithium, potassium and chloride, iodine by 2030. And in all our products, 2040 and waste reduction 50% by 2025. Okay. You know the numbers better than I know. It means that this is the quarter -- revenues quarter net income, last 2 quarters, net income of the company in excess of $800 million. Second quarter better than first quarter. And I think the most important question today was that, you know all the details why the results in the first and second quarters moving forward, what we think is the short-term outlook? And the short-term outlook, first, I think it's important to consider what's going on in Europe. I think what's going on in Europe is important. It's going to be important in the short term and could be important in the medium and long term. First, we have -- you have many effects because of the war in Ukraine. Let me try to focus in the effects in SQM business. The first one is the production of fertilizer in Europe, has been affected a lot. You know that most of the fertilizer production in Europe that is not -- is a big important production in Norway and other countries, they use the gas. And natural gas is being today was the most difficult product to get in Europe. That's why the production of fertilizer is being affected in Europe in the short term and continue to be affected. Second one, of course, Belorussia and Russia are very important in the potash production worldwide. They are like 40%. Russia is just a little bit bigger than Belorussia, but both are very important. And today, for Belorussia to export -- Belarus to export to different countries is very, very complicated. Russia is starting to export in the last 2 months. But again, if you have 40% affected in their business, of course, affecting the supply of potash. Finally, and I think it's affecting today, but it will be an important risk for next year, is the economy in Europe. Means, all this issue will probably affect the economic situation of Europe. At the end, bottom line, in our business, second half, especially plant nutrients, we think that prices that are better than last year will continue to be relatively stable. That's our best guess today. And sales volume similar to the first half of this year. It means lower volumes than last year, if you compare it, but similar to the first half. It means, fertilizer consumption in Europe and the rest of the world is lower this year because of the price effect. Because pricing will be higher, people reduce the consumption of fertilizer. That's something we observed in the specialty plant nutrient business. But the most important effect being in the potash, we see a significant increase in potash prices. We have seen that in the first half of the year. This negatively affect the demand of potash. We today, even though we are not very big in the potash industry, but we follow the industry in detail, we think that the total demand of potash in the world will be just a bit lower than 60 million tonnes. Last year, it was probably 71 million tonnes. It means a huge reduction in demand, mainly due to the fact that the high pricing and everything that is connected with the situation of the war in Ukraine. We think that the prices should fall during the second half. It means prices from the first half were very, very high. We think that prices are going to be good, higher than last year but not as good as the first half of the year. And I think that our volumes during second half will be slightly higher than the volumes of the first half, but prices lowered as compared to the first half in the potash business. Anyway, in the specialty plant nutrients, I think that even considering a stable volume and a stable price environment, we foresee that probably margins is going to be a slightly better second half than first half. We're very positive about that. Finally, in the iodine and lithium; iodine, things are going in the right way. We think prices are going to be better second half. We expect higher volumes. We think volumes will be close to 6% higher second half as compared to the first half of the year. That's important increase in iodine, demand and sales. If you remember and you have the numbers of the second half last year, second half last year was just a little bit low in terms of volumes of iodine. We're going to have a strong volume sales during the second half this year. It means that the total [ yield ] in iodine will be higher than last year. That's a very good news. And the second good news is that we think that prices during the second half will be quite stable, but higher than the average of the first half. We think that as an average will be between 10%, maybe 15% higher the price environment of iodine during second half this year as compared to the first half, with better volumes in the range of 6%, okay, if you put together better margins of iodine second half this year compared to the first half. Very good news coming from iodine. Lithium, we expect good news. That's for sure. Third quarter, we are almost ready. It means third quarter finish in the next 2 weeks. We think that the prices, third quarter, will be very similar to second quarter, just a slightly higher, but very similar. That's a good news because it was a very good quarter, second quarter in pricing. And fourth quarter prices -- lithium is difficult to predict. But considering what we know today, considering what is the trend today of the demand, what is the trend today of the supply and the situation of the market, we think that it's, today, reasonable to expect similar prices fourth quarter as compared to the third quarter and second quarter. It means a very good price environment, fourth quarter. Now, we review our numbers, and we are trying to push our production, and we think that we can expect to sell just a little bit more than 1 month ago. It means we're looking forward for the 150,000 metric tons of lithium carbonate equivalent. It means we sell, as you know, lithium hydroxide plus lithium carbonate. But as lithium carbonate equivalent, we are thinking about 150,000 metric tons. That's the new target. That's a positive one. It means that if you consider sales of the first half of the year as a lithium carbonate equivalent, we expect an increase between 7% to 9% in volumes second half this year as compared to first half. Considering the first quarter, prices were lower than second quarter. And you put the volumes, you put the pricing, of course, lithium second half will be better than the first half. But anyway, keep in mind that fourth quarter prices is still a pending issue. We don't know. It's a volatile market. You don't know exactly what's going to happen. But as today information, it seems reasonable to be a stable price environment. Let me go to the nitrates and iodine, what's our plan? It's important to remember that it's a very important business unit for us. Here, you have a map of the north of Chile. And our most important project is [ Arkoma. ] This is the greenfield project that is north of [indiscernible]. This period, we expect to start producing 2,500 metric tons of iodine, that's a lot of iodine. And we expect that in the second stage of the project, we will reach the 5,000 metric tons. As a nitrates equivalent because we are going to produce nitrate salts, we will transport the salts to our facilities in Maria Elena [ collisol ]. But as a final nitrate, we expect to start with 200,000 metric tons per year, moving to 500,000 metric tons per year when we reach the 5,000 metric tons of iodine. We expect today to start production, the first production in the first stage during second quarter 2025. Probably, 1,800 metric tons in 2025 is a reasonable goal we have in the production of this or [indiscernible]. It's a big project. It's a very important project for us. We're using full seawater, means we get the sea water. We use all the water, right? We don't need the desalination process. We don't care if the water is salt because we use it in the leaching of our -- the caliche [indiscernible], that's why for us, from an environmental point of view, is very, very good project. And we have a very good mine there, and we will be -- we are putting a lot of effort, and we are working very hard in order to have ready this project. The second important project we're facing today is [ Nueva Victoria ]. [ Nueva Victoria ] is where we produce most of our iodine today. We use continental water, and we decided to move from continental water to seawater. Now we are starting with the project. It's going to be, at the beginning, 700 liters per second, that's more than the water we consume from the continental water today, it will allow us to increase the yields and will allow us to increase some production. We are working on it as we speak. And we think second half 2025, this new pipeline from seawater will be ready in [ Nueva Victoria ]. It means we will fully replace continental water in our production of nitrates and iodine in [ Nueva Victoria ] in 2025. That's why my goals about continental water, it's going to be more strong in the future. Finally, you have Pampa Blanca, and there's some link between Pampa Blanca and Salar Futuro. I will show you why it's some link here. We will -- it is an old facility we had in the past. That is a very big one in terms of nitrates and iodine that is very close to the south of Maria Elena [ collisol ]. It's relatively close to Antofagasta. We will start producing next year second half at a level of 1,300 metric tons of iodine. We are buying the water in the first stage. We are going to -- you see what in the second stage of -- probably the production will be much, much higher in this. It means, if you ask me where you have the next step, we move from 2,500 to 5,000 to 500,000 here. Our today production will be here just a little bit more because the seawater, because the yields. And fourth stage will be here. Here, we can go to probably 5000, 6,000 or 7,000 metric tons of iodine. It means it's a huge resources. And with the seawater, we'll have the opportunity to do growth a lot in iodine and nitrates in what we call Pampa Blanca project. It's not all the projects we have, of course, in the nitrates. We have in order -- because we are going to have all these nitrates, we have to prepare nitrate salts. We have to prepare the capacity to have the crystalization, these big facilities to transform the solar salts into the final high-quality products, oriented with solar salts to the high-quality potassium nitrates. We need to develop a lot of logistic improvements in order to move more products and so on. And finally, we think that the CapEx in 3 years, always talking about 3 years 2022, '23, '24. In this business line, we'll be very close to $1 billion, including the maintenance CapEx for the 3 years. That's our target we have in the Iodine and Nitrates business. In Lithium business, I will try to get into the details of our plan, but before the plan of the Lithium, I think it's very important to have a focus what's going on in the demand in order to have an idea where we think things are moving in the Lithium business today. This is at SQM. There's nothing in the bottom, a third-party estimate. This is SQM estimates. We have our own estimates. We work with our numbers, and we have a lot of scenarios where we play with it. First, we think that for sure, this year is going to be a huge increase in demand. Now we are expecting 750,000 metric tons of lithium equivalent demand, chemical demand this year. That is close to 40% increase as compared to last year. That's huge. We think the electric vehicles penetration of the total vehicles will be higher than 10%, that was an original idea, but it's going to be 14%. It's very, very strong. That's why 2022 is a very strong position, as you can see in the graph. But 2023, we think that we have been conservative all the time. We have been wrong all the time about what's going on in the lithium become better than expected all the time. But we are putting our best numbers, and we think that it's going to be 20% to 23% increase. But starting from a very high number, I mean, 750,000 metric tons, 20% is 150,000 metric tons, means we have to deliver in the world, 150,000 metric tons of additional lithium from the 750,000. That's huge because -- it's in mining. It is natural resource. A lot of people will have to invest a lot of money in order to maintain their production. It means in order to maintain the 750,000, most of the people have been putting a lot of efforts to produce, they need to maintain their production. And in excess of the maintaining production, we need 150,000 of additional lithium. 150,000 is a lot. It's not one project. It's not 2 projects. It's many new projects because it's a lot of lithium we need for the next year. Of course, at SQM, we are trying to do our best, as we did in the past, to provide more lithium to the market. But it is a very important increase in 2023, at least 150,000. And of course, the green light's here, the green lines are our most negative and most positive scenarios where we put our numbers, we put different penetrations of the electric cars. What's going on with the demand of cars in the world, what's happened with some other technologies or the economy, whatever, we have these two alternatives. And of course, if you start moving away from 2022, it's very difficult to have a real prediction. That's why 2025, we think that total demand -- I remember, being here a couple of years ago and saying, I hope I will reach the 900,000 800,000 metric tons. Now we think it's going to be between 1.2 million, 1.6 million tons, expected value at the middle of the 1.2 million, 1.6 million tonnes, that's 2025. And if we go to the 2030, it's huge. I know the range is very, very big, but it's between [ 2.3, 3.3 ]. You put in the middle what we do expect is a reasonable expectation, maybe to 7 million to 8 million tons of lithium carbonate equivalent demand during this year. And at the end, one key element that we play with it every year is that we think as an average, we expect a penetration of the total cars in the world, close to 47% 2030. You have someone that say the penetration will be, I don't know, 70% because most of the cars are going to be produced electric 2030. Yes, numbers are completely different. But that's how we're estimating, that's our best numbers we have today. What it means we have also -- we worked very hard in the supply. We have a lot of different people announcing lithium, as you may know. There's a lot of people. It's a good business. People want to produce lithium, they announce all the time. either brownfield or greenfield of lithium in different countries. You have China, you have Australia, probably the most important one, different projects in Australia, some projects in Africa, some projects in Canada, in Argentina, a lot of small projects. And it's very, very difficult to have a prediction because if you review the past, most of the prediction fail because people promise to deliver something they didn't deliver at time, they didn't deliver at all. They failed to deliver. They learn, I think. It's more likely that they would produce because you learn from your failure, that's something that happens. From the other side, most of the today producers are trying to increase their production, the much they can in [ 2002 ], 2023. And they're using their spodumene resources in terms of increasing capacity. Means that it will be more difficult for them having high-quality spodumene available for the future. But all my models, everything that we have, keeping in mind that predicting supply is much, much more difficult than predicting demand in this market, every single scenario that I have and we have here in SQM, always demand divided by supplies. It's likely to be more than 90%. It means, it's reasonable to expect a very tight market supply and demand because first thing is trying to produce the lithium. Second thing is try to get the qualification from the customer, from battery customers, and they accept your lithium, start buying lithium, you're supporting the quality and so on. That's why 90% at least, is what we expect every single year, the relation between demand and supply, very tight market in the future. That's what we expect today, considering this huge increase in the demand in the last 2 years and the expected demand in the future. Sorry. This is what we expect for next year in lithium. This picture is very interesting because it's the picture they sent to me, I think, one month ago from Australia. This is the spodumene facility that they are advancing very, very fast, and it's much more ready than this picture. And that's why we say that we will start producing concentrated spodumene in Australia in our mine in fourth quarter 2023. We will produce close to 300,000 metric tons of spodumene per year. That's -- we will start producing at the end of next year. That's very important. It's something we are very proud about it. It's advancing very fast. First, next year. Next year, we think that -- as Carlos explaining the video that he's the #1 in the Lithium business in SQM. He said that we can produce 2010. What's the way we produced in 2010? We will produce -- expect to produce 180,000 metric tons in Chile using lithium [ chloride ], that is our raw material coming from the Salar. But as you may know, we have a second raw material. That is lithium sulfate, we invested in the last 2 years, and we continue to invest in order to produce this lithium sulfate. And this lithium sulfate, we export the lithium sulfate to China. And we transformed this lithium sulfate into lithium hydroxide. That's why we expect to have next year, 180,000 metric tons available in Chile, and we're trying to do our best to have at least 30,000 metric tons in China of lithium hydroxide from our lithium sulfate. In Chile, we are going to increase at -- first, let me go to the last point because something new I want to inform today that we bought a plant in China, a chemical facility, a big chemical facility is located close to Sichuan. We started negotiation with them. They are buying. They are building a new plant, and we're helping them the technology of the new plant. And we feel comfortable, and we bought that. And we are going to have this plant in China in order to produce 20,000 metric tons of lithium hydroxide from lithium sulfate. This plant is already close to being ready. That's why we expect to start producing second quarter next year. We are working with them. We send our people. We know the technology in order to transform lithium sulfate. We have been working in the last 3 years in the technology in China, testing the way to do it. And we feel very comfortable that this plan will be a very good idea for us in order to transform. We paid $140 million for the total investment. And this plan is going to be ready during the second quarter next year. The other 10,000 metric tons, we are not going to produce 20,000 because it's second quarter. The other tonnage is probably going to be in the range of 15,000 metric tons coming from here, the other 15,000, we're looking for Taylor -- tolling agreement with different Chinese, and we expect to finish the toll agreement in the next 2 months. But I do expect, and we are pushing very hard to have at least 30,000 metric tons coming from this lithium sulfate. Finally, we have lithium hydroxide in Chile. We have today 22,000 metric tons. We have been working very hard in the capacity increase. We think that during next year, third quarter, it is going to be available in the new expansion. And the new expansion will allow us to produce at least 37. We're working very hard to be close to 40, but the number we have now is 37,000 metric tons of lithium hydroxide that we can produce in Chile with our lithium carbonate from the 180. Plus, this 30,000 that will be lithium hydroxide means next year, we are going to have close to 70,000 metric tons of lithium hydroxide. One of our key ideas is having both products and having the flexibility, depending on the market conditions. That's something very important we are working today. We will start, as we said there, the production of concentrated spodumene in Australia, fourth quarter 2023. The final facility, the chemicals facility located at the port in Australia, will be ready 1 year after that. Means, we will have 1 full year of production of spodumene. We're working with our partner in Australia in order to see potential tolling or selling of this spodumene into China in order to convert this one to lithium carbonate. That's why it's very important because we are going to have -- this is equivalent to 50,000 metric tons of lithium hydroxide, more or less 50,000. This means we will have available this potential lithium of 50,000 metric tons per year, up from 2023 -- 2024 onwards because we will have this volume. That's why we are working in order to allocate and try to have the toll agreement using this spodumene. Moving to 2024, 2024 we think that in Chile, using our lithium chlorine solution, we can move from 190,000 to 210,000 metric tons in Chile, maintaining at least 30,000 metric tons from lithium sulfate, could be something more than 30. But today, we're using the 30. Means that the total capacity -- those are capacity, no sales. It's important to consider that -- we will announce our sales expectation in the near future. We need to have some inventory. We are increasing ourselves very high, and you need to have inventories all around the world. That's why we cannot sell all the production. Some of the production will go to inventory. That's why when you say 210,000 metric tons in the previous one, probably my sales would be just slightly lower than 200,000 metric tons. The same for 2024 when you're increasing capacity. We are very proud about it. This is the facility, the chemical facility in Tijuana and the port that has been under construction, and this is the most important event because we have the dryer that is a huge equipment. It's the most important equipment for the chemical facility arriving in Australia, arrived one month ago, and we are ready to go to the facility, start putting the new dryer and putting all the other equipment. That's why we feel comfortable that it's going to be ready for production during fourth quarter 2024. The COVID affected a lot of the production in Australia, affected everyone in Australia trying to produce lithium. We try to advance as fast as we can. But of course, we have, in some way, being affected by this delayed due to the restrictions in Australia. We are working very hard in geology work in Australia. We have a big team, a very good team looking for new alternatives in Australia. We think that we will not stop with this project. We will look for new spodumene in Australia. We're looking as we speak. We think that we will try to get something new. We think that Australia is a very interesting spodumene alternative for us. We have the experience, the know-how. We have very good geologies. And of course, we are looking forward for potential M&A, especially in natural resources in Australia. Finally, total CapEx in Chile. Considering everything I already explained, I think in Chile, we are going to put, again, close to $1 billion, including maintenance CapEx, in 2022, '24 in 3 years. Plus, in Australia, in order to finish all our investment in the project we have today, is a 50% joint venture we have with Wesfarmers, plus the investment in China, we are doing today, the one of the new facility noted to convert lithium sulfate in lithium hydroxide, will be close to $700 million, both. It means $1.7 billion in the Lithium business. Let me go -- try to go to what we announced 2 days ago -- 1 day ago. That is the Salar Futuro. We have been producing the Salar for 25 years. That's a long period, and we have a lot of experience about trying to produce lithium in the Salar de [ Atacama ]. First, we think that it is one of the economic activities that contribute most in Chile as a percentage terms, and we are sure that it's the best example of a successful public-private partnership. We operate the Salar, the Salar belongs to the [indiscernible] and we have a public private partnership that's been very good for both. Contribution for lithium just the first half of the year was $2.3 billion to the government as a total in this year. We are an integrated producer of high-quality lithium worldwide. In our country or a region, no one produces more high-quality products, [ find a ] probably in its own country where they produce of the natural resources. We have increased our capacity from 45,000 to 150,000 in the last 3 years, and we are the fastest-growing producer worldwide. We announced our sustainability plan, and among other aspects include the voluntary commitment, as you know, to lower brine extraction in Salar [ del Carmen ] close to 50% in 2030 of the out authorization we have, that is 1,700 liters per second. It means we voluntary want to go to the [ 822 ] instead of the 1,700 that was approved. We estimate that today, as Carlos said in the video, we are lithium producing company with a lower carbon and water footprint today, what we are doing today. And the current production process and the projections in time, even if we continue as we are doing today, are fully compatible with the water balances of the Salar [ del Carmen ] in the surrounding area and the environmental permit we have. But we have been working very hard at being involved in the project with a lot of people inside SQM, and we have been working very hard in the technology development, in the process development. And it's a lot of time we have been working on it. And today, we think that we are in a point that we can -- where we can go into an extraordinary environmental contribution. First, we are in a position to add 4 main technologies advances. We test all of them, and we're ready to go. It's a long process, but we are ready to start with engineering because we test all the previous -- from process and technology -- technological part, with a significant part of the branch of the Salar will be under this new technology. First, we expect to use mechanical evaporation equipment for a significant part of the price of the Salar. I have a scheme in the next page in order to show you the way to do it. But you have an idea where is an advance of operational technologies. It's a big, big equipment where you put some energy inside, you put the brines. On the top of the equipment, you get fresh water, you capture the fresh water. In the middle, you get solutions that are more concentrated in lithium. And at the bottom, we are going to get in our equipment, MOP, means potash. This is a very interesting idea, is a lot of investment, a lot of energy you need to consume. But you get all the water, you consume the water, and you get the potash, you get the concentrated solution. But that's not enough. You have this advance in operation technology and you use linked to a direct lithium instruction technology. DLE is trying to get lithium -- concentrated lithium from solution with many different [ source ] inside, and there's probably 5 different technologies around the world that are testing, not really proven. We have been -- probably we are the company with the most extensive experience testing these new technologies. And we test all of them from solvent extraction, resin absorption, receive ion exchange, nanofiltration [ membrants ] that are very important or reverse of mosses at the end in order to recover water. We're testing all of them. We have been testing all of them for a long period of time. We have some recommendations, and we know some of them are very good in some points, some of them are very good in other points, and they have pros and cons. Our Salar is very unique. You need to have a tailor-made process because you have a very unique Salar with some high contents of sulfate. You need to have high concentration of lithium at the end of the process because it's the process we have in our chemical capacity. You need to be careful about the water consumption of all of these. [ GLA ] needs a lot of water to work, fresh water, that's why you need to be careful what kind of -- whether you -- it's going to be the consumption -- you need to be careful about the chemical raw materials you are going to use in the process. Some of them use chemical raw materials that are at the end will go to the Salar, and we need to, from an environmental point of view, be very careful about that. And at the end, of course, the OpEx and CapEx you need to invest. We have a recommendation after a lot of technology testing. We feel very comfortable with our testing and recommendation, and we are in a moment to work together with CORFO in order to decide what is the final recommendation. But this is a step -- we think it's reasonable to expect that we do it together with CORFO. It's going to be a long-term decision, and it's a private-public owned -- partnership. We think it's the moment to work together, to sit together, to review. I submitted all the documents we have to CORFO 3 weeks ago. We expect to start having conversation with them as soon as we can in order to review all these alternatives, what is the best one? Why we think some are better than the others and having also receivable to test all the different companies that are selling the technology. But just due to have an idea, when we are talking about use direct lithium extraction in Salar Futuro, we have different scenarios that we are working on it. But our total investment in DLL will be at least between 4x to 8x higher in terms of volumes and capacity that any other projects of [ GLA ] operating in the world or in a study to be operated. It means, it's going to be by far the most important implementation of this new technology. And that's why we know that it is serious. I know that it's a very complex decision. We have been working very hard in order to have the final decision because it's going to be huge. It's going to be big. That scheme is big in terms of production of lithium. Every single project is big. Finally, we are working in every single step of our chemical facility close to Antofagasta. And we know that there's a lot of opportunities to increase the deals at the end of the process, where when you receive this high-concentrated lithium chlorine solutions. We think that we can increase at least 5% in our deals there, and we want to implement all these initiatives in the #3 stage. And four, we are going to have seawater in [ Orcoma ]. We are going to have seawater in the densely [indiscernible]. We have the -- we know that. We have been working on the technology of the seawater in Chile, there's a lot of examples. And we think that we have a very good alternative [indiscernible] word in order to show you in the graph, we'll be back here. We can -- [ Salar del Carmen ] is something here, and we can bring the water from the sea and use all the salty water because you have this process in order to have fresh water and very salty water. We don't need to send the salty water to the sea. You use the salty water in our nitrate production. We will use it here in nitrate production in our increase in Pampa Blanca, as I mentioned to you before, and we'll send the fresh water [ 270 ] kilometers to the [ Salar de Atacama]. That's a very good idea that is linked to our current operation. Why the seawater? Because the seawater will allow us to have all the equilibriums we are going to have in our process in order to provide enough water, fresh water to the environment, in order to maintain what is our goal from the beginning of Salar Forturo that is 0, means the amount of water we evaporate with the amount of water we recover from -- in the Salar de Atacama. This is the key. Let me go to the next page, this one. you can see, we want to be total neutral long-term water balance. That's the total whole idea. This is the basin that is an environment of the Salar. This is the core of the Salar. We get the brines. And the first ponds are the ponds where you get the sodium chloride. Here, we are going to have some evaporation, no more than 190 liters per second, very small compared to the total operation. And we'll have 2 alternates here, moving to the new technology and probably will be very big and very small here, but you need to have both in order for technology, from an engineering point of view. But this is going to be very big. I mean with mechanical evaporation here plus DLE, we are going to get excess of water, freshwater. We are going to put this water inside the Salar, and we are going to get this evaporation, that's evaporation coming from here and some evaporation coming from here. We have a lot of reinjection and solutions inside the Salar. We have the MOP, the potash, as a production, as I already explained. And some water will be inside the trucks, where we send this lithium chloride solution at 6%, there's some water. And we account this water as a water coming out of the Salar. If you put the water here, plus the evaporation, we will recover all the water with fresh water, what it's going to do with the fresh water? Our first idea is to replace some of the wells of the communities, they have wells for the human consumption and agricultural users, and replace the water they get from the rivers for consumption and for agriculture processes. This is going to be difficult. We are working on the technology, but it's going to be between 300 liters per second to 400 liters per second in order to have a total stable zero -- total neutral long-term water balance. 300 to 400 meters is less than 50% of the total water consumption of the small towns that are very, very close to our facility. It's not -- it means that we are not -- it's not a huge amount of water, the ones that we want to provide to the towns in order to replace the wells and replace the water they're getting from the river. You put everything together, we are in a position to offer a completely neutral water balance in the [ Salar de Atacama ] operation. Finally, that's very important. We have this first draft, but it's a long time working on this first draft. It means that, of course, we can work in different jobs in the near future. But the first one considered and we maintain because the first thing people can ask me, why you are keeping the 822, if you're going to replace the water, you can move to more than 822? Maybe you're right. That's why I say, in the first stage, we say, we maintained the 822. With the 822, that is 50% of the ], we can produce our numbers between close to 250,000 metric tons of lithium carbonate equivalent coming from [ Salar de Atacama ]. Of course, if we deliver -- and believe me, we are going to deliver, and we're going to do it right. If we do it right and we deliver, there's no reason why not to review from a geological point of view, environmental point of view, hydrogeological stable of the basin on the Salar, moving something better than 822. Just an idea, moving up of 822, if you ask me, if it is a potential dream to be in the 300? Yes, it is a potential dream to be in the 300 or 350, but it will depend on the balance on the geological studies and the hydrogeological equilibrium between the basin and the Salar. That's something we are working. But the first initial analysis is using the same restriction that we have today. SQM, we have started the engineering a lot of time ago, and we are working very hard on it. We need to move forward in order to have better numbers, and we have just a preliminary estimate of the investment. We think that the project we are working, as we speak today, is close to $1.5 billion, plus some investment in energy that we expect to buy the energy, but someone has to invest in order to provide us the energy. But the investment already explained to you that is the new technology in evaporation, DLL, all the changes in the facility, plus the seawater is close to $1.5 billion. And finally, this is the last one, we are very -- not only we want to stop there. We think that it's very important to add value to the region, to add value to Chile. We have a plan today to put more than -- together with, it's part of Salar Futuro to put $700 million in value-added initiatives, even we think that we can produce battery components in the future. We're in conversation with many different battery producers, they have a possibility to produce battery components in Chile, and it's a real possibility. But for sure, we want to increase capacity for lithium hydroxide. We are going to produce lithium metal, lithium metal is very important because in the future, maybe you have heard about solid-state batteries that it's going to be an important future and better consumption of lithium any way, a better battery, use lithium metal. That's why we need to transform our lithium to lithium metal. I think it's a very good idea to do it, and we will do it in Chile. And we are going to produce the best lithium carbonate. We have a new technology we're developing in-house in order to have a huge high-quality lithium carbonate for some specific uses, and we're going to build some facilities for that. Something very unique, we want to produce our own soda ash that is important for lithium carbonate. It's a lot of consumption, 500,000 metric tons you need for 250,000 metric tons production. That's why we think that it's a huge opportunity in Chile to produce our own soda ash. We have the project. We want to move forward with the project, a very interesting project in terms of cost, very interesting project in order to reduce the carbon footprint. The soda ash produced in the United States has a very high footprint in carbon. We have the ability in Chile to reduce it. That's very important and also reduce the cost. And we have many other initiatives in order -- but there are -- we call the $700 million value-added initiatives in the north of Chile. Salar Futuro definitely is assuming challenges. It means there is no doubt that we are trying to move a lot of things together. Our complicated projects are big projects. But we are optimistic. We have been doing the test. We have the people, we have the experience, we have the know-how. We have the proven track record of doing right of delivering. We think that today, we are more than ready to take the risk as SQM. And we have no doubt that we will be able to achieve the proposed objectives, and that's why we are in a moment, the right moment to inform that we want to move forward about that. Of course, we have to do it together with the government. We are facing what we call a unique opportunity. We are proposing disruptive alternatives. We think that we can further increase our competitive advantage in the environmental situation, something we cannot stop today. We can move -- we need to move forward as soon as we can. We believe it is essential to start early and to take an initiative now, not to wait. The current terms, and as you know, the contract between [indiscernible] is okay. Impose certain limitations, that's okay. And that's why we need to see it together. We see it together 4 or 5 years ago with CORFO because the lithium market was better and we tried to find a solution. And we did find something that was very good for the country. It was good for us. I have no single doubt that if we put together CORFO and SQM and evaluate different options, we can generate value for Antofagasta, the region, the communities, Chile and SQM. That's something we need to do it. I hope we will do it. We expect to start as soon as we can in order to have conversation with CORFO. We are not in a huge hurry, just you to know. Why? Because we will continue to advance in the technology and the engineering, in preparing everything to the environmental permit. We have at least 1 year to have everything ready. But before going with environmental permit to the government, we need to have the approval of CORFO because, of course, are very long-term projects, and we need to be together with our partnership. This is a partnership. We need to go together. We will continue to advance. And in the middle of the process, we had negotiation or conversation with CORFO in order to have what we think, and it's very important for me, Salar Futuro must become, again, let me repeat, public-private corporation project. It's the most important one in Chile. It will continue to be. And I think it's going to be an example of long-term sustainability development. We will continue to work in technology during the next year. And I hope we can find a way that create value for everyone. I'm sure we can. And that's exactly what we want. Most of the government in Chile be informed about our initiatives. They have our proposal. Of course, we have no agreements with need to start the conversation with them, but we think that we have a unique opportunity today to move forward in the right direction. Thank you.

Thank you, Ricardo. And I'm going to go quickly over a couple of a couple of slides, and then [ Patricio Navio ] is going to talk to us a little bit about the political situation in Chile and what has happened in the year past. First, a little bit about the contract that we have with CORFO. As Ricardo said, we renegotiated a contract in 2018, and this renegotiated contract basically stipulates that we pay to CORFO up to 40% of our sales price of everything in excess of $10,000. Not long ago, prices were in the [ range ] of $5,000, but today, prices are well above $10,000. That's why we have been paying a lot of money to CORFO. Then, on top of that, we pay 1.7% of the revenues at SQM Salar, which is an entity that extracts, produce and sells lithium and potassium chloride to the local governments and local municipalities. On top of that, the contract stipulates that we have to make contribution to local communities between $10 million to $15 million per year. And on top of that, we have to fund certain R&D initiatives in the amount of approximately [ $19 ] million. So it's a contract that's quite a complex contract, that considers several variables, under which this contract generates revenues for CORFO. But here, I wanted to have a very simple illustration, basically what happens? We produce a product in Chile after a long process, and Ricardo explained in quite some detail what we do there. Then we export the product from Chile to the different markets, mainly in Asia. But at the moment we export the product, we make the lease payments, the local government payments, community payments and R&D payments are made or actually accrued. Then approximately 2 months after that, the product is imported in China, let's say, in this example, then the product is distribute and sell to the customer approximately 2 months after that. So we have between 3 to 4 months from the moment we actually make the payments or accrue the payments to the moment the revenue from those sales, from those exports are actually recognized in our books. And that, of course, creates some noise as some of you pointed out on the results that we published for the second quarter. But following our -- sorry, following IFRS rules, part of the payments that we make to CORFO are activated as additional cost of inventory and part of this payment are expenses -- our expense at the moment, the priority is export from Chile. And of course, there is a function -- I mean, the amount that is actually spent and what you see as the cost of goods sold is a function of the ratio between our exports and our sales. And because we have been increasing capacity significantly over the last several quarters, we have been increasing our production and when we increase production, we increase our exports. And then we increased the sales. You see there over the last 4 quarters, we have been exporting on average, of course, on the first quarter of 2022 was a special case, but we have been exporting more than what we have been selling. And of course, that is creating some kind of noise in the sense that we pay, for example, in the second quarter, we pay to CORFO. We accrue payments to CORFO as a [ function ] of 53,000 metric tons while we reported sales for 34,000 metric tons. The difference, of course, is inventory that is in transit that will be sold in the very near future. Now this was not significantly relevant in the near past. But when you see this chart, this is pretty much a definition of what off the chart means. Lease payments that we have made to CORFO over the last 10 years have been significantly smaller than what we have paid this year. And we're very proud, as Ricardo was saying, this is a private public partnership, and this is where we're actually putting the body where your mouth is. We're very proud of what we have made. But of course, this payment is making this effect, sorry. This effect a little bit more big in the numbers when you see them. But this is just an accounting issue that is important for you to keep in conservation. And one minor comment. This is exactly the moment where we renegotiated the contract with CORFO Africa and was saying. And today, we're seeing these big results from CORFO's point of view. Now very quickly on the financials that we published a few weeks ago, you saw that the numbers were quite positive. Leasing prices were significantly higher than last year. Leasing volumes were significantly higher, prices of [ Fiel ] and we're also in a very good position. Volumes were lower because the second quarter last year was an amazing quarter in terms of volume. Prices of potassium nitrate were also very, very high, same as the price of potassium chloride. We have had, over the last many, many years, a very strong financial position, for it was that have been following us for a long time, you know that we're the company that has been in Latin America for the longest period of time, Baa1 with Moody's. And that is quite important for us because all the projects that Ricardo was mentioning that are -- the challenges that we want to deploy and develop in the near future require us to have a strong financial position. And as you see there, I would say the most important one on this table is the net financial debt over EBITDA, currently following the capital increase that we did in the first half of last year. Our net financial debt over EBITDA is close to zero. So we're in a very strong position to develop the projects that the market -- the lithium market needs and also the nitrates and [ ion ] market needs. And finally, we have a dividend policy. It has been there for quite some time. And this dividend policy basically let us distribute dividends as a function of how strong our balance sheet is. So far, the Board has approved interim dividends of approximately $1.3 billion on total net income of almost $1.7 billion. So on top of making huge contributions to the government, making huge payments to CORFO, to local communities, to R&D and of course, the development of the regions where we operate, we have been able to distribute to our investors quite a substantial amount of money, and we're quite proud of that. I told you it was quick. Patricio?

Thank you, Gerardo. So I was [ opposed ] to deliver on bad news, but resulting from what happened in 2019. I mean, you're all familiar with the riots and the perception that Chile was no longer a unique case in Latin America and that all the sudden the market friendly model was over, and Chile was in the middle of turmoil and the response that the political class gave was a constitution writing process. And after 3 years, we have an election. Well, we had a plebiscite in October 2020, 80% of the people who voted, only 50% of the people voted, but 80% of them voted to start this constitution writing process in May 2021, in the middle of the pandemic. Chilean selected a 155 member assembly to draft this new constitution, the assembly had a medium voter way to the left and they ended up writing a very, very long, comprehensive, what I defined as a Christmas tree constitution with presence for everyone a very, very high price tag on the constitution. Everyone expected that given that a lot of people have voted for a left wing constitution, then people would vote in favor of or left-wing constitutional assembly then they would vote in favor of approving this constitution. But then all of a sudden, on September 4, 2022, Chileans overwhelmingly rejected that proposal. So by a 62% margin -- or 62% to 38%, with 85% [ turn ] out. So everyone turns out and people voted against the constitution. This is very relevant for one particular aspect. We all predicted that people would approve the new constitution because the [ whole ] constitution was written by Pinochet. So if you want to think about Chile today, think of Chile as Luke Skywalker and Pinochet is Darth Vader. So everything associated to Pinochet is sort of bad news. It's tainted, corrupted, is toxic. But then all of a sudden, Chileans said, "Well, you know what, there are things that are worse than a Pinochet within constitution, like the one you guys wrote." So 62% voted against the new constitution. And in essence, we're now back to the old Pinochet constitution. Notice that the margin of victory was somewhat surprising. The red is the vote against. Already in March, things were looking pretty tough for the constitutional convention, they didn't update their writing of the constitution, they kept the moving left. But the polls were closing in. In the last few days, many of us thought, well, you have a Christmas tree constitution in one hand, people want Christmas trees. I mean nobody is against Christmas trees, not even if you are not Christian, beautiful presence for everyone. And on the other hand, you have the Pinochet constitution, sort of the toxic Darth Vader constitution and people then all the sudden voted for that toxic constitution, okay? And this is how it fell like on September 4. So a ship goes through a storm, everyone thinks that ship is going to sink, the ship did not sink, but a few containers did fell off. So -- you have to keep in mind that there will be consequences as to the entire process. Chile is not back to where it was before the social riots in 2019. But then again, the ship did not sink. But we're going to discuss a bit as to what containers fell off. In short, since we don't have that much time, let me just put it to you this way. Chileans want a new constitution. They don't want a new country. So they voted against the proposed constitution because that proposed constitution offers them a new country. And they just simply want a new constitution with more social rights, with more provisions for pensions, health care and education, so a higher price tag, but they don't really want a new country. They want to fix the country that they do have. So there were other things going on as well. There was high inflation. We know that nobody wins elections when there is high inflation. So the government in favor of the new constitution was punished by voters because there was high inflation. So some voters, they didn't even look at the constitution, they just wanted to punish the government. So low inflation might have produced a different result, but then there was high inflation, nothing to do or largely to do with the government, but people voted against high inflation. The government is not that popular. There was also a vote against the elites and now the constitution writing convention was the new elite. People don't like the elites and they voted against all those things. A number of other things that convention made a number of unforced errors. They made a really bad name for themselves, so they screw it. They could have produced a medium vote or a constitution that was acceptable for the medium voter, but they decided to go way left. And for the people who did read the constitution, they didn't like it. People wanted equality in the constitution and they thought that the old constitution favored the upper class, but the new constitution favored indigenous communities. So the large majority of mixed blood Mestizo Chileans said, well I didn't like the old constitution because I was a second-class citizen. And now under the new constitution, I'm going to remain a second class citizen because the constitution just grant way too many rights to indigenous communities. If we look at the text of the constitution, the constitution was really out there. I mean you had some really, really stupid, incredible, extremely [ innovating ] and damaging things, but then people didn't really read them. So it was really a bad contract. But for most people, they voted on other things. But the perception was that the Pinochet constitution was not that bad. President Boric while campaigning for the new constitution said anything is better than a constitution written under a [ detailers ]. And Chilean didn't think about -- they didn't agree. And this is relevant and it's very important because up to September 4, everything associated to Pinochet was toxic and we expect that anything associated to Pinochet would be voted down. And now all of a sudden, people don't seem to care that much about Pinochet. And that is significant for the historic connection of SQM with the military dictatorship. So that's particularly positive news for SQM. So we dodge a bullet. But it is important to keep in mind that a few containers did fall off. So there will be some changes in the constitution that we need to take into account. And I would mention 3 things. One is that people who do want more social rights. So the government is going to be hard-pressed to raise more revenues to fund those social rights. So the news that Gerardo just offered you, come to like very good news for the government because they need to raise revenues and now all of a sudden SQM is spending more money in taxes. So maybe you don't want to kill the goose that lays the golden eggs at this point or nationalize it because you need the money to provide for education, pensions and a number of other things in this Christmas tree constitution that people want. There will be other things as well that have to do with labor costs and environmental protection regulations. But I do want to underline that those things were going to happen anyway. So right before the riot in 2019, the most important legislative item on the agenda was the reduction of labor of work week from 45 to 40 hours. So those things were already on the pipeline and they were going to happen. You can't blame the social riots for higher labor costs or more -- or more important environmental concerns and environmental regulation. The people do want social rights and whatever new constitutional process, we get into, and I'll get to that in a minute, will include more social rights and thus a higher price tag in terms of what the government will have to -- or the government share of GDP. Now could we potentially get into a constitution rewriting [ Groundhog Day ]. So we're going to have a new constitutional convention, the convention [ May ]. There was this convention member in the old constitution that dress up as Pikachu like the Pokemon. Well, maybe we're going to let another Pokemon this time around at the new constitutional convention might end up producing another really bad constitution that people might end up voting against. So there is the risk that we end up falling into this Groundhog Day constitution right. But the politically, it is very much aware of that. So they are now trying to think of a process that looks very democratic and with participation, but it is straitjacketed, so that they make sure that the new constitution, it's a right constitution or it's a constitution that can work. The -- since the agreement in 2019 ended with the exit plebiscite. So we're now in uncharted territory, but the constitution riding power has gone back to Congress. And there is no reason why Congress would want to give that up again. So Congress will probably want to set a process, establish a process where they keep the real power. And what they are now trying to balance is, okay, maybe we should have an election of some sort, but we are going to keep that elected value with a leash. So we are going to decide what goes into the constitution. And alternative would be to let the clock run and by the end of the year, they still haven't reached an agreement, the timing for a new election 6 months to draft the constitution and an exit referendum just doesn't work well anymore because the exit referendum would have to take place in early 2024. And at that time, there will be extremely high constitution [ writing ] fatigue in the country. We see some of that now because I don't want to talk about the constitution. It's just -- it's like when you bring people over to fix your house and after a few months, they're still there, you just [ hate ] them. You want them to sort of finish and get it over with. So one alternative may be the appointment of a committee kind of adjusting [ to the ] cabinet, fully representative gender parity, different minorities, indigenous people, people who just have a sort of different things. But leashed, straitjacketed so that they produce a constitution that looks very much like the present constitution. So all the political institutions remain the same, but it has a longer chapter of social rights. So the same constitution with a much higher price stack. and's that will be acceptable for people. So the argument is the following: a long social or a long chapter of social rights is pricy, but social piece is priceless. So just pay a bit more and you will keep the good structure of the old political system, but it will be a bit more costly. So -- now the worst-case scenario is a Groundhog Day kind of constitutional process, and we could potentially be there. It doesn't look like we will be there because 2 years ago, most Chileans wanted a new constitution, so they wanted to remodel the house, 2 years later, they just want the workers out of the house, and they just want to close the deal and have a constitution that they can live with. We are -- we do conduct some polls at Universidad Diego Portales. And right after the constitutional convention, our rejection rate in responses just went up the roof. About 98% of people didn't want to talk to us about the constitutions. Don't want to talk about it. So we started asking other questions because people just are into constitutional fatigue. But there should be sort of a middle case scenario with perhaps an elected body to be elected in April 2023, we cannot do it before. Nobody wants to do that in the summer. So December, January and February are not going to be good months for an election, but there might potentially be an elected body that will be [ leashed ] that will have a straitjacket and Congress in essence, will tell that elected body what the content of the constitution will be. It will have a high price tag because you will have a number of social rights, but the political institutions, property rights and those things will remain the same. There will be more environmental regulations, but that was going to happen anyway. And there will be more labor legislation regulations, constraints, but that was going to happen anyway as well. The body [ test ] administration, the center left administration has -- they did not dodge the ballot -- the bullet. It got right to their heart. So what we saw in the week after is that the old center left ruling coalition parties conducted a hostile takeover of the far-left government. And President Boric and his close associates have been put on the second floor -- sort of daycare center and on the first floor, the adults are now running the show. And they are controlling the constitution writing process. So you can just look at President Boric's platform, his government program into 2021 and just [ close ] it out. None of those things are going to happen, except the few containers that fell off the ship. There will be a tax increase because the new constitution will have a much higher price tag, so they are going to have to raise revenues. They don't really know how to do this. They have started with a tax reform that start to increase tax revenues by 8 points of GDP, very high. They went down to 6 and then to 4. They are now at 3.5%, probably less than 3. And by the time this passes, the opposition has a majority in the Senate now, so they need to negotiate this with the right-wing opposition. By the time it passes, it will probably be 2 points of GDP. So they are not going to have enough money to do all the things that they wanted to do. They will do, though, the biggest container that fell off is pension reform. So there will be a significant pension reform that will probably drastically change the private savings account system the country has. That's probably not as relevant for SQM, but that's probably where the government's efforts will be focused and concentrated. They will do the tax reform and then the pension reform. But they are not going to have that much more time to do anything else, any other significant thing. So one of the things that Boric want -- President Boric wanted was to create a national public sector lithium company. They are just not going to have enough time to get to that point. So I think they will be willing to talk to you and CORFO will be a bit more open to discussing with you, especially when you show them the size of the check that you are ready to pay in taxes because they are really desperate for money to fund the social programs that the new constitution had and people liked, but were rejected nonetheless. So what will Chile look like in late 2023, we're still going to have a constitution writing process. So prepare for that, it might potentially look like Brexit or 5 years or Groundhog Day. But it will be a constitution writing with a straitjacket. So the new constitution is going to be a homage to one great Jorge Luis Borges' story, the Argentine writer. He had a story that was called Pierre Menard, rewrite Don Quixote and this was a 19th century French writer who wanted to write a novel, Quixote that was supposed to be exactly like a Quixote, like Cervantes or Quixote, but with a different author. So that's how the new constitution will likely look like. The most radical reforms are going to be there. People do want a stronger safety net, so it will be a high -- there will be pressure on the fiscal side. But since the traditional center-left coalition has conducted a successful takeover of the body administration, we should see the government becoming more moderate and following on the example of previous left-wing governments that produced pretty positive results. The final point, Chileans just rejected populism. That is the significance of the September 4 plebiscite and by a wide margin. Now the fact that Chilean sort of [ thinker ] plays with populism reminds us that Chile, like the rest of Latin America, because of high levels of inequality and historical legacies, it's like a recovering alcoholic. A few decades, countries just going through this political crisis and they vote for populism. Now Chile is like a recovery in alcoholic that for 3 years, what's drinking [indiscernible] from 2019 to '20 and '22. And now the country has voluntarily checked into rehab. So it's good. It's really good. We're really, really happy. Now what we should do, though, is keep in mind that it's a recovery in alcoholics. So don't send a whiskey as a sort of -- for Christmas or don't offer them alcohol and Chile might do well. And well it might return to where it was. And recovering alcoholics can go for many, many years, decades without drinking as Chile did. So -- the good news-- the bad news is that passengers are still this content, and they won't change. So there will have to be some change. But the good news is that the muting is over and the ship did not sink. So that's pretty positive. What about SQM and I will just finish here because I know I've used up a lot of time. Probably the company that most benefited from the plebiscite on September 4 was SQM because SQM is probably among the large companies in Chile, the one that people most associate with the Pinochet dictatorship. So because people associated SQM with the Pinochet dictatorship, everything that was associated with the Pinochet dictatorship was toxic. And now all of a sudden, it doesn't seem to be that important anymore. People say, well, Pinochet is dead, we have other issues now. Really, I mean since 30 years, you have been talking about Pinochet all the time, Darth Vader is gone. I'm going to worry about other things. So we're moving away from the Star Wars metaphor. But this is very significant for SQM. And I think the fact that there are other priorities right now takes SQM off the list of sort of the most immediate targets. In every ritual, there has to be blood. And the blood will come from the [ PPS ] from the private pension system. That's going to be the biggest victim of this political process. But I work at a university, so we go through active shooting trainings. And the one thing about active shooting is that when a couple of people get killed, the sense is that you will actually go down drastically. So we should worry about the [ PPS ] more than anyone else right now. So this is the point that I just made, and I just want to end up with what we expect to have in Chile, a sinking ship and what we ended up getting. And there is a word of caution here. It's not that nothing happened. A few things happened. I mean there were containers that fell off the ship. And there will be costs for Chile in the future. But the basic tenets of the economic model are still there, and they will probably remain there for the foreseeable future. Thank you very much.

Good afternoon, everybody. This is Lucas Ferreira from JPMorgan. Congrats on the presentation. [ Salar Futuro ]. My -- I have 2 questions. The first one on the [ Salar Futuro ]. If you can talk a little bit about the timing of this project at $1.5 billion investment, how many years that would take the technologies you are developing, how mature they are? So a little bit on the time line for [ Salar Futuro]. And if you can comment on the -- what you wrote in the press release about the cost of production that could be increasing as a consequence, if you have something to -- more information about that. And the other topic I wanted to explore is the economics on lithium sulfate, you're mentioning in the presentation, why the plant in China, if you can discuss a little bit the reasons for going in that direction as opposed to eventually increase more the production of a carbonate in Chile? Just so technically speaking, what's the reason, the economics of that 30,000 tons production, how that compares currently with the operation of a carbonate in Chile? Thank you.

Okay. Salar Futuro, first, we -- if you consider the timetable, first, we have to finish all the engineering and all the preparation for the environmental studies. I mean environmental studies in Chile are very complex and very good ones. It means we are very proud about our environmental standards and very high-quality preparation means all your engineering has to be ready. It's not just an idea of the project. And at least we need one year in order to have documents ready to go to the environmental permits. Environmental permit is a very important issue because in order to go there, we need to go together with CORFO because it's a huge change in the process, in the future, and we are a private public association. That's why -- we have in order not to delay the project probably one year to have a full agreement with CORFO. Of course, I need to sit together with CORFO as we do all the time because I want to agree with them some of the technological decisions, for example, in the direct lithium extraction. Mechanical operation is more simple because we know the technology is very -- it's not that complicated. It's big but not that complicated. We have experience about that. But [ DLA ] means DLE that is Direct Lithium Extraction. It's something new. You have many alternatives. We have been working very hard on it, and we are ready to go. It means we are in a moment where we need to have enough information to take a decision, but we want to work together with CORFO during the next year. And that's why I put it, if I'm not wrong, 6 months, I hope that we will have the final decision of the DLE in the next 6 months. At least one year, you have to go to the environmental permit, and we need to go to CORFO. An environmental permit is very open discussion. And this is a complex project in the Salar de Atacama is a very unique place in Chile. It means that it's reasonable to expect at least 3 years between -- you need to have the opinion of the communities, you need to have the opinion of the different entities, more than 10 different governmental entities. They send you a question after 4 or 5 months. You need to send them the answer. They come back, they have questions again. It's not a short process. Probably that's the problem we have in Chile, not having the environmental restriction. That is very good. The problem is that the time frame is just a little bit too long. We know that, getting the authorization, for example, from the [ pipe ] solutions or [ pipe water ], it's length. You have a lot of different authorization you need to do so. That's why 3 years is a good scenario, plus 1, it means 4. Construction depends -- it's the pipeline on the other, you will start with some first and the other one, but at least 3 years, construction sounds reasonable to very short, probably 3 is more reasonable. And if you put together, you are talking about 7 years at least. And that's the framework in terms of the total investment in order to finish if you follow all the procedures. I think you asked me about [ Sulfado ]?

Yes. But before that, if I can, just a follow-up on your point. When you say we have to sit down with CORFO next year for the discussion. So the discussion -- since it's a 7-year time frame. So the discussion is about the renovation of your license because obviously, you wouldn't do this project, 7 years if you didn't have the perspective of keeping remaining the Salar after 2030. So does this 12 months also include -- it's -- your base case is that you also discussed the renovation of that license or not necessarily you're going to be discussing only the project?

During this period, remember that Chile as a country, we are going to have a national policy of lithium, something they are working as we speak today, means whatever we have discussion, it will be inside this national policy of lithium, but I think it's important to have a very good ones, and I hope the government is working on a national policy is going to be a good one. We do believe in the public-private projects. I think the Salar is a very good example where you can do a private-public positive projects. Chile is getting a lot of money, probably we're going to get close to $5 billion, if you consider the first half of the year, there is a lot of money of the GDP of Chile. Just because this came a private company, increased capacity, we have the ability to do, no other company the one that in China or in Australia, did it. We did it. We have the people. We have the effort. We have the technology to do it. And because we did it, we can pay this amount of money. It means it's a very good association for both sides. That's why we have one year to find a solution. I'm not going to say today to acquire this solution. We found a solution 4 years ago. We sit together, the government is very smart. We think we are smart to and we find a way. And we expect to find a solution that is good not only for the government. It's good for the second region. It's good for the communities. It's good for the government, and it's good for the company. And we have to work hard in order to do it. But I don't want to get into detail. We need to find a way. I think it's important for the countries, it's important for everyone to move forward in something better in the Salar is something that we are offering today. And the second question regarding potassium salt is lithium sulfate. We think that we need lithium today. If you want to build a new facility of lithium -- lithium hydroxide starting from lithium sulfate that we have the production. We invest in the lithium sulfate that was easy to do it. We want to have all the permits, environmental, we are going to -- we need to wait at least 3 or 4 years or 5 years to be ready. But I want to be ready selling tomorrow. It means what you want as investors on SQM selling lithium hydroxide tomorrow. And lithium -- the lithium -- lithium sulfate is not a competition of lithium chlorine. In the process we have today, we produce a lot of lithium chloride, and as a byproduct, we had these lithium sulfate in the Salar. We process the lithium sulfate and we have a high-quality lithium sulfate that is a parallel process without affecting lithium chloride. And that we have this new alternative to produce more lithium and we're going to want to use it as soon as we can. We went to China because in China, there are a lot of many chemical facilities, they do tolling, tolling with the Australians, the [ Hispavinus ] and so on. And we adopt one of the tolling equipment, very good one in order to be able to produce the lithium hydroxide as soon as we can. And I showed you, we can produce next year. And I think it's a mix -- all the difference, we can provide an additional 30,000 metric tons of lithium hydroxide next year instead of waiting 5 years. But it depends, in the future, we can do that. Yes, we can do that. But now we are very focused in order to deliver for the next 2 years in order to produce as soon as we can this lithium sulfate into the lithium hydroxide.

On China that maybe you could touch on now. The question is from Joel Jackson from BMO. And he is asking about the economics of the plant there, a 30,000-ton plant in China. Is it similar to other plants that are already producing conversion facilities that are already producing in China and where will we get the lithium sulfate -- sulfate from?

Yes. First, who is asking, sorry? Hi Joel. And first, yes, we bought this facility. We are in the negotiation with this company. It's a big company, chemical company in Sichuan, that they have many different facilities. They are in the same place. We ask them, we want to buy one. And we want to buy a new one, they were building and adapt this one for producing -- starting with lithium sulfate. It's not so different in some technology point of view using lithium sulfate that using as [ polymers ] better using lithium sulfate. We can produce a lithium sulfate at the Salar. We have the facilities we use to. We have some facilities there. We adapt the facilities to have high content of lithium sulfate. We have been testing this project for 3 years. And now we can export and we have the authorization to do so. And we did the export in the past, I don't know, 10,000 metric tons [indiscernible] to China, we will continue to export because now we have our own facility, the technology is very good, very straightforward, and we are negotiating, as we speak, some tolling agreement with other Chinese they use. We adopt some [ spodumene ] facilities to use our lithium sulfide. And that's why it's something that makes a lot of sense. From an economic point of view is very good. We will be releasing what we expect is our total cost in the short term, not today. But even though it could be just a little bit more expensive, that's what we are doing today, really, if you consider the price of lithium is a no-brainer. It is a very good project. We are very proud about the development at the Salar level with our people in order to create this new product on the lithium sulfate that was a byproduct there, transform to a high quality and to try have the opportunity to transform to lithium hydroxide in China.

[ Corinne Blanchard ] with Deutsche Bank. I have 2 questions. The first one, you mentioned on Tuesday in the press release, putting $700 million for development hub in North of Chile. So -- if you could just give us some clarification on what you intend to do there? Are we looking to midstream or cathode production? And then the second question would be, which kind of lithium structure contract for the pricing can we expect for 2023?

Yes. Let me try to go to the first one. We mentioned some of the ideas we have with the $700 million. The first one is more lithium hydroxide. It means that we won, if we are going to be producing 240 -- 210,000 metric tons or in Chile from lithium chloride. We think having more lithium hydroxide is a very good idea because we will have this ability. There's many different technologies in the world. We have different clients. Some clients who want lithium hydroxide or lithium carbonate. We want to provide the best lithium carbonate, best lithium hydroxide to the world, not just one [ product ] we need to have capacity. And I think it's a very good idea to have capacity of both. That's lithium hydroxide investment is a very good one, and we will move forward on that. Second one, lithium metal, as I mentioned you before, solid-state batteries are coming. We want to develop lithium metal. We are going to have a joint venture with a third party with the expertise in technology and know-how, and we have our own now. We can go directly from our lithium chloride. We think we have a very unique opportunity to move from lithium chloride to lithium metal. It's -- we are working in the technology now. We need a partner, and we have the partner and we are working with him. Today is not public so far, but we expect to be public about the partnership sooner and lithium metal for me is a key element we have to produce. Second one, we think that it's the moment to produce soda ash in Chile, soda ash that is carbonate -- soda ash, I don't know the translation in chemical point of view. So -- but it's very important because we use soda ash in order to produce lithium carbonate. And we use more than 400,000 metric tons of soda ash and we import that. And we import from the States mainly. And the footprint of the carbon footprint of the soda ash in the U.S. is very bad. We want to have every single footprint in our production very clean. We're producing lithium for electric cars. We need to have new footprint of carbon emissions. Producing of soda ash is a big project. It's a very big and very good project and we want to implement this big project and very good project. And finally, we are working with LG and other one because it was public the announcement with LG in order to produce some other derivatives. And yes, is not out of the table. It's on the table. The alternative of reducing cathodes on some cathodes in Chile with the battery producer. And second question was about pricing this year? Well, do you have an idea? We have pricing. We have contracts, very good contracts today. And all the contracts we have, a couple of them are under negotiation, but most of our projects contracts are according to market conditions, means even though we have contracts, we have this -- we supply products to all the big guys in the battery industry. We have agreement to them to supply high-quality product next year, pricing are fixed according market conditions. That's why most of our price, most of our price for next year depends market condition. And we feel very comfortable about that. I think I don't want to have a client that at the end, he doesn't want to buy because it's too expensive. And I don't want to have a client that I don't want to sell because it's too cheap. I think the best for the company is to be very effective, we're very effective, very low cost. We have very low cost and to sell at market conditions. We don't want to have long-term pricing. There is nothing like long-term pricing. The market price is the best one. And the volatility of lithium is the recommendation -- reasonable recommendations not to get into this fixed price for long term.

This is Chris Kapsch with Loop Capital Markets, and I had a sort of a follow-up on your discussion just now about the commercial strategy. But it's clear right now that supply constraints are creating concern on behalf of automotive OEs about the security of supply and it's changing their behavior in terms of their willingness to invest upstream to partner upstream. And so I guess the question is, in some cases, they're even prepaying for commitments of future production. But I'm just wondering if that -- the other thing that they're concerned about, obviously, is sustainability and that footprint, it could be a source of a marketing advantage looking forward. So you guys make the case that your future production is going to be highly sustainable, great footprint, environmentally. Just wondering if that confluence of dynamics is making you rethink your commercial strategy in terms of being more willing to commit to those longer-term agreements? Or do you just feel that you're going to let the market prices dictate what your commercial agreements with those customers might look like?

Yes. First point, we think that our footprint, carbon footprint and environmental footprint today is very good. It's the best in the market. While we want to be even better than that not just to improve because we're bad. We are good, and we are going to be better than that. Second, we are more than willing to commit long-term relations. Don't mislead my words. It means -- we're open for long-term relations. We are signing, as we speak, different contracts with the most important clients of lithium in the world, I'm more than prepared to commit long-term supply of lithium because it's good for them. They can rely. They will get the lithium. I know that we'll produce high-quality digital to them. There is no problem, and we're signing long-term contracts. What I think is good for my client is good for me that the price will be the market price and not to fix the price today. But if one client, big ones, I'm talking about all the big guys buying lithium for batteries or electric cars, whatever, wants to have a long-term agreement with us, we're open. We do business 24/7. We are signing long-term agreements. We are fully committed for long-term relation with all our clients. We, as you can see, we are increasing production capacity. We are going to have Australia going to the market with the spodumene at the end of next year, we will try to convert this spodumene into lithium hydroxide means we will have lithium and we're willing to provide this lithium for the big customers all around the world.

[ Marcus Greer ] with Capital Group. And I had a question about the Australian volumes that you mentioned. Are those incremental to the volumes that you've spoken about up until now?

Yes. But keep in mind, sorry.

No, no, no. They are asking about the volumes and recarbonation of spodumene?

Correct.

And those are the volumes of spodumene that we will produce that will later be transforming to lithium hydroxide. But the total volumes that we have informed are the same, which is a total capacity of 50,000 metric tons.

Yes. But it's Australia. It's not constituent to 210 for example. It's a different -- it's a joint venture. We are 50% with Wesfarmers in Australia. We're going to produce 50,000 in the first stage, 50,000 metric tons of lithium hydroxide. We expect and we are working very hard in order to deliver the second stage that is moving to the 100,000. I hope we will do it this year or beginning next year. We're working on the engineering, geological everything. But the thing is that we are going to start producing this spodumene before having the final chemical facility for one year in advance. And we are thinking what we're going to do with this spodumene that is equivalent to 50,000 metric tons of lithium hydroxide and it's a joint venture.

And I had an additional question. So speaking on the demand side, with the acceleration of cathode production, battery production globally, at a rate much faster than supply. What gives you the lack of confidence moving forward as far as -- you talked about volatility even going or uncertainty about price in Q4? But when you look even throughout multiple years, what gives you the lack of confidence when there's a relatively clear supply-demand fundamental backdrop?

It's not lack of confidence. It's a very danger wall out there. We get out of this room. This is a very danger wall. It means the recession is something that can happen. The economic situation of the world today is not the best situation ever. It means -- you have this war in Europe. You don't know where it's going to end. You have an economic situation with an unprecedented inflation in the U.S. and Professor said inflation is not a good news for electors and for political changes. We don't know if we are facing a recession in the world, is something that we need to be aware about that. And if you face a recession, you face a bad economic situation worldwide, of course, electric cars are going to be affected. There's nothing like you sell to someone that is not affected. We are selling something that is for the good quality of life and depends on the growth of the economy. If you are fully confident of the growth of the economy in the Western world and China, of course, you are right. But there's a lot of tensions between China and the West. You don't even know where it's going to finish. I'm very positive about that. I think it's going to finish pretty good after October in China, and they will reach some agreements with the West especially the U.S., but there's some risk. And the only thing that I say is there's some risk. But it [indiscernible] in my explanation. Definitely, every single scenario, demand means -- the supply divided by demand will be in excess of 90%. It means I'm very confident that it's a very good market. But I cannot assure you what it's going to be the price.

I'm [indiscernible] of Howard Klein at RK Equity. Just on your M&A strategy, you only mentioned possibly buying resources in Western Australia. So I just want to ask you about other geographies, maybe in North America, South America and also given the inflation Reduction Act in the U.S. and the I mean, Chile has a free trade agreement and Australia as a [ retrade ] agreement. But if you're processing in China, there may be impacts there. So acquiring resources maybe outside of Australia? And also, are you thinking at all of building conversion facilities in the United States or Canada or maybe Europe?

That's a very good question. We have a group of geologists doing active work in Australia. But in the M&A side, we are open for everywhere. It means there's no place of the world where we don't want to look an opportunity. We look opportunities in Canada, in China even in the United States, there's some opportunities in Europe. We will continue to do so. Of course, we are not -- our strategy is not to be the largest producer of lithium at any means, my strategy or SQM's strategy is to be a profitable company and doing right our business is we are not prepared to overpay means if someone wants to sell something very expensive, and we don't think it will create value for the company, we will not buy it. It doesn't matter if we would mean that we will increase our market share. Increasing market share at any cost is not our strategy. We feel comfortable being very low-cost producer. And if you buy very expensive, you are not low-cost producer because the payment is part of your cost. That's why we are very careful. We have a strong discipline about M&A, but we're looking forward everywhere in M&A. But active geologists, studies in early mining is in mainly -- we have a group of people in Australia, but looking for projects everywhere, yes. If we're thinking about having some production of derivatives outside Chile, it's an alternative, but we think that we have a full commitment in our public-private alliance with the government to generate a hub of development or value added in Chile. We feel very part of this deal. It means one of the key element of this alliance is that we have to work together in order to produce as much as possible value added in Chile because we think it's essential part of the public private agreement we have today.

Conscious of everyone's time. But if we want to take just one more there in the middle, [ Avina ], and then we can wrap it up [ for the day ]. So make sure it's a good question to end on a high, no pressure.

Wayne Pinsent with Gabelli Funds. Just you mentioned the lithium sulfate project and now it's a little higher cost and market-based pricing. Just wanted your thoughts on long term when you're factoring in these projects, your thoughts on long-term lithium pricing?

Well, it's -- of course, supply and demand is the key element. One key point is at what price, the demand of electric vehicles will be affected. We -- at today's price environment, we don't foresee any -- of course, any car manufacturers today complain that the lithium is too expensive. That's for sure. But the demand of electric vehicles at today, price environment of the lithium has not been affected. It means this is a pure economic. Demand has not been affected today. That's for sure. You see the numbers has not been affected. And that's -- you need to have an equilibrium in order to have a long-term price. Supply is very difficult to have a -- a forecast. But the good news for me, and I think that we will have a lot of supply in order to supply the lithium, very high-cost supply and the very high cost of lithium supply will put the price. It's not marginal cost, it's total cost. If you need 150,000 metric tons of additional lithium next year. And after that 200,000 -- 220 additionally. It means a lot of investment in order to maintain the 1 million tons of whatever total production, plus new projects for the 200 or 250 a lot of new projects. In every single year, you need new projects and they have to pay everything, investment, OpEx, CapEx, whatever. That's why if you try -- if you go to 1.5 million tons, 1.6 million tons, what really matters is the total cost of the last 200,000 metric tons. This is what really matter. It doesn't matter what is the cost of the 500. The last 200,000 is the one that put the price because those are the guys that put investment in order to go to the market. That's why the [ equilibrium ] will be the last 150,000 or 200,000 that are 3 or 4 new projects and the market demand. I do think at today's price environment, market demand has not been affected. The key question is going to be what's going to be the supply, the last supply in order to catch the demand. I guess with the model. I don't know. It's not like we have in my computer, the answer to the question I don't want to share with you. We have the same assumptions maybe you have or other people have. A couple of investment banks, they have their own assumptions about penetration about what is introduced in Australia, if those projects are going to go ahead or not, what is going to be the margin total cost because our new projects are not, when are they going to be available and so. And putting everything together, as I said before, we have no reason to believe that the prices in the fourth quarter will be lower than third quarter. It is very short term, I know. But we need to be very short term in terms of giving you assurance because we cannot give you assurance. What assurance I can need to do is that we are doing the best in order to provide the best lithium and lithium hydroxide, and lithium as mentioned in the future to the market, the best one, quality. And to increase the production and it's our commitment and to be a very low-cost producer and to have a very good alliance with the government. That's our commitment. And the price will be the supply and the demand equilibrium there's nothing different than that.

All right. Thank you. I want to thank everyone for coming for the New York Stock Exchange for hosting us, Patricio, thanks for coming down or up from NYU. Gerardo, Ricardo. Thanks for all your efforts with the presentations and sharing your insights.