15 Vragen aan AMG

We stuurden een lijst met vragen naar het management van AMG naar aanleiding van de recent gepubliceerde jaarcijfers.

1. Lithium prices: In 2024, we saw continued volatility in lithium prices. How does AMG assess the price outlook for 2025, and what scenarios does AMG consider in its internal planning?

We don’t believe the lithium prices are sustainable at these levels. However, in our guidance we use current lithium pricing and update quarterly.

2. Cost structure: AMG has repeatedly emphasized the importance of cost control. What are the key initiatives AMG is implementing to further reduce production costs
in 2025?

AMG’s strategic target is to be among the low-cost producers in the businesses it is operating in. We usually aim to achieve this by structural measures like the leveraging of our tantalum operations by additionally extracting lithium. Another driver for our cost efficiency is the use of spent catalyst (at virtually no cost) as starting material for our vanadium business.

3. Capex reduction: AMG significantly reduced capex in 2024. Given the improved EBITDA guidance for 2025, does AMG see room to restart certain projects?

The yoy decrease in our capex in 2024 was structural as our recent growth capex program nears completion. We expect our capex to decline further yoy to $75-100m in 2025. We
follow a strategic approach to our growth capex. The positive earnings outlook for 2025 has little to no influence on our capex decisions.

4. Vanadium performance: AMG Vanadium delivered strong results in Q4, partially due to an unexpected benefit from the IRA Act. How sustainable is this contribution,
and what is AMG’s outlook for the vanadium market in 2025?

Indeed, 4Q24 benefited from the adjustment of section 45x i.e. inclusion of input costs and some related catch up effects. We have not disclosed a specific number for 4Q, but the IRA
had a meaningful contribution to the strong performance in 4Q24. We think that the vanadium market should improve going forward.

Prices already started to turn from a low level in 4Q24. The recent announcement of the tightening of the rebar regulation in China, targeting to increase the content of vanadium in alloys should support the recovery. We are also working on improving our raw material supply and hence our output.

5. Section 45X (IRA Act): Can AMG provide more clarity on the exact contribution from Section 45X, and how does AMG expect this support to develop in 2025?

We initially expected a c. $10m tailwind from the IRA in 2024. Our expectations were exceeded by the same amount to total c. $20m in 2024 as we were able to include our raw material costs to the calculation. Unless there is a change to the overall legislation, we expect the run rate of $20m p.a. to continue.

6. China supply-demand dynamics: How does AMG view China’s role in the global lithium and vanadium markets? Are there signs of structural demand recovery, or does AMG foresee continued price pressure from overcapacity?

In lithium China is expected to lead the demand growth and together with some pending catch up effects in Europe the global supply/demand situation is likely to become balanced in 2025. From 2026 we believe there is likelihood that the lithium market will become under supplied again.

Regarding vanadium the new rebar regulation should compensate or even slightly overcompensate the continuing demand weakness from construction (in China) at least temporarily, in our view.

7. Cost competitiveness: Where does AMG currently sit on the cost curve for lithium and vanadium? Which peers does AMG consider its main benchmarks for cost efficiency?

In spodumene (lithium mined from rock) AMG considers itself a low-cost producer. The profitability of our lithium value chain is set to improve by the ongoing upstream integration (Bitterfeld). We expect the benefits from our lithium refinery to become visible from 2026.

In vanadium we are focusing on the recycling of spent catalysts from the oil and gas industry, which results in a structural cost advantage. Furthermore, we are targeting additional economies of scale.

8. Geopolitical risks: To what extent does AMG expect its supply chains to be impacted by geopolitical tensions, for example through export restrictions or regulatory changes?

The substitution of imported critical materials by locally sourced and/or all western supply chains stands at the heart of our strategy. Against this background we consider ourselves well protected from geopolitical tensions so far.

In the mid term they could even come to our benefit. For example the US chrome market relies virtually entirely  on imports. AMG is the sole western supplier to the US (from our UK plant).

AMG Vanadium is the global leader in spent catalyst recycling and metal reclamation and the largest ferrovanadium producer in the United States.

Technologies order intake: AMG Technologies recorded strong order intake in Q4, but lower prices pressured margins.

9. How does AMG see the order pipeline for 2025?

Our order backlog already secures high capacity utilization in this business in the short- to mid-term. There is some lumpiness in the margin contribution of our individual businesses/orders within AMG Technologies . We consider this a natural margin fluctuation.

10. Separate listing for AMG Technologies: In the past, AMG discussed a potential separate listing of AMG Technologies. What is the current status of this consideration?

We do not have any update on this.

11. CATL: What is your view on the potential IPO of CATL and the re-opening of their Lithium mine?

In our view the global lithium supply needs to grow significantly in the mid- to long-term in order to keep up with the demand growth projections.

Although the recent demand growth in Europe and North America disappointed somehow we the mid- and long-term market growth fundamentals remain intact, in our view.

12. Dr. Schimmelbush: What was the motivation of Dr. Schimmelbush to be prepared to serve for one more term of 2 years when his current term ends?

Our CEO Dr. Schimmelbusch is the founder of AMG and is very passionate about our businesses and the company. He is very significantly involved in the strategic development of the group and he continues to to drive the business forward.

13. EU Critical Materials Act: What impact do you expect for AMG from the EU Critical Raw Materials Act and its imminent designation of Strategic Projects for achieving its goals? 

For the time being we see no immediate impact on our core business. However, future growth projects like increasing of our lithium refining capacity in Bitterfeld and our partners Savannah (15% holding) and Zinnwald (25% holding) establishing lithium production in Europe could benefit. But there are no details available yet.

14. LIVA: How is the market for LIVA batteries developing and specifically, the demand for your LIVA products?

The industrial stationary battery market has been experiencing accelerated growth lately. Many projects are in evaluation/early planning phase and we experience increasing interest in LIVA.

Given our first commercial project at Wipotec GmbH (also AMG Graphite) and our completion of the vanadium electrolyte plant at AMG Titanium in Nuremberg, Germany we see us very well
positioned to capture a fair share of the market growth.

15. Realized prices: Why was there such a high discrepancy in Q4 2024 between your average realized sales price for lithium concentrate (US$ 680/dmt CIF China) and the spodumene prices in the markets in the same quarter (Spodumene Concentrate 6% CIF China) averaging ~US$ 790/dmt?

This is due to our pricing lag of 3 to 4 months from when it is priced in Brazil and then officially sold when it arrives in China.