Good day, everyone, and welcome to today's AMG Q3 2023 earnings conference call. At this time, all participants are in a listen-only mode. Later, you will have the opportunity to ask questions during the question and answer session. You may register to ask a question at any time by pressing star and one. You may withdraw yourself from the queue by pressing star two. Please note, this call may be recorded. I will be standing by if you should need any assistance. It is now my pleasure to turn the conference over to Ms. Michele Fischer, Vice President of Investor Relations.
Welcome to AMG's third quarter 2023 earnings call. Thank you, everyone in Europe, who's joining so late in the day. Joining me on this call are Dr. Heinz Schimmelbusch, the Chairman of the Management Board and Chief Executive Officer, Mr. Jackson Dunckel, the Chief Financial Officer, and Mr. Eric Jackson, the Chief Operating Officer. AMG's third quarter 2023 earnings press release issued earlier today is on AMG's website. Today's call will begin with a review of the third quarter 2023 business highlights by Dr. Schimmelbusch. Mr. Dunckel will comment on AMG's financial results, and Mr. Jackson will discuss operations. At the completion of Mr. Jackson's remarks, Dr. Schimmelbusch will comment on strategy and outlook. We will then open the call to take your questions. Before I pass the call to Dr.
Schimmelbusch, I would like to expressly refer you to our statement on forward-looking statements and the meaning thereof, as we have used at all previous occasions, and we use at this earnings call, and which explanatory statement has been published as part of our financial presentation and on our website, all in connection with this earnings call. I will now pass the floor to Dr. Schimmelbusch, AMG's Chairman of the Management Board and Chief Executive Officer.
Thank you, Michele. The 48% decrease in EBITDA compared to Q3 2022 was driven primarily by the global decline in metal prices within our portfolio, predominantly the lithium price decline. The average quarterly prices of lithium carbonate and ferrovanadium have decreased more than 50% and 29%, respectively, versus the average pricing in Q3 2022. Cash from operating activities, however, was EUR 178 million on a year-to-year basis, compared to EUR 111 million for the first nine months of last year. We ended Q3 2023 in a EUR 320 million net debt position, with EUR 542 million of total liquidity. AMG Engineering signed EUR 81 million in new orders during the quarter, 51% higher on a year-to-year basis in 2023 than in 2022.
Our order backlog was EUR 341 million at the end of September 2023, the highest in AMG history for the second straight quarter. This was largely driven by the aerospace market, which is experiencing a strong growth period. Our Q3 2023 order intake remains at a very high level, reaching EUR 323 million year to date. AMG Supervisory Board has authorized the implementation of a new corporate structure, which will be operational January 1, 2024. Our present segmental reporting structure will be replaced by three corporate entities: AMG Lithium B.V., AMG Vanadium B.V., and AMG Technologies, either AG, SE, or GmbH. Each with its own leadership, team, and operating management.
The three new AMG subsidiaries, AMG Lithium, AMG Vanadium, and AMG Technologies, are clearly distinct as regard to underlying growth, trends, industry sectors and peers, business models, and required management skills. Each of the three new subsidiaries are global and regional industry leaders. AMG Lithium is on its way to be the premier European lithium refiner based on its own low-cost resources in Brazil and operates a value chain, starting with mining and including solid-state lithium batteries in Germany. AMG Lithium was formed in 2023 and has already been audited for 2021 and 2022. AMG Vanadium is the world's market leader in recycling Vanadium from oil refining residues.
It is also the only U.S. ferrovanadium producer, and it is expanding in the Middle East through the so-called Supercenter Project in the Kingdom of Saudi Arabia through Shell AMG Recycling B.V. Amsterdam. AMG Technologies is the established world market leader in advanced metallurgy and provides equipment engineering to the aerospace engine sector globally. It is also providing the engineering home for our fast-growing LIVA battery.... Each subsidiary will be governed by newly formed management boards that will exercise their control through respective supervisory boards. These supervisory boards will apply the same corporate governance principles currently in place at AMG Critical Materials N.V. The new subsidiaries will also be the new reporting segments with financial reports as of January 1, 2024.
In terms of our expansion projects, there will be a three-week shutdown of the lithium concentrate plant in the first quarter of 2022, to enable the expansion from 90,000 tons to 130,000 tons. We expect to produce at full run rate capacity beginning of Q3 of next year. Our lithium hydroxide refinery, first 20,000-ton module in Bitterfeld, Germany, is the initial, is in the initial phases of commissioning, with the ramp-up and qualification process planned for the second and third quarters of next year. This will be the first European hydroxide refinery. AMG's LIVA projects are integral for industrial power management applications and industrial energy transition. The batteries are currently under various stages of bidding and development. One, the first one is operational, three others are under construction, and thirteen are in bidding and development stages.
LIVA is well on its way to become a market leader for large-scale industrial storage systems. Shell AMG Recycling B.V., or SARBV , project development of closed -loop circular recycling in the Middle East, is progressing. Phase one of the so-called Supercenter Project, a hydrometallurgical facility to process vanadium-containing gasification ash, is under a long-term contract with Aramco. The gasification ash will ultimately be processed into vanadium electrolytes for use in batteries in the Kingdom of Saudi Arabia. Phase one is expected to reach FEL-3 status by the end of this year. The Supercenter concept also includes spent catalyst recycling projects, fresh catalyst production, and the construction of vanadium batteries. FEL-3 is a term for basic engineering. I will now pass the floor to Jackson Dunckel, AMG's Chief Financial Officer. Jackson?
Thank you, Heinz. I'll be referring to the third quarter 2023 investor presentation, posted today on our website. Starting on page three, this shows an overview of the financial highlights of the quarter. Revenue for the quarter decreased by 13% to $369 million. Q3 2023 EBITDA was $54 million, a 48% decrease versus the prior year. As Dr. Schimmelbusch mentioned, this decrease was primarily driven by the global decline in metal prices within our portfolio, predominantly the lithium price, which saw declines of over 50% compared to average Q3 pricing last year. Net income attributable to shareholders for the quarter declined $68 million, QoQ.
This decline is partially due to a non-recurring sale in the third quarter of 2023, in our, excuse me, of an existing supply contract in our silicon business, as well as the aforementioned fall in prices compared to Q3 2022. On a year-to-date basis, net income was $99 million, compared to $127 million for the first nine months of last year. Now I'm going to review our three segments. Let's start with AMG Clean Energy Materials, which is shown on page four of the presentation. On the top left, you can see that Q3 2023 revenues decreased 25% versus Q3 2022, to $140 million.
This is driven mainly by decreased prices in both lithium and vanadium, as well as lower volumes in lithium concentrate, and was partially offset by 48% higher volumes in ferrovanadium versus last year's third quarter. Q3 2023 EBITDA decreased to $39 million from $84 million in Q3 2022, due to the decline in metals prices, primarily the lithium price decline. Finally, the quarterly CapEx, shown on the bottom left of $37 million, mainly reflects our investment into a battery-grade lithium hydroxide plant in Bitterfeld, Germany, as well as the expansion of our lithium concentrate capacity in Brazil. Turning now to page five of our presentation, which shows critical minerals.
AMG Critical Minerals revenue for the quarter decreased 38% to $53 million compared to Q3 2022, due to lower volumes across the segment, largely driven by the silicon metal plant operating one furnace during the quarter. Q3 2023 EBITDA decreased 83% compared to Q3 2022 to $1 million, largely due to lower volumes across all three businesses. As noted last quarter, lower volumes in antimony and graphite were caused by a slowdown in their end-use markets, primarily in the housing, industrial, and automotive markets.... In terms of silicon, we currently plan to continue running one furnace in order to satisfy outstanding customer contracts. Moving on to AMG Critical Materials Technologies on page six. Starting on the top left, you can see that Q3 2023 revenue increased by $24 million or 16% versus Q3 2022.
This improvement was driven by strong revenues in our engineering unit, as well as higher sales volumes of of titanium alloys and chrome metal, partially offset by lower chrome metal pricing. EBITDA was $13 million during the quarter, compared to $12 million in Q3 2022. This increase was primarily due to higher profitability in our engineering and titanium businesses, partially offset by lower chrome margins, driven by the continued sequential decline in chrome price in the current quarter. Turning now to page seven of the presentation. On the top left, you can see that AMG's Q3 2023 SG&A expenses were $43 million versus $37 million in Q3 2022. The increase was attributable to higher personnel costs, driven by increased hiring in our lithium, engineering, and LIVA businesses.
AMG's net finance cost in Q3 2023 was $9 million, compared to $14 million in Q3 2022. The decrease was mainly driven by both foreign exchange gains of $3 million, as well as higher interest income earned on an increased cash balance in the current quarter. In today's rising rate environment, AMG continues to benefit from its low-cost, fixed-rate debt facilities and has an average interest rate charge across its two main debt instruments of 5%. AMG recorded an income tax expense of $13 million in the third quarter, compared to $39 million in the same quarter of 2022. This variance was mainly driven by lower profitability in the current quarter. AMG paid taxes of $33 million in the third quarter of 2023, compared to tax payments of $10 million in the third quarter of 2022.
This higher payment was due mainly to the high profitability in Brazil last quarter, in Q2 2023. Turning to page 8 of the presentation, you can see on the top left that cash from operating activities was $25 million in the third quarter of 2023, compared to $75 million in the same period of 2022, due both to the higher tax payments this quarter, as well as the lower profitability. AMG's annualized return on capital employed for the first 10 months of 2023 was 28.4%, compared to 29.5% achieved in the same period in 2022. AMG ended the quarter with $320 million of net debt. Excluding the municipal bond due in 2047, our balance sheet would reflect zero net debt.
As of September 30th, 2023, the company had $347 million in cash and total liquidity of $542 million. As I've mentioned, AMG has no interest rate risks since our debt portfolio is fixed at 5% until at least 2026. Our strong liquidity supports the current level of capital expenditures, and AMG management remains committed to maintaining a net debt to EBITDA ratio below 2.5%. That concludes my remarks. Eric?
Thank you, Jackson. Our management teams proactively manage price risk. However, the sharp drop in lithium and vanadium prices over a short period of time resulted in unavoidable margin compression this quarter as we worked through our inventory positions. It should be noted, however, that our number of days in inventory compares very favorably to our relevant competitors and peers. In addition to price risk, we are focused on safety, maximizing cash flow, and successfully executing our strategic projects. The spent catalyst roasting facility in Zanesville operated at full capacity in the third quarter of 2023, and the melt shop has operated at full capacity. The Vanadium Team is presently focused on increasing operational availability and reducing cycle times and improving yields.
The Zanesville facility has additional sulfur scrubbing capability compared to Cambridge, and provides us with increased flexibility when sourcing and processing spent catalysts and other vanadium-bearing raw materials. We are progressing the arbitration proceedings, seeking compensatory damages for costs and lost profits with the insurance agent of the equipment supplier that provided us with a defective fan for Zanesville earlier in the year. Our mine in Brazil delivered a total of 16,000 metric tons of lithium concentrate in Q3 2023. The third quarter experienced low sales volumes due to shipping schedule variances that we noted last quarter. The average realized sales price was $2,395 per ton, CIF China, for Q3, while the average cost per ton, CIF China, was $529 per ton.
The cost per ton is lower than in the second quarter due to higher volumes of tantalum. In Brazil, the shutdown of our lithium concentrate plant to facilitate the expansion from 90,000 tons to 130,000 tons, has been rescheduled to the first quarter of 2024 due to delays in the delivery of electronic components for processing automation. The last electrical center is now tested and scheduled to be delivered on site in November. This will result in lower second quarter sales volumes in 2024. We expect to produce a full run rate capacity of 130,000 tons per year, starting in the third quarter of 2024. Consequently, AMG Brazil will produce its full nameplate capacity of 90,000 tons in 2023.
In 2024, we anticipate the cost per ton to run of producing spodumene to rise due to unabsorbed costs during the ramp-up, as well as lower relative tantalum sales, which offset our spodumene production. We believe net of co-product credits, we are at or near the bottom of the global lithium concentrate cost curve. It's also worth restating that 100% of our tantalum concentrate production is sold at market prices under the terms of our joint venture with JX Nippon Mining & Metals Corporation. AMG Brazil's project with Lago, with Grupo Lagoa in Portugal, will begin basic engineering in December of this year. From current data, we believe that we will be able to confirm the main assumptions for the construction of a 150,000 ton lithium concentrate plant at the site.
This resource, once developed, will provide sufficient feedstock for an additional lithium hydroxide module in Bitterfeld and enable us to continue our vertical integration strategy. AMG Lithium's battery-grade lithium hydroxide refinery in Bitterfeld in Germany is in the initial phases of commissioning for the first 20,000-ton module. The ramp-up and qualification process is planned for the second and third quarters of 2024. We expect to produce and qualify approximately 7,000 tons of battery-grade lithium hydroxide in 2024, and the full 20,000 tons in 2025. Our Global Vanadium Team in Ohio and Germany has developed, engineered, and installed process technology at AMG Titanium in Nuremberg to produce vanadium oxide from roasted spent catalysts. This new process technology will further diversify our ability to accept a variety of vanadium-bearing materials to support our vanadium electrolyte expansion.
The process is commissioned, and processing material from AMG's existing spent catalyst sources. The vanadium electrolyte plant at AMG Titanium in Nuremberg is under construction. This facility will process vanadium oxides into vanadium electrolyte. The target capacity is 6,000 cubic meters of vanadium electrolyte, the equivalent of approximately 100 MWh, which will serve the electrical storage market as a vertical integration into AMG's LIVA batteries. Production is expected to start in the first quarter of 2024. AMG Silicon operated one of its four furnaces throughout the third quarter, and we will operate the one furnace for the remainder of 2023. We continue to review the operational parameters of the silicon business on an ongoing basis.
In terms of our critical materials technology segment, AMG Engineering signed EUR 81 million in new orders during the third quarter, making the order intake of EUR 323 million for the first nine months, 51% higher than the same period the prior year. We had an order backlog of EUR 341 million as of September thirtieth. We are also seeing strong improvement in the end markets in our aerospace-related products, specifically titanium aluminides and titanium master alloys. Our overriding objective, in addition to safety, is to be the low cost, highest quality, and most environmentally responsible producer of our products, ensuring strong cash flow and profitability even at low prices. I'd like now to pass the floor to Dr. Heinz Schimmelbusch, AMG's Chief Executive Officer.
Thank you, Eric. Since the end of July, when we issued the previous 2023 EBITDA guidance of between EUR 350 million and EUR 380 million, market prices for spodumene and lithium carbonate have decreased by 50% and 43%, respectively. Given these price decreases, AMG's new EBITDA guidance for 2023 is approximately EUR 320 million. Considering the ramp-up of the strategic projects explained earlier, as well as the volatility of our key material prices, specifically lithium, it is challenging to provide firm guidance for 2024. The recent fall in lithium prices has surprised every industry participant. Establishing the cause for the fall in prices and projecting future movements involves analyzing both the Chinese lithium industry as well as broader macroeconomic factors in China and generally.
Given the difficulty of this analysis, and despite certain signs of the lithium supply and demand picture remains strong, there is a high uncertainty with regard to the near-term pricing dynamics. Therefore, utilizing today's depressed price levels, AMG's EBITDA will be approximately EUR 200 million in 2024, with a stronger performance in the second half of the year. Operator, we would now like to open the line for questions.
At this time, if you would like to ask a question, please press the star and one. You may remove yourself from the queue at any time by pressing star and two. Once again, that is star one to ask a question. We will pause for a moment to allow questions to queue. We will now take the next question from Martijn Den Drijver with ABN AMRO. Martijn, your line is open.
Yes, thank you, operator. Good afternoon. Good evening, gentlemen. My first question is about the 2023 guidance. You've just mentioned that the expansion itself, SP-1 plus, is delayed. That should actually be positive. And the prices of lithium in the third quarter are obviously known. So I'm struggling to understand the reduction in the 2023 EBITDA guidance. Is there something else besides price that explains this adjustment? Has there been a renegotiation of contracts? That would be question one. Then the second question is if this is the new reality, regardless of how much headroom you've actually built into 2024 guidance, what does this mean for your strategic projects? The Brazilian conversion plans, the negotiations, discussions with Zinnwald. That would be my second question.
My third question is, given the new reality also on the ferrovanadium prices, would you be willing to give us any EBITDA guidance for the combined Zanesville and Cambridge plans for 2024? Thank you.
Yes, segment next year. Do you wanna, do you wanna talk about 20?
Okay, Jackson.
I'll start on the first one. So, in terms of 2023 guidance, in July, as you know, the lithium price was $41,000 a ton. It's currently $22 a ton. The entirety of that fall fell onto our Q4 shipments, and we did not expect that fall, so it's entirely price driven.
And if I may respond to that, the methodology that I've been using to calculate your revenues and EBITDA for lithium has worked extremely well in the last 6, 7 quarters, and we know the market prices. So I know I should know what my revenue and EBITDA was going to be in Q4, and it doesn't align with the new guidance. Is it really just price? No other factors?
Yeah. Yeah, what I would suggest is maybe we take that offline. I think we're gonna talk later in this week, and we'll go through number by number with your model and make sure that, that we're all aligned. But it is price. The answer is, it's all price.
Okay, the number two question, new, is how does that affect our strategic projects? It does not. Our financing structure is very robust. Jackson mentioned the net debt figure. Excluding a 30-year EIB financing repayable in 2047. Excluding that, we are net, we are net cash. We are not in net debt, but in net cash. That's extremely important because if you have a 30-year, 4.5% bond, I would rather, it's better than equity. A very strong financial position, a strong cash flow. The fact that the new EUR 300 million conversion plant to be decided finally by the supervisory board, presented to the board, decided by the board in December, I predict a positive, affirmative decision.
This is financed by a very long-term financial instrument to the full amount. A low cost, long-term financial instrument, utilizing government-backed structures. So it doesn't really, it's, it's another version. It's not 30 years, but it's very long-term and very favorable. Zinnwald in Portugal, because I assume that you also include Portugal in your question. Zinnwald, Zinnwald is a very attractive project, and we don't want to comment on this in great detail because we don't want to influence. We are a board member of this, of the Zinnwald Plc in London... and therefore, we are in great discussions about the future of this project. Not the future in a sense that better or not, but the future in a sense of how.
Rational analysis would consider that the best way of approach this project is by combining the ore body in Germany with the ore body in Czech Republic, which is one ore body. One-third is in Germany, two-thirds roughly is in Czech Republic. We are in very constructive discussions with interstate or intercountry or inter whatever interproject discussion to combine those projects. It's financially very attractive to do so. We have no, we have no problems to arrange financing for that among the partners involved. As regard to Portugal-
Yeah, go on.
No, no, please.
Now, I was just wondering, you mentioned strong cash flow, and perhaps this is a question for Jackson, but are you also at the EUR 200 million EBITDA level for 2024, projecting positive free cash flow?
No, not free cash flow. Operating, positive operating cash flow.
Okay. Please continue with Grupo Lagoa.
Before exiting, Zinnwald, there are available for Zinnwald, given the specific structure and location of that project, various financial instruments in the European Union and in Germany, for such projects, which make it additionally attractive. The same in a way applies to Portugal. Portugal, we have, over the years, developed a very close relationship to the feldspar mine in Portugal, which has lithium traces of Brazilian quality. It has the size of one Brazil plus, once the commercial plant is in operation. We are in basic engineering, actually progressed basic engineering, of a commercial-size pilot plant to ascertain the feasibility of extracting lithium, the lithium content of this ample ore body, in addition to feldspar.
That same technology which we used in Brazil, it's almost identical. In order to make sure that we don't overlook anything and to reduce risk, we are doing this commercial pilot plant. It's a large commercial pilot plant, which is very profitable. And we do so because that also moves then the Portugal region which we are located has other ore bodies. And in order to prove, without any questions, the viability of our extraction technology of multi-grade multi-trace ore bodies, we are building that pilot plant. So that is a very systematic exercise. And the combination of those projects, it's not a project, it's projects, ultimately in Germany and in Portugal, will each lead to at least one additional module in Bitterfeld.
So it's a, as we always have published, it is a resource module, resource module, step-by-step expansion strategy, utilizing a variety of available financial instruments in the sector of grants and other state government supports. So this is a very detailed planned procedure, and it, it doesn't show in any way financial crunches or bottlenecks. So that's my answer to your Stijn word new reality thing, adding Portugal to the fray.
Thanks for that, additional color.
There was a third question, I just-
About if you were willing to, at this price level, to give an EBITDA guidance for the combined Zanesville and Cambridge units?
Well, that will be, as you see from the new legal entity structure, reported in fairly detail in 2024. So we're not really giving out that information right now, but the gearing up of Zanesville is progressing, and, you know, we're very happy with the progress in it. We've mentioned we're processing some fixed price raw material, where we purchased it from new sources, and that's compressing our margins a little bit in the first and probably a little bit the second quarter of 2024. But you'll see that with much more transparency in 2024.
Lithium and vanadium will be the two large contributors, followed by technology in 2024.
Thank you, gentlemen.
We will now hear from the line of Richard Hatch with Berenberg. Richard, please go ahead.
Yeah, thanks very much for the call. Just a question on the growth strategy in Germany. Obviously, you're bringing on the first module now. You know, is the expectation that you continue to roll those out over the next few years to reach 100,000 tons a year of hydroxide, or is that not a fair assumption? I'm just trying to work out, you know, what a sensible kind of strategy is just on that business. Thanks.
Totally unchanged. We have as it looks like to us and to you, we have the two mentioned fairly large projects, where we are very optimistic to turn that into reality. We have timelines, we have agreements, we have positive response in many ways here. Although the negotiations are in all complicated as in such things, and there are permitting processes involved. We utilize in the permitting side, we utilize a very specific quality. We have a mine in Brazil, which includes in future carbonate plant, and this carbonate plant has had enormous amounts of studies and behind it.
We have the benefit of demonstrating to new partners by touring the Brazil facility and the surrounding communities, how positive in many ways these activities can be, and how environmentally responsible developments of that nature can be done, not in theory and promising it, but demonstrating it in Brazil. That has so far played a big role in the political acceptability of these projects. Now, to give you an indication, the Portugal project, once the commercial plant is built, it's about 150,000 tons of spodumene. That's a little larger than Brazil. It's amply enough for one module. Portugal is a larger, but Germany, Zinnwald, with the extension into Czech Republic, is larger.
It's north of 30,000 tons, so essentially that is more than one module. AMG has an exploration team centered in Brazil and Portugal, with new operations in Porto, Portugal. We have a pipeline of projects, and we have been approached by lithium producers who have the idea to extend their value chains into lithium refining in Germany, utilizing our infrastructure. So given that picture, we are confident to reach what we originally said, the 100,000-ton situation by 2030.
Okay, that's very helpful. Thank you. My second question is just on the cost inflation that you've pointed to in Brazil. Are you able to put some sort of kind of guidance or steer around that number, please?
Yeah. You know, the Brazilian real has appreciated about 10% over the last year. That's the number we're using for our financial plan. The ratio of tantalum sales to spodumene sales will be a little bit lighter, and tantalum sales have come down, prices have come down a little bit, so it's in the ballpark of around a 15% increase.
Okay. Super helpful. Thanks. And my last one is, I suspect the answer is no, but just to clarify. You know, in the worst-case scenario, or potentially, you know, it gets worse, but on the scenario that the price stays where it is and your EBITDA next year is EUR 200 million. You know, obviously there's a lot of investment there. If the supervisory board approves your Brazilian plant as more CapEx to be spent in Germany, Brazil, such like, leverage increases. Am I right in saying that the key covenant is 3.5x net debt to EBITDA? Would you just be able to, just clarify, remind us where the key covenants sit and how you feel about those? Thanks.
Yeah, that's 3.5 times net senior secured debt to EBITDA, so excluding our municipal bond.
So you start from zero then?
Today we're zero. Presumably by the end of the year, next year, we will not be zero, but we won't be very tight at all.
Okay. So, so I'd say absolutely zero worries about that. Okay, understood. All right, appreciate.
Yeah, but the one issue in your question, which I don't want to overlook, is that you mentioned on whether somebody might be hesitant to approve the carbonate plant in Brazil. The financial attractiveness of that plant is substantial. To give you two figures. So we envisage a $300 million investment, CapEx, at $20,000 per ton, which nobody believes or, yes, Goldman Sachs believes, but I don't know what they believe, really. But at $20,000 per ton, a very so below the present market, the incremental EBITDA of this carbonate plant in Brazil is $60 million. So 60 versus 300 is a multiple of five, which it's not our normal multiple is between three and four, but we have strategic elements.
And by the way, we have a price leverage. So give me another number. I'll give you another number. At $30,000 per ton, instead of $20,000 per ton, the incremental EBITDA of that carbonate plant in Brazil is $150 million. So that's two times 300. So the, if the truth is anywhere in the middle, it fits into the three-four times discipline multiple. And the multiples we apply here is normalized, annualized, incremental EBITDA over CapEx. That's our strongest investment decision criteria. But talking about carbonate in Brazil, it of course shortens the logistics from Brazil, China, Germany to Brazil, Germany. It also implies, accordingly, strong working capital reduction. CapEx, in order to make that calculation precise.
But on the other hand, also, there, we are in a feasibility study to, we have to invest in order to make the refinery in Bitterfeld able to receive carbonate in addition to technical-grade hydroxide, and that investment might be counted against that working capital reduction. You also have a CO2 reduction, because this and the CO2 reduction is substantial, and the CO2 reduction is very important in every conversation we have with OEMs. We are in our marketing efforts of the future of the battery-grade qualities we are addressing, of course, cathode manufacturers, battery manufacturers, and OEMs. And in the OEM discussions, invariably, the CO2 load per ton of battery-grade hydroxide is very important. The CO2 load, recently, Brazil, China, China, Germany, is 16 tons per ton, CO2 per ton.
For the straight line, Brazil, Germany, it's 10. It's a substantial reduction. And while I'm at it, the refinery in Germany is modular. It is designed by the basic, by the basic quality, a refinery of that such a thing has to have, which is flexibility to take in, to be taking whatever comes, lithium contained, in its way, in order to utilize optionality. So carbonate, hydroxide, and by the way, also, whatever comes out of the recycling variety. We, as you know, are not in recycling. We have a lot of recycling partner discussions, but every recycling...
We are in recycling because every recycling plant ultimately will send whatever, the result of that recycling effort is, to a refinery, and hopefully to us, and we are the only one right now, in order to create a commercial product. Because the results of recycling normally is not a commercial product, it has to be refined to create battery grade, battery, battery grade qualities.
... Understood. Thank you very much for your time.
Once again, if you would like to ask a question, please press Star and One on your touch phone. We will now take the question from the next line of Stijn Demeester. Please go ahead.
Yes. Yes, good evening. Thanks for taking my questions. I have a couple; we'll ask them one by one, if that's okay. First one is on the 2024 guidance. If I understand correctly, the 7,000 tons you expect to produce in Bitterfeld is not included. What is the reason for this? Don't you expect any EBITDA contribution from these volumes, or is there another reason why you wouldn't include it? And if you expect EBITDA from it, would, would the 3,000-8,000 EBITDA tons still be a good approximation for this?
So we do expect profitability from those tons. It's just a question of the fact that they're not in our control in terms of the timing of the sale, because they're subject to our customer qualification. Right? So yes, we will be able to produce them. Yes, they will be profitable, but will they actually get sold in 2024 remains a question and subject to our qualification procedures with our customers. So, and yes, your estimated profitability is about right.
Okay, understood. Understood. Next question is, also on Bitterfeld. Does the delay in Brazil impact the tolling agreement? Maybe it's a bit of an irrelevant question if you don't expect, or if you're, if you're not certain yet to sell these volumes. But could there be an impact on the tolling agreement and thus the profitability of Bitterfeld?
No.
Okay, that's clear. Another question for you, Jackson. Can you provide an estimate for the remaining CapEx for 2023, and also give an idea on what you would spend in 2024, given the shift in Brazil, et cetera?
Yeah. So, we would expect the short answer, we'd expect EUR 175, so an incremental EUR 40 or so for the remainder of this year. And we'd expect about the same level, next year. I would probably put a range on that of EUR 175-EUR 200. It will depend upon how quickly we start to build the technical grade plant.
Understood. Understood. Then on the new structure, does it imply any asset sales or other portfolio pruning elements, or will you simply lump everything from critical materials into technology divestments?
Wait two seconds.
Yeah. So, we have—You will, for the first time in the history of AMG, experience disinvestment. We approach those very carefully as regards what it is, because we don't want to create uncertainty or question marks among our corporate population. But there are more than one disinvestments to be expected, streamlining the portfolio.
Okay. I assume these are in the Critical Materials portfolio?
What we're now calling technologies, correct.
But not only.
Okay.
Not only.
Understood. Okay. Another one on the structure. Can you be a bit more precise as to what way the new structure will improve accountability at the subsidiaries? Because, yeah, I didn't fully grasp the leadership changes.
Well, the basic idea of this new structure, which has been studied now for over a year, in every aspect and, is very carefully designed. The three divisions have three separate basic growth trends behind them, which are different. The management requirement of the management qualification of these new entities show a great deal of synergy within the management teams. The lithium management team has to compete in a very precisely defined industry along the value chain of the lithium industry, and we have that in place, downstream and upstream and even beyond.
So that's ready to go, and we have this company and the other companies will, by the way, function as fully independent companies, where the control function and the management function of the parent company, AMG NV, will be exercised through supervisory boards, as if the three companies were owned by the capital market. The corporate governance structures will be, from day one, implemented in that way. So the management models are, as I said, different. So in vanadium, for example, which also extends into chromium and titanium, is a management model where the management has the task to identify feed options, has to run conversion plants, and be linking it to the changing markets on the output, changing markets in vanadium.
As you know, the market in 2030 will be dominated by vanadium batteries, according to whatever, what prognosis you can find. So it is a conversion activity, and it is a recycling activity in every aspect. So it's a circular concept, and it in Nuremberg at AMG Titanium we convert gasification ash into V2O5, and in Ohio, we convert spent catalyst into ferrovanadium. And in Ohio, we also have a roaster, and in Nuremberg, we have developed a technology where we can take roasted spent catalyst and turn it into V2O5.
So it's high degree of optionality, and that was the background why we were selected as a partner of Aramco to co-convert the largest vanadium resource, untapped vanadium resource, namely the gasification ash in Jazan, behind the Jazan gasification complex, into V2O5, and later on into electrolytes, and later on into battery material. So this is one complex of value chain in the vanadium. It has nothing to do with lithium. It has only to philosophical to do with lithium, because it's also addressing energy storage markets. And the energy storage markets was the guiding light when we had the segment of the clean energy materials, but you know, it doesn't have any management application. Contrary, the management of vanadium and the management of lithium do not have to talk to each other to create value.
It's a separate concept. Technology is very interesting. It is a very dominant position in the metallurgical-- in the high-end metallurgical industry, as exemplified by the latest win of the largest plant we have received for a long time. By the time when we got this big, new, brand-new, $500 million plant in the U.S., where the central, the heart of the plant, namely the great vacuum furnaces, are all supplied by AMG Engineering. So, that leadership is also expanding into anode materials.
We are in the market of supplying new concepts of creating synthetic graphite to customers, and that was the leading idea to give the graphite and silicon metal activities a status of being a subsidiary of ALD, technically, in this new technical cooperation. Because the future of anode materials, like the past, depending on natural graphite, increasingly synthetic graphite and much more increasingly silicon metal. And there are very ambitious plans in the area, in the R&D sector of AMG. So, then we had to make a decision where to put LIVA. The new fast-growing battery activity should not be in the vanadium area, be in the lithium area, although it's a lithium vanadium battery.
It should be where the management requirements are, namely, in establishing production lines of different sizes of stationary batteries. Essentially, that is equipment engineering. A typical $25 million metallurgical plant in ALD, in AMG Engineering, I call it ALD because that's the brand name of our bearing stamp. The ALD is the translation of supplier contracts, say, 20 supplier contracts, into an assembly, into a $25 million machine.... and the battery is exactly that. So in order to avoid being viewed as a venture capital exercise in this battery sector, like all the other 100 venture capital activities, we want to quickly avoid that thing and become a senior supplier, a very senior accepted supplier, of such things.
Those batteries, by the way, are the center of the internal grids of manufacturing plants. Since ALD, our engineering company, is associated with, in worldwide, with about 1,000 metallurgical plants, which they built, and they know the operators, and they know they have a high reputation. All these plants ultimately need energy transformation. The center of the energy transformation in the manufacturing plant is obviously a battery, because then it is the only way to create a bridge between renewable energy input into the plant and optimizing the various streams of electricity in the plant. That is, by the way, under construction in several customer areas and in our own plants, including in Nuremberg and including in Hanau. Therefore, LIVA is housed in AMG Engineering in Hanau.
Housed because it is, it's a very special activity. It needs the engineering environment around itself, but it is a highly specialized and we want to have LIVA as a company which might one day take off on its own path.
Thanks. Thanks. Short one in the interest of time. I, it's a bit same question as my friend had. I also failed to grasp the magnitude of the, the guidance cuts on 2023. Let's call it EUR 30 million on the low end of the, the previous EUR 350 million. Given that you have the 3-month lag in prices, and you don't lose the volumes from the Brazil shutdown, because you now lose them in Q2 next year. So what would be your volume, what would be the shipments, in Q4 for Brazil? Would it be as low as Q3, or do you expect to be at 90 kilotons per annum run rate?
No, I think we don't want to go into those details. It's really... We might be misunderstood. I see my colleagues have complicated tables here.
Yeah, we'll-
But let me say, the disappointing factor is our vanadium price.
Lithium.
The vanadium price has fallen, too.
Also, vanadium price, yeah. But it,
When we did this in July, this guidance, the visibility forward in the lithium market, which is three months, it's July.
Depends on shipping schedule and-
August, September.
Yeah.
It leads a lot of months, and the fall was 50%, and that combined with vanadium, that is the explanation. And it's we can do this mathematical offline-
Well-
show it to you. It's just simply a very straightforward calculation. There's no other case. So take this, please, as an answer.
Okay, understood. Just one more. On the 2024 guidance, do you spot prices for all the metals or simply for lithium?
All of them.
All metals.
Oh, okay. Thanks.
We will now hear from the line of Nicola Dalla Torre with Helikon Investments. Please go ahead.
Thank you for taking my question. Given depressed valuation of the company, in your capital allocation decision process, would you consider share buyback at a certain point?
The share buyback is competing with the project development in especially lithium and also vanadium and also in the battery sector, as regard to build, own, and operate models, which we have a mixed situation, where we sometimes want to be involved as an owner in those batteries. But and secondly, the base one, not the, but one of the considerations of the new corporate structure is we can see scenarios where lithium projects and vanadium projects and battery projects starting to compete with each other for corporate funds. And even unlikely.
So therefore, we want to be in a position, purely optionality-wise, to not lose interesting growth opportunities by having to delay situations because the parent company is notoriously undervalued, and therefore, the equity has to come somehow from the subsidiaries. If the subsidiaries are needing equity components to project finance the expansion. This is a high-growth strategy, and foresees in this project development foresees that there might be certain clusters which cannot be handled together unless we find ways of having conservative project financings. And therefore, I think, given those growth scenarios, it's highly unlikely the growth scenarios are more attractive than the share buybacks.
Okay. Okay, understood. Thank you. And second question, very, very quickly, on the module expansion in the refinery plant in Germany. In your opinion, when should we expect a final investment decision for module two?
Well, I think in end of 2024, beginning of 2025.
Okay, thank you very much.
That has to do, of course, with the timing, because it is an intricate exercise to. You have to be reasonably sure that you, the resource projects are interfacing with the module, so that we don't have to have too much leakage to sell or buy materials for interim periods, which you obviously will understand. That is an intricate thing, so it is. This is not, you know, this is not a hard plan. This is my best answer I can give you.
Completely understand. Thank you very much.
This does conclude the AMG third quarter 2023 earnings call. Thank you for your participation. You may disconnect at any time.