Thank you for attending AMG's Capital Markets Day. I'm joined at the table today by Dr. Heinz Schimmelbusch, our CEO and chairman of the Management Board, Fabiano Costa, our CEO of AMG Brazil. Next to Dr. Schimmelbusch on his left is Dr. Scherrer, then we have Dr. Kölln . Those are the order of the presentations. Thank you everyone for attending virtually as well. After the presentations, we'll do a Q&A and followed by lunch. Dr. Schimmelbusch, if you'd like to get started.
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Correct.
Yeah. Perfect. I also, ladies and gentlemen, want to welcome you. I want to include in the list of people who are present here for also available for conversations is my colleagues on the management board of AMG, Eric Jackson, Chief Operating Officer, and Jackson Dunckel, Chief Financial Officer. They're both Jackson. The one has a for-first name and the other has his last name, so I address them summarily as Jackson Square. We have our legal brain here, not for any particular reason, but you never know. Dr. Witzel, who is our senior legal brain, for very active in when we go after acquisitions or so. I speak English here, although I'm not used in Frankfurt to speak English. I actually know German. Vienna sausages and Gulashsuppe and Vienna sausages.
of our downstream operations is here. It's a very complicated material. The technical expertise is not broad distributed, and we were lucky enough to attract a fairly substantial amount of people when Chemetall, the originator of lithium in the world, a German company, was bought by Albemarle. The decision in AMG dates back to 2016, where we decided to add $5 million to build a spodumene facility in our Mibra mine in Brazil. In 2022, that investment in our lithium operations in Brazil produced 63% of AMG's record-breaking EBITDA in 2022 of $343 million. This percentage of 63% is estimated or expected to grow to 70% and 80% of the total of AMG's EBITDA, which is also supposed to grow in the next years.
This is the same percentage as lithium activities in Albemarle. Albemarle is a lithium company. Nobody questions that, although Albemarle has substantial other activities in catalysts and in boron. The strategic question for AMG therefore is to whether the difference between 70% or 80% and 100% is a difference large enough to separate lithium from the rest of the company. That needs very careful decision-making. Until we have made the decision, we are a lithium company, like Albemarle. This question is being under careful consideration, and there is there's no haste. We also have certain decisions which are in the making as regard to the expansion of our business, and they will be very important for this decision also.
The three presentations today highlight the dynamic nature of lithium value chain in AMG from mining to battery-grade hydroxide. Our underlying strategy at AMG in everything we do is to interpret market dynamics, anticipate long-term needs, and position AMG's expensive capabilities to generate value for you. The lithium value chain is a shining example of that execution of the execution of that strategy. Please note that the word lithium was not mentioned in the IPO prospectus filed by AMG in going public in Amsterdam in 2007. We operate two lithium business units, the upstream mine in Brazil and the downstream processing business in Germany. Each of these businesses will be described in these presentations by Fabiano Costa to my right, who built the mine in Brazil, and Dr. Stefan Scherer to my left, the CEO of AMG's downstream operations and who is building the refinery in Germany.
We have included into this presentation, because we were asked to, we are most happy to include Dr. Kölln sitting here, the young man to my left. He's managing one of the biggest growth aspects of AMG, LIVA, the lithium vanadium battery unit, which we formed, a fully management team, we are building batteries. Stationary batteries, we will come to that, he will present it. It will be a substantial unit of AMG over time. The presentations today are fairly comprehensive. What is left to me is to add a few remarks about the strategic thinking behind all that. I will explain the strategic thinking, I will comment also a little bit of LIVA. The Mibra mine, which you see, is in Minas Gerais.
Brazil has been in the Mibra mine, has been a tantalum mine for quite some time. The lithium contained in the ore was not processed. It was stored in tailings. We started to invest in processing of lithium in 2016 and started to produce spodumene lithium concentrates in 2018. In addition to technical and other challenges of this diversification in Brazil, we had to find a customer for the qualifying of the product. We found that in a contractual tolling partner in China. This leading lithium refiner has become a very valuable long-term partner. The Mibra mine is a low-cost producer of spodumene. Historically, that has been also, or partly, the result of the processing of tailings, so it's a circular economy aspect, and the credits from the production of tantalum.
As Fabiano will detail, the tantalum production is under long-term contract, partly thanks to this tantalum production, the spodumene costs at the Mibra mine are below $500 per ton, CIF China. This low-cost position will be further enhanced when we expand the production from 90,000 tons- 130,000 tons of spodumene, which is underway and going operational later this year. We are determined to fill the empty space in Europe, where there is a battery-grade hydroxide refinery is missing. There's not one hydroxide refinery in Europe. It's strange, there's also not one hydroxide refinery in the U.S. We have acquired an infrastructure framework of building five modules, as we say, 20,000 tons each. The first module is under construction, you have a model there in the hall. 20,000 tons.
We expect, and everybody else expects, there's a consensus that in 2030, the European market needs 600,000 tons of battery-grade hydroxide. The first module is based on spodumene from Brazil, converted into technical-grade hydroxide in China. Prior to an upgrading plant being operational in Brazil, we are in basic engineering for building a carbonate plant in Brazil. We selected Bitterfeld as a location, groundbreaking was in May 2022. We estimate our CapEx, $140 million, including the infrastructure for the expansion and excluding the investments to make the refinery feed agnostic. This was not project financed. It was financed from cash flow, this investment. You see a picture of the refinery. It's fairly advanced and commissioning this will be around August, September.
The downstream strategy was designed starting 2019 in the context of building a extensive lithium team in Frankfurt. Chemetall GmbH, Chemetall, the world's leading lithium company at that time was sold to Albemarle. That happened in 2015. Chemetall had been a 100% subsidiary of Metallgesellschaft, and actually had invented lithium in 1922, produced the first lithium salts. Albemarle, apparently, was focused on the overseas production assets of Chemetall when they did this acquisition in Nevada, Chile, and Australia. The intellectual property in form of a large team obviously was non-core and available to be integrated to AMG. In the meantime, we have over 20 former Chemetall employees, including the management and the research team in our AMG family, led by Dr. Scherer, head of Lithium GmbH.
At the time, Dr. Scherer pointed out that we also should do fundamental re-research, and in order to target solid-state batteries. We were the most happy to be able to attract a world-leading name here, Dr. Vera Nickel. She's one of the persons in the world who have a chance to be the leader in that materials for solid-state batteries. That is materializing in a pilot plant around the corner here. We are in basic engineering for a larger semi-commercial plant in order to keep our leadership development intact. The main point is that in addition to feeding additional modules by the way of additional resource projects for the refinery, there is a great deal of optionality to arrange feeds through commercial contracts with producers of a variety of lithium-containing materials.
In a way, it repeats the business model of the custom smelting industry in copper. Dr. Scherer will explain this. The lithium sector is transforming itself from a small niche to a major industry. The liquidity of these various markets contained along the value chain of lithium will rather erratically change over time, as happened in all the development of large metal industries in the past. The central role in all of this is the last step of the value chain, the link to the end market, and that is battery-grade hydroxide, and that's the refinery. The revenue potential of the Bitterfeld battery-grade hydroxide refinery complex fully built, five modules, is in the range of EUR 5 billion per annum. Due to our flexibility in feed material, we believe this operation will provide a very strong return on investment under any market conditions.
We are active in searching to develop new lithium resource projects. We have a variety of things we offer. The AMG Lithium to resource owners, junior miners, for example. The AMG Lithium value chain gives our lithium team the ability to participate in the development of lithium resources beyond our Mibra mine. The slide tries to illustrate that. We provide mining expertise in hard rock or brine resources, engineering support, project management services through our Brazil-based plant engineering group, which has 35 engineers and support staff with global reach. The spodumene processing now ability to sign long-term bankable off-take contracts with or without German government support, upgrading such contracts into project financing structures, and finally, to provide the missing equity.
Fabiano will comment further on our resource development strategy, which cannot be detailed any further. Beyond our non-disclosure and agreements, which in this area we of course cannot comment too much. A great example, however, of developing additional resources is our investment last week, I think it was, of Zinnwald Lithium, announced last week as a partner with Zinnwald. Together, we will pursue a definitive feasibility study for the project in East Germany. Establishing a raw material base in Germany close to our Bitterfeld operations has obvious attractions. The global lithium demand is pointing into the right direction. My perception is that the lithium demand and supply forecasters are far apart in their predictions, both in demand and in supply.
The demand forecasts are driven by the e-car forward statistics, forecasts of the e-car in-intensity in each country, announcements of transition by companies and states, and so on. That doesn't sound too difficult. The supply forecasts are more challenging, relying on a large extent on the announced projects, including their announced timelines, and complemented by some assumptions about the production in China. Some of these announcements must be taken cautiously because many projects who are announcing timelines have announced the parallel shifting timelines over quite some time. Resource developments frequently lack the expertise of how to access lithium process technology. The recent dramatic increases in interest rates combined with global unrest in the banking sector will restrict access to viable capital to only the most attractive projects. This dynamic will reduce the rate of new lithium projects coming online. That is already happening.
I do not envy junior miners trying to raise project financing in today's market conditions. Conversely, AMG has about $350 million in unrestricted cash and over $500 million in liquidity maturities, principal maturities. Combine this with our substantial operating cash flow generation, we are in a uniquely strong position to finance our strategic initiatives while maintaining very reasonable conservative leverage. Additionally, we have fixed interest rates at around 5% for our main credit facility through 2026 and are close to net debt zero, excluding our net to net debt zero, excluding our 30-year maturity fixed rate municipal bond in America. We actually a 30-year bond at 4.5% is better than equity. To summarize, we are quite satisfied with our enviable balance sheet position.
We believe that there is a clear and undisputable fundamental energy shift happening globally built on energy storage materials. That is the demand side. On the supply side, our low-cost position combined with the vertical integration strategy we are currently executing puts us into an advantageous position under all market conditions. Every realistic scenario of supply and demand we have analyzed results in a dramatic return on investment in lithium supply chains. We believe that based on these factors, our lithium strategy will result in extraordinarily high profitability, potentially for a generation or more. As regard to lithium, as regard to the LIVA battery, I want to confine my remarks to the origin of the idea of a stationary battery combining instant power with low-cost storage. One of our plants was operating a hot gas mill with highly volatile electricity demand.
This led to the penalties from the utility and unusually high electricity costs. Management planned to lower its electricity cost by installing a small island diesel engine power plant for peak shaving. A vanadium battery was considered as a green alternative. This did not solve the issue since the vanadium battery would not handle instantaneous electricity demand when operating a hot gas mill. The idea was born to let the lithium battery handle the fast discharge part and then activate the low-cost vanadium battery. Artificial intelligence software was required to manage this lever structure. We ended up buying the firm in conjunction with AMG Engineering built the battery within 12 months, the first battery. The system works as planned.
The supply storage capacity enable us to build rooftop solar energy facility integrating the electricity generated in our internal grid that fits to whatever manufacturing plant. The first LIVA battery for third-party customers is under construction. Others are in negotiation. Indications are that the demand for such solutions is very large and global. The vanadium electrolyte, which is of course the raw material for the vanadium part of the battery, is supplied by AMG Titanium, a traditional producer of vanadium electrolytes in Nuremberg. To manage all of this properly, we formed LIVA Power Management System with Dr. Kölln as CEO, Dr. Grünberger as Chief Operating Officer, he was the project manager of the first plant. We already have a CFO in that company, which is fast-growing, as I said. Finally, four, if that is of interest.
We have just completed the fiscal year guidance from “$320 million with a final EBITDA of $343 million. We surpassed that guidance. We have posted our 2023 guidances “$400 million or higher.” Looking at our year-to-date February results, we had a very good start in 2023. In May 2023, we will have our AGM in Amsterdam. Traditionally, we publish at that occasion our new five-year EBITDA guidance, which in May 2022 was stated as “$500 million or higher in five years or earlier.” We presently are working on a variety of scenarios, which is necessary to come to such long-term guidance statements in a responsible way. At the AGM in May, we will formally update our five-year guidance as we annually do.
Looking at our scenario planning, my comment on the present long-term guidance statement to reach an EBITDA of EUR 500 million or higher in five years or earlier is that earlier could be as soon as 2024. Thank you for your kind attention. Alongside with Messrs. Costa, Scherer, and Kölln, we will answer the questions once the presentations are completed. I will now ask Fabiano Costa to talk about his mining operation.
Thank you very much, Dr. Schimmelbusch. Good morning to everyone. It's a great pleasure for me to be here. Let me just share a little bit of the background of the mine in Brazil. As Dr. Schimmelbusch mentioned in his introduction, there has been initiatives of mining in the Volta Grande pegmatite since 1945. At the very first beginning as essentially focused on the cassiterite to support the tin industry in Brazil. At mid-1980s, the focus of that particular ore body shift to the tantalum, as the tantalum was demand for the electronic industry, and that has been pretty much the focus 2000. The interesting part of this is by something around seven to eight parts of waste.
In average in the ore body, there is 350- 400 ppms of heavy density materials, meaning cassiterite and other minerals bearing tantalum in it. Converting this into wage units, you essentially have to remove six-seven tons of waste to uncover one ton of ore. In that ton of ore, you have 400 grams of something heavy density. This is obviously a challenge for a company like AMG. We want to maximize the mineral resource. That's essentially where the lithium come from. At the very first beginning, we were making feldspar, a feldspar concentrate. A major part of this lower density minerals of that particular ore body, they form a good concentrate for the ceramic industry with feldspar, albite, quartz.
One of these minerals happens to be spodumene, and we start producing that feldspar concentrate for the ceramic industry. Around the year 2010, 2011, we start research and development to try to concentrate that spodumene part into a spodumene concentrate without obviously jeopardizing the ceramic industry in Brazil, where AMG is the major supplier for porcelains in Brazil. We were very successfully developing that route to concentrate the spodumene out of that. In around 2014, 2015, we start engineering that plant. The plant that we built from 2016 to the end of 2017, plant starts running in 2018. The project was implement on time, on budget, and we are now producing at the nominal capacity of 90,000 ton per year. Grace, can you flick through the last, the first slide?
No, the first one first, just out of curiosity. This is a picture of the mine, and I'm gonna show you guys a little bit, but just to want to show this first. The next slide, which is a 3D, it shows the operation. From the former operation, it is interesting to see that, you know, we have the pegmatite coming, feeding to a comminution circuit. The comminution circuit is essentially formed by a crushing circuit followed by a grinding circuit, where we adjust the particle size. There's an interesting factor in this, in this way that we're doing things different than other lithium producers around the world. We recover the tantalum first, which give us the ability to maximize the potential credits on tantalum, because the degree of the liberation of these two elements in the ore are different.
If you recover the lithium first, that demands that you mill your ore so fine that the tantalum gets unrecovered by normal, simple, cheap gravity concentration. If you want to concentrate the tantalum after you mill your particle size to a final size to recover lithium, means that you either are jeopardizing your tantalum concentration, or you have to use very expensive methodologies to concentrate that tantalum. That's a good differential of AMG. We recover the tantalum first, and then we keep grinding our material to a particle size that is feasible to concentrate the lithium. I am already showing there in that picture the expansion that Dr. Schimmelbusch has just mentioned. We are going through right now, and I'm going to in a little bit more details on this expansion in the next slide. Sorry, Grace.
Can we keep on that one for a little bit? Just out of curiosity, in this slide you see already that we have real estate prepared for the next phase of this expansion, which includes a technical-grade chemical plant construction at the site, which will give us a huge advantage in terms of logistic saving costs since that we are converting that in China nowadays, and we will convert that 100 meters away from our operation. That will be a great advantage in terms of cost. We can go next. The expansion is essentially a 45% expansion from today's capacity, going from 90,000- 130,000 per year.
The interesting feature about this expansion, it's a very low technological risk since that we are essentially focused on debottleneck and increasing the recovery capability of the plant by what we learn with this plant operating that since 2018. There's a lot of opportunities that we can implement some small processing change that will give us the ability to increase the metallurgical recovery. Yes, there will be enlarging on the same process that we use nowadays, so again, very low risk because it's similar mineral process what we are doing but a little bit bigger. Of course, some new technologies which will help us in terms of mass recover to recover some of the coarser particle size that we were not able to recover in the first pass of this plant.
As well as we are embracing what we call the robustness of this plant, it's. This is happening right now. We are scheduling the shutdown to do the tie-in. We are building everything without stop the plant. In the end of Q2, beginning of Q3, we do the shutdown to do the tie-ins. The start up around this date and ramping up towards the end of the year when we expect to have new nameplate capacity already in place from the fourth quarter onwards. Dr. Schimmelbusch mentioned lower than $500. He was being conservative. Our cost is $461 nowadays Delivered to China. Optimization of the tantalum grades.
Not only the tantalum, As I mentioned before, we have successfully kept our feldspar consumers in Brazil, and we also do some tin, similar to what people were doing there in that mine in the '40s. As I was mentioned before, the Mibra mine, it has been a long-term tantalum concentrate. It's one of the largest conflict-free producers of the tantalum industry. The tantalum, it's what give us the ability to be a very low-cost spodumene producers in the world. I would dare to say that, you know, we are probably leading this cost race at this moment. Together with the expansion that we are doing in the spodumene, because it will be more ore feeding that comminution circuit, we also have the ability to increase the tantalum capability.
Nowadays, we have the capacity to produce 300,000 pounds, and that will be increased to 370 pounds by the second quarter of next year, 2024. The good thing is we have recently announced a partnership, players on the tantalum industry around the world, JX Nippon, the powder produced here in Germany, in Goslar, TANIOBIS, that's the name nowadays. We have Life of Mine, which considers that we delivery 100% of our capability to that plant. It's a kind of a take-or-pay, there's a marketing de-risk in this very strategic partnership that guarantees that low-cost spodumene producer produce for Life of Mine. Next, please.
I have previously mentioned that as a next stage of our expansion of the upstream growing strategy of AMG in Brazil, we will build a chemical plant converter to convert our spodumene into technical-grade lithium to be used as a feed in Bitterfeld. We are at the FEL 3 phase. This is, in simple terms, it's basic engineer done. There is a little bit of plus, minus in the number that I'm presenting here, but the investment is in the ballpark range of $250 million. The commission expect at the end of 2025 to produce 16,500 tons of technical-grade lithium per annum, per year, which is similar to the 130,000 capacity. We will be able to convert 100% of the throughput of the spodumene plant today.
Delivery cost to Germany, it's less than 10,000 tons per ton. Less than $10,000 per ton, I'm sorry. And this, as I was mentioned before, it gave us a huge save in terms of logistics of about 90,000 metric tons reduction in CO2 by not converting that in China. Next slide, please. Just a few remarks on our ESG initiatives in Brazil, which is a very important principle for us, starting with safety. I just want to present some of our safety parameters. Our lost time rate, it's 0.14, and recordable rate of 0.42. When you compare that to the Bureau of Labor Statistics industry benchmark, we are 88% and 90% better respectively. you know, this is something that we are very proud.
We have been putting a lot of effort and focus on the safety of our own people in Brazil. Mining, it's not a simple operation. It's dangerous, and we are quite happy to present these kind of numbers. The safety culture and the safety value is really practicing in the mine in Brazil. We are also very well-recognized by the industry, our suppliers and our customers. I just mentioned there one example that in 2021 we got this prize from Novelis, which is one of our customer and supplier. This is a very important prize, this award in Brazil. There's others to be mentioned. There's another initiative for us, which is we produce nowadays around half of the energy that we consume in our own hydropower plant.
The number in 2022 was 48% of total consumption that was produced by ourselves. You know, above of all, the responsibility of us to preserve the environment and to developing communities around us, it's one of the main objectives of AMG Brazil. Talking about local community, we also very, very dedicate programs in Brazil to work together with the communities in our neighborhood. We obviously prioritize local culture and build a relationship of mutual respect with them. Over the last 10 years, we have managed to increase the number of people who work from us from 45% back in 2011 to 70% that lives in the area around us.
This is thanks to a lot of programs that we do with the Brazilian authorities and ourselves to develop the people around us to be capable to work with us. This is something that we're very proud of. We can go next, please. Just talking a little bit on our mineral resource. These numbers had been update back in the end of 2021, which we are showing around 21.2 million tons remaining in the... We do consider the inferred, and for those who have geological background, that might be a little bit interesting. I just want to mention the numbers that we had before. This number has been is stated back in 2017 when we have announced our Canadian Code 43-101 classified resource was 24.5.
Out of that 24.5, we have 4.2 million ton in inferred category. Nowadays we are showing 3.7 million, which means that 500,000 ton, which is about 15% of our production since 2017, have been actually mined from that inferred resource, which in other words, it is reserved to us. The numbers that I'm showing to you, it essentially give us expectation of about 18 years of Life of Mine, already considering the expansion which will increase the ore consumption from 850,000 ton per year to 1.2 million per year. As Dr. Schimmelbusch mentioned, we have several resource increase initiatives around the world. I'm just showing to you guys the ones that we are doing Brazil.
The point that you see down below in the southeast of Brazil, Minas Gerais state, it's in our concession. There's a possibility for us to get another ore body just down below the ore body that we are mining. We are serious investigating it now. There is two other opportunities we have although in northeast of Brazil, 17 mineral rights or concessions to explore, to do exploration, geological exploration. We start doing that by geochemical analysis, and the geochemical results has been pretty good, indicating that we have presence, anomalies, if you want, of lithium, tantalum, and tin. We, this is the initiatives in Brazil.
We, as Dr. Schimmelbusch has mentioned in his introduction remarks, we do have knowledge to develop areas around the world, something that we are covered by NDAs, so we cannot go into the details here. The increase in the mineral resource bases is one of the targets and the main objectives of the upstream strategy here. I think I'm finishing here. I'm happy to address questions after the presentation.
Very good. Thank you, Fabiano. Now back to Germany.
Yes. Thank you very much. I just want to spend a couple of seconds on the slides which Dr. Schimmelbusch has already shown before. On the left corner below, you see the utility building, the one with a dark roof. This will be the fully automated warehouse with the goods receipt and the dispatch area, the refinery, which is the production building. At the very end of it to the right, you can see the place where we unload the big bags in a automated way. Later on you can have a bit more detailed view on the model we've put around, and on the monitors there is more photos running and animation show on how the construction was progressing. Let's go to the next one.
This is from inside of the plant, so we have not only the cover, we are also doing work inside, which is quite important. Next slide, please. On this slide, let me give you a short recap on the current activities in Bitterfeld. Our module one has a capacity of producing around about 20,000 tons of highest quality lithium hydroxide battery grade. We are talking here impurity levels of down to five digits behind the comma or ppb. That's the level we are talking here. Our idea is at the end to have installed a total of 100,000 tons of lithium salt production in Bitterfeld by 2030, which is fully supported by the available infrastructure and services provided at the industrial park in Bitterfeld, which was one of the reasons why I've selected this site.
Although we, as many others, have seen impacts of the Ukraine war, COVID, and especially this year of low temperatures on supply chains, steel prices, and availability of construction services, we are convinced to start up the plant as communicated all the time in Q4 this year with a $130 million budget for completing this. Next slide. Continuing on Dr. Schimmelbusch comments before, let me give you a bit more detail on the lithium supply chain for our module one. I apologize if it's now getting a bit technical, but that's the nature of it. Module one represents our base scenario, I call it, and can be fed to a very large extent by our Mibra mine in Brazil.
In order to de-risk a synchronized construction and commissioning of two new plants in two different places, one of them converting spodumene to technical-grade lithium carbonate in Brazil, as outlined by Fabiano, and the other one taking this carbonate and converting it into lithium hydroxide solution in Bitterfeld. We have signed a binding toll conversion agreement with our valued Chinese business partner, General Lithium, a well-established name in the lithium industry since many, many years. I personally know these guys since 12 years now. This will pave us the path to transition from a pure spodumene seller as of today to a fully integrated lithium hydroxide producer in a flexible, smooth, and most important, profitable way. The two plants required for such transition are shown in the dotted boxes and are supposed to start up end 2025, 2026. Fabiano just talked a little bit about the Brazilian plant.
The German part is right now in phase three stage. Since we are waiting on test work results and final process design, it is a bit early to give a CapEx number. For those who necessarily want to hear one, it will be around about EUR 80 million for the part from carbonate to hydroxide. The primary customers for us are always the cathode paste producers. The reason for this is simply because this is the final instance, together with cell producers, where the decision is finally made whether a battery-grade material is suitable and therefore qualified for cathode making or not. A very important point, for sure something not to be downplayed or even neglected. Next slide. Some words. This year is our startup year, so that cannot be in Q4 you cannot expect any significant volumes coming out of this plant.
We will not need much feedstock to be able to do the commissioning, and we plan to purchase such small volumes on the market, which is right now going on. 2024 will be a transitional year for the production and is clearly driven and impacted by the course and outcome of the qualification process of our product at the cathode side, which will take place in the first half of the year and-- performance chemical like lithium hydroxide. In order to smoothen the qualification process, we are already qualifying lab samples. That's one of the purposes, apart from solid-state batteries, why we have established the laboratory here. We are already qualifying lab samples, developing, validating, and exchanging analytical procedures with customers, and setting up a fully-fledged quality management system for Bitterfeld from day one on. 2025 will be then our first year of full production.
As you can see here, about 50% of the capacity is fed by lithium equivalents coming from Brazil or coming from strategic partners, we call them. For us, a strategic partner has access to LCEs today. LCE is a lithium carbonate equivalent. It's the lithium world currency. A restriction in converting them and no footprint in Europe, be it in production and/or sales. Once we are released from our spodumene, AMG Brasil will have LCE for this module. This is almost the complete volume we need. I will get back to the flexibility of the plant in digesting different types of feed. Coming to sales and offtake for module number one. Our focus clearly lies on selling our material to customers and using the material in Europe.
Already published and also for further growth is EcoPro, I would say the most dynamic cathode miner. As you know, we have an executed binding offtake agreement in place with them. With the possibility to purchase up to another 5,000 metric tons. Utilize EcoPro to support our sales of the majority of our product. We are also in discussions or having MOUs in place already with almost all of the cathode producers around in Europe. We are more than confident to be able to turn these into binding agreements soon, especially when the refinery materializes more and more in the next month. One of these customers is FREYR, a new, very interesting and diversified cathode and cell producer in Norway. Most of these custom volumes in 2025 according to their forecasts. Next slide, please. Some comments on how we expect the margin develop over time.
Our Bitterfeld plant is currently an upgrader from technical-grade to battery-grade hydroxide. Since there is always grades, the plant will always depend on the spread. We show this on the first bar on the left, utilizing today's battery-grade price and today's technical-grade price. You can see it's the green is the margin, the blue is the cost. As just said, we've negotiated a tolling contract with General Lithium to produce the technical-grade hydroxide for us, utilizing the spodumene from Brazil. As you can see from the middle bar, this is much more profitable for us than purchasing on the open market, and therefore we go in this direction logically. The final bar represents Bitterfeld receiving technical-grade carbonate at the cost of production from the plant we are building in Brazil and starting up in 2026. This represents the fully back-integrated picture.
This graph assumes that Brazil has no profitability. This will obviously not be the case, but the graph does show you the enormous profit available for all of AMG Lithium at today's prices. This opportunity is of course driven by the combination of Brazil's low-cost operations, plus AMG Lithium Germany's ability to produce battery-grade quality for its customers. Next slide, please. Let me now move more to the strategic and growth considerations for our downstream activities. AMG has chosen a new and game-changing approach for lithium in 2019. Admittedly, not really new, as Dr. Schimmelbusch already pointed out, since it established already in other industries, for example, in copper. I am noting here that Albemarle has just announced a so-called Mega-Flex facility in Chester County in South Carolina, which shows more or less the same concept as ours.
It should have 50,000 tons capacity at the end of the day. Today, most mining places do also have a production of battery-grade materials very close to it. This is how it traditionally has been built up in the last decades, especially most of the are still showing these plans. Now, in this context, there are coming along several issues. A: Realigning up to producing battery-grade materials requires a long breath and good financial backup to overcome the numerous technical and regulatory hurdles. Examples are legion. B: One mine feeds one plant, bears an intrinsic supply risk. Even for well-established productions like in the Atacama, it happens every couple of years with El Niño that you face heavy rains resulting into reduced production output. Last, point C: Shooting directly for battery-grade offtakes is risky, since such offtake agreements are always subject to successful qualification.
The time required to reach this battery-grade quality is very, very often underestimated. As pointed out already, we have hired over time a number of people in Frankfurt and Bitterfeld, around about 20 out of 45 today, having collected lithium experience across all boards of skills and professions and all aspects of the lithium business. This high level of lithium know-how distinguishes us from many other new lithium players around. Therefore, AMG has developed a lithium refinery concept. Basically, we will be able at one point to digest all different kinds of lithium feedstock, and we have established a network of tolling partners helping us in realizing such flexibility until we have built our own production. Already today, we could accept lithium sulfate or carbonate, hydroxide and get it converted into feedstock for our Module one. Very important point.
What AMG offers to partners is to enable their projects generating cash on an accelerated timeline through offering a robust, low-risk and long-term offtake, which is the base for getting a solid project financing. It also give an advantage to our clients at the end, since we significantly de-risk the lithium supply chain by being independent from only one lithium source. I will not go into details on this slide because it's a lot of little words here. Sure. Let me summarize. There is different possible for securing feedstock for further modules. I mean, Number one doesn't need any further explanation. That's AMG Brazil. You can tick this one off. Number two, interesting, although off-grade materials are an interesting aspect here. Materials which are out of spec and cannot be used in the cathode manufacturing process.
There will be tons of hydroxide produced which do not fulfill quality requirements and which cannot get absorbed by the relatively small technical-grade hydroxide market. You have to find a place where to get it rid. We just have an example of 200 tons of hydroxide sitting in a European port and degrading over time simply by picking up CO2. Points three and four, spodumene and lithium carbonate can get toll converted, as already pointed out. One huge and important factor is the ability of our refinery to digest lower grade materials coming from recycling of spent batteries. This is a little bit more down the road, but I would say that we are well prepared for helping the circular economy in lithium also here, because we can simply take the materials from these recycling activities.
Building a battery plant is, doesn't make sense in most cases from a volume and again, a technical risk point of view. Points five and six, strategic partners. I've pointed this out already a little bit. There are established lithium players with no production footprint in Europe today. For those, for example, a tolling arrangement can be attractive as well for us, and a fast track to realize sales and access the market in the European Union. The second category are We can significantly contribute by its knowhow and experience in reducing time to market. We are having already quite a lot of advanced discussions here with different projects worldwide. Each such a partnership can support the construction and operation of an additional module or even more, depending on the size of the resource. Next slide.
This slide is an attempt to summarize a truly complex matter, I apologize for it, and is supposed to illustrate to you the complexity of the lithium supply chain and how AMG is planning to handle it. It further explains why lithium will likely never be a commodity like copper, zinc or iron. Next slide. Leaving now the AMG specific sector and giving you some comments and views on the lithium market, we see it today in general. Dr. Schimmelbusch has already talked about the growth of EV and energy storage markets and what it means. Why Europe is focal point for our downstream business? There is now a cathode manufacturing footprint emerging in Europe, which was not the case in the past years.
It was a wide spot. Just to mention here again, EcoPro in Hungary or also Umicore in Poland. If you count all announced cathode capacity together, we can expect around 300,000 tons of lithium salt required by 2025 already for Europe. Being sited in Europe has advantages. Short distances for transport, quick delivery and substitution of materials, amongst others. The picture on the left shows the supply gap for Europe in 2030. Even if all announced European mining projects would get realized, there is a huge supply deficit in the order of magnitude of 300,000 tons. Europe needs to continue importing lithium, and we need to form strategic, sustainable partnerships with other countries and partners in order to support the market. Having support from governments and finance institutes like KfW is for sure a big plus here.
These are the reasons why we believe in our European setup. Remember, AMG is the first European lithium hydroxide battery-grade producer on European soil, and therefore the number one partner to be contacted on lithium in Europe. Next slide. Why lithium hydroxide? I need to keep this a bit short. High nickel cathode chemistries will show the strongest growth, spurred by the fast-growing demand in Europe and in North America. One needs these cathode materials for driving reach and power battery targets, something especially people in Europe and the U.S. request. Of course, this is nothing AMG can influence. At the end, each individual decides which type of car he buys. There is a lot of pros and cons for lithium iron phosphate and/or high nickel. You can have endless debate on this.
Even us striving to produce 100,000 tons of hydroxide per year in Bitterfeld, we do have the flexibility to change our view and our production footprint on the way. If market requires, we could also produce lithium carbonate battery grade. Next slide. Coming a little bit to the views on the current lithium salt price development, there is a lot to read in different journals and press releases. I mean, Dr. Schimmelbusch just shared his skepticism on reliability of long-term price forecasts and demand-supply curves. Let me share some of our thoughts on things happening around lithium prices right now. Generally, the music still plays almost exclusively in China today. Lithium carbonate, it's also a general statement, is much more prone to price reductions than hydroxide.
Reason for the latter one is the low cost of producing battery-grade carbonate from brine. Spodumene cannot compete with this. Therefore, you have the pricing flexibility for producers to push their material into the market. Especially the Chilean brine expansions end of last year and also this year might be showing this effect, might be one of the reasons why we have this prices declining right now. Some other reasons for the price situation in China for carbonate is that there are almost no long-term contracts in place, and that there are inventory reduction efforts going on along the whole value chain right now. Naturally, at the end, purchasers will restart buying only when they have to, and wait for the prices to fall further until the very last moment. On top of that, we have a slight increase of domestic carbonate production in China.
This is the mix of reasons why we believe in this development. Something which just came to our attention is that by end of June this year, in China, there will be it's not fairly new, but it's a new regulation from that point in time on, that combustion e-engines have to show 50% reduction in CO2. When you think about the car industry there, it's logical that they try to sell their old engine technology, maybe even at special offers. This could be also one good reason for why we see this dip in pricing at the moment. Hydroxide is following this trend slowly. Not to the extent in hydroxide, but slowly. There are two reasons.
One is the contracts for hydroxide are usually running longer, and once carbonate get cheap enough, you can produce hydroxide from carbonate. That's what we plan to do in Bitterfeld. Which will lead to an increased production on top of the spodumene-based one, and following then to a slight price correction. Logically, there should always be a premium for hydroxide, which again means that hydroxide is the sweeter spot to be at compared to carbonate. Given what I have just said, especially this Chinese regulation issue, prices might get back to a higher level again in the second half of the year once the market gets settled and back to regular conditions. Next slide. Finally, I wanted to give you some comments on our all-solid-state batteries activities.
We firmly believe, in line with industry experts, by the way, that in the next years, a new generation of battery technology will be rising. Namely, the solid-state battery. The chart here on the left shows you the expected EV growth, which we all know. The chart on the right, the portion of it applying to solid-state technology and resulting in a volume for solid electrolytes, which is the subject we are working on. Such new battery technology will come. It's already in the R&D labs and in small series at the OEM, especially in Asia. Since this technology is needed to achieve energy density targets, just to mention again, driving reach and charging time especially, and improved safety targets for batteries. We are working since 2018 on making materials available to this market on a commercial scale. Next slide. Again, apologies, it's getting technical now.
We are having a team of experts here in our laboratories, namely Frau Dr. Nickell, which you will have the chance to meet and talk to later during the lab tour. From talking to major developers of such solid-state batteries, we are convinced that sulfidic-based materials are the ultimate development target for this next generation of batteries. They simply provide the best set of properties. As you can see, we have two product groups in our portfolio today. One is a sulfidic precursor being produced from hydroxide battery grade. We are back integrated for this one also. The second one, the solid electrolyte, which will replace the environmentally problematic liquid electrolytes, and is produced by taking the precursor, the sulfate, and other chemicals like phosphorus pentasulfide.
This type of chemistry, and we call this in the chemical community World War II chemistry, and the natures of the reagents requires enormous focus on safety and safe handling on chemicals. This is definitely nothing you can do in a backyard somewhere. This portfolio is also backed up by a series of patents we have filed. For developing these kind of materials, you need to be able to speak the same language as the people at the customer end, and to be able to test the performance of your materials developed. A significant part of our laboratories is set up for exactly doing this. At the end, it is all about designing specific material properties in close exchange with the clients. Next slide. This slide shows you the customer base for us for solid-state materials.
Unsurprisingly, Japan and Korea are spearheading the market here. We are having collaborations with all significant solid-state battery technology players across the globe. Based on their expectations, we foresee a demand for our materials in the range of 6,000 tons per year by 2028 to be re-again reliably produced, maintaining quality standards and a safe production environment. Also, OEMs are an important part of the game here since they are at the end driving time to market for a new EV battery technology. Now my last slide. We have developed a roadmap for bringing on production capacity for precursors and solid-state electrolyte materials based on the market forecast and the customer's needs. Again, it's important to stress out here that this chemistry is delicate and requires careful step-by-step upscaling and learning in order to not end up a fiasco.
It would not be wise to immediately jump into building a 20,000 tons plant without having gathered experience through a regular, good old traditional chemical scale-up. Currently, we do basic engineering for a 100 metric tons per year demonstration plant exactly for this reason, and this plant will be built here in Höchst. After some time of collecting experience and operational know-how, we will invest in the next step, and if market requires, into a commercial plant, which from today's point of view, will be producing some time in 2028. I'm now at the end of my part, and Volker, sorry for waiting so long. I think now the stage is yours.
Shall I keep it running? Just the next slide, please step in. Okay. LIVA is active in the B2B market for stationary large-scale energy storage. The fluctuating power supply, we are integrating and shifting unsteady renewable energies, namely from solar and wind. How are we doing this? We have a technical approach, a concept called a hybrid energy storage system. We take in high power unit, where we mostly use a lithium-ion battery or even a supercapacitor, and we combine this high power unit with a mass energy storage unit. Here we use a vanadium-based redox flow technology. We combine those units with a sophisticated software solution driven by artificial intelligence. We create a kind of an artificial virtual battery.
The software also control further energy assets on the supply and then the demand side of energy, like Power-to-Gas, Power-to-Heat facilities, for producing hydrogen, oxygen, even process heat and cooling or compressed air. Also part of the strategy is that we have an environmental friendly battery. We have a low carbon footprint of the energy storage system. We have green mining strategy I will explain. We do not use any problematic raw material, and we have fully closed recycling. Next, please. Here on the left side, you can... Just a few words to the technical advantage in the battery of our hybrid energy storage system.
Here on the left side, you can see that's a performance profile of a virtual HESS compared to standalone, lithium battery and redox-flow battery technology. What you can see here with the red and the orange line is one technology is not better than the other. It's just different. That's exactly our approach. We use the respective advantage of a technology, the key performance indicators. Also partly we heal the disadvantage of a battery technology. When we improve the properties of the battery, starting from that we could increase the spectrum of application. We could achieve a broader range of industrial application and grid scale application. We could optimal use those KPIs. We increased the overall system efficiency to power supply and energy storage. Also, we could improve the safety.
We have an increased reliability, we could achieve an availability of more than 99.9%. That is very crucial for an industrial application. Also we have a long lifetime of the batteries of up to 20 years and more than 20,000 full cycles charging and discharging of the batteries. Using those as total cost of ownership or Levelized Cost of Storage, it's the same concept. It means we calculate the real cost of each kilowatt hour charged and discharged with the battery or each used kilowatt of power used with the battery. We have the lowest carbon footprint at life cycle. Here's, you can see the application of our HESS systems. We have energy application, and we have power application. With our HESS, we have both. We can do both.
On the side of the energy application, we have the so-called prosumers. That means we produce renewable energies from solar and wind, produced solar and wind energy locally. Optimize the self-consumption and the self-sufficiency. In doing so, we could reduce the carbon footprint by up to replacement of fossil fuel-driven gen sets. We could reduce the electricity cost by more than half and reduce the power grid cost by up to 80% by doing peak shaving and power quality improvement, namely frequency containment. It's a long word, but basically it's all the same concept. We have a fluctuating power demand of electricity when we are flattening those curves. We bring the supply side and the demand side together. We match them. This is actually what we are doing.
We use the system for the power supply with black starting capabilities, which is crucial also for industrial applications. We see new applications like for electric vehicle infrastructure. We integrate renewable energies in the infrastructure. We inter capabilities and we see rising potential for opportunity charging and discharging. We make up electricity. Next, please. Here you can see the markets behind those applications. We could be on the supply side and the demand side. On the demand side we see energy intensive industries like the heavy industry, the metallurgical sector, like the AMG groups. AMG is basically our first priority customer. Metalworking, chemicals, automotive, aerospace, glass, ceramics and papers, all where we use a lot of energy. We consume a lot of electricity. We have a large carbon footprint.
On the supply side we can be behind the meter on or on the grid side, in front of the meter. Behind the meter also we see energy intensive industries, ties in the field of mining exploration. Facilities where you're not directly connected to the national power grid. On the grid side, we see markets in the field of electricity infrastructure like utilities, transportation grid operators, local electricity suppliers, even cities and community. They invest in infrastructure like charging station. I hope so. We see investors, private investors, private equity investors in the field, in the focus of infrastructure and private public partnership investors. Okay, next one. Here are some roots to the value chain.
As you know, LIVA is part of AMG, and we strictly focus on our core competence. It's this blue area here. The nucleus of LIVA is software. We have the software to simulate those facilities with all the batteries and the energy assets. We have the software to control those plants. We have the software for monitoring for grid application. Also here on the right side, as we are part of AMG, we with AMG Engineering, we have an access to a large pool of engineers. We build those batteries here in Germany. We assembly them here locally in Germany, and we have a very close strategic partnership with global suppliers of all key relevant components. Anything else, any standard parts and components we source globally, worldwide. Okay.
Also as crucial is that we produce in-house our own electrolyte here in Germany, in Nürnberg. With it also the active material that's a vanadium salt, vanadium pentoxide, and also the vanadium itself we produce within the AMG Group. We receive the vanadium not from a classical mining process. Instead, we harvest different process of spent catalyst and gasification ash from the petrochemical industries, from the oil and gas industry. Why we're doing this, we see a cost benefit. Other hand, we could achieve a much lower carbon footprint, reduce by up to 80%. This is part of our core strategy within AMG. Just a few words. That's a brief overview of our current projects, starting with Hauzenberg, that's our running system.
With AMG Graphite, it's a 3.5 MWh system. We use it for peak shaving and emergency power supply. Currently, we make an upgrade on the system. We install large solar battery for energy shifting, and also for grid service, for frequency control, containment reserve. Under construction there is in the southwest of Germany, in Kaiserslautern, we have a customer. It's a 4.0 MWh system. Interesting is that they have already a large solar plant, and they have an existing geothermal power plant, and they intend to install windmills. Here we use then the system for energy shifting, for peak shaving, and also for grid service.
We have a couple of internal projects with AMG Titanium in Nuremberg, AMG Chrome in the U.K., AMG Vanadium, where they recycle those spent catalyst, United States, and they use the systems for peak shaving, for energy shifting, for grid service, and for emergency power supply. There's a very interesting project. It's a really large scale project. It's a customer, they produce electric steel. It's a pretty large system. It's a 28 MWh lithium battery combined with a more than 80 MWh vanadium redox flow battery. We use then the battery for peak shaving. We could reduce the grid cost by up to 80%.
We replace the existing diesel gen sets, so we use it also for emergency power supply, and also for grid service. Very innovative is that we also integrate a very large Power-to-Gas facility, electrolyzing plant. We produce large amount of oxygen and hydrogen. The oxygen then is used in the large Electric Arc Furnace to put out the carbon impurities. The hydrogen is used for a reheat treatment process and also to fill unmanned transportation vehicles driven with fuel cells.
That's very, an innovative project. Okay. That's it. That's an impression. That's a four MWh project in Kaiserslautern. You can see in the front, that's all the energy to power converters, the six-inch stack cabinet units. In the back, you can see that's the energy filled with, the tanks filled with electrolyte. On the left side, you can see the high power unit, the lithium-ion batteries, with the power electronics. That is how it looks like. Thank you.
Thank you very much, Volker. It was exhaustive presentations. I'm sure there will be questions. If you just simply... Do we have microphones? Yeah. There's a gentleman here and then here.
Good morning, Martijn Drijver , ABN AMRO. You mentioned when you talked about the medium term, five trains up and running, EUR 5 billion in sales, profitability at healthy levels under all market circumstances. You've also provided the insight in the production cost for the Brazilian converter plants. To judge whether you can actually be profitable under all market circumstances, it would be worthwhile if you could give something of a range of the production cost of the German conversion plant in Bitterfeld, as that would play a major role, and also the tolling agreement that you have, if there had been binding agreements. That would be question one.
Can you, I don't know whether I got it. Are you talking about the conversion costs of the carbonate plant in Brazil, the estimated conversion costs of the carbonate plant in Brazil?
No.
Of the conversion costs of the German refinery?
That is correct. Specifically, the German refinery plants and also the tolling agreement for which you have a binding agreement in place, so that we have a picture, we can form a picture of the overall profitability.
Well, we do not disclose contracts with customers, tolling contracts.
This is not with customer contracts, this is your own production cost.
Yeah, look, are we talking about the tolling agreement or?
Both.
Why don't you comment on conversion costs of the refinery in Germany, generally?
I mean, A, it's not even started up, right? It's a conversion cost model. If you want to compare it with other things which are out there already,
it's simply not possible because such a plant does not exist.
When I give you now a cost, it's only a portion of what you can see in other places, right? We are foreseeing something in the range of high digit three, or three-digited numbers in dollars per ton.
You say something, say a number.
Something between $800 and $1,000.
Dollars per ton?
Yeah.
$800,000 per ton.
Eight hundred-
800-1,000.
$800-$1,000 per ton.
Not 8,000. 800 to 1,000. Okay, that's the one thing, carbonate in Brazil conversion costs.
Yeah, I think that was in the presentation. Again, it's an early stage. It's a FEL 3 for the carbonate plant. We are quite comfortable to state that the carbonate will be out of Brazil for less than $10,000 per ton of carbonate to the plant in Germany. The raw material cost of Germany in this carbonate from Brazil will be $10,000 per ton. The difference between that plus the conversion costs, is then will make the profit to the, to the market price of the particular product.
That is after 2026, but prior to 2026, you still have that tolling agreement.
Either we're talking about the tolling agreement or we're talking about later on the carbonate plant in Brazil.
You-
about the tolling agreement, we cannot unfortunately tell you what that is.
Okay.
because it is subject to non-disclosure, disclosure agreements, obviously.
Got it.
Okay. There was a question over here that. We do the, you know, let me do the ranking here, yeah? That guy was second.
Can you hear me? Okay. Stijn Demeester, ING. Thank you for the extensive presentation and for taking my questions. Three questions, if I may. The first one is indeed Martijn's question. I think it would be helpful to return to the slide with the yellow bars on the net hydroxide margin to give some comfort on the minimum profitability of the early-stage refinery, where you have the tolling agreement in place, to give some idea on what we could expect in the 1st phase of the development. The second question is... So just to get some color on what you see as minimum profitability or what we could, like, model for 2024 when it's still in this early phase whereby you have all the tolling agreements in place. The second question is maybe more for Mr. Scherer.
I'd like to hear your thoughts on sort of recent news flow on novel technologies and sodium-ion in China, bottom end of the market, and whether this could present sort of a risk to the developing lithium supply chain globally. The third question is also near term. That's on the pricing structure. Today, your contract in Brazil tracks Chinese lithium carbonate prices, which as we've seen, are very volatile. Would you consider moving to different contract structure, more long-term, to reduce that volatility in your P&L? Would you stick with the current setup and accept the volatility, which has large upside, as we've seen last year, but potentially also some downside? These are my three questions to start with.
As regard to, the profitability of the refinery, depending on prices and a lot of other things, our scenario planning has a range of $60 million-$200 million per module.
Yeah.
That has a lot of assumptions behind him, and of course, the $200 million reflect a price of $70,000 up, and the $60 million is the conversion, is the spread. The spread, the spread of $3,000, which is a very, very established spread, times 20,000 tons gives $60 million.
That $3,000, that is the difference between technical grade, battery grade, minus the cost of production at your end. This directly translates into-
That's correct.
Okay. That's very helpful. I think that is what also-
That's correct.
Martin was after. Then the potential, given that diverging spread, is quite substantial.
Yes.
Indeed. Okay. Thank you.
The second question was?
sodium-ion.
Sodium-ion. Well, sodium-ion is not really new. CATL is basically promoting this technology in China. Sodium-ion, for sure, has not the performance criteria or cannot fulfill the performance criteria of a lithium-ion battery. Now having said this, for passenger EVs, I think it is unlikely that you will see this. It's, it has not proven in a small, even in a small series of batteries that it's actually usable. I think CATL has announced it's working on this some time last year or even two years ago, since then, you haven't heard anything new about it. It's kind of a sleeping beauty, I would call it. I mean, you never know. Maybe there is some niche applications markets where size and weight doesn't matter.
Again, giving the chemical and physical properties of lithium-ion for small compact applications like you need in a passenger car, lithium-ion, in my view, is the only mass market technology. At the end of the day, OEMs of this world do not tend to change their technology platforms every two years. Once they are set for lithium-ion, it will take a lot of time to make them changing their mind and maybe investing in another battery platform, which still has to show that it can deliver. You know, from time to times, you have these technologies bumping up, and you have to just take a hammer and get them done again. E-fuels is now a new one, right? Extremely high cost. CO2 reduction is one thing. NOx is the other thing.
When you have been in China, you know what I mean, right? When you walk through a yellowish fog through the streets. It's extremely expensive. It's just using masses of electricity for producing a synthetic fuel, which is also not new. It has been established, what was this? 100 years ago already.
What's the price formula?
That's a little bit on technologies.
As regard to the third question, price formulas, there is always a philosophy difference between spot pricing and long-term pricing. In, in the, in the long-term pricing, you tend to have a formula mixing several components. In our long-term pricing, we have mixed the certain components, estimating or drawing on the profitability of the customer and mixing the profitability with the customer on a theoretical on a negotiated basis of negotiated parameters with spot prices. You're never correct. There are times when the spot prices would have been better, especially in very high price situations where Pilbara gets auction prices, which are, of course, above the general index prices and is benefiting from that. We have always done a very conservative mixture of prices negotiated with our...
peacefully negotiated with our customers. As I said, you're never correct. In low price scenarios, we benefit. In high price scenarios and very high price scenarios, we give something up. It's a trade-off. We are still optimizing these things, and right now we are entering, of course, throughout the value chain, through a lot of co-contracts, and we are learning here. That are the basic philosophies. There was a question here.
Yeah, go to Who's next?
Shall I start?
No, no, that you're third, and then you're four.
Good. Yes, just to follow on from two questions. One follow on from the pricing question. You sounded very confident that prices actually may go up again in the second half of the year once these particular Chinese issues-
No, no, no. We don't do confidence here. The future is the future. We are not confident or not confident about the future. It's very different. We are low-cost producer.
Yeah.
That's important.
That wasn't my question. I know it's.
We are making money. There's a base. Our focus in this whole thing, in each element and in the total value chain, is we want to be the low-cost producer. That then stabilizes our profitability forecast. Now, let's confidence. Let's try to do something confident. I said that all the forecasts of, for example, Benchmark or Wood Mackenzie or people like that, show a slight of the lithium prices medium and long term, very steady. They also show a production deficit in 2030 of considerable lithium. You get a book of 40 pages in Benchmark, and in this book you read that the price will go down, and then you read about a substantial production deficit in the end of 2030.
It cannot be true, because if that production deficit is the case, then people will buy, and therefore the price will correct itself. I think it is very difficult to do these forecasts, and we will have to do it because it's analytically and otherwise very complex. We believe in a delay and a delay and a complex road towards additional production.
That delay will be cementing the intrinsic. It will be volatile, but there will be an intrinsic lack of production, because it's easier to build a cathode plant or a gigafactory than to build a mine. The difference between building times of a mine. A mine you have to do five-10 years, and then you have a mine. A plant, a conversion plant, two-three years. I think we are living in a time. It will be volatile, but there will be a scarcity of supply as a major issue of this industry.
I'd agree with that. I'm just looking just to this year in terms of how your pricing works compared to the spot market. You're looking from a bit this current level of weakness potentially to recover. Other forecasters suggesting that lithium prices may go down to $30,000 a ton before recovering again. How in that type of environment, how does your revenue fluctuate with lithium pricing? Let's say lithium pricing goes up and down.
What you're asking.
Yeah.
is what will be the first quarter of AMG.
I'm asking what the second-
I, I-
No.
I tell you it will be okay.
Yeah. That's not what I-
I can't tell you what it will be.
Okay.
We don't want to do guidance of on a quarterly basis.
My question is how does the revenue received relate to the fluctuations in spot? How much have you got locked in at fixed prices versus how much have you got-
Well, there's a certain time lag.
Yeah.
involved, but we are not disclosing what the time lag is. You have to wait until the first quarter, and then you have to wait until the second quarter. I think you can simulate. Once you have those two numbers, you can pretty well simulate what the time lag is by which these price formulas kick in.
Okay.
We started well, I said, you know. It's a very important statement for the.
We start very well.
Yeah. Very, very good. Fortunately, that is not quantified. Okay, we have here a gentleman.
Frank Gengs from Deutsche Bank. I have two questions. First, regarding the hybrid energy system. What is the potential? How do you develop the business until the end of the decade, partnering? Second question, I missed some comments regarding your 25% participation in the mine in Eastern Germany. What your ideas regarding this new site?
Okay. The first one is the question of the pot-market potential of the LIVA battery?
Yeah.
Well, we are, as has been said, we are right now in the business of building batteries for urgent use in our own plants. We have a few customers outside, and all these plants are under construction in our own engineering capabilities, and they are very profitable. For example, there's a huge potential of solar roof installations which has not been done in plants. It has been done in Bavaria on the farmhouses, but it has not been done in the production plants because it doesn't pay. You have to then make a contract with the utility and sell to the utility the intermittent electricity production from the rooftop, and this is not profitable. However, when you have a battery in-house, then you create an internal grid. You produce...
You feed the grid by the solar roof, you reduce the electricity imports from the utility, therefore you can apply the electricity price to that calculation, the higher the electricity price, the more the money you make on your solar rooftop. That's a very interesting mechanism because it is very, very green. It enhances, so the high electricity price enhances the rooftop in the industry. For that, you need a battery for that. The battery in industrial applications has to be fast, instant availability. That's where we add to the peak shaving, the solar application. Our demonstration customers then have a mix of uses, the central idea is to create your own grid within the plant and manage the electricity streams within your plant as an internal grid, that's the attraction of this.
You reduce your electricity consumption. We are now using those batteries as demonstration plants and building a marketing system. The key competitor is the diesel engine. The diesel engine is our competitor. It sounds good to me, you know, a diesel engine as a competitor.
We have a Geschäftsführer in, in this graphite plant who happily came and said, "We will reduce our electricity cost by flattening the volatility, and therefore, we will reduce the penalties which we have to pay to the, to the utilities." We said, "Now, how will you do that?" They said, "We have an offer for a diesel engine." We said, "Well, a diesel engine doesn't fit very well into our sustainability report." If we announce that we now have a great idea, namely to burn diesel in order to-- but AMG is not made for that. That's was the origin of the, this LIVA battery, idea, and it's spreading very fast. Another application which is very interesting is for grid management.
We are working on several large projects for grid management, where large entities, take an airport or take a, want to have their own grid for grid management purposes to optimize their grid management. That is then batteries in the neighborhood of 50-100 MWh capacity or a $100 million investment. We are talking about, this will be a separate market.
The industrial market is the first market, and it's very widespread in its applications. In one of our own plants, we are installing a solar-supported, as a rooftop solar, we are do peak shaving, but also applied for solar. We, in this plant, also produce clean energy because we import hydrogen in that plant, and we buy hydrogen, and we want to produce now our own hydrogen from solar energy on the rooftop. There are incredible where they are, variability of applications. The other question was?
Around the 25 participation, % participation in Eastern Germany, is it your mine?
We have a project. You mean Zinnwald? Yeah, Zinnwald is the one and only lithium property in Germany when you disregard geothermal ideas from water. This is very complex projects. We wish everybody luck from that. The deep water geothermal lithium projects are futuristic ideas. We will see what happens. This lithium project in East Germany is very old, has been mined, has a considerable reserve to be mined, and has an ore body which reaches into Czech Republic under the order. It's one-third in Germany, two-thirds in Czech Republic. The Czech Republic portion is owned by the utility, ČEZ, called ČEZ, 51% and 49% by an Australian junior.
The German part is owned by a London-based, London-listed junior company, in which we took a significant minority stake. The rationale for this minority stake is to be combining our know-how in an optimal solution. There are various alternatives. The one alternative is to develop the German part separately. The second alternative is to develop the German part in conjunction with the Czech Republic part, which has implications for where to put the plant. The chemically upgrading plant, either in Germany or there. The third one is to start with the German plant and then make it in such a way that you can combine it later on with the Czech plant. That all is a beginning thing. We have a very definitive idea what the optimal solution is.
We believe in rationality, because the difference, economic difference of these various alternatives is very significant. We will convince everybody, as we are optimistic people, that our ideas will then be implemented. If they are implemented, we will feed one or two modules from Germany and from Czech Republic, modules in Bitterfeld.
What's the timeline?
We cannot say because we first have to convince everybody that our ideas are the, are the best ones. You know, convincing process is a combination of technical arguments, patience, and many things. We are entering that process, you know.
To follow up on that question, convincing the shareholders of the junior miner, would that include potentially also making a bid for the whole company? Is that one of the strategic options you could consider?
That hasn't crossed our mind.
Okay. Just to follow up on the flexibility of the German conversion plants. You mentioned it might require some investments to make it agnostic. You mentioned recycling, lithium carbonate. What kind of investments are we talking about to do that, roughly?
I don't want to answer for Dr. Scherer. In my view, the critical quality of the German refinery will be modeled after the successful customs melters in the metal industry. The biggest example here in Germany is Aurubis in Hamburg, conventionally called Norddeutsche Affinerie, of which I had the privilege of being chairman for a long time. Aurubis in Hamburg is, I think, the largest copper smelter in the world, and is highly successful in a higher costs, in a high-cost location. Why? Because they can take any copper-containing material, all sorts of scrap, including electronics scrap, copper concentrates in what high arsenic copper concentrates, low arsenic copper, any... The German word is Allesfresser. Of course, you have a wide variety of optionality.
When Dr. Scherer says agnostic. That is our intention. We want to be able to take, efficiently, all sorts of lithium-containing raw materials. As said, there will be low-quality materials, there will be starting production, there will be off-grade materials, there will be recycling. We are investing in this. Of course, you have to be technically capable of doing it, and that requires investments up front. We are going through that. It was mentioned, you mentioned $80 million for-
The carbonate to hydroxide.
Of being able to tap into the carbonate market worldwide. We see when we travel around even in Messen.
Exhibitions.
In exhibitions, in lithium exhibitions, you are being offered carbonate. The carbonate market seems to be a very liquid market relative to in the present times. I also said that the liquidity, not liquidity in financial terms, the liquidity in these markets along the value chain will be highly different over time. Mimicking what happened to, for example, the. The good thing about me is, you know, I have been several generations in that industry. I've been watching the aluminum industry. The liquidity in the aluminum industry for alumina and for various grades of aluminum was highly different in the development phase of that industry. That will replay itself. There is a large new producer coming on stream with spodumene. There will be a spodumene overcapacity for a moment, and then there will be.
That will happen to all these stages. The liquidity will be very variable. We want to be completely able the maximum flexibility to benefit from that different liquidities in the different markets: carbonate, technical-grade hydroxide, technical carbonate, spodumene, and interim products.
My final question is on a follow-up on that point of Mr. Gensch. If you look at the LIVA opportunity and also your solid-state, what kind of opportunity do you see there? Should we think about that as The LIVA plus the solid-state activities, should we see that as a $100 million plus activity, or how should we view that?
The LIVA?
Yeah.
It's too early to tell.
LIVA for solid state. Solid state and LIVA, you know.
The solid state doesn't have anything to do with LIVA.
No, I know, it's two projects that you.
Oh, two questions.
eventually to generate revenue with.
In both questions I can. Look, don't you understand? We are early stage. In early stage, it's not very, it's not very prudent to make quantitative. You only can say that what we see is a substantial amount. Now, you can say, what is the size of the diesel engine market in the world for industrial applications? I don't know. I heard that it's between $50 billion and $100 billion a year. We are competing against industrial diesel engine applications.
Thank you.
Also, we rely on proven technologies because we go in the industrial sector, this is very important to us that we have the availability of the system. With a new technology, that's a huge risk for us and for the customers. What happen in the future, we don't know. We use the lithium battery for in high power unit, if the properties are good using a solid-state battery, we easily could change them. That's far in the future.
I'm also thinking about grid management applications in a very different way. You know, in Germany, for example, the energy storage in Germany, electricity storage, rested 99% on hydropower and Pumpspeicherkraftwerke. The Pumpspeicherkraftwerke are living off availability of low-cost electricity in the evening because the coal-fired power plants and the nuclear power plants are, in the evening, trying to sell their electricity low cost. You pump it up from a lower lake to a higher lake. In the morning, when the industry starts again, happily, you need electricity, and then you let it down to the lower lake through a flow power plant. 99% of energy storage was Pumpspeicherkraftwerke in Germany. The problem is it doesn't work anymore because in the evening the nuclear is closing, the coal fire is really not in the...
Now the low-cost electricity availability in the medium term, long term, in the evening is not there. It doesn't make sense. In the evening you need a lot of charging of e-cars. Now in the evening, there is no low cost, and therefore, in the morning, when you let it down, the sun is shining, and there is no good market for. In both sides, Pumpspeicherkraftwerke are not something you should invest in. Nobody is investing, by the way. Therefore, we have a Speicher problem. The Speicher problem, however, in Germany has an automatic correctional because you import from France or from Czech Republic, or it's a connected system.
In countries where the grid is not connected to enabling saving box, enabling reserve, the grid management is of central importance. It is more complicated daily because as these countries add solar energy and intermittent energy, the grid management problem becomes more and more acute. We have found such a grid management situation where the utility has abandoned the expansion into solar and wind over and above a certain degree because of the grid management problems. That's an ideal customer for large-scale grid management backup. Of course, in grid management, you need instant availability of the electricity because the basic task of a grid manager is to match a large number of suppliers with a large number of customers, and nobody is forced to shut down.
That, of course, is a very precise situation, and a battery is the necessity answer to make that job efficient. I think energy, electricity is. I've studied this for a long time. Electricity storage is the biggest overlooked success criterium for renewable energy, logically. That is, of course, now everybody knows that. Since the Pumpspeicherkraftwerke as a national thing, as a standard solution doesn't work anymore. Battery solutions are necessary. Elon Musk, for example, has built a lithium battery in Australia for such stationary applications. It's, of course, extremely expensive, and it's the one and only. I don't think there's another one. The vanadium battery has this enormous advantage of being cheaper, much more, much more cost-effective.
However, it is a, you know, when you look at the one picture, you saw the tankage. You know, when you see a tankage, there are pipes, and there's electrolytes, and it's going through pipes, and there's. The vanadium battery is a little lazy to come up to stream. It takes time, one minute or two or three. You need instant reactability. That's where lithium comes in. Expensive, but instant. Milliseconds. The combination has enormous advantages.
I do wanna thank everyone for your questions. We can ask more questions during the lunch, but we do need to start the lab tours now. Everyone with a green tag on their name tag will be first for the lab tour, and I thank everybody for your kind attention and your questions.
By the way, I come back to my initial advice. We have goulash soup, and we have Viennese sausages. I have done great efforts to convince the host here to try to upgrade the quality of those sausages since I come from Vienna.