Status Update

Mar 15, 2019

Good morning, ladies and gentlemen, and thank you for standing by. Welcome to today's Sector Corp. PGS Conference. I must advise you that this conference is being recorded today, 15th March, 2019. I would now like to hand over our conference over to your speaker today, Martin Dan Woody. Please go ahead, sir. Thank you, Nadia. Good morning, everyone. I'm Martin Dunworthy, the Director of Investor Relations at Johnson Matthews, and I'd like to welcome you all to our call today. This is the latest in our series of calls to give you more detail on our sectors and our strategy to deliver sustained growth and value creation. As usual, we will not be giving a trading update as part of this call. I'm pleased today to welcome Jane Toogood, Chief Executive for our efficient Natural Resources Sector and Mark Bedford, Managing Director of Platinum Group Metal Services, a subsector of efficient natural resources, and that will be the subject of today's call. With that, I'll hand over to Jane. Thank you, Martin and thank you all for joining the call today. As you may recall, this time last year, I spoke to you about our efficient natural resources sector, which helps our customers more efficiently use, transform and transfer SKESS net resources across a range of industries. Today, we're going to talk about how Platinum Group Metalservices or PGMS delivers on those objectives. I'll start by giving you an insight into the importance of plasma group metals to JM. Market dynamics and why we have a strong competitive advantage before Mark talks more about our services. I'll then conclude before opening up to Q And A. Hopefully, you can see all the slides on the webcast and you can navigate through these yourselves as we talk. So turning now to For GM, JMs being a world leader in Platinum Group Chemistry for decades. Our competitive advantage is underpinned by our unique debt of knowledge and understanding of platinum group metals or PGMs for short. And that stems from our 200 year history, the foundation of which was our gold Appaying business, formed by Percival Norton Johnson in 2017. Fast forwarding today, assaying is still a critical part of PGMS. But we're much more than that. We're a world class technology company, and our expertise in PGMs has been pivotal in making us the company we are today. So for those of you who are less familiar with platinum group metals, let me start by giving you a brief reminder of what they are and why they're important to us. There are 6 platinum group metals platinum, palladium, rhodium, rhodium, iridium and Osmium. GM refined all six metals and we use all of them with the exception of Osmium. Platinum Group Metals have a number of unique properties, which include high conductivity, high melting points and unique catalytic properties which means the metals are unchanged by the reactions they capitalize. These properties make PGMs extremely valuable for use in wide range of consumer and industrial products. For example, in automotives, jewelry products, glass, pharmaceuticals, healthcare, and in many electronic devices, including mobile phones and computers. In fact, between 2030% of all modern materials did end on in some way on PGMs for their production. In terms of the uses of platinum group metals within our sectors today, In efficient natural resources, we use PGMs in our Catalysts Technologies business to manufacture Catalysts, which are customers use in the production of a range of bulk chemicals, such as oxal alcohols and petrochemicals. In Clean Air, PGMs are used in metal salts, which we use to make wash coats. These wash coats are then applied to substrates for the production of water catalyst. In health, PGMs were the foundation of this business, and today they're still used in oncology drugs, including cisplatin and carboplatin. Within new markets, we fabricate precious metal wire and tubing used in the production of medical devices, including cochlear implants, catheters and stents. And over the longer term, there will be additional opportunities that will leverage the competencies we've developed in precious metals, and I'll touch on this later on. The diversity of these applications illustrates the importance of platinum group metals. Their special properties make them hugely valuable across many key global markets. However, supply of these precious metals is scarce, I'll talk more about the supply and demand dynamics on Slide 4. Let me move to the next slide. In terms of primary supply, areas known to be rich in PGMs include South Africa and Russia. However, supply of PGMs from primary sources is declining as mining becomes more difficult and capital intensive. In fact, we hit peak platinum supply over a decade ago. In terms of other key PGMs, palladium and rhodium, the palladium market is is currently exceptionally tight as the market is in structural deficit, and we don't see an end to this tightness in the near term. By contrast, rhodium is a small illiquid mid market and any short term misalignment between supply and demand can have significant consequences for price and physical availability. We expect that demand for both platinum and palladium will rise over the next 5 to 10 years, demand for palladium, rising faster than the platinum. The main driver for demand is the adoption of stricter emissions legislation, particularly in China, where palladium demand for auto catalysts could double in the next decade. All of these dynamics mean that whilst supplier PGMs from secondary sources is already important, it will become even more so as this primary supply declines. So to put some numbers around this, It's been estimated that over the next decade, the proportion of PGMs coming from secondary recovered and recycled resources is going to increase from about 25 today to around 35% to 40%. And this is where JM comes in. As a global leader in secondary refining, we're well positioned to respond to these trends, which I'll talk more about over the next slide. So turning now to Slide 5. By way of a reminder and to help frame platinum group metal services in the context of the wide sector, We've previously said that we expect efficient natural resources to deliver market leading growth in the medium term. Specifically, sales increasing 1% above growth in the markets in which we operate, with the exception of PGMS, which will grow at low single digit over the medium term. PGMS represents around 1 quarter of efficient natural resources sector sales, around GBP 250 million in revenue, the split of which is roughly fifty-fifty between internal and external customers. We offer our customers a holistic service. We refine, we trade, and we hold metal, and we also fabricate precious metal products. Our customers trust us and have confidence in our ability to manage all of their metal needs. In addition, the nature of the PGMS business is such that it generally delivers a negative working capital and generates attractive returns above the group target. However, as we've talked about previously, we're currently experiencing working capital challenges due to unscheduled downtime that we had last year something I'll talk more about shortly. Strategic importance of this business. It provides a secure supply of PGMs for JM and our customers. And going forward, The biggest advantage is that as primary supply declines, we're well positioned to meet the needs of our internal and external customers from secondary sources. And this is why we're investing around 1,000,000 into our refining capabilities over the next 3 years, which is within our existing CapEx guidance. We're applying our science, technology and deep understanding of PGMs to improve the efficiency and resiliency of our refining efforts. We're adopting improved techniques within our In our US refinery, we've increased capacity by several 100,000 ounces. And in China, our capacity has increased by similar amounts, putting us in a strong position to ensure the security of supply in the region over the medium and long term and serve the expected demand increase we've mentioned. Once completed, our overall refining capacity would have increased between 20% 30% to over 5,000,000 ounces per annum. Our current capacity is adequate to service our internal needs and our investment technologies the need to improve the efficiency and resilience of our existing assets. It puts us in a strong position to be able to support the increased demand we anticipate over the next 5 to 10 years from both JN businesses and externally. Whilst it's difficult to predict PGN demand beyond 10 years, our capacity expansions are modular and flexible, we're able to quickly adapt and add to our existing capacity, mitigating the risk of stance stranded assets in the future in the event of demand falling. So before we talk more about our core activities within PGMS, I'll now spend some time discussing our competitive advantage on Slide 6. Slide 6 now JM is a world class technology company, and cutting edge science is at the heart of what we do. We have a spine of technology that runs through our sectors. And in PGMS, it's no different. We lead us in precious metal chemistry and with our deep understanding of the metallurgy of PGMs, we turn technology expertise into value for our customers. This expertise has enabled us to develop a suite of efficient processes for secondary fining and fabrication, some of which are proprietary to JM. And Mark will touch on what we do in fabrication as well later on. To give you an example of a key process, separating key PGMs is particularly challenging for refiners. So chemical similarities between elements that are close to each other on the periodic table, such as rhodium and iridium or platinum palladium, makes chemical separation very difficult. We apply appropriate techniques for specific AGM, and this enables us to refine to a market grade purity of over 99.95%. And of course, we continually look for ways to make our processes more efficient. We want to deliver better products more efficiently for JM and our customers. Our ability to turn science into value is driven by our deep understanding of our customers' needs So we are a trusted partner. And this trust has been built over many years, which makes it very hard to replicate. Many of our customers have been with us for over 50 years they come back to us time and time again because they know they're being treated fairly and they can trust us to accurately assay their materials. In PGMS, we managed platinum group metals through their life cycle of refining, purification, product manufacture and recycling, we have a large scale flexible offering. As the world's largest secondary refiner, a significant volumes 1,000,000,000 worth of nettles flowing through our refineries every year. We would estimate that we have more than double the capacity of our nearest competitor and a mark share in secondary PGM refining of around 40%. Our significant scale means we can offer an integrated service of precious metal management to our customers. We're essentially a one stop shop for our customers' metal needs. We can also deal with PGMs in many forms and our customers know that have flexibility to provide them with metal as and when they need it and in the desired form whether that's sponge, metal ingot, or grain. We can also supply metal in many different quantities from tiny amounts to multiple tons. In summary, Our unique combination of size and flexibility gives us a very strong position in the market. As I've described, PGMS has a huge strategic importance as it ensures an untrrupted supply of PGMs around a third of our metal for internal purposes, which our refining business. Our ability to manage our own metal circuit means we are largely protected from an over reliance on other market players and outside refiner and this is particularly important for Clean Air, PGMS' largest internal customer. PGMS ensures Clean Air has a reliable cost effective source and raw materials. This is essential for the operational efficiency of this business, particularly at the moment, given Clean Air's strong growth that help to minimize supply chain risks. Ultimately, the role of PGMS goes beyond secure and sustainable source of critical raw materials and value added products to JM and our customers. Our recycling and refining business is 1 of successful examples of a circular economy. And in a world where we're seeing greater emphasis on circular supply chains, this is a real differentiator. Typical examples of products managed through a closed loop or circular economy include PGM gozes used in the nitric acid fertilizer industry. And platinum fabrications used in the manufacturer of glass. And longer term, our leadership and technology expertise in PGMS will support us in the development of some exciting opportunities, for example, in recycling of lithium ion batteries from cars. Although the metals involved are not PGMs, we can use the skills and competencies from our other metals recycling activities and apply them here. Refining and recycling is part of JM's DNA. And given the number of batteries that are likely be available for recycling. This will be an opportunity for the mid-2020s, and JM is evaluating now whether and how we should enter this market. I'll now hand over to Mark to talk through our specific activities within PGMS. Thanks, Shane, and good morning, everybody. Turning to Slide 7, there are 3 core activities within PGMS, which collectively provide the complete integrated service, offering to the customers, which Jane has described. Around 2 thirds of our sales come from Refining And Chemical Products. The recycling and refining of platinum group metals and the production of chemical compounds. Around 25% is our fabrication business, which is a fabrication of raw metal products for our own and our customers' use. And finally, the remainder is Precious Metals Management This business manages our metal trading activities on behalf of JN and their external customers. I'll now talk through these core businesses in more detail. So moving on to Slide 8 and starting with defining and chemical products, GM is a secondary refiner. So put simply, we refine metal that's already been used. Globally, we have 4 refining operations, These include our refineries in the U. S. And China as well as our UK refineries in Royston and Brimstown. We also use refined PGMs to produce various chemical compounds. We offer our customers a choice of around 200 chemical compounds ranging from simple platinum applied in nitrates to very complex organic metallic compounds. I'll now talk more We take scrap, which contains PGMs and generates refined metal in three forms ingots, grain, and sponge, Spund, which is a powder form of PGM metal, is the most common because it can easily be transformed into other products such as catalysts, There are 5 stages in the refining process and the first is the collection of scrap from various sources globally We work with a network of collectors and semi refiners who collect aggregate and sometimes transform some of the scraps into a form which is easier to transport. The scrap is packaged and it's sent to one of our refineries. The biggest single feed of scrap around 40% is from spent order catalysts. Other sources include spent catalysts reduces in the petrochemical sector from electronics scrap and also from jewelry scrap. We also receive scrapping internally from Johnson Matty. For example, if any auto catalyst doesn't meet our strict quality criteria, we will scrap and recycle stage, which is evaluation. Evaluation is a process of taking a representative sample from the bulk material which is then assayed to determine precious metal content. This is technically very challenging because of the need to isolate small samples of material, sometimes as small as 10 grams, which are representative of a bulk, which may be in excess of 100 tons. The materials for refining may contain 20 or separate 2030 separate elements requiring analysis to parts 1,000,000 level doing this right is important in building trust of relationships with our customers. Once the material's been evaluated, the scrap is combined into batches for smelting. In smelting, the material undergoes a high temperature fusion in which the material is melted at over 1200 C for around 12 hours. This produces a melt which consists of two layers, a flag containing mainly nonmetals and a billion containing the PGMs. Next, the billion goes on to a chemical leaching process This further concentrates the PGMs and removes any gold and silver. And that leads us to the final stage, the chemical separation of PGMs This is a highly complex multistage process that converts PGMs into their final form. Revenue in the refining industries generates from the service we provide. We have a service charge for refining the metal, which is independent of the metal price, Our job is always to recover as much metal as we can for the customer and we guarantee an amount to return. If we recover more than the contracted amount, then we may have a small metal gain, which is of course metal price dependent. Moving on then to Slide 10, which covers the fabrication part of our business. In this space, we provide a range of fabricated PGM products based on metal wires and sheets for numerous end markets. Our products, which are inert and have high strength, are unequaled in their resistance to corrosion from both the atmosphere and from chemicals. For example, we make PGNY, which is used in airbag initiators and gas sensors in cars. Our rhodium foils are applied within digital mammography scanners used in cancer screening. And we supply PGMs using a range of ignition products that have been developed by our expert metallurgists. The final activity within PGMS is Precious Metals Management Precious Metal Management comprises our metal trading activities, which because of our size and scale, means we act as a center of metal liquidity both for our internal and external customers. We're one of the largest players in the physical PGM market, with estimates around a third of global supply passes through our hands every year. The business is small in terms of sales, but strategically important because it underpins the entire PGMS business it also enables us to deliver a valuable service for our external customers. For example, we could hold metal on behalf of our customers and use that metal within our business or for our own purposes. This ups our working capital since we don't need to buy that metal ourselves. I will touch on this in further detail on the next slide. In addition, we can offer customers flexibility in terms of metal return for example, a customer who may have an outturn in the United States, continues to have metal returned in the United States or in the UK, The customer also has flexibility over the type of metal return, whether it be sponge, ingot, or on paper as a digital transfer. The breakthrough activities means that we have the capability and flexibility to meet all our customers' requirements. And with that, I'll now hand back to Jane. Okay. So turning to Slide 11. As I mentioned earlier, PGMS is strategically in It has unique competitive advantage, generates attractive returns and generally delivers negative working capital. Let me just now explain the working capital dynamics in more detail. When we refine metal, we're contractually obliged to return it to the customer on a specific date. If we refine the metal before the customer. Similar to the customer metal I referred to on the previous slide, this also reduces our working capital needs. However, as we've talked about previously, there were some challenges in the business as a result of the unscheduled downtime in our refineries last year. As a result of that downtime, we were unable to refine metal and return it in time to meet our contractual obligations. And because of the significant volume of metal flows through our refineries each week, around 1,000,000. This leads to what we call backlogs. As you know, these backlogs are also to increases in metal prices that you've seen for some time now. Of course, we can always improve the efficiency and resiliency of our refineries, and we're investing for exactly that But we believe we have a business that's adequately sized. And therefore, as a consequence, it takes time to work through the backlogs. As a result, in order to meet our customer obligations, we either buy or lease metal to return to them. If we buy metal, this increases our working capital And if we lease metal, this impacts our interest costs. For those customers that leave metal with us, high lease rates, which we're currently seeing, can lead to change in customer behavior. For example, customers are encouraged to reduce the metal balances they hold with us and lease it into the market turn a return on that metal. This in turn increases our working capital requirements. The UK's withdrawal from the European Union has all had some effect. We've been working closely with both our customers and suppliers for some time and have been building inventory so we can continue to serve all of our customers effectively no matter what the outcome. As we said before, we anticipate that over time the backlogs will reduce, and we'll update you on that when we get the full year results in May. So to conclude on Slide 12, GMS is a great business for JMP. In our field, we are the market leader in terms of technology and scale. It's a business that generates attractive returns, which should be beneficial for our working capital. And our expertise, technology and competences underpinned the wider group and are crucial to our future success. Our global brand is built on a strong heritage, and we're excited about our opportunities, which I look forward to updating you on in the future. I hope that's been helpful. And with that, we're happy to take questions. Thank you. The first question comes from the line of Charlie Webb from Morgan Stanley. Please ask your question. Hi, there guys. Just one for me around your comments you made on battery recycling. Just perhaps you can help us, what expertise can you take from your business that would differentiate you in that market? What type of returns do you think such a business could do, is there other high barriers entry or not? And what size of investment would be required for mid-2020s? Should you decide to go down that route? Okay. Thanks for the question. It's probably a little bit early to answer some of those questions. So let me give you a little bit of and I'll go down the list there. So in terms of expertise, I mean, clearly, we've got really deep knowledge of metallurgy of chemical separation of metals we're brilliant to that. So this is very relevant in the context of recycling metals. In terms of the market, I mean, you said there about mid-20s, which I talked about in there. If you look at battery materials and what's going to happen in that market, it's going to be some years yet, before that market is really growing significantly. So at this stage, we're really evaluating that opportunity. So in terms of the of your other questions, it's a bit early to make any further comments on that. The next question comes from the line of Neil Taylor from Rouburn. Please ask your question. Yes, good morning. Thank you. One question on the fabrication business, please. The expertise that you hold in, metals handling and processing that that's, I suppose, given rise to that business. And how do you value that IP, in relation to the value of the metal? I suppose question is if metals prices were to be either lower or higher longer term, particularly if they're lower, And does that undermine your expertise, or do you think lower metals prices would conversely perhaps open up further fabrication opportunities for the business? You think you're on a sort of 5 to 10 year view from here? Question actually. And we'll see how we do with that. I mean, basically, yeah, the expertise is very much in metal hand processing. It's our real competitive advantage. And actually, including our name, I mean, we offer a service in producing or fabricating products from this. In a sense, I mean, these metal prices move, then obviously, that does change people's ability to use these metals in different applications, but fundamentally, we're well positioned irrespective of what goes on with the prices. Perhaps Mark, you'd like to add a couple of comments? Yes. I think one of the things we're thinking about in the fabrication business is we do have a range of products where they have perhaps rather low intrinsic metal ends, but very high added value. We mentioned earlier on in the call, something like an airbag initiate a wire. That is an incredibly fine wire, which is almost invisible, to the naked eye. You supply in kilometers and kilometers. It has a really very, very high added value, but quite a low intrinsic content. So in a way, the fabrication business, in particular, it's to some extent the revenue and the value we derive from it is rather independent of the metal price because the intrinsic metal content of these products can be quite low. Okay. Could I perhaps just follow-up in that case and ask you whether there are markets that you have, you've discovered recently or investments that you've made and that potentially would give rise to new markets for your expertise? I mean, if you look across, J. M, and we had a business in fuel cell, that's quite an interesting area that's growing at the moment and is a relatively early stage of developments as a relatively small base is quite, that's quite developing quite interestingly actually particularly in China in terms of that market I mean given the intrinsic properties of the metal, there will always be opportunities to use them in different things as science and technology develop. So I wouldn't want to comment on any specific opportunities, but if anyone's going to approach anyone, they'll approach JM about it because we're so really knowledgeable about this and because we offer this one stop shop approach. So we are we are always talking to people who are exploring ways of using these metals. Please, and Mark mentioned a few in his presentation. Perhaps you could just go a little bit further. Yes, I mean, there are new applications for PGMs coming along. I mean, I think a great example of something we have at the moment where, developing an ethylene scavenger which is based on a palladium catalyst. What this does is it essentially extends the shelf life of fresh fruit and vegetables on the shelves by, scavenging ethylene from packaging. This is an example of where our research Center came up with an excellent low temperature plating catalyst, and we applied it to what is a completely new field for this kind of catalysis. So these applications can come up from time to time and it's a case of leveraging our Catalysis knowledge to something which might, in this case, be completely new. The next question comes from the line of Tom Wriggowirth from Citi. Please ask your question. Hi, thank you. Thank you very much. A couple of questions for me, if I may, and forgive me because I had to jump off the call at one point. In terms of your refining and chemical products, how much of the sales there is directly related to consignment to your role as a consignment stockist, versus just the business of effectively processing PGM scrap. Secondly, around that, obviously, if I look at, the size of recyclers in PGM markets, I think you're think to in totality, they're about 23% of the total market give or take. What's your pricing strategy? Are you purely passive in PGM pricing markets or do you have to or do you just react to customer responses? I mean, could you give us a little bit of color as to how if the prices move higher and lower how you respond to that or if you're proactive in your in participating in the market? Okay. I think what we'll do, we'll take the, second question first. And I might ask you to just clarify what you meant by the first question. I can you with a couple of things you might have missed in the presentation in terms of the numbers though. So, Mark, if you can take that second question. Yes, in terms of, our pricing strategy, and the way that prices are constructed in the industry, especially refining is probably the best one to look at. The way that our refining price is constructed, we have part of this, which is a service charge, which is essentially independent of the metal prices. And that's charged on tons and ounces of materials passing through the refinery. On top of that, We, of course, recover and make all our efforts to recover as much metal as we can for the customer. If we recover a little bit more than that, there may be a small gain on the metal contract and that metal gain is a revenue stream to us and that is price dependent. So in broad terms, a lot of the pricing is independent in the metal price, but some has a dependency on the metal price itself. Okay. And for the first part of the question, maybe just slightly clarifying, so I wasn't quite sure it meant by consignment stockist, but there were a couple of charts that you might have missed drops off the call, where we just talked about on Slide 7 and the proportion of business that's in each area of the business. And Yes. Go on, please. Yes. So I was on for that, but so I'm guessing so maybe I haven't understood correctly this pie chart, but, effectively, you will an automotive customer will ask you to effectively process their scrap auto cats. You hold that as I understand and correct me where I'm wrong. And then, you hold that metal for them, which is what you're talking about this inventory that you're then able to borrow but you're contractually obliged. I just wondered, is that only the business or are you buying in independent, are you purchased scrap from the market, which you process yourself where you kind of own the whole chain as opposed to being part of a cycle for a customer. And that's what I meant by consignment stockists. Okay. So we'll just try and explain very simply what we're doing in terms of? Yes. I think the best way to look at this in terms of the refining businesses there is a certain amount of refining that we do, which is what we describe as closed loop. In other words, we're providing a product to a customer, the customer will return that to us for refining. We'll separate out the precious metal and then we'll either hold that metal on account for them and or just transform it back into another product for that same customer. On the other side of the business, there is what we would call open loop refining where there are a number of collectors and semi refiners who are collecting metal on their own account and they will return that metal for us and we simply return the metal to them, without there being this automatic transformation into a new product So I think the best way really to think of this is what we would call open loop, which is with external customers, and closed loop, which tends to be with our own business within Johnson Matty and also customers who buy products from us and have products refined by us. I don't know if that answers the question you may. How big are the oneplus? So I think in the and what we talked about here, we did talk about roughly sort of fifty-fifty internal external. I would want to split out the other parts. The next question comes from the line of Sebastian Bray from Berenberg. Please ask your question. You for taking my questions. If I might start with one on platinum versus palladium, the current market consensus appears to be the remains tight. And I think you've endorsed that during the call as well. What exactly is stopping people easily switching back to platinum and how long would this process have initiated take for water catalysts. This is my first one. The second one is, Jay Matt a few years ago, sold its gold and silver refining business. And in competing with other players, the names BSF and Sumitomo Metals And Mining jumped to mind, which have full service recycling. I also take metals outside the PGMs? Is this a problem when bidding for scrap, which could potentially contain valuable other metals? And finally, a last one, Could you give me a feel for what the average grams of platinum and palladium for an average car would be for PGM and how much higher this could be for fuel cells? Okay. What I'll do is I'll ask, Mark, if you could just comment on the palladium platinum and how long? Yes, thanks for the question. I mean, as we know, what we can or the market can look at doing. There is the possibility of substitution of some of the palladium in gasoline catalysts with platinum What I would say about this is that although it sounds simple, on paper, in practice, it's not trivial technically to do that. So in terms of a timescale, it could be several years before White said substitution of palladium by platinum occurs in order catalysts. So its impact on the market is probably still quite distant in terms of the kind of dynamics we see at the moment. I think the second question there was about Whether so we'd sold our Golden Fluor business, whether that's a problem in terms of, people asking us to refine their scrap. And, of course, it it's not a problem. We are extremely competent in what we do, and we're really good at the very difficult part, particularly our getting the right purity of the Platts and palladium. Again, Mark, if you want to add any extra color to that? What some of the companies that you do mention, especially, some of the bigger mining companies, they're dealing with a much broader spectrum of input then John to Matthew now focuses on. We are very firmly focused and specializing in PGMs. Some of the other refiners tend to be taking in rather lower grade materials on a much larger scale which contain a much larger cross section of the periodic table. Okay. And then there's a 3rd question. What's the 3rd line? Oh, I didn't thought it was. It's loading at PGM water catalysts and fuel cells? Give me an absolute number? Is it about 3 to 6 grams per vehicle of platinum group metals, typically for a car? And how much is it for fuel cells? Okay. I think it's variable. Obviously, Mark, if you can give a comment. Yes. The kind of number that you talked about is not untypical for a loading in the average ICE engine car. As things stand today, loadings in typical fuel cell vehicle which are being developed are quite significantly higher than that, but are coming Thank you. The next question comes from the line of Geoff Habe from UBS. Please ask your question. Good morning and thank you for the opportunity to ask questions. Most of mine have been answered. I just had one more just going back to the recycling of lithium ion batteries. Can you maybe help us understand what exactly you're targeting to recycle? Is it the is it the anode? Is it the electrolyte? Is it the cathode? And will the current refining technology that you have at the moment be used or will you have to effectively come up with a new technology and therefore, and also build new refining capacity to do that? Yes. I think So again, with this, it's just not it's too early really to talk more in detail about this at this stage. All I would say is, we do have really good competences, but course, we are always developing our technology all the time to improve our efficiency and effectiveness of our processes. We've got some great technology researchers and we were we are able to build as well on our technologies. But I I don't think I can comment further on whether we would use new or different technologies, etcetera, at this stage. Okay? Okay. Thank you. Thank you. The next question comes from the line of Adam Collins from Liberum. Please ask your question. Yes. Hello. Good morning. I had 3 on Precious Metal Services. So first one is around the trading desk. Historically, that business has been driven by volatility as well as volumes. Although we're not nearly back to where we were in 2009 in terms of metal volatility, have been periods in the last year or so where it's been quite high, but particularly for palladium and rhodium. So I wondered if you could just sort of comment on the sort of trading conditions in that area. So that's the first one. The second one is around the market conditions currently in PGM Recycling, a couple of areas there. So firstly, in the European market, it looks like a little bit of capacity is coming out of the market there's been some refinery closures in both the UK and Italy. I wondered if you could just comment on whether you think the market is tight. And then on the sort of the midterm growth outlook in terms of recycling volumes, In the last few years, there's been quite a lot of growth in KEMKAT's original installations. And if I'm not mistaken, there was good amount of palladium added to cards around about 10 years ago because of regulations. Do you expect a good flow of end of life material in the next few years in that area? And then just finally on the sort of comments about the working capital stresses that have occurred in the recycling business in the last few quarters. Wasn't clear whether you were indicating that there's been a deterioration there in the last few months over and above what was indicated at the last set of half yearly results in to Maddie. So I wonder if you could just clarify that. Are you signaling there's been a deterioration there? Right. Okay. So three questions there. Obviously, so just to repeat, it's not a trading update, so I can't go into all the details. Now there's some there's something and the team will go through and debt at our full year results. With regards to, I think, the trading debt, your question about the trading desk and volatility, I mean, basically, again, no trading update, but of course, if you look at our proportion of sales of that trading desk in the context of the group's overall performance is unlikely to be a big contributor I think if you look at the first slide, you can see that. Cycling. At the moment, of course, we've had a period of unscheduled downtime in 2018. It was actually an outage, one that can versus any disruption in refineries is likely to have an impact on the market. And so that it is reasonable to assume that some of that downtime may have contributed to the tightness in the market, okay? That's helpful. I think the third question I've probably answered by saying that we can't say anything on a trading update at this stage. That deals with all and there's one other comment. Do you want to add a little bit? Adam, you mentioned the sort of wave of metal coming back from the car pool essentially in order catalysts. Yes. I think what we're seeing there is in the United States, we're kind of right in the middle of that wave And there is obviously that end of the market is extremely buoyant at the moment. I think the interesting thing for the future, of course, is to look at possible trends in the Far East and in China in particular as a lot of the battle now being laid down on cars in China won't be coming back to the market probably for another 10 or 15 years. So there's kind of a movable wave of palladium in particular, which is going around the globe coming back from the auto carpal. And I think it's going to keep the secondary refinance pretty busy for quite a while to come. May I ask a couple of related questions on that? So as you were suggesting, it appears as if the flows are going to shift slightly towards palladium and away from platinum over time. Given the 10 year historical installation rates. Does the shift away from platinum to palladium have any impacts on profitability of the business. Clearly, that's not an issue at this stage where the value of the two metals is similar, but if in the long run, the price changes to the historical averages, would that be a fact or does it not really matter from your point of view, whether it's a ounce of platinum or an ounce of palladium that's recovered. And then on the market tightness, I mean, yes, of course, you've had an outage, you of course had an outage. But there are a couple of other players that are taking capacity out of the market indefinitely in Europe. Which is slightly at odds with your indications that you're investing, which I presume is more Asian facing. Do you have a sort of sense why they would be taking capacity out of the market given that the prognosis is for growth? Okay. Let me deal with the latter question actually. So I'm not going to comment on why other people would what other people would do in their capacity. What I can say is we are investing both in the efficiency and the effectiveness of our refining and, and also in the capacity And that's not we're not just investing in Asia, okay? So we're investing around the globe. So that's important to know. And I think it would on the comment about whether it makes any difference, whether it's palladium or Platts. And do you want to comment on that, Mark? Yes, in essence, it doesn't make a huge difference to us. We're able to deal with a whole suite of PGMs and we're somewhat agnostic terms of the refining business of how that metal split actually pans out. Clearly, the dynamics are something that we have to deal with all the time. But it really makes no fundamental difference to the nature of the business depending on how that split develops Okay. Yes. So if I can just wrap that, that's actually important. We are, I think I talked about this in the way we deal with our capacity. We are right sized to meet both AAM's need and our customers' needs now in the future. And we're also quite modular and flexible, it changes. They are quite important as well that I reinforce that review. The next question comes from the line of Chetan Udeshi from JPMorgan. Please ask your question. Yeah, hi, thanks. First question was just around that £100,000,000 of investment that you talked about in the business over the next couple of years or 2 years, can you give us a sense of how much of that is just going into maybe improving the sort of resiliency and consistency of the process so as to not have these outages and how much of that is going actually into capacity? And the second question was In terms of competitors in this business, correct me if I'm wrong, but I heard a figure of 40% market share that GM has in PGM Refining Business. I mean, who are the key other competitors in this set of refining markets, are those the competitors that you have in the auto catalyst market or do you also see some independent metal Republic refiners being quite active in this business as well? I'm afraid I'm not going to comment on competitors, so that's not for now, or at all, in fact. In terms of the capital, the capital I gave you is everything wrapped up together and is also part of our capital spend across the group. And I heard you say that the the extent of secondary refining as part of the total availability of PGM is going to rise from maybe 25 to 35 to 40 which suggests maybe the growth should be strong. So why is it that you internally just have a low single digit kind of a growth aspiration in this business? So our business is rightsized for our growth. Which is actually also good and for our customers' growth. And we're investing to improve efficiency and effectiveness and resilience of our refineries and also to ensure we have the right capacity for the future. So I think I mentioned we have invested in new refinery in China example, where we see of the market develops over the next 10, 15 years. Thank you. Thank you. The next question comes we are taking from Martin Evans from HSBC. Please ask your Yes, thanks. It's just on slide 3, just really a little bit more on the health side of the end market demand for PGMs. Because, obviously, most of the focus in terms of refinings on the auto accounts are on and clean air. But Jane, you mentioned that the historic foundation of Health was PGMs, and we know about carboplatin and so on. But what's the current kind of trend within the drugs industry for the uses of these all of PGMs generally. Is there been is there growth or is it a fairly small niche stable market? Thanks. Okay. I'll ask Mark to comment on this. Yes. I mean, there are always I mean platinum brew metals are extremely interesting from some sort of farmer side because of their potency. I'm not aware of any new development in the PGM space, which is going to change the use of, assist platinum group of compounds is coming from. Interesting, one of the bits of the market, which is growing quite strongly for us, which is not actually on the drug side. It's on the medical device side. And that's where our business comes in because a huge amount of new medical devices that are being used for things like ablation ablation capitalism and so on use PGMs in raw forms. They use because they are chemically inert This has become quite a substantial use of PGMs over the years and not to be overlooked. A lot of these, medical devices which are made are actually single use and they are products which tend to attract, decent added value in terms of the expertise we can bring to them. Good. Thanks very much. The next question comes from the line of Adam Collins from Liberum. Please ask your question. About the substitution potential for platinum over palladium in auto cats. With regard to electronics, do you think that there's some potential now for some substitution to platinum instead of gold or palladium in terms of electroplating electronics area, that would seem to be quite an interesting area if it can be cracked. Adam, I think it's a really interesting question and a very interesting potential for platinum. Now price is developing in the way it is platinum is an exceptionally good conformal coating in a lot of electronic components. It happens central use already in memory storage, as you probably know. But it's the prospect of it developing more as a plating and conformal coating electronics could be quite interesting. We do have a decent amount of technology and expertise in that area. So it is something certainly we're looking at. Okay. Thank you. Okay. All right. Thank you very much. I'll pass over to Martin. Great. Thank you very much, Jane. And Mark for the presentation and also the Q And A. Thank you very much everyone for joining today. If you have any questions, further to this call, then please do come back to us Investor Relations. And without, I will say thank you and goodbye. Goodbye. That does conclude our conference for today. Thank you for participating. You may all disconnect. Have a nice weekend ahead.