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In presenting AMG Advanced Materials’ second-quarter results, CEO Heinz Schimmelbusch said that the Zannesville, OH, spent catalyst recycling plant, AMG’s largest capital spending project to date, was “on schedule to come in on time and on budget.” He did not specify the start-up date, but AMG is on record saying that plant construction is expected to be completed in the first quarter of 2022.
The Zannesville plant will be a duplicate of the plant in Cambridge, OH, and double AMG’s capacity by adding 35,000-tpy of incremental spent catalyst processing capacity and over 6-million ppy of incremental V production capacity.
In addition to the new US plant, AMG is building a new plant to produce vanadium oxides and vanadium electrolyte materials from spent catalysts at AMG Titantium Alloys & Coatings in Nuremberg, Germany. The target market for the plant’s output is vanadium batteries. Schimmelbusch said that the decision to start construction was made “after extensive tests,” but he gave no details about the plant’s capacity and start-up date.
AMG Clean Energy Materials (vanadium, tantalum, lithium) reported a 70% increase in revenue in Q2 to $90.1-million compared to $53.1-million in the year-ago quarter. EBITDA rose to $12.6-million compared to $1.3-million in the second quarter of 2020. Key revenue drivers in the second quarter were price and volume increases for vanadium and spodumene. Tantalum prices were flat but volume was higher. AMG explained that tantalum prices have risen but higher prices will not be realized until Q1 2022 upon the completion of current contract commitments.
“It is worth noting,” said COO Eric Jackson, that the spot FeV index price in North America is below the five-year average and the actual sales prices are as much as 20% below sales prices in China and Europe. “This is unsustainable in a region that relies on imports for more than 50% of its requirements,” Jackson told analysts.
AMG did not make any public statements about its unsuccessful effort to prove that vanadium imports constitute a national security threat to the US under Section 232. AMG and U.S. Vanadium had asked the US Commerce Dept. to impose duties of 40% on imports of vanadium.
Questioned by one analyst as to why Clean Energy Materials’ revenues in Q2 rose nearly $20-million compared to Q1 but gross profit (excluding exceptional items) rose only $2.7-million to $16.1-million in Q2 2021 compared to Q1 2021, Jackson said that AMG aims to keep margins stable. He noted that as vanadium prices rise, production costs rise. In addition, he said, spodumene prices lag and reflect lower pricing of the previous quarter.
The analyst noted that the Q2 results for Critical Materials showed the same disconnect between the revenue increase over Q1 (nearly $4-million) and virtually the same gross profit in Q2 and Q1.
“Again,we attempt to have a constant margin above raw material prices,” Jackson said. “Chome metal is essentially a conversion business and we have an advantage of having stable margins,” Schimmelbusch added.
Clearly unsatisfied with the answer, the analyst pointed out that several quarters ago, AMG had said that it did not expect to spend any more money on slag remediation at its decommissioned site in New Jersey, but AMG had spent over $11-million in Q2 on further slag remediation. He asked whether more funding for slag remediation would be necessary and Schimmelbusch said no.
During the second quarter, AMG discovered additional slag located below surface level. The slag was inconsistent with earlier estimates. “As such, AMG recorded an adjustment to its environmental provision of $11.7-million associated with these higher quantities.” Management does not expect any additional remediation to be required. This adjustment negatively impacted operating loss for the period.