Livent Corporation (NYSE: LTHM) Third Quarter 2022 Results Conference Call November 1, 2022 4:30 p. m. Eastern Time
Participating companies
Daniel Rosen – IR
Paul Graves – President and Chief Executive Officer
Gilberto Antoniazzi – Chief Financial Officer
Conference Call Participants
Chris Kapsch – Loop Capital Markets
David Deckelbaum – Cowen and company
Steve Richardson – ISI de Evercore
Christopher Parkinson-Mizuho
Graham Price-Raymond James
Joel Jackson – BMO Capital Markets
Kevin McCarthy – Vertical Research Partners
Jeffrey Zekauskas – JPMorgan
Corinne Blanchard – Deutsche Bank
Operator
Good morning and welcome to the call for the third quarter 2022 convention for Livent Corporation. [Operator Instructions].
I now give the floor to Mr. Daniel Rosen, Livent Corporation Investor Relations and Strategy. Rosen, you would possibly proceed.
Daniel Rosen
Thank you, Denis. Good evening to all and welcome to Livent’s call for third quarter 2022 results. With me are Paul Graves, president and chief executive officer; and Gilberto Antoniazzi, Chief Financial Officer.
The slideshow accompanying our results, as well as our earnings report, can be found in the Investor Relations segment of our website. Ready comments from today’s discussion will be available after the call. After our comments ready, Paul and Gilberto will be available to answer your queries. Given the number of participants in today’s call, we request a limit of one inquiry and follow-up according to the caller. We will be happy to answer any other queries after the call.
Before we begin, let me remind you that today’s discussion will come with forward-looking statements that relate to the dangers and uncertainties related to express points, including, but not limited to, the points known in our press release and in our filings with the Securities and Exchange Commission. The data presented represents our maximum productive judgment based on today’s data. The actual effects are likely to vary as a result of these hazards and uncertainties. Today’s discussion will come with references to non-GAAP monetary measures. Definitions of those terms, as well as a reconciliation to the maximum directly comparable monetary measure, calculated and presented in accordance with GAAP, are provided on our investor relations website.
And with that, I pass it on to Paul.
Paul tombs
Thank you Denis and good evening everyone. Livent provided very strong monetary functionality in the third quarter as the company continues to achieve record levels of profitability. Third quarter adjusted EBITDA of $111 million, compared to $15 million a year ago at $95 million last quarter. And what remains very strong in the market, Livent continued to achieve the best prices learned, while offering higher volumes to consumers in the third quarter.
As the end of the year approaches, Livent has lowered its full-year 2020 monetary guidance levels, while extending its medium-term adjusted EBITDA projections. This is supported by higher learned costs than currently expected.
I think we’re moving on to more details, Livent continues to make abundant progress on its expansion plans and stays on track with all schedules and planned capital plans. Construction of our 5,000 metric ton lithium hydroxide expansion investment center ended quarter and we are now in the early stages of generating and qualifying this product with customers.
2023 will be a historic year for Livent, as we plan to fully boost the hydroxide expansion of Bessemer City. Complete two stages of lithium carbonate expansion in Argentina, with a total of 20,000 metric nominal capacity, and load a new 15,000 metric ton hydroxide plant in China by the end of the year.
Given the time required to drive additional expansions in Argentina, Livent expects to produce approximately 6,000 metric tons of additional LCE volume in 2023, an annual accumulation of approximately 25% from the current quarter, and we expect to further increase our production in 2024 and beyond.
2023 will also be a pivotal year for Nemaska’s assignment, as the structure is initiated and critical decisions related to the financing of the allocation and industry routes are made and executed. All of those capacity expansion efforts continue to progress as planned and announced in the past.
I will now give the floor to Gilberto to talk about our third-quarter functionality and our updated monetary guidance for 2022.
Gilberto Antoniazzi
Thank you Paul. Good evening everyone. Turning to the fourth slide, Livent reported earnings of $232 million in the third quarter. Adjusted EBITA of $111 million and adjusted earnings of $0. 41 consistent with diluted stocks.
This is a record monetary execution for Livent, as we continue to perform well operating in a solid market environment.
Compared to the last quarter, sales increased 6%, with higher overall LCE volume sold, complemented by higher acquired costs and a favorable product mix.
Adjusted EBITDA in the third quarter is 70% higher than the previous quarter and more than seven times higher than the previous year. This is due to the continued maximum costs for all products and our ability to take advantage of favorable market conditions.
In addition, we have noticed a slight improvement in sequential costs. Since we sold most of our higher-cost third-party carbonate fabrics that were left from our stock in the current quarter. There was also currency merit in adjusted EBITDA, due to the strengthening of the U. S. dollar against some of our foreign currency-denominated costs.
From a balance sheet perspective, we ended the quarter with $212 million in cash, adding $198 million in advance bills from General Motors. As a reminder, this prepayment is connected to a six-year battery-grade lithium hydroxide source contract, starting in 2025, that was announced through Livent and GM last quarter.
During the third quarter, Livent also announced the renewal of its five-year revolving credit facility through 2027, while expanding it to $100 million. As a result, and due to continued money generation, Livent now has an unused $500 million line of credit in the quarterfinal.
As we look ahead to the rest of 2022, see that Livent has updated its guidance for the entire year, as shown on slide five. We have reduced our guidance levels while expanding the midpoint of our projected adjusted EBITDA effects to $10 million.
For the full year 2022, Livent now expects revenue to be between $850 million and $845 million and adjusted EBITDA to be between $350 million and $370 million. This improvement is largely supported by higher learned price expectations.
The demand for knowledge has been exceptionally high this year. And published costs for lithium across its bureaucracy continued to rise, reflecting very tight market conditions. Livent was able to take advantage of this by achieving higher costs on a subset of its market-exposed volumes costs.
We are confident that this environment will not be replaced during the rest of the year. In the light, we will continue to enjoy it. However, due to the mix of visitors, we will have a higher percentage of volumes sold in the fourth quarter. There are contracts as in the past established at a decreasing constant price.
As a reminder, we expect the total volume sold in 2022 on an LCE basis to be more or less robust compared to 2021. As there is not expected to be a significant volume of our capacity expansions in the market before 2023. The revised forecast does not represent a replacement in overall volumes from 2021. Based on the latest forecast, we expect to sell slightly higher volumes sequentially in the fourth quarter.
That said, given some of the disruptions in the regional supply chain, we continue to see effects across many industries, adding our own, it’s imaginable that some year-end volumes will regress to the first weeks of 2023.
Livent particularly improves profitability and cash flow, it will be further strengthened through additional production volumes that will be brought online in the coming years. This particularly advanced money generation provides Livent with enough liquidity to continue growing anywhere possible, accelerating its expansion investments.
In addition, we will continue to point to other funding bureaucracies, such as prepayment obtained from GM, which provide greater flexibility and are only available to reliable and recognized manufacturers like Livent, with credible expansion plans. The visitor concentrates on the safety of battery grade lithium source from the manufacturers shown remains more powerful than ever.
Livent’s allocation for capital expenditures of $300 million to $340 million in 2022 remains unchanged. Our spending accelerated in the third quarter, and this will continue in the fourth quarter as we move forward with the approval of our first phase of 10,000 metric tons of carbonate expansion. in Argentina, and the milestones of our assignment.
Now I will call Paul back.
Paul tombs
Thank you, Gilberto. Now let’s move on to several market observations on slide six. Despite some short-term supply chain disruptions, in China, with energy discounts and zero-tolerance policies against COVID-19, demand for lithium has remained incredibly strong.
During the first nine months of 2022, electric vehicle sales in China reached 4. 5 million units. And according to full-year maximum estimates, sales in China have more than doubled compared to 2021. 245% during the third quarter of the year compared to 2021 and BEV registrations in Europe have reached a record. Record time in September, a feat that was not expected before the year-end increase in December.
The lithium market remained incredibly tight, as evidenced by the lack of storage throughout the origin chain and the frequently higher origin costs set for the limited amount of uncommitted, uncooked fabrics available. We believe Australian spodumene-based LCEs, which represent almost a share of the overall market, did not increase in the third quarter compared to last quarter. While demand continued to grow.
There is little credible evidence to recommend that this tension will ease for the rest of the year, as we revel in a seasonal recession resulting in higher prices for Chinese grain producers. at the end of the year.
It is also difficult to make a strong case for a significant shift in the balance between source and demand as we look to the foreseeable future. On the source side, several extensions of new projects are expected to bring more volumes to market over the next few years. But demanding situations will increase markedly. There are many reasons for this, ranging from permitting issues to gadget acquisition issues well in advance, problems locating enough labor, expansion projects, and especially Greenfield advancements that are more critical and very complex businesses that require a lot of time through nature itself.
In addition, the burden of these projects is expanding due to inflationary pressures, contractor arrears and, in particular, tight labour markets. And, of course, pressure from local communities to participate in those projects means a longer and more extensive engagement than many new entrants. it takes waiting, and even incumbents like Livent want time to set up new production lines to meet increasingly stringent visitor specifications.
None of this is to say that there will be no source relief in the coming years, there is a long-term price curve to justify existing market values. But it’s hard to see a very likely situation where the lithium market doesn’t remain. structurally adjusted to varying degrees, or in a sense where our industry returns to the complicated value levels of the past.
On the other hand, it is important to recognize how resilient the demand for lithium has been. Despite going through a global pandemic, although no regional customer in the industry has been spared, the projected expansion of lithium demand has not only not slowed, but has exceeded almost every single available published forecast. The last flag of caution has been raised, raising concerns among commentators that high lithium costs may ruin demand, or the negative effect of a possible global economic slowdown, i. e. on customer call to.
While we don’t intend to rule out the likelihood of either, there are plenty of reasons to remain optimistic about lithium.
When it comes to lithium values relative to the recent all-time highs we’ve noticed in recent months, there has been little to no evidence of a resulting slowdown in demand. And even at those higher value levels, lithium accounts for a small percentage of an electric vehicle’s total charge. In addition, we see many examples of record profitability from lithium consumers and major producers of batteries and electric vehicles.
A broader or longer-lasting macroeconomic weakening may ultimately have an effect on the end consumer. However, there is merit in a recent ranking of EV players in the industry as somewhat recession-resistant. The main explanation for why this is how the shift to electrification is supported across diverse regions and governments continuing to strengthen their own low- or zero-carbon commitments, policy incentives and emissions regulations remain incredibly influential. And we’ve noticed intensified efforts in recent months, specifically in the United States.
We’ll talk about the progression that we’ll be incredibly favorable to Livent and prepared for.
On slide seven, I’d like to provide more vocal feedback to Livent and why the company is so well placed for 2023. As we said earlier, this is a company that will continue to generate a particularly high cash flow. Our expansion is supported through the ability to sell another 6,000 metric tons of domestically produced LCE in 2023, a backlog of approximately 25% year-over-year.
Moreover, a large part of those additional volumes are not committed today from the point of view of value. Therefore, if market values remain resilient in 2023, which is in line with our expectations and those of most other observers, we will achieve a higher average acquired values compared to 2022. Therefore, we are confident that we will generate particularly high money flows and a wide variety of scenarios.
While it would possibly be unwise to report on charge trends, it is fair to say that we do not expect a significant improvement in the prices of raw fabrics and other inputs in a largely higher inflationary environment. That said, as a incorporated producer, our exposure to third-party prices is much less than that of those who have to source lithium from abroad. And we’ve demonstrated our ability to pass on some key prices to our consumers in 2022.
We expect capital spending in 2023 to be higher than in 2022. This does not replace our past expectations as we continue to execute our approximately $1 billion capital plans from 2022 to 2024, excluding Nemaska. We will begin to see the first benefits of those efforts in early 2023, when we push forward our first phase of expansion of 10,000 metric tons of carbonate in Argentina, which we can do on a temporary basis given the exclusivity of our daily processes.
Given some of the recent announcements in the U. S. of the current administration, I need to spend some time on slide 8, highlighting Livent’s regionalization efforts and why the company is so well placed to capitalize on the next government and industry in the north. U. S. energy storage supply chain.
As discussed above, we finished an expansion of 5000 metric tons of battery-grade hydroxide in the third quarter and began the procedure of increasing production and qualification with customers. We expect this increase to end in the first quarter of 2023, in line with the final touch of our first carbonate expansion in Argentina, which will supply the plant’s raw material.
This additional capacity builds on Livent’s position as the largest lithium hydroxide manufacturer in the United States and one of the few lithium hydroxide manufacturers outside of China today.
We also need to provide an update on Nemaska, as the task is now nearing the conclusion of its detailed engineering phase. After doing this work, we are more determined than ever to contribute to the production of Nemaska.
We continue to say that Nemaska will be critical to a long-term supply chain in North America and are excited to be a component of it. As a reminder, Nemaska is a fully incorporated lithium hydroxide allocation located in Quebec, Canada, in which Livent is now a 50% component and equivalent between Investissement Québec and Investissement Groupe belonging to the Government of Quebec.
Nemaska expects to have a nominal capacity of 34,000 metric tons of battery-grade lithium hydroxide and will have more than 30 years of mine life as a very cost-competitive asset.
It will have a carbon-free hydroelectric force and will be strategically located near regional seaports in a commercial park that will be developed on demand.
It is expected to become a global hub for battery fabrics. And there have already been several advertisements to produce active cathode fabrics on the site throughout Nemaska. Create a localization style that is critical to the sustainability of our industry.
Total capital expenditure is estimated lately at approximately $1 billion, which corresponds to the capital prices of ongoing incorporated projects around the world.
Nemaska’s mechanical finishing touch is still on track by the end of 2025, with the first significant production starting in 2026, the team has already begun ordering the significant long-term appliances needed for construction, which is expected to begin in early 2023.
When it comes to financing, Nemaska is comparing several horny options. Most likely, the resulting design will come with a combination of third-party debt financing, adding potential cheap government financing, long-term customer financing or prepayments, and financing from IQ’s existing shareholders and ourselves. We hope to have more percentage and a complete plan in the first part of next year.
It is vital to reiterate that one hundred percent of Nemaska’s long-term volumes remain uncommitted to today’s consumers. Livent will play a leading role in helping Nemaska identify an appropriate business strategy and manage business resolution-making. It is not unexpected that Nemaska will ask us to help them in those areas, given our experience in rating and promoting lithium battery products among major consumers around the world and especially in the United States. North.
We plan for Nemaska to locate some initial consumers who are credible and committed to supporting a localized supply chain focused on North America and especially Quebec.
Livent recently hired a new senior executive, who joins us for a primary appliance manufacturer focused on electric vehicles and will lead our efforts in Canada, as our broader expansion strategy.
The regionalization of production chains, whether for reasons of source security and sustainability, has a developing precedence for our industry. Recent moves through the U. S. governmentPower garage supply chain.
Given the importance of the locally processed or mined lithium source and those efforts, Livent is incredibly well placed to take advantage of a number of additional long-term regional expansion opportunities. We expect the operations at Bessemer City and Nemaska to qualify EV downstream credits as a component of the critical mineral requirement for lithium sourcing and processing.
There may also be capital savings and expense opportunities for Livent through the advanced manufacturing production tax credit portion of the IRA.
We will continue to expand our production functions in North America and build on our leading national footprint. The Bessemer City and Nemaska projects are designed with significant scope and to create greater production capacity as we continue to grow alongside our customers.
In addition, Livent is advancing designs that will allow all long-term production lines to be much more flexible in their ability to use a wider variety of lithium feedstocks, adding recyclates that generate lithium streams.
Over time, we continue to have greater confidence in the decisions we make to invest in a U. S. -based chain. U. S.
I need to conclude with some updates related to GSS. According to our annual sustainability report released in the current quarter, we continued to make significant progress on several fronts. As one of the first lithium manufacturers in the world, it is a full member of the Responsible Mining Insurance Initiative. We lead by example in our industry and help establish an agfinisha for greater transparency, stakeholder engagement and guilty growth. By the end of November, Livent will take the next step in the IRMA procedure by initiating an on-site assessment of our Phoenix operations in Argentina.
During the on-site review, independent external auditors will evaluate our court cases and solicit direct feedback from stakeholders, adding members of local communities. Our participation sends a strong signal that we value feedback from our stakeholders and are committed to guilty expansion and continuous improvement in all facets of our operations.
Livent’s long-standing commitment to sustainability and the progress we are making in ESG are being recognized through our clients and independent organizations that assess sustainability benchmarks. Most recently, Livent was placed at the highest level of sustainable lithium manufacturers in the inaugural ESG benchmark Mineral Intelligence report. This is another testament to Livent’s sustainability profile and the progress we continue to make as we seek to meet our sustainability commitments for 2030 and 2040.
Now I will call Dan back to ask questions.
Daniel Rosen
Thank you Paul. Dennis, you can now log in to Q&A.
Q&A session
Operator
[Operator Instructions] And the first is in the line of Chris Kapsch of Loop Capital Markets. Continue.
Chris Kapsch
Yes, smart afternoon. So you saw it with his formal comments on industry dynamics, but demand clearly outstrips supply. In fact, one consulting firm we talked to indicates more, I think, more than 800,000 metric tons of demand for this year. So, evidently, this underpins a false price cycle, or maybe even paradigms, a bigger word.
I am curious to know whether this dynamic, more recently, has influenced the sourcing strategy of the key EMBs involved. Or does it give you insights on how to redesign your business strategy?Just think about it?
Paul tombs
Hey, Chris, smart question. Yes and no, I think. I think those who join you, who have followed us for many years, know that we have tried to be business-oriented. We don’t think the outside world is content to produce. and sell the product in the market.
If you’re not committed to your customers, especially when you’re producing hydroxide, you can be blinded by adjustments in battery generation or adjustments in who makes purchasing decisions in the supply chain. So, I think it’s fair to say that our advertising engagement has allowed us to constantly look at the long term and have a fairly accurate view of the dynamics ahead. And we were largely not surprised.
I think what we’re seeing today, I think the attractive dynamic that I’m seeing today is that I’m not sure it’s necessarily driven by higher prices, I think it gets a little more attention that way. I think it’s the OEM, knowing that they’re paying for lithium regardless, and it’s them who will end up suffering if they don’t have enough access to lithium.
And so, to varying degrees, they look around and say, what role are we playing, they can’t stink in most cases. Some, even other people who have been 100%, will buy all the lithium, we will move away from this lithium, say that possibly it would no longer be possible. And we’re going to have to let other parts of the supply chain see if they can get lithium, I mean, at the end of the day, if you’re a cathode producer, or possibly a mobile producer, it’s up to you what quality lithium you can use. It is up to you to expand a procedure if you can to facilitate the acquisition of other qualities of lithium.
I don’t see a big trend in that, in fact, my conversations with our consumers tell them frankly that they’re crazy to proceed to adjust the specifications because they’re just making it harder and harder for themselves. But I think we’re moving to I want more flexibility from OEMs. But I also think that today there are maybe 3 or 4 guys in the world that have committed to credible contracts for lithium sources in the OEM world and we are going on to have to go through more than that.
I think allowing agents or your supply chain to get everything for you will be very complicated for them. Are they acting today? No, I think it’s an evolution, I think the scarcity of sources rather than costs, and maybe they see costs as the best indicator of the scarcity of sources, it’s what triggers their behavior, which goes back and reads our scripts for a year. and part apass, we predicted this, it was happening to happen, okay, it’s becoming a look to the future. And someone will realize that they simply don’t have the raw fabrics safe.
And I think desperation is a strong word, but there’s a lot more fear among today’s automakers about whether they’ll have enough hardware.
Chris Kapsch
I am aware that. And then my follow-up question. And I think he talked about that, he discussed it, strategic hiring. And I picked that up in the public domain that, this hire is called your now chief strategy officer, this user who used to have a source of battery materials, as he said at a giant electric vehicle company. So, I wonder if you can tell us a little more about the goal of the amazing and what your mandate will be. Thank you.
Paul tombs
Yes, of course. It’s not very simple. Notoriously we had a lot of commitment to her. She’s incredibly talented, she probably knows the industry better than anyone. And it’s a wonderful cultural compatibility with Livent. con taking the lead across Canada, which considers us, we see Canada and specifically Quebec as the center of the moment for Livent after Argentina and, frankly, it will probably overtake Argentina over time. And there are opportunities in general, a view across Canada that she will take the Livent.
But I also think it can help us in a total diversity of other spaces where we run the business, what we do in recycling, for example, what our strategy will be there, what our length is and how far we go, in terms of mixing products, carbonate instead of hydroxide, even in the steel space.
So it reflects the fact that Livent is growing, we can’t keep pretending that with a corporate that we were five years ago, or even 3 years ago, and 3 or 4 years from now, I think it will be unrecognizable. And to get there, we want more time, we want other people with capabilities and we want to invest not only in assets and resources, but also in the other people we have.
I think the other people we have in our experience spaces are the most productive in the industry. And it’s a source of competitive advantage. And we’re going to keep uploading talent, especially talent, like this user as much as you can imagine to be honest, Chris.
Operator
Next is from David Deckelbaum’s line with Cowen and Company. Please continue.
David Deckelbaum
Thanks for taking the time, Paul. My first consultation is just a follow-up to Nemaska. I just sought to perceive the moment. First of all, I think the most recent update estimated that CapEx at one point one hundred percent is a billion dollars. Is this still the subject of definitive feasibility studies?
And then, I guess, would CapEx already start in the first part of 23?Would it be just the structure of the initial paintings before announcing some kind of comprehensive investment plan and structure?
Paul tombs
It is – this capital figure corresponds to what we call an L3 point, of which we are necessarily 10% certain, which is the point on which we insist and the investment that Quebec insists that we arrive, to give the approval of the construction, too many projects. You have noticed figures where there is a FEL 1 or FEL 2 point, which is more or less 30% 40% 50%, you cannot make investments. Therefore, comps order parts and start construction this way.
So this is certainly a definite figure of how far we’re going in terms of engineering. So it’s a pretty falsified number for sure. The expenses frankly have already begun, that this is an allocation incorporated as a corporate mine and as a hydroxide plant.
But other expenses in the mine have already taken a position in the last incarnation and those are expenses that do not have to be repeated. So, at the mine level, frankly, the negative kind of waiting for the chemical plant, we can start. — we can get the mine up and running much faster, probably in the late ’23rd, early ’24 if we needed to, but we didn’t — we’re not going to sell spot concentrates, we’re not going to export concentrate on a spot basis. I don’t think the Quebec government needs us to do that. We don’t need to do that.
We will defer additional expenses to the mine until the chemical plant is built. Chemical plants take two or three years to build. People can tell you what they want, but unless they have a special magic in some of the long-term item producers. , crystallizes it and some. . . And, by the way, we are competing for pieces with projects like copper, for example. It’s not that everything is exclusive to lithium, we just can’t get these curtains in two or three years. You shouldn’t ask for these curtains until you’re at point L3 anyway.
That’s why it takes so long to build those things. Maybe someone has a magic trail in China, but in the West it’s just how long it takes. starting in January, February, is even a little trickier in Canada because it’s so bloodless in winter. Therefore, we have to classify the stages when we start the structure. But the structure itself is not, frankly, the element that grows or 25 26, are those pieces of long lead.
David Deckelbaum
That’s fine with me. Thanks for the color, Paul. At that time, my question at the moment was the hope of checking the percentage of volumes over market-based prices. I think about 70% of their volumes this year were fixed-price agreements. And that’s evident and that’s the kind of recommendation you give through Q4. And then certainly, I guess with the expansion, it’s a big number, I guess the additional volumes would be under new contracts, maybe I can give us a high-level concept of those combined adjustments and when that would happen.
Paul tombs
It’s simple. I think those contracts that we announced this year will be renewed next year, those volumes are still below a constant value next year. Additional volumes do not have, when they come with some, some changes here and there, in large part we are loose to sell at the value we want. We can do it under contract, we can sell them, frankly, at $79. 15, or whatever the last value in China is. This is a resolution we’ll make later this year when those products go live.
But it is almost certain that, even if we hire them, they will be securities exposed to the market. of the constant value contract has been removed for the past 12 months. I don’t think anyone will renew their contract and constant values. I think cash and necklaces will have a bigger role to play. But there will be a lot of flexibility in The market is worth the movements in ceilings and colors. And the explanation of why is very simple.
You can get away with a constant value, when the pressure on that value has never been too great, the market value is $3 more or $3 less. But when the market value is $10 to $10 more, there is too much tension around a constant value constant value contract. If you look at it, constant value contracts probably won’t be part of our industry, sometimes speaking, in my opinion. So, as constant value contracts, make a transfer, they will all be transferred to some form of place-based pricing in the market.
Operator
Next is from Steve Richardson’s line with Evercore ISI. Continue.
Steve Richardson
Good night. Thanks for the time. Paul, I wonder if you can also tell us, last quarter we communicated about the transaction with GM and the 3 sales or how you need to categorize it. I wonder if you can also communicate a little bit about conversations with your other consumers, and how that would possibly have replaced the tenor of conversations with your other potential consumers and your current consumers. Knowing that you have this long-term commitment and that you are your spouse with GM?
Paul tombs
Yes, it is an attractive model. I think there was, I will describe the other 3 types of consumers, there is the visitor who had the market for him alone for many years. And their reaction, which I think is in large part, as expected, as expected, that is, the market is evolving. A lot more festivals are coming and when the dates we’ve had with consumers go back so long, it’s an honest and open verbal exchange about where we are with each other. What does this mean and what is expected of this visitor as we move forward?
And what is expected of us, also with this consumer as it goes. Because consumers who have a contract with us relatively early in their relationship, frankly, get a little nervous, that means there possibly won’t be any more volumes for them in the long run. So, it’s helping our engagement with that consumer because it forces them to go in and perceive what our investment plans are, where they have compatibility with the investment plans. And also, what they can do to be more prominent in our long-term supply chain plans, which everyone needs to do.
And then there are the consumers that we don’t hire today and who were looking for us to provide them through us. And, frankly, I think it creates a little bit of panic and uncertainty on their part. Again, I don’t need to use the word depression because it’s not a valid word for what’s going on there. But it creates, I think, more fear than other people like Livent and I think others in the industry will not have 10 primary consumers, I think we will serve 3 or 4 and decide on the consumers that suit us most productively in several other parameters.
And so, a bit of a dating game, I think among the clients without a contract who should they consult to convince them to marry them.
Steve Richardson
It’s great. Very useful. One thing I was wondering, if you can explain or give us your reading, is the detail of critical mineral tax credits under the ERI, the language about the origin of the U. S. Could you explain your ability to comply with this and your customers?’ ability to meet this requirement with curtains from Argentina. It seems that there will be a broad reading of this. And that just means it’s not from China, but I was wondering if I could just explain why [several speakers].
Paul tombs
Not me. I think it’s going to be a very limited read. Take a look at the comments the Secretary of the Treasury recently made. I do not think that the interpretation of the wording will be broad, I think it will be quite narrow.
I think what’s interesting, I think people’s maximum reading is not only ours, but obviously our consumers also read it very consciously, that is, if the final product comes from a country with a flexible industrial agreement, then it will be eligible. , frankly lithium in that position is chili, carbonate from chile.
If the product is processed into a secondary product, a product that can be used in the United States, that will also qualify. Therefore, lithium carbonate from Argentina, in the city of Bessemer, was converted into lithium hydroxide, this lithium hydroxide is processed in the United States that will be eligible.
Australia’s spodumene concentrate, processed into carbonate or hydroxide in China will not qualify even though Australia has a loose industrial agreement. So it’s not as transparent and undeniable as you might think, in terms of lithium because you think it’s a credit to Australia. , however, the Australian-made product can’t be used in the United States, so you probably wouldn’t come here. The product manufactured in Argentina through us can at least be remodeled into a usable product. And so, although there is no loose industry deal with Argentina, it will really leave, as long as it goes through additional value-added processing in the United States.
Steve Richardson
That is a useful clarification. Thank you so much.
Operator
Next is from Christopher Parkinson’s line with Mizuho, move forward.
Christophe Parkinson
Great, thank you very much. Paul, can you temporarily go through the other projects and extensions and just say where you are, where you hope to be?And anything that can motivate more confidence and make them work over the next year or two, that would be very helpful. ? Thank you.
Paul tombs
Of course. So, first pump of 10,000 in Argentina, all carbonate, will be whole with 4 pieces, 3 of them will be finished in the next few weeks, the last one just after New Year, which means that we can start feeding this plan ourselves and we configure it and make it work, it will start producing, as we said at the quarterly time.
The momentary expansion of 10,000 tons, which was tied to the same infrastructure as this, which is much faster, will be completed mechanically later. Therefore, it will return to normal. And then we have another 20,000-ton expansion to come that will adhere to the mechanically completed one until the end of 2024.
Therefore, we have large portions overdue on the 22nd, 23rd and 24th in Argentina. We have just talked about Nemaska, which will be finished until the end of the 25th and will generate in 2026. We have the already completed Bessemer City expansion of 1,000 tons that will be operational and will produce and ship to consumers early next year. And then we have a 15,000-ton expansion in China for hydroxide, which will be completed by the end of 2023. And also an advertising contribution in early mid-2024.
Christophe Parkinson
And just to follow up quickly, I mean, you and others have funded a lot of strategic partnerships. I’m sure he’s happy with that, but now he’s had a chance to take a step back and see what you’ve already achieved. Is there anything else on the horizon that the street deserves in this regard?Are you happy with the ones you’ve already done in the last 12 to 18 months?Any color would be useful. Thank you.
Paul tombs
Are you interested in visitor engagement or. . . ?
Christophe Parkinson
Yes, commitments, if he is so [ph].
Paul tombs
Yes, yes, our commitments to our consumers and those we have made are far from vital enough to satisfy us. We just don’t have any more inventory to sell. And that’s why we’re very pleased with the consumers who aligned themselves with it. I think our commitment to them, their commitment to us, this openness. It’s simply. . . It was wonderful to see and we are very satisfied about it.
We would like to sell you more products. Our purpose is to supply them with many more products. Our purpose is to load maybe one or two more primary consumers, but first we want to expand our offering. Therefore, it is an intelligent bird and an egg. I think that’s why we hired them to help us as temporarily as we can expand our production footprint. We can also satisfy the origin desires of our existing consumers and one or two new consumers.
Operator
Questions from Graham Price’s line with Raymond James, please skip ahead.
Graham Prize
Good morning, good afternoon. Thank you for answering the question. To fulfill the above question, I guess the first one, approving expansion in Argentina, once it becomes available early next year, how long will it take to boost, to succeed in some kind of steady state?
Paul tombs
Yes, it is a little bit: frankly, it depends on the time of year, fortunately for us, this summer will go down, which means we can move the curtains regularly through the procedure and a month of 4 or five months, that does not mean it will take a month, just make sure that there are no leaks and that everything works takes a few months.
So I expect the team to produce apparatus that can be used in a hydroxide plant before the end of the current quarter.
Graham Prize
they gave it to me That makes sense. And then, regarding Bessemer City, he discussed that there is more expansion capacity there. I wondered, at the end of the day, what the maximum capacity would be and what would happen if I expanded it at that time.
Paul tombs
I think, I’m not sure there’s a limit, it’s a massive e. I mean, we used to grow there, and then two hundred acres, and for a moment we made 5000 space online next to the first one. But frankly I don’t think it is necessary to take a big step forward to raise multiples to Bessemer City, if we can try to solve the bigger problem, it is simply expensive to do so in the United States.
It’s all well and good to want fundamental production in the United States, but someone has to pay for it. That’s probably 10 times the capital to do it in China. And when you think that the nature of this specific beast is that it requires carbonate and therefore also wants to get carbonate from Argentina, spend a significant capital investment to grow. So it’s literally about whether consumers are willing to pay to make it worthwhile. I mean, we can continue to do that. I wouldn’t say all day, all year, but we can definitely do several iterations and Bessemer City if consumers are there for us.
Graham Prize
they gave it to me It’s useful. Thank you so much.
Operator
The next one comes from BMO’s Joel Jackson lineage. Continue.
Joël Jackson
Hello, Pablo, how are you? I will review this question, and maybe we will execute it or not.
Well, let’s say that point values stay where they are, for the next two years, that’s fine. In your opinion, what would be your average promotion value for your constant value to lock in for next year?values, what would be the gain of value realized through Livent from one year to the next in the 23rd instead of the 22nd?For example, can you give us an idea of where it is, please?
Paul tombs
I know you need me to do it with that. I’ll stick with that. But I’ll answer you next quarter, when we forecast for 23. It is going to be superior, in a sense, than it will be superior. But it’s not necessarily about the pricing environment, it’s about having more volume capacity. to promote at a higher price.
And I think over time, I don’t think the value you see in China is the benchmark value of lithium value over the long term. I don’t know, it’s just that it’s too volatile, it’s too variable. .
And much of the supply chain is now withdrawing from China in the long run. But over the next 3 or 4 years, everything will change. Forget that there are no capital factories in North America, there is limited capital capacity in Europe. Lithium is entering China today, for the most part.
That’s why it’s such a vital prize. And why if you’re in China with volumes without a contract, it’s a market, but never where we’ve been and I think if we were to target all of our consumers today, and that says we locked it up, you’re going to pay regardless of the value of China, I think we lose a lot of what we offer to those consumers in terms of reliability. predictability, partnership, and I think that has quite significant consequences for a company like ours that asks for wonderful visibility to know if the roadmap of electrification is that of our consumers, because it affects what we do, what we do, where we invest.
So I think, in fact, it will increase average values in our industry to the securities acquired next year, for those of us who have a multi-year visitor contract portfolio. which is worthwhile in China.
Joël Jackson
It is ok. I was given two parts of my consultation so far only about Nemaska. I think you said before that you were into investment options. I mean, do you want to start raising capital in the first quarter?How is the capital-intensive vision developed?And the question of the moment is that there is a lot of investor feedback because you know, okay, it’s as smart as it can be in lithium, right?You can not get more than 70,000 or tons, lithium. I agree. And a lot of things that other people will cite, because this is what’s coming, whether it’s battery inventories, cabinet inventories, the elasticity of European demand for electric vehicles, China, it’s over, it’s over. What would be your reaction to that?
Paul tombs
Yes, listen, I think we’re dealing with it. May’s answer is quite simple. I don’t think that in terms of average values achieved by Livent, nothing is as smart as it doesn’t even come close. And United talked about it. If China’s value went from $80, which other people are trading today, to next year, our learned average value would still rise significantly.
And probably, if it stayed there for a few years, our average learned value would increase for two or three years. It’s just an A service that brings more volume. And that volume will result in a higher average learned value than we saw in 2022, plus the fixed-value contracts I mentioned expire and are replaced by floating value contracts.
So, I don’t know if to generate genuine profits for the profitability of money generation, I don’t really think I’m as smart as it seems. If $80 is as smart as possible, our internal guide is that it goes much higher in the $80 quarter. We’ll see why, as one of my former bosses said, trees don’t grow to the sky. At some point, you have to prevent at some point, you have to prevent.
And I think it’s a bit masked, at a time when the strengthening of the US dollar means that costs are consistent in dollar terms while continuing to rise in RMB terms. There comes a time when you want to stop, but it’s probably not the fourth quarter of this year.
And Nemaska, I had already forgotten what it was.
Joël Jackson
It was, well, you have the capital, not the so-called capital, it’s going to start coming temporarily in the lot [ph], right?
Paul tombs
This will be the backend next year with the oldest but the first part of next year. We don’t expect to have any with some, I don’t think we have a fundraising requirement for the Nemaska era at any point in the project. , we are not going to see a giant business capital of the Livent type to finance Nemaska, it will come out with existing money flows, or more importantly, there are other investment resources, I mean Nemaska still autonomous, it will be fixed only investment as an IQ because shareholders will dictate if what their investment looks like, it will not be just every dollar that receives $ 0. 50, What they want to get an IQ of 50%. That’s how I would fund them.
Joël Jackson
Can I ask for another one on this? I think you will count on Nemaska on what basis do you call it a fair type of investment?Will it be like the Albemarle Greenbushes joint venture?tell us how you are going to continue in the Nemaska?
Paul tombs
It’s simple. Unlike other situations, there will be no source agreement between Nemaska and Livent. Nemaska is an autonomous company. So, we’re only going to build up our percentage of Nemaska’s profits until we consolidate it, we’re going to consolidate it at some point in the future. But until then, it will be fair that we capture 50% of Nemaska’s net profit, in a single article.
Joël Jackson
So there is no EBITDA? So, it won’t be an EBITDA, it will just be a net profit and EPS, right?
Paul tombs
It is known that mutual accounting is a net source of income, it will not be a proportional consolidation in the survey versus the declaration of the source of income, it will be a net source of income sensitive to a direct line.
Joël Jackson
Okay, thank you very much.
Paul tombs
But it doesn’t matter to all the businesses that Nemaska may not be generating or promoting in the next two or three years. So, to be honest, it’s a bit irrelevant. I hope that we will consolidate at this stage, I hope.
Operator
Next is from Kevin McCarthy’s line with Vertical Research Partners. Continue.
Kevin McCarthy
Yes, smart night. Paul, the issue of relocation has gained a lot of traction in the last two years. You went up five kilotons of hydroxide in North Carolina and you go up triple that amount or 15 kilotons in China, within a year.
I guess my query would be, how do you think the IRA will have an effect on long-term capital allocation?It seems that he has new credits in the United States. But I think he also commented, the capital spread is 10x. So when you look at long-term needs, how do you weigh those compensatory benefits and harms to figure out where to load capacity?
Paul tombs
Now, let me start by saying that I don’t think there will be a reaction to the IRA in other parts of the world. I suspect that the IRS itself could be the answer to the moves and incentives given in China. I don’t know if Europe is really going to have to look at itself about duration and what I’m sure it should be and what it doesn’t want. It does not seem to have a specific coherent policy and, in fact, does not seem to have a well-thought-out incentive design to identify itself in Europe, but it can also happen.
I think it’s a tough question, because I think other people are asking, well, you get pretty differentiated costs in line with the product. And it’s quite possible. I think you would possibly have other regional expectations about how much capital a consumer is obliged to give you to incentivize you to produce, it’s a big difference, however, it’s a big difference that’s going to have to be, it’s going to have to be resolved.
I think in lithium, and specifically in spaces like nickel, I’ll find it appealing, because some of the big production spaces can also double them and concentrate more on China and say, look, we just can’t deliver on that. It’s too much capital or because we don’t have a flexible industrial agreement. And China can also gain great advantages in the short term. And possibly there would be more investment in China and around China and processing. Because, frankly, if you’re generating Australian spodumene, and you’re reading together, keep sending it to China, or you have to build hydroxide capacity on land, we know how complicated it is in Australia, to serve the United States.
I don’t know if many Australian miners are very excited about the investment decisions they make. I think they have a tough head on it. And I suspect they will continue to ship to China.
Kevin McCarthy
Thank you, I thoughts.
Operator
Next is from Jeff Zekauskas’ line with JPMorgan. Continue.
Jeffrey Zekauskas
Thank you so much. Its sequential combined value during the quarter was 0. Is it true that 70% of the fixed-value contracts you had are longer?Is the base case situation that the effect on the income of those tons deserves to be 0 for the five quarters?And for 30%?Not resolved?How long?Should it stink? In other words, will it have to have sold ahead, I suppose, at a safe value or commitments made?Can you do that?
Paul tombs
Look at the bloodless dress. I’m not sure I perceive his point of view on selling futures. Listen, it’s undeniable. Let’s take a very undeniable example, if our combination of visitors between Q2 and Q3 was exactly the same, and I sold exactly the same proportion to my fixed price contract, and I have others. So those ratios are the same from one quarter to the next, my volume and the amount entering the market are also the same.
From the second to the third quarter, the values were not large, a little higher in the third quarter, but not much. Therefore, you expect that the composition of the value in this scenario will not be much different. If for some reason, you can see this in the fourth quarter, the number of fixed-value contracts increases, my preference will be transmitted downward unless there is a big jump in the market base to compensate, it will be transmitted down, to the right, because the combine is operating in the opposite direction to me at that point.
It’s frankly just math. I mean, I think that’s the danger of hunting on a quarterly basis. Why don’t we advise on a quarterly basis? We don’t run the business on a quarterly basis, we get lost on an annual basis.
So, I have a tendency to inspire other people not to become too obsessed with that piece. Although we are still on track for full-year forecasts, while in all our forecast types they relate to average learned costs and combination, etc. . , for the whole year, or what we have said and begged and asked you not to cling too much to construction or to get or read too much in quarterly movements, I have detected a tendency to do so. Trying to get more knowledge, more knowledge doesn’t necessarily give you greater resolution or understanding of our industry.
Jeffrey Zekauskas
Okay, I’ll review a longer-term question. I apologize if you are too naïve. What you said is that the prices of structures in North America are $10 compared to what they are in China. And when you look at your lithium hydroxide expansion in China, where you’re going up 15,000 tons by 25 million if we take that to 34,000 tons, that would be 56 million. And at the Nemaska plant for the hydroxide plant, capital expenditures are 650 and 750. So do we get 650 to 750 in Canada, what we get from 56 in China, or do we get something else?
Paul tombs
Fundamentally other projects, fundamentally other projects. You may not build in Quebec, in Canada, that Nemaska makes spodumene hydroxide for $56 million in China. I mean, it’s another scale. It’s another complexity. Our hydroxide carbonate plants are fairly straightforward processes that shouldn’t charge as much as they do in the United States.
They simply do their homework in Europe too. So you can’t compare the two, you can compare the factory in Bessemer City with a factory in China. And that’s where I communicate a difference of 8 to 10 times. And it’s probably gone down a little bit lately, China has gotten a little more expensive, and we’ve figured out more effective tactics to do that in the United States. But it is still five, six, seven times more and it is precisely the same plant, precisely the same capacities.
But as I said, don’t compare it to Canada at a fundamentally different time.
Jeffrey Zekauskas
Great, thank you very much.
Operator
The next one comes from the lineage of Deutsche Bank’s Corrine Blanchard, move on.
Corinne Blanchard
Hello, good afternoon. Thank you for taking the time. My first question, I would be able to implicitly interpret North Korea as Q. Then, the indications were more limited. But I think in one of the last slides of his presentation, the price of what is quoted in the third quarter and he discussed that he expects an increase in value. I’m just looking to reconcile, what kind of goals can we expect?for EBITDA?Do we expect flat EBITDA quarter-over-quarter?
Paul tombs
Yes, listen, I think that’s the diversity that leads. And he knows what our EBITDA has been since the beginning of the year and, obviously, for me, our diversity of EBITDA management will be less in the fourth quarter than in the third quarter. It reflects a lot of other things. It reflects the differences in the mix in the fourth quarter, it reflects: we have noticed more and more, shipping logistics at the end of the fourth quarter is difficult. Therefore, we do not recognize income until the income from the assignment has arrived. If the product remains under surveillance for another week, more than a year or two weeks, it can actually have an impact on revenue. We hope that will happen.
So, there’s a lot of other things happening in the fourth quarter that, frankly, reflect our details, are going to reflect the details of how our consumers take the products to where they take the product, what product it is.
And also the fact that it’s the end of the year. That’s right, I would describe that the general environment in the fourth quarter is probably more powerful than in the third quarter. I think the opportunity in the fourth quarter for us is stronger than it was in the 3rd quarter. But we are more limited to know to what extent we can take advantage of this opportunity in the fourth quarter compared to the 3rd.
Corinne Blanchard
Fine thank you. And then just the follow-up question. Change. On the other hand, I think we are starting to hear more and more considerations about the demand for electric cars in China until 2023. And, quite in the macro, I know you have commented a little, but what else?Have you had or noticed a sign of sweetness at the end of this year and next?
Paul tombs
My only comment on that is that when you have lithium expansion — I don’t know 5% 10%, quarter after quarter and you have battery demand or degrees of battery production between the second and third quarters double in China, I think yes, you have a lot of room for flexibility demand, in my opinion about electric cars in China. especially without making the slightest cut in excess demand due to oversupply. I haven’t noticed any evidence of a slowdown in China, I think with a lot of expectations, I think there’s a lot of nervousness in China about what COVID and other policies are doing in many general degrees of commercial production.
Electric cars haven’t been hit closely, as hard battery production hasn’t been as affected. More and more contracts are being signed with Chinese battery companies to export to Western cars. Therefore, it is not only the electric vehicle market in China that is driving battery production activity in China. So, it’s just one factor, it’s a confusing market. There are many portions moving.
We have yet to find many examples of a single metric that obviously has a decisive effect on lithium demand. Usually, there is another set of things that have an effect on our industry.
Corinne Blanchard
Thank you very much.
Operator
This concludes the Q&A portion of today’s call. I will now call Daniel Rosen for any final comments.
Daniel Rosen
Thank you so much. That’s all the time we have for today’s call. We will be available after the call to answer any other questions you may have. Thank you all and good evening.
Operator
This concludes Livent Corporation’s third quarter 2022 earnings convention call. Thank you, you can now log out.