Voor de liefhebbers van AMG.
Advanced Metallurgical Group (AMG)
Mar. 28, 2018 9:51 PM ET|Includes: Albemarle Corporation (ALB), ALTAF, AMVMF, AZZVF, FMC, GALXF, KDDRF, LAC, LGORF, LIT, OROCF, PILBF, PRPCF, SQM, TSLA, TWNAF, UMICY
A global critical materials company at the forefront of CO2 reduction trends.
AMG looks very interesting @ €35 per share. Shareprice dropped significantly last month, although results came in better than analyst consensus.
Average analyst consensus (AMG site) is € 52,4. That's aprox. 50% upside @ present share price.
AMG is starting lithium concentrate production in a few months. 90k ton spodumene a year in fase 1 & doubling that in 2020. Downstream LCE is expected in the future.
AMG is planning to expand it's Vanadium recycling business with 30% by the end of 2019.
AMG is divided in 2 main segments;
- Critical Materials; basically they mine, recycle or proces the following metals; Vanadium, Lithium , Tantalum & Niobium, Titanium & Aluminum alloys, Chrome/superalloys, Silicon, Antimony, Graphite.
- Engineering; They are the world leader in vacuum heat treatment services. Better known as 'ALD vacuum technologies'. They mainly serve automotive, aerospace, energy (including solar and nuclear), superalloys and specialty steel industries.
If you like more info about their businesses, this link is a good starting point!
AMG trades @ Euronext Amsterdam (NYSE:AMX). The ticker symbol is (AMG.AS). AMG reports its results in US$ but the stock trades in €.
I'm only going to cover a few (probably the most profitable) businesses within AMG.
AMG's most important mining activities are located in Brazil @ the Mibra mine. They are exploiting that (open pit) mine for more than 40 years. Tantalum & Niobium has been there most important ore for years. But several years ago they noticed that there were high degrees of lithium in that ore. So they started a pilot plant & stockpiled the tailings of the processed ore. 7 years later they are ready to start production. Official opening is planned the 15th of may. AMG's states that they are among the lowest cost hard rock producers, if not the lowest cost producer. AMG’s spodumene operating costs benefit from the production of tantalum concentrate, which absorb the costs of mining and initial ore processing (crushing and grinding), they target a production cost of 134$/ton. So with current prices of around 850-950$/ton for spodumene that is highly profitable! The lithium story is planned in 3 stages;
- Fase 1; 90 k ton spodumene. 3year 'variable' contract @ somewhere north of 800$/ton (related to some Chinese spot prices & with downside protection I assume)
- Fase 2; 90k ton spodumene + doubling Tantalum production to 600k lbs concentrate + expanding of the mine infrastructure. The Capex for this project will come in @ around $ 110M. MGMT said they were in negotiations for an off take agreement. (last conference call)
- Fase 3; Downstream Lithium. This project is progressing well, they already got a site location & are under negotiation with (local) Brazilian governments. AMG seeks for stable LT contracts. AMG expects LCE production costs of aprox. 4000$/ton.
the life of mine would be aprox. 20 years, but I expect more drilling to come in the future.
You can find more info in this presentation.
Tantalum mining & processing
It's a bit comparable to the Cobalt story, most of the world supply comes from (illegal) mining in Congo, Rwanda & Burundi. AMG delivers conflict free Tantalum & that is an asset these days! There were some issues last year, such as a fire in 1 of the 2 production lines & a contract termination by 'GAM'. AMG did not agree with the decision of GAM & this story is going to be continued in court. The production line is back on steams since the end of september & insurance paid all the damage done. In the meanwhile AMG has sold al it's Tantalum in a 1year contract. I guess they don't want to sell on a long term contract, cause of the 'GAM' courtcase. The GAM-contract was very profitable, rumors say it came @ 130$/lb. Spot prices were 96$/lb on the 2nd of march according to AMG's latest presentation. That's 14% higher than the average for Q4 17.
One of the main uses of tantalum is in the production of electronic components, mainly portable electronics.
an older Roskill report on Tantalum; (the info on AMG is wrong though :) )
AMG Vanadium is the sole producer/recycler of FeV in North America. They have LT contracts to process and recycle spent catalysts from a major oil refinery in North America. This is a very cost effective & environmentally friendly way to process FeV. Since there are no competitors left in NA, AMG Vanadium must be doing something right?! AMG has LT contracts with downside protection, so that's very interesting to stay profitable when prices are on the lower side. @ current prices of 34 to 35$/lb, AMG will make a load of money. This business was highly profitable during 2017 when the average price was aprox 15,4$/lb. The great news is that AMG will expand it's business with 30% by the end of 2019 (if they get environmental approval, I don't expect any problems there since it's a critical material to the USA). Dutch bank ING, expects it to impact Ebitda with $ 12,5M in case FeV prices normalize & with $ 27,5M if prices stay high, prices were aprox. 27$/lb when their analyst spoke to the newspaper. So if prices remain where they are. There would be even more upside!
Why are Vanadium prices that high? It's a mixture of reasons; Chinese environmental restrictions which lowers the output significantly, new rebar standards in China & higher demand for Vanadium redox batteries.