Sustainability

From the CEO

As regard to the COVID-19 crisis and the resulting societal and economic impacts, we want to be careful with predictions. We do not know whether the pre-crisis global work “order” will return to a kind of “old normal,” or go on to a “new normal,” and if so, what that would look like. At AMG, we have established a systematic approach to continuously update carefully selected scenarios for monitoring our forward-looking results. This scenario-based planning approach seems to be appropriate in the current environment, especially in trying to prepare for alternative longer-term economic outcomes of the COVID-19 crisis.

The world’s greatest intellects are now appropriately focusing their ingenuity on defeating the coronavirus. The search for a vaccine or cure to this pandemic has taken center stage on a global scale. Although we cannot say how or when, the determination of our finest is sure to meet the challenge and provide a solution to this blight. We are aware that our specialty, critical materials, will not likely play a key role in that solution and therefore it is imperative that despite the near-term emergency, that we remain focused on our mission of CO₂ reduction. This challenge, though longer in term, is of no less significance than it was prior to the outset of the pandemic. We are convinced that critical materials will play a defining role in addressing the long-term crisis of global warming. The short-term unpredictability we face today is only matched by the certainty that we face in the long-term existential crisis posed by climate change. We will not lose focus on our mission as this is where our contribution to the world will be felt.

The AMG Portfolio: We believe that AMG, as a portfolio of nine niche market leaders in critical materials and related technologies, is prepared to survive severe downturns. We lead our niche markets, we are the low-cost producer in our markets, we are the process technology leader, we are the lead innovator, we are end market diversified, and we know our industries deeply.

 

When we formed AMG, we had acquired a portfolio of critical materials producers and related technology assets which would serve the biggest societal trends of our times, namely energy transition and the urgent need to save energy. We integrated these assets into AMG. Our assets include unique access to resources, sometimes in remote locations; proprietary process technologies; and long standing and solid customer relationships. In their niche markets, the acquired companies—without exception—are global market leaders. It turned out that our customers, the global industrial names, have been targeting the same trends we were targeting.

 

CO₂: Energy transition and energy saving have a special place in our portfolio. The functionality of this is captured by a powerful equation: CO₂ emissions are a function of population growth, growth of affluence, changes in the carbon intensity of energy production, and energy efficiency. From day one we defined our role in this equation. AMG is to provide critical materials and related process technologies to advance a less carbon intensive world.

 

More than 5 years ago we started to develop a methodology to measure the CO₂ reducing impact our products and services have on the CO₂ emissions of our customers. The primary motive was to provide an empirical basis for our claim to be assisting clean energy production and energy saving. Over time we refined these methodologies also with the help of third parties, such as ERM. For 2019, we were pleased to announce that the net impact of AMG on global CO₂ emissions is a savings of 67 million tons. That is an amazing result of which we are extremely proud.

 

The COVID-19 Crisis and Strategy Adjustments: As regard to financial stability, the resilience of the AMG portfolio can be illustrated by the fact that all of our nine business units were EBITDA positive in 2019, albeit at a low level given the historically depressive price levels. We have repeated that in Q1 2020 and are planning to do it again for full year 2020, subject, of course, to what I said earlier about predictability. Second, we have a strong balance sheet with sound liquidity and our number one priority is to keep it that way.

 

AMG’s long-term strategy of value creation was amended in 2019 by three transformational projects. First, we increased our presence in the circular economy by approving the project to double our refinery waste recycling capacity, and therefore double our secondary production of vanadium, molybdenum, and nickel in Ohio. This expansion was facilitated by the issuance of bonds in the U.S. tax-exempt market, generating a total of $325 million in proceeds through the Ohio Air Quality Development Authority. Second, we decided to build a lithium hydroxide plant in Germany. And third, we formed AMG Technologies by combining AMG Engineering and AMG Titanium Alloys & Coatings.

 

Vanadium and Circular Economy: Two parameters have driven the growth prospects of AMG’s vanadium secondary recovery projects; one is the IMO2020 legislation prohibiting high sulfur fuels for maritime use; the second being the strategic decision of crude oil-producing countries to move downstream and build refineries instead of exporting crude oil. These two trends have led to a significant increase in the demand for “fresh” catalysts and that implies an increase in “spent” catalysts generation. That is the basic space of activity for the newly formed Shell AMG Recycling B.V., offering state-of-the-art recycling options for vanadium containing refinery waste worldwide. Our studies have quantified the substantial advantages of extracting vanadium from refinery waste, compared to primary mining, both in terms of CO₂ footprint and cash costs.

Energy Storage and Renewable Energy: Renewable energy expansion requires a proportionate expansion of electricity storage capacity. That is because renewable energy production is highly volatile. Wind blows, or it does not. The sun shines, or it does not. Traditionally, large scale stationary electricity storage has been provided by hydro pump stations, pumping water up during the night using surplus electricity from continuous fossil fuel power plants and releasing electricity during the day. In the renewable energy world, that does not work, especially given the growth in electric vehicles (EV). The sun does not shine at night. The wind might not blow. EV drivers come home and charge their cars overnight. This completely upends the supply-demand balance that made hydro storage facilities feasible. Going forward, vanadium batteries are the most competitive solution for battery-based electricity storage systems. This is a transformational market opportunity for AMG and the Shell AMG joint venture since we are expanding the vanadium supply. We will produce less ferrovanadium and more vanadium oxide for use in batteries.

Lithium Hydroxide Refinery: The LiOH refinery in Zeitz, Sachsen-Anhalt, Germany, is being designed and will be operated using cutting edge technology in order to be energy and cost efficient while minimizing its CO₂ footprint. The refinery will produce battery-grade hydroxide, targeting the emerging European lithium ion battery industry. The location of the refinery in the heart of Europe will also help the environmental impact of long-haul transportation. Mid- to long-term, our lithium value chain concept from mining to battery pack assembling will eliminate shipping of highly dilutive lithium equivalents such as spodumene ore over long distances. To have such a plant nearby also increases the supply security of our customers and provides for a more intensive communication between supplier and customer.

AMG Technologies: The formation of AMG Technologies, combining AMG Engineering (“ALD”) and AMG Titanium Alloys & Coatings (“TAC”) in 2019 under a joint management structure, has been in the making for quite some time. The breakthrough innovation of titanium aluminides was the result of many years of collaboration between the units. ALD vacuum furnaces are the core of AMG TAC’s plant after all. The specific strategic targets of the new company include the acceleration of furnace technology development by combining engineering and operating expertise; the offering of furnace solutions for metal conversion in the form of Build-Own-Operate models as practiced in heat-treatment for some time; and the expanding of the scope of our engineering services beyond vacuum furnace technology such as the building of recycling facilities based on proprietary technologies of AMG TAC.

Summary: AMG’s mission is to provide critical materials and related process technologies to advance a less carbon intensive world.

AMG is dedicated to long-term value creation. We are operating a portfolio of market leaders. Our balance sheet is strong. The significant Ohio investment, doubling our vanadium recycling capacity, is financed by a special bond facility with a very long maturity and a low fixed interest rate. Our growth projects in recycling and lithium chemicals are proceeding as planned. AMG Technologies is operating with a high backlog and we see the current challenges facing the aerospace industry receding later in 2021/2022. In the COVID-19 times, our short-term priorities are cash and liquidity preservation, but we have not lost focus on our long-term mission which is evidenced by the transformational strategic projects detailed above.

Dr. Heinz C. Schimmelbusch
Chief Executive Officer

About AMG & Our Report

Sustainability Strategy & Governance

Stakeholder Engagement & Materiality

External Initiatives

GRI Content Index