Q2 2026 Sociedad Quimica y Minera de Chile SA Earnings Call
Operator: Good day, everyone, and thank you for standing by. Welcome to the SQM Q2 2026 conference call. At this time, all participants are in a listen-only mode. After the presentation, there will be a question and answer session. To ask a question, you will need to press star 11 on your telephone. You will then hear a message advising your hand is raised. To withdraw the question, press star 11 again. Please be advised that today's conference is being recorded. Now it is my pleasure to hand the conference to Megan Suitor with investor relations. Please proceed.
Speaker #1: Good day, everyone, and thank you for standing by. Welcome to SQM's second quarter 2026 conference call. At this time, all participants are in a listen-only mode.
Speaker #1: After the presentation, there will be a question-and-answer session. To ask a question, you will need to press *11 on your telephone. You will then hear a message advising that your hand is raised.
Speaker #1: To withdraw the question, press *11 again. Please be advised that today's conference is being recorded. Now, it's my pleasure to hand the conference over to Megan Suter with Investor Relations.
Speaker #1: Please proceed.
Speaker #2: Good day, and thank you for joining SQM's earnings conference call for the second quarter of 2026. This call is being recorded and webcast live.
Megan Suitor: Good day, and thank you for joining SQM's earning conference call for Q2 2026. This call is being recorded and webcast live. Our earnings press release and the accompanying results presentation are available on our website, where you can also find a link to the webcast. Today's participants include Mr. Ricardo Ramos, Chief Executive Officer, Mr. Gerardo Illanes, Chief Financial Officer, Mr. Carlos Díaz, CEO of Novandino, Mr. Pablo Altimiras, CEO of the Iodine and Plant Nutrition Division, and Mr. Mark Fones, CEO of the International Lithium Division.
Speaker #2: Our earnings press release and the accompanying results presentation are available on our website, where you can also find a link to the webcast. Today's participants include Mr. Ricardo Ramos, Chief Executive Officer; Mr. Gerardo Yanez, Chief Financial Officer; Mr. Carlos Diaz, CEO of Novandino; Mr. Pablo Altimiras, CEO of the Iodine and Plant Nutrition Division; and Mr. Mark Fons, CEO of the International Lithium Division.
Speaker #2: Also joining us today are members of our Commercial and Business Intelligence teams: Mr. Felipe Smith, Commercial Vice President of Novandino; Mr. Pablo Hernández, Vice President of Strategy and Development of Novandino; Mr. Juan Pablo del Hoyo, Commercial Vice President for Plant Nutrition and Specialty Products; Mr. Álvaro Arraya, CFO of the International Lithium Division; Mr. Andrés Fontanas, Commercial Vice President of the International Lithium Division; and Mr. Max Fial, Head of Studies of the International Lithium Division.
Megan Suitor: Also joining us today are members of our commercial and business intelligence teams, Mr. Felipe Smith, Commercial Vice President of Novandino, Mr. Pablo Hernández, Vice President of Strategy and Development of Novandino, Mr. Juan Pablo Bellolio, Commercial Vice President for Plant Nutrition and Specialty Products, Mr. Álvaro Araya, CFO of the International Lithium Division, Mr. Andrés Fontannaz, Commercial Vice President of the International Lithium Division, and Mr. Max Vial, Head of Studies of the International Lithium Division. Before we begin, please note that statements made during this call regarding our business outlook, future economic performance, anticipated profitability, revenues, expenses, and other financial items, along with expected cost synergies and product or service line growth, are considered forward-looking statements under US federal securities laws. These statements are not historical facts and are subject to risks and uncertainties that could cause actual results to differ materially.
Speaker #2: Before we begin, please note that statements made during this call regarding our business outlook, future economic performance, anticipated profitability, revenues, expenses, and other financial items, along with expected cost synergies and product or service line growth, are considered forward-looking statements under U.S. law.
Speaker #2: Federal securities laws. These statements are not historical facts and are subject to risks and uncertainties that could cause actual results to differ materially. We assume no obligation to update these statements except as required by law.
Megan Suitor: We assume no obligation to update these statements, except as required by law. For a full discussion of forward-looking statements, please refer to our earnings press release and presentation. With that, I will now turn the call over to our Chief Executive Officer, Mr. Ricardo Ramos.
Speaker #2: For a full discussion of forward-looking statements, please refer to our earnings press release and presentation. With that, I will now turn the call over to our Chief Executive Officer, Mr. Ricardo Ramos.
Speaker #3: Thank you. Good morning, and thank you for joining us today. I'm pleased to report SQM's second quarter results, which reflect a strong performance across our main business lines.
Ricardo Ramos: Thank you. Good morning, and thank you for joining us today. I am pleased to report SQM's Q2 results, which reflect a strong performance across our main business lines. I would like to start by highlighting an important milestone for our lithium operations in Chile. In July, Novandino Litio, our association with Codelco, submitted the environmental and technical documentation for the Salar Futuro project to the authorities. Salar Futuro represents the next stage in the transformation of our operations in the Salar de Atacama, subject to the required approvals. The project contemplates approximately USD 3 billion of investment over seven years, and is designed to increase production while significantly reducing the environmental footprint of our operations. I would also like to highlight the contribution that our operations make to Chile.
Speaker #3: I would like to start by highlighting an important milestone for our lithium operations in Chile. In July, Novandino Lithium, our association with Codelco, submitted the environmental and technical documentation for the Salar Futuro project to the authorities.
Speaker #3: Salar Futuro represents the next stage in the transformation of our operations in the Salar de Atacama, subject to the required approvals. The project contemplates approximately $3 billion of investment over seven years and is designed to increase production while significantly reducing the environmental footprint of our operations.
Speaker #3: I would also like to highlight the contribution that our operations make to Chile. During the first half of this year, SQM and its subsidiaries accrued more than $1.6 billion in payments to the Chilean government, including taxes, contributions to local governments, and payments to Corfo.
Ricardo Ramos: During the H1 of this year, SQM and its subsidiaries accrued more than USD 1.6 billion in payments to the Chilean government, including taxes, contribution to local governments, and payments to Corfo. Moving to the lithium market, we achieved record quarterly sales volumes of more than 84,000 metric tons of lithium carbonate equivalent from our operations in Chile through Novandino Litio, and in Australia through Covalent Lithium. As anticipated in our previous earnings report, lithium prices increased during Q2, supported by a stronger-than-expected market demand. We now expect global lithium demand to exceed 2.1 million metric tons in 2026. We continue to expand our production capabilities in both Chile and Australia. In Chile, we expect Novandino Litio to produce between 280,000 and 290,000 metric tons of lithium carbonate equivalent this year, and to have approximately 300,000 metric tons of production capacity by next year.
Speaker #3: Moving to the lithium market, we achieved record quarterly sales volumes of more than 84,000 metric tons of lithium carbonate equivalent from our operations in Chile, through Novandino Lithium, and in Australia, through Covalent Lithium.
Speaker #3: As anticipated in our previous earnings report, lithium prices increased during the second quarter. Supported by strong and expected market demand, we now expect global lithium demand to exceed 2.1 million metric tons in 2026.
Speaker #3: We continue to expand our production capabilities in both Chile and Australia. In Chile, we expect Novandino Lithium to produce between 280,000 and 290,000 metric tons of lithium carbonate equivalent this year, and to have approximately 300,000 metric tons of production capacity by next year.
Speaker #3: In Australia, together with our partner Wesfarmers, we recently announced the expansion of the Mount Holland mine and concentrator, which is expected to double its spodumene concentrate production capacity to approximately 350,000 metric tons per year, corresponding to SQM's share of the project.
Ricardo Ramos: In Australia, together with our partner, Wesfarmers, we recently announced the expansion of the Mount Holland Mine and Concentrator, which is expected to double the spodumene concentrate production capacity to approximately 350,000 metric tons per year, corresponding to SQM's shares of the project, with first production expected in 2030. These investments reflect our long-term view of the lithium market and our confidence in the fundamentals of the energy transition. Moving to iodine, we once again delivered good results, supported by robust market demand and favorable pricing. We expect demand to remain robust. Our seawater pipeline is currently in its commissioning phase and will provide additional flexibility to optimize our production and respond to market conditions. We are now producing iodine from our four different operations, and we expect total iodine production to reach approximately 15.5 thousand metric tons this year.
Speaker #3: With first production expected in 2030, this investment reflects our long-term view of the lithium market and our confidence in the fundamentals of the energy transition.
Speaker #3: Moving to iodine, we once again delivered good results, supported by robust market demand and favorable pricing. We expect demand to remain robust. Our seawater pipeline is currently in its commissioning phase, and it will provide additional flexibility to optimize our production and respond to market conditions.
Speaker #3: We are now producing iodine from our four different operations, and we expect total iodine production to reach approximately 15,500 metric tons this year. Turning to the specialty plant nutrition segment, we delivered another strong quarter, supported by higher sales prices and volumes.
Ricardo Ramos: Turning to Specialty Plant Nutrition, we delivered another strong quarter, supported by higher sales prices and volumes. We continue to expect full-year sales volumes to increase by approximately 10% compared to 2025. Market conditions have benefited from supply constraints in certain markets, and we expect these conditions to gradually normalize toward the end of the year. Finally, we have updated our capital expenditure outlook. We now included 2028, and we expect approximately total capital expenditures of approximately USD 3 billion over the three years 2026-2028 period. This investment is mainly focused on supporting future growth and enhancing the competitiveness of our operations through lower production costs. Overall, we are encouraged by the performance delivered during the H1 of the year and remain focused on executing our growth plans and creating long-term value for our shareholders.
Speaker #3: We continue to expect full-year sales volumes to increase by approximately 10% compared to 2025. Market conditions have benefited from supply constraints in certain markets, and we expect these conditions to gradually normalize toward the end of the year.
Speaker #3: Finally, we have updated our capital expenditure outlook. We now include 2028, and we expect total capital expenditures of approximately $3 billion over the three-year 2026 to 2028 period.
Speaker #3: This investment is mainly focused on supporting future growth and enhancing the competitiveness of our operations through lower production costs. Overall, we are encouraged by the performance delivered during the first half of the year and remain focused on executing our growth plans and creating long-term value for our shareholders.
Speaker #3: With that, I will turn the call over, and we can go to the operator for the Q&A. Thank you.
Ricardo Ramos: With that, I will turn the call, and we can go, operator, to the Q&A. Thank you.
Speaker #1: Thank you so much. Ena, a reminder: if you do have a question, simply press star 11 to get in the queue and wait for your name to be announced.
Operator: Thank you so much. As a reminder, if you do have a question, simply press star one one to get in the queue and wait for your name to be announced. To withdraw your question, press star one one again. One moment, please. Our first question is from Joel Jackson with BMO Capital Markets. Please proceed.
Speaker #1: To withdraw your question, press star 11 again. One moment, please. Our first question is from Joel Jackson with BMO Capital Markets. Please proceed.
Speaker #4: Hi, thank you. I'm going to ask a couple of questions one by one. Can you talk about Q3 for a second? If I look at Q3 for the lithium segment, you're guiding to prices about flat, and volumes seem like about flat as well.
Joel Jackson: Hi. Thank you. I am going to ask a couple questions one by one. Can you talk about Q3 for a second? If I look at Q3 for the lithium segment, you are guiding to prices about flat. Volumes, seems like about flat. Costs, I had a question about, because costs stepped down a lot in Q2. Should we expect Q3 lithium earnings gross margin to be about the same as Q2?
Speaker #4: And then, cost—I had a question about, because cost stepped down a lot in Q2. Should we expect Q3 lithium earnings, gross margin, to be about the same as Q2?
Felipe Smith: Hello, Joel. This is Felipe. I will comment about the Novandino part, of course. So yeah, indeed, we had a very good Q2. We are very enthusiastic about how the market is doing. Regarding Q3, first of all, in terms of sales volume, we expect Q3 2026 to remain strong, in line with Q2. Okay? In terms of the price, I would say that the average price based on the indexes, because you know that our contracts are all based on indexes, and indexes are well-known. Based on that, we believe that the price of Q3 should be more or less in line with what we saw as the average of the first semester. Again, nobody can predict where the indexes are going. It is a very volatile market today. Still difficult to predict prices too long.
Speaker #3: Hello, Joel. This is Felipe. I will comment about the Novandino part, of course. So, yeah, indeed, we had a very good second quarter. We are very enthusiastic about how the market is doing.
Speaker #3: Regarding Q3, first of all, in terms of sales volume, we expect Q3 2026 to remain strong in line with Q2, okay? And in terms of the price, I would say that the average price, based on the indexes—because you know that our contracts are all based on indices, and indices are well known.
Speaker #3: Based on that, we believe that the price in Q3 should be more or less in line with what we saw as the average of the first semester.
Speaker #3: But again, nobody can predict the volatile market today. Still, it's difficult to predict prices too far ahead.
Carlos Díaz Ortiz: Hi Joe, this is Carlos Díaz. Regarding you asking about the cost. Well, mainly we have been working harder the last year in continuous efficiency and improvement process. That together with the economy of scale as we have been increasing the production level, we have been constantly being able to make a cost improvement. But in Q3, we expect similar costs that we already got in Q2. But at this year, at least 2026, it should be lower compared with last year.
Speaker #5: Hi, Joel. This is Carlos Diaz. Regarding what you asked about the cost, no? Well, mainly, we have been working hard in the last year on continuous FCC efficiency and improvement processes.
Speaker #5: And that is together with the economies of scale, as we have been increasing the production level, we have been constantly able to make cost improvements.
Speaker #5: So, in Q3, we expect similar costs to what we already saw in Q2. However, this year, at least in 2026, costs should be lower compared with last year.
Speaker #4: Okay, thank you for that. I want to ask about price realizations between Novandino and international Australia. I understand some of the math that works with tolling and things like that.
Joel Jackson: Okay. Thank you for that. I want to ask about price realizations between Novandino and International Australia. I understand some of the math that works with toll and things like that, but the premium, the Chile AS, the Novandino average selling price is really expanding. Like the discount, the premium of Novandino average selling price, the premium is really widening versus international. Should we expect a catch-up in Q3? Even if Novandino average selling price is about the same in Q3, should we not expect international selling price to catch up, like go up, and the gap to reduce?
Speaker #4: But the premium—the Chile AS, the Novandino average selling price—is really expanding. The discount, or premium, of the Novandino average selling price is really widening versus international.
Speaker #4: Should we expect a catch-up in Q3, even if Novandino average selling price is about the same in Q3? Should we not expect international selling prices to catch up, like go up and the gap to reduce?
Andrés Fontannaz: Hey, Joe, this is Andrés Fontannaz from SQM International. Well, most of our sales are based on spodumene concentrate, so in order to compare, you need to add some conversion costs and also to take into consideration the conversion yield. So, that's where the main difference is. At the end, what matters the most, that we are also following the market. These shipments that are discrete, because not every month we have sales. All these shipments are following market conditions at the moment of shipment.
Speaker #3: Hey Joel, this is Andrés Fontanaz from SQM International. Well, you know, most of our sales are based on selling in concentrate. So, in order to compare, you need to add some conversion costs and also take into consideration the conversion yield.
Speaker #3: So that's where the main difference is. And in the end, what matters most is that we are also following the market. These shipments are discrete, because not every month we have sales. All these shipments are following market conditions at the moment of shipment.
Speaker #4: That's the point of my question, though. The spodumene average selling price, by your own numbers, increased by $600 from Q1 to Q2. From Q1 to Q2, spodumene went up $600 a ton.
Joel Jackson: That's the point of my question, though. The spodumene average selling price by your own numbers increased by $600 from Q1 to Q2. Spodumene went up, $600 a ton price, Q1 to Q2, but your LCE equivalent international selling price barely went up. That's what I'm confused about.
Speaker #4: From Q1 to Q2, your average LCE-equivalent international selling price barely went up. That's what I'm confused about.
Speaker #3: Yes, well, as we commented before, our prices are affected by the timing of the shipments. Again, not every month we are having shipments. And as I said, in the coming quarters, you will see this better reflected in our price reporting.
Carlos Díaz Ortiz: Well, as we commented before, our prices are affected by the timing of the shipments. Again, not every month we are having shipments. As I said, in the coming quarters, you will see this better reflected in our price reporting.
Speaker #4: Let's ask one more question, to be greedy. So, you've raised your lithium demand expectations for the full year by 200,000 tons. I imagine you're going to tell us it's all on the demand side, all from energy storage.
Joel Jackson: I will just ask one more question to be greedy. So you have raised your lithium demand expectations for the full year by 200,000 tons. I imagine you are going to tell me on the demand side, it is all from energy storage. Where is the extra 200,000 tons of supply coming from? Is that restarts in Australia? Is that Africa? Is that lepidolite in China? Where is the extra 200,000 tons of supply coming this year to meet the growing demand?
Speaker #4: Where is the extra 200,000 tons of supply coming from? Is that restarts in Australia? Is that Africa? Is that in China? Where is the extra 200,000 tons of supply coming from this year to meet the growing demand?
Speaker #3: Hey Joel, this is Pablo Hernandez speaking. So, of course, these are just our estimations, so we cannot predict what's actually happening fully in the market.
Pablo Hernández: Hey, Joel, this is Pablo Hernández speaking. Of course, these are just our estimations, so we cannot predict what is actually happening fully in the market. But we believe there is some increase of supply mainly coming from China, both from spodumene and brine, but also some ramp-up projects in Africa and Argentina. Of course, as you have heard, because of the current price scenario, there are some restarts in Australia also as well coming into the market.
Speaker #3: But we believe there's some increase in supply, mainly coming from China, both from spodumene and brine, but also some ramp-up projects in Africa and Argentina.
Speaker #3: And of course, as you've heard, because of the current price scenario, there are some restarts in Australia also coming into the market as well.
Speaker #4: Thank you very much. Thank you.
Joel Jackson: Thank you very much. Thank you.
Speaker #1: Thank you. One moment for our next question, which comes from Isabella Simonato with Bank of America. Please proceed. Isabella, your line is open.
Operator: Thank you. One moment for our next question that comes from Isabella Simonato with Bank of America. Please proceed. Isabella, your line is open.
Isabella Simonato: Hi. Good afternoon, everyone. Do you hear me?
Speaker #2: Hi, good afternoon, everyone. Can you hear me?
Speaker #1: Yes, please proceed.
Operator: Yes, please proceed.
Speaker #2: Thank you. Hi, everyone. Thank you. I have two questions. First, it's still on the lithium market, right? I believe you guys are ramping up production in Novandino faster than initially expected when the deal was signed.
Isabella Simonato: Thank you. Hi, everyone. Thank you. I have two questions. First, still on the lithium market. I believe you guys are ramping up production in Novandino faster than initially expected when the deal was signed. I wonder if you could update us on, and you mentioned about 300,000 tons next year, but beyond that and when the new concession starts in place, what could be a feasible production level, especially when Salar Futuro is in place, in terms of annual production? That would be my first question. My second question on the iodine market. It was a pretty good quarter in terms of volumes as well as prices, and you mentioned some sort of slowdown in sales, I think as more supply is coming.
Speaker #2: So I wonder if you could update us on—and you mentioned about 300,000 tonnes next year—but beyond that, and when the new concession comes into place, what could be a feasible production level, especially when Solar Futuro is in place, in terms of annual production?
Speaker #2: That would be my first question. And my second question on the iodine market—right? It was a pretty good quarter in terms of volumes as well as prices.
Speaker #2: And you mentioned some sort of slowdown in sales. I think as more supply is coming, can you elaborate a little bit on where this supply from third parties is coming to the market, and what that could mean in terms of prices for the second half?
Isabella Simonato: Can you elaborate a little bit on where this supply from third party is coming to the market and what that could mean in terms of prices for the H2? Thank you.
Speaker #2: Thank you.
Carlos Díaz Ortiz: Hi, Isabella. Sorry, this is Carlos Díaz again. Well, this year, as our CEO said before, we expect to produce around 280,000 to 290,000 metric tons. Looking ahead, growth will initially be more motivated as we continue reducing the price structure. Specifically for next year, we expect a production close to 300,000. For the coming year, we are still studying different initiatives in order to keep and to increase a little bit the production. But you have to have in account that we have been reducing the price structure. So it is an exercise we are not ready yet. So in the coming, probably, call conference that we can share with you.
Speaker #5: Hi, Isabella? Sorry, this is Carlos Diaz again. Well, this year, as our CEO said before, we expect to produce around 280,000 to 290,000 metric tonnes, and looking ahead, growth will initially be moderated as we continue reducing the price structure.
Speaker #5: Specifically for next year, we expect a production close to 300,000. And for the coming year, we're still starting different initiatives in order to keep and to increase a little bit the production, but you have to take into account that we have been reducing the pricing structure.
Speaker #5: So, it's an exercise we are not ready for yet. In the upcoming call or conference, we can share it with you.
Pablo Altimiras: Hello, Faiona. Pablo Altimiras speaking. Well, regarding your question about the iodine and the new supply, again, this is our estimations, but we believe that the main supply could arrive from projects here in Chile. We see a particular new project that is coming, it is a project of Caliche Oro. Respective to the amount of product that will come into the market, actually, we do not know, but we expect that they will provide more product. That is the reason why we believe that our sales volume this year will be similar to what we see last years. Of course, if something different happens with the supply, well, we could potentially see more sales in our case, but everything will depend on the supply and demand.
Speaker #3: Hello, Isabella, Pablo speaking. Well, regarding your question about the iodine and the new supply, again, these are our estimations, but we believe that the main supply could arrive from projects here in Chile.
Speaker #3: We see a particular new project that is coming. It's a project of Caliche Ore. Regarding the amount of product that will come into the market, we actually don't know, but we expect that they will provide more product.
Speaker #3: That's the reason why we believe that our sales volume this year will be similar to what we saw last year. Of course, that is unless something different happens with the supply.
Speaker #3: Well, we could potentially see more sales in our case, but everything will depend on supply and demand.
Speaker #2: Just thank you very much. But just a final comment on the iodine. But do you think that if you can you quantify a little bit what this new project in Chile means in terms of volumes?
Isabella Simonato: Thank you very much. Just a final comment on the iodine. Can you quantify a little bit what this new project in Chile means in terms of volumes? Again, any significant disruption in terms of supply, demand, and ultimately prices?
Speaker #2: And again, any significant disruption in terms of supply, demand, and ultimately, to prices?
Speaker #3: It is important to note that we have seen good demand. Our demand forecast for this year is that growth will be around 3%.
Pablo Altimiras: What is important to remain that we have seen a good demand. Our demand forecast for this year is that the growth will be around 3%. We expect that the new capacity that will come into the market will compensate that growth, but we don't see more than that.
Speaker #3: So we expect that the new capacity that will come into the market will compensate for that growth, but we don't see more than that.
Speaker #2: Great. Thank you very much.
Isabella Simonato: Great. Thank you very much.
Speaker #1: Thank you. Our next question comes from Emerson Viera with Goldman Sachs. Please proceed.
Operator: Thank you. Our next question comes from Emerson Vieira with Goldman Sachs. Please proceed.
Speaker #4: Hello, good morning. Thanks for your time. I have a couple of questions here. First, can you please break down the expected production capacity increase to 300,000 tons in 2027?
Emerson Vieira: Hello, good morning. Thanks for the time. A couple of questions here. First, can you guys please break down on expected production capacity increase to 300,000 tons in 2027? I mean, how much is coming from Chile, given that you are converting the hydroxide plant? How much is coming from tooling contracts? That's the first question. I have some follow-ups.
Speaker #4: I mean, how much is coming from Chile, given that you are converting the hydroxide plant? And how much is coming from tooling contracts? That's the first question.
Speaker #4: And I have some follow-ups.
Carlos Díaz Ortiz: Well, first of all, our production is coming from the Salar de Atacama in two different ways. One is a lithium chloride that is refined in Chile and lithium sulfate we are refining in China. So what I said before, this year we expect 280,000 to 290,000, and for next year, 300,000. Of those, we estimate now that 80,000 of those is going to be from lithium sulfate and the other 220,000 for lithium chloride or for our Antofagasta chemical plant.
Speaker #5: Okay. Emerson, Carlos Diaz speaking. Well, first of all, all our production is coming from the Salar de Atacama in two different ways. One is lithium chloride that is refined in Chile, and the other is lithium sulfate, which we are refining in China.
Speaker #5: So what I said before, this year, we expect 280 to 290. And for next year, 300,000. Of those, we estimate now that 80 of those is going to be from lithium sulfate, and the other 220 from lithium chloride, or from our Antofagasta chemical plant.
Speaker #4: All right. Thank you.
Emerson Vieira: All right. Thank you.
Carlos Díaz Ortiz: I am sorry. You asked for the hydroxide production?
Speaker #5: And sorry, sorry, you asked for the hydroxide production? And carbonate. What we see is no more than 20 or 30,000 of those—a total of 10% of that production will be hydroxide, and the remainder, obviously, carbonate.
Emerson Vieira: And carbonate.
Carlos Díaz Ortiz: And carbonate. We don't see more than 20,000 or 30,000 of those of total. That means 10% of those production will be hydroxide, and the remainder, obviously, carbonate.
Speaker #4: Okay, thank you. Just one on Tal-Tal very quickly. You guys recently approved the extension, right, on the mining and the concentrator. So just wondering about a potential extension in the refinery. Are you guys planning maybe to do this just after the expansion is concluded?
Emerson Vieira: Okay. Thank you. Just on Mt Holland, very quickly, you guys recently approved the expansion on the mining, the concentrator. Just wondering about a potential extension in the refinery. Are you guys planning maybe to do this just after the expansion is concluded? How are you thinking about the mix between hydroxide and spodumene sales going in 2007 and later on, please?
Speaker #4: How are you thinking about the mix between hydroxide and spodumene sales going in 2027 and later on, please?
Speaker #3: Hi Emerson, this is Mark Fones here. Thanks for your question. First of all, we're very proud of the decision to expand Mont Holland.
Mark Fones: Hi, Emerson. This is Mark Fones here. Thanks for your question. First of all, we're very proud on the decision of expanding Mt Holland, first the miner concentrator. Regarding the refinery, we still remain open to a decision. We have not yet came to a conclusion or a decision there yet. This will be continued analysis by Covalent and Wesfarmers, our partner, and it will be depending also on the reaching our ramp-up at full extent by second semester next year thereon. Regarding the balance for next year in terms of sales and production, we expect next year to be a higher lithium hydroxide production than this year for sure, based on the same ramp-up curve. Therefore, our sales of direct spodumene concentrate sales should be probably lower than this year.
Speaker #3: First, the mining concentrator. Regarding the refinery, we still remain open to that decision. We have not yet come to a conclusion or a decision there.
Speaker #3: This will be continued analysis by Covalent and with Farmers, our partner. And it will also depend on reaching our ramp-up at full extent by the second semester next year.
Speaker #3: Thereon. And regarding the balance for next year, in terms of sales and production, we expect next year to have higher lithium hydroxide production than this year, for sure.
Speaker #3: Based on the same ramp-up curve, therefore our sales of direct spodumene concentrate should probably be lower than this year.
Speaker #4: Okay. Thank you. Very clear.
Emerson Vieira: Okay. Thank you. We're clear.
Speaker #1: One moment for our next question, please. It comes from Lucas Ferreira with JP Morgan. Please proceed.
Operator: One moment for our next question, please. It comes from Lucas Ferreira with JP Morgan. Please proceed.
Speaker #5: Hi, guys. Good afternoon. Thanks for your time. My first question is a follow-up on the sulfate production, especially regarding the tooling and processing in China.
Lucas Ferreira: Hi, guys. Good afternoon. Thanks for the time. My first question is a follow-up on the sulfate production, especially in regards to the tolling processing in China. This production surprised me a lot. I never thought you guys could ramp up this tolling and find too much capacity in sort of a short period of time. So my question is regarding these tolling contracts. I just wanted to understand how long they are, and if you guys see any risk over the next few years, you have to give some away or find new partners for this tolling at maybe different costs. If these fees are fixed and predictable. Just to understand the operational risk of running, if I'm not mistaken, something around 50,000 tons of sulfate tolling with these third parties. My second question is regarding a follow-up on Mt Holland.
Speaker #5: These production, I mean, surprised me a lot. I mean, I never thought you guys could ramp up this tooling and find so much capacity in such a short period of time.
Speaker #5: So, my question is regarding these tooling contracts. I just wanted to understand how long they are, and if you guys see any risk that over the next few years you have to give some away or find new partners for this tooling, maybe at a different cost, if these fees are sort of fixed and predictable.
Speaker #5: Just to understand, sort of the operational risk of running, if I’m not mistaken, something around 50,000 tons of sulfate, tolling with these third parties.
Speaker #5: And then my second question is regarding a follow-up on Mont Holland. Since the expectation is for first production in 2030, this seems to me to be a sort of extended period of time, considering this is a brownfield.
Lucas Ferreira: Since the expectation is for first production 2030, this seems to me an extended period of time, considering this is a brownfield. Just wondering, what are the next big milestones there that you think you should deliver to expand the production capacity, or the main challenges to bring this capacity online? Thank you very much.
Speaker #5: I'm just wondering, what are the next big milestones that you think you should deliver to expand the production capacity, or what are the main challenges to bringing this capacity online?
Speaker #5: Thank you very much. Hi. Hello, this is Carlos Diaz speaking again. Well, regarding the lithium sulfate production, yes, we have been increasing the production very strongly over the last three or four years.
Carlos Díaz Ortiz: Well, this is Carlos Díaz speaking again. Regarding to the lithium sulfate production, yes, we have been increasing the production very strongly the last three or four years. What we said before, we expect to produce next year in the range of 80,000 to 90,000 as an LCE equivalent. First of all, we have to remind that we have our own plant in China, the XinAo Square plant, that will produce close to 24,000, 25,000. We are expanding. We expect to reach 30,000, around that level. The difference, we do the tolling with a different supplier that we do not disclose that contract, but we are very happy with the contract that we have, and we expect to continue working with those in the coming year.
Speaker #5: And, as we said before, we expect this year, or next year, to produce in a range of 80,000 to 90,000 as LCE equivalent.
Speaker #5: First of all, we have to remind that we have our own plan in China, the CHIM plan, that we produce close to 24, 25.
Speaker #5: We're expanding. We expect to reach 30,000, around that level. And the different—we do the tooling with the different supplier. We don't disclose that contract, but we are very happy with the contract that we have.
Speaker #5: And we expect to continue working with those in the coming year.
Speaker #3: Lucas, hi. This is Mark Fones. Regarding the Mont Holland timeline, you're right—first product is expected by the first half of 2030. Well, the schedule reflects the normal sequencing for a project of this scale.
Mark Fones: Lucas. Hi, this is Mark Fones. Regarding the Mt Holland timeline, you are right, the first product is expected by H1 2030. Well, the schedule reflects the normal sequencing for a project of this scale, and we have been building the schedule to achieve de-risk, rather than a rushed project. You need to consider also that this is a relevant, not a marginal brownfield increase. So we are doubling the capacity where our operation already exists. Giving some milestones which you asked for, I would say the next relevant milestone has to do with the start of the construction of the facility itself, which should happen mid next year. A construction of a facility of this nature takes between 18 and 24 months in duration. Ahead of that, we need to, of course, purchase long-lead items, prepare earthworks, and earth movement.
Speaker #3: And we have been building the shell to achieve the risk, rather than rushed projects. You need to consider also that this is a relevant, not a marginal, brownfield.
Speaker #3: Increase. So we are doubling the capacity where our operation already exists. And, giving some milestones—which you asked for—I would say the next relevant milestone has to do with the start of the construction of the facility itself, which should happen in mid next year.
Speaker #3: Construction of a facility of this nature takes between 18 and 24 months to complete. Ahead of that, we need to, of course, purchase long-lead items, and prepare earthworks and bulk earth movement.
Speaker #3: After the construction of these 18 to 24 months, there's a period of commissioning, which will follow in 2029 to reach a first product by the beginning of 2030.
Mark Fones: After the construction of these 18 to 24 months, there is a period there of commissioning, which will follow in 2029, to reach our first product by the beginnings of 2030. So that is the overall scheme of things and the relevant milestones in there. In terms of if there are any opportunities to compress this schedule, yes, there are opportunities. Covalent and our technical teams are actively advising, analyzing those, and we will continue to push it forward. But please take into consideration that this brownfield, of course, has relevant opportunities since we are working on an existing operation, but also it increases levels of challenges, and we need to be always mining and safety. Thank you.
Speaker #3: So that's the overall scheme of things, and the relevant milestones in there. In terms of whether there are any opportunities compressed in this channel, yes, there are opportunities.
Speaker #3: Covalent and our technical teams are actively advising and analyzing those. We will continue to push it forward, but please take into consideration that this brownfield, of course, has relevant opportunities since we're working on an existing operation. However, it also increases the level of challenges, and we need to always be mindful and safe.
Speaker #3: Thank you.
Speaker #5: Perfect. Thank you very much, guys.
Lucas Ferreira: Perfect. Thank you very much, guys.
Operator: Thank you. One moment for our next question that comes from Corinne Blanchard with Deutsche Bank. Please proceed.
Speaker #1: Thank you. One moment for our next question. That comes from Corinne Blanchard with Deutsche Bank. Please proceed.
Speaker #6: Hi. Good afternoon, team. Mary, can you come back to your commentary about the story you said being in line with Q2? How do we think about it for Q4?
Corinne Blanchard: Hi. Good afternoon, team. Mary, can we come back to your commentary about the Q3 sales being in line with Q2? How do we think about it for Q4? Because normally Q4, I think on seasonality, is your highest quarter. Do you also expect Q4 to be high 70s to maybe 80 kiloton each? Or are you expecting a strong Q3 followed maybe by a softer Q4?
Speaker #6: Because normally Q4, I think on seasonality, is your highest quarter. Do you also expect Q4 to be high 70s to maybe like 80-kiloton-ish?
Speaker #6: Or are you expecting a strong Q3, followed maybe by a softer Q4?
Speaker #7: Hello, Corinne. This is Felipe. You know, Q4 is so far away now, so I will try to speak about the future—the long future.
Felipe Smith: Hello, Corinne. This is Felipe. Q4 is so far away now. I will try to speak about the future, the long future, but I only have hopes that we can at least have volume of a second and third quarter, because as I said before, Q3, we expect to have similar volume as Q2. I expect minimum that in the Q4, but hope that could be more. But again, my boss is looking at me like, "What are you doing?" But this is my personal hope, okay?
Speaker #7: But I only have hopes that we can at least have volume for the second and third quarter because, as I said before, for the third quarter we expect to have similar volume as the second quarter.
Speaker #7: So I expect, at minimum, that in the fourth quarter, but hope that it could be more. But again, my boss is looking at me like, "What are you doing?"
Speaker #7: But this is my personal hope, okay? I will try. I will try.
Corinne Blanchard: That
Felipe Smith: I will try.
Speaker #6: So that should bring your total lithium volume to 315, 320 kilotons, which is much more than what you have guided, right?
Corinne Blanchard: That should bring your total lithium volume to 315,000, 320,000 kiloton, which is much more than what you have guided on.
Speaker #7: Yeah. If you add only the Novandino part—I mean, I will speak about the Novandino part; it's hopefully above 280. And then my colleagues in the International could comment.
Felipe Smith: Yeah. If you add only the Novandino part, and I will speak about the Novandino part, is hopefully above 280. Then my colleagues in the international could comment. Maybe Andrés? Good luck.
Speaker #7: Maybe Andres. Good luck.
Andrés Fontannaz: Yeah. Yeah, Corinne. Andrés speaking here. We are expecting sales to be around 27,000 to 30,000 tons LCE for the full year.
Speaker #5: Yeah, Corinne, Andres speaking here. We are expecting sales to be around 27,000 to 30,000 tons LCE for the full year.
Speaker #6: Okay, thank you. That's helpful. And then, Mary, a bigger picture question, because I think we seem to have some investors starting to think a little bit more long-term.
Corinne Blanchard: Okay. Thank you, Andrés, therefore. Then Mary, a bigger picture question, because I think we think you have some investors starting to think a little bit more longer term. Can you just talk a little bit about what happens after 2030, 2031? We know that Codelco will be probably much more in charge than you guys. But I think if you can just provide high-level view and to frame it for us and how we should think about strategic decision and CapEx and cetera, I think that will be helpful. Thank you.
Speaker #6: Can you just talk a little bit about what happened after 2030, 2031? I mean, we know that Codelco will probably be much more in charge than you guys.
Speaker #6: But I think if you can just provide a high-level view and frame it for us in terms of how we should think about strategic decisions and CAPEX, etc.
Speaker #6: I think that will be helpful. Thank you.
Speaker #5: Okay. Corinne, Ricardo, okay. Ricardo Ramos speaking. Yes, as Felipe said, fourth quarter is a really long term. It's really far, far away. 2031, it's just a little bit more difficult to have predictions about what's going to happen.
Ricardo Ramos: Okay. Going Ricardo. Still with it?
Corinne Blanchard: I think.
Ricardo Ramos: Okay. Ricardo Ramos speaking. Yes, as Felipe said, Q4 is a really long term. It is really far away. 2031 is just a little bit more difficult to have predictions what is going to happen. But again, I think that we are working very good now in Novandino. I think the agreement with Codelco, it has been even better than expected in terms of coordination, working together at the board level, having cooperation between both companies. That is why we are very positive about that. We already comment in the press release that we are starting the submission. We did it in July of the Salar Futuro. We are working in engineering, in everything, in order to be ready for the investment. That is why I hope in 2031, we will be in the middle of the investment of Salar Futuro. We think it is going to be a great project.
Speaker #5: But again, I think that we are working very well now in Novandino. I think the agreement with Codelco has been even better than expected in terms of coordination and working together.
Speaker #5: And at the board level, there is cooperation between both companies. That's why we are very positive about that. We already commented in the press release that we are starting the submission.
Speaker #5: We did it in July of the Salar Futuro. We're working in engineering, in everything, in order to be ready for the investment. That's why I hope in 2031 we will be in the middle of the investment of Salar Futuro. This is going to be a great project.
Speaker #5: We are really committed with Codelco in order to do so. I think everything is included in our long-term projections, all the investment of the work we want to do.
Ricardo Ramos: We are really committed with Codelco in order to do so. I think everything is included in our long-term projections, whole investment of the work we want to do. What Carlos is doing today with their team is trying to have a very good expectation about the sales volume for the future. I think we will share with you in the next conference call our first view about what we expect for the next year, and we will continue to have a long-term view. But we are working very hard on very good agreement so far, and Codelco is a very good partner. Thank you.
Speaker #5: And what Carlos is doing today with their team is trying to have a very good expectation about the volumes—sales volumes—for the future.
Speaker #5: And I think we will share with you, in the next conference call, our initial views about what we expect for next year. We will continue to maintain a long-term perspective.
Speaker #5: But we are working very hard. I'm in very good agreement so far, and Codelco is a very good partner. Thank you.
Speaker #1: Thank you. One moment for our next question. That comes from Ben Isaacson with Scotiabank. Please proceed.
Corinne Blanchard: Thank you.
Operator: One moment for our next question. That comes from Ben Isaacson with Scotiabank. Please proceed.
Speaker #5: Thank you very much, and good afternoon. Just two questions for me. Number one is, I think there's a bit of confusion among investors in terms of your recent filing of spending $3 billion at Salar Futuro.
Ben Isaacson: Thank you very much, and good afternoon. Just two questions for me. Number one is I think there is a bit of confusion among investors in terms of your recent filing of spending $3 billion at Salar Futuro, and some are drawing the conclusion that it is all going towards increasing capacity by 30,000 tons, and therefore your CapEx is $100,000 per ton. I think that is wrong. Can you just separate the $3 billion spend from the 30,000 ton increase in capacity?
Speaker #5: And some are drawing the conclusion that it is all going towards increasing capacity by 30,000 tons. And therefore, your CAPEX is $100,000 per ton.
Speaker #5: And I think that's wrong. Can you just separate the 3 billion dollars spend from the 30,000 dollars sorry, 30,000 ton increase in capacity? Ben, it's very important to
Ricardo Ramos: Ben, it is very important to consider that the Salar Futuro project is not only increasing capacity, it is changing technology. It means, as you know, we are offering a very good technology in terms of cost, in terms of production, in terms of environmental footprint. That is why you have to analyze the Salar Futuro project as a whole in terms of having a new beginning of the Salar de Atacama for the next 60 years operation. That is exactly, or 30 years operation that we have. That is the whole idea. Of course, we expect to have more production. We are working on it, and it will depend on the deals and depend on the quality of the solutions that we are going to bring to the process. We will disclose our best estimate in the next two years.
Speaker #7: Consider that the Salar Futuro project is not only increasing capacity; it's changing technology. It means we are—as you know—offering a very good technology in terms of cost, in terms of production, and in terms of environmental footprint.
Speaker #7: And that's why you have to analyze the Salar Futuro project as a whole, in terms of having a new beginning at the Salar de la Cama for the next 60 years of operation.
Speaker #7: That's exactly what 30 years of operation that we have. That's the whole idea. And of course, we expect to have more production. We are working on it.
Speaker #7: And it will depend on the deals and depend on the quality of the solutions that we're going to bring to the process. We will disclose our best estimate in the next two years.
Speaker #7: But the whole project, Salar Futuro, is not just an idea to increase production capacity. It's much more than that, in terms of having a revamping, having a new Salar de la Cama for the future.
Ricardo Ramos: The whole project, Salar Futuro, is not just an idea to increase production capacity. It is much more than that in terms of having a revamping, having a new Salar de Atacama for the future.
Speaker #5: That makes sense. Thank you for that. And then my second question is on the lithium market. I understand that battery storage production has been about 1 terawatt-hour, or around that area.
Ben Isaacson: That makes sense. Thank you for that. My second question is on the lithium market. I understand that battery storage production has been about one terawatt hours or around that area, but installations have only been about half of that. My question is, are we seeing a big inventory build in battery storage, and we could be going into some temporary oversupply over the next 12 to 18 months, and that could put a cap on lithium demand growth? Or is this just part of the normal cycle and the lag in terms of it will just take six months to a year to kind of catch up? Just trying to understand if this is an anomaly or if this growth rate is sustainable.
Speaker #5: But installations have only been about half of that. So my question is, are we seeing a big inventory build in battery storage? And could we be going into some temporary oversupply over the next 12 to 18 months?
Speaker #5: And that could put a cap on lithium demand growth. Or is this just part of the normal cycle, and the lag means it will just take six months to a year to catch up?
Speaker #5: Just trying to understand if this is an anomaly, or if this growth rate is sustainable. Hey Ben, Paulo Hernandez speaking. First of all, I agree with your view on the market.
Pablo Hernández: Hey, Ben. Pablo Hernández speaking. First of all, I agree with your view on the market. Indeed, we have seen much larger shipments of batteries for BESS than the actual deployments of those batteries. There is some gap there that we are monitoring. We believe most of that gap is related to some larger projects being implemented, which larger projects naturally bring some longer terms in terms of implementation and some delays from approvals and everything. There is a natural delay on that end. Of course, as well, I think there is also some push forward of some sales from 2027 because of tax rebates that have been removed from the export side in China. Overall, my view for the longer term is that indeed, for the following years, we might see some slowdown in the pace at which the BESS battery implementation is growing.
Speaker #5: Indeed, we have seen much larger shipments of batteries for BSS than actual deployments of those batteries. So there's some gap there that we are monitoring.
Speaker #5: We believe most of that gap is related to some larger projects being implemented, which—larger projects naturally bring some longer terms in terms of implementation, and some delays from approvals and everything.
Speaker #5: So there's a natural delay on that end. But, of course, as well, I think there's also some pull-forward of some sales from 2027 because of tax rebates that have been removed from the export side in China.
Speaker #5: So, overall, my view for the longer term is that, indeed, for the following years, we might see some slowdown in the pace at which the BSS battery implementation is growing.
Speaker #5: Great. But sorry, Ben—just to finish that point: of course, BSS will remain a very relevant and strong demand factor for the future.
Ben Isaacson: Great.
Pablo Hernández: Sorry, Ben, just to finish that. Of course, still, BESS will remain a very relevant and strong demand factor for the future.
Speaker #5: Of course. Thank you very much.
Ben Isaacson: Of course. Thank you very much.
Speaker #1: Thank you, ladies and gentlemen. This will conclude our Q&A session and conference for today. We want to thank everyone for participating and you may now disconnect.
Operator: Thank you. Ladies and gentlemen, this will conclude our Q&A session and conference for today. We want to thank everyone for participating, and you may now disconnect.
