Good afternoon, and welcome to the SQM Q2 2024 Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press Star, then One on your telephone keypad. To withdraw your question, please press Star then Two. Please note, this event is being recorded. I would now like to turn the conference over to Irina Axenova, Head of Investor Relations. Please go ahead. Thank you. Good afternoon. Thank you for joining SQM's earnings conference call for the Q2 of twenty twenty-four. This conference call will be recorded and is being webcast live. Our earnings press release and a presentation with a summary of the results have been uploaded to our website, where you can also find a link to the webcast. Ricardo Ramos, our Chief Executive Officer, will be speaking on the call today. Gerardo Illanes, our Chief Financial Officer, Carlos Díaz, CEO of SQM Salar, Mark Fones, CEO of SQM International Lithium, Felipe Smith, Commercial Vice President of SQM Salar, Pablo Hernández, Senior Director of Business Strategy and Development, SQM Salar, Pablo Altimiras, CEO of Iodine and Nitrates, and Juan Pablo Bellolio, Commercial Vice President of Iodine and Industrial Chemicals, are also available to answer any questions. Before we begin, I would like to remind you that some statements made during this conference call regarding our business outlook, future economic performance, anticipated profitability, revenues, expenses, and other financial items are considered forward-looking statements. Please note that the same cautionary language used in our press release and presentation also applies to this call. And now, I will leave you with our Chief Executive Officer, Ricardo Ramos. Thank you, Irina. Good afternoon, everyone, and thank you for joining us today. Before diving into the key drivers behind our results, I would like to highlight an important milestone we achieved last quarter. As mentioned in our earnings release, we're very pleased to have entered into a partnership agreement with Codelco to jointly operate the Salar de Atacama until 2060. Based on the principle of private-public alliance, we believe this agreement is a pivotal moment for both SQM and for the future of the lithium industry in Chile. While there are several conditions precedent for the partnership to become effective, together with Codelco, we are committed to ensure that these conditions are met by the first half of 2025. We're looking forward to working together with Codelco to operate the most sustainable lithium operation in the world, based in the Salar de Atacama. Our Q2 results were positively impacted by strong volume growth in all our major businesses, supported by a strong demand growth in their respective markets. We reported record sales volumes in lithium and iodine businesses, exceeding 52,000 metric tons and 4,000 metric tons, respectively. We anticipated solid growth in the lithium market this year, driven by a strong EV performance, mainly in China. Demand growth in the iodine market this year exceed our expectations. We expect this trend to continue for the remaining of the year and believe that our iodine volumes will exceed 14,500 metric tons this year, marking 2024 a record year. While our average realized price in the lithium business improved slightly in the Q2 compared to the previous quarter, we have seen lithium prices decline since the beginning of July. As most of our contracts are linked to price indices and our average prices follow the prevailing market prices, we believe that our average selling prices in the Q3 will be lower than in the previous quarter, given the current price environment. We are convinced that most of the greenfield projects are not profitable. While we continue with our previously announced capacity expansion projects, we're also reassessing the attractiveness of certain markets and initiatives in the current price environment. We believe our lithium sales volumes in the second half of the year could be similar to those reported for the first half of the year, with a potential upside should the market conditions improve. We recently formed SQM International Lithium to develop our lithium business outside of Chile. Its primary objective is to leverage the lithium assets and expertise we have in exploration, project development, mining, and chemical operations to expand our lithium portfolios overseas. Thank you, operator. We'll now open the line to questions. We will now begin the question-and-answer session. To ask a question, you may press Star, then One on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press Star then Two. Our first question today is from Joel Jackson with BMO Capital Markets. Please go ahead. Good afternoon. This is Anthony on for Joel. So you indicated in the press release that in the current lithium price environment, peers may take production out of the market. Yet SQM is maintaining 24 production targets, with sales volume maybe slightly lower. Obviously, SQM has a unique quota system with Corfo and the lease that was previously expiring, which encourages maximizing production. But shouldn't SQM, as a market leader, be disciplined and maybe lower volumes? ... Hello, this is Felipe Smith here. How are you? I'm not sure if I understood correctly your question, but let me rephrase that we estimate that the sales in the second semester of twenty twenty-four will be similar to those reached in the first semester of twenty twenty-four, meaning that our annual sales could be around one hundred and ninety thousand tons, with a potential upside should market conditions recover. Just to follow up on that, the question was, I guess, around whether SQM, as a market leader, should be disciplined if, you know, we start needing to see production come out of the market. Yeah. Hello, this is Carlos Díaz. How are you? Well, let me tell you a little bit about our capacity in Chile. That is now according to our schedule, and so we expect this year to produce two hundred and ten thousand as a lithium carbon equivalent in the different quality and, let's say, carbon or hydroxide or sulfate. Of which thirty thousand are converted in China. So we're still reviewing the volume to be converted in China for lithium sulfate to dioxide or carbonate, and during the second semester. So the total volume converted in China obviously will depend on the specific market segment and following the current price environment. So finally, it's good, it would depend on how the price is coming in the next month. So I don't know if I answered your question. Great, thanks. Just to follow up, so maybe weighing strategic priorities, how would SQM rank delaying future tons out of Chile versus, you know, investments in places like Australia or other opportunities moving forward? Hi. Moving forward, as is clear, we are gonna develop a huge project that is called Salar Futuro, together with Codelco. That's why our investment, together with Codelco, in the next ten years in Chile, is gonna be significant. If you consider the Salar Futuro project we will develop together, we expect to increase some production in Salar de Atacama with the project, of course, but this is, this is mainly Chile, is mainly oriented to the Salar Futuro project. Of course, we want to growth outside Chile if we find good opportunities. As you know, we have been active. We have investment today in Australia. We continue to have geologists looking for new alternatives, and probably we will announce new investment or new projects in Australia in the medium term. I don't know, but we are working very hard in order to do it. Great. Thank you. The next question is from Ben Isaacson with Scotiabank. Please go ahead. Hi, everyone. This is Apurva on for Ben. I might just piggyback off of the last question a little bit, but, given that the market is currently oversupplied, and you've previously shared, and based on your 210,000 tons of production versus about 190,000 of sales, is the expectation still that you'll be able to work through these inventories? Are you finding any challenges, seeing any challenges in finding buyers for that lithium inventory? Are you holding in anticipation of demand and pricing picking up in the near term? You... Well, we're really coming. I don't know if you-- we expect to sell this year around 180,000 metric tons of lithium carbonate, and we expect to produce around 210,000. So it's gonna be 20,000 excess. That is approximately what we sell in one month. So we... For the other side, we have to prepare for next year, where we expect to sell a little bit more. So it's a good investment in working capital, and we don't see that it's too much. It's healthy inventory. All right, and then as a follow-up, the production volume for 2024 were contracted with kind of a one-month like to spot. How should we be thinking about lithium, realized pricing in Q3 so far, given that quarter to date, the index is down, what, 15%-20%? Is there any sort of indication as to whether you're baking price floors and ceilings into your contracts? Yeah. Hello. Felipe again. So, indeed, SQM price mechanism is based on price indices in the different geographies with certain lag, which average approximately one month. This means that, in general, our realized average price will always be close to the prevailing average spot price. Now, during the beginning of Q2, we observed a certain price recovery, which unfortunately lasted until mid-April. Then we saw price fluctuations that were quite moderate, but over the last three months, we have seen a persistent decline in the index prices, especially in China. So that is why we are expecting that the average price in Q3 will be lower than in Q2. Thank you. And, if I may sneak in a- ...Pardon me, ma'am, we seem to have lost audio from your location. Hello, can you hear us? We can hear the main speakers, we can't hear the questioner. Can we go to the next question, please? The next question will come from Isabella Simonato with Bank of America. Please go ahead. Thank you. Good afternoon, everyone. So, I have a couple of questions. First of all, on lithium. When you say, right, SQM is reevaluating the markets and what's attractive at these levels, I wonder what exactly do you mean by that, and what are things that are being taken into consideration here, and also on the international expansion here, if and you mentioned a hundred thousand tons by two thousand and thirty. If you could give us a sense, what are the main regions of focus, the main raw materials, and exactly what type of cost of production should we be thinking about for this hundred thousand tons? Thank you. As we come in, we expect to produce a little bit more than 200,000 in Chile. Thirty or 40 thousand of those is produced as a lithium sulfate in Salar de Atacama, that is sent later to China to convert to lithium carbonate and hydroxide. That is something that we could reevaluate according to the market condition, the production that we're gonna expect to produce in China in the Q2, in the second semester. That's the point. Regarding the future projects. Hi, I'm Mark Fones here speaking. Regarding the future projects in Australia, and what was mentioned in press release regarding the 100,000 tons per year of lithium carbonate equivalent production into, looking into 2030. As you know, we've been pretty active in Australia. We now have gained access to two world-class lithium deposits, namely the Andover project and the Mt. Holland project. Both of which we're expected not only to have a significant scale, but also we are already discussing the expansion for Mt. Holland lithium project. In addition to that, we continue to work on, monitor, and invest in various early exploration projects, not only in Australia but also across the world. We have just recently announced a new partnership in Sweden with Talga Group. All of them developed to, or aimed to develop, early stage, innovative and marginal cost effective products into the long term. We intend to be a lithium chemical processor, not only in Chile but also outside, and leveraging on SQM's knowledge, and also technology innovative process to be in the lower part of the marginal cost of production. Thank you. The next question is from Lucas Ferreira with JP Morgan. Please go ahead. Hi, guys. Can you hear me? Yes. Yeah. Okay. Thank you. So two questions. The first one, can you explain, correct me if I'm wrong, but I'm seeing your average cost, cash cost per ton in lithium increasing, like, 8% quarter over quarter. That's driving your gross margin to be reduced. So can you explain the reason why? I was expecting actually the opposite, since I would imagine lease payments allocations would be lower, given the lower prices. And also higher volumes would imply maybe fixed cost dilution, the depreciation of the peso, maybe helps you as well. So can you explain why this quarter, specifically, cost was higher? And the second question to Ricardo Ramos. I just to confirm, so the... Obviously, you signed already the contract with Codelco for the JV, but you mentioned that certain conditions must be met. So just, I wanted to clarify that. So apart from the signing of the contract, what are the next steps for the JV to be actually formed and run smoothly? So, and how long that could take? If you can explain, that would be great. Thank you. Hi, Ricardo Ramos speaking. We published the agreement with Codelco. It is available for everyone in our webpage, and there's a list of conditions precedent that are included in the contract. You can check it. But they are mainly legal ones that we have to follow some steps in the companies and so on, in the by law, whatever. But we are working on that, and we are gonna be ready as we speak in the Q1 of next year. But if you want to review in detail these conditions precedent, those are included in the contract that are public. Hi, Lucas, this is Carlos Díaz speaking. Well, with respect to your first question about the cash cost of the lithium, and this is mainly explained because of the inventory adjustment related to the lithium sulfate. The lithium sulfate that we export to China- Five thousand, is this something we can work with? Our cost is stable during this period. I mean, we don't see a significant change. What I comment before, it was most related with the royalty that we pay, as we pay in the moment that we export and not we pay when in the moment that we sell. And, you know, there is a lag because we have to export from Chile to China, and we keep inventory there, and so on, and that is the main effects that is in the lithium sulfate. Perfect. And apologies, one final in this topic of the royalties, if I may. Can you confirm if that quota, legacy quota of the previous contract with Corfo before 2017? So, if not mistaken, as of this year, you should be already exploiting part of the quota, something like 50,000 tons a year with that fixed flat rates. Is this already in place? So eventually that comes to sort of a flow into the P&L in future sales. If you can confirm this, please. Hi, Lucas, this is Gerardo. Yes, what you're saying is right, and for the ones that are not familiar, what, when we signed the new contract in 2018, we had a balance under the previous contract at a fixed rate of 6.8% with Corfo, and according to the new contract, this, the balance that we had, could be used from 2024 onwards, and it's approximately 50,000 metric tons per year, so approximately 50,000 metric tons sold this year will pay a fixed rate of 6.8%, while the rest will pay based on the table that is publicly available. Perfect. Thank you very much, everyone. The next question is from Alejandro Demichelis from Jefferies. Please go ahead. Yes, good morning. Thank you very much for taking my question. Just one question on the Codelco agreement. If you, as you said, you get the conditions precedent in the first half of twenty twenty-five, then my understanding is there is a kickoff of extra capacity there. Are there any discussions with Codelco regarding what could happen to that extra capacity in twenty twenty-five? No, we are not having marketing or commercial discussion with Codelco yet, because part of the conditions precedent are some authorizations, and the following antitrust rules, we need to have the agreement ready before starting to talk about its commercial strategy. If the current lithium market pricing conditions continue, is there a chance that the extra capacity for next year may not become available, or you may choose to delay that? As someone said before, we're a very disciplined company. It means that we will increase the capacity anyway, and we will sell more lithium carbonate next year as compared to this year. That's for sure. Okay, that's very clear. Thank you. The next question is from Santhosh Seshadri, excuse me, HSBC. Please go ahead. Which has a relatively higher cost base, or maybe by slowing down ramp-up at Mt. Holland project? Thank you. So, this is Gerardo. Yes, always our focus is to reduce our cost and to look at alternative to keeping increasing the quality, reducing the cost and our carbon footprint, and so on. So but, we're not thinking at least to reduce our capacity of lithium dioxide. I don't know if it was your question, but no, we continue with our plan to expand in the lithium carbonate and dioxide in Chile. Yeah. Thank you. Just a question on your Mt. Holland project. You know, are you planning to slow down, ramp up, and what would this mean for the sales contribution in 2024 and 2025? Hi, Mark Fones here. Thanks for your question. No, we continue full throttle managing the Mt. Holland lithium project. We, as you know, are already producing spodumene concentrate from the mine concentrator. We have already produced more than 100,000 tons of spodumene concentrate. We will continue to increase productivity, reduce costs, and maintain quality into the future. On the refinery side, we are already above 80% construction completion. We are starting commissioning at the refinery, which we expect to have first product mid-2025, so mid next year. Once completed, we expect the project to be fully profitable to increase and add value, add value to SQM's full extent of profits. Got it. And just to follow up on that, so until commissioning of your refinery, are you looking at tolling opportunities or selling spodumene directly into the market, or maybe just holding on to your spodumene inventories until you commission the, you know, refinery? ... Yes, we do have tolling commitments. We are tolling concentrate, and we are also open to additional alternatives in that respect. The next question is from Marcio Farid with Goldman Sachs. Please go ahead. Thanks, everyone. Thanks for the opportunity. Couple of questions on my side. Obviously, when we look at net income, year-to-date, still negative by about $650 million. I understand that has been, you know, mainly explained by $1.1 billion impairment that you did earlier in the year, but just trying to understand how should we think about this- Marcio, sorry to interrupt you, but there is a problem with your microphone, so we will go to the next question, and then we can come back with you, but please try to fix your microphone. Is it better now? No. Let's please try to change to another microphone, because there is a problem. We cannot hear anything of what you're saying. The next question is from César Pérez-Novoa with BTG Pactual. Please go ahead. Yes, good morning. Good afternoon, I'm sorry. In the press release, I see that management reaffirmed their previously announced expansion plan for this year, but at the same time, you also suggested of some certain reassessment of specific market and initiatives that may be, quote, unquote, "less attractive" in the short term. Could you please provide further detail on that specific assessment and potential near-term impact? Thank you. There is, I think, two different separately connected, but we have had our long-term strategies to keep on increasing our capacity in Chile, what I said before, as lithium carbonate and hydroxide, and to keep it growing at the same pace that the market is doing. But it's a tactic in the short term is if we have to reduce the conversion, what I said before in China, because the price are not convenient for us to do the business we're doing. I mean, it's something that we would do in the short term, but it's a little bit different than we are planning for the long term, because we still think that this market is gonna keep growing in the future. Okay, understood. Thank you. The next question is from Corinne Blanchard with Deutsche Bank. Please go ahead. Hey, good afternoon. The first question, just related to the pricing. Is there a scenario or is there a certain price, like spot price, at some point that you could be thinking, actually, of having contract with a negotiated price? So basically, the question is like, are you considering at some point moving back with like maybe a fixed price contract or with having, like a stronger like flow and selling price? Hello, Corinne. This is Felipe. As we have been doing already in the past years, and we want to continue like this, we are a low-cost producer, so we prefer to follow the indices. We think that this is the best way to contract our volumes. It is good both for the customer and for us. Okay. Fair enough. The second question, can you please give an update on the Tianqi situation? I mean, we saw a lot of filing since there is not a lot of further options for them to do anything, but just trying to understand the view here, that would be very helpful. Okay. The what you call Tianqi situation is a public situation. We don't have different information than the one that is in the press. It means that Tianqi they have a different opinion of the regulator in Chile, the CMF, that is the regulator. They have an opinion about the transaction, and Tianqi has a different opinion, and they appeal to the court with their position. We are participating in the appealing also with our opinion, and there's nothing new about that. It means it's public. Tianqi has been very public about their statements, their opinion, and the company has been also very public about what is our opinion about the situation. The regulator, CMF, also being very clear about their opinion about this specific situation. So maybe differently asked, can they do... Is there any other step that they can be taken? So we're just trying to understand what can further happen or, or this is just a static quote at this point? Okay. I probably have to ask Tianqi about their potential future steps. I really don't know. But of course, in this specific situation, we expect that after the court decision, we are very optimistic about the court decision. I hope it's gonna be over. But again, if they are thinking something else, you have to ask Tianqi. I don't have the answer. All right, thank you. The next question is from Camilla Barder with Bradesco. Please go ahead. ... Hi, good afternoon. Thank you for taking my questions. So just quick questions on my side. Regarding the deal with Codelco, could you please elaborate on the main challenges and discussions with local communities? And the second question is on CapEx. In case the market gets worse, would you consider flexibilizing CapEx, and if so, how much would it be? Thank you. Okay. About the deal with Codelco, there's a clear process in order to have a relation with the communities for the new agreement, and we're working on it. There's a, you have to go to the communities, ask their opinion. That is not binding, but it's a very important opinion for Corfo in the, for the companies. And for them, we're working very hard in order to do it as soon as we can. Our relation with the communities, I will say that is, are very good. We are open with them, they are open with us, and we are working in order to solve any difference that we may have. No, no, the CapEx is getting- Oh, quickly? Sorry, regarding the CapEx, the CapEx informed by the company, it will continue. We think that the CapEx we have today in the lithium industry is very good, in the iodine nitrates is the right one, and the projects that we have in Australia are the right one. As mentioned before, we don't think that the long-term... Really, we don't think that the long-term pricing of lithium is the today price environment. There's a specific situation today of the price environment, but we are very clear that the price will be different in the future. That's why we have a clear plan of investment in the lithium. We are really committed about that, and we are very low-cost producer, that's why we will continue to do our investment. Okay, thank you very much. This concludes our question and answer session. I would like to turn the conference back over to Irina Axenova. Thank you, Gary. Just before we close, I had a question from Marcio, who couldn't connect. If there's any dividend potential in view of negative net income so far? I don't know, Gerardo, you would like to take it. The company has a dividend policy that has been approved by the board and informed to the shareholders. That dividend policy established that we will distribute the dividend as a function of the net income if certain conditions are met on our balance sheet. Since the net income is negative because of a one-time effect that hit the results because of the lithium mining tax that was applied in the Q1, I mean, the result is negative, and because of that, the net income that the board has approved as interim dividend has been zero. It depends on what will happen in the rest of the year, but the policy is quite clear in that regard. Thank you, Gerardo. And this concludes our call today. Thank you for joining us, and we look forward to having you on our next call. Have a great day, everyone. Bye. The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.