Eramet (+4.98%, at 77 euros)

Eramet is heading for a third consecutive session of gains, now up 27.23% since the start of the year. The stock is benefiting from renewed interest in the raw materials sector as well as the resumption of merger talks between Rio Tinto and Glencore.


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 Key Points

 - Producer, founded in 1880, of ores and alloy metals, a global leader in manganese ore and ferronickel (world’s No. 1), zircon and titanium minerals (4th worldwide), and diversified into resources for the energy transition;

- Revenue of 3.4 billion €, refocused on mining and metals — manganese accounting for 60% of sales, nickel 19%, mineral sands 9%, with lithium in the start-up phase;

- Business model based on maximizing the value of metals and minerals essential for economic development (manganese, nickel, mineral sands) and the energy transition (lithium, nickel/cobalt salts, battery recycling);

- Capital controlled jointly at 64.21% by the French state and STCPI (4.03%, Société Territoriale Calédonienne de Participation Industrielle, owned by the New Caledonian provinces), with Cristel Bories chairing the 18-member board, and Paulo Castellari serving as CEO since May 27.

Challenges

 - Agility of the business model combining growth and cost control: ?

    - after the underperformance in the first half, operational review with a focus on operational performance and capital allocation: reduction of capex to 400-450 million € in 2025, limitation of nickel sales in Indonesia, and cost control (suspension of manganese production in Gabon, postponement of battery recycling project in Europe),

   - balance sheet management with debt maturity extended to 3.2 years,

   - innovation driven by the IDEAS center in Trappes: business unit-led management for 4.0 mines using data, additive manufacturing, robotics…); ?

- Environmental strategy "Act for positive mining" aiming for carbon neutrality by 2050: ?

    - 2035: 40% reduction in CO2 emissions through decarbonization of production and rehabilitation of mining sites (waste management),?

    - circular economy with protection of water resources and air quality,

    - increase to 40% by 2030, versus 2019, of borrowings linked to sustainable development,

    - Norwegian carbon capture and utilization (CCUS) project;
- Portfolio of world-class mines: ?

     - production: manganese (Moanda in Gabon), nickel and nickel-cobalt (Weda Bay in Indonesia), mineral sands (Senegal), and lithium (Argentina and France),

     - exploration: lithium brines (Chile), nickel and cobalt limonites (Indonesia);?

- Promising progress on the Argentinian lithium production project at Centenario;

- Tight balance sheet at end-June, with free cash flow negative at 266 million €: debt of 1.7 billion € with a leverage of 2.7 and ratings under negative outlook, but available liquidity of 1.7 billion €.

Risks

 - Sensitivity to the decline of the dollar against the CFA franc;?

- Exposure to geopolitical risks — Gabon, Mali, and Senegal — and to Chinese demand;?

- Rumors of divestments to ease the financial situation, notably in mineral sands and manganese alloys, or, via minority stakes, in lithium;

- Weda Bay in Indonesia: new production sites with disappointing nickel content and, following restrictions imposed by local authorities, limits on the extension of nickel sales from the joint venture with Tsingshan;