Eramet Sa Unsp/Adr

Welcome to the Aramath first half 2024 resource presentation. I now hand over to Christelle Bory, Chair and CEO of Aramath.

Good morning, everyone. And thanks for being with us this morning for our half year result presentation. I will start with the introduction and then We will review the financial performance and operational performance, and Nicolas Carré, our CFO, will take care of this presentation, and I'll come back with an update on the strategic roadmap and the conclusion. So starting with some words of introduction, we delivered a good operational performance in the first half of the year. with normal operating conditions in Gabon, a strong increase in production in Indonesia, and mining and grade optimization everywhere. In terms of financials, our intrinsic progress driven by organic growth and productivity has enabled us to weather a challenging pricing environment and to continue to invest for the group's future growth with a limited impact on net debt. We have also taken a decisive step in our development in energy transition method strategy with the commissioning of our first lithium plant in Argentina. Production will start in November, and this growth driver will fully contribute to the group's performance from 2025. And last but not least, we have started to deploy our new CSR roadmap, Ask for Positive Mining, with the first new steps, particularly in terms of employee social protection. If we move to the financials, some words on them. The environment in terms of pricing has been continuously depressed over the semester. We delivered an adjusted EBITDA of 247 million euros, including a strongly negative contribution of SLN of 109 million, and we managed to deliver that thanks to a good intrinsic performance. This intrinsic performance of 216 million comes from significant growth of production in our key mining assets, plus 33% manganese ore in Gabon with a return to normal operating conditions, and plus 40% of nickel ore production in Ouedabe. It's also due to good productivity improvement and fixed cost reduction to cope with the difficult environment. Altogether it had a positive impact of 87 million for the semester. The external impact has been strongly negative due to the continued decline in prices, mainly in nickel, and to the fact that the sharp increase in price of manganese ore has not materialized yet in our investing. Our cash flow for the period has been negative as a combination of low weather-based dividend distribution in H1. We'll come back to that. Sustained capex pace due to our growth strategy in lithium and in Gabon. And higher working capital due to higher manganese prices at the end of June. Thanks to the conversion of SLM loans into equity earlier this year, our debt increased only by 97 million to 711 million, leading to a leverage of one. The key event of the semester has been the commissioning of our first loan. a direct extraction lithium plant in Centenario, Argentina, becoming then the first ever European company to develop a capacity to produce battery-grade lithium carbonate at industrial scale. Production at Centenario is scheduled to start in November 2024, with a ramp-up expected to be achieved by mid-2025. At full capacity, this plant will produce 24,000 tons of lithium carbonate per year, and it's equivalent to the requirement of 600,000 electric vehicles per year. And very important, this plant, because of the technology and the quality of the deposits, should be positioned on the first quartile of the cash cost curve. Very important also, we have started to deploy our new ambitious CSR roadmap, Act for Positive Mining. A few elements, and I will not come back to the details of this roadmap that we have presented at the end of last year and beginning of this year. I would like to highlight a few elements. Safety, which remains our first priority, and on which we continue to improve, leading the pack in the mining industry. We have a frequency rate during the first semester of 0.8, which is below our target of 1, and is more than 20% improvement over last year. We also have developed a transnational employee representation body in 2023. We are the first mining group to set up such a transnational employee representation. And it's called the Eramet Global Forum. And Eramet has signed the first agreement with all our social partners to set up a common base of social protection worldwide for all our employees. And last but not least, the Act for Nature International has validated the new biodiversity target in the group 24-26 CSR Roadmap, and especially regarding the biodiversity, as I said, and it's including a commitment of RMS not to conduct any deep-sea exploration of mining activities. So I will stop here for this introduction, and I will hand over to Nicolas Carré, our CFO, who will detail our financial performance.

Thank you very much, Christelle. Good morning, everyone. Thanks for being with us in this Olympic day for France So I will indeed enter into more details of financial performance for the first half. And I will start with a couple of comments on these financial numbers. Christelle was mentioning in her introduction the impact of SLM on the adjusted EBITDA, which is clearly an important impact. And I will come back to what it means overall for financials. But also the other topic I want to highlight here is the impact of SLN on the net income, because as you can see, it was indeed negative for the first time, but minus 41 million euros for our share. But out of that, 72 million euros is negative related to SLN. So this means that it was clearly driving down this performance, and as we will see, it doesn't have any more economic impact for the group. So I think it's really important to highlight. The other topic which has already been said by Christelle but still I would like to emphasize is the limited increase in net debt and the well-maintained and controlled leverage in the context of both negative and I would say challenging pricing environment overall and also in the the context of significant investments that we continue to do. And I will also come back to that later on. So I think it's really to be emphasized the ability we have, which is the confirmation of the robustness of our business model, to keep a limited debt in challenging environments and making sure still that we can continue to invest. Looking at more details of our performance, the thing I will, and we have already emphasized, but I will detail it a bit more in the coming slides, is the strong performance, the strong operational performance we have had in the first half. As you can see, overall, we have generated an interesting performance in just the first half of €216 million. That is the previous year. That is the first half of 2023. Clearly, there is one thing which makes this possible is the fact that in H1 of 23, we have been facing one of logistic events in Gabon, as you may remember. And this is something we highlight here in the first box for plus 100 million euros. This being said, even that, so it means two things, that we have been able to come back to normal. So what... We said last year that it was one-off event. It is clearly the case. It remains one-off, and it will remain one-off. So that's the first thing I would like to highlight. And the second one is that the rest of the performance has also been very strong. As you can see, if we remove this 100, we still have a positive 116, driven by positive volume, especially out of Fueda Bay, and also improvement of grade of of our mining production both at Preda Bay and also GCO primarily if we compare to previous year. And overall the productivity and the management of its cost has remained very strong as you can see. And the last piece is the negative inventory variation that we have had out of SLN given the context paid currently in New Caledonia and I will come back to that later on. So that's the same. Keeping in mind that this performance has been generated, also including some negative effects coming out of Estelent, which don't have any more economic effect to our financials, to the financing conditions of the group. In terms of external factors, Estelent has been mentioning it in our introduction, so I won't go into detail. In any case, we describe a bit more the evolution of pricing later on in the presentation. One thing I would like to highlight is we have here also a negative effect coming from the level of low-grade saprolyte volumes out of Coedave. This one being indeed driven by the fact that we have not obtained the permitting for this portion, which is honestly not in our control. And we can see a positive effect on the other hand related also to the permit insurance process in Indonesia leading to a situation of deficit currency enabling to get premiums on the price of ore in Indonesia. So that's why both items, as you can see, are reported in the same box here. And the other thing I would like to highlight on this topic is the fact that it's not because we didn't get the permitting in 24 for this low-grade vaporized ore that we won't be able to get it in the coming years, and that's really something we'd like also to emphasize. And we'll come to the overall situation of permitting and volumes on Ueda Bay, on which we have some good news to share later on in the presentation. Let's keep moving and having a look on the net income. So I was commenting already the key item on this is the fact that indeed, especially we are reporting a negative net income group share in the first half, but this one is including the 72 million euros negative for SLN. So that's something which is very much to be taken into account because this means that Again, if we remove economically something which is not to be considered due to the fact that we don't finance anymore SLN, in the context of very challenging depressed market situation, which would improve as we'll come back to later on in the second half, we are still able to have a slightly positive net income. So that's something I would like to emphasize. In terms of capex, we have continued our growth capex as it was planned, and that's something which is very important, even, and that's something we said when we presented the 23 results, and that's something we are continuing, and we wanted to continue for 24, and we are continuing, as you can see here, is despite this challenging pricing environment, We want to make sure that we prepare the future of the group. So that's the reason why you can see a maintained investment on the lithium front, very similar overall amount as H1 of 23. It's primarily the end of the construction of the first plant that Christelle was mentioning in terms of highlights in the past weeks and will come also later on to to the future of this very important new business for the group. It's also, and that's something we shared openly also in our TMD and during the 23 full year research presentation, we are continuing to invest in Gabon. So you can see the detail on the right side of this slide. We are investing both in the community activities, the mining activity, and to be honest, it's primarily also the investment on the railway, the rail equipment to be able to transport the ore. And on top of that, we have been investing in the front Japanese renovation program, as you can see, for 37 million euros. On the other side, and that's something I was highlighting a bit before, we are keeping a stringent control of our current capex. As you will see, and as you can see, it's actually reducing. It's in reduction versus what we spent last year in the first half. And we will see later on. We continue this stringent management with the revision of the full year guidance, which is clearly a sign that we take for sure into account the current environment, even if it could improve in the manganese ore area, and we are still having a strong control of our architects. If we move to working capital requirements, we have an increase of the working capital, which is very mechanical. Christelle was saying that we have not yet seen the full materialization of the increase of the index in Morgan's Ore in the first half, which is true. I was adding fully because we have actually started to see an increase at the very end of the semester, especially in June, and mechanically, this drives to an increase of the receivables. So that's the biggest portion of the increase of our working capital. That is the end of 23. As you can see also, and it's always important to compare to the same period of the previous year, actually we have a slight reduction of our working capital. So which is a confirmation of what we have already said in the past, When we talk about seasonality, it's very often that in terms of working capital, the seasonality is negative, and we have a higher working capital at the end of the first half versus the end of the year. And on top of that, as I said before, we have also the impact of the selling price of Morgan is also no negative signal here, and it's clearly something which will stabilize in the second half without any doubt. Talking about net debt evolution, so we have already said that it's a slight increase for 97 million euros versus the end of 23. It's by the way, and back to the same comment I was making on the slide before on the seasonality of our working capital, if we compare to June 23, we are exactly at the same amount of net debt. something really to highlight given the environment in which we are concerning the market pricing. The free cash flow, so when we look at the reported free cash flow, it is significantly negative because it is at 521 million euros negative. The reason why we talk about the economic free cash flow because we do believe it is important to highlight a few items which are not in the free cash flow but which eventually are also explaining the limited evolution of our net debt. The first one is the financing of the SLN needs and losses. So financing needs and losses. I will come back to that later on. So this is financed by the French state. So that's why as everything is financed by the French state and knowing that the negative impact is consolidated in Africa's flow, We feel important to provide the picture, what it means, removing it, knowing that this is not eventually impacting our net debt. The second piece we like to highlight is clearly the Centenario CAPEX, so our lithium project in Argentina, is fully consolidated in our numbers as well, and knowing that this portion, so 50% of it, is financed by our construction, via capital increase, capital injections into the subsidiary in Argentina. So this is the 85 million euros you can see here. So that's the reason why we are really willing to keep following this economic free cash flow criteria because this is, according to us, the best way to look at the true generation of cash. In the first half, it was consumption of cash. Christelle was mentioning the two items. in our introduction because we have had limited dividends out of in the first semester. It could improve in the second one, so that's for sure. And that's a first driver and the second driver is because we have invested in our growth capex as I was detailing just before. So that's overall the reason why we remain with negative economic free cash flow. But I think it's important to look at the overall picture, again, taking into account the items which should be considered out of, not really out of our control, but things which are reported and consolidated fully in our free cash flow that are financed separately by other parties. So I was already detailing SLM before, but I think it's important to make a slight pause here because it's a negative and pretty significant negative impact in a lot of areas of our financials in H1, mentioned ABDA, mentioned net income, mentioned also free cash flow for 145 million euros. So that's why it's really important to point out the fact that all of this, something we said before, but which is confirmed fully again in the first half, is financed by the French state. I will try to show in this slide a pretty clear breakdown of what happened on this area in the last six months. The first piece is that, as you may have in mind, we were in our at the end of 23, having the existing loans of the French state to . for 260 million euros. This has been converted, thanks to the agreement we found at the beginning of the year, into an equity instrument. So the undated, subordinated bonds, which have been issued by SLM and fully taken by the French state. And this already has reduced mechanically our net debt. Second piece which has happened is the financing of the needs of SLN in the first half. As you can see on the middle of this chart, this free cash flow, so the financing needs of SLN amounted to 139 million euros in the first half, and it's almost fully equal to the financing which have been provided by the state for 145 million euros. It confirms what we have said before, that this is now fully taken care of by the French state. And the 145 million euros, to be even more detailed, it's 60 million euros financed by the French state in February. This was already disclosed in our previous communications. Another 80 million euros financed in April. So that's an additional information we are providing. The other 5 million euros is the capitalization of interest on the previously existing loans. So that's how you have this breakdown of 145 million euros. On top of that, we have, and I think it's really also important to note, SLM has obtained another financing for another, so it's not the same amount, it's the same amount, it's not the same financing of 80 million euros in July. So, which is not for the past consumption because, as I said before, it's the same amount financed in H1 versus the needs of Estelen. It's to cover the coming needs in H2. So, this is an additional confirmation about what I said about the French state covering the needs of Estelen. And this is important because given the context you all know in New Caledonia since mid-May, the performance of SLM has been extremely challenging from an operational standpoint, of course, and accordingly from a financial standpoint. I really want to say here that we have a big thought for the teams in New Caledonia who are doing an outstanding job to keep the operations running in this context and honestly, even with this huge drop, being able to keep producing at the minimum level to keep the equipment running is a fantastic performance. This being said, and just to finish on that one, sorry, also want to highlight that it has been done in a very safe environment, which remains the priority of the group, as also Christelle was saying earlier, and which remains clearly our priority also in the current context in New Caledonia. So, this being said, clearly, even with this, again, outstanding performance from the teams, the impact on the operational criteria is huge, Division by 3.5 of your exports in H124 versus H123. The reduction of production from 24,000 tons to 17,000 tons. And accordingly, things can drop in ABDA because not only the production is changing, but the pricing is also changing. And here it's actually pretty limited because there is also a fixed cost management implemented by the team. And I've already mentioned the pre-cash flow negative. So I just wanted to provide all these numbers because I think it's important to understand our consolidated financial numbers. But the message I really want to convey and insist on is that this is not anymore impacting our financing, and economically, it does not impact and weigh anymore on our performance, which is very important to understand. If I move to our debt maturity, so if you remember last year, it was already an increase by a year, that is 22, and we have managed to further increase it by another year, moving from three to four. So and I will come a bit more detail in the next slide about the main driver. So the other thing I would like to highlight here is that thanks to that, we also keep a very strong liquidity. It was close to 3 billion euros at the end of last year. It is at 2.8 billion currently. So this is a confirmation that we have a very robust balance sheet. which also enables us to look at the growth potential of the group with a lot of confidence. And again, we managed to do this in a very challenging market environment, which is a very strong performance. So the reason why we have extended the maturity, the main one, is because we have issued our second SLB in 12 months in May of this year. So it's a confirmation of the new attractiveness we have. It has been a very successful issue. The other book, as you can see, was subscribed by more than three times. which is a very solid performance. And if we compare to our past performance in this area, it's something on which we have been very happy to see the attractiveness of our bond issue. And this is for 500 million euros, and it's maturing, this new bond. At the end of 29, it's a 5.5 years maturity, and this is the reason why we have the overall increased maturity of the desk by one year. And just a few words about the sustainability link features. These are the same of the previous SLB we did in 23. with a target to reduce our carbon intensity by 37 percent by 2026 versus 2019 baseline and also to have 67 percent of our suppliers and customers having the decarbonization target consistent with the well below two degrees scenario of the Paris Agreement. very similar, exactly the same as the ones we, the same targets as the one we included in our SLB in 20. One now to move to the operational performance of the group. I won't spend too much time on the first slide, which is showing the pricing environment we are currently facing. And it's showing the continuous trend we have faced in H1-24 on most of our products with one key exception. And, of course, we'll come back to that later on given the significant increase in perspective it gives us for H2. It's on manganese ore and to a lower extent but still to an extent on manganese alloys. Starting with manganese ore, following the announcement of our competitor in Australia in March, you have seen the things can increase of index starting in Q2. And when I say things can increase, it's almost doubling. That's why it was in Q1. It has, by definition, given that it's a conversion business, also paying effect on the Morganese alloys indexes, which has been increasing, as I said before, to a lower extent. This being said, it's also to note because it was an inversion of trend, which has been very challenging for the last two years because it started to decrease in H2 of 22. And now we have seen this inversion of trend. The fact the Manganese ore price is increasing will have, of course, an impact on the margin at some point in time. But currently, I think it's important to note that given the lag, we have 45 months between the time the oil is purchased by our alloys plant and the time it is consumed in our cost of goods sold. So this gives a positive evolution of the margin, which is expected to last at least for two years. The overall operational performance, as we said before, we could tell, is coming from almost all our businesses. I will come into a bit more detail afterwards, business by business, but as you can see, overall, very strong performance. Production of Manganese ore plus 33% versus H123. Production of fallow is plus 4%, so we could say a bit limited, but in the current market, it's a clear strong performance. Nickel, again, an outstanding performance, which is confirmed after a very strong year, 21, 22, 23. because we managed to produce 58% more in H1-24 versus H1-23. As we said before, there has been, however, a negative impact in terms of external sales, which is coming from the low-grade vaporize on which we had permitting to sell in H1-23, which was not the case in H1-24, as I said before. So that's something to highlight, but it does not at all question our ability to produce, as you can see in our overall production performance. And as you will see in our confirmed guidance, at least for the bottom end of the range, which still confirmed a very strong increase of the production and sales in 24 versus what we delivered in already a very strong 23 year. SLN, I mentioned it before, so I won't I mentioned it again, and GCO, another very strong performance with an increase of 33% here also versus H1-23, and in terms of sales, also very high with plus 24% for Inmanite and 26% for Zircon. Manganese, to start with, is a very important business unit for the group. So an increase overall of SBA. As I said earlier, limited at this stage in terms of impact for the pricing because it has just started to materialize in June, but a start of increase overall. Overall, the pricing was slightly lower in H1 of 24 versus H1 23. So this means that the reason of this increase of LGA is coming from the intrinsic performance primarily driven by the increased volumes I was mentioning in the slide before. In terms of free cash flow, A limited improvement so far. I think it's also good to highlight that the main reason why it's limited is because of the working capital increase at the end of June that I was already mentioning. The fact that even if the price has started to pick up, it was at the very end of the semester, so it's still now receivable. So this means that the full free cash flow generation will be coming out of H2, and that's something which will be massive, as we'll mention later on. If we talk about the performance a bit more in detail, so the transported volumes as seen At this stage, a limited increase due to the lower seasonality related to H1, and especially that the wet season is taking place primarily in Q2 in Gabon. And this wet season was, by the way, pretty strong this year. So this is why it has been limited. And also, that's something we mentioned at the beginning of this year, We want to ensure that we do the adequate maintenance work on the railroad to sustain the growth we have had so far, and we want to continue to work on this business. Overall, though, and that's something which we want to highlight, the cash cost has been very strong. It has been down by 15% versus 1 of 23, reflecting higher volume sold, and by the way, It's very close to the cash cost we reported for the year 23, which again, given the fact that the seasonality is much stronger in H2 than H1, is something which confirms a very high performance on our productivity, efficiency, and cash and cost management for this business. The next point I want to highlight is the supply shortage from Gemco in Australia that we have been mentioning a few times. This is very significant for the performance of our business because Gemco represents a bit more than 10% of the overall Morganese ore supply, generally speaking. And it is close to 30% of the high-grade ore on which we are, by the way, playing. So this is a massive disruption. So we wanted just for the sake of illustration, show what we mean the current cash cost without the Genco volumes, which is the situation in 24. So it shows that we are now by far the best place in this cash cost curve, which confirms the strong cash-cost positioning we have been mentioning in the past, and this is what also enabled us to generate so high margin for this business, and even in a challenging pricing environment. So this means that here, now with our GEMCO, the fact that the volumes would have to be compensated by high-cost producers is showing the price upside you can see here. And this price upside has already materialized because the index, and that's what you can see on the right-hand side of the slide, as I said before, almost doubled versus where it was in April. So the fact is, if we look at the consensus, and this is something we have in our illustrative calculation of adjusted EBDA based on the consensus of the analyst. It's giving a consensus for HQ around $9, precisely $8.9 per VMCU in the second semester. Very similar to where the index is today. So it's not only, I would say, expectations. It's today where we have and where we see the pricing taking place. And again, very much in line with the current cash flow curve. So with that expectation, I also want to remind, and Christelle will come back to it in the perspective, that $1 per DMTU for us, given the volumes we are currently reaching, means a positive additional EBDA margin, so it's pure EBDA, for 255 million euros for $1. Here, when we talk about an evolution of the index, which was before, in average, when I say index, consensus, I'm sorry, Before at 4.8, now it's at 7.3. It's an increase by $2.5. So it shows how big the impact is expected to be for performance in 24. I will not spend more time here. I was already explaining the manganese alloys. So pretty good performance in H1. And again, the current situation of margin has improved due to this lag between the time we purchase and the time we consume in our sold goods, the ore, so which is and which will show also an improvement in margin. That's something we could expect though an inversion of trend likely at the end of 2024. Let's move to nickel. So we have had a very resilient contribution from Ueda Bay, but in a clearly lower price environment. And I mentioned the fact that it was, by definition, lowering significantly the cash contribution to our free cash flow in the first half of this previous year. It really links also to the timing of the sales, which will improve in H2, as I said. So we can expect, and we are expecting for sure, a much stronger free cash flow contribution in the second semester. The other point I want to remind, I've said it before, but it's always good to put a bit more emphasis on, is the fact that In the current situation of deficit of supply, we can see in Indonesia due to the delays in granting permitting to most of the producers. So we have seen an increase of the premium. It has already impacted for 24 million euros, as I said before, our performance in H1. It's clearly much higher currently, so we are expecting a much stronger contribution also of that for the second semester. So that's another good signal for coming financial performance. Let's move to the next slide, which I was describing already more or less in most of the details. The other information is that on top The lower price coming from the LME evolution for the ore, we have also seen a reduction of the NTI prices by minus 23% versus H123. So it's a pretty significant drop. So that's another explanation for the lower financial contribution of Wedabe in H1. Again, the point I want to highlight is in terms of production, it keeps to be a very strong success. We stated before that 22 was already the biggest nickel mine in the world. So 23 was another 80% growth, 80 versus 22. And in terms of production, again, we have been able to generate another 40% of increase in the first semester. Ending with mineral sands. So I said that it was a strong operational performance with a plus 33% of production in H1. It's explaining why we have been able to have a solid EBDA despite the reduction in selling prices as for the other markets. So it's more or less offsetting all the intrinsic performance we have in general as you can see on the right-hand side. And the free cash flow is also lower because of higher working capital, which is reflating the of last year. And by definition, it is now putting an additional working capital which was before internally, and also the fact that we have had our first tax payment in H-124 for 15 million euros, so that's actually the biggest impact, related to the 23 income tax and also for 24 interim tax. And to end up, so this highlights the impact HMC production, again, very strong in H1. And this also details the evolution of pricing, which has been negative in H1, which currently, as is being said, is slightly improving. It's a slightly improving Q2 versus Q1. So the negative trend has stopped for the time being, which is a rather reassuring signal. But overall, the main important message we wanted to provide for this business is a strong operational performance, which has been key for our success in the past. So with all these details, I now hand it over to Christelle for the strategic roadmap update.

Thank you, Nicolas. So in terms of strategy, I will just remind you our strategic roadmap that you know well now. It's aligned with the global macro trends, and this strategic roadmap has two pillars. The first one is to grow in metals supporting global economic development. These are the resilient markets of manganese ore and alloys, of nickel for stainless steel and mineral surrounds. In all these markets, we have a very strong position and very strong mining position. assets best in class and with a lot of opportunity for organic growth. And we have a second pillar, which is to sustainably develop the critical methods for the energy transition. These are the fast-growing markets of lithium for batteries. Also, lithium provides for batteries and the recycling of those batteries. All this is supported by this ambitious PSR roadmap at propositive mining. So we have recently reached a significant milestone in our strategy to develop the metal for energy transition with the commissioning of our first lithium plant in Argentina. As I said in the introduction, the production will start in November, and we expect to reach nominal capacity mid-2025. This is one of the most advanced DLE process, which has been developed in-house and is supported by 12 patents. We have been testing testing this process in a pilot plant in real-life conditions on the Salar at 4,000 meters in Argentina for five years. So we have very good knowledge of the process right now. The lithium recovery yield is at 90%, which is very high. compared to our competitors, which is triggering a very good cost position of this plant. The construction capex should be around $870 million. Expected cash cost between $4,500 and $5,000 per ton of carbonate. which would be leading at nominal capacity to an annual EBITDA between 200 and 300 million, which is depending on the, of course, the long-term price assumptions for lithium. On the next slide, you see this attractive positioning of this new plant. Here we have built an illustrative cash cost curve for the lithium industry in 2025. And you see that after reaching the nominal capacity, the Eramet plant should be very well positioned. And in the first quartile of the cash cost curve, very first quartile, and it shows also the strong resilience this down to the low of the cycle because you see the spot prices of today, which is not very high and much lower than the expected long-term price for the market. But you see that even with the spot price of today, we should be quite comfortable in terms of cash positions. We have already planned to build a second plant in the north of the deposit. As you know, this deposit has a large resource. We have certified recently 15 million tons of resource in the San Antonio deposit. So we have already planned to build a second plant. This plant should have a production capacity of 30,000 tons of lithium carbonate. cost around 800 million, and with the same cash cost as the first one. It has been conditionally approved by our board, but the construction is subject to some conditions, especially the attention of the construction permit, which takes some time in the Santa province, and also, and importantly, to the implementation of the new investment fiscal regime for large projects in Argentina that should significantly enhance the economics and financing conditions of these new plants. Beyond these two lithium projects in Argentina, we continue to build a portfolio of projects in metals for energy transition. In lithium, we pursue several opportunities in Chile. As you know, we have acquired a big mining concession in Chile covering a cluster of some of the most promising undeveloped lithium salar in Chile. We are presently working with the state-owned companies who are the holders of the permitting, the lithium exploration and exploitation permits. And we are working with them to develop the future projects on this transition. And we are also developing other partnerships, and we have signed in H1 two farming agreements to conduct exploration activities in Chile on other standards. In nickel, As you know, we have announced during the semester that we will not pursue the joint project that we had with BASF to develop a nickel cobalt asphalt plant at the bottom of our Maida Bay mine. That being said, we know that Indonesia will continue to play a critical role in the future of the overall nickel industry and to investigate opportunities to participate in the nickel value chain for electric vehicle in Indonesia. And regarding the recycling of the nickel cobalt batteries in Europe, our project with Suez, we are continuing the feasibility studies. But given the considerable changes in Europe EV battery value chain observed over the recent months, we carefully assessed the merits and the timing of when to proceed with this battery recycling project. So as a conclusion, and it has been alluded to already by Nicolas in the operational presentation, we are entering the second half of the year in the context of favorable seasonality for our activities, combined with a sharp increase of manganese ore, sharp increase in the price of manganese ore, The economic conditions remain sluggish at the start of H2, especially with the weak domestic demand in China. And the real estate crisis continues to wait on our markets. But the Manganese oil supply significantly disrupted the supply market and providing support for the price upside, as we have mentioned. In terms of Manganese alloy selling price, we see a price increase, but it's just in line with the oil price, which is input cost increase. And we don't expect the margins to be higher, and they remain under pressure because of the low demand, especially in Europe and North America. And we expect the price to stabilize in H2. So globally, quite weak market conditions, but this Manganese or supply disruption provide an opportunity, a significant opportunity, in terms of pricing for the second half of the year. In terms of operations, as we said, it's a favorable semester for us in terms of weather conditions, and we always have higher production in H2 than in H1. We are back from the beginning of the year to normal operating conditions in Gabon. In Indonesia, our Amdal, which is the environmental license, has been signed in July. So it will enable the permitting for Wedabe nickel cells of high-grade saprolyte and limonite for 2024 but also for the next three years because now the permitting in Indonesia is given for three years which is good news. It also explains why it takes now more time. It has been taking quite a lot of time for many mining companies to get their permitting this year. because it's given now for three years, so it requires quite a lot of attention for the administration. But when we will get it, we'll get it for three years, which is good news. And as I said, we should start our production in Santonario in November this year. So, overall... We see further growth in our mining operations as we announced at the beginning of the year. So the volume guidance for the year 2024 in Manganese ore is between 7 and 7.5 million pounds versus 6.6 last year, so a significant increase. The guidance of production for the oil at Weda Bay is between 40 and 42 million tons from 33 last year, so it's also a significant increase. We have reduced the top of the guidance, the top range of the guidance given previously because we didn't get the low-grade production saprolyte permitting this year doesn't mean that we should not get it in the next year because it's something that is beyond the normal permitting and it's given on an exceptional basis year by year so it's something that we didn't get this year but we will apply for again in the coming years And we should have, because of the start of the production in November, the production in Santonario should be very limited, around 1,000 tons of lithium carbonate this year. We have also lower our capex guidance. It was 700 to 750 million previously. It's now between 550 and 600 million with growth capex between 350 and 400 million mainly due to the postponement of the start of the construction of the second plant in Argentina. We have not yet obtained the construction permitting, and as I said, we are waiting also for the new incentive package from the government. And we are also very cautious regarding our sustaining capex, so we should spend each year 200 million versus close to 260 in our previous guidance. Overall, because of this huge increase in the consensus price, we have calculated an indicative illustrative adjusted EBITDA Taking into account, I mean, the sensitivity that we have, huge sensitivity on manganese off-price. I remind you that $1 per DMTU for Eramet means an annual impact on EBITDA of 250 million, 55 million, which is significant. So with the new consensus price that you see below here, and mainly for manganese ore, the main change is manganese ore, at the $7.3 per BMCU average for the year, the illustrative adjusted EBITDA for the group, taking into account our volume assumptions that I've just described, should be between 1.2 and 1.3 billion euros for this year. So we are quite confident that we should have a very, very strong improvement in H2 versus H1. for two reasons. Again, this positive seasonality that we have in our volume, the fact that we got our permitting in Ueda Bay, and this significant increase expected and already happening right now in the Manganese ore price for the second half of the year. So thank you very much. I'm stopping here, and now I think we have time, and I hand it over to Sandrine for the Q&A.

Okay, so thank you, Christelle. Thank you, Nicolas. We will now start the Q&A session. We will take questions from our self-taught analysts first, and then we will move to the questions from the people connected by the webcast. Operator, please, I hand it over to you.

Thank you. This is the conference operator. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on their touchtone telephone. To remove yourself from the question queue, please press star and 2. Please pick up the receiver when asking questions. Anyone who has a question may press star and 1 at this time. The first question is from Julienne O'Neill-Stiefel. Please go ahead.

Yes, hi, everyone, and good morning. I'd just like to come back quickly on the manganese market. And we have seen, obviously, the big increase in pricing due to the problem of Jemco. But we have seen also what was interesting with the potential big shortage is that a lot of small producers started to come back in the market, and we discovered that they had plenty of small inventories that they were able to to provide to the market. The question is, they had some inventories, they've been able to provide that to the market quickly, which has made that the price has stabilized right now. But once those inventory will be gone, and normally it's been gone very quickly, could we see in the second half, I would for the next nine months, because Gemco will be at least, will not export any ore for the next nine months at minimum, could we see an interim being rise of a new rise once zero growth inventory has been adding fast? And that's one first of the questions. And behind that, I have also the question about the inventories that could be done, and if you have a view on that, on the alloys producers, build inventory ahead of this big, let's say, shortage, low production, but also on the steel makers, do we have some indication that they have buy in advance some alloys manganese, some alloys, to make sure they don't have any production problems. And that's important because that will obviously have a major influence in the next nine months coming, at minimum, I would say, and of course, might also have an influence later on for 2025. So that will be my first question. I will have another question on the lithium market. We have seen the pricing quite low and stable for the time being. Do you see any, I mean, what you hear about the short-term of the market, do you think that we could see another rebound, a strong rebound? We see effectively the cost curve, which could tell us that effectively a rebound would come, but in the same time, it's not something which is happening right now. Thank you.

Thank you, Julien, for your questions. I will take the first one on Manganese Org. So indeed I think it's an important dynamic of the market that you are highlighting. The fact that at this stage we have seen the possibilities especially of producers of semi-carbonated ore out of South Africa. being able to replace, to compensate the lack of the absence of production and export out of Genco. This being said, and I think it's also important to mention it, and it will be a segue to your second question, the other thing we need to keep in mind is that overall the market in China and also especially of construction in China, which is by definition very much the consumption of steel, has been pretty low since the beginning of the year, which is a continuity of trend after 2023. So that's why we have seen the stabilization of the index for the high-grade ore that we are producing and selling out of Gabon. You may have seen also, as contrary, more reduction of the index and selling price for the semi-carbonated ore because, indeed, there's been on this area given the inventory which was available and combined with the overall situation on the market in China, more or less a surplus, short-term surplus. So that's why you are right, this trend could actually change in the coming nine months. This being said, I think... We need to be cautious because we cannot be sure about the overall evolution of the market in China. They have started to put some incentives but not significant ones last week. And overall, we feel and I think it's important to remind the way we look at our illustrative calculation of adjusted EBDA, which is based on the consensus. And we believe that this consensus, which is more or less that the current index for high-grade ore is pretty balanced. So could we see a slight increase? Difficult to say yes or no as of today, but it's a possibility depending indeed on how long this shortage will last and also the evolution of the overall market.

Maybe just to add, you have to understand that the manganese alloy producers, which are the customers of manganese ore, they have recipes for their furnace and they need to put high-grade ore in the mix. They cannot live only with semi-carbonated ore. Usually, they put something like 35% of high-grade ore in the mix. Right now, because of the huge increase of high-grade ore and the high availability of low-grade ore, they have changed the chemistry and the burden mix for some time. 10% and 20%, so quite low. But you have to know that dropping at those levels creates a negative value in use for them. It creates a furnace instability, loss of power, productivity, and even if you go down to 10%, it can even sometimes damage the furnace. So they cannot stay very long at a very low level of high-grade ore. So today, they are right. I mean, they took quite a lot of semi-carbonated ore, and they were available. But we think that they should be over time in need anyway for high-grade ore. All this, back to what Nicolas said, will depend also significantly from the appetite of the market in China. But just to understand that there has been a kind of short-term opportunity to buy semi-carbonated ore at a much lower price. But at some stage, they cannot avoid having some high-grade ore in their chemistry.

And on your, so, yeah, concerning manganese alloys, clearly there has been inventory, which was built in 2008. in the plant especially again in China, which is more than half of the consumption of manganese oil in the world. But this is something which we have seen and we are following very closely. It started clearly to decrease in the last weeks. It was not that much given the The possibility for some of the producers of semi-carbonated, especially out of South Africa, selling and so shipping some of their available stock to the customers, but clearly it's a continuous trend, and we expect that it will continue by definition, and it should actually further reduce. by the lower availability of additional compensation from these sources. And as Christelle explained it very clearly, the compensation we could have seen in the past weeks between high-grade and semi-carbonated cannot last too long. So this means that overall, at some point in time, there will in any case need to also slow down a bit their purchase of semi-carbonated and so which will have another effect on the inventory. So that to complete it was honestly it's an associated question in any case because overall the fact that at this stage it's also stabilizing the index is because there is an inventory effect which has more or less, but it will continue to decrease in the coming months. Concerning lithium, there is indeed a pretty low price currently. We have seen some kind of easy winter. That's how it is called currently on the different markets. It's what we believe is a short-term trend. At the same time, there has been a new lithium production, new lithium supply coming into play in the beginning of the year, which explains that There is a current surplus on the market, explaining why overall the pricing has been slowing down. I want to remind one thing is that even with a price around $12,000 per ton currently, with our expected cash cost below between $4,500 and $5,000 per ton, we still have a very, very solid operation in business case. But our expectation is that this current surplus we see will decrease in the coming years, and we are still confident with what is the consensus of the NIS for the long-term price, which is between $15,000 and $20,000 or so.

You have to understand that the lithium market today is still a very small market. So the supply, each time there is a new production coming on screen in terms of supply, it's a kind of step change in the market. And the demand is evolving more smoothly. That being said, the overall demand for lithium, and as you know, whether you put LSP or NMC, you need lithium anyway in the same range. So we expect the market to double every five years over the next 15 years. So there are some short-term effects, as you explained, and we expect the market to be in surplus this year and probably beginning of next year. But again, it highly depends on the dynamics of the EV market. And the only good thing I see of the price of today is that it has stopped all the fancy projects. There were projects... pumping up almost everywhere with cash cost above $17,000 per ton. And those projects today have stopped, have been most bold, and I think it rationalized the supply market going forward, which I think is good. because most of these projects were not economical.

Thank you.

The next question is from Alan Spence, BNP Paribas. Please go ahead.

Thank you, operator, and good morning. Two questions on nickel. The first one on Weta Bay. The release notes some slow production in one furnace in the first quarter. Was that driven by the lack of the saprolite ore, or was there some operating issues? And if so, has that been resolved? And then secondly, still on nickel, just on the outlook, you talked about an expected surplus in 24, but I'd be interested to hear your views on how you think that surplus evolves over the next several years.

Thank you, Alan, for your questions. I will answer for your first one. For the reduced production out of the one furnace, it's actually maintenance which was taking place on this furnace. So it's more a short-term issue, which has been, indeed, impacting the lower performance, especially comparing to last year. So it's really not the lack of ore. It has been continued. supply of ore from our mine to our plants shared with Tsingshan and Onwedebe.

Regarding the surplus, yes, there will be a surplus this year. And as you know, there have been a lot of capacity builds, especially in Indonesia, especially in the ferro-nickel, on the ferro-nickel side. When you look at the SMM for the nickel salts, it's remaining at quite a good level. What is quite low today is the price for NPI or ferro-nickel because of the significant capacity. And also the fact that now the Chinese have registered their nickel metals at the LME. So they can play with this capacity on all the different markets. They can produce NPI, they can produce MAP, they can produce nickel metals, and they can produce also... So now there is a kind of leveling on all these capacities. And the good thing is that the demand is still dynamic. When you look at the growth of the demand in nickel for stainless steel, so the basic production. Stainless steel production worldwide has grown 8% in H124 versus H123. And the global primary nickel demand has grown 7%. So it's a dynamic market. Yes, there is today a surplus. But I think also the price of today, the good thing of the price of today is that it is regulating the capacity. And you may have seen that in Indonesia, first the government is not incentivizing any longer the construction of MPI plants. On the contrary, they try to limit now the additional capacity. because they have realized that they have enough now. And on the other side, the rest of the market is also adapting to this new supply-demand condition, and the least profitable capacities are closing down elsewhere. So we expect this surplus to... be rationalized and come to a balance in the coming years. But, again, I think it will remain a very, the peronical part especially will remain a very competitive market, we think, in the short term.

Okay. Thank you very much.

The next question is from Maxime Kogi. Otto, please go ahead.

Yeah, good morning. So two questions on nickel. So the first one is related to your ambitions in battery-grade nickel. So there was a report about a possible partnership with Wayu, which is a big player in that area. Where do you stand in that respect? Are you still intent on keeping a majority stake in such a project? And what could be the timeline for this project? And second is on the... New Caledonia is nickel packed now off the table or do you see potential for revival of this quite crucial pack to restore competitiveness in New Caledonia further ahead in H2 or in 2025?

Thank you, Maxime. So for your first question, We'll repeat what we have said after the decision to stop the Sun Invade project with BASF, is that we are investigating all the options to be participating into the nickel industry in Indonesia for batteries. We confirm it. We want to comment things you could have read separately, which is, I mean, not sustained and some possibilities which could be part of the options, but nothing else. So I want also comment if we would remain a major main shareholder, as you were asking, as it was indeed planned. for Selmy Bay because it's really too early to say with what we are currently contemplating.

In Caledonia, honestly, the situation, the political and social and societal situation in Caledonia is really unpredictable right now. Things are very, I would say, difficult to to control and the fact that we don't have really a long-term government in France and the fact that there are still a lot of disruption and social disruption and riots in Caledonia doesn't help. So today we don't have any visibility and honestly it will take time to sit down around the table and rethink about the future of the nickel industry. So the good thing is that it has no economic impact on Eramet any longer, as we have explained several times now over the last month. We help SLN operating from a pure technical point of view, and we manage the safety of the people there. But honestly, from a political point of view and the future of the nickel industry there, I have absolutely no visibility, and I think we will not have any in the very short term, in the coming weeks. It will take months.

Okay, thank you.

The next question is from Nicolas Montel, BNP Paribas. Please go ahead.

Hello. My first question is on working capital. What do you expect for the full year impact? Are you going to be able to... to be stable, or do you think you should have a negative impact in the foliar basis? For my second question, it's about manganese ore. You have talked about 18 million mixed impact. Can you explain where it's come from, please? And, sorry, I have a third question. It's about your low-grade saprolyte. Do you accept to get an authorization to sell it in 2025? And what are you going to do with your inventory? Thank you very much.

So thank you, Nicolas. So I will take the first one concerning working capital. So the first thing I would like to to remind you that we have demonstrated in the last years that we are managing very strongly and very well our working capital, so optimizing as much as we can all the areas and especially in venturing. One thing clearly, and I would say it's a good problem to have, with the current expectation in terms of price for H2, mechanically the same as what we are seeing at the end June with already an increase of working capital due to the start of increase of pricing in June. We are expecting if this materializes and that's currently our expectation, we are expecting that it will impact the working capital up. Again, this will be a mechanical effect. Honestly, you can make quickly the math for that is we have usually a one-month payment term for most of our activities and especially this activity. And if a price, just to make it simply, is at $9, it was closer to $4 at the end of 2023 for Manganese Ore. So it means that it will be a pretty substantial increase that we are expecting. Could there be waste? To further optimize this, of course, we are always looking at the options to anticipate some payment from our customers. But realistically and reasonably, yes, we are expecting a non-unsignificant increase of working capital, again, in this pricing context. But as I started to say, it's a good problem to have.

Especially on that, is it not possible to have an off-take agreement to ease your finance on this subject?

So the answer is it's always possible to contemplate an uptake agreement, but it's rarely adding value overall to a producer's. And usually you would do it and we could consider it in a situation where we are really under significant financial stress. So I would not personally consider and advocate for this kind of option in a situation on which we have confirmed that we have a robust balance sheet with limited increase of the debt in the changing context we are facing in H1, as we mentioned before, and with the fact that even if I was answering specifically to your question, should we expect an increase of working capital at the end of December? Yes. But in any case, this means also that we'll have enjoyed significant generation of cash in H2 in this pricing context. So honestly, I would not consider and contemplate this kind of offset agreement because it's always a risk to destroy the value.

Just quickly, because we are running out of time, there's a question on the low-grade ore in Ueda Bay. So this year we don't expect to get it. We will reapply next year. The fact is that the administration in Indonesia, they have been quite slow and quite restrictive giving the permitting this year. Also, because now they are giving it for free, so they are particularly careful. And it has created a tension on the oil. That's why we have premiums today on the internal Indonesian oil price. So we think that the market in Indonesia will need this low-grade saprolyte in the future, so we will be able to sell them. And in the meantime, yes, it is in our inventory, because when you extract your high-grade saprolyte and your limonite, you also extract some low-grade saprolytes, that you put in the inventory. We used to call that conservation ore because at the beginning of the production of the mine, we were not able to sell them. So it will be in our inventory, but we think that we'll have, when the market is in tension, we will have potentially from time to time ability to sell this low-grade ore in the short term and in the long term anyway as the grade is going lower in Indonesia this quote unquote low grade sapolyte will become normal sellable products so longer term we should not keep these inventories at high level on our hands but short term we won't get the permit this year

Okay, so we are running out of time, so I suggest that we move on to the questions from the webcast. Laurent?

Yes, we have a few remaining questions from the webcast. First, on Morganese ore production, could you give more color to the small change to your guidance, and do you have flexibility if you decide to ramp up production or shipment?

In fact, it's really a transportation bottleneck, and we will do already a strong second semester due to the good seasonality. We continue to invest to renew the railway, and we think it's important to continue to do so. So we have some cuts. during the week of the railway in order to do maintenance and renovation work. So we have very limited flexibility to increase our production beyond the range that we have given.

Do you have an indication of the current level of high-grade manganese inventory in Chinese ports? And regarding cost, do you have an estimate of the marginal cost in manganese production in South Africa?

So I will be very quick. So the estimation of high-grade ore inventory is around 1 million tons. So that's for the first question. And concerning the second question, so there is an estimated of the cost out of South Africa. It could be around $5.5, $5.4, $5.5 per DMQ. I really want to emphasize the fact that it's part of the additional semi-carbonated, which is currently available. So clearly it's not a signal of where should be the price going forward. So there has been inventory available, which was indeed a bit impacting the business on the very short term. So there will be a need, as we discussed earlier, to get additional supply from much higher-cost producers, but to answer specific questions, it's a one-size-fits-all.

And finally, will the Manganese oil price increase impact your EBITDA in Manganese oil business? And where do you see that debt at your end?

Thank you. So first question, I was trying to explain it in the course of the presentation. So short-term, indeed, we are expecting it will increase the margin due to its primarily accounting, let's be honest. It's the fact that as it takes four to five months to consume what we purchase in terms of price, so it means that the recent increase in selling price for manganese alloys will impact positively without having a negative impact of the oil consumption itself. This is something, as I was saying, we could expect to reverse after this short five-month lag. So that's really a short answer. Short answer, short term, indeed, an increase expected. We are starting to see that at the end of the first half, and an inversion of trend likely at the very end of this year. And concerning the second question for net deaths, so we are not providing any guidance, but clearly with the anticipation of the ABDA, the illustrative calculation we give for the full year, so it tells what will be the potential generation of ABDA for the second half, which by definition should lead to a substantial decrease of our net debt. So it's not a precise answer, but I won't give you the precise answer, but clearly you can expect that it will decrease.

And finally, could you give some update on your assessment of the geopolitical environment in Gabon?

Yeah, globally speaking, I mean, we are connecting with the new authorities and In Gabon, for the time being, everything is going quite smoothly. So I think, again, it's a transitional government. So we will see in the future how it will evolve. But for the time being, we are working with the new authorities, and there is no impact on our activity in Gabon.

So the Q&A session is now over. Christelle, one last word.

Yes, I think that we, as I said, we are confident that we will have a second semester much higher than the first one, again, because of the the significant improvement in the seasonality of our activities and production increase of the second half. And also because of this opportunity, the opportunity in the Manganese Prize that will materialize in the second semester. mainly in the weeks to come and that has not materialized in our figures for H1 so again we are quite confident in a much better second half of the year Thank you very much all of you and have a good day and a good opening ceremony for the Olympic Games in Paris

Thank you very much. Bye-bye.

Thank you.

Ladies and gentlemen, thank you for joining. The conference is now over and you may disconnect your telephones.