ERAMET S.A. (ERA) Earnings Call Transcript & Summary

Good morning, everyone, and thanks for being with us this morning for our half year results presentation. I will start with the introduction, and then we will review the financial performance and operational performance. And Nicolas Carre, our CFO, will take care of this presentation, and I'll come back with an update on the strategic road map 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. 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 metal 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 road map, Act 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 EUR 247 million, including a strongly negative contribution of SLN of EUR 109 million. And we managed to deliver that, thanks to a good intrinsic performance. This intrinsic performance of EUR 216 million comes from significant growth of production in our key mining assets, plus 33% in manganese ore in Gabon with the return to normal operating conditions and plus 40% of nickel ore production in Weda Bay. 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 EUR 87 million for the semester. The external impact has been strongly negative due to the continuous 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 invoicing. Our cash flow for the period has been negative as a combination of: low Weda Bay 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 EUR 97 million to EUR 711 million, leading to a leverage of 1. The key event of the semester has been the commissioning of our first direct extraction lithium plant in Centenario, Argentina, becoming then the first ever European company to develop capacity to produce battery-grade lithium carbonate at industrial scale. Production at Centenario is scheduled to start in November 2024, with the ramp-up expected to be achieved by mid-2025. At full capacity, this plant will produce 24,000 tonnes 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 in the first quartile of the cash cost curve. Very important also, we have started to deploy our new ambitious CSR road map, Act for Positive Mining. A few elements, and I will not come back to the details of this road map 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 a more than 20% improvement over last year. We also have developed the transnational employee representation body in 2023. We have 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 or social protection worldwide for all our employees. And last but not least, the Act4nature international has validated the new biodiversity target in the group for '24-'26 CSR road map. And especially regarding the biodiversity, as I said, and it's including a commitment of Eramet 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 Carre, our CFO, who will detail our financial performance.

Thank you very much, Christel. Good morning, everyone. Thanks for being with us in this Olympic Day for France. So I will indeed enter into more details now for our financial performance for the first half. And I will start with a couple of comments on these financial numbers. Christel was mentioning in her introduction the impact of SLN on the adjusted EBITDA, which is clearly an important impact, and I will come back to what it means overall for our financials. But also, the other topic I wanted to highlight here is the impact of SLN on the net income because as you can see, it was indeed negative for the first half at minus EUR 41 million for our share, but out of that, EUR 72 million 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 Christel, but still, I would like to emphasize is the limited increase in net debt and is a well maintained and controlled leverage in the context of both negative and, I would say, a challenging pricing environment overall and also in 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 a challenging environment 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 intrinsic performance in just the first half of EUR 216 million versus the previous year, versus the first half of '23. Clearly, there is one thing which makes this possible is the fact that in H1 of '23, we have been facing one-off logistic events in Gabon, as you may remember. And this is something we highlight here in the first box for plus EUR 100 million, this being said, even that. So it means 2 things that we have been able to come back to normal. So what we said last year that it was one-off events 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 you remove this EUR 100 million, we still have a positive EUR 116 million driven by positive volume, especially out of Weda Bay and also improvement of grade of our mining production, both at Weda Bay and also GCO, primarily if we compare to previous year. And overall, the productivity and the management of fixed 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 faced 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 SLN. True, we don't have any more economic effect to our financials to the financing conditions of the group. In terms of external factors, Christel has been mentioning it in our introduction, so I won't go into detail. And 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 saprolite volumes out of Weda Bay, these ones 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, in case -- related also to the permit insurance process in Indonesia leading to a situation of deficit currently, enabling to get premiums on the price of ore in Indonesia. So that's why both items, as you can see, are reporting 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 saprolite 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 Weda 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 there is 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 EUR 72 million 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 a very challenging depressed market situation, which will 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 want it 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 Christel was mentioning in terms of highlights in the past weeks and we'll come also later on 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 CMD and during the '23 full year results 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 Comilog activity, the mining activity. And to be honest, it's primarily also the investment on the railway, so the rail equipment to be able to transport the ore. And on top of that, we have been investing in the Transgabonese Renovation Program, as you can see for EUR 37 million. On the other side, and that's something I was highlighting a bit before, We are hitting a stringent control of our current CapEx. As you will see And as you can see, it's actually reducing. It's a reduction versus what we spent last year in the first half. And we will see later on, we'll 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 will improve in the manganese ore area, and we are still having a strong control of our CapEx. If we move to working capital requirements, we have an increase of the working capital, which is very mechanical. Christel was saying that we have not yet seen the full materialization of the increase of the index in manganese 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 versus 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 that 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 manganese ore. So 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. So for EUR 97 million 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. So that's 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 EUR 521 million 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 our free cash 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'd like to highlight is clearly the Centenario CapEx to our lithium project in Argentina is fully consolidated in our numbers as well and knowing that a big portion, so 50% of it, is financed by our partner, Tsingshan. The capital increase, capital injections into the subsidiary in Argentina. So this is the EUR 85 million 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 a consumption of cash. Christel was mentioning the 2 items in our introduction because we have had limited dividends out of Weda Bay in the first semester. It will 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 a 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 SLN before, but I think it's important to make a slight pause here because it's negative and pretty significant negative impact in a lot of areas of our financials in H1. Mentioned EBITDA, mentioned net income, mentioned also free cash flow for EUR 145 million. So that's why it's really important to point out the fact that all of it, something we said before, but which is confirmed fully again in the first half is financed by the French state. We've tried to show in this slide a pretty clear breakdown of what happened on this area in the last 6 months. The first piece is that, as you may have in mind, we were, in our net debt at the end of '23, having the existing loans of the French state to SLN for EUR 260 million. This has been converted thanks to the agreement we found at the beginning of the year into equity instruments. So the undated subordinated bonds, which have been issued by SLN 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 EUR 139 million in the first half, and it's almost fully equal to the financing, which have been provided by the state for EUR 145 million. It confirms what we have said before, that this is now fully taken care of by the French state. And the EUR 145 million, to be even more detailed, it's EUR 60 million financed by the French state in February, this was already disclosed in our previous communications; another EUR 80 million financed in April, so that's an additional information we are providing; the other EUR 5 million is the capitalization of interest on the previously existing loans. So that's how you have this breakdown of EUR 145 million. On top of that, we have, and I think it's really also important to note, we have -- SLN has obtained another financing for another, so it's not the same amount -- it's the same amount, but it's not the same financing, of EUR 80 million in July. So which is not for the past consumption because, as I said before, it's the same amount finance in H1 versus the needs of SLN, it's to cover the coming needs in H2. So this is an additional confirmation about what I've said about the French state covering the needs of SLN. And this is important because given the context, you all know in New Caledonia since mid-May, the performance of SLN 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, I also want to highlight that it has been done in a very safe environment, which remains the priority of the group, as also Christel 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 with -- driven by more than 3, 3.5 of 0 exports in H1 '24 versus H1 '23; the strong reduction of ferronickel production from 24,000 tonnes to 17,000 tonnes; and accordingly, a significant drop in EBITDA because not only the production is challenging, but the pricing context is also challenging. And here, it's actually pretty limited because there is also a fixed cost management implemented by the teams over there. And I've already mentioned the free 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 versus '22. And we have managed to further increase it by another year, moving from 3 to 4. So -- and I will come a bit more details 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 EUR 3 billion at the end of last year. It is at EUR 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, 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 to -- it has been a very successful issue. The order book, as you can see, was subscribed by more than 3x 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 EUR 500 million, 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 this overall increase in maturity of the debt by 1 year. And just a few words about the sustainability-linked features. These are the same of the previous SLB we did in '23, with a target to reduce our carbon intensity by 37% by 2026 versus the 2019 baseline and also to have 67% of our suppliers and customers having the decarbonization targets consistent with the well below 2 degrees scenario of the Paris Agreement. So this is, again, very similar. It's actually the same as the ones -- the same target as the one we included in our SLB in '23. On 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 is showing the continuous trend we have faced in H1 '24 on most of our products with one key exceptions. And of course, we'll come back to that later on, given the significant increased perspective it gives us for H2. It's on manganese ore and to a lower extent, but still to an extent on manganese alloy. Starting with manganese ore, following the announcement of our competitor in Australia in March, you have seen the significant increase of -- you can see the significant increase of the index starting in Q2. And when I say significant increase, it's almost doubling versus where it was in Q1. It has, by definition, given that it's a conversion business, also paying effect on the manganese 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 2 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 significantly 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 4 to 5 months between the time the ore 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 Q3. The overall operational performance, as we said before with Christel, is coming from almost all our businesses. I will come into a bit more details afterwards business by business. But as you can see here, overall, a very strong performance. Production of manganese ore, plus 33% versus H1 of '23. Production of alloys, plus 4%, so we should say a bit limited, but in the current market, it's a clear strong product performance. Nickel, Weda Bay, again, an outstanding performance, which is confirmed after very strong years '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 saprolite on which we had permitting to sell in H1 of '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 confirms 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 mention 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 ilmenite and 26% for zircon. Manganese to start with still a very important business unit for the group. So an increase overall of EBITDA. As 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 still slightly lower in H1 of '24 versus H1 '23. So this means that the reason of this increase of EBITDA 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 in our receivables. 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 has 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 have 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 H1 of '23 reflecting higher volumes sold. And by the way, it's very close to the cash cost we reported for the year '23, which was [indiscernible], which, again, given the fact that the seasonality is much stronger in H2 versus 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 manganese ore supply generally speaking. And it is close to 30% of the high-grade ore that -- 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 will mean the current cash cost without the GEMCO 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's 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 will 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 righthand side of the slide, has, 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 disclosed in our illustrative calculation of adjusted EBITDA based on the consensus of the analysts, it's giving a consensus for H2 around $9, it's precisely $8.9 per dmtu, 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 cost curve. So with that expectation, I also want to remind and Christel 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 EBITDA margin, so it's pure EBITDA for EUR 255 million 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 a pretty good performance in H1 and again, the current situation of margin has improved due to this lag between the time we purchased and the time we consume in our sold goods, the ore, so which is and which will show also in Q3, an improvement in margin. That's something we could expect though an inversion of trend likely at the end of '24. Let's move to nickel. So we have had a very resilient contribution from Weda Bay, but in a clearly lower-price environment. And I've mentioned the fact that it was, by definition, lowering significantly the cash contribution to our free cash flow in the first half versus previous year. It's really linked 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 EUR 25 million -- EUR 24 million, 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 our 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 of the lower price coming from the LME evolution for the ore, we have also seen a reduction of the NPI prices by minus 23% versus H1 2023. So it's a pretty significant drop. So that's another explanation for the lower financial contribution of Weda Bay in H1. Again, the point I want to highlight is in terms of production, it keeps to be a very strong success. We've stated before that '22 was already -- so Weda Bay 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 growth of nickel. Ending with mineral sands. So I said that it was a strong operational performance with a plus 33% of our production in H1. It's explaining why we have been able to have a solid EBITDA despite a reduction in selling prices as for the other market. So it's more or less offsetting all the intrinsic performance we have been generated, as you can see on the righthand side. And the free cash flow is also lower because of higher working capital, which is reflecting the sale of ETI at the end of last year. And by definition, it is now putting an additional working capital externally, which was before internally and also the fact that we have had our first tax payment in H1 '24 for EUR 15 million. 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 HMC production. Again, very strong in H1, and this also details the evolution of pricing, which has been negative in H1, which currently, this being said, is slightly improving. It has slightly improved in 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 Christel for the strategic road map update.

Thank you, Nicolas. So in terms of strategy, I will just remind you our strategic road map that you know well now. It's aligned with the global macro trends and the strategic road map has 2 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 sands. In all these markets, we have a very strong position and very strong mining 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 nickel/cobalt for batteries and the recycling of those batteries. All this is supported by this ambitious CSR road map Act for Positive Mining. So the -- we have recently reached a significant milestone in our strategy to develop the metals 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 this process in a pilot plant in real-life conditions on the salar at 4,000 meters in Argentina for 5 years, so we have a very good knowledge of the process right now. The lithium recovery yield is at 90%, which is very high compared to our competitors and which is triggering the very good cost position of this plant. The construction CapEx should be around EUR 870 million. Expected cash cost between $4,500 and $5,000 per tonne of carbonate, which would be leading at a nominal capacity to an annual EBITDA between EUR 200 million and EUR 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 of the discount 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 position. We have already planned to build a second plant in the north of the deposit. As you know, this deposit has large resources. We have certified recently 15 million tonnes of resource in the Centenario deposits. So we have already planned to build a second plant. This plant should have a production capacity of 30,000 tonnes of lithium carbonate, cost around EUR 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 obtention of the construction permit, which takes some time in the Salta province and also and importantly, to the implementation of the new investment fiscal called regime for large projects in Argentina that should significantly enhance the economics and financing conditions of these new plants. Beyond these 2 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 concession and we are also developing other partnerships, and we have signed in H1 2 farming agreement to conduct exploration activities in Chile on other salars. 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 Weda 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 Eramet continues 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, I mean, the feasibility studies. But given the considerable changes in Europe EV battery value chain observed over the recent months, we carefully assess the merits and the timing of when to proceed with these battery recycling projects. 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 in the sharp increase in the price of manganese ore. The economic conditions remain sluggish at the start of H2 and especially with the weak domestic demand in China. And the real estate crisis continues to weigh on our markets. But the manganese ore supply significantly disrupted the supply market and providing support for the price upside as we have mentioned. In terms of manganese alloys selling price, we see a price increase, but it's just in line with the ore price, which is the 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 freight price to stabilize in H2. So globally, quite weak market conditions but this manganese ore supply disruption provides an opportunity in terms -- 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 condition, 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 Weda Bay nickel sales of high-grade saprolite and limonite for 2024, but also for the next 3 years because now the permitting in Indonesia is given for 3 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 even now for 3 years. So it requires quite a lot of attention for the administration. But when we will get it, we'll get it for 3 years, which is good news. And as I said, we should start our production in Centenario 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 million and 7.5 million tonnes versus 6.6 million last year, so a significant increase. The guidance of production for the ore at Weda Bay is between 40 million and 42 million tonnes from 33 million tonnes 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 saprolite 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 Centenario should be very limited, around 1,000 tonnes of lithium carbonate this year. We have also lowered our CapEx guidance. It was EUR 700 million to EUR 750 million previously. It's now between EUR 550 million and EUR 600 million, with growth CapEx between EUR 350 million and EUR 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 -- we are very cautious regarding our sustaining CapEx, so we should spend this year EUR 200 million versus close to EUR 250 million 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 the manganese ore price. I remind you that $1 per dmtu for Eramet means an annual impact on EBITDA of EUR 255 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 $7.3 per dmtu 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 EUR 1.2 billion and EUR 1.3 billion for this year. So we are quite confident that we should have a very, very strong improvement in H2 versus H1 for 2 reasons. Again, this positive seasonality that we have in our volumes; the fact that we got our permitting in Weda Bay; and this significant increase expected and already not 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 I think we have time, and I hand it over to Sandrine for the Q&A.

Okay. So thank you, Christel. Thank you, Nicolas. We will now start the Q&A session. We will take questions from our sell-side 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.

[Operator Instructions] The first question is from Julien Onillon, Stifel.

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 GEMCO. But we have seen also what was interesting with the potential big shortage is that a lot of small producers are starting to come back in the market. And we discovered that they had plenty of small inventories that they were able to provide to the market. The question is that their inventories have 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 has been gone very quickly, could we see in the second half, [ I would ] for the next 9 months because GEMCO will be -- at least will not export any ore for the next 9 months at minimum, could we see in the interim a big rise of a new rise once those inventory have been passed? 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. Does they have built inventory ahead of this big, let's say, shortage, low production? But also on the steelmakers, do we have some indication that they have buy or 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 9 months coming at minimum, I would say, and of course, it 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's your view about the short terms 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 at the same time, it's not something which is happening right now.

Thank you, Julien, for your questions. I will take the first one on manganese ore. 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 GEMCO. 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, leading very much the consumption of steel, has been pretty low since the beginning of the year, which is a continuity of trend after '23. 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 at contrary, more reduction of the index and selling price for the semi-carbonated ore because indeed, there has been on this area, given the inventory which was available and combined with the overall situation and the market in China, more or less a surplus -- short-term surplus. So that's why you are right; it could -- this trend could actually change in the coming 9 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 EBITDA, which is based on the consensus, and we believe that this consensus, which is more or less at 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 the shortage will last and also the evolution of the overall market.

Maybe just to add, you have to understand that the manganese alloys 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, sometime between 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 furnace instability, loss of power, productivity and even if you go down, I mean, to 10%, it can even for some time, 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 there, there should be, over time, the 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 yes, concerning manganese alloys, clearly, there has been inventory, which was built in the plant, especially again in China, which is more than 1/2 of the consumption of the manganese ore in the world. But this is something which we have seen and we are following very closely, has started clearly to decrease in the last weeks. It was not that much given 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 Christel 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, they 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's 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 stabilized 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 since the beginning of the year, so 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 the price around 12,000 barrels per tonne currently with our expected cash cost below -- between $4,500 and $5,000 per tonne, we still have a very, very solid operation and 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 analysts for the long-term price, which is between $15,000 and $20,000 per tonne.

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 stream in terms of supply, it's a kind of step change in the market, so -- and there is -- the demand is evolving more smoothly. That being said, the overall demand for lithium and as you know, whether you put LFP or LMC, you need lithium anyway in the same range. So we expect the market to double every 5 years over the next 15 years. So there are some short-term effects, as you explained, and then we expect the market to be in surplus this year and probably beginning of next year. But again, it highly depends on the dynamic 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, popping up almost everywhere with cash costs above $17,000 per tonne. And those projects today have stopped, have been most bold and I think it rationalized the market -- the supply market going forward, which I think is good because most of these projects were not economical.

The next question is from Alan Spence BNP Paribas.

Two questions on nickel. The first one on Weda Bay. The release notes some slowed production in 1 furnace in the first quarter. Was that driven by the lack of the saprolite ore? Or was there some operating issues? And if so, I mean, has that been resolved? And then secondly, still on nickel, just on the outlook. You talk 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 1 furnace, it's actually a 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. There has been a continued supply of ore from our mine to our planned share with Tsingshan and on Weda Bay.

Regarding the surplus, yes, there will be a surplus this year. And as you know, there have been a lot of capacity built, especially in Indonesia, especially on the ferronickel 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 ferronickel because of the significant capacity. And also the fact that now the Chinese have registered their nickel metal at the LME, so they can play with this capacity on all the different markets. They can produce NPIs, they can produce matte, they can produce nickel metal and they can produce also nickel salts. 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 just the basic production, stainless steel production worldwide has grown 8% in H1 '24 versus H1 '23. 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 a bit the capacity. And you may have seen that in Indonesia, first, the government is not incentivizing any longer the construction of NPI 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 -- the supply/demand condition and the least profitable capacity 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 ferronickel part, especially will remain a very competitive market, we think, in the short term.

The next question is from Maxime Kogge, ODDO.

So two questions on nickel. The first one is related to your ambitions in battery-grade nickel. So there was reports about the possible partnership with 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 time line for this project? And second is on the New Caledonia. Is the nickel pact now off the table? Or do you see potential for revival of this quite crucial pact to restore competitiveness in New Caledonia and 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 [ Saliba ] 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 since 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 main shareholder, as you're asking, as it was indeed planned for Sonic 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 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, I mean, 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, I mean, 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 coming -- in the very short term, in the coming weeks. It will take months.

The next question is from Nicolas Montel, BNP Paribas.

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

So thank you very much, Nicolas. So I will take the first one concerning working capital. So the first thing I would like 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 inventory. One thing clearly, and I would say it's a good problem to have, with the current expectation in terms of manganese ore price for H2, mechanically, the same as what we are seeing at the end of 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 net working capital up at the end of December. This will be a mechanical effect. Honestly, you can make quickly the math for that is we have usually a 1-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 '23 for manganese ore. So it means that it will be a pretty substantial increase that we are expecting [ could there be a ] way to further optimize it. Of course, we are always looking at the options to anticipate some payments from our customers. But realistically and reasonably, yes, we are expecting a non-insignificant 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, don't you -- is it not possible to have an offtake agreement to ease your finance on this subject?

So the answer is it's always possible to contemplate an offtake agreement, but it's never -- it's rarely adding value overall to our producers. And usually, you will 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 a 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 will not consider and contemplate this kind of offtake agreement because it's always a risk to destroy value.

Just quickly because we are running out of time, on the question on the low-grade ore in Weda 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 given the permitting this year. Also because now they are giving it for 3 years, so they are particularly careful and it has created attention on the ore. That's why we are premium today on the ore, internal Indonesian ore price. So we think that the market in Indonesia will need this low-grade saprolite in the future. So we will be able to sell them. And in the meantime, yes, it is in our inventories because when you extract your high-grade saprolite and your limonite, you also extract some low-grade saprolite that you put in inventory. We used to call that a 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 inventories, but we think that we'll have -- when the market is intention, 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 "low-grade" saprolite 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 manganese 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 shipments?

In fact, it's mainly 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 works. So we have a very limited flexibility to increase our production beyond the range that we have given.

Still on manganese, 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 tonnes. 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 dmtu. 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 what should be the price going forward. So there has been inventory available, which was indeed a bit impacting the business in the very short term. But that -- so there will be a need, as we discussed earlier, to get additional supply from much higher-cost producers, but to answer specific questions, so it's around $5.5.

And finally, will the manganese ore price increase/impact your EBITDA in manganese alloy business? And where do you see net debt at year 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 it's primarily accounting, that's the earnest. It's the fact that as it takes 4 to 5 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 ore consumption itself. This is something as I was saying, we could expect to reverse after these 4 to 5 months like. So that's really a short-term answer, so short answer, short-term indeed an increase expected. We have started 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 debt. So we are not providing any guidance. But clearly, with the anticipation of the EBITDA, the illustrative calculation we give for the full year, so it tells what will be the potential generation of EBITDA 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 in your assessment of the geopolitical environment in Gabon?

Yes. 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. Christel, one last word?

Yes, I think that as I said, we are confident that we will have a second semester much higher than the first one, again, because of the significant improvement in the seasonality of our activities and production increase for the second half and also because of these opportunities, the opportunity in the manganese ore price that will materialize in the second semester and 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 very much.