eramet tokyo pressconference · view of market conditions early in the year. focused on improving...

ERAMET TOKYO PRESS CONFERENCE

July 6th, 2017

ERAMET TOKYO PRESS CONFERENCE

CONTENTS

ERAMET – TOKYO PRESS CONFERENCE – JULY 6TH 20172

Key Figures

2016 financial results / improving performance

Operating performance

� ERAMET Nickel

� ERAMET Alloys

� ERAMET Manganese

Conclusion - outlook

Appendice

ERAMET AT A GLANCE

3

� About 14 000 people worldwide

� A presence in more than 20 countries

� 220 employees dedicated to R&D

� 150 products in portfolio

Manganese - Gabon

40+ years resources

Mining

Zircon and Ilmenite –

Senegal

25+ years ressources

Nickel – New Caledonia

50+ years ressources

#2 in Manganese alloys

worldwide

#1 in refined manganese

alloys worldwide

#1 in FeNi worldwide

Extractive Metallurgy

First metallurgical complex for Mn

metal produced in Africa

# 1 in nickel chloride worldwide

# 3 in high grade Ni worldwide

# 2 in high power closed-die

forged parts worldwide

# 1 capacity in gas-atomized

metal powders worldwide

Elaboration & transformation

high-value products

From Mining to Metallurgy to serve our Japanese clients

ERAMET Manganese

48%

ERAMET Nickel20%

ERAMET Alloys32%ERAMET

Group turnover

(2016)

2984 M€


After a very difficult 2015 year, 2016 has shown some recovery thanks to a combination of better metal prices and internal cost reduction

4

Millions of €

Millions of € 2016 2015

Nickel (119) (261)

Alloys 27 27

Manganese 219 58

Holding (43) (31)

Group 84 (207)-400

-300

-200

-100

0

100

200

300

400

500

600

2011 2012 2013 2014 2015 2016

Nickel Alliages Manganèse Groupe

Current Operating Income (COI)


2016 : GIVING PRIORITY TO CASH-FLOW GENERATION

� Focused our efforts on our core businesses.

5

Suspension of

major projects

Projects

Restriction of

capital

expenditure

CAPEX

Program for

2016-2017

Asset disposals

� Increased competitiveness to strengthen our market positions.

€360 million(1) in cost

reduction and productivity

improvement

Operational plan for

2014-2017

The performance

improvement plan has been

stepped up:

target: USD 4.5/lb(2)

ERAMET Nickel - SLN

(1) Annual impact on current operating income relative to 2013 at the end of the plan.

(2) Cash-cost, on an annual basis, to the end of 2017, based on economic conditions at the start of 2016.


ACCELERATION AND AMPLIFICATION OF THE 2014 - 2017 COST REDUCTION AND PRODUCTIVITY IMPROVEMENT PLAN

6

(1) annual impact on current operating income relative to 2013

Initial plan: target of €360 millionAnnual impact on current operating income

€129 million achieved in 2016

€306 million since 2014(1)

2014

2015

Total:€400

million (1)

2014-2017

2016

2017

Updated plan: target of €400 millionAnnual impact on current operating income


STRENGTHENING OF ERAMET'S BALANCE SHEET

7

Drawdown of the revolving credit facility (RCF) in early

January 2016.

Strengthening of ERAMET's equity through the issue of

€100 million in net share settled undated bonds convertible

into new shares (ODIRNAN) in September 2016.

Completion of the asset disposal program, generating in

2016 an impact of €142 million on the Group's net debt.

2-year extension to the maturity of the revolving credit

facility in January 2017.

630

1 698

981

0

200

400

600

800

1 000

1 200

1 400

1 600

1 800 1,6981,611

31/12/201631/12/2015

ERAMET group financial liquidity

(millions of €)

� Substantial financial liquidity

� 47% Net Debt / Equity ratio

Revolving credit facilityAvailable cash


� World number 1 producer of ferronickel.

� World number 1 producer of nickel chloride.

� One of only three producers of high-purity nickel in the world.

8

ERAMET NICKEL


NICKEL PRICES REMAINING AT LOW LEVELS

9

030 00060 00090 000120 000150 000180 000210 000240 000270 000300 000330 000360 000390 000420 000450 000480 000510 000540 000

6 000

8 000

10 000

12 000

14 000

16 000

18 000

20 000

22 000

Jan-

14F

eb-1

4M

ar-1

4A

pr-1

4M

ay-1

4Ju

n-14

July

-14

Aug

-14

Sep

-14

Oct

-14

Nov

-14

Dec

-14

Jan-

15F

eb-1

5M

ar-1

5A

pr-1

5M

ay-1

5Ju

n-15

Jul-1

5A

ug-1

5S

ep-1

5O

ct-1

5N

ov-1

5D

ec-1

5Ja

n-16

Feb

-16

Mar

-16

Apr

-16

May

-16

Jun-

16Ju

l-16

Aug

-16

Sep

-16

Oct

-16

Nov

-16

Dec

-16

Jan-

17F

eb-1

7M

ar-1

7A

pr-1

7M

ay-1

7Ju

n-17

LME stocks SHFE stocks LME Nickel spot price (USD/t) Nickel inventories(in tonnes)

Low nickel price environment and high level of nickel inventories In LME and SHFE warehouses.

Sustained primary nickel demand despite current slowdown in China.

Impact of Indonesia and the Philippines on global primary nickel supply.

A change of USD 1/lb in LME price results in a change of approximately €110 million in ERAMET's annual current operating income (at an exchange rate of USD 1.1/€).

LME nickel prices

USD / lbUSD/tonne

2014 2015 2016 2017


SLN HAS PUT A STRONG FOCUS ON COST REDUCTION

10

6.00

05

-25%

end-2020end-20172016

5.06

2015

*Annual rate, based on economic conditions at the start of 2016

SLN cash-cost* (USD/lb)

� SLN's cash-cost fell 16% in 2016 compared with 2015, as it rapidly implemented the

performance plan.

2018-20204.5


NEW SETUP AT SANDOUVILLE PLANT WITH AN OBJECTIVE OF INCREASED PROFITABILITY


Decoupling the Sandouville refinery from SLN feed

Long-term agreement for the supply of Sandouville with nickel matte as of the second half of 2017

Start of the new process 19 June 2017. Ramping-up over the next months

Target capacity : 15 000 t Ni in high purity products

Strand Minerals Pte. Ltd.(Singapore)

AGREEMENT WITH TSINGSHAN, THE WORLD'S LEADING STAINLESS STEEL PRODUCER TO DEVELOP WEDA BAY NICKEL


� April 2016: Put option exercised by Mitsubishi

� June 2017: Agreement finalised with the

Tsingshan group to develop the Weda Bay Nickel

deposit in Indonesia

� An integrated partnership for:

• Mining operations

• Production in Indonesia of nickel ferroalloys, with a

target annual output of 30,000 tonnes of nickel

content

• The parties will each market their own share

� The Weda Bay deposit is one of the largest unexploited nickel oxide deposits in the world.

� Resources in excess of 9 million tonnes of nickel content*

Shareholding planned for Strand Minerals Pte Ltd,

controlling holding of Pt Weda Bay Nickel

PT WEDA BAY Nickel (Indonesia)

PT Antam Tbk(Indonesia)

90% 10%

Tsingshan

group

57%

ERAMET

group

43%

Indonesian Government

65%

* Inferred, indicated and measured resources

ERAMET WILL GROW IN NICKEL BY CA. 50%


� ERAMET Nickel will grow : SLN, Sandouville and Weda Bay

55 22753 36955 012

0

10 000

20 000

30 000

40 000

50 000

60 000

70 000

80 000

90 000 ERAMET Nickel projected size: 87 000 t

Sandouville

production SLN

2014 2015

Weda Bay

2016 2020

kt

� World number 2 producer of high-power closed-die forged parts

� World number 1 player in gas atomized powder metallurgy

� A leading producer of high-performance special steels


ERAMET ALLOYS

15

EXCELLENT PERSPECTIVES IN AEROSPACE SECTOR


� 60% of our sales ordered in Aerospace, a growing business

� Production rates are sustained at a high level for single aisle at both Boeing and Airbus

� Success of the new Leap engine program developed by CFM (JV Safran / GE)

� Globally order books are strong and full for the 5 years to come at OEMs

� Aubert & Duval is well positioned on high-power closed-die forged parts:

� Examples : Jet engine turbines disks for A350 and B777, landing gears for A350, wing parts for Airbus…

� Aubert & Duval has been awarded the Best Performer supplier from Airbus Helicopters 2016,

during Le Bourget Air Show (Paris, June 2017).

ERAMET ALLOYS IS WORKING ON IMPROVING ITSPERFORMANCE…


Across the division, roll out of strong improvement plans:

� Cost reduction and productivity at shopfloor levels:

o Boosting the usage of recycled materials

o Simplifying manufacturing routes to shorten production steps

o Improving OEE (Overall Equipment Efficiency, especially on large forging

presses, melting shops, rolling mills, machining and finishing equipment)

� Shorter lead times and better customer service

o Re-designing and accelerating product flows all along our industrial

processes.

� Products quality enhancement

New industrial setup for melting shops concentrating high performance and

stainless steels metal elaboration on one site at Les Ancizes, France.

Forging press at UKAD

17

… WHILE INVESTING TO GROW AND TO REINFORCE ITS

BUSINESS POSITION

� Opening of the MKAD plant, a joint venture between Aubert & Duval and

Mecachrome, on 14 October 2016

� Machining of aerospace-grade titanium parts

� Start-up of EcoTitanium on 3 February 2017

� the first producer of aerospace-grade titanium in Europe using recycled materials

� Start-up of spent catalysts and batteries recycling facilities early 2017

at the Commentry (Allier) site

� New market segment, set to be ramped up progressively throughout 2017:

recycling of molybdenum, nickel, manganese, cobalt, zinc

� Powder metallurgy : Start up of a new atomizing tower on 11 May 2017

� New atomization tower to produce superalloys powders, especially for aerospace

and additive manufacturing sectors


� World number 2 producer of high-grade manganese ore

� World number 2 producer of manganese alloys

� World leading producer of refined manganese alloys


ERAMET MANGANESE

MANGANESE ORE PRICES REMAIN FIRM

19 ERAMET – TOKYO PRESS CONFERENCE – JULY 6TH 2017

CIF CHINA HIGH-GRADE (44%) MONTHLY MANGANESE ORE PR ICES

Chart source: CRU

0

1

2

3

4

5

6

7

8

9

Jan-17Jun-16Jan-16Jul-15Jan-15Jul-14Jan-14Jul-13Jan-13Jul-12Jan-12Jul-11Jan-11 Jul-17

US

D/d

mtu

2011 2012 2013 2014 2015 2016

� The "CRU 44% CIF China" manganese ore price index hit a record low in February 2016. Prices recovered strongly

during the second half of the year and peaked end-2016. Prices remain firm in this first half 2017.

� A change of USD 1/dmtu in this price translates into an impact of approximately €95 million on ERAMET's annual

current operating income (at an exchange rate of USD 1.1 /€ at nominal production level).

2017

MANGANESE ALLOYS PRICES AT HISTORICAL HIGH LEVEL


From their low point early 2016, manganese alloys prices trended upward strongly. Theycontinue to remain firm in H1 2017.

A change of USD 100/t in the price of manganese alloys translates into an impact ofapproximately €65 million on ERAMET's annual current operating income (at an exchange rateof USD 1.1 /€).

Source: CRU Western Europe Spot Prices

MANGANESE ORE PRODUCTION SHOULD BE BACK TO NORMAL IN 2017

Output was primarily affected by our decision to halt mine production for one month in Q1 2016, in

view of market conditions early in the year.

Focused on improving performance at our Moanda mine and modernization of railway.

Ramp-up of Mn alloys and Mn metal facility in Gabon.


MANGANESE ORE AND SINTER PRODUCTION

3 4133 868

0

500

1 000

1 500

2 000

2 500

3 000

3 500

4 000

2011

3,703

2012

3,481

2013 2014 2015

4 000

2016

-12%

2017

3,0373,434

kt

TIZIR: MARKET ENVIRONMENT IMPROVING IN 2017


Ilmenite, Rutile, Leucoxene and Titanium Slag

� Ilmenite, rutile and leucoxene sold to pigment, slag producers

and for welding applications; this market is firming up in the

beginning of 2017.

� Titanium slag product from TiZir Norway used to make

TiO2 pigments

� Stable prices in 2016

Zircon

� Used notably for ceramics

� Market prices seem well oriented in the beginning of 2017

22

TIZIR: AN INTEGRATED PLAYER FOR TITANIUM DIOXIDE AND ZIRCON


TiZir:

� Joint venture with Mineral Deposits Limited

(Australia)

� Positive EBITDA: €16 million in 2016

Upstream: TiZir Senegal

� production of heavy mineral concentrates of

614,000 tonnes in 2016

� Ramp-up in progress with 194,000 tonnes in Q4

in 2016 and good outlook for 2017

Downstream: TiZir Norway

� After the incident of 15 August 2016, the

furrnace is back to normal operations.

23

LITHIUM PROJECT WHICH PREPARES ERAMET’S FUTURE

ERAMET LITHIUM PROJECT IN ARGENTINA ENTERS ITS LAST PHASE OF DEVELOPMENT BEFORE INVESTMENT DECISION


Extremely dynamic lithium market in 2016. Bright

perspectives

Success in piloting the innovative proprietary

extraction process : few hundreds of kg of lithium carbonate battery grade

produced in 2016

Pre-feasibility study performedInvestment of 350-380 MUSD

Environmental permittingdemand filed in December

2016

2017- 2018 : Detailed feasibility study and economical valuation

Start of construction scheduled early 2019 subject to investment decision

Start of production end of 2021Production capacity : 20 ktpy Lithium carbonate.

Active continuation of CSR programs

ROBUST CSR POLICY


Sustainable development is at the core of ERAMET's strategy

� Protect men and women by placing health and safety at the heart of our

objectives.

� Create processes which respect both regulations and the environment.

� Develop ways to reduce environmental impacts, commit to biodiversity.

� Implement "product" responsiblity ("license to market").

� Increase resource effectiveness and promote recycling.

� Maintain a trusting relationship with stakeholders.

ERAMET is implementing this sustainable development policy

across all Group activities through:

� An environmental charter.

� A biodiversity policy deployed in 2015.

� An ethics charter updated in 2015.

� A sustainable purchasing charter.

� An energy policy.


CONCLUSION -OUTLOOK

CONCLUSION

� ERAMET is at a turning point with significant potential ahead.

� But in a still fragile and volatile environment, ERAMET needs to

transform itself:


� To accelerate improvement initiatives for performance and launch new ones

� To review organisation and working flows to develop agility and adaptation capacity to fast changing market conditions

� To design a new strategy for growth with ambitious targets


APPENDICE

SHAREHOLDER STRUCTURE ON 31 DECEMBER 2016


Number of issued shares: 26,550,443

Famille Duval : SORAME +

CEIR37.05%

APE25.65%

STCPI1

4.03%

BRGM2

1.34%

Autres31.93%

Notes

1 STCPI (Société Territoriale Calédonienne de Participation Industrielle): an entity owned by the neo-Caledonian provinces

2 BRGM (Bureau de Recherches Géologiques et Minières)

eramet tokyo pressconference · view of market conditions early in the year. focused on improving...

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