Materials / Metals & Mining / Gabon
ENXTPA - ERA
Current Rating - BUY (03/09/2023) [Price - 69.9]
Eramet is a mining and metallurgical company with operations globally headquartered in France. The company operates in the extraction and processing principally of three groups of metals and minerals - Manganese, Nickel, and Mineral Sands.
Eramet is the largest producer of high-grade manganese ore and refined manganese alloys in the world. Manganese is a crucial metal in the production of iron and steel. It is used as an alloy in steel to remove excess oxygen, sulphur, and phosphorus from the metal improving the malleability of the alloy. This makes up around 90% of global manganese demand. Other uses of manganese include in alloys for aluminium, batteries, and resistors.
As such, when considering the overall manganese market, it is key to understand the dynamics of the steel market. As demand for steel rises, so will demand for manganese given how important an alloy it is in the steel-making process. Manganese steel alloys are particularly used in the construction and car industries.
The company mines its manganese in the Moanda mine in Gabon. Eramet estimates that another 20 years of manganese reserves are available at the mine. There are plans to modernise the railway link that runs from the mines to the port of Owendo, so as to improve the company’s ability to export manganese ore out of Gabon. Further plans to improve production at the site include adding modular washing plants and a new conveyor for the mine.
When it comes to processing the manganese ore into refined manganese products, the company relies on six pyrometallurgical plants - three in Norway, one in France, one in the United States and one closer to the mine in Gabon.
Nickel is another metal important in the production of steel, however the nickel steel alloys create stainless steel which makes up around 70% of global nickel demand. The remaining demand can be attributed to batteries in particular in electric vehicles.
Eramet operates the largest nickel mine in the world at Weda Bay in Indonesia. This is via a joint venture with Chinese steel group Tsingshan. Additionally, the company has smaller nickel mines in New Caledonia. All the sites have hydrometallurgical plants to produce the final product once mined. The company estimates a further 22 years of production from the Weda Bay mine and 25 years at the New Caledonia mines.
Eramet extracts certain sands which contain various metals and minerals including titanium and zircon. The company is the largest producer of titanium containing raw materials and fourth largest producer of zircon. Zircon is a mineral that is principally used in the ceramics industry, which makes up 54% of the global demand. It is used to improve the whiteness of tiles or enhance pigments.
The mineral sands are mined at a mine in Senegal, and then partly enriched in Senegal or Norway. The company expects a further 24 years of reserves from its mineral sands mines. Eramet hopes to see a 10% increase in mineral sands production thanks to initiatives it is implementing. These began in October 2022 and are expected to be on stream across the whole mineral sands operation by 2024. Additionally, renovation of the furnace in Norway should also help with the titanium oxide processing. This improvement is expected to also be online by 2024.
Other Business Areas
Eramet has added a new business segment in lithium. The company has acquired perpetual mining rights over a lithium mining concession in Argentina. Lithium has many uses however is key to the energy transition process given its role in the production of lithium-ion batteries. This makes up more than 75% of the global market for lithium.
The lithium plant is to begin production in early 2024, with an annual expected production target of 24,000 tonnes of lithium carbonate to be mined by 2026. Cash costs for the project are currently slated at USD 3,500 per tonne of lithium mined.