(AOF) – ERAMET (+ 12.11% to 75 euros)
The mining group rebounded on the stock market following a recommendation increase. According to a market source, Bank of America Merrill Lynch (BAML) has gone from underperformance to buy on the stock. Eramet is expected to benefit from the rebound in demand for manganese in China, according to BAML.
AOF – LEARN MORE
Strengths of value
– World leader in alloy metals, including manganese and nickel, and high-end metallurgy.
– Strong global positions in its three activities, weighing € 3.65 billion: manganese (through its subsidiary Comilog, mines in Gabon and factories in France and Norway, 50% of sales), nickel (mines in New Caledonia and Indonesia, 20%) and high-performance special alloys and steels (30%);
– Positioning throughout the metal chain, from mining exploration to processing;
– Towards a sustainable performance of nickel prices, driven by the rise of electric vehicles, as well as manganese, driven by the production of carbon steel;
– Strategy based on the widening of leading positions in alloy metals, strengthening of high-end metallurgy, diversification towards special metals, greater international presence and improvement of operational performance;
– Turnaround in profitability since 2016 and sharp decline in debt;
– Return to the SBF 120 in December 2017 and dividend reinvestment, with a distribution rate of 30%.
Weaknesses in value
– No critical size facing the mining giants;
– Sensitivity to social and political climate in New Caledonia and geopolitical risks in Gabon and Senegal;
– In nickel, uncertainties related to the future referendum of self-determination in New Caledonia;
– Difficulties in the industrial process of the Sandouville refinery;
– Cyclicity of the three activities and volatility of the results (main customers in the steel industry).
How to follow the value
– Strong correlation to the evolution of nickel and manganese prices;
– Advances in Gabon in the increase in manganese production capacity and in the renovation of the SETRAG railway, in the valuation of the Weda Bay deposit in Indonesia, in the widening of the portfolio to metals for batteries of electric vehicles – cobalt, zircon or titanium dioxide and lithium;
– Result of the takeover bid on Mineral Deposits, already co-partner of the group in the joint venture TiZir;
– Uncertain prospects for 2018 due to international trade tensions;
– Capital controlled, with the presence of the Agency of the participations of the state (25.6%), the BRGM (1.34%), the STCPI (New Caledonian Industrial Participation Company, owned by the New Caledonian provinces ) and the Duval family (37%).
Commodities – Metals
Some industrials no longer hesitate to deal directly with mining groups, because of the surge of prices and face the risk of shortage, to secure their supplies. This is the case of Apple, which is discussing with mining groups in order to conclude long-term cobalt supply contracts. Earlier this year, on the London Metal Exchange, the price of a tonne of cobalt jumped to $ 82,000, its highest level since 2010 as analysts predict a growth in demand for electric vehicles with batteries. Today almost a quarter of the world's cobalt production is used in smartphone production. German automaker BMW is also looking for its own 10-year cobalt supply contract for its electric car program. Just like Volkswagen or Samsung.