French Mining Company In Trouble – Bailout, Whatever It Takes – by Andreas Meyer (Seeking Alpha – September 29, 2016)

Eramet SA (OTC:ERMAF) is, after Vallourec (OTCPK:VLOUF) (see article here), an additional French company that looks kind of interesting. Of course, it is another distressed story with event-driven character that appears on my screen with non-negligible risks. Nevertheless, there are a few interesting points for ERMAF I would like to present.

Eramet is a multinational mining and metallurgy company headquartered in Paris, France and listed on the Euronext Paris. The corporation produces non-ferrous metals and derivatives as well as nickel alloys and superalloys. The product portfolios is rounded off by special high-performance steel.

The historical developed company (founded in 1880) has a few subsidiaries with a large mining operation in New Caledonia, a French overseas territory and further mines around the world in Africa, Argentina, the US and mainly Europe (France & Norway).

-Nickel: Société Le Nickel (SLN) – New Caledonia (22% of revenues)
-Alloys: Eramet Alloys Titanium Dioxide and Zirocn: TiZir – Norway & Senegal (32% of revenues)
-Manganese: Eramet Manganese (46% of revenues)

As of today Eramet isn’t profitable. Within the last twelve months ((NYSE:TTM)) the company generated revenues of USD 2.76bn with a net loss of USD 772m. The main drivers for these poor results are strongly decreased prices for Nickel and Manganese as well as a weaker demand and higher cost pressure by main competitors.

Nickel (USD/lb) is currently traded at USD 4.88 per lb. In H1/2016 Eramet had a cash cost ratio for Nickel of USD 5.4, which is compared to main competitors already a great ratio. The target ratio for the end of 2017 is USD 4.5 per lb.

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