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Earnings Transcript for ERMAY - Q4 Fiscal Year 2021

Christel Bories: Ladies and gentlemen, good morning, and thank you for being with us this morning for the presentation of the financials for 2021 for ERAMET Group. We're delighted to be with you here this morning to share with you our excellent results from the year that has just ended. This comes from the strategic transformation and managerial transformation that we started to implement 4 years ago now that has clearly changed the group. Despite a business environment that has been chaotic over the period, we've been able to deliver on all of our promises. From a strategic standpoint, we've been able to reorient our portfolio and accelerate our repositioning for the group on mining and metals which are growth drivers. Beyond strong growth in mining production in 2021, we've also been able to achieve a significant step forward with the divestment of Aubert & Duval, Sandouville and we restarted a lithium project. Furthermore, we have positioned ourselves as a responsible company that helps societies. This is something that's been important to the group since I arrived. And working with people to save the environment and to save the climate have now been recognized by everyone. On top of that, we have excellent financials that show the relevance of our new operating model. And our financials also showed the engagement and agility of all of our teams in the field that have been able to adapt over the last 4 years to a business environment that, as I said, has been very up and down. This new model is generating a lot of cash. As you can see on the slide, our free cash flow in 2021 is €426 million excluding the diversity activities, more than €400 million if you were to include them. And this has enabled us to deleverage and to move into 2022 with a lot of elbow room. If we drill down a little bit into what we've done since 2018, you may remember that back in 2018 I presented our new strategic roadmap. There were 3 legs to that chair. First of all, we wanted to fix and reposition our least-performing assets. The second leg of the plan was grow our attractive businesses with strong organic growth. And then thirdly, expanding and developing our portfolio in metals for energy transition. All of this is supported with a digital and managerial transformation within the group at the same time, allowing us to be more agile and higher performance. If we look at what we've achieved, we have, and I'll be coming back to this a little bit later, achieved, we even over-delivered in a number of our targets. If we look at what happened in 2021, 2021 was a year of ramp up for our repositioning in Mining and Metals. So we finished the divestment of Sandouville at the very end of 2021. And just the beginning of this year, we signed an MOU for the divestment of Aubert & Duval. For the second pillar, grow our attractive businesses, we've achieved a 4-year organic growth of more than 200% of our mining business, 75% in 2021 if you include Weda Bay at 100% booked. And expanding into metals for energy transition has started up, with the restart at the beginning of the year of the construction for our lithium project in Argentina. Given the current lithium prices, this should be extremely profitable and should contribute EBITDA as well as a lot of ROI. All of this also demonstrates the new agility within the ERAMET teams. They've been able to adapt to any circumstances and have been able to seize any opportunities as they arose throughout 2021. So that was strategy, and I will be coming back to that at the end of the presentation. But let's talk CSR now. We have clearly positioned ourselves as a gold standard in our industry when it comes to CSR and when it comes to sustainability. We have continued our high performance on our roadmap, which is a demanding roadmap based on 13 targets in 2021. We achieved 104% of our roadmap and our targets as we set them for 2021. Let me give you a couple of examples when it comes to safety, we're particularly proud of our results. We've been able to slash by 2, the number of accidents in 2021. This comes after 4 years of regular drops as well, significant drops. And we are now amongst the best performers for safety in the industry, especially for our Mining and Metal division. We have a TF2 of 1.5. That puts us ahead of the pack in the industry for safety. And we're extremely proud of that achievement. This is extremely important for everyone who works for ERAMET, our employees, our contractors, and all of our stakeholders. We're also working to improve diversity in our teams. As it stands, we have 26% of our managers who are women, and we aim to drive that up to 30% quickly. We've also increased our social impact support, especially on our African site. Let me give you a couple of figures to illustrate this. We have provided medical support to more than 22,000 people. We've been able to improve drinking water access to more than 13,000 people. And we have worked on education and been able to improve learning conditions for more than 14,000 students in the regions where we work. Moving on to climate. In the fight against climate change, we're also moving forward quickly. Since the beginning of the roadmap on Scope 1 and 2 we've been able to drive down our CO2 intensity by 39%. Our roadmap has now been approved by SBTi, that's for 2021. And when it comes to biodiversity, we are also doing a lot. In 2021 we were able to rehabilitate 30% more land area than what we used for industry. So we're reducing our impact on biodiversity. Furthermore, the group, act4nature approved our roadmap in its biodiversity commitment. We also had the inauguration of the Lékédi Biodiversity Foundation, which is the first such foundation in Gabon. All of these commitments and all of this progress has been widely recognized by ratings agencies. They have us amongst the best performers amongst our peers. This is true for climate with a score of B with the CDP, amongst some of the best companies in our sector. Vigeo, we have the advanced level, which puts us third out of 44 companies in our sector. Also on the Sustainanalytics, we've been able to significantly improve our score with them. And we're currently signing up to the Initiative for Responsible Mining Assurance known as IRMA. And we have already started to assess our mining sites based on that reference grid which is an international one and a very demanding one. All of this strong operation and financial progress, also CSR progress, has led to strong financial results in 2021. Given that the 2021 environment was a buoyant one. Mining production, as I explained, is up 75%. And if you look at our production for nickel ore, we produced nearly 20 million tons of nickel ore in 2021. If you book 100% [indiscernible] more than double what we had last year, 7 million tonnes of manganese ore in Gabon, that's up 21% versus 2020, and is more than double what we had 4 years ago. This makes our mine the largest manganese ore mine in the world. Year-on-year, we've been able to improve our mining production, which means that we can fully ride the strong dynamics in the market. And this has led to strong financial performance throughout the financial year with EBITDA that is now above €1 billion. This is the double of 2020. And more important than that, it's a significant increase, more than 60% up versus 2019. This 2-year increase is entirely due to intrinsic performance. More than €450 million over the period. 2020 was a year of a drop off of prices in all outside factors. 2021 it rallied. Over 2 years those external factors are a wash for ERAMET which means that all the increase, more than 60% increase in EBITDA between 2019 and 2021 comes from our own internal intrinsic progress. That's a great sign of the strength of our model, and we're extremely proud of it. Our free cash flow, as I was explaining, €400 million or €526 million if you exclude discontinued operations or the ones that are currently being divested. This has enabled us to deleverage with a leverage ratio versus EBITDA that is under 1x with more elbow room and room for maneuver. And we've been able to resume payout by paying dividends to our shareholders, which is of course extremely important in the long term. And this is a commitment that we continue to uphold with that distribution ratio in the long term. In 2021 we were able to restore our economic fundamentals, and that means that we are strong moving into 2022. Before we get into the financial performance and the roadmap for 2022, I would like to give the floor to Thomas Devedjian to tell you all about the financials.
Thomas Devedjian: Thank you, Christel. Good morning to you all. I'm pleased to present the 2021 financial results, just a comment to begin with. We applied IFRS 5, that is to say we restated assets held for sale. Aubert & Duval, ERASTEEL and Sandouville, 3 activities. So you won't see in the P&L in the financial statements the performance of those activities. They appear on a single line. And so we presented the financial statements consistent with IFRS 5 on the basis of the new scope, Mines and Metals, excluding assets held for sale and discontinued. You see outstanding results of the continuing operations in 2021. We increased our sales by 30%. Our net income for these continuing operations is close to €800 million, whereas the net income of discontinued operations is negative, minus €426 million. Once again, Aubert & Duval, ERASTEEL and Sandouville. And in those minus €426 million you have minus €348 million. That's the impact of the sale of Aubert & Duval, for which we signed a Memorandum of Understanding 2 days ago. Now in spite of that impact, the net income group share remained significant, close to €300 million. And our net debt is down sharply from €1.378 billion to €936 million at the end of '21 which gives us a leverage net debt EBITDA ratio of 0.9x, placing us at a very reasonable level. EBITDA performance that exceeds the €1 billion mark and doubles over the period on continued operations. You can see that this improvement is due to a sharp improvement of intrinsic operating performance irrespective of price effects, €164 million, primarily volume increases in line with our targets pretty much across the board except for SLN, that suffered from a number of difficulties during the course of the year and Christel will return to that later. Furthermore, we benefit from a favorable price environment in manganese alloys. First and foremost a very significant increase in prices of between €300 million and €400 million, a very sharp increase. The price of nickel also rose by almost €200 million. But we had to suffer the impact of the increase of our inputs, and in particular the increase of freight costs for which we suffered the increase in sea transport for some €200 million for the year. These external factors are on the whole very favorable, an improvement of €437 million. And that gives EBITDA of €1.051 billion. If we include the EBITDA of activities held for sale, it's down €20 million, €1.031 billion. €298 million net income group shares due to several factors because of the transaction with Tsingshan at the end of last year we revalued our stake in our lithium project taking count that reference value which improves by €117 million. Other operating income and expenses. And furthermore, we had expenditure of course on the lithium project that we maintained and that we have restarted. And we benefit from share in Weda Bay. And let me remind you that we hold 43% of Weda Bay, and that contributes to our net income to the tune of €121 million. And of course, we paid taxes in Gabon for some €50 million, in Norway €25 million, and also in France €23 million in income taxes where we of course generate profits on discontinued activities minus €426 million. I mentioned that. With the impact of Aubert & Duval divestment that involves, of course requires consultation of the staff representative bodies will allow a signature before the end of the first half. And the closing of the transaction expected given the antitrust authorities that was formed hopefully between now and the end of the year. Our CapEx were strictly monitored and controlled over the period 2021. We limited our investments to those with a very rapid payback. And you can note that our CapEx in '21 were at a reasonable level, just over €300 million, €140 million current CapEx to maintain our equipment at a low point, following our resolve to control our cash and €170 million give or take for our growth CapEx, the large part being represented by supporting mining production growth in Gabon investments to continue to grow the production of the Moanda mine and also sustain rail transport through the investment we're making to renovate the track. And, of course, accelerate the increase of this transport to follow a key pace with the increase in production. In '22, we plan to invest a bigger amount, €550 million, excluding lithium CapEx because Tsingshan, our partner, will finance the share. And since we've already financed ours, it will fund the full CapEx to be undertaken. This amount to be added to the €550 million consolidated in our P&L, of course, because we hold the majority of this lithium company. Out of the €550 million, €300 million will be for current CapEx and €200 million for growth CapEx in Gabon to support the growth in production and the ramp-up in transportation. Working capital requirement has increased by €160 million. But in proportion slower than our sales. That reflects a good containment of our WCR that we're tracking closely. You see a number of days of sales. We've reduced the WCR because it represents a decrease of 3 days of sales that is given the good performance of last year is once again a successful WCR control. Our free cash flow generation, as Christel said earlier, is very significant. You can see that Mines and Metals division generates almost €700 million in free cash flow. The largest part represented by the Manganese BU ore and alloys for some €500 million. That's the ramp-up of production of manganese ore, but also very good performance of manganese alloys. We both increased our production, improved our mix in terms of refined products against the backdrop of very favorable price environment. We're able to deliver that performance. Nickel, of course, we need to take account of the free cash flow with €146 million FCF, the distribution of dividends and the commercial margin that we generate on the production share that we market. Mineral Sands delivered a very good year, €115 million in FCF. And lithium is still to come. And we're still in a spending phase. So all in all, group free cash flow, once again, under IFRS 5 on continued activities stands at €526 million. That's a fourfold increase in cash flow generation, considerable versus 2020. Thanks to that, we were able to sharply deleverage our balance sheet. Our net debt stood at €1.378 billion at the end of 2020. And thanks to the strong contribution of our free cash flow of the Mines and Metals division of €526 million, we were able to significantly improve our debt net. Of course, operations that are being discontinued had a negative contribution of €125 million. So that means that all in all, net debt in the IFRS 5 scope, €936 million and net debt of activities held for sale €990 million €991 million, very good reduction in net debt. Liquidity, €2 billion in financial liquidity, about €1 billion for our RCF €1 billion for available cash. Our RCF was fully repaid. We ended repayment in January. So it's totally undrawn at this point in time. And in July we repaid early the TiZir bond that funded our growth in Mineral Sands in Senegal. And there was -- it was quite a costly debt, and that was repaid early, which led to a cash out of €240 million as an early repayment, and of course reduces gross debt and cost of debt. We have no significant maturities before 2024. As you can see, in 2024 we have a first bond to be repaid of €500 million and in '25 one of €300 million. And this is the government loan to SLN for just under €200 million maturing in '24, so. And given our financial situations, we're very comfortable. We have all the time necessary to refund those bonds or to repay them without difficulty at maturity. Our capital allocation, how does it stand. As you can see, our priority is significant deleveraging, #1 priority. And in '21 we devoted €388 million to reducing that net debt. And we plan to continue that deleveraging effort. Our target is to be at a leverage below 1x EBITDA on average through the cycle and to maintain a strong balance sheet in order to secure the financial sustainability through the cycle of our group, whilst maintaining a measure of flexibility in order to seize investment opportunities. Second priority after debt reduction are our growth CapEx. We maintained a disciplined investment policy by focusing our CapEx on organic growth, brownfield projects with very swift paybacks and attractive returns. That's our priority. And we also have in our portfolio, and Christel will discuss those, we have some strategic greenfield projects that can be achieved through partnership with a limited risk. And in '21 we devoted €173 million to those growth CapEx. Lastly, third priority in our capital allocation and when that becomes possible with the financial situation allowing for that, and that's the case this year, we planned to pay a dividend to our shareholders, will propose to the AGM this year at €2.5 per share, which will be a cash out for the group of just over €70 million. That's a reasonable about. Lastly, we ensure that we maintain minimum cash reserves to successfully manage our operations and weather any change in the cycle. That's a minimum of €500 million. That's part of our criteria and points of attention. Thank you. Back to Christel.
Christel Bories: Thank you for that, Thomas. Let's take a look at our operational performance now in our various business units. This will also be the opportunity to talk about the next step in our strategic roadmap. When it comes to operational performance, this year has been a record-breaking year when it comes to production. We're very proud of that. Breaking records left and right, except at SLN where we suffered from strong external factors in 2021. It's been a very difficult year. And I'll come back to it in a minute. However, overall, in manganese, we've achieved 7 million tonnes of ore produced, as I mentioned. That is 20% up. Manganese alloys are also up with an excellent mix with a lot more refined alloys out of the mix because we can get -- and we can get better margins on those. On nickel, Weda Bay has increased its production fourfold, an increase in production of ferroalloys as well. And for SLN, despite those external factors that I mentioned, we've been able to maintain the 5 million tonnes of ore produced. And we were also able to increase our exports. However, ferronickel production is significantly down. For the Mineral Sands business unit, again, record production, above 800,000 tonnes. And Ti above 2,000 tonnes -- 200,000 tonnes, which is a record for that operation. All of these excellent production levels have been achieved in a price environment that is in our favor, but also in a wider environment of an increase in prices for a lot of our input. An impact of about €280 million in 2021 came from that. Generally, the increase in the freight costs, which I'm sure you're all familiar with, 2 of our main routes for manganese and for nickel are illustrated here on the slide, and you can see that they are up 160% and 250% respectively. So huge spikes year-on-year in freight costs. There's a slight slowdown in the second half of 2021 after the spike midyear, but we're likely to see freight costs that are still very high into 2022, at least no significant improvement for container freight costs. And the loose shipping that we use for our ores may improve, but the average in 2022 will still be higher than the average for 2021. Energy costs also spiked in 2021. And it's unlikely that the news we had this morning is going to drive down those costs anytime soon. Thankfully, here at ERAMET, 80% of our power purchases are protected by long-term agreements, particularly in Norway for our Norwegian plant. This enables us to significantly blunt the blow of the increase of energy costs, especially for those manganese alloys. However, at SLN, we are fully exposed to Brent price rises as we have an oil energy plant there. And we are fully exposed to the strong increase in coke spot prices, which increased by 115% in 2021 in Europe versus 2020. And that is going to continue to weigh on our costs in 2022. So strong inflation, inflation in the cost of our inputs, and that is going to continue to weigh down our books in 2022. If we take a look at each business unit individually, starting with Manganese. For Manganese, we have excellent operational performance in a price environment that has been in our favor and very good for manganese alloys. The Manganese Business Unit multiplied its EBITDA by 2, €900 million. And its free cash flow was also multiplied by more, up to €490 million, up 72%. This is due to increases in production, of course, increases in the mix quality and also a significant increase in the prices for manganese alloys, plus 38% for those prices at invoice. So these are the prices that we billed in 2021 versus 2020. You may know that there's a lag period of 3 months between the indexes and the prices increasing. And we still have a further 39% increase for Q4 2021 versus Q3 2021 in the indices. And that is going to start to come into our books in our invoice prices in the first quarter of 2022. Overall, a strong uptick in trends for our Manganese Business Unit. We are expecting those prices to come back to nominal levels in the second part of 2022. But overall, the average in 2022 is likely to be slightly higher than 2021. These good prices are due to demand on the market, of course, over 2021. We saw an increase in the production price of carbon steel, plus 4% over the year, despite the slowdown in China in the second half. This was due to the trade issues on steel production and energy costs. An increase in manganese ore production was only 1.3%. There were a number of issues in some large mines, including in Brazil. And there were also transport issues in South Africa. This means that inventories are down. That is the gray part of graph that you can see on the bottom-right. These are manganese ore stocks. All of this drove up the price about 15%, but that was entirely offset by the freight costs increasing, so invoice prices have not increased. However, the red line is the manganese alloys prices with strong demand and also production. The manganese alloy producers have experienced issues throughout 2021 due to the COVID crisis, due to the increases in energy costs and other factors. We were able to produce throughout this and to achieve those good results that you know. If we look at Moanda, the mine is continuing to ramp up. You can see that we increased our production 20% to 7 million tonnes as we opened up the new Okouma plateau in 2020. So strong growth of 63% over the last 3 years for volume produced. We transported 6.5 million tonnes. That's a small part of the product that is used on site rather than being transported away. It's sent to our Gabonese alloy plant. But it is true that we were hamstrung by transport despite the significant improvements that we've made to the Transgabonese line especially in the second half of the year. Remember that the first half of the year we were suffering from a number of issues on that transport line. So now we're at a good transport throughput, which is in line with our expectations. And for 2022, we are forecasting production and transport to 7.5 million tonnes of ore in Gabon. All of that comes with a cash cost which is very good for us. It was stable throughout 2021 despite an increase related to ForEx and fixed costs that increased because we opened the new plateau. So that did increase fixed costs, but that was offset by good productivity, especially with the increase in volume. Overall, in Moanda, we now have the largest manganese ore mine in the world with a cash cost which is excellent in the first quartile of the cash cost curve. If we move on now to the Nickel Business Unit. Once again here we are seeing good improvements. EBITDA, which increased twofold, up to €113 million. Free cash flow increased threefold to €111 million against the backdrop of the increase in prices of LME and also nickel ore, up 32%. As I was saying earlier, the Weda Bay mine is now at 14 million tonnes, which is a fourfold increase over the previous year, excellent production levels from them. And despite the upheavals, production was stable at SLN at 5.4 million tonnes. This means that overall, at ERAMET, if you include Weda Bay at 100%, and you know that we now operate the Weda Bay mine, we produced about 20 million tonnes of nickel ore in a good business environment. Weda bay significantly contributed to free cash flow, overall €146 million, as Thomas explained, of cash flow coming directly from Weda Bay, especially through the dividend. It's a mine that has excellent positioning on the cash cost curve as well. All of this happened in a buoyant market for nickel demand, up 17% demand for primary nickel in 2021. This is exceptional. And we were almost at €2.8 million in demand, which is huge, up 16% for [indiscernible] for 64% for batteries. Batteries accounted for 30% of growth of demand for nickel in 2021. And this has pushed LME prices up, plus 34%. And as you can see, stock levels have crashed. They are now at extremely low levels. We have about 2 weeks in reserve, which is something that we haven't seen for a very long time. Especially with the issues coming up with Russia, this is a sector that is likely to remain under a lot of tension. As you know, I'm sure Russia is the fourth or third largest worldwide producer of nickel. Excellent performance in Weda Bay, as we've already said, 14 million tonnes produced. We sold 10 million of those tonnes, 4 million tonnes are limonites that have been stored for future needs. And we're expecting to produce 15 million tonnes in 2022 out of Weda Bay. And we produced 39,000 tonnes of ferroalloys in Weda Bay, up 66% versus the previous year. And we're expecting 40 million tonnes in 2022. Over at SLN, as I said, it's been a difficult year. Thanks to the good market environment and despite the issues that affected production in 2021, SLN has achieved cash breakeven level in 2021. That's important. We didn't lose any money with SLN. It's important to note. Ore production remained stable, thanks to our efforts. We were expecting an increase. We were able to keep it even. Exports are up 17%, about 3 million tonnes. However, the plant had issues with supply with ferroalloys down 18% -- ferronickel production down 18%, which affected the cash cost because there are lot of fixed costs at the plant. And also we had the impact of the increase in energy costs. All of that being said, we were able to achieve some significant milestones in SLN production. We were finally able to achieve a couple of weeks ago, authorization to export a further 2 million tonnes. This means that we can export more than 4 million tonnes in 2022. You need to invest before we can push up to that 6 million tonnes, which is our target set for 2025. The next step that we need to achieve to continue our SLN plan is to have access to more competitively priced power. We have ongoing discussions with the New Caledonian authorities and the French state for a new energy plant for Caledonia. And we hope that, that is going to lead us to be able to have more competitive energy prices there. We're looking to get back to nominal levels of production. And our previous production level is above 45 million tonnes in 2022. If we take a look at Mineral Sands, once again, excellent financial performance with a price environment which has been in our favor, up 51% EBITDA, €137 million. Free cash flow 2.5x, and more than €100 million, €108 million. We've been breaking production level records overall for the GCO mine and also for production of zircon. And we've also broken production records in our Norwegian mine. All of this against the backdrop of increasing prices, significantly up especially in the second half for zircon. Prices up 24% in the second financial half and 12% for the whole year. There are supply issues in the market. There are production issues that are occurring with a number of suppliers. And this means that there is a lot of tension currently on that market, especially for zircon, but also for titanium dioxide. You can see prices for titanium dioxide that are up with prices that went significantly up in the second financial half as well. We're likely to see higher prices moving into 2022 with production levels that aren't able to keep up with demand. I've already discussed production. We have record-breaking production levels. At GCO we are continuing to increase year-on-year production. And this enables us to offset in part the fact that for the last 2 years we have entered a lower yield phase of the vein. We should get back to higher ore content from 2023 and beyond. We believe we're going to produce more than 750,000 tonnes for HMC at GCO in 2022. 2021 was an important year for us and for the third part of our road map. This is the year during which we're starting up the lithium plan once again. As you remember, that was mothballed in the first half of 2021. As you know, lithium demand is booming right now. There really is extremely strong demand with a lot of tension on supply for lithium in the market. You can see the demand forecasts are quite impressive. We're at about 500,000 tonnes right now of production with demand. And we're expecting that to go above 2 million tonnes by 2030. So a huge increase there for equivalent carbonate. And you can see the impact on prices here with prices beyond $60,000 per tonne for LCE and for hydroxide in fact. This is 10x the price that we had at the beginning of 2021. So a dynamic market that is under a lot of stress. So the outlook for our projects is looking even better, and that's why we're continuing to ramp it up. This is a project, as you know, that should produce 24,000 tonnes of lithium carbonate with a cash cost that is extremely competitive in the first quartile of the cash cost curve. Long-term prices are relatively conservative, given the prices today, but this is what we are working with, with about a bit less than $13,000 per tonne. About 30% internal rate of return with an EBITDA at about USD 200 million once the plant is at nominal capacity. So a very profitable project. As you can see, we're currently building the factory. We're hoping to start it up in the first half of 2024. And to have achieved full ramp-up during 2025. This would make ERAMET the first European company to operate a lithium complex of this size. And this comes on top of a process that uses a lot less water than the traditional processes. So this is for the overview of our operations. Now I'd like to move on just for a few minutes to our strategic road map as this is a turning point for us. We're really at a watershed. As I said, we presented a strategic road map in 2018 with 3 pillars. The first was to fix or reposition our least-performing assets. That's almost done. Sandouville has been divested. Aubert & Duval currently being divested. The ERASTEEL, that divestment process should be completed this year in '22. And you see we put it in activities held for sale. And at SLN, a major milestone in the recovery with the 6 million tonnes. And discussions ongoing on energy. On the growth front for our attractive businesses, I won't return to that, there we overachieved, outperformed considerably everything we promised in 2018. Big success by the ERAMET teams. And we've begun our Pillar 3. So we really are delivering what we planned. That is to say to become a pure player in mining and metals. And so today, we're proposing a new strategic road map this time with 2 components, which really positions ERAMET as a pure player in mining and metals and genuinely contributing to a sustainable future for the industry with 2 focus areas. The first is to contribute to the growth in metals, supporting global economic growth. These are infrastructure, construction markets that are growing with the global economy and still growing across developing countries. That's our business in manganese, in nickel for industrial and daily usage, stainless steel and others, and our applications of mineral sands in construction, ceramics, et cetera. Then we have this second stream that is growing strongly, which is to develop critical metals for the energy transition, with lithium, the current project, but also the subsequent phases because we have a deposit in Argentina, which means that we can have several plant construction phases. And as you know, we have exploration at ERAMET, will continue to explore to open new mines in the future in lithium in our traditional business or nickel cobalt. We also have a plan with BASF, a project for a nickel cobalt plant at Nashfall on the Weda Bay mine. That project is progressing well. We plan to accelerate it on the back of very strong demand. And places are being taken now. But we're moving forward fast. And we'll come back to you with a program on that project. And we're also advancing and accelerating our project in battery recycling. So you can see that it's a portfolio that's extremely well-positioned with the current metal boom. There's talk of a new metals age. ERAMET is fortunate in being at the right place with the right portfolio, both for infrastructure and energy transition. Its business is very well-positioned on the price curve, all of them, and hold promise of cash generation. They have an advantage, and we have a unmatched advantage, which in our portfolio we have products and high-grade ores that are particularly useful to our clients who seek to reduce their carbon footprint in most of our plants, leaving aside SLN that we have low carbon energy, decarbonized energy. We have a CO2 reduction pathway, very ambitious, aggressive, certified by SBTi. We are a benchmark in terms of CSR for biodiversity. The environmental community is positioned on metals that will assist and strongly contribute to the energy transition. So we do have the right portfolio at the right time in order to significantly contribute to the fight against climate change and in favor of energy transition. That's what I wish to say about the strategy. Well, in conclusion, as you've seen, we're beginning '22 in a far more solid position, and we're prepared to embark on a new growth phase for ERAMET. Thus far, '22 was looking very good, looking good in terms of market demand. The markets are very well-oriented at the beginning of the year. Of course there was some uncertainty regarding demand in China, but that was broadly positive. And of course we have the geopolitical context in Europe that is becoming far more challenging. Prices are currently staying at high levels. We've continued to raise our ambitions in terms of organic growth in our mines. For '22, we plan to achieve 7.5 million manganese ore in Gabon, more than 4 million nickel ore export in New Caledonia. 15 million nickel ore production, 100% at Weda Bay. We plan to increase CapEx on the back of this fine momentum. We need to invest in growth CapEx. So we have a target of some €550 million of cash CapEx for '22, of which some €200 million to support and secure organic growth in Gabon. An EBITDA target of around €1.2 billion based on the assumptions outlined here that may change. Manganese alloy selling price is slightly higher than those of 2021 on average through '22. An average consensus for manganese ore price of 5.2 dmtu. Average consensus for nickel price of $19,000 per tonne, higher energy and coke prices versus '21. So against this backdrop and with those assumptions, we plan an EBITDA of the order of €1.2 billion cash generation that is quite significant. That will allow us to reach the CapEx shown here. And of course we plan to be very strongly cash positive even with the CapEx indicated here, and to be able to continue our deleveraging pathway. And of course we'll be working at accelerating our projects, notably the lithium project. So in conclusion, 2022 has clearly marked an acceleration in the group's refocusing and the rollout of the strategic road map. Our good results have demonstrated the relevance of the operational model. And '22 is the new milestone in the group's history. And we're addressing it in a stronger position with a great deal of ambition. And the ambition that was written in our corporate purpose to become a reference, a benchmark for the responsible transformation of the vast mineral resources for living well together and to be the expected champion of metals for the energy transition. Thank you all for listening. And we're now available to answer your questions.
Operator: [Operator Instructions]
Alain William: This is Alain William from ODDO. Could you discuss the delta in EBITDA between 2020 and 2021? What are you expecting from intrinsic growth? Do you have a kind of formal model for that? Secondly, regarding the divestment of Aubert & Duval, we have a multiple of 2x EBITDA, with prices that have changed since before the COVID crisis. Can you tell us more about the price paid? And finally, could you clarify your dividend policy? How should we interpret that €2.5 per share? Is that the base dividend? Is that likely to change based on payout policy?
Christel Bories: Thank you. I'll answer that question. I'm going to answer the first one, and then I'll let Thomas answer the 2 others. So on your first question, we are continuing on our trend to -- for intrinsic improvement from volume, from productivity increases, from what we've been doing to improve the efficiency rate of the use of our equipment. I mentioned the figure over the last 2 years, we have €450 million in total intrinsic improvement over 2020 and 2021. 2021 is likely to be about the same. Again, we're expecting intrinsic improvements again that are significant. So we're continuing along the same trend at the same speed over the last years. It is becoming much harder, of course, because you start with the low-hanging fruit, but we do intend to continue to improve our operations in line with how we've been able to achieve it in the past. Thomas, for the next.
Thomas Devedjian: I hope you can hear me, yes, the mic is on. Yes, on the valuation of Aubert & Duval, the transaction price, €95 million enterprise value, that may seem rather low in respect of the revenue figure of about €500 million of Aubert & Duval. Nevertheless, you need to bear in mind one thing is that A&D consume -- been consuming cash for several years now. This year we'll have consumed about €125 million in cash. That's quite a significant number. And this year is set to continue to have a high cash burn rate. And as you probably noted on the part of the consortium, there is an investment plan that's significant, that is planned. And so one can expect that the return to positive cash generation will not be immediate. So an enterprise value of €95 million that gives a positive value for the share, significantly positive. And so we considered that even that asset has a record strategic value, an important place in the industry value chain. It was a good price for the divestment of A&D. On the dividend policy, you noted our capital allocation policy that we presented to you with 3 priorities
Christel Bories: Are there any other questions?
Operator: Societe Generale, [indiscernible].
Unidentified Analyst: [indiscernible] on Gabon. First, could you remind us what the timetable is for discussion about royalties with the Gabonese state this year? Second question on Gabon is what benefit do you expect from the entry of Meridiam in the Setrag with regards to the next couple of years? 2 questions on Indonesia. First of all, can you remind us what is the energy feed of the smelter of Tsingshan that you're showing? And also that H-pile technology, you're looking at with BASF, is that Tsingshan H-pile technology that you would be sharing? And finally, ERASTEEL, is that going to be simpler to sell than Aubert & Duval has been in your opinion?
Christel Bories: Thank you for those questions. Maybe starting with Gabon. I'm not sure I fully understood your question because we don't really have much of a time table on royalties. There's not a particular issue. So I'm not sure exactly what you're driving at, but we can get back to it. When it comes to our expectations for Meridiam, things are looking good. Until recently we had 100% of the Transgabonese railway. Transgabonese railway does not just transport con material product, far from it. There are other users of the Transgabonese line, other mining players, all of the wood operators, freight, passengers, et cetera. The Transgabonese line requires a lot of investment to continue to grow. As you saw over the last 3 to 4 years, we've been able to more than double the transport capacity of the line. And a lot of work has already been done. The infrastructure is funded in part by the state, but most of it, 70% of that is being funded by Setrag itself. So the fact that we have Meridiam and also the Gabonese state that has bought a share in Setrag, and Comilog will have just a majority share of 51%. This better reflects the usage of the line by Comilog. This will provide money, also skills because Comilog has a lot of skills in operating infrastructure and elsewhere in Africa and elsewhere in Gabon. Now we think this is an excellent thing to have partners on board with us. We do want to maintain a majority stake through Comilog in Setrag as it is a vital transport line for us for the mine, making sure that we can get the ore to the ocean, but we have no intention of keeping 100% of it. For Indonesia, as it stands, the energy that is being used for the Indonesian plant is coal. And this is one of the challenges that we're facing. The fact that now we have not decided to increase our capacity to move into other NPI tranches in Indonesia. The H-pile power plant that we are planning is not a Tsingshan technology. Tsingshan does not have H-pile technology in the strictest sense. However, there is Chinese engineering firms building H-pile power plants in Indonesia. So we're currently working with Chinese engineering, which is not Tsingshan, but is a highly specialized Chinese firm in this kind of project. As a reminder, this is 51% ERAMET and 49% BASF. And on the topic of that project, we are working for energy supply to not be coal-based. So electricity to not be from coal plants. And your final question on ERASTEEL. Yes, ERASTEEL should be easier to sell than Aubert & Duval. It's smaller. And also ERASTEEL is on a positive trend, as you could see on our books and in our presentation. ERASTEEL was in the red for a very long time. But for a number of years now, 2 or 3 years maybe we have a restructuring project that's been rolled out. They really suffered from the drop off in the automotive market in 2020. Things are back in 2021. Market share is going up, production is going up, and we think that we're going to be in a good position to divest ERASTEEL in 2022.
Unidentified Analyst: Just to clarify my question on Gabon. I mean sometime in 2022 you're going to have to discuss with the government some payment of either dividends or royalties with regards to the profits that you've made in Gabon. Is that right?
Christel Bories: No, it's not reality. It will be dividend, but we do each year. We distribute... Every year, we distribute, payout a dividend where every year when we generate profits we distribute dividends to Gabon. Thomas, would you like to answer that point to be more specific?
Thomas Devedjian: So there's no royalties, but the Gabon state holds 29% of Comilog. When we pay out dividends, 29% of the dividends go to the Gabon state. Yes, no royalties in Gabon. Comilog is making money in Gabon, pays taxes to the state as minority shareholder -- significantly on the Board every year we discuss the dividend payment. And depending on the results, and generally the results are good, so we pay a significant dividend, and we receive a large part of that, and a share goes to the minorities. And every year we had this discussion without revealing beforehand what is going to be paid. Discussions always proceed well. There will be the payment of dividend this year to Comilog.
Christel Bories: Further questions?
Operator: There are no further questions on audio lines. We will continue with questions asked on the webcast.
Philippe Gundermann: Questions from the webcast.
Unidentified Analyst: Could you come back to the impact of the crisis between Russia and Ukraine? What is going to be the impact on nickel and manganese prices according to you?"
Christel Bories: Well, if I knew what the impact was going to be on nickel prices, I would be buying shares right now. Russia, not the Soviet Union, but Russia, sorry, but at least you can see where my mind is going. Russia today accounts for about 26% of worldwide nickel production, a significant part. So if there were to be an embargo, then nickel supply around the world would suffer. That all being said, we're not too concerned because it's quite easy to work around trade restrictions and things can be run through China. There may be embargoes for Europe or Western countries, but nickel will probably find its way out into the market. Although we are expecting tension on the nickel market. As I explained earlier, we're at just 2 weeks in inventory, which is very low. For the other impacts, there is the macroeconomic impact, of course. There's probably going to be an impact on manganese alloys as well because especially Ukraine is a big producer of manganese alloy, especially silica manganese. And if that producer were to no longer be able to produce or export product at the same levels that they have in the past, then that is going to cut off the European and Middle Eastern market from part of their manganese alloy supply, that's likely to be good for us though, if we are able to keep our production levels high, and is likely to drive prices up for manganese alloys as well. So probably an upside to be found there. It's also important to note that Russia is a big producer of metal coke. And you get supply from our Norwegian plant in large part, and there may be issues with supply there. We're not seeing any major impact on ERAMET's books beyond the few components that I just mentioned beyond the overall macroeconomic impact of the crisis on the world economy.
Unidentified Analyst: And to keep on the topic of nickel, is the trade deficit due to strong demand in batteries or something else?
Christel Bories: I explained this. That was on the slide deck. I think we need to wind back a few slides here. Here we go, right here. As you can see, the strong demand in 2021, up 17% is due to Inox volume, which was very dynamic. So construction, automotive industry up 16%. But you can also see that the battery market, which is about 200,000 tonnes is now at 325,000 tonnes, and that's likely to continue to increase, up 64%, accounting for 30% of the rise in demand. We're expecting batteries to be an ever-increasing part of demand for nickel. Especially if you look at LME stocks, which are pure nickel in the shape of bricks, they then get dissolved to make nickel sulfate for batteries. This is Class 1 Nickel, so not ferronickel, but the pure nickel that's required for batteries, and that is where we're seeing a lot of tension on the LME stocks.
Unidentified Analyst: And as part of that, your €19,800 estimation for nickel prices that you're basing your 2022 guidance, is that maybe a little bit low?
Christel Bories: When we drop the guidance, this was the consensus across analysts. We take a market consensus. We don't just pull these figures out of thin air. We try to be as close as possible to market consensus. The market consensus at the time when we drew up the forecast was this, and that's how we calculated our guidance. If you look at today's prices, they are significantly above what we used when we established our guidance. As to whether today's prices are going to be sustainable and continue throughout the year, that's a question that's better put to you. So I think it's up to each person to come up with their own forecast for nickel prices. You know our exposure. We have that in the press release and in the appendices with this presentation. So you should be able to calculate very quickly the impact of nickel prices on ERAMET's books.
Unidentified Analyst: Moving to lithium. Could you detail your lithium projects in France and outlook?
Christel Bories: In France, we're working on geothermal lithium. And perhaps Philippe can tell us what the situation is with those projects in France.
Philippe Gundermann: Geothermal lithium in the Alsace plane in Eastern France and lithium that today is found in salts extracted by energy suppliers to recover heat. The idea of value creation is to use the novel process of ERAMET, when the lithium is on the surface to recover it before it's reinjected into the lower levels of the earth. In '21, world-first, we commissioned a small-scale pilot showing the feasibility of the ERAMET lithium carbonate for battery quality from this sort. And '22 will be devoted to the economic case study. Now it's clear that this extraction of geothermal lithium is clearly capital intensive in terms of the resources available. It will depend what we anticipate for lithium prices. With the price of lithium today, no problem. It's very profitable. If we take lower lithium prices, there could of course the issues regarding the economics of this type of project, but our process works. So we continue to work on it because there is every likelihood that the lithium, price of lithium will remain high for quite a while. Returning to nickel cobalt at Weda Bay, how will it be financed? And do you still have sufficient in-house skills to develop this innovative project. So these are 2 separate questions. Financing, I'll hand over to Thomas. And then we can discuss the skills.
Thomas Devedjian: For financing, the hydrometallurgic project at Weda Bay is still under study with our partner BASF. And we will of course ensure that we can raise appropriate funding for the project and reasonable in terms of our financial situation. On the competencies, the skillsets, we have hydrometallurgic skills. We've worked a lot on these issues. We're working, of course, part of recycling because the recycling process, also hydrometallurgic process, BASF also has skills, expertise clearly. So we're 2 players with expertise. They come from the other end of the chain, from chemistry with hydrometallurgical expertise like we do, and we rely on engineering systems that have developed these with Ashpals work in the world, the first Ashpals but some 10, 15 years ago had difficult start up. The latest to be built were commissioned without difficulty and reached nominal output very quickly. There's a real experience curve that has been achieved on this technology. And we're quite confident with the available skills and expertise with the engineering company supporting us. We don't have any expertise issues.
Unidentified Analyst: Regarding manganese alloys, you've sharply improved the mix this year. Will that continue?
Unidentified Company Representative: Well, it's clear that here we have a particularly high mix level compared to past history. It remains our goal, which is to maintain a high level of refined alloys. There's a real challenge here in terms of this mix level as compared to price and to market share because we have a very high market share in refined alloys. We're far and away the leading world production of refined manganese alloy production. We have a big market share to increase to grow. If the market isn't growing, it's difficult. It will all depend on market dynamics.
Unidentified Analyst: Two more financial questions. Could you come back to this €340 million impact of the divestment of Aubert & Duval? And what's behind that figure? And on dividend, is an option to be paid in shares considered?
Christel Bories: Thomas?
Thomas Devedjian: Thank you for the question. So on the breakdown of those €340 million, there are 3 different underlying components. The first value is the divestment write-off, so debt and some provisions. The securities end up being less valuable than they were in our books. Secondly, there was a depreciation of a number of Aubert & Duval assets given the outlook for 2022 for Aubert & Duval. And then thirdly, we also provided guarantees to the purchaser. This means that we have some financial provisions to prepare for those guarantees. And then on dividend in shares, no, we're not expecting to pay out any dividend in shares.
Unidentified Analyst: Regarding the potential divestment of ERASTEEL, do you have any buyers lined up? Have you identified any? And what kind of industrial profile do they have?
Christel Bories: Right now we are preparing to implement the process. We haven't pulled the trigger in any way. We don't have any buyers lined up. We don't have any prospects. Of course, we've thought about who might be interested. And the range is relatively wide. Industrial players and financial players are involved. So we think that there could be quite a wide variety in potential buyers. And some people have already expressed interest.
Unidentified Analyst: And final question from me. So 2021 is an exceptional year with a very ambitious road map behind it. What are the main risks that you can see as you roll out that road map?
Christel Bories: Well, look, as it stands, our balance sheet is much stronger. We've got some large upcoming projects as well that will need to be financed. That's going to be one of the challenges. Even though today, if we're moving into ramping up these projects is because we believe that our free cash flow generation is good enough to allow us to be much more aggressive in our growth projects and should enable us to raise the necessary funds. Quite clearly we have some big greenfield projects ahead of us, which need to be delivered on time and on budget. Given the business and supply environment, that isn't easy. We've got issues with freight. We've got a lot of suppliers that are struggling getting their own inputs. So building up projects right now given the issues and concerns that we have on a lot of key inputs is not necessarily the easiest thing in the world. We are being particularly attentive to the timeline for our project given the supply issues.
Operator: Thank you very much. We have no further questions on the webcast.
Christel Bories: In that case, thank you very much, everyone, for joining us and for asking your questions. We will be very happy to see some of you once again for the upcoming meetings in the next few days. Of course, we have our Investor Relations department that is available to answer any questions you may have. Thank you very much, and have a great day.