Eramet Faces Steep Decline Amid Nickel Price Turbulence
French mining conglomerate Eramet encountered a significant downturn, with net income plummeting by 85% to 109 million euros in 2023, starkly contrasted against the 740 million euros recorded in 2022. This substantial decline reflects the broader challenges faced by the nickel and manganese markets, exacerbated by a dramatic drop in nickel prices, largely attributed to increased production in Indonesia. The downturn in prices led to a 29% decrease in Eramet's sales, falling to 3.82 billion euros.
The company also faced setbacks with an asset write-down concerning its New Caledonian subsidiary, Société Le Nickel (SLN), which necessitated a 218 million euros adjustment in the financial statements, impacting Eramet's share by 121 million euros. This move was prompted by SLN's unclear cash flow visibility, leading to its net asset value being marked down to zero.
Despite these challenges, Eramet CEO Christel Bories highlighted the company's resilience, noting positive account balances amidst a tough market environment and continued investments, such as the forthcoming lithium mining project in Argentina, set to commence production in summer 2024.
Eramet's Indonesian operations notably surged, with nickel production at Weda Bay increasing by 76% to 36.3 million tonnes, positioning it as the world's largest nickel mine. In Gabon, manganese production recovered in the latter half of the year, reaching 7.4 million tonnes after operational halts due to a landslide.
Looking ahead to 2024, Eramet remains cautiously optimistic, expecting the first half of the year to present challenges related to seasonality and price recoveries anticipated only in the latter half. A significant focus is on resolving the financial situation of SLN, with efforts to find an accounting solution to separate SLN's financial woes from Eramet's balance sheet, amidst ongoing discussions with the French government.
The broader New Caledonian metallurgical sector faces similar distress, with companies like Glencore considering the sale of their stakes due to the high costs of nickel processing in the region. The French government is in talks to forge a new nickel pact, aiming to alleviate pressures through subsidies, improved access to mining resources, and increased exports of raw ore to sustain the industry.
