Eramet targets debt reset with lithium, nickel sales

Eramet is pursuing potential buyers for its lithium and nickel stakes as it aims to adjust its free cash flow this year and rebuild its financial foundation to support future growth. The company highlighted interest in a minority stake in Argentina’s Centenario-Ratones, situated about 300 km west of Salta, and a significant portion of its 38.7% ownership in Weda Bay Nickel in Indonesia during a Monday statement.

Eramet’s Chair and CEO, Christel Bories, acknowledged the need to restore the balance sheet to achieve these objectives. She emphasized that all teams are fully committed to the execution of these strategies, which would restructure Eramet’s financial structure and equip the company with the necessary resources to capitalize on growth opportunities.

Eramet intends to reduce its adjusted debt-to-earnings ratio below three by year-end, down from 5.5 at the end of 2025. The company plans to achieve this through a €500-million rights issue, spending restraint, and operational enhancements. However, the proposed stake sales are not anticipated to generate proceeds before the end of the year.

Eramet projects adjusted earnings before interest, taxes, depreciation, and amortization to range between €540 million and €610 million this year, up from €372 million in 2025. Capital spending is expected to decrease to between €250 million and €290 million, from €412 million in 2025. The turnaround strategy follows a costly expansion into lithium, which involved Eramet purchasing Tsingshan’s 49.9% stake in Centenario for $699 million (C$986.5 million) in October 2024.

The company is now seeking a different minority investor for the same venture. Lithium carbonate and nickel prices declined by 17% and 10%, respectively, in 2025. Additional pressures, including weaker manganese prices, unfavorable exchange rates, Indonesian permit restrictions, and operational challenges, further exacerbated Eramet’s financial strain, resulting in a 54% drop in adjusted free cash flow in 2025.

Adjusted free cash flow was negative €481 million, and net debt increased to €1.94 billion from €1.30 billion a year earlier. Eramet received a lender waiver after breaching its debt-to-equity covenant, fully utilizing its €935-million revolving credit facility in January as a precautionary measure. While there is a slight recovery, with adjusted free cash flow reaching €7 million in the first half of 2026, a February fire disrupted mineral sands production in Senegal, and Weda Bay resumed mining in September following a four-month suspension due to permit limitations.

Eramet’s rights issue, initially proposed in February, would make the French government the largest shareholder in the company. The state’s investment agency would retain its existing 27.1% stake and purchase some or all of Sorame-CEIR’s subscription rights. France views the increased investment as a means to ensure critical metals supply security.

Eramet has also agreed to sell its undeveloped Arizaro lithium concessions in Argentina for $71 million, with the closing expected by year-end. The proposed stake sales have not disclosed prospective investors or valuations. The improvement program, named ReSolution, targets productivity gains, procurement savings, and reduced fixed costs.

Eramet has committed to withholding dividends until its adjusted debt-to-earnings ratio falls below one. Eramet aims to produce 20,000–24,000 tonnes of lithium carbonate in 2027, while a potential $350-million expansion could add 11,000 tonnes of annual capacity to the existing 24,000-tonne plant, contingent on operating cash flow.

A construction decision for the expansion could be made by the end of 2027. At Weda Bay, nickel ore sales to external customers in 2027 are expected to be similar to the past two years, contingent on Indonesian approvals. Eramet has not set a timeline for potential decisions. In Gabon, the company anticipates 6.8 million to 7.3 million tonnes of manganese ore transported next year and is exploring a $40-million manganese oxide plant, without an announced investment decision or start-up date.