Eramet Group: The ERAMET group's 2013 results

Paris, February 21^st, 2014

PRESS RELEASE

The ERAMET group's 2013 results

In a difficult global economic context, in 2013 the ERAMET group showed its responsiveness and was supported by the sound performance of ERAMET Manganese.

• ERAMET Nickel: results hit by very low nickel prices in 2013, cost reduction plans stepped up, Weda Bay project postponed

• ERAMET Alloys: profitability improved

• ERAMET Manganese: very sound 2013 results, production records for high grade manganese ore and for refined alloys

• WCR reduced, lower capital expenditure marking the end of substantial expenditure for Moanda metallurgical complex and TIZIR

• Debt still moderate, financial liquidity preserved

ERAMET's Board of Director, meeting on February 20^th, 2014 under the chairmanship of Patrick Buffet, prepared the financial statements for 2013, which will be submitted to the General Shareholders' Meeting of May 14^th, 2014.

*impairments pursuant to the IAS 36 standard, with no impact on the ERAMET group's cash

Patrick BUFFET, ERAMET group Chairman and CEO, stated:

"In a difficult economic environment, particularly in Europe, the ERAMET group proved its resilience in 2013 and showed responsiveness.

ERAMET Manganese's results remained firm with current operating income 218 M€ (i.e. current operating margin 14%), thanks in particular to a historical record for manganese ore and sinter production.

ERAMET Alloys' operating income became positive again.

Nevertheless, the Group's results in 2013 were essentially impacted by extremely low nickel prices (according to some analysts, at the end of 2013 almost 60% of the world's nickel production was made at a loss). ERAMET Nickel therefore posted a substantial decrease in current operating income, which totalled - 222 M€.

Given current nickel price conditions, the likely short-term outlook and the negotiations still needed with the Indonesian government in order to benefit from a suitable legal and tax framework, ERAMET and its partners judged that the conditions for considering a final investment decision on the Weda Bay project in 2014 were not met. This postponement of the project led the ERAMET group to record a 224 M€ write-down (ERAMET share) as of December 31^st, 2013.

We remain confident in the nickel market's outlook. In that respect, the implementation in January 2014 of the ban on non-processed ore exports from Indonesia is a positive step towards restoring market balance.

Thanks to all of the measures taken to lower costs, improve productivity, reduce working capital requirement and revise capital expenditure downward, the Group ended the year with moderate net debt. In parallel, it consolidated its liquidity by carrying out several financing operations, particularly a major 7-year bond issue for 400 M€. 

In addition, the 1^st half of 2014 will see the completion of two major capital expenditure programmes with the start-up of Moanda metallurgical complex in Gabon and, through TIZIR, its 50/50 joint venture with the Australian company Mineral Deposits Limited, the Grande Côte project in Senegal on mineral sands that are rich in titanium dioxide and zirconium.

In 2014, the priority given for several years to crisis adaptation measures and to maintaining a sound financial situation will be enhanced with further measures to reduce both costs and working capital requirement. Moreover, capital expenditure will be brought below 400 M€ (40% less than the 2012/2013 average)."

• The Group's key figures

The Group's revenue totalled 3,162 M€ in 2013, an 8% decrease.

Its current operating income was lower in the 2^nd half of 2013 than in the 1^st half of 2013, due to the fall in nickel prices. The other divisions held out well in a deteriorated environment.

The productivity efforts made by the Group enabled it to achieve savings of 85 M€ in 2013.

The Group's share of net income amounted to -74 M€ before the effect of extraordinary impairments and -370 M€ after their effect. These impairments have no impact on the Group's cash and concern three entities: Weda Bay Nickel, recycling and high speed steels.

• Thanks to the measures taken, the Group ended 2013 with moderate debt and stronger financial liquidity

As of December 31^st, 2013, ERAMET's net debt was 218 M€, a moderate amount equivalent to 7% of shareholders' equity and 1 year's EBITDA.

Working capital requirement decreased in 2013, which had a positive effect of 87 M€ on cash. At the same time, capital expenditure was reduced to 587 M€ (641 M€ invested in 2012), marking the final year of heavy capital expediture for Moanda metallurgical complex in Gabon and Tizir in Senegal. This trend will continue with a capital expenditure target below 400 M€ in 2014.

The ERAMET group has a very sound liquidity situation, with more than €2.1 billion at year-end 2013 (of which 911 M€ in gross cash and a 981 M€ non-drawn syndicated credit line). The ERAMET group's liquidity was particularly strengthened in 2013 by:

• The issue of the Group's first bond, for 400 M€ and 7 years;
• The issue of a "Schuldschein*" for 60 M€ with a 7-year maturity;
• Successful renegotiation of a syndicated credit line, of which the amount was increased from 800 M€ to 981 M€ and the maturity for the most part extended by one year, from January 2017 to January 2018.

*Invested loan contract under German law

Over the next few months ERAMET intends to keep up its policy of diversifying financial resources as opportunities arise.

The policy of dividend distribution by the Group's subsidiaries, particularly SLN and COMILOG, continued in 2013, enabling ERAMET SA to increase its shareholders' equity and liquidity by 242 M€.

• Dividend

The Board of Directors will submit to the shareholders' vote at the Combined General Meeting on May 14, 2014 that no dividends be paid out with respect to 2013.

• ERAMET Nickel: results hit by especially low prices in 2013

ERAMET Nickel's turnover decreased 22% compared with 2012, totalling 704 M€. ERAMET Nickel's production amounted to 53,000 tons in 2013, a slightly lower amount in line with market trends. Shipments were close to production at 52,400 t. ERAMET Nickel's current operating income totalled -222 M€ in 2013, compared with -38 M€ in 2012.

These results reflect difficult conditions on the nickel market:

• Despite a 5% increase in global stainless steel production, the nickel market was affected by a fall in prices to very low levels, especially towards the end of the year. LME prices fell 14% on average to 6.8 USD/lb. in 2013, compared with 8.0 USD/lb. in 2012. They continued their slide in the 2^nd half of 2013, averaging 6.3 USD/lb;
• This further drop in nickel prices results from continued excessive growth relating to China at every point in the nickel and stainless steel value chain. The production of Chinese nickel pig iron using ore imports from Indonesia and the Philippines has nearly tripled in three years and now totals almost a quarter of global supply;
• Nickel ore prices sold in China were almost halved in a year, substantially reducing the cost of nickel pig iron production.
• This development resulted in building up excess nickel inventories to even higher levels, particularly on the LME;
• In addition, Indonesia's ban on non-processed ore exports (announced in 2009 for implementation in 2014) resulted in inventory building as a precaution in China, which artificially swelled exports from Indonesia and the Philippines. The implementation of the ban in January 2014 is good news and will eventually support nickel prices.

Given the deterioration observed on the nickel market in 2013 and the short-term outlook for nickel prices, ERAMET, in agreement with its partners Mitsubishi Corp. and PT Antam, considered that the conditions that would allow them to consider an investment decision on the Weda Bay project in 2014 were not met:

• The particularly low levels of nickel prices would not enable the project to be financed on satisfactory terms. Furthermore, discussions are ongoing with the Indonesian government to clarify some important points in the regulatory and tax framework that would apply to the project.
• This postponement of the project led the ERAMET group to record, as of December 31^st, 2013, a 224 M€ write-down (ERAMET's share) on its fixed assets with respect to the Weda Bay project.
• The postponement decision in no way calls into question the quality of the project, based on one of the largest world-class nickel deposits, nor the performance of the hydrometallurgical process successfully developed by ERAMET's teams for this type of deposit.

Finally, as regards Société le Nickel, further productivity improvement and cost reduction plans were defined for 2014. Furthermore, extensive thought was given to a substantial reduction of ERAMET Nickel's fixed costs.

• ERAMET Alloys: profitability improved by ongoing reconfiguration and by improvement plans in phase with highly contrasting trends between different sectors of activity

ERAMET Alloys' turnover decreased 9% in 2013 compared with 2012.

Thanks to substantial productivity efforts made in 2013 (31 M€), current operating income was positive at 4 M€, which was an improvement on the previous year (-5 M€ in 2012).

Nevertheless, the European economic climate remains highly unfavourable to some of ERAMET Alloys' activities and continues to weigh on its profitability.

In 2013, the performance of ERAMET Alloys' different activities varied widely:

• Sales to the aerospace sector rose slightly (+2%), despite the postponements of some new aircraft programmes;
• Sales to the tooling sector fell 27% and remain penalised above all by the crisis in the European automotive sector. Sales for power generation equipment also fell, by 22%;
• Given the excess capacities built in high speed steel production in recent years, Erasteel's repositioning is under examination, based on its strengths of powder metallurgy and alloy making.

• ERAMET Manganese: resilient results in 2013, production records for high-grade manganese ore and for refined alloys

ERAMET Manganese's results remained very sound in 2013. Its turnover was stable at 1,562 M€, while current operating income remained firm at 218 M€, compared with 240 M€ in 2012.

Global production of carbon steel rose more than 3% in 2013, reflecting slower production outside China and a 7% increase inside China. Demand for manganese ore grew more sharply because of the inventory building needed after the low stock levels reached in late 2012.

CRU CIF China spot prices for high-grade manganese ore rose 10% on average in 2013 compared with 2012, buoyed by high steel production in China and the low inventories observed at the end of 2012. Nevertheless, the two halves were contrasting, with prices gradually eroded in the 2^nd half to end the year around 5.1 USD/dmtu.

ERAMET Manganese kept up its policy of renewing and extending capacities at existing units and consolidating its position on high value-added products:

• New production records were achieved in ERAMET Manganese's two main areas of leadership: high-grade manganese ore and refined manganese alloys. Ore and sinter production totalled 3.7 million tons (+22%) in Gabon, while external ore shipments rose 29%.
• Manganese alloy production increased by almost 2% to 746,000 tons, with a production record for refined alloys (366,000 tons), thanks to the start-up of the New Guilin, China plant in particular. Manganese alloy prices were affected by a surplus capacity market in China. Furthermore, in 2013 ERAMET Manganese finished concentrating all of its Chinese alloy production on the New Guilin site, which replaces two old, less efficient units that did not produce refined alloys.
• Manganese chemistry, in which ERAMET Manganese is one of the world leaders, maintained its turnover at a level close to 2012, at 165 M€, while its current operating margin decreased slightly but was still over 13%.

In Gabon, research and development work on the Mabounié project (niobium, rare earths, tantalum and uranium) led to very significant progress in 2013.

• The ERAMET group's outlook in 2014

The 1^st half of 2014 will be marked by the start-up of two major projects:

• The production of ilmenite (an ore upstream of the titanium dioxide chain) and zircon at Grande-Côte represents the development of a new deposit outside nickel and manganese for the Group, as well as its first base in Senegal. The Senegalese state has a 10% capital stake in the project alongside TIZIR, of which ERAMET is a 50/50 shareholder under a partnership with the Australian group Mineral Deposits Limited. With the Tyssedal, Norway plant, this 650 M USD project will form a powerful player in the titanium dioxide value chain, upstream of white pigment producers.
• Moanda metallurgical complex, which consists of two plants next to the mine, will produce silicomanganese and manganese metal for the first time on Gabonese soil. Through this COMILOG project, Gabon will be the only African country, apart from South Africa, to have developed this kind of processing for its manganese ore. The project represented total capital expenditure of 228 M€.

Given the outlook for economic conditions and for markets, which in early 2014 are in line with the end of 2013 overall, the Group will keep up its competiveness efforts in each of its divisions. The Group's 2014 target in terms of productivity improvement is approximately 110 M€, following the 85 M€ savings already achieved in 2013.

In 2014, ERAMET will also continue its efforts to reduce working capital requirement and will keep its capital expenditure below 400 M€.

Finally, ERAMET intends to continue implementing its strategy of diversifying its financial resources. The Group's financial structure will remain sound.

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WEBCAST OF RESULTS PRESENTATION

The presentation of the 2013 results will be webcast at 10am (Paris time) today in French with simultaneous English translation. To register click on the link displayed on the Group's website: www.eramet.com

ABOUT ERAMET

ERAMET is a leading global producer of:

• alloying metals, particularly manganese and nickel, used to improve the properties of steel,
• high-performance special steels and alloys used in industries such as aerospace, power generation and tooling.

ERAMET is also studying or developing major projects in new activities with high growth potential, such as mineral sands (titanium dioxide and zircon), niobium and rare earths, as well as in recycling.

The Group employs approximately 14,000 people in 20 countries. ERAMET is part of Euronext Paris

Compartment A.

CONTACT

Head of Financial Communications and Economic Studies

Philippe Joly

Tel: +33 (0)1 4538 4202

Investor Relations and Economic Analyst

David Fortin

Tel: +33 (0)1 4538 4286

For more information: www.eramet.com

APPENDIX

Turnover

Production and shipments

*     Ferronickel and matte

**   Finished products

The financial statements of the full year 2012 have been restated for the retrospective application of the revised IAS 19 standard.

The financial statements of the full year 2012 have been restated for the retrospective application of the revised IAS 19 standard.