Good morning, everyone, and thank you for attending OM Holdings' Webinar this morning. My name is Jenny from the IR Department of OM Holdings. Together with me is Rishi, and we will be hosting the webinar. OM Holdings is a manganese and silicon smelting company with vertical exposure in mining and trading, and has just released its Q1-2025 quarterly production and market update last Monday. I'm delighted to have OM Sarawak Managing Director Adrian Low with me today. He will run through the key points, followed by a Q&A session. If we are unable to answer your question, we'll attempt to address the query post-webinar. Without any further ado, I'm pleased to hand over to Adrian.
Thank you. Thanks, Jenny. And, you know, thanks to everyone for dialing in today. I think, you know, let's skip to the main slide. In the 1st quarter of 2025, you know, I'll sort of go over the production stats in a second, but just looking at the main achievements, OM Sarawak received the Merit Award at the 11th Premier Sarawak Environmental Award Ceremony. This is something that we're very proud of. I think we're very, very engaged locally in Sarawak on the ground in terms of what we're doing with the circular economy, as well as other measures to sort of reduce the waste that we're emitting and also the recycling efforts that are in place. OM Sarawak was also awarded the ISO certification for quality management, and so that's another achievement that we're very proud of.
More significantly, I think, in the 1st quarter of 2025, and this is something that, you know, I've spoken about at a couple of webinars and presentations, we finally sort of achieved and closed the exercise. I am referring, of course, to the refinancing exercise at both OM Singapore as well as OM Sarawak. We placed $168 million in syndicated debt facility, as well as just, you know, over $100 million, sorry, for working capital and bank guarantees. Now, I think, you know, it's very important to sort of bear in mind that prior to this refinancing, what we had in terms of the project finance structure was a structure that was initially meant to see us through the greenfield phase of the project.
Now, along the way, I think, from, you know, when we did that in 2011 and when production commenced in 2014, you know, several milestones and several sort of iterations of projects took a life of its own. You know, in 2016, 2017, we actually reinvested proceeds into converting a couple of furnaces to manganese alloys. More recently, we did another round of conversion. In 2023, we closed an exercise in which we acquired 25% shares of OM Sarawak from our joint venture partners. You know, I think the point I'm trying to make is, along the way, we have used the same vehicle for a purpose beyond that which it was originally envisioned for.
You know, in closing the refinancing exercise, I think, you know, the company and management is very pleased that, you know, we are able to sort of unlock value, both in terms of the cost of interest to the company, leaving more shareholders, as well as really finally achieving a sort of more balanced capital structure that will support our needs and as well as provide flexibility for our growth in the years to come. That has been concluded. In terms of the capital structure that we are aiming for, I think this is more or less close to the ideal. On the operation front, you know, I think for smelting, for ferro-silicon and manganese alloys, both, we are more or less on track. You will get the numbers in the chart in the bottom left corner.
That's more or less, you know, on track for the full-year guidance. And so, you know, for a smelting business, I think, given that all our sort of maintenance schedules, sort of power downtime, schedule downtime, that's all planned out way in advance. I think, you know, shareholders and analysts will note that there haven't been much surprises in the last two years or so. Okay. In terms of Bootu Creek operations, so, you know, I think we're very pleased to share that the UFP trials, the second trial, has achieved the grades and yield that we had budgeted for. So, you know, with that, I think we are just, you know, one step nearer to completion. And so, the third trial that is sort of underway as we speak is a full sort of commercial trial involving hydromining.
Once that is completed, I think, you know, we will be in place to deliver that project. Okay. That is all in terms of the quarterly updates. Now, can we move on to the market updates? Thank you. In terms of the ferro-silicon market, I think, you know, again, for a lot of shareholders, a lot of people that own the stock, you know, ferro-silicon prices and manganese alloy prices are not always the most transparent. Every quarter, I think we want to take the opportunity to answer questions as well as to shed some light as to what is happening, you know, in terms of global alloy prices and what the demand and supply levers look like. For ferro-silicon in the 1st quarter of 2025, not much has changed, really.
I would say that China obviously remains the marginal supplier to the market, and we still see downward pressure on prices, mainly due to lower demand, as well as competition from Russian products. What we are seeing is China importing material from Russia. I think if you look at the statistics, it's something like 10,000-20,000 tons per month. You know, with this sort of gradual downward pressure, I think we've seen ferro-silicon prices decrease down to $1,120 per ton to Asia. Given these pressures, I think, you know, and obviously as a company, we track very closely what the cost of production in China looks like, and we do this for major regions and major competitors. We do see significant cost pressures.
I think even with the raw material prices, like semicoke, coming down to an almost all-time bottom, we still see cost pressures for a lot of our close competitors. I think it's heartening to note that there have been entire plants that shut, as well as several furnaces shutting at major competitors. I think, on the sort of demand and supply front, we are at a point where supply has been gradually reducing month on month in order to create that deficit that will eventually take care of the overhang. In terms of overhang, I think we very often look at Russian inventory. I had just mentioned that China has been importing material from Russia, whether that's for domestic consumption or then later on resold. That's not something that's 100% transparent.
I think, you know, looking at the cost structure and also looking at the duration, you know, over which this has happened, that overhang must surely also be slowly chipping away now. With that, I think we'll move on to the manganese markets. For manganese markets, again, you know, there's always this tension and dynamic between the ore and the alloy. Obviously, as a smelting company with exposure to mining as well, we pay attention to both very, very closely. You know, on the ore front, I think we've seen ore prices normalize, you know, come down to sort of a near-term bottom several months ago. Since then, you know, it has rebounded. I think, you know, this quarter, manganese ore prices for the high grade closed at almost $5.
Historically, you know, I think we've always seen the ranges between $4-$6 for the benchmark high grade or what used to be called the 44% index. You know, I think what we're seeing is obviously, you know, an overshoot in the correction, you know, a couple of months ago. Off the back of that, silicon manganese has also seen an improvement from $885-$965 CIF Japan. I think in the background, you know, this is obviously kind of very linear. I think if you, you know, put all the prices on a scatter plot, you will see the sort of linear relationship.
Beyond that, I think, you know, what we're trying to understand, obviously, is also what is the net de-stocking effect that is happening behind the scenes that we don't necessarily, you know, we can't necessarily sort of shine a light on, both on the ore front as well as the alloy front. Now, on the ore front, it's relatively more transparent. You know, if you look at the shaded area in the background, and, you know, we've had this chart for a long time, but it's not always referred to. If you look at the shaded area in the background, that's ore inventory in Chinese ports. You will note that, you know, it's come down very, very sharply from its peak of just above 6 million tons. This is due to three things.
One, obviously, the supply of ore has reduced with South32's GEMCO mine being out of action for such a long time. Notwithstanding that, prices are not increasing because why? Second reason, demand has decreased, right? This is a global phenomenon. I mean, it's not just in China. I think around the world, you know, steel production has been very weak. This sort of balance between ore demand and ore supply is the reason why ore prices have been kept at around its, you know, sort of traditional bounds between $4-$6. The third reason is just the fact that the amount of financing out there, you know, dollar financing to hold this inventory in port has reduced, right? This is not as exciting a way for people to deploy capital as it was in the past, right?
I think overall, the size of the market has shrunk. You know, having said that, it's not had an impact on profitability. If you look at the spread between what the alloy prices look like, the blue line, and what ore prices look like, that spread has reestablished itself, right, after the sort of anomaly, after the blip in the middle of last year. I think, you know, that's what we mean by, you know, prices normalizing, alloy prices are in a place where healthy margins can be made with the sort of contemporaneous ore price. In saying that, you know, sort of going back to what I was saying a couple of minutes earlier, that's really what we've been trying to understand in terms of how much overhang is there in terms of manganese alloy inventory out there.
I think when you look at the net closures, net closures of manganese alloy smelting capacity over the last, you know, call it 12 to 18 months, you will note, and sorry, in saying this, also keeping in mind that, you know, there are a few major plants that will close in a couple of months' time. You know, I think we're seeing, again, not dissimilar to the ferro-silicon story, that smelters are shutting and supply is being reduced to the point at which it is just under demand and sort of creating that deficit to eat away at the overhang. You know, I think if you look in the region, both, you know, sort of East Asia and South Asia, we see, you know, supply reduction. You know, when we look in the West, we also see supply reduction.
In China as well, I think, you know, that's a bit more dynamic, but, you know, we see that playing out as well. This overall reduced utilization globally will add to price stability. I think that's why we see, you know, sort of manganese alloy as being a healthier market in 2025. Okay. With that, I will end the presentation. I understand, as usual, that a couple of questions, and so, I'd be happy to take them now.
Yes. Thank you, Adrian, for the presentation. We will now move on to the Q&A session. The first one relates to Chippy and its ore supply. If Chippy mine was to be sold or closed for some reason, how easy would it be for OMH to buy manganese ore from the market?
Okay. Yeah. I mean, that's a good question, right?
You could substitute Chippy with any other manganese mine. I think, you know, we're not wholly dependent on any single mine. Just as, you know, I think before GEMCO closed at, somewhere around this time last year, we were consuming at one point in time, you know, more than 50% of the ore was coming from Groote Eylandt . I'm very happy to report that nothing changed in terms of the cost structure of OM Sarawak. I think the same applies for Chippy. The only difference, obviously, is the grade of ore that Chippy supplies. Chippy supplies a semicarbonate ore, and that's produced by a few major producers in South Africa, notably South32, Assmang, and UMK. I think it's not difficult to source semicarbonate ore.
Obviously, at the most extreme, you know, what if the supply of semicarbonate ore disappeared completely? You know, you would just, you know, get the necessary chemistry you need to present to the furnace through a combination of items you could add, right? To substitute the calcium, you could add limestone. To get the right manganese-iron ratio, you simply have to tweak, you know, the sort of high-grade ore versus low-grade ore you're feeding the furnace. I think we're not concerned, you know, if any single supplier sort of were to close or disappear. I think in terms of the sort of non-Sarawak economics, with respect to what we're doing with, you know, distributing our share of the Chippy, obviously, that would then be impacted. That's, you know, sort of a relatively minor contribution, I think, in the scheme of things.
Great. Thanks, Adrian. Now, the second question is, has private bond of AUD 30.9 million been repaid? If not, will the new working capital facility be used to finalize this debt, or will the repayment be funded from cash flow?
Yeah. Okay. That's a good question. I mean, cash is fungible at the end of the day. Yes, I mean, the answer is yes. The entire refinancing exercise has been conducted with this in mind as well.
All right. Thanks, Adrian. The third question is, what kind of catalyst could help actually push ferro alloy prices to a much higher level? Is there any potential of this scenario happening anytime soon?
Y eah. I mean, sort of barring the fact that, you know, across the board, obviously, alloy prices recover when inventory runs out, right? That is, you know, an obvious truism.
I guess what the question is, is once we reach a state where, you know, this alloy overhang has once again been depleted, what sort of catalysts might we see with the current market environment, with the current market environment, that could make people realize that, you know, we've actually collectively run out of alloys? I think, you know, historically, this has happened in a few, you know, in sort of various forms, most notably in sort of during COVID, when we saw sort of power prices increase through multiple faults, and when, you know, China had like, you know, three days of coal inventory or something like that. You know, that was a catalyst. We've also seen this happen in terms of, you know, trade restrictions.
I think what could play out, you know, one scenario that could play out this year is given the tariffs that are sort of, you know, flying through the air, something could happen that would lead to a sort of massive shortage of alloys in a position, in a location where it's not the most convenient to sort of ship to. That could trigger, you know, that could be a catalyst for price recovery. I think in terms of Asia, obviously, one catalyst would be what, you know, what's going to happen in China, basically, in terms of, you know, the government's stance to steel production. Then, you know, that's always something that people watch. You know, it wouldn't really come as a surprise.
You know, I would point to, you know, factors like, you know, tariffs, the trade war, as well as issues that might revolve around production, such as the cost of power, availability of power, environmental regulations, and so on.
Great. Thanks, Adrian. Moving on to the next question relating to silicon metal. Given the current market, the silicon metal market does not seem to be such a good investment when considering the amount of silicon metal plant or currently produced. Would you be able to shed some light on that?
Yeah. The question is, was the silicon metal investment a mistake, right? Look, I think, so silicon metal as a product is listed as a critical mineral in Europe, in the U.S. The cost of production in these countries is very, very high, right?
I think much higher than, you know, even what our sort of trial production costs look like, just given sort of the power price spread. You know, and silicon metal is obviously the dominant application of silicon metal in the world is in the production of polysilicon. Polysilicon eventually ends up in solar panels. You know, I think it is a very critical resource. I think it is, you know, absolutely imperative that we have the option to produce it. You know, its time will come. The key thing, the key thing, I think, is that the timing was really bad, was really, really bad. I think, you know, when you look at where we are today, the U.S. has initiated a new round of antidumping investigation on silicon metal production around the world.
Ironically, you know, Malaysia has already been part of that investigation. So, you know, we in a sense sort of sheltered from that. You know, I think if you look at how potential tariffs and sort of the trade war is going to fracture the world's sort of demand centers for silicon metal, sort of fracture that from the supply sources, then I think we have bought ourselves the option to plug and play as and when, you know, the situation arises and as and when the market conditions are fulfilled. I think, you know, in saying that, perhaps, you know, I'd just like to share briefly on what's happened in the silicon metal markets, right? Because I think we're seeing prices below $1,500 now. You know, when we commenced production, prices were around $2,000 per ton.
When we initiated the project, I think prices were around $1,600, $1,700 per ton, right? These are all sort of major prices. You know, I think from the time we commenced the project till today, I think, you know, we have seen silicon metal production, monthly production in China double. You know, at its peak, it probably reached just above 500,000 tons a month, right? When you look at that output versus at its peak in China, the demand for silicon metal must have been at most 450,000 tons, you know? We are seeing just incremental addition of silicon metal into sort of the social inventory in China. This obviously has been exacerbated by two things. One, an excessive capacity building in China.
Very, very recently, in the last six months or so, massive reduction in the consumption of silicon metal in China. I think if you look at the Q1 stats, between 2024 and 2025, the consumption of silicon metal for polysilicon, and this is the dominant sort of application of silicon metal, that has halved in China. Will that remain at the level it is today? I don't think so. Will that go back to, you know, 500,000 tons per month? Probably not in the near term, right? If I'm being honest, if you look at the sort of pricing and demand supply of polysilicon that eventually ends up in solar, the world needs that, but it will not in the near term sort of immediately go back to 500,000 tons per month in terms of consumption.
I think those are the dynamics in play for silicon metal. I think, you know, as a company, just given our position, given our power costs, given our strengths, silicon metal is a useful product to have in our portfolio. Will we produce it in 2025? We may or may not, right? It really depends on what the market pricing looks like and, you know, how quickly we can sort of move things around. I think that that's, you know, sort of the full answer to that question.
Thanks, Adrian, for the comprehensive answer there. I think we have just one last question. Was there any impact to sales since the declaration of the reciprocal tariffs that was subsequently put on hold?
Yeah. I mean, okay. This is a good question to ask here because we get asked this a lot, right?
By analysts, by our shareholders, by our bankers. Manganese alloys are listed in Annex II of the reciprocal duties. Manganese alloys are exempt from the tariffs. Having said that, ferro-silicon is not. There is a sub-HS code of ferro-silicon that is in Annex II, but unfortunately, it does not apply to our product. You know, we do not know exactly why it was done this way. You know, keep in mind that ferro-silicon, there is an active antidumping investigation, you know, ADD-CBD investigation for ferro-silicon that is ongoing. It is about to close. I think a lot of the sort of near-final tariffs have been released. You know, we are obviously very pleased that we are fairly low sort of in the scheme of things, right? We are sort of between 5%-10% if you add the ADD and CBD components.
You know, having said that, if the reciprocal duties were to come into play, right, then what the analysis that we would have to do is add these things together and then look at how we stack up against other countries that are producing ferro-silicon. You know, Russia, obviously, although it is not a sort of not on the list of the reciprocal duties, it has, you know, a huge number on the ADD front. That puts them, you know, out of the picture. China is out of the picture. I think, you know, when you look at that list and you add these things together, the picture becomes a lot more nuanced. I think, you know, it wouldn't be unfair to say that this could be an opportunity for us distributing ferro-silicon in the US rather than really than a risk or a threat.
In terms of what's actually happened to sales and shipments, you know, I will say this. Nothing much has happened. You know, the investigation, the antidumping investigation has happened, you know, has been going on for, you know, over a year now. You know, everything that had to be done, you know, was already done last year. You know, we have, you know, covered all our obligations to our customers with whom we've signed contracts. In terms of the manganese front, because it's in Annex II, nothing really has changed in terms of how customers are drawing down and consuming the manganese alloys. I think the only thing it has done is create a lot of uncertainty for our customers, for steel makers in the U.S.
You know, to the extent that that might affect their own, you know, utilization rates, their consumption and, you know, what that might mean for business in 2026, you know, I think only time will tell. That is the full answer for the tariffs, you know. In short, not much has changed, you know, in the long term, you know, I think it really depends more on sort of the U.S. domestic situation.
Great. Thank you, Adrian. Now, that appears to cover the majority of the questions from our audience today. If you do have any further questions, please forward them to investor.relations@ommaterials.com. We will make a recording of this webinar available via OM Holdings' LinkedIn in the coming days. This concludes our webinar for today. Thank you, everyone, for attending, and thank you, Adrian, for the comprehensive update.
Thanks. Thanks, everyone, for dialing in.