Good morning, everyone, and welcome to Eramet's H1 2025 results. It is a great pleasure for me to be here, and once again, thank you for coming to me. Today, we'll start, as always, with talking about safety. As you know, I've joined Eramet just over two months ago, and since my arrival, I have been very positively impressed with the safety performance of the company. What we share with you there is a historical TRIFR since 2017. I just wanted to highlight this first half year result of 0.6, which continues to be very strong and well below the acceptable limit that we have set up in our CSR roadmap of 1.
We will continue to work on the safety side because not only is it our first and most important value, but also because we strongly believe that having safety working, we will, of course, have very efficient operations. To start our conversation today, I think I want to share with you that the performance for this half, for this first half, was not at all in line with our ambitions. Operating performance varied a lot across the portfolio. If you look at manganese ore, we are pretty much slightly below first half 2024, but we have seen improvements in Q2. I think you remember that in Q1 we had logistical challenges. During the first half, we have suffered this impact, but we see a very good trend during Q2, and we'll cover that in a minute.
Very good results from mineral sands, improved from the first half in 2024, and this is within the plan where we're now starting to enjoy better grades, very much in line with plan. At Centenario, we have met a number of very important milestones, understanding better and better our system, resolving a number of challenges that we had with certain pieces of equipment that, of course, you've been following since the last quarter. At Weda Bay, we have started operations in new and more distant sites, more remote sites, remote pits, and if you remember the restrictions that we had with operating licenses from late last year have impacted our operation for this first year, have impacted nickel grades, and as a consequence, also in costs with higher, longer hauling distances. We will talk more about that. We are still operating under a challenging environment.
We all know about the situation in the steel industry in China. Exchange rates have also played a role in our results. Going forward in June, we are confident that we will leverage from the Q2 trends that I just mentioned with you. I will also go through with you a very important piece that we started reviewing all our assets across the board, the performance review that we're doing so that we can build a plan to start working forward as during the second half. A little bit of detail on EBITDA. At just over €190 million, again, clearly not in line with our ambitions, but it's important to highlight that 60% of this variance is related to intrinsic performance and related to the variances that I shared with you on Weda Bay operation.
The remaining €37 million, the other 40%, are related to non-controllable items, mostly input costs and, as I mentioned, exchange rates. Moving to free cash flow and, of course, the consequence in net debt, we have reduced operating cash flows in the region of €25 million and continued, so the reduced cash flow, €25 million, added to the continued use of CapEx, as we see there, €215 million, have resulted, of course, in reduced free cash flows and impacting net debt. Net debt at the moment sits at €1.8 billion, and you see there the adjusted leverage as a consequence of that. Very quickly, just to talk a little bit about CapEx, €215 million of the €266 million there relates to the CapEx increase for the first half. Sharing with you a bit of Centenario, I briefly mentioned that we have been posting strong developments and improvements along the way.
We continue to learn more and more about the process. We have now established a very good understanding of the system. You remember it's technology that Eramet developed. We continue to progress. We are using the DLE technology at industrial scale in a new region like Argentina. We have, however, suffered some late commissioning. I think you remember from the last time we had results, the forced evaporator unit that impacted on our ability to bring up the ramp-up. The good news is that we have continued to see improved results as from June, and it is a journey. In my experience in ramp-ups, there is a lot of learning. We expect to continue in this journey for the end of this year. We expect to get more and more results, and towards mid-next year, we expect to reach design capacity.
Important to mention that these kinds of operations typically take time. I've been involved with many of these ramp-ups. If we deliver on what we're saying, and we believe we will, we will be very well placed looking at other operations of this same sort. Before handing over to Nicolas and going through the detail of financials and operations, I just wanted also to update you on our CSR roadmap. Again, as it was the case with safety, I was very positively impressed by the work that the Eramet team has been doing, resulting from the actual positive mining. We continue on the journey. I mentioned the strong results in safety as an important springboard, and we shared with you a few examples there. The Eramet Global Care, which is work around preventive health, the biodiversity education efforts as well, and the Women for Future that we launched in 2025.
I will now ask Nicolas to take over, talk with you about the detailed results financially and operationally, and then I'll come back and talk a little bit about what is it that we expect for the second half. Thank you.
Thank you, Paulo, and good morning, everyone. I will now go through the details of our financial performance in the first half, as well as the detailed operational performance corresponding to this. As Paulo mentioned in his introduction, the first half has been clearly challenging for different reasons. The first one being that we remain in a very challenging market environment. I will come back to that, as well as diverse performance in terms of operations. It was leading to a sharp decrease of our adjusted EBITDA, excluding SLN, leading to a €191 million performance altogether, which is clearly a sharp decrease versus last year. Also, accordingly, a negative net income group share and excluding SLN for minus €101 million.
One thing I would like to remind is, as you know, our performance, our seasonality is very much towards H2, meaning that usually we have a much stronger performance in H2 in terms of operations, especially in Gabon, as well as in Asia and also in New Caledonia, due to the rainy season in most of these regions in H1. That's something to keep in mind when you look at the absolute value in H1. The second thing to highlight here is linked to the significant increase of debt we have had last year, linked to the strategic move we had acquiring the full ownership again of our asset in Argentina of Centenario. We have also linked to the cash consumption that Paulo was mentioning in his introduction, now a leverage which is reaching 2.7 x the adjusted EBITDA, which is clearly an increase.
This is also the reason why we have launched this asset review, which has been described by Paulo, and we'll come back to that later on. Last thing to be highlighted, we are still within our covenant in terms of gearing. Here it's the covenant we have with our main banks, and it is at 94%. This is indeed significantly increasing in H1, linked one to the increase of debt, as just mentioned. The other thing to be also highlighted, FX has actually impacted two things. It has impacted our financial performance of the year, and I will describe it a bit more. At this stage, not so much, but it's something which is expected to increase in H2.
What has been the main impact in H1 is actually the impact on our equity, because some of our assets are denominated in dollars, and given the sharp decline of the dollar we have seen in the first half, it has led to a significant decrease of our equity. That's one of the drivers also of this increase of gearing covenant. Moving now to the details of our adjusted EBITDA. This is the usual variance analysis between H1 2024 and H1 2025. As already said, clearly the main driver, and that's something we deeply acknowledge, is the intrinsic performance that we control. To a certain extent, why do I say that it's something we control to a certain extent? It's because out of that, we have clearly a sharp impact, a strong impact coming from the reduction of grade, which is natural out of the deposit in Weda Bay.
Weda Bay, as already Paulo was mentioning, represents a significant portion of this negative intrinsic performance. As you can see here, it's minus 83 out of 117. It means that it's two-thirds of the overall negative intrinsic performance. It doesn't mean that we didn't have other issues, and I will come back to that. The good thing is on these issues, we have made really good progress and strong resolution in Q2, which should give positive effects in the second half. That's something also important I would like to convey today. When I said that the overall market environment is not helping, here, of course, the impact, if we look back H1 to H1, is not that strong. It's minus €37 million.
We can say that it's not the main impact by definition, but we need to keep in mind that we have had very strong negative impacts already in 2023, continued in 2024. We are having a low starting point and still seeing a negative evolution of these external factors is clearly a concern. That's also leading to the overall absolute value of adjusted EBITDA we have seen in the first half. One last comment I would like to make here is I said that the FX impact has not been that significant in H1. This is here, as you can see, just minus €11 million out of the minus €26 million you see on the right-hand side. The reason why it is limited is because let's keep in mind Q1 was actually seeing a pretty strong FX rate. It was in the range of 1.02 to 1.04.
It has started to decline significantly for the dollar in April after the announcement of Liberation Day. That was leading to this negative evolution through the first half and overall a slight negative effect. I'm just mentioning this because we can expect, unfortunately, a sharper impact in H2. I will just come back quickly to that. This is detailing our overall evolution of the net income. One thing I would like to precise here is that it's actually putting or evidencing what is the overall impact of Weda Bay. This is the line in the middle. Clearly, the negative variance in terms of EBITDA falls into this line of sharing income from associated companies. This is reduced by €62 million overall. This is one of the main reasons why we have seen a negative evolution of our performance of our net income in H1 2025 versus H1 of last year.
As already mentioned by Paulo in his introduction, we have still invested, but we have really ensured that we control significantly our investments in this challenging environment. We will see later on that we keep our commitments in terms of guidance for the full year. In the first half, what have we done in terms of investments? We have kept low, very low, the sustaining CapEx. That's something we focus on a permanent basis to ensure that we just spend the strict minimum to ensure the adequate continuity of our operations. On top of that, we have kept investing into a few items to sustain the growth we have generated in the past. As we have said a few times in our previous presentations, we kept investing on the logistics for the manganese ore business. It's on both sides. Here, the €27 million mentioned manganese ore.
This is actually primarily the rolling stock, which is owned by our subsidiary Comilog, as well as the necessary investments to upgrade the loading capacity at the port. That's something important because that's also something which will enable us to strengthen our operation at the port, which has been one of the issues we faced in the first half. The second portion is also the continuous program of renovation for the Transgabonais in Gabon, which amounted to €30 million. That's something which started more than five years ago. That's something, as we have mentioned already a few times, which is expected to continue for the next three to four years. Last, also, is at least in this box two, we have spent money for our business in Senegal of mineral sands to further the bottleneck, our plant, which is extracting the sand.
That's the dredge to make sure that we can get a higher capacity of extraction going forward. The last piece here I would like to highlight is, as said already, we have now fully finalized our CapEx for the first plant of lithium in Argentina in our deposit of Centenario. This is a portion of spent which we announced should be done in H1 and with a term until to €64 million. With all of that, as already said, clearly with this disappointing adjusted EBITDA performance, as well as with this CapEx program that we have continued to support our future activities, our free cash flow has been negative for minus €266 million, leading to an increase of our debt to €1.8 billion. I also want to always be clear on that one. Why do we mention €1.8 billion?
It was the same situation at the end of June as the one we had at the end of last year, with financing going to SLN, financed fully once again by the French state, which came at the end of the semester to finance the future needs of SLN for the second half. This is a €90 million you can see on the right-hand side. This means that from a pure accounting standpoint, we have a net debt of €1.7 billion. For the same reasons as the P&L adjusted EBITDA net income performance, given the specific status and the specific nature of SLN right now, we are reporting all our numbers for the better understanding of our investors without the SLN impacts, negative in the P&L or positive, as you can see here with the cash which was available.
Altogether, with this clear tension and pressure we have on our balance sheet, we have to continue to ensure that we proactively manage our balance sheet. We have done that in the last couple of years. Maybe no need to remind, but I will still do it, that we have issued two bonds in the last two years, one in May 2023, one in May 2024, and on that one, actually, what we have done in May of this year, we love the month of May to make bond issues. We have issued a tap of €100 million on this last bond of 2024, which increased it to €600 million altogether. Just for the sake of clarity, this new bond issue or this tap of €100 million was leading to an effective new money of €75 million after the necessary reimbursement of our term loan.
That's something we did already in the past for the previous bonds. We have to ensure a reimbursement of 25% of the raised value. That's what we have done, also to ensure that we stay, despite this increasing level of debt, with a strong level of financial liquidity. Of course, it decreases linked to this free cash flow evolution, and it has decreased significantly at the end of last year with the buy of the purchase of the shares of Tsingshan within Eramine, within Centenario in Argentina. Despite that, we are still having €1.7 billion of liquidity at the end of June. Let's now move to the operating performance for the half year. As I've already said, the macroeconomic environment remains very challenging, with a lot of uncertainties all over the place. I won't come back in the details for the reasons why.
You know them by heart, and it's not the purpose. This is, unfortunately, the way it's weighing on our markets. As said, the evolution year-over-year is not so dramatic, but unfortunately, it's starting with a low point. I will start quickly with manganese. As you can see, it has decreased year-over-year by 4%. The point being that we have seen a pretty good Q1 with an increase progressively, the price reaching again a mark above $5 per DMTU at the beginning of Q2. It has again started to reduce for the rest of the second quarter. Why? Because of a couple of things. The first one is the Chinese steel market remains pretty depressed. There could be some positive evolution we have seen in the last few weeks with some announcement out of the Chinese government. This being said, it remains pretty challenging.
Second, we have seen still a pretty strong supply out of South Africa for the manganese ore business, especially in Q2, which was leading to this decrease of price. The trend has continued because of the third driver, which is GEMCO, our competitor in Australia, which came back as it was expected in operations at the end of May. We should be again full speed in Q3. Currently, the price is the index is around $4.2 per DMTU. We would expect this to remain in the same region going forward, if not slightly lower. All will depend how potentially the Chinese steel market will evolve going forward. Nickel also has been pretty depressed in terms of prices.
One thing to highlight, though, is given the constraint of permitting in Indonesia, leading to again the need to supply, for example, ore out of the Philippines, it was leading to significant premiums in the first half. These premiums have been now reaching a mark above $25 per ton. Just for the sake of explanation and clarity, this means that the premium today of this ore is close to the floor value, which is defined by this governmental formula. That's just to highlight how sharp is indeed the premium, and it highlights also the need overall of the Indonesian market and the Indonesian ferronickel NPI producers, as well as nickel class one producers, to get additional possibilities of supplied ore out of the country. We'll come back to that because this explains why we have obtained this additional permit, which is currently focusing on limonite.
Nothing really I would like to focus on the mineral sands other than to say that it's followed the evolution we have seen for the other businesses with a continued decline in the cost of H1. We don't expect anything really better for the second half. The last piece, lithium, has clearly seen again a strong reduction. I think it's important to highlight, we don't see that in the screen because it's stopping on H1. The beginning of H2 has shown a pretty strong rebound because there has been some stoppage of production out of China for the lepidolite production, which explains why now this surplus of supply, which has been the case for the last few periods, is, I would say, progressively decreasing. We could see this positive trend in the last few weeks continuing for the rest of H2. More to come. No certainty at this stage.
It remains a pretty young market, but at least we have seen some positive news out of there. Let's move now to our operating performance in H1. As Paulo was saying at the beginning, it is far to be at the level of our ambitions. We need to face it. I will come back operation by operation about the drivers. The key message I would like to share here is that the evolution we have seen has been positive in Q2. This is something important to highlight because, yes, H1 has been a challenging period for the group. The trend is positive, and we are building on this positive trend to make sure that we'll deliver a stronger H2. If I move now to manganese, I've already explained the situation of the market, so I won't spend too much time on this one.
Just mentioning that, as said, today's index is at 4.2, and we don't expect it to move quickly further up, as I said before. That's why the H1 mark, which is on average 4.64, is clearly something we don't expect to continue altogether for H2. We expect an H2 which should be lower, even if when we look at the consensus of the analysts, we could say that it will continue, but we don't think it will be the case given the market dynamic I described before. With GEMCO coming back, it should normalize clearly the market. The reason we say that the $4 or $4.2 mark is usually what we see as the inflection point is still linked to this cash cost curve, which shows that the third and fourth quartile producers are more in the range of $4.5 and above.
That is why when we reach the kind of price we have seen in the last few weeks, it's usually the time the price rebounds because we see these producers stopping their production. The big difference we likely see this year is this rebound will take more time given the fact that GEMCO is coming back. That is why we don't anticipate this rebound to be as quickly. That is something which we could actually expect maybe to take place later on in the year or at the latest at the beginning of next year. If I move to financial, sorry, to the overall production and transportation performance, production has been strong. It's been in line with what we have been able to deliver in H1 of last year, which was already a strong half year. This is a sustainable, strong performance, and nothing more to say.
It's a positive area. Transportation has been more challenging because it has been constrained at the beginning of the year, especially in, it's been almost the case for the entire Q1, not directly actually for the transportation reasons, but because there was a bottleneck at the port. That is why I mentioned earlier it was important to make sure that we further invest there. We have had continuous issues through the first quarter, which have been progressively solved in the second quarter. That is why overall the performance has been slightly negative. Minus 5% is not a small number, but at the end of Q1, it was closer to 12% - 13%. It means that Q2 was actually more or less in line with the performance we delivered in Q2 of last year. This is giving some optimism.
Just due to the fact that we have had this negative performance, I'm sorry, in Q1, we have had to consider to revise our guidance for the full year because we are missing the volumes we didn't deliver in the first quarter. Just to provide also some positive evolution, June, we transported 600,000 tons. The trend of July is very similar to that. This means that 600,000 tons, it's a pace to be with around 3.6 million tons in the second half. This is something we have already delivered in the past, and we are confident to deliver, especially again keeping in mind that H2 is usually more supportive in terms of weather conditions. That's why we are really confident to achieve this number. Just another thing I would like to highlight here is concerning the cash cost.
Cash cost has been impacted by the volumes, so what I explained coming from Q1. The fixed cost portion is actually primarily coming from the necessary maintenance costs we have had to face at the port. That's something we had to do to solve also our issues. This is leading to this negative effect, again, to make sure that we'll be able to deliver a stronger performance in the second half. Manganese alloys, I will say overall pretty stable production. One thing I would like to highlight is the sales, as you can see, have been more down. It's not because of our operational performance. It's primarily because of the market situation. This is also to explain why we have a pretty balanced or, I would say, average production performance. We have had in some areas to adjust the load to the market conditions.
Currently, we put that as volumes under our own intrinsic performance. To be totally transparent, it's something we are not really controlling because that's really linked to the overall market conditions. In terms of price, as you can see, it's been a pretty strong evolution in the first half with big ups in the first quarter and then reducing again or big ups. It was for the manganese ore price, as I explained before, but it's been slightly up for the manganese alloys prices. The fact that the manganese ore price reduced was linked also to a further reduction of manganese alloys prices in the second quarter. In terms of financial performance for the manganese business, EBITDA was impacted by these lower sales out of manganese ore. This is one of the drivers.
The other driver, as you can see, is primarily coming from manganese alloys because out of the €28 million EBITDA reduction, €17 million is coming from manganese alloys. The main reason, I would say the single reason, is because with the price of ore, which was higher in Q1 due to the lag between the time we purchased and the time it is consumed. Coming from the higher price of the second half of last year, and at the same time, manganese alloys price, which were more or less flat, this is leading to this much lower financial performance. Some good news, though, in terms of free cash flow, because despite this reduction of EBITDA, the free cash flow generation out of the manganese business was much stronger, especially because we have had a much lower working capital.
Let's be honest, it's also because of pricing, because the pricing at the end of the first half of last year was high, leading to a higher receivable amount. It has reduced afterwards, so that's why we were cashing in in H2 this higher price last year. It's not the case this year, but overall, it's also a reflection of the strong working capital management we continue to manage. Moving now to nickel, same, I explained earlier the dynamic on the market, so I won't come back to that. I just want to explain the increase in the guidance, which is good news, and that's something which is important to highlight. Thanks to or due to this constrained situation I described before for Indonesia, the situation was that overall our customers in the industrial park were not able to get all the volumes they needed to produce.
Clearly, it was highly problematic, especially for the HPAL producer. You have in mind that an HPAL plant is costing several billions of dollars. Being in the situation to invest so much money and not being able to actually get supplied with the necessary ore was a significant issue to our customers. They have helped us to lobby with the Indonesian government, and it led to this additional production and selling license we got actually on Tuesday for 10 million tons. At this stage, as it is already end of July, so just five months are remaining, we want to be cautious in the new guidance we provide. We have increased it in a range between 7 and 10 million tons altogether.
This being said, of course, we are very confident that we will be able to be very close, if not exactly at the top of the range. That's the good piece of news. It will help, of course, to get a stronger financial performance than the one we had at the beginning of the year. I won't come back to the details. It has already been said. Due to this natural evolution of the deposits, the fact that we had to hold at a much further distance, as well as increasing the strip ratios, it was leading to this negative productivity and negative evolution of the grade overall. This led to this negative adjusted EBITDA performance, unfortunately, also in a constrained permitting or licensing context. The free cash flow, though, was positive, and this is good.
The reason is because we were able to also manage the working capital pretty well, and it was leading to this positive evolution overall. Just quickly, I won't spend too much time on that. We have had a strong performance. We were able to obtain this 10 million tons additional license because overall, when I say that our customers struggle to get the supply of the ore, overall, that's something we have said already in the past. With these permits, the permits we had before, it was just 40% of the need of the industrial park, which is at the bottom of the mine. With this additional permit of 10 million tons, it remains just 50%. It means that there is still space to get additional permitting for the coming years, and that's something we'll continue to pursue because the situation is stabilizing for the nickel class one for limonite.
With one precision, there will be a second plant which will start the production at the end of H2 in the industrial park of Weda Bay. There will be an additional need of limonite. On top of that, clearly for the saprolite side for the nickel class two, the situation remains challenging, and that's why we will keep pushing and we'll keep making sure with our partner that we can get additional licensing going forward. I will move quickly to mineral sands, even if I would love to spend a bit more time. Why? Because it's really a strong performance and it's something to be highlighted. As you can see, in terms of overall production, it was up by 20% year-over-year. It's really a significant improvement.
It's leading to an estimate that we'll be able to, for the first time in the history of this asset, to achieve more than 900,000 tons of production of HMC production in 2025. It was already a solid performance last year. It's expected to be an even stronger performance this year. It's really to be highlighted. Again, a very strong performance in this area. It's also enabling to have a solid financial performance in terms of EBITDA primarily, despite the decline of prices, as I said before. It was thanks to this strong operational performance I've just described. Why is it negative in terms of free cash flow? Because we are invested to further the bottleneck of our production plant over there, which means that we have spent higher CapEx, and this explains why we have this negative free cash flow.
The key is to deliver even stronger performance going forward. I will end with our lithium activity. If you remember our previous presentations, usually I didn't present lithium. Why? Because lithium was not yet on production. Now it is an operational activity, and that's the big change. I will start very quickly mentioning the market. I explained that we have seen a shift, a pretty positive shift recently. We need to keep in mind, even if it has been a depressed environment in the first half, that it remains a very strongly growing market. It's been the case for the last couple of years. As you can see, a CAGR of plus 20%, 23%, sorry, and it's expected to be continuing in the coming years, thanks to the continued growth of electric vehicles, as well as the electricity storage, which is a new output for this market.
This is leading to overall a strong outlook. It's been clearly offset by the also strong increase of supply in the past few years. This being said, we have seen recently some of the supply for the high-cost producers, which have stopped in the last few weeks. This also should provide us confidence about the ability for this market to go at higher prices again in a reasonably near future. Last, just to highlight what we have done in the last periods, you know about regaining the full ownership of the asset in October 2024. We have said that we have started the production December 2024. We have had this issue with the forced evaporation unit, commissioning it, issues with the supplier, which, that's the good news, are solved now. That will help us to continue adequately our ramp-up.
The good news is we have demonstrated that our DLE process is working, and that's the most important news. Now we have everything, all the ducks in a row, to be able to continue our ramp-up and to get the maximum benefit and to unlock all the value of this outstanding asset. That's, in a nutshell, what I wanted to mention for lithium. I'm done with all this financial and operational piece, and I will end it over again to Paulo for the conclusion and strategy outlook. Thank you very much, Nicolas. Before we go to the conclusions, I just wanted to share with you our thinking around the operational review that we're carrying out. I mentioned this in the beginning of our conversation, and Nicolas also referred to it. I think in terms of context, we all know that we hold tier one assets.
These assets are long life, high grade. We also shared with you that the performance that we've been talking today is not at all in line with our ambition and/or with what we can deliver. We also shared with you that in Q2, we have started seeing very good performance in terms of building up from Q2. With that in mind, we launched a performance review, which is a door-to-door review of all our assets. This is something that I have done a few times in my previous lives with very good results. The objective is really to be able to assess all our assets under the same basis, to set a very solid baseline, and from the baseline, define what is it that we need to do to reach the full potential of these assets.
Of course, put together a very detailed plan, very structured plan, which obviously we want to share with you in due course, so that we can start delivery on the journey of delivering the full potential for these assets. There is more to come. Towards Q4, we will be able to start sharing with you our views, our conclusions, and also what is it that we expect to do, as I said, to reach the full potential of our assets. To conclude, and then we will be very happy to take questions from you, we do expect a downward trend for the rest of the year. Again, we all know that there's not too much to be said there. We will continue to see a macroeconomic environment that is challenging, tariffs, demand in China, as we talked about, FX.
We share with you our views for the full year when it comes to prices for manganese ore, nickel at the LME, as well as lithium prices. This is our view, and most of them are downward trends from 2024. We do expect nickel ore prices to be stable in Indonesia, but pretty much all our sectors, remaining sectors, will be under pressure for the remaining of the year. We talked briefly about guidances, and I just wanted to share a little bit with you on that. We talked about the uncertainty of the scenario that we see for the rest of the year. We also have shared with you the first half performance, although we do expect to pick up from the good performance in Q2. We have changed our production guidance in lithium, and then we'll go to that in a minute.
We have pretty much kept the same slight decrease in manganese ore, and we have upgraded our guidances for nickel based on the fact that we have obtained the additional license. At manganese, we are projecting the new guidances between 6.5 and 7 million tons, as I said, a very slight decrease. For nickel, we are incorporating the ability to mine with the additional license that was acquired literally a couple of days ago. In lithium, taking into account what we shared with you, the challenges that we have with commissioning of that piece of equipment, the forced evaporator, we have revised downwards our guidance between 4,000 and 7,000 tons for the year.
Important to mention that these numbers by December, we will be between anything 80% and 95% of capacity, which in my experience and by any terms, it is a very good performance when it comes to ramp-up, keeping in mind that first lithium came out in January. It is not uncommon to see ramp-ups of operations of this nature way beyond 18 months. We're confident with the work that we're putting together with this range between 4,000 and 7,000, but more importantly, this range will give us confidence towards the end of the year between anything between 80%, 85% - 95% capacity. For CapEx, the indication is between €400 million and €450 million, of which between €150 million and €200 million is sustaining CapEx and the remaining being growth CapEx. As a final piece, final word from my side, I mentioned that we have been experiencing good performance in Q2.
We want to leverage from that and continue with the momentum. I am more than convinced about the quality of the assets, the quality of our people, the focus on safety. The foundations are there. The focus, needless to say, will be on operating efficiency and, of course, on making sure that we deliver the ramp-up at Centenario safely and responsibly. We want to sustain, maintain the progress that we have been getting during Q2 when it comes to logistics for manganese. You saw that the guidance is not very different to what we had previously indicated. We want to be able to leverage the additional tons that we will be able to access after the acquisition, the fact that we were granted the additional license in Weda Bay. As I mentioned just now, ramping up Centenario will be a very, very important area for us. We are taking action.
I shared with you the high-level plans for the Eramet performance review that we rolled out literally a month ago. Again, a comprehensive, very detailed analysis for each of our assets. I very much look forward to be able to share with you the results and the plans that we have forward next time we speak. I'll pause now. As I said, very happy to take questions that you may have.
Okay, we will start first with the questions of the events known. Please, if you could raise your hand and bring his law. Is there any question in the room? Otherwise, okay. Jean-Luc.
Jean-Luc Romain at CIC Market Solutions. Coverage of Eramet. The ore, it was 2%, now it's 1.6%, if I understand correctly. Is there a possibility that it improves over time, or is it something that we should base our long-term forecast on?
Thank you for your question. I think it's important to note that by definition, usually a deposit by nature, and I will say the case also for the kind of deposit we have in Weda Bay in Indonesia, should show a decline over time. What I explained is there was an aggravating factor in H1, which was the delay in the permitting, not only the production and selling one as well, but also the one for forestry permits, which was actually impacting our ability to produce in the expected, sometimes in the expected areas. Now it is solved, but it was an aggravating factor. You may have seen that indeed the grade was declining between H1 of last year to H1 of this year by more or less 40 basis points from 2% to 1.6%. I will say the natural decline, and that's really something we anticipated.
It was in line with our mining plan, is 75% of it, 25% of it will be linked to this one-off situation. This is to say that we can expect a slight increase in H2, but not more than the 20% - 25% I just explained. If I may, very important to mention that there are no structural changes. This is a long life, high grade deposit. The nickel is there. As we said, it has been the ability to reach certain fronts that have built up. As Nicolas said, the grades are expected to, I mean, the nickel is there.
Thank you.
Hi, I'm Auguste Doris, Kepler Cheuvreux. I have a question on the audit of the assets. What is the end target? What is the goal? Is it to reduce the cash cost, to increase the production, or just to review and see what is going on?
Thank you. You mean in general?
Yeah.
Thank you for that. The exercise looks at many different fronts. It does look at ore board capability. It does look at the ability to improve costs, pick up possible gaps in terms of the production system. We're going to look at everything. There are some deposits that will provide more opportunity when it comes to costs. There are deposits that, by definition, will provide more ability to unlock volumes. The important thing is that it is a systematic approach to look at all dimensions. Again, depending on the profile of the asset, how much it is, how much the maturity of the asset, as well as the ability that the team has been doing to manage the asset. We'll be looking at everything. At the end, the end result is the focus is going to be around delivering value safely and responsibly.
We work backwards on whatever is appropriate for that specific asset.
We can't hear you very well. Can we switch the mic, please? It doesn't seem to work.
All right.
That's the backup.
All right.
[Foreign language]. François Labarthe for Attijariwafa Bank . I have a question on Comilog in Gabon, and I would like to understand the impact of the decision of the Gabonese government to ban the export of crude manganese by 2029. What would be the impact for Eramet? Thank you.
Thank you, François. As you mentioned, more or less two months ago, there was this communication by the government with the intentions to do precisely that. The period that was mentioned was three years. Since then, we continued to work very closely with the government to understand what are the means that we have to do to bring the ability to transform material. At the moment, you may know, we already transform manganese ore in the region of 1.3 million tons. There is activity already. The story here is that we continue to engage. We want to work in a spirit of co-creation with the government. In terms of impact, right now, it's a process of understanding from now until the next three years, what is it that will be the solutions that can be available for us.
[Foreign language].
[Foreign language].
[Foreign language].
Hello. Thank you. Orlando Varela from BBVA. What are the strategies you are implementing to contain inflation in a country like Argentina? What are the strategies also that you are doing to contain the FX risk in the country? Thank you.
Thank you. Thank you for your question. I'll address your question on costs, which is somewhat related to the other question on the asset review. Nicolas will address the FX point. As you know, we are ramping up Centenario. Right now, the focus is really to understand the processing, the working, the production system. Not to say that we're not looking at costs. This is the time that we collect information so that we actually can build our database. Alongside with the review that we're doing, we're going to make sure that we control our inputs in terms of the ones that we can control and the ones that we can't. We'll continue to manage. Our team is local. We have a team that is pretty much local. I myself have a lot of experience in inflationary environments. It's going to be business as usual, right?
If you ask me if it's more difficult or easier, of course, we wouldn't like to have inflation. It is something that we are well prepared to deal with. Again, excuse me, taking the advantage of the moment where we're building a very strong database and going through the asset review. On the FX question, clearly, we have seen a huge devaluation of the peso in the last years. You may have in mind that we had negotiated or we have participated through the negotiation of this decree, which enables us to keep outside of Argentina a big portion of the cash which will be generated by the asset, especially in the first years. As of today, I will say, as we are still in the ramp-up period, we are not yet at the position in the situation, in any case, to generate cash. It will come.
It should come starting in 2026. That's where the decree will apply. Of course, after that, we'll make sure that once the effect of the decree will progressively reduce, we'll handle adequately the risk of devaluation.
Yes, we have some questions from the webcast. First, three sets of questions from BofA. I will ask them separately. On Weda Bay, you already answered to the grade decline, but what could we think about Weda Bay contribution in H2?
The Weda Bay contribution in H2 will definitely be upgraded with the additional permits we obtained this week, two days ago. You may have in mind that the margin we get on the limonite, so for the HPAL production, is not as high as the one we get for the saprolite for the nickel class two, because on average, the grade is much lower. This being said, the good thing is, as the production is coming more or less with the production of saprolite, that's something for which there is already a portion available in inventory. The effect on cash will be pretty significant. In a nutshell, the contribution in terms of EBITDA won't be that significant, but the contribution in cash will be significant, and it will be higher in H2 than in H1 by definition.
Regarding lithium, you mentioned the ramp-up challenges. Previously, you were targeting to be at nameplate capacity by year end. When is that target now?
When it comes to the ramp-up plan, I shared that it is not uncommon to see operations like this ramp up in anything between 18 up to 26, 30, 18, 24, 36 months. I mentioned that the range that we're putting forward between 4,000 and 7,000 tons will get us by December in the region of 85% to 95% capacity. It is fair to expect that before mid-end or around the end of the first half of next year, i.e. 18 months, which is the typical period that you would expect operations like this to ramp up, we will be at design capacity.
Finally, regarding your financial structure, how are you thinking about deliveraging? What are CapEx plans for 2026? How will capital be prioritized given the level of gearing? Is there room to optimize the portfolio?
It's quite a lot of questions in one, but I will try to go through it in the order. Starting with the CapEx plan for 2026, we have not yet defined it. We will work on that in the coming weeks. This being said, we have demonstrated in the last couple of years that we are very stringent in the way we manage our sustaining CapEx and will continue to do so. Of course, especially given the current financial leverage we have reached and making sure that we continue to invest where it is necessary. There won't be any restriction concerning the necessary CapEx for safety, for environment. We also need to make sure that we keep the adequate level of maintenance for the overall assets. Clearly, we'll be very stringent and selective in our capital plan.
You should not expect to see any increase in the area of sustaining CapEx versus what we have done in the last couple of years because we have already done this kind of strong control. If I move to a more gross CapEx, which is also part of the question, clearly, with the leverage we have achieved, and if we think about what has been the main gross CapEx in the last few years, which is Centenario, our priority, and it has been said already, our priority is to finalize a ramp-up to be at nameplate capacity. At the same time, we are reviewing the options, so what is the best setup and the best timeline to launch a development phase. We do believe about the outstanding quality of this deposit, and there is a much higher potential than the first phase we have developed.
This being said, all the factors drive to the fact that we need to take the adequate time to think about this development phase. One, linked to the ramp-up of the first phase. Second, linked to our financial situation. That's what we are currently doing to ensure that we review all the options related to that. When we talk about the review of the assets, potential portfolio decisions, maybe you want to take that one?
Yeah, thanks. When it comes to portfolio, I want to share with you that we all know that over the last few years, very, very good work has been done to refocus the portfolio, resulting in what we have today: assets that are long life, high grade, and scalable, all of them, no exception. When it comes to divestment or growth in terms of picking up from what Nicolas said, we will make sure that we are very, very cautious and very precise on how we do things. The asset review will help us doing that. We will only take into consideration changes in the portfolio when it makes sense. That's our job. Any mining company who has strong assets as we do is going to do the same. Scalable, long life, high grade deposits that we'll continue to manage to optimize value generation.
We have two questions from Benoît de Broissia. To follow up on assets, do you consider deferring the Centenario first to investment?
I think I was alluding to this question in my previous answer. It's not a question about delay. It's about making sure we do it at the right time. Currently, the priority is ramp-up. We have already said in previous publications that in any case, we are taking the time to review the options. That midpoint 2026 will be the earliest timing on which we will consider this, and it remains the case for the reasons I described before. Could it be taking a few months more? That's always a possibility. As said, we want to make sure we manage the priorities in the right order.
Do you expect free cash flow to be positive in H2, considering the usual positive seasonality and higher permits at Weda Bay?
That's always a tricky question because it will depend, of course, on a lot of different factors. Unfortunately, I was giving one which should be taken into account, which is the evolution of the FX rate. I will say that if you would remove this, and I know it will be an unfortunate choice of word, but the trump card of the FX rate, I will say the answer could be yes, but something impossible to ensure at this stage.
Coming back to Centenario in H2, do you expect to reach EBITDA break-even?
I will give the same kind of in-the-middle answer. The answer could be yes, depending on the selling price and the FX rate. Especially on the selling price, there is some sign of positive evolution. I didn't mention it in the presentation, but the selling price was reaching below $8,000. At this level of price, I will say it's unlikely. If it is increasing, as it's been the case for the last few weeks, we could consider something close to break-even, indeed, in H2.
We have two last questions from Maxime Kogge. What are your expectations regarding the ongoing safeguard investigation on manganese alloys? Could it be enforced before the end of the year? What would be the impact for Eramet? The second question is, do you think that Eramet needs to maintain such a large number of activities given its relatively small market size?
For the safeguard measure, it's really a complicated question because as of today, it's been moving in a lot of different directions in the last months. We are not sure about what is the overall intent of the different countries of the EU. There is some indication that it could indeed, on one side, protect us, and on the other side, not so much, depending on the scope, which will be decided for these measures, and also the geographical scope. I will be very clear. The EU is either applying a restrictive definition of to which countries it applies, meaning the pure countries belonging to the EU, or it's taking a more extensive approach, meaning that it will include, for example, countries as it has been the case for several situations, like Norway. It's an important precision because Norway is where we also operate our manganese alloys business.
Depending on what will be the outcome on that one, it could be either slightly positive or, unfortunately, significantly negative. It's too early to say, but that's currently the situation on this topic. We follow that very closely. As I started to say in my answer, there has been pretty changing and evolving stances on this question. That's something we'll need to come back to when we get more clear and final information.
Thank you, Nicolas. I'll take the second question. The way I believe it's the way to tackle it is linking to the conversation we had on the portfolio. We mentioned already that the first step, and I strongly believe it's the way to go, is to carry out an asset review where we're going to understand in very detail where we are. If there is room to simplify, if there's room to optimize, of course, we'll take that into account. I go back to my point around the quality of our assets and our ability to manage them. This is going to be the guiding line where we'll continue to make sure that we manage our assets to the best potential. If there's opportunity to simplify, obviously, we'll look at it.
We have no more questions from the webcast. Thank you very much.
Thank you very much, everyone.