Good morning, everyone, and thank you for joining us. Welcome to The Elmet Group Company's business update call. Joining us for today's presentation are the company's Chairman and CEO, Peter Anania, Executive Vice President, Scott Knoll, and Chief Financial Officer, Mike Lee. At this time, all participants are in a listen-only mode. Following management's remarks, we will open the call for questions from the company's publishing research analysts. Please note that this call will be recorded and made available for replay via a link available in the investor relations section of the company's website at investors.theelmetgroup.com. Before we begin, I also would like to remind listeners that today's remarks may include statements that are not historical facts and are considered to be forward-looking statements within the meaning of the U.S. securities laws, including the Private Securities Litigation Reform Act of 1995.
These forward-looking statements include, but are not limited to, performance, including our long-term financial targets for gross margin, expected run rate revenue, run rate gross margin, and other metrics. These statements are based on the company's current expectations, estimates, forecasts, and projections about our assumptions, about our business and the industry in which we operate, as well as the management's beliefs and assumptions. They involve known and unknown risks, uncertainties, and other factors that may cause our actual results, performance, or achievements to differ materially from those expressed or implied by such forward-looking statements. Participants on this call are cautioned not to place undue reliance on these forward-looking statements, which reflect management's beliefs only as of the date hereof. The company expressly disclaims any duty to update or correct any forward-looking statements.
Please refer to the cautionary language in today's press release and investor's presentation, as well as the company's SEC filings for a discussion of the factors that may cause actual results to differ materially from those statements. I'll now turn the call over to Elmet's Chairman and CEO, Peter Anania, for his comments. Please go ahead, sir.
Thank you, operator, and good morning, everyone. In conjunction with today's announcements, we have prepared a supplementary presentation we plan to reference in today's call. Please refer to our investor relations website for a copy of the presentation. Let's begin on slide three. Today, we are pleased to discuss four important updates. First, a landmark investment from the U.S. Department of War, or DOW. Second, a planned strategic deployment of capital intended to expand and strengthen the U.S. and allied tungsten supply chain. Third, a new framework agreement with the Defense Logistics Agency, or DLA. And fourth, our recently announced agreement to acquire ams OSRAM's metal production operations in Schwabmünchen, Germany. These announcements represent a transformational moment in Elmet's evolution, building on a nearly century of experience in high-performance refractory metals and positioning us to support a more secure U.S. critical minerals supply chain.
The DOW's $450 million committed investment, the additional investments we are making, and our new DLA framework will potentially enable us to accelerate the U.S. tungsten manufacturing, build our independent conversion capacity, and support a more resilient, non-China supply chain for critical defense in industrial applications. We believe these investments will also further solidify our company's already strong competitive positioning in expanding our manufacturing base, adding midstream capabilities, and strengthening our ability to serve as a differentiated strategic partner to both government and commercial customers. This is only possible because of the strong foundation our team has built, and we have just begun to show what we can accomplish. Let's turn to slide four for an overview of our business and some additional context on today's announcement.
For background, Elmet is one of the world's leading manufacturers of high-performance refractory metals and the only U.S.-owned, U.S.-based manufacturer of highly engineered pure tungsten and molybdenum critical material components. In addition, we maintain a difficult-to-replicate asset base, strong supply chain network, and a U.S.-centric manufacturing capabilities. We believe we are well-positioned to address the growing need to secure resilient and trusted tungsten supply chains. Our Critical Materials Components division, or CMC, is our core refractory metals division. We manufacture tungsten, molybdenum, and specialized alloys for demanding applications across defense, aerospace, semiconductors, medical, energy, and industrial markets. We have further enhanced the business through expanded U.S. and European capacity, including our recently announced acquisition of ams OSRAM's Schwabmünchen metal production operations in Germany, which I will discuss momentarily. We have also established a proven track record of continuously introducing new and innovative products to our customers across key end markets.
Our Engineered Microwave Products division, or EMP, provides highly engineered radio frequency systems, components, and engineering services and is continually looking to leverage this technology across new programs and platforms. Today we announce we are adding a third division, Elmet Refining & Trading, or ERT, which is operationally separate from CMC but strategically aligned with the business. ERT will manage our ammonium paratungstate, or APT, conversion capacity and mine offtake agreements, coordinating sourcing, refining, trading, and delivery across our tungsten supply chain. I will discuss the specifics of this more in a moment. APT conversion, for those unfamiliar with our business, is a critical chemical refining process that transforms raw tungsten concentrate into the standard industrial intermediates required for advanced metal powders and carbides. To close out our brief overview of these three divisions, I will note Elmet's capabilities now span material supply, processing, precision engineering, and finished components.
Each are intended to play an important role in supporting our customers and our long-term growth. Turning to slide five. As I mentioned, last Tuesday, we announced our entry into an agreement to acquire ams OSRAM's metal production operations. The ams OSRAM acquisition is another important step in Elmet's global expansion strategy intended to establish a strategically integrated tungsten and molybdenum manufacturing base in Europe. It is our first refractory metals production footprint in the European Union. This is a goal we've had for long articulated since before our IPO. Through this, we plan to create a European production platform for tungsten and molybdenum powders, rods, wire, electrodes, and machined components, enhancing our ability to serve customers across key end markets while strengthening supply chain resilience.
The facility is Germany's only fully integrated producer, spanning powder through finished components, and is one of a limited number of European facilities capable of producing pure tungsten powders. When this transaction is closed, the Schwabmünchen facility will be integrated into our CMC division and is anticipated to bring a fully integrated manufacturing operation covering the entire production process from powder production through pressing, sintering, swaging, drawing, and finishing. This site also includes an advanced materials laboratory specializing in chemical and physical analysis that has been recognized as a leader in manufacturing innovation, receiving Germany's 2024 Smart Digitization Factory 4.0 award. We expect the acquisition to close the first quarter of 2027. Under the transaction, Elmet will continue supplying ams OSRAM through a two-year framework agreement and will operate the site under a 15-year lease arrangement.
Once acquired, these capabilities will help expand our manufacturing footprint, enhance our vertical integration, and strengthen our position as a leading supplier of tungsten and molybdenum products across North America and Europe. This is also another example how we have positioned ourselves as the acquirer of choice over the years. Building on this foundation, today's announcements meaningfully expand Elmet's capacity support a secure and resilient U.S. tungsten supply chain. On slide six, I will dig in further into the details. The Department of War has committed $450 million to expand our tungsten processing and manufacturing capacity across the U.S. This transaction is the first initiative launched under the Department of War's new Economic Defense Unit, aligning public and private capital to strengthen America's tungsten supply chain.
The investment begins with a $200 million draw on this commitment at closing, with the remaining capital in future draws tied to project spending need and execution. In connection with the investment, the DOW will receive redeemable preferred equity warrants representing up to 19.9% of Elmet's common stock on a post-exercise basis, and the right to appoint one independent director and one non-voting board observer. This preferred equity structure also includes a redemption adjustment, also known as netting feature, which provides Elmet capital structure flexibility as the warrants are exercised. We believe this structure aligns the interest of, and creates long-term value for Elmet, the Department of War, and U.S. taxpayers. Now I'd like to turn the call over to our EVP of Business Development, Scott Knoll.
Thank you, Peter. With the critical use cases across various key markets, tungsten and molybdenum. This is on slide seven. Various key markets, tungsten and molybdenum remain of significant strategic importance, with global demand projected to increase significantly by 2030. As you can see on this slide, from 2024- 2030, the global tungsten and molybdenum markets are expected to grow by 7% and 4%, respectively, representing what we see as a meaningful opportunity to solidify our position in the development of these raw materials. On slide eight, please. There is a compelling and urgent national security issue at hand. China has a strong grasp over the global tungsten market for the past several decades and currently controls more than 85% of the world's global tungsten supply, imposing restrictions that have led to tightening supply and price volatility.
Throughout much of the 20th century, the U.S. has had an integrated supply chain for tungsten. Through this investment, we plan to rebuild that vertical integration in the U.S. from the mine to the finished product ready for end-use application. Elmet is the only U.S.-owned vertically integrated producer of pure tungsten and pure molybdenum serving the full range of critical end markets. The DOW's investment, coupled with our strategic allocation across key initiatives, are designed to allow the U.S. and its allies to reduce reliance on the China supply. With that, please turn to slide nine for more on how Elmet plans to utilize the DOW's investment across the business to fortify this global supply chain. We expect to deploy the $450 million across several clearly defined priorities. You saw several of those in the press release this morning.
First, approximately $165 million is designated to support upgrades on our existing CMC facilities in Maine, Michigan, and Ohio. We also intend to deploy approximately $100 million across the ERT division to coordinate sourcing, refining, and delivery activities across a diversified non-China supply chain. In addition to these initial funds, as part of ERT, we intend to allocate approximately $150 million to Blue Moon's Springer tungsten complex in Imlay, Nevada, forming and operating an Elmet-controlled joint venture with Blue Moon Metals and EQ Resources of Australia to restart and expand APT conversion capacity at the Springer facility. This investment provides a direct bridge from Elmet's traditionally disciplined capital investment model to the large-scale capacity needed for the widely anticipated missile and defense replenishment cycle.
While our core businesses can grow with comparatively modest capital investment, we believe this program positions Elmet to be prepared for a materially larger defense demand opportunity. The objective with this capital deployment is to fortify Elmet's existing operations while establishing a domestic supply chain infrastructure needed to serve growing demand for tungsten and molybdenum products. Now to slide 10, please. Separate from the DOW investment, Elmet has also been awarded an IDIQ contract from the DLA to support the rebuilding of the U.S. National Defense Stockpile and strengthen the long-term resiliency of the nation's tungsten supply chain. The contract has a ceiling value of $2 billion, including a guaranteed minimum funded commitment of $150 million, and covers the supply of tungsten concentrates and sodium tungstate to DLA Strategic Materials. The contract has a five-year base ordering period through August 2031, with a two-year extension option through August 2033.
We believe this framework creates a long-term pathway for demand within ERT, strengthens our government relationship, and can help backstop ERT refining production. Based on DLA planning, the goal of this framework is to support the DLA in rebuilding the stockpile without disrupting existing American manufacturers or disadvantage our current customers. Importantly, deliveries to the U.S. National Defense Stockpile will likely not begin until significant incremental supply becomes available through the mining investments offtake agreements and processing capacity expansions announced today. On slide 11, please. Turning now to our first use of proceeds, expanding our U.S. existing platform. Our facilities in Maine, Michigan, and Ohio are already well-established manufacturing and processing facilities for tungsten, molybdenum, and other advanced critical materials and components, and the planned investment is slated to add capacity for current defense programs, future opportunities, and a broader range of commercial applications.
The investment is meant to support capacity for key programs such as the Patriot PAC-3, Precision Strike Missile, Next Generation Interceptor, THAAD, and other rocket components, plus the Phalanx, SLAM, SLAP, and F-35, plus numerous other applications. Also intended to increase capacity for tungsten heavy alloy balance weights for aircraft and expand powder production capabilities, as well as modernize infrastructure across all three of our facilities. Importantly, this investment is designed to allow us to serve our current customers more effectively while preparing Elmet for future defense and industrial demand. On to slide 12, please. As you can see on slide 12, we are planning meaningful capacity expansion across our CMC operations. Currently, we have approximately 520,000 sq ft of manufacturing space across these three facilities, supporting more than 125 key U.S. defense programs and 90 national lab programs.
We expect to increase tungsten powder production capacity by approximately five times. Powder is a foundational input for downstream CMC products. This capacity expansion can support a broad range of applications and markets. We also plan to expand capacity for missile and munitions components, tungsten wire, tungsten heavy alloy balance weights, and dedicated F-35 and Navy program requirements. The timeline is staged and initial funding is expected at closing. Equipment procurement, installation, and modernization are expected during 2027. Expanded capacity is expected to begin coming online for defense programs in the second half of 2028, with full run rate across the upgraded facilities targeted by 2031. On slide 13. As Peter Anania mentioned at the beginning of our call today's announcement also creates a new Elmet division, ERT, which you can see on slide 13.
ERT is designed to extend Elmet's capabilities beyond downstream manufacturing and create a more integrated platform across the tungsten supply chain to support a broader segment of the U.S. tungsten industry that is currently supply constrained. Its role will be to secure tungsten from trusted non-China suppliers, manage APT conversion capacity, mine offtake agreements, and coordinate material delivery into the U.S., plus for Elmet's manufacturing operations and customer base. ERT is also intended to support the DLA framework to create a stronger connection between feedstock supply, processing capability, and downstream manufacturing. We believe this expansion will complement the capabilities Elmet already has in powder production, pressing and sintering, forming, machining, and fabrication, resulting in greater control over material availability, conversion capacity, input costs, and supply chain reliability. Turning to slide 14. The first major project under ERT is to support the Blue Moon Springer complex in Nevada.
The complex includes a historic tungsten mine, a flotation mill, and an existing APT circuit originally developed by GE. We believe this site creates an opportunity to establish the first independent APT facility in the U.S. not tied to captive tungsten carbide. Elmet expects to invest approximately $75 million in a majority-owned APT joint venture with Blue Moon Metals and EQ Resources. In return, Elmet will own 70% of the joint venture and will operate the APT plant. By combining domestic mining and conversion capacity with Elmet's component manufacturing capabilities, the project is expected to shorten the typical mine to finish component cycle for critical defense applications by approximately three months. This is a key reason the DOW supported the investment.
Separately, Elmet expects to invest approximately $75 million in Blue Moon through a combination of a $25 million equity investment plus $50 million prepayment for tungsten in exchange for a perpetual offtake from the Springer mine in Nevada. Elmet will also receive issued warrants with an aggregate exercise price of $25 million and have rights to appoint a board member to Blue Moon. Additionally, as part of this agreement, Blue Moon will be issued warrants in Elmet with an aggregate exercise price of $25 million. The planned APT restart is targeted for the first half of 2029 or sooner, subject to engineering, permitting, construction, and other customary conditions. As production ramps, the Springer mine and offtake agreements are expected to provide long-term offtake of approximately 1,000-3,000 tons per year of tungsten concentrate.
The goal is to have Springer and the site at Springer provide independent U.S. APT conversion capacity and serve as a hub for other Western U.S. tungsten mine supply and support the incremental material needed for future DLA stockpile deliveries. I would like to turn the call back over to our CEO, Peter Anania.
Thank you, Scott. Slide 15 illustrates the breadth of Elmet's vertically integrated critical materials platform. Across the value chain, we bring together mining and raw material supply, APT refining, powder and thermal mechanical processing, machining, fabrication, and quality control. Our established commercial relationships support APT conversion capability today, while the planned Nevada APT facility will add an independent and redundant U.S. conversion capacity over time. We believe the DOW investment enables us to build on this existing foundation, strengthening U.S. manufacturing capacity, expanding access to non-China supply, and connecting material availability with the finished components our defense and industrial customers require. Let us move to slide 16.
As U.S. defense sourcing requirements become more stringent, we believe this investment positions Elmet to play an increasingly important role in strengthening the resilience and security of the U.S. and allied tungsten supply chain. We are already a trusted supplier to many of the nation's most important defense programs, including Patriot, Javelin, Aegis, Trident II, THAAD, and the Virginia- and Columbia-class submarine programs. In our view, Elmet is well-positioned to support this effort as the only U.S.-owned vertically integrated tungsten producer serving the full range of critical end markets. These investments are expected to expand domestic and allied capabilities across mining, processing, and advanced manufacturing, helping to secure the materials needed for missile systems, munitions, naval platforms, and other critical defense applications.
By strengthening domestic and allied capabilities from mine to missile, we intend to help build a more secure, resilient, and compliant national security supply chain for strategically important materials relied upon by the U.S. and its allies. The timing, from our perspective, is particularly compelling. The U.S. already restricts sourcing of certain tungsten materials from specific countries, and beginning January 1st, 2027, those recent restrictions will extend further across the tungsten and molybdenum supply chain for key military applications. We believe Elmet is well-positioned to help customers navigate these evolving requirements. With this investment, we expect to have the capital and capacity to expand support for critical defense programs while helping customers meet increasingly rigorous sourcing compliance and supply chain security standards. I would like to now turn it over to Mike Lee, our CFO, to discuss the operational framework.
Thank you, Peter. On slide 17, you can see the projected timeline for these investments, which will roll out over several years. The CMC facility upgrades will begin with initial funding at closing, followed by procurement and modernization work in 2027. Expanded defense capacity begins coming online in the second half of 2028, with full run rate targeted for 2031. We believe once ramped, CMC will deliver revenues between $625 million and $675 million, with gross margins consistent with our existing long-range targets of 26%-29%. Our long-term outlook for EMP remains consistent, and when combined with our updated CMC outlook, we continue to believe steady state gross margins in the 30% range is attainable in the 2030- 2031 timeframe.
Looking at our new ERT division, the trading side is expected to begin fulfilling the DLA contract during the first half of 2028, subject to mine ramps related to our strategic offtake agreements. The refining side of our ERT division and the associated Springer APT facility restart is targeted for the first half of 2029 or sooner, subject to customary conditions. We believe the facility will be fully operational and expect to be running at capacity in 2031. ERT combined refining and trading run rate is expected to be between $850 million and $950 million of revenue, with a gross margin range of 10%-15%. Collectively, this is a multi-year execution program with the goal of being fully operational in 2031 and generating a combined revenue range of $1.5 billion - $1.7 billion at 18%-22% gross margin.
As we work towards completion, we will remain focused on delivering measurable progress for customers, shareholders, and U.S. industrial base. I'll now turn it back to Peter for some additional commentary.
Let me close with highlights of today's announcement on slide 18. First, the DOW's $450 million committed investment provides capital intended to strengthen the U.S. tungsten supply chain. Second, approximately $165 million will be allocated to expand and modernize Elmet's existing U.S. manufacturing capacity across Maine, Michigan, and Ohio. Third, Elmet Refining & Trading and the Springer Complex project create a potential path towards independent U.S. APT conversion capacity and a more integrated mine-to-missile platform. Fourth, the DLA framework can provide a long-term path to support the rebuilding of the National Defense Stockpile as incremental new supply becomes available. Fifth, independent from the DOW investment as announced today, we have entered into an agreement to acquire ams OSRAM metal production operations in Germany, which we expect to close in the first quarter of 2027.
Finally, we believe Elmet is well-positioned as a sole U.S. vertically integrated tungsten supplier serving the U.S. and allied nations. To wrap things up on slide 19, we see Elmet's investment case as resting on a durable foundation. We have vertically integrated manufacturing capabilities, an experienced engineering organization, and a difficult-to-replicate U.S. asset base. Today's announcements are intended to provide the capital and commercial framework to accelerate a strategy strengthening both Elmet's long-term growth and U.S. supply chain resiliency. On our final slide, in a few weeks, we will be further discussing Elmet's strategy, operating plan, updated financial framework, and long-term opportunities as part of a comprehensive investor business update on Thursday, September 24th. We will be providing additional logistical details in the coming days. Thank you for your time and your interest in The Elmet Group. Operator, we are now ready to open the line for questions.
Thank you. At this time, we'll open the line for questions from the company's covering analysts. If you'd like to join the question queue, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Our first question comes from the line of Jim Ricchiuti with Needham & Company. Please proceed with your question.
Hi. Good morning. Congratulations, by the way, first off, on the agreement.
Thank you, Jim.
And obviously, a lot of information here. Maybe first off, tungsten had $165 million of direct investments that are going to be deployed, I guess, in Maine and Michigan and Ohio. Will these be mainly to support your existing capabilities or for any new manufacturing capabilities? I am also wondering how we might think about the timeline for these investments.
Sure. As you know, Jim, in the past, we have talked about the last mile. In some of these programs, we need specialized equipment for some of the specific end components. There is some of that. There is some of putting in additional capacity for tungsten furnaces and molybdenum furnaces. Then there is some just to upgrade the infrastructure at each of the plants, which are long in the tooth and need a little upgrading of electrical and other mechanical services. So it is to really cover all three of those aspects in those plants.
Got it. Then a follow-up question, and I know there will be a bunch of other questions, and I will jump back in the queue. As you build out the new ERT division, I am wondering if you could talk about the upfront investments you are going to need to make, operating, financial, leadership investments. I think you have given us a framework to think about the long-term revenue and margin opportunity. I am also wondering, in the early days, how we might think about the upfront investments and the potential that there could be some drag as it relates to those upfront investments.
Mike, do you want to handle that question for Jim?
Yes, sure. Jim, you are going to hear me say this a few times. In the investor day we are going to have on the 24th, we are going to go much deeper into what we expect to take place here over the time horizon. There will be some drag in the near future. We do not anticipate it to be too dramatic. The ERT division we are standing up is by design a low G&A structure. A lot of our investment up front is going to be focused in around that APT facility, and that capital investment engineering design, and getting the facility back and running. Yes, there will be some. We do not see it as something that will be dramatic. We will go into much more detail, again, when we get together on the 24th.
Great. I will jump back in the queue. Thank you.
Thank you. Once again, as a reminder, if you would like to join the queue, please press star one on your telephone keypad. Our next question comes from the line of Chip Moore with Roth Capital Partners. Please proceed with your question.
Hey, good morning. Thanks for taking the question, and congrats as well. I wanted to ask, we might wait for the 24th, it sounds like. But the CMC, I guess, upgrades first, you outlined sort of thoughts on timing. But any potential for downtime or disruptions as you think about some of those upgrades over 2027, maybe?
We don't have any significant expectation of that. Going back to Peter's commentary, a big piece of the investment is going to be that last mile capital, new installation. We have a full team operating these factories that know how to implement new equipment and infrastructure without being disruptive. So anything that would take place, we would see as nominal, and we don't expect it to show up in the financials, in simple terms. Yes, in real world, of course, there's always some kind of disruption. But switching over things like switchgear, if you do it properly, you're down a day. Usually you do that on weekends and so forth. So it won't be significant of taking a factory offline for an extended period of time.
Perfect. Got it. Thanks, Mike. My follow-up, the new ERT division. I think I read you expect to deploy an additional $100 million, right? That's incremental to the, I think it's $150 million total going into Blue Moon. Is that right? How should we think about potential additional deals or where that could go?
Yes. So yes, there's $75 million going into Blue Moon. $25 million is an equity investment. $50 million will be structured in prepayments for future offtake. Then there's 75 going into the APT facility itself planned. The additional $100 million is going to be used for solidifying our supply chain. That will manifest in a few different ways, but we're holding back on talking too much of what can happen until we get closer to having those investments clearly defined. So right now, those are to be determined.
And one other point on the Blue Moon investments in equity and the offtake, those are also going to support the site, the electrical, the infrastructure, the mill that would supply the APT plant. So those are all going into capital investments to support Blue Moon in getting ready to support the APT plant.
Got it. Okay. Thanks, Scott. And just lastly, maybe follow up there, just the JV with Blue Moon, just any milestones or anything to watch there? Thanks, guys.
There's a legal framework agreement, and we will be uploading that shortly through the 8-K, and that will have a number of milestones over the coming six months that our legal team and project team will be working through as we stand that JV up.
Perfect. Thanks very much.
Thank you. Our next question is a follow-up from Jim Ricchiuti with Needham. Please proceed with your question.
Yes. I was wondering, first of all, if you can give any additional color first on the revenue contribution from the proposed acquisition in Germany and maybe, to the extent you can, the mix of that business in terms of tungsten and molybdenum.
Yeah. In our 2031 projection, we have it as a range of $50 million-$80 million, and with the majority of the business being tungsten in that projection. One thing to keep in mind is the factory today is a captive factory for ams OSRAM. It possesses what we consider to be some significant process IP, production capabilities, a very, from our perspective, provocative set of equipment that can support a lot of the markets that we think we can play in. We are going to be standing that commercial enterprise up, and so we will have that two-year supply contract with ams OSRAM to bridge us standing up that commercial side of that business. There is a transition there.
There will be revenue, and we will see the profile of that business going from what was currently being at a wholly owned and controlled, dedicated factory largely for ams OSRAM to more of a commercial entity. That is going to take a few years to get there. The revenue will move around a little bit in that time horizon, but our end target is that $50 million-$80 million range for that facility.
I guess one other point, if I can add. It's a historical legacy lighting facility, very similar to the facility we have in Maine. We have experience in expanding the markets for plants like that, and we would be planning to, or are planning to expand into tungsten heavy alloy and TZM, which is a molybdenum alloy that we also produce in the U.S. But there's demand for European sources of that.
Got it. Helpful. As you execute on this agreement, both from the standpoint of this larger, broader U.S. government deal as well as the acquisition in Germany, how are you thinking, or how should we be thinking about the mix longer term of tungsten and molybdenum? It seems like it's going to obviously change that mix fairly dramatically.
Yeah. So it's a good question, Jim. The CMC division, we think the mix is going to stay. We've seen tungsten grow both from price and demand. Molybdenum continues to be over 60% of the CMC business. It supports some major Department of War programs. We don't see that stopping. A lot of the programs we anticipate adding capacity for are molybdenum and tungsten. So in the core CMC business, we'd expect to see tungsten grow, but it won't overwhelm molybdenum. So we think that's the phenomenon that will play out there. The ERT is all tungsten, right? It's going to be a mixture of trading and processing, which will have different financial profiles as it flows through our financial statements. But we will be predominantly a, in terms of revenue, or dominantly a tungsten business in 2031.
Got it. The final question from me is, as you think of the overall impact of the analysis you've made today, how do you think this affects your competitive position in the overall market? I mean, clearly it enhances your position in the ADG market. I'm also wondering the impact on your commercial business.
You want me to take that?
Sure.
Yeah. I think as we build out the capabilities, our ability to support semiconductor, medical, energy, and expand the addressable market and some of the new products that we will be able to go after through these capabilities. I think it will take some time, as Mike described, but that's the goal and the execution that we need to go deliver on. Clearly, some of the capacity questions that current customers might have in some of the other markets can be addressed through these investments.
I look forward to hearing more on the 24th. Thank you.
Thank you.
Thanks.
Thanks.
Thank you. Our next question comes from the line of Austin Moeller with Canaccord Genuity. Please proceed with your question.
Hey, guys. This is actually Eddy Kim speaking for Austin Moeller. Just had a few questions. First, could you guys quantify the incremental output that the $165 million investment is expected to generate by major product line, and which programs you guys think will benefit the most from the added capacity?
Well, we're going to be going into more specifics again on 24th. But I'll give you a walk on 2031 for the CMC division. We had already projected a pretty steady 10% CAGR on the existing CMC business over the course of the horizon we're showing here. That's still consistent, that we expect that to take place. That start gets us into that $350 million-ish range out there in 2031. And then, as I referenced before, Schwabmünchen, we're thinking 50-80. There's a lot of variables that Scott referenced us going into a few new markets there. We're taking, again, a captive factory and effectively commercializing it. That's about 50-80. And then the balance is going to be associated with net new aggregate demand. The programs we anticipate supporting are largely many of the ones we do today.
You can think of us, we think of this a bit of getting ahead of the normal defense capital cycle, where often the demand shows up first and then the capitalization happens after, which is part of the historical, I'd say long cycle times within the defense supply chain. This, we think, will help speed up production for what we foresee as a ramp-up in programs that we referenced before, such as PAC-3 and Javelin and Next Generation Interceptor and on and on. As referenced before, we support over 125 defense programs. There's a menu of programs we anticipate supporting there, close to the line to conversations that we've had with the Department of War. The stack of that gets us to that $650+ million range in the 2031 time horizon.
Okay, great. Thank you so much.
Thank you. At this time, this concludes our question-and-answer session. If you have any additional questions, you may contact Elmet's Investor Relations team at elmt@gateway-grp.com. I'd now like to turn the call back to Mr. Anania for his closing remarks.
Thank you again, everyone, for joining us today. To close, I'd like to thank our employees, partners, and shareholders for their continued support, and we look forward to providing a more comprehensive update in a few weeks. Thank you.
Thank you for joining today's call. You may now disconnect your lines.