Good morning, and thank you all for joining us today. My name is Jacopo Gaspardone, and I'm with Three Part Advisors. Next up, we have Ferroglobe, a global producer of silicon and specialty metals, trading under the ticker GSM on the Nasdaq Exchange. I would now like to introduce Alex Rotonen, VP of Investor Relations, who will be presenting today on behalf of the company. Thank you.
Thank you. I need to lower that. I'm vertically challenged. How is everyone doing today? Sorry for being late, by the way. I didn't realize I was I don't want to read that. I'll start with who we are. I want to give a general introduction of what we are for people that don't know us. We're about a $750 million, $800 million market cap company. We're the number one producer of certain alloys in the West. In some cases, we're the only producer, like silicon metal in Europe. The company was created by a merger of a U.S. company called Globe Specialty Metals, and that's why the symbol GSM. This was in 2015. A Spanish company called FerroAtlántica, a private company. That kind of generated the footprint. That's why we have operations in various locations. We are on five different continents.
We have more than 50 furnaces around the world. Last year, we had $1.3 billion in sales. Below what we had hoped. Our main products, we really have three main products. We have silicon metal, silicon-based alloys, and manganese alloys, and they're each roughly 1/3 of our business. So very good mix, very diversified. Majority of our sales take place in the U.S. and Europe, accounting for 85%, roughly. Rest of the world really is Middle East and also Asia. Asia, we hope to get a little bit more market share at some point, but certain products, it's going to be pretty difficult. What are these products used? There's a picture there in the bottom and shows what the products look like.
There are a lot of uses for it, but I'll make it simpler by saying that if you look at the silicon-based alloys and manganese alloys, those essentially go to the steel industry. They enhance the characteristics of the steel, strengthening, lightweight, et cetera, certain characteristics. Silicon metal is the most complicated product, is the most energy-intensive product we have. As an anecdote, we were number two user of electricity in France. So it just shows how energy is important to us, and so is the cost of it. End markets are solar. You need silicon metal to produce solar panels. EV batteries, that's more the future, using in the anode instead of using graphite, 100% of which comes from China. We can substitute it and use silicon metal.
Has higher intense capacity, about 10 times the capacity, and also it's probably 10 minutes to charge an EV battery versus about 30 minutes, so charging times are much more advantaged, and it's also much more capable of being used in very cold climates like Chicago at some points in time. We do also other automotive. We sell to aluminum guys, silicon metal, so auto industry, consumer products, construction, semiconductor, energy. Also increasingly, there's interest from the defense industry for drones and all that, and we have a partnership with a company on EV batteries that just sells to the drone market and also to robotics. So that's the very high level view to give sense of what we are and where we are. Some of this is a little bit repetitious, so we are the leading Western producer of many of these materials.
Where we're going next is really, it's been a difficult environment business-wise, especially in Europe. Where we're going next strategically is we're pushing more into the critical materials, especially on the processing side where we have expertise. We've done it in the past, and we have capacity, and in some cases, we can use our existing furnaces. In some cases, the CapEx is very minimal. At the same time, we are going through a portfolio optimization and looking at costs, which we always do, but especially now because there's a lot of dumping from Asia, specifically China. We've got to make sure that we optimize those operations. Some of them may be, at some point, we might utilize them for other purposes than metal production, especially with energy contracts we have. So we have potential ability to sell energy to certain data centers, et cetera.
That's something that we're evaluating. One of the things I mentioned, anti-dumping, also countervailing duties or subsidies. Certain countries are providing a lot of subsidies makes them very competitive, but also predatory on pricing. So we've been working in Europe and the U.S. on safeguards and also anti-dumping duties. That's gone quite well. We still have a little bit more work to do. One opportunity where we have to grow is Venezuela. We own a plant in Venezuela with four furnaces, with 120,000 of capacity, historically highly cost competitive. Energy is nearby. You have a lot of hydro, and energy, in general, is quite cheap. Labor is cheap, plus all the raw materials and inputs are right next door. We had a quartz mine, which we use in production. Also there's a coal which we use as a reductant to process, is in Colombia.
All the raw material inputs are essentially next door. So a fantastic location. We're working on getting farther with the U.S. government on that because we need to get permission to operate there. From the balance sheet perspective, we've cleaned the balance sheet up a lot. I'll cover that more in a little bit. So here's a snapshot of what we do. We have raw materials, coal, charcoal is the reductant. We use electrodes in our furnaces. Quartz is obviously a key material, especially on the silicon side, silicon alloys and silicon metal. Sometimes we use wood chips as a reductant instead of coal. We're trying to go more into the wood chips and charcoal because it's obviously cleaner, but only if it makes economic sense. Then we smelt it, high energy capacity.
We own and operate all these plants, and we produce those three key materials that I mentioned. I do not want to talk about the end products again, but it is similar as I mentioned earlier. A lot of steel, a lot of aluminum players also goes into solar panels and other more advanced materials. Even CPUs, we do something in the semiconductor, but we are not the ultra-high premium product, so it does not go into the [Taiwan Semiconductor Manufacturing Company] or Apple Inc. products. The critical materials is something I want to spend more time on because we already produce some of them. Silicon metal and manganese alloys are considered critical materials and are essential for a lot of production of steel and aluminum. We do have a coal mine in the U.S. that we use, again, for reductant. Those are considered critical materials. What we are really doing is we are expanding.
Our capacity utilization is suboptimal, and so we want to increase capacity utilization. We are branching into some of the critical materials that we have historically produced, have capability of producing, and we have successfully test-produced. I will talk about that a little bit more in the next slides. We have the technical know-how, we have the footprint globally. We have operations in U.S., obviously significant, also in Europe, significant, also in Canada, as well as South Africa, and maybe Venezuela in the future. We will see. Also Argentina, we have a small plant in Argentina, and we do electrodes in China. That is a small business for us, and it is for internal use. Here is the process we went through. We started earlier. We met with the Department of Defense in February in Florida, and they were very keen on certain products.
We produce some of it already in silicon metal and manganese, but really the interest was more into the magnesium, which there is no Western production. We have produced it in the past. Antimony, silver, gallium, and then the ferromolybdenum, ferrochromium, and ferrovanadium. Those are really kind of the products where we are looking further. We have successfully produced magnesium and ferromolybdenum. Magnesium is one where for us to go forward with that, we would need a new plant in the U.S., and this would only make sense in the U.S. It would not make sense in Europe. Magnesium is already protected in the U.S. China controls 95% of the magnesium market. Obviously, Department of Defense is highly interested in that. It would probably take a couple of years to get up and running, and the CapEx would be $180 million-$200 million to get it up and running.
The bottom three there on the right, the ferro critical materials, we could essentially produce them all at our existing furnaces, so no CapEx or very minimal CapEx. Silver and gallium would be in Europe, and it would be recycled, would probably take EUR 20 million each to get those up and running. Antimony, we potentially do it in South Africa, but we need to get an energy contract there. We have been fighting with the government for months and months, as have other high energy-intensive producers. A lot of opportunities, a lot of interest. Department of Defense has been very proactive. We are in the final stages of sending our final request list to them and asking for certain assistance, help, guarantees, et cetera. I do not want to get too much into it, but it looks quite promising. We will have to see what they come back with.
They are certainly not going to give everything we ask, but they are quite willing, especially in the magnesium. We feel very good because, again, it is highly critical, and there is no Western production. So makes sense for them. We still have the core business to deal with, and one of the measures we have done is to attack on the trade front. China started dumping silicon metal to EU at the beginning of 2025 after they had a lot of internal issues on the polysilicon side. Also their subsidiary country, Angola, which is Chinese furnaces, Chinese employees largely, also started producing. They doubled imports of silicon metal to Europe from 2024 to 2025. At the same time, the price of silicon metal dropped by about 40%. So clearly you can see that creates a major challenge for us, and which has resulted in weak results. We have attacked on specific trade measures.
We call them safeguards in Europe, but they are somewhat similar to anti-dumping, but they have a quota and then penalty for exceeding the quota. We were successful on FeSi, so ferrosilicon, and manganese alloys. 75% of the previous three-year average and then 25% penalty for exceeding that. No one has exceeded intentionally. I think someone mistakenly did it the first quarter. It has been working, especially on the manganese side. The challenge on the ferrosilicon side is that when silicon metal got so cheap, some producers were actually using silicon metal in place of ferrosilicon, which is typically probably 30% more expensive. But they were dumping it at a price similar to ferrosilicon, which was even below Chinese production cost. Maybe the best plant in China could produce at that level. So we clearly know that they were not making money.
They had excess supply and polysilicon market cratered, so they had to find an outlet, and that has been quite challenging for us. Our next step is to get the silicon metal safeguards or anti-dumping against China and Angola, and we are pushing the European Commission extremely hard to try to get that accomplished. As I said earlier, we are not optimized as far as capacity utilization, and we are going through this process, and part of it includes starting to add other critical materials to increase utilization. Even beyond that we need to look at costs, and continue to reduce. We are not ready to give any specific numbers, but we have a pretty aggressive plan on that front. Again, accelerate growth, we need that. Then we have a partnership with a company called Coreshell, and this is the anode, as I mentioned, in the EV batteries.
We invested $17 million. We own about 10% of the company. They are already shipping, as I mentioned, to robotics and the drone makers and are far along in discussions with the auto OEMs. A couple of them invested in Coreshell in the last round, one American and one European automaker. So that is progressing quite well. Probably takes a couple of years for that to start materializing more as far as revenues goes. The good news is we have been around as a company, although it was a result of a merger, but even beyond that, there were existing long-term operators, and we have significant blue-chip customer base. I do not want to go through there, but Tata, Rio Tinto, AK Steel, Dow, Alcoa, ThyssenKrupp. I do not think it shows, but Cleveland-Cliffs also we do business with.
We are local, and the localization is something that is really happening much more, and obviously our current administration is quite aggressive on that. That is probably going to help local producer, whether it is steel guys, which increases steel production or aluminum production, and we obviously supply them locally, either in Europe or in the U.S. So that puts us in a pretty good position. We are one of the few. In the U.S., there are two ferrosilicon producers, us and [CCMA Industries] . On the silicon metal, it is us and Mississippi Silicon, which is owned by Rima Industrial in Brazil. So very limited. That is why we are number one player because we are one of the very few that have succeeded. Venezuela, I mentioned that. Again, excellent operations. I do not want to go through the same litany.
We are waiting for that OFAC, that is the Office of Foreign Assets Control, to give us authority to speak to Venezuelan government so we can start negotiating on energy and see what we can do on that. Energy, as I said, is very critical for us. The furnaces are in good shape. We have actually maintained a staff there since 2017, so it has been under care and maintenance. So the facilities are in pretty good shape. Transformers are the key component, and they look to be in good shape. I do not think we have tested them. We are confident that at least the majority of them are okay. So we may not be able to do all four furnaces instantly, but we can do two to three if we choose to do so.
We do not want to flood the market with excess product, so we have to be very strategic on how we go about it. Logistically, obviously, we do not know the logistics of Venezuela. Do you have a question? You look like you have a question. From the balance sheet perspective, we have cleaned up a lot. We had more than $500 million of debt at the end of 2021. Now it is down to $131 million. We have about $93 million of cash. So net debt is around $37 million, $38 million. That is obviously taken a lot of burden off. That debt was also quite costly, and that was necessary. Not truly a restructuring, but transformation of the company back then. Now, I do have to say that 2022 was a very fortunate year for us.
We had $860 million of EBITDA, so that certainly helped to clean the balance sheet, and that is because of the COVID logistics issues. Some of it was we did well but got lucky too. We pay a dividend currently around 1.6% yield. We have increased it a couple of times now, modestly. We do not plan to go crazy, but over a period of time, we hope to increase it and continue increasing it. We did some buybacks earlier, and now the market conditions got difficult, so we have been out of the market for the last couple of quarters. I mentioned that Coreshell, we have the investment and multi-year supply agreement. I want to leave a little bit of time, but basically here is our game plan.
Expand the critical materials, take advantage of those, especially magnesium has significant opportunity from scale perspective and also from margin perspective. We have to optimize the footprint and increase the capacity utilization, but we also have to look at the cost structure, and we are doing that actively. Venezuela, huge opportunity for us because it will allow us to revamp our production footprint. Their costs are probably going to be significantly lower than the U.S., probably one of the lowest cost producers anywhere. Very optimistic about that. Clearly, we got to get through the hurdle with the government and the energy contract, but the labor force is already there. We have been paying them for the last several years. It is a very inexpensive workforce. Trade measures, anti-dumping activities, those are to protect the core business. We need to do better on that front.
Last year, we made $28 million of EBITDA, which is obviously not enough to cover our CapEx, so that is not a sustainable level. We are looking at that at the same time. Then we cleaned up the balance sheet and made some investments in Coreshell, et cetera. We feel like we are very well positioned going forward. It is going to take a little bit of time for us to really execute fully on these because we are dependent on governments to a certain extent, and their time frames are sometimes different than ours. Now you have a question.
I had a question before, but it was not on that.
Okay.
Could you talk about the cost cutting when Marco came in five years?
Yeah.
six years ago. Did a great job reducing it.
Yeah.
It sounds like after another five years, something needs to be done again. I guess, how aggressive are you going to be?
We are pretty aggressive. It's really looking at which plants, what is the profitability level, what happens with Venezuela. We have some, not every operation in the U.S. And I don't want to get into overly specific, but there are certain operations that are just not optimal. If we can get that capacity at cost that's significantly, and I'm not saying 10%, 20%, I'm talking 30%, 40% cheaper to produce. It behooves us to go with Venezuela and utilize that. Obviously, certain things have to fall in place, but we're also looking at overhead in general, which we haven't wanted to scare the employees too much. That's why we haven't been overly specific. But over time, things we were doing well, and I think you tend to probably have more staff in some areas. AI is probably helping a little bit.
We're pushing forward with that on certain tasks. That's not why we're replacing employees. We just got to be nimble. Yeah.
When you look at the whole enterprise, can you segment it for us? Where are you most excited, and then where does it fall off? How do you guys think about that? If I remember to call it, then when it comes to yield, are you guys trying to grow that? What are you doing with fair market value?
Yeah. We're going to increase the actual dividend amount.
Yeah.
The stock price is, clearly we think it's undervalued. But yeah, we'll continue to increase. Now, if the stock price doubles, yeah, we're probably not going to-
Yeah.
increase the yield, but we plan to increase over time the dividend amount.
Yeah.
That's the strategy on that. On what I'm excited about, I think the critical materials-
Okay.
because they will increase the baseline of our business.
Right.
In other words, last year was very difficult, and this year is difficult as well, for the reasons I mentioned. But we need to raise that bottom line where "a bad year is okay," not where we burn a bunch of money, right? That's really where we are on that front. I'm excited that we have this opportunity, and we are such an obvious player. We've talked to the Department of Defense probably, at least six times in meaningful, and there's been other conversations, but in a meaningful way. It provides such an opportunity for us, and they're the right people, and they're executing on it very aggressively. Some of the timeline, they come back to us so quickly that we got caught one time, so to speak. We send them information then they're like, "Oh, this is great.
Can you present to the committee tomorrow?" This is the government. That was like, "Oh, shit. Now we got to do a presentation." We think we'd have some time. We did that. That was Wednesday. We did the presentation on Thursday, and they're like, "Oh, great. There's other topics came," and they say, "Okay, can you get this other information to us by Monday?" It shows that they're truly behind it. Now, what they will provide us and all that remains to be seen. We're excited about the critical materials. We're also excited about Venezuela because it gives us flexibility. That's really the optionality.
Yeah.
Because it is so much. Critical materials to a certain level, because we can produce more than the seven that I have mentioned. We are not a huge company, and we do not have unlimited capital, so we have to look at it rationally. Where is the biggest bang for the buck early?
Sure.
Time to market is critical. The urgency that they have is real. Venezuela, critical materials. I think Coreshell is a very interesting opportunity.
What was that?
Coreshell, that is the EV battery.
Yeah.
It would completely remove the reliance on China in the U.S. in the EV batteries that are made through them.
Yeah.
That's, again, that's not going to benefit us in 2026. It's not going to benefit us in 2027 unless someone buys them out or whatever at some crazy valuation. We're not expecting that. That optionality is there, and it's-
Yeah.
the auto OEMs having its names everyone would recognize. Again, fantastic opportunity there. I would say those I'm probably most excited. Most urgently needed are probably the trade measures because they can happen relatively quickly, but European government is, let's just say, a little slow at times.
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Silicon in Europe. Because like I said, not having safeguards on silicon not only hurts the silicon business in Europe, it hurts the FeSi business because people have substituted. We are estimating loosely minimum 60,000 ton impact, maybe 100,000 ton impact. That would be 15%-20% of the market has been just eaten by silicon in the FeSi market, and that is significant. And that is why our capacity utilization is low. Clearly that can change. The steel production is picking up in Europe. There are safeguards now in steel in Europe effective July 1st. 50% of the prior year's quotas, 50% cut on imports of steel, which is significant. That implies that there has to be increased production of steel.
The demand picture is starting to look better, whereas in the last 18 months it has been pretty much continuously negative steel market, and that is because of the auto industry is not doing great in Europe, and the European economy is more sluggish than the U.S. Yes.
Could you talk about your energy contracts, where you are looking at, how they are set up and where you are looking at possibly for another option?
Yeah. Different countries are different. In Norway, we have a contract, hydro, pretty straightforward. We have very good operations there, so expect those to continue. In France, we have a very good contract, renegotiated last year, effective January 1 this year, 10-year contract. Probably the lowest cost energy we have anywhere, which is not what you would expect. I was shocked when I saw that. So France is going to be competitive, but some of the plants are quite old, so there might be some other alternate uses. And in the U.S., yeah, we have energy contracts. They are not fantastic, what we think relative to France or Norway. On a U.S. standards, they are actually pretty good, and I think some of the data guys would be quite happy with the prices we are paying. But all the contracts are different, so how that can be translated might be a question.
Yeah.
In South Africa, we do not actually have a contract, and we are not producing in South Africa. Let us just say Norway, we probably pay $25, rough number, per megawatt hour. The proposed level in South Africa was well into [100+]. High energy-intensive business can make money, so unless they come back. Glencore operates some stuff in South Africa, and they are close to getting a deal done that is quite competitive. If we get that, then we will produce.
Are your plants located close to the source of raw materials, or are they located relatively? Could they be located closer to cheaper [audio distortion]
I think originally, I would say probably raw materials, and a lot of the plants were probably smaller when they were started back in the day. Some of them are quite old. I am trying to think. South Africa, obviously, the resources are there. In the U.S., the resources are by and large there. We are pretty self-sufficient there on all the products. Manganese ore, there is no manganese ore in Norway as far as I know, so we buy it elsewhere and ship it. So manganese ore is a bit different. A little bit of a mix.
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Yeah.
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Because these were all built before natural gas was such a thing, right? To move it. Just to give you on the capacity, I don't think I mentioned this. If you look at to add 60,000 ton silicon metal facility, greenfield in the U.S. will cost $600+ million. You wouldn't move existing facility if you're going to build a new facility. You certainly wouldn't do that. It doesn't make sense. Now, if what Tesla is planning to do with their solar supply chain and they actually hit their 100 GW number that they've thrown out, that would mean that the silicon metal demand doubles in the U.S. probably next five years. There's not enough capacity. Then it might make sense to say, "Hey, you know what?
We can do it." But that's why Venezuela is, again, a key for us because we could supply some of that from Venezuela, and it might still require a new plant. Yes.
Have you had a chance to take a look at the Venezuelan assets and the type of work that they
They've been under care and maintenance, so they're in pretty good shape. Some of the transformers, we hear that they're fine. Maybe not every one of them because we haven't fully been able to test because there are still technically sanctions on Venezuela. That's why we need this U.S. approval to actually go and have free rein to go there and have our key guys. The guy that ran our operations in Venezuela, actually, his office is next to mine in Madrid, so he's not been in Venezuela since he left, which is a long time ago. We need that to fully be aware. We believe we can do two to three furnaces without a problem, assuming that we might have to move one piece from one furnace to another and one furnace might need some work.
But overall, we're saying we can start for single millions of dollars to operations there. So we think they're in good shape.
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Then we can go and talk to Venezuelan government and get the energy, because if the energy deal doesn't. We need the energy deal. In U.S., we pay $50+. In Norway, we pay $25. France is cheaper than that, and Venezuela is probably going to be very cheap. Anything else? Thank you. If you have any other questions, let me know. I'll be glad to