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Managem resists headwinds

Boosted by a sale of assets (transaction with the Chinese Wanbao on the Pumpi mine in the Democratic Republic of Congo) and a favorable price trend in 2017, the profits of Managem amounted to MAD 370 million (+2% restated exceptional operation) in 2018, despite a loss of MAD 179 million at the level of the SMI subsidiary.

“Over the last two to three years, we have been able to stabilize our profits despite the high volatility of prices,” commented Imad Toumi, President and CEO of Managem.

The good momentum of the prices of the main metals exploited by the group was abruptly broken against a backdrop of trade conflict between the United States and China. Base metals dropped by 15%. The decline in cobalt prices is more spectacular.

Worn for two years by the prospects in the automotive sector, the price collapsed to end the year around 30 dollars/lb after listing up to 44 dollars in the first half. Prices continued their plunge this year to less than 15 dollars currently.

“We hope it’s the floor. All the analyzes show that the fundamentals are good. Cobalt is an indispensable metal in the production of vehicle batteries,” believes the CEO of Managem.

On precious metals, the context is not favorable for the money. The decline in prices is accompanied by a decline in the performance of the mine. In addition, Managem recorded a near-zero year in terms of gold production since the Bakoudou mine was shut down in Gabon.

Tensions in Sudan have disrupted operations in the country, limiting production of the pilot unit to 700 kilograms! As a result, the Managem Group’s turnover fell by 16% to 4.4 billion dirhams. SMI’s revenues have plummeted by 40%. “Much of the underperformance in the silver business was offset by other metals. This reinforces our diversification model,” says Imad Toumi.

In the short term, price volatility will remain strong, the manager predicts. Despite these setbacks, the group is maintaining its main targets, particularly for gold. “We had expected one to two years of hollow on this metal until other projects come into production. We are on the right track to reach our target of 7 to 8 tons annually by 2021”.

To achieve this, Sudan remains a strategic asset with reserves estimated at 50 tonnes of gold. The group must invest heavily to exploit this potential. “The political situation in the country is not conducive to the lifting of international funding,” admits Imad Toumi. Managem therefore invested in equity in the first phase of the project in Sudan.

The first treatment plant, beyond the pilot site, was commissioned last February. It will produce 2 tons a year. “The plant reached the nominal production rate in four weeks. We are on a cruising pace to produce between 1.7 and 2 tons per year,” the CEO hopes.

In the long term, Sudan is expected to contribute 4 to 5 tons of the group’s gold production. The contribution of Tri-K in Guinea is expected around 3 to 4 tons over a decade. Feasibility studies confirmed 30 tonnes of gold reserves. Managem hopes to start construction of the mine in the first half of 2019 for a start-up from the end of 2020.

“We are well on the way to big projects in Africa,” says Imad Toumi. The group is in talks with the Gabonese state for the signing of a mining convention on the Eteke project. This site could produce up to 1.5 tons per year.

In addition, the deal with the Chinese Wanbao marks an evolution in the operating mode of the mining group on the rest of the continent. In markets that are sometimes difficult, joint ventures with strong players mitigate risk.

“Our partnership with the Chinese allows us to target large projects, but also to have allies able to mobilize funding and operate in a difficult country,” says the CEO of Managem.

The Moroccan group still holds 20% of the Pumpi project in the Democratic Republic of Congo. This mine will produce 40,000 tons of copper and 5,000 tons of cobalt per year. Its construction will require an investment of $ 580 million.

Managem’s contribution is close to 40 million dollars. The company has reached an agreement with its partner to import 1,000 tons of cobalt hydroxide which will then be converted into a cobalt cathode in Morocco.

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