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Metso and Outotec to join together in ‘industry-shaping combination’

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The boards of Metso and Outotec have unanimously approved a demerger plan and a combination agreement to combine Metso’s Minerals business with Outotec.

As part of the deal, Metso Flow Control, which was recently split off from the Metso Minerals division, will become a pure-play listed entity under the name of Neles.

The combination of Metso Minerals and Outotec is highly complementary and will create a unique company in the industry, according to the two companies. “Metso Outotec will leverage the strengths of both companies, including technology and R&D, product and process excellence, scale and global service offering footprint. The combination will deliver significant benefits to all stakeholders,” they said.

The combined company, Metso Outotec Corp, had illustrative 2018 combined sales and adjusted EBITA of €3.9 billion ($4.4 billion) and €369 million (excluding the impact of the €110 million provision recorded in relation to the ilmenite smelter project as described in Outotec’s 2018 financial statements).

This represents an illustrative combined adjusted EBITA margin of 9.6% in 2018, excluding the benefit of the expected synergies, and also Metso’s recently announced acquisition of McCloskey International. Including McCloskey, illustrative 2018 combined sales would have been approximately €4.2 billion.

Metso Minerals and Outotec expect to achieve run-rate annual pre-tax cost synergies of at least €100 million, and run-rate annual revenue synergies of at least €150 million, delivering significant value for shareholders, they said.

Upon completion of the agreed demerger, Metso shareholders will receive 4.3 newly-issued shares in Outotec for each share owned in Metso on the record date. This implies Metso shareholders would own around 78% of the shares and votes of Metso Outotec, and Outotec shareholders would own the remaining 22% of the shares and votes of Metso Outotec. In addition, Metso shareholders will retain their current shares in Metso, which will be renamed Neles.

The current CEO of Metso, Pekka Vauramo, will become Metso Outotec’s CEO, and the current CEO of Outotec, Markku Teräsvasara, will become the Deputy CEO of Metso Outotec. Eeva Sipilä will become the CFO and Deputy CEO of Metso Outotec.

The board of Metso Outotec will include board members from both companies. It is proposed that Metso Outotec’s Chairman will be Mikael Lilius and that the Vice Chairman will be Matti Alahuhta.

Shareholders representing 33.6% of the shares and votes of Metso and shareholders representing 24.8% of the shares and votes of Outotec have irrevocably undertaken to vote in favour of the transaction, which the companies hope will close in the June quarter of 2020.

Metso Outotec’s headquarters will be in Helsinki, Finland and it will maintain its listing on Nasdaq Helsinki, the companies said.

Outotec Chairman, Matti Alahuhta, called the deal an “industry-shaping combination” that joins two “uniquely complementary companies”, while Metso Chairman, Mikael Lilius, said the deal represented a “transformational combination of two great companies” and the simultaneous creation of an “independent leader in flow control”.

Outotec CEO, Markku Teräsvasara, said: “The combination of Outotec and Metso marks an important milestone in each company’s history and in Outotec’s strategic development. I am excited about the many benefits that the combination will deliver for customers, employees and ultimately shareholders, with the larger scale and combined strengths of both companies. Outotec has a highly compelling portfolio of technologies and capabilities that will be a key catalyst for unlocking many of these benefits. I look forward to building a great new company together with the Outotec and Metso Minerals employees, as part of Metso Outotec.”

And, Metso CEO, Pekka Vauramo, said: “This is a unique opportunity to create value for our customers, employees and partners globally. Metso Outotec will have capabilities that will enable us to drive sustainable growth, while providing our customers with high-quality technology, equipment and services that will ultimately improve their businesses. We will have an extensive global presence, complementary offering, strong services and a large installed base. We also have excellent people – the best talent in the industry. I am therefore eagerly waiting to join with Outotec’s personnel to begin our exciting journey together.”

The combination of the two companies is, according to Metso and Outotec, expected to deliver a range of strategic, commercial, operational and financial benefits:

  • A leading company with a wide presence across the value chain allowing Metso Outotec to provide an end-to-end offering in minerals processing;
  • Enlarged installed base coupled with advanced service offering providing opportunities to unlock significant benefits;
  • Leadership in sustainable technology across all businesses;
  • Breadth across verticals (minerals/metals/aggregates), geography and application provide enhanced performance;
  • Significant revenue and cost synergies, and;
  • Solid capital structure and attractive dividend policy.

The companies said: “The combination of Metso Minerals and Outotec will create a leading company in process technology, equipment and services serving the minerals, metals and aggregates industries. Metso Outotec will also have expertise in specialist areas, such as recycling and energy solutions.”

Metso Outotec will have a presence across the full minerals processing and metals refining value chain, with a “differentiated ability to deliver end-to-end solutions across the whole process from crushing to end products”, they said. The combined company will own a broad portfolio of leading technologies in, for example, comminution, beneficiation and metals refining, as well as a market leading aggregates business and global strength in services.

On a combined basis, Metso Minerals and Outotec had 15,630 employees globally, as of March 31, 2019, with close to 100 nationalities represented.

Completion of the transaction is subject to approval by a majority of two-thirds of votes cast and shares represented at the respective EGMs of Metso and Outotec, regulatory approvals, including competition clearances, and other conditions.

As a result of the combination of Metso Minerals and Outotec, Metso will be renamed as Neles and will become a globally recognised flow control company with highly attractive market positions.

Neles, which will continue to be listed on Nasdaq Helsinki, is expected to create additional value for Metso’s shareholders as a separate entity through:

  • Leading position as a flow control solution provider with market leadership across pulp & paper valves and down stream oil & gas control valves;
  • Continued outperformance of market growth with best-in-class profitability and proven resilience through the cycle;
  • Diversified sales mix both by region and industry;
  • A fully focused, dedicated management to deliver shareholder value and leverage further growth opportunities;
  • Solid balance sheet and financial position, and;
  • Crystallisation of attractive sector trading multiples.

At year-end 2018, Neles had illustrative combined net cash of €72 million. To support the capital structure of Neles, Metso has entered into a €150 million term loan facility agreement, which may be used for the repayment and replacement of Metso’s credit facilities and other liabilities that benefit the flow control business and are to remain with Neles post completion. Prior to the completion, Metso is also expected to enter into a new revolving credit facility of €200 million to be used for the general corporate purposes of Neles.

Olli Isotalo, who was named the new CEO of the Flow Control division last month, will become Neles’ CEO.

Baikal Mining and Outotec sign equipment supply cooperation agreement

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Baikal Mining Company and Outotec have confirmed that they have signed an agreement that could see the technology company supply process equipment to the Udokan Mining and Metallurgical Plant in Kalar District, Russia.

Udokan is thought to host the third largest undeveloped copper deposit globally, with a JORC-compliant resource of 26.7 Mt of copper.

The document, a cooperation agreement according to Outotec, was signed by Baikal’s Chairman of the Board of Directors, Valery Kazikaev, and Outotec President and CEO, Markku Teräsvasara at the St Petersburg Economic Forum. It was later followed by a press release from Outotec saying the two had signed a €250 million ($282 million) delivery contract for the copper operation.

This will see Outotec design and deliver a greenfield copper concentrator and hydrometallurgical plant for the Udokan project.

Around €35 million of the €250 million contract will be booked in Outotec’s June quarter order intake, with roughly two thirds of the order booked for Minerals Processing and a third for Metals, Energy & Water segment.

“Outotec’s delivery includes basic and detail engineering of the concentrator and copper hydrometallurgical plant, procurement, delivery of main process equipment as well as installation supervision, training and start-up services,” the company said.

Kazikaev said in Baikail’s release: “A unique flotation and hydrometallurgical Udokan ore processing flowsheet including bulk and sulphide flotation, leaching, solvent extraction (SX) and electrowinning (EW) was developed as a result of long-term research performed by BMC together with major Russian and international engineering companies.”

Outotec equipment, expected to be delivered in 2020, was selected for the implementation of this ore processing flowsheet, Baikail said.

Teräsvasara said: “We are happy to enter into cooperation with Baikal Mining Company on such a significant project. Our high-end technologies and competent service shall enable Baikal Mining Company to develop consistently and improve production efficiency.”

Baikal said flotation cells with the capacity varying from 20-300 m³ were expected to be used for flotation beneficiation of ores, while hydrometallurgical processing would employ reactors, high-compression thickeners, modular SX units and EW equipment. The latter is expected to reduce the construction period by 20%, Baikal noted.

A fully-automatic cathode withdrawal and loading crane and cathode stripping machine shall alos be applied for copper EW, according to the company.

Kazikaev said the Udokan Mining and Metallurgical Plant shall be the first plant in Russia to use these technologies, all of which are “notable for ore processing potential irrespective of the quality and oxidation of the ore and achieving high process performance”.

Stage one annual capacity of the plant is expected to be 12 Mt/y, with start-up in in 2022. There are also plans for a further exansion up to 48 Mt/y, according to Baikal.

Outotec sees the greenfield project positives in Q1 financial results

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Outotec President and CEO, Markku Teräsvasara, says the company saw signs of increased greenfield investments in both minerals processing and metal refining technologies in the most recent March quarter, providing the company with a positive outlook for the rest of 2019.

The mineral processing and refining company reported 1% year-on-year growth, to €336.1 million ($370.7 million) in the first three months of 2019, alongside a 22% boost in service order intake (€159.9 million) and adjusted EBIT of €11 million, up from €7 million a year earlier.

While overall sales dipped 11% year-on-year to €254.7 million and the company reported negative net cash from operating activities, Teräsvasara painted an upbeat picture in his statement accompanying these results.

“The overall market sentiment developed positively in the first quarter,” he said. “In addition to brownfield investments, we are seeing signs of increased greenfield investments in both minerals processing and metal refining technologies. Order intake was at the same good level as in the first quarter last year. I am pleased with the 22% growth in service orders and the 19% increase in equipment orders for Minerals Processing.”

He said sales decreased primarily due to fewer plant and equipment deliveries, but there was a clear improvement in profitability, both in absolute and relative terms, due to better gross margins (27.1% in Q1 2019, up from 22.8% in Q1 2018).

Teräsvasara added: “I am pleased with the progress in our must-win battles that further improve our performance. These programs focus on strengthening customer focus, service business, product competitiveness, project competencies and people development.”

He also commented on the ilmenite smelter project that has hit the company’s recent financial results, saying negotiations were ongoing in cooperation with the customer and that the company remained confident “we are provided adequately for the project”.

“We continue to be positive about the current market outlook and reiterate our 2019 guidance for sales (increase from 2018) and adjusted EBIT (increase from €63.8 million in 2018),” he concluded.

After the end of the quarter, Outotec received a €140 million greenfield mineral concentrator and gold processing plant order from Ma’aden in Saudi Arabia.

Ma’aden chooses Outotec process equipment for Saudi Arabia gold project

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The Saudi Arabian Mining Company (Ma’aden) has awarded the consortium of Outotec and Larsen & Toubro with an engineering, procurement and construction contract to build a greenfield mineral concentrator and gold processing plant in the Kingdom of Saudi Arabia, the Finland-based company says.

The order, worth some €140 million ($157 million) to Outotec, is almost evenly shared between the reporting segments and will be booked into Outotec’s June quarter 2019 order intake, the company said. The total value of the project is around €540 million.

Outotec’s delivery includes basic and detail engineering, procurement and delivery of process equipment, commissioning, start-up assistance and training services. The new gold processing plant is due to be completed in 2022, it said.

Ma’aden is a leader of the Saudi Arabia mining industry, and an internationally recognised mining company with a global presence, thanks to partnerships with the likes of Barrick Gold, Alcoa and the Mosaic Company.

The Mansourah & Massarah operation will be built in the Central Arabian gold region, with the processing plant capable of up to 4 Mt/y throughput. The concentrator and the gold processing plant has been designed to produce an average of 250,000 oz/y of gold per year over the life of mine, Outotec said.

Markku Teräsvasara, CEO of Outotec, said: “We are extremely pleased with this significant order and continued cooperation with Ma’aden that is growing to be a global mining company.

“Our previous deliveries have included grinding, flotation and filtering technologies as well as alumina calcination technology, and three sulphuric acid plants. Our proven technologies and services enable them to get the best value from their resources and build sustainable operations.”

Outotec continues to invest in technology as sales rise

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Outotec registered a year-on-year improvement in financial performance in 2018, excluding a €110 million ($125 million) ilmenite smelter project provision, the company reported today.

The company’s sales increased 12% in 2018 to €1.28 billion, while its order intake jumped 4% to €1.25 billion. The €110 million provision for the Saudi Arabia project saw adjusted earnings before interest and taxes (EBIT) come in at -€46.2 million, compared with €33.5 million in 2017, yet President and CEO, Markku Teräsvasara, said adjusted EBIT would have almost doubled to €64 million had it not been for this deduction.

“In 2018, we made significant progress in several areas,” Teräsvasara said. “In the beginning of the year, the market for minerals and metals technologies improved, but global macroeconomic uncertainties and reduced metal prices started to affect the market sentiment, and we saw several larger investment decisions being delayed into 2019.

“This was demonstrated in our order intake, which increased 4% year-on-year (in comparable currencies 8%) but declined in the fourth (December) quarter from the comparison period,” he said.

The company’s largest order in the December quarter – around €34 million – was for the delivery of battery chemicals technology in Finland for the Terrafame plant to be built in Sotkamo. The company has since followed this up with a contract in Australia to convert spodumene to lithium hydroxide.

Teräsvasara said profitability continued to improve in the Minerals Processing segment, with EBIT coming in at €78.5 million, compared with €60 million a year earlier.

Outotec said copper, gold, and battery metals projects were the most active during 2018, with demand for minerals processing equipment and spare parts stable throughout the year. In the company’s Metals, Energy & Water divisions, meanwhile, “solid demand” was registered in hydrometallurgical and pelletising solutions, as well as sulphuric acid plants, Outotec said.

Outotec said the €110 million provision related to possible costs for an ilmenite smelter project in Saudi Arabia. Back in October, the company said it was working with the client to investigate the reasons why one of the repaired furnaces in a first-of-its-kind ilmenite smelter had issues starting up.

“The currently estimated provision is based on progress made with the analysis of the furnace,” the company said today, adding that the provision was booked in its December quarter results.

Teräsvasara highlighted the “leading technologies” that were part of the company’s core strength in the 2018 results.

During the year, the company continued to develop its technological capabilities and grow its patent portfolio, with Outotec’s R&D investments representing 5% of its sales and totalling €57 million last year, he said.

Outotec went into a little more detail about this in its 2018 and Q4 review.

The first two industrial references of Outotec TankCell® e630s are running at the Buenavista del Cobre concentrator in northern Mexico, the company said.

“The site has reported an increase of more than 3% in overall recovery with a higher-grade copper concentrate. The TankCell® e630 flotation cell has a nominal volume of 630 m³ and is equipped with a FloatForce mechanism with a diameter of 2,200 mm,” Outotec said.

The company has also developed and filed a patent application for a thermal leaching process to convert spodumene concentrate into battery-grade lithium hydroxide. The lithium hydroxide process has been piloted at the Outotec Research Center in Pori for Critical Elements Corporation in Canada and Keliber Oy in Finland. Lithium hydroxide corresponds to the change in demand in the metal salt markets, it said.

Meanwhile, the new Hybrid filter plates that are 40% lighter, and, therefore, more competitive than conventional plates, were introduced to the spare and wear parts markets during 2018, Outotec said. “The new plates also improve the filtration capacity, provide low residual moisture in the cake, and reduce operational costs,” it added.

Outotec has also designed a skid-mounted, modular prefabricated sulphuric acid plant which significantly lowers the installation cost and time. In addition, the modular plant offers lower operation costs, increased availability and maintainability, as well as environmentally sound and safe operation, it said. “The innovative plant concept is based on Outotec’s technology and expertise gained from 650 plants delivered globally,” Outotec said.

Meanwhile, Outotec is in the middle of a pilot study with Sweden-based miner LKAB to treat industrial waters at its Svappavaara mine in the country. The pilot started in August and consists of nanofiltration and chemical precipitation of sulphate with Outotec’s Ettringite process. The pilot has shown sulphate concentration can be significantly reduced from the inlet value of 1,800 mg/l to the level of 150 mg/l, Outotec said.

A new digital product, Outotec Health Indicator, was also introduced last year. This produces data for flotation process control when used together with Courier on-stream elemental analysers. It enables higher performance in terms of concentrate quality and recovery of valuable minerals, according to the company.

Lastly, Outotec has been developing MesoTherm™ bio-oxidation technology for leaching base metals. The development work has shown it to be effective on certain copper sulphides, yielding 98% copper dissolution.

Outotec heralds “positive” Q3 minerals and metals processing technology markets

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Process technologies and service provider Outotec saw its order intake from the minerals and metals sector pick up in the September quarter as producers continued to focus on improving their existing operations.

The company’s order intake rose 16% year-on-year to €271.5 million ($308 million) during the three months to the end of September, while its sales jumped 17% to €320.2 million.

In the period, the company secured a contract worth €25 million for a greenfield copper concentrator in South America, but it did note that there was “evidence of postponements in larger investments due to the global economic uncertainty, which has impacted metal prices”.

Outotec added: “Producers continued focusing on developing their existing operations. Demand for equipment, smaller technology packages and spare parts remained solid.”

In the company’s service business, Outotec said it was still experiencing supplier constraints, with sales remaining at previous levels to last year. “However, the sales started to improve towards the end of the third quarter,” the company added.

In terms of earnings, Outotec’s EBIT went from €12.3 million in the September quarter of 2017 to €16 million in the most recent quarter.

President and CEO Markku Teräsvasara concluded: “We expect the demand outlook for our technologies and services to remain good. However, major investments continue to develop relatively slowly.”