Materion Corporation: Investment Thesis

Materion (MTRN) produces high-tech metals for industry. It also has a near monopoly position in one minor metal, Beryllium (symbol Be). I believe the company has off-book assets and intellectual property that make it an undervalued situation. However, I do not see a catalyst for a move now, so I’m watching, but do not have a position.

MTRN was founded in the ‘30s based on the work in the ‘20s at Brush Laboratories. This involved the element Be. Be is an extremely light and strong metal but is quite difficult to produce and to alloy with other metals. MTRN mines its Be from a unique deposit at Spor Mountain, Utah that produces about 75% of the world’s Be. In fact, the major competitor to MTRN, ULBA in Kazakhstan, doesn’t do any mining. It sells off the remaining Soviet stockpile.

Be is used in two main ways. About 80% is alloyed with copper to produce a metal that is stronger than some steels, formable, nonmagnetic and has much greater electrical/thermal conductivity than other strong metals. It’s used in a wide variety of applications, from springs to oil drilling to electronics.

Be is also used in metal form for applications that need ultra-high performance, like aerospace and defense. The DoD was so concerned about the supply of Be that it built a plant in Ohio with MTRN to ensure supply. This is still running; about 70% of its output goes to DoD. To illustrate how high performance this is, it was banned from F1 racing to prevent the McLaren team from getting an overwhelming advantage.

Over the years, MTRN has extended its product line beyond Be. It now produces a wide line of clad metals, high-performance alloys, and metallic chemicals. Many of these products only have niche markets but are superior or irreplaceable in what they do.

The end markets for MTRN’s products, as you would expect, are mostly high-tech industries.

Consumer Electronics

28%

Industrial Components

15%

Medical

11%

Defence

Automotive Electronics

Other

11%