International Ferro (IFL) - IMS & Production Report
RNS Number : 2662P
International Ferro Metals Limited
23 October 2012
23 October 2012
International Ferro Metals Limited
("IFL" or the "Company")
Interim Management Statement to 23 October 2012 and
Production Report for the three months to 30 September 2012
·Ferrochrome ("FeCr") production of 57,949 tonnes for the quarter up 83%
on the quarter to 30 September 2011
·FeCr sales of 54,003 tonnes for the quarter, up 29% on the quarter to 30
·Sky Chrome mining operations produced a record 190,000 tonnes run-of-mine
ore for the quarter, up 54% on previous quarter
·Co-generation plant produced a record of 19.5GWh of electricity for the
quarter, 8.4% of total electricity requirement
·UG2 Chrome Recovery Plant ("CRP") delivered 43,400 tonnes in the quarter,
1,600 tonnes below contractual commitment as a result of the unprotected
strikes in the platinum sector
·64% of targeted production cost savings achieved for the quarter; up from
40% for FY2012
·Net borrowings increased from ZAR308 million at 30 June 2012 to ZAR390
million at 30September 2012, as expected
·Capex was ZAR16.4 million for the quarter
·Zero fatality track record maintained and further significant improvement
in overall safety performance
Post period end:
·Benchmark European FeCr price decreased by 15¢ to US$1.10/lb for the
quarter ending 31 December 2012
·UG2 CRP at Anglo Platinum shut down on 12 September due to unprotected
strikes and no UG2 has been received so far in October
Three months to Three months to Three months to
30 Sep 2012 30 Jun 2012 30 Sep 2011
(tonnes) (tonnes) (tonnes)
FeCr production 57 949 18 505 31 637
FeCr sales 54 003 14 396 41 929
FeCr stock at quarter end 14 795 10 849 14 984
Commenting on the update, Chief Executive Chris Jordaan said:
"This quarter was a record breaking quarter for IFL. We achieved record
chrome ore production from the Sky Chrome mine, we generated a record 8.4% of
our electricity requirements from the Cogen plant, and ferrochrome production
from the smelters is the second best quarter ever and would have been a record
if we adjust for the peak hour power reductions due to high winter tariffs.
We continue to focus on bringing costs down and we have achieved 64% of our
targeted cost reduction.
"Overall, we are delighted by the progress made over the quarter - our costs
continue to come down and our production continues to improve, which puts the
Company in good stead for the future."
Stainless steel and ferrochrome markets
The stainless steel market slowed significantly during the third calendar
quarter of 2012 as a production overhang exerted pressure on prices and
industry profitability. This indirectly affected ferrochrome demand and
The European Benchmark Price of FeCr decreased in the last two quarters of
calendar 2012 from 135¢/lb in Q2 to 125¢/lb in Q3 and 110¢/lb in Q4. This is
mainly due to softening market demand resulting from continued negative
sentiment from the Eurozone debt crisis, which also negatively impacted the
Asia-Pacific region as reported GDP growth in China dropped below 8%.
Ferrochrome prices in China, which are dominated by domestic supply, had a
significant impact on global ferrochrome spot price trends. Both stainless
steel and ferrochrome markets remained depressed throughout the third quarter,
which resulted in an increasing disconnect between the European Benchmark
Price and the spot market, and ultimately led to the 12% decrease in the Q4
2012 benchmark price.
Health and Safety, and the Environment ("HSE")
The Company had no fatalities during the quarter and remains fatality free
since inception, representing 22.9 million fatality free man hours. This
equates to 2.87 million fatality free shifts as at 31September 2012, an
improvement on the last period of 21.2 million hours. The 12 month moving
average lost time injury frequency improved from 4.36 at 30 September 2011 to
3.57 at 30 September2012 as a result of a further visible leadership and
focus on adherence to critical risk controls. IFL is pleased with its fatality
free track record and the progress made in safety performance, and is
committed to maintaining these high standards in the future.
No environmental incidents were reported in the period under review.
Run-of-mine ore production for the quarter to 30 September 2012 decreased to
243,600 tonnes from 293,400 tonnes in the prior quarter. The ramp up at Sky
Chrome progressed to plan and has consistently exceeded 70,000 tonnes per
month of run-of-mine ore since August 2012 (August production was 73,000
tonnes as previously reported).
As expected, the Lesedi open pit reached its end of life in July 2012 and
therefore did not produce any ore in August or September. As such, production
for the quarter was 13,000 tonnes compared with 87,000 tonnes in the
corresponding period last year. Production from the Lesedi underground mine
also declined over the quarter (from 82,000 tonnes to 40,000 tonnes) as JIC,
the Company's underground mining contractor at Lesedi, dismissed approximately
50% of its workforce in July. The Lesedi underground mine produced 14,000
tonnes run-of-mine during August as announced on 11 September 2012. IFL is
currently evaluating underground mining options at Lesedi to ensure optimised
production. The temporary drop in production at Lesedi is not expected to have
a material impact on the Company's performance given the ramp up of its open
pit operations at Sky Chrome.
The ramp-up of Sky Chrome has more than adequately replaced the production
lost from the Lesedi open pit and has made up for most of the production lost
from the Lesedi underground operation. The Company has a number of available
options to replace any potential shortfall of ore production going forward.
Chrome ore production Three months to Three months to Three months to
30September 2012 30June 2012 30September 2011
(tonnes) (tonnes) (tonnes)
Lesedi 53,400 169,800 191,600
Sky Chrome 190,200 123,600 71,900
Total 243,600 293,400 263,500
Recovery rate (%) 55% 62% 59%
Recoveries for the quarter from the ore beneficiation plant averaged 55%
compared with 62% in the previous quarter. The recoveries were negatively
influenced in the period under review due to lower grade weathered material
from Sky Chrome. It is expected that recovery rates should stay at these
levels until such time as Sky Chrome has mined through the weathered material,
which is expected in the next 12 months. The recoveries were enhanced by the
ore concentrate recovery plant which produced 11,700 tonnes, up 12% on the
Production for the quarter was 57,949 tonnes compared with 18,505 tonnes for
the previous quarter. This was in line with management expectations due to the
start-up in June 2012, which went without delays and full load was achieved in
the second half of June. During the expensive peak winter tariff hours the
furnaces were operated at reduced load resulting in an estimated 6.4%
reduction in furnace production during July and August.
Management actively continued to pursue operational improvements, and these
have had noticeable benefits over the quarter. Reductant feed ratio
optimization continued through the quarter, resulting in record anthracite
usage for the quarter. This contributes to further reduction in cost. Furnace
stability also improved, resulting in improved ore and energy efficiencies.
Stable gas plant performance resulted in improvements in the fuel supply to
the co-generation plant and the sinter plant. These positive effects improved
co-generation output and lowered sinter production cost, which further
contributed to the reduced smelting cost. Further improvement in the smelting
performance is expected going forward.
For the quarter under review, the Cogen plant reached a new record and
generated 19.5GWh of electricity which represents 8.4% of the Company's total
electricity requirement for the quarter, compared to 3.7GWh for the previous
quarter which had only one production month. The output of the plant is
directly related to the stability and performance of the furnaces. At
steady-state production from the smelter, the Cogen plant should provide the
Company with 11% of its total electricity requirements.
The UG2 Chrome Re-Treatment Plant ("CRP") at Anglo Platinum's Waterval
operations in Rustenburg delivered its full contractual volumes in July and
August. However, the CRP plant was shut down on 12 September 2012 due to
strike action at Anglo Platinum and only 13,400 tonnes UG2 was received for
September. Under the supply agreement, IFL has the right to receive the first
15,000 tonnes of metallurgical concentrate production per month from the UG2
CRP plant which has a design capacity of about 50,000 tonnes per month of
concentrate. The CRP is still not in operation and as a result, IFL has not
received any UG2 in October as of yet.
The Company has sufficient supplies of ore from its own operations and other
sources and is therefore not reliant on UG2 as supply to its own operations.
Sales and inventory
IFL sold a total of 54,003 tonnes of ferrochrome during the quarter compared
to 14,396 tonnes in the preceding quarter, with the majority of sales to the
European and US markets. The low sales volume in the previous quarter was as a
result of the furnaces being shut down under the Eskom electricity buy-back
programme. Ferrochrome inventory increased to 14,795 tonnes at 30 September
2012 from 10,849 tonnes at 30June2012. Chrome ore sales were substantially
lower at 46,000 tonnes during the quarter compared to 128,000 tonnes in the
previous quarter. This was due to ore being consumed in the smelter as both
furnaces operated throughout the period under review.
Ferrochrome sales for the next quarter are expected to be higher, in line with
higher expected production and inventory is expected to reduce. Ore sales are
expected to remain stable at these levels.
This was another strong cost reduction quarter. Ferrochrome production cost
came in at ZAR6.58/lb Cr. July and August are winter tariff months when
electricity costs are on average 75% higher than during summer months. The
Company is targeting a cost reduction of 12% (ZAR0.76/lb) on FY2011 production
cost of ZAR6.25/lb.
Adjusting for changes in unit electricity and reductant costs, this quarter's
production cost was ZAR5.77/lb compared with ZAR5.95/lb for FY2012. This
represents 64% (ZAR0.49/lb) of the targeted cost reduction.
The cost reduction was mainly as a result of increased anthracite consumption,
improved electricity consumption, higher electricity co-generation and higher
production volumes. There was an increase in ore cost but this is expected to
reduce when Sky Chrome beneficiation recoveries improve and targeted levels of
UG2 is consumed in the smelting process.
The Company's net borrowings increased to ZAR390 million at 30 September 2012
from ZAR308 million at 30 June 2012, in line with previous guidance. The
increase of ZAR82 million is attributable to ZAR70 million utilised in working
capital, ZAR20 million utilised in investing (including ZAR16.4 million of
capex) and ZAR12 million utilised in financing activities, offset by ZAR20m
cash generated from operations. Net borrowings are expected to increase to
about ZAR420 million over the next two quarters after which it is expected to
steadily decrease. This expected increase in borrowings is mainly due to a
forecast increase in working capital and the pricing environment over the next
Fifty two furnaces were shut down in South Africa during the Eskom buy-back
arrangement according to CRU. This was mostly continued during the winter
tariff periods. Although not all, a number of furnaces originally shut down
have now been restarted in South Africa as the Eskom buy-back arrangement
ended in May 2012 and with the winter tariff period ending on 31 August 2012.
This has increased alloy supply. While IFL has been relatively unaffected,
ongoing illegal strikes in the platinum industry have reduced UG2 supply which
has resulted in some improvement in ore prices. These two opposing forces are
expected to continue throughout quarter four. It is therefore expected that
spot prices will remain relatively constant throughout quarter four.
The International Monetary Fund's latest global economicgrowth forecast
released in October shows a gradual strengthening of activity from the low
base of early 2012. Global growth is projected at 3.3% and 3.6% in 2012 and
2013 respectively. Financial easing and recent announcements of large scale
projects by the Chinese Government may stimulate demand toward the end of the
quarter and an increase in spot prices may be expected. Ore demand is expected
to remain buoyant throughout the quarter as supply is reduced.
IFL notes the discussions around the South African chrome ore export duty and
would welcome the introduction of this levy; the Company will monitor this
situation closely for any further developments.
Analyst / investor Conference call
Management will discuss these results in a conference call with the investment
community on Tuesday 23 October at 09.00am (UK time). Dial in details are
Dial-in: +44 (0) 1452 561 263
Conf ID: 54168545
For further information please visit www.ifml.com or contact:
International Ferro Metals Limited +27 (0) 82 653 1463
Chris Jordaan, Chief Executive Officer
Brunswick Group +44 (0) 20 7404 5959
Carole Cable / Clemmie Raynsford
Numis Securities Limited +44 (0) 20 7260 1000
James Black / Alastair Stratton / Stuart Skinner
About International Ferro Metals:
International Ferro Metals produces ferrochrome, the essential ingredient in
stainless steel, from its integrated chromite mine and ferrochrome processing
operations in South Africa. International Ferro Metals is listed on the
London Stock Exchange under the symbol IFL.
Forward Looking Statements
This announcement contains certain forward looking statements which by nature,
contain risk and uncertainty because they relate to future events and depend
on circumstances that occur in the future. There are a number of factors that
could cause actual results or developments to differ materially from those
expressed or implied by these forward looking statements.
This information is provided by RNS
The company news service from the London Stock Exchange
MSCBKBDDKBDBDKB -0- Oct/23/2012 06:00 GMT
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