International Ferro IFL IMS & Production Report

  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

Highlights:

·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 
September 2011

·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 
prices.

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.

Mining

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 
previous quarter.

Smelting

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.

Co-generation plant

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.

UG2 Plant

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.

Production costs

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.

Cash

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
quarter.

Outlook

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 
below:

Dial-in: +44 (0) 1452 561 263

Conf ID: 54168545

                                   - ENDS-



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

END


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