Bellzone Mining Plc (BZM), an iron-ore producer in Guinea that sells to Glencore International Plc (GLEN), slumped to a record low in London trading after trimming an output forecast at its Forecariah mine in the African nation.
The shares dropped as much as 49 percent to 5.86 pence, the lowest price since starting to trade in April 2010, and were down 39 percent at 11:36 a.m. London time. Trading volumes were already more than eight times the three-month daily average.
Bellzone cut its production forecast at Forecariah after revising ore estimates earlier this year. Output will be 800,000 to 1 million metric tons in 2013, down from an earlier target of 3 million to 4 million tons, Bellzone said today in a statement. Production next year and in 2015 will be about 1 million tons.
The revision is “balanced” and “resets the expectations at Forecariah,” Chief Executive Officer Glenn Baldwin said by phone from London. Bellzone shares have dropped 50 percent this year, valuing the company at 51.9 million pounds ($78.4 million), as slowing iron-ore demand weighs on prices.
The price of iron ore delivered to China, the biggest buyer, has declined 14 percent in the past five weeks from its high for the year. Bellzone shipped its first ore from Forecariah, a 50-50 venture with China International Fund, in December and plans a second project in Guinea that it has previously said will cost an estimated $4.4 billion.
Today’s statement “is going to give little confidence in the prospects for the company,” said John Meyer, an analyst at London-based broker and adviser SP Angel Corporate Finance LLP. The cut “would suggest that the project is marginal at this stage til costs can come down,” while shipments may be “barely profitable” at current prices, he said.
Bellzone attributed the lower forecast to the “limited quantity” of estimated resources at Forecariah that can be exported without being refined, known as direct shipping ore, or DSO. In January the company revised the estimated DSO resource at the mine to 3.2 million tons.
Bellzone will continue to explore for additional DSO resources, according to Baldwin, who said existing infrastructure can support production above 1 million tons. The company is “realizing good prices” for its sales, he said.
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