Int Ferro Share News (IFL)

Thu, 22nd Jan 2009 10:28

LONDON, Jan 22 (Reuters) - South Africa's International Ferro Metals Ltd plans to conserve as much of its year-end cash balance of 526 million rand ($51.2 million) as possible as it waits for the ferrochrome market to improve so it can restart operations, the firm said on Thursday.

'The company's actions have been designed to conserve cash whilst retaining the ability to start production efficiently when demand for ferrochrome returns,' it said in a statement.

The firm, which shut down its two furnaces in November due to low prices, has cut all major capital expenditure and reduced monthly ongoing costs to 35 million rand per month, it added.

'We suspect there is no rush to buy IFM shares, but their cash position, which we expect to increase from here as inventories are sold and the cash collected, implies they will not go bust,' said analyst Simon Toyne of Numis Securities in London.

The firm's shares, which have shed 90 percent since touching a peak last May, were 9 percent lower at 18 pence by 1010 GMT, compared to a 5.2 percent increase in the UK mining index .

IFM posted a 24 percent quarter-on-quarter fall in sales of ferrochrome during the three months to the end of December to 21,410 tonnes due to weak demand. The year-on-year decline was sharper at 34 percent.

The firm said it had noticed a slight pick up in demand from China, a major customer, and there was optimism that this might continue.

'However, the abundance of chrome ore inventory and the availability of ferrochrome, particularly from Indian and Chinese producers, will continue to dampen prices and demand from non-Chinese sources,' it said.

Contract prices for the first quarter have not been settled, but spot prices were hovering around 70-90 cents per lb, compared to the fourth-quarter contract price of $1.85.

South Africa is the world's biggest producer of ferrochrome, an alloy that is a key component of stainless steel, giving it shiny and non-corrosive qualities.

(Reporting by Eric Onstad; Editing by David Holmes and Jon Loades-Carter) ($1=10.276 Rand)

(eric.onstad@thomsonreuters.com; +44 20 7542 7093; Reuters Messaging: eric.onstad.reuters.com@reuters.net)

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