London, UK, 9 January 2013: Sierra Rutile Limited (AIM: SRX) ("SRL") is pleased to provide an operational update on developments during the fourth quarter of 2012 ("Q4" or "the Period") and the 2012 year.
· Full-year 2012 rutile production of 94,493 tonnes, a 39% increase on 2011 production;
· Full-year 2012 ilmenite production of 22,008 tonnes, a 38% increase on 2011 production;
· Q4 production of 25,502 tonnes of rutile and 6,378 tonnes of ilmenite, both ahead of budget;
· Lanti Dry Mining construction completed and commissioning commenced on budget and ahead of schedule. First product produced from Lanti Dry Mining concentrator.
· Exceptional new Gangama Dry Mining project announced:
- US$507m pre-tax NPV10;
- 238% pre-tax IRR;
- 8-month project payback; and
- Detailed engineering work and project implementation plan underway.
· Scoping study on Sembehun Dredge completed, providing long-term, low-cost production optionality for SRL with compelling economics:
- US$347m pre-tax NPV10;
- 34% pre-tax IRR; and
- 22-year project life.
Full-year 2012 production was 94,493 tonnes of rutile and 22,008 tonnes of ilmenite, respectively 39% and 38% ahead of 2011 volumes (2011: 67,916 tonnes of rutile and 15,946 tonnes of ilmenite). This strong result was contributed towards by Q4 production of 25,502 tonnes of rutile and 6,378 tonnes of ilmenite.
Construction of the Lanti Dry Mining plant was completed during the quarter and commissioning commenced. First ore was successfully processed through the concentrator and the concentrate transferred for onward processing in the mineral separation plant. Production ramp-up is continuing.
A significant change in SRL's expansion plans was announced on 31 October 2012 with the completion of a pre-feasibility study into the dry mining of the Gangama deposit ("Gangama Dry Mining). The pre-feasibility study reported an exceptional project with a pre-tax NPV10 of US$507 million, an impressive 238% pre-tax IRR and a payback period of just 8 months. Furthermore, as it replicates, on a larger scale, the Lanti Dry Mining project that was successfully completed within the quarter, Gangama Dry Mining represents a much lower-risk option of increasing SRL's production to the 200,000 tonnes per annum level. SRL has commenced detailed engineering work and a project implementation plan on the project in order to fast-track its development.
The Gangama Dry Mining project has replaced the new large dredge in SRL's near-term expansion plans. The feasibility study into the new large dredge has, however, been modified into a scoping study on the dredging of SRL's Sembehun deposit (the original feasibility involved the dredging of Gangama followed by Sembehun). This study yielded a pre-tax NPV10 of US$347 million, a 34% pre-tax IRR and a project life of 22 years, and provides a low-cost, long-term option for the development of SRL's assets.
SRL currently holds $24.6 million of cash and has inventory on hand of 22.9k tonnes of rutile.
Prices for Q4 have remained, as with Q3, at softer levels than in the first half of 2012. These prices remain, however, at very high levels when compared to historical prices for all SRL's products. Furthermore, SRL remains positive regarding the medium- and long-term demand for its products, and expects to see a strengthening of the market during 2013.
Commenting on the fourth quarter performance, CEO John Sisay said: "The quarter has seen further major advancements for SRL. Firstly, we have successfully implemented our first new production expansion, demonstrating that we can bring on new projects as well as restoring our existing assets to much higher levels of sustainable operation. Secondly, we have identified an exceptional new project with Gangama Dry Mining that is already low-risk, having just implemented a similar project at Lanti, but which also has highly impressive project economics. Finally, we have confirmed SRL's ability to be a meaningful low-cost and long-term producer of rutile with the Sembehun Dredge. We enter 2013 in an extremely robust shape and expect similar success for the coming year."
For Further Information:
Sierra Rutile Limited
Chief Financial Officer
+44 (0)20 7074 1800
RBC Capital Markets
Nominated Adviser and Joint Corporate Broker
Martin Eales / Jonathan Hardy
+44 (0)20 7653 4000
Joint Corporate Broker
+44 (0)20 7321 2508
Kreab Gavin Anderson
Andy Jones/ Anthony Hughes
+44 (0)20 7074 1800
Notes to Editors
About Sierra Rutile Limited
Sierra Rutile produces titanium feedstock industrial minerals (primarily rutile, with some associated ilmenite), as well as smaller quantities of zircon. Sierra Rutile's mine, located in the south west of Sierra Leone, is one of the largest natural rutile deposits in the world, with a JORC-Compliant Mineral Resource for measured, indicated and inferred resources for the Sierra Rutile mine of over 600 million tonnes (as at February 2011).
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