LONDON (Alliance News) - African Minerals Ltd Wednesday reported narrower losses for the first half of the year as it reported its first revenues and said it had compensated Shandong Iron & Steel Group a further USD42.3 million because the Tonkolili iron ore project had failed in 2012 to meet the targets set out in an investment agreement the companies have.
It also warned that it had experienced interruptions to its shipping programme in the third quarter due to major maintenance and problems with its trans-shippers. It is therefore lowering guidance and now expects to export between 11 and 13 million tonnes of product in 2013.
The company reported revenues of USD404.8 million in the six months to end-June, meaning its pretax loss narrowed to USD24.6 million, from USD86 million a year earlier. It reported earnings before interest, tax, depreciation and amortization of USD99.5 million in the period, compared with a loss of USD14.3 million.
Its results will start to become more meaningful now it has started earning revenues.
It said it had mined 67% more metal and ore in the second quarter compared with the first quarter, and processed 81% more. Exports from the mine in Sierra Leone rose 65% on the quarter, while cash costs fell 19%.
The miner said it was making progress towards stabilising Tonkolili's integrated mine, rail and port operations at 20 million tonnes a year.
In return for an equity investment of USD1.5 billion in Tonkolili, African Minerals had agreed to deliver two million tonnes of iron ore to Shandong Iron & Steel in 2012 and ensure the mine produced 12 million tonnes and sold 10 million tonnes.
After failing to meet the targets, the companies agreed that the African Minerals liability was USD35.5 million for failing to produce 10 million tonnes in 2012, USD9.8 million for not producing 12 million tonnes and USD3.7 million for failing to meet its supply obligation to Shandong. They also agreed a USD32.5 million liability for warranty breaches plus USD8.5 million a year for 2014 and the following two years and then USD5.3 million a year until the end of 2031.
The company said it had settled USD39.2 million of the liability in its 2012 accounts, and had now settled a further USD42.3 million.
The company's shares were down 16% at 164 pence Wednesday morning.
By Steve McGrath; stevemcgrath@alliancenews.com; @SteveMcGrath1
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