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LONDON (Alliance News) - Strategic Minerals PLC Tuesday reported a narrowed loss for the first half of the year, as cost cutting more than offset a sharp drop in revenue caused by its decision to halt iron ore exports after a drop in iron ore prices.
The magnetite iron ore producer company, which produces in New Mexico in the US and is also exploring in Australia, is now focusing on domestic sales in the US, having halted exports in response to the lower iron ore price. It is cutting costs in an attempt to return to profitability.
It reported a pretax loss of USD2.8 million for the six months to June 30, narrower than the USD6.9 million loss it reported a year earlier. Its revenue fell by nearly three-quarters to USD5.7 million, from USD21.5 million, but that was more than offset by a sharp drop in cost of sales and administrative expenses, and a drop in amortisation after it wrote off rail infrastructure and intangible assets at the end of December.
It halted exports in February, which meant export sales in the first half were 64,000 dry metric tonnes, down from 247,000 in the first half of 2013. Domestic sales, which are higher margin, rose to 12,850 short wet tonnes, from 8,900 in the first half of 2013. It achieved an average net FOB price of USD76.23 per dry metric tonne, down from USD84.73 a year earlier.
"The drop in iron ore price has made it a challenging half year which resulted in the decision to cease the export of iron ore and focus on domestic sales that are not linked to iron ore price," Executive Chairman Julien McInally said.
"The company reduced its losses in spite of significantly reduced revenue and there will be a further positive impact to our cost structure with the focus purely on our higher margin domestic sales business and the corporate overhead reductions which will take effect in the second half of this year," he added.
"I am pleased with the significant cost reductions to corporate overheads in the last few months and our board is confident that our new strategy will result in significant financial and operational improvements in the medium term," McInally said in the earnings statement.
Strategic Minerals shares were down 9.6% at 0.520 pence Tuesday morning.
By Steve McGrath; stevemcgrath@alliancenews.com; @stevemcgrath1
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