IFL.L Regulatory News (IFL)

24 Sep 2007 07:00

International Ferro Metals Limited24 September 2007 24 September 2007 International Ferro Metals Limited ("IFL" or the "Company") Full Year Results - Year ended 30th June 2007 International Ferro Metals Limited (LSE: IFL), the integrated ferrochrome producer, presents its full year results for the year ended 30 June 2007. Highlights • Market ferrochrome price increased 40% to US$1.00/lb over the period • Revenue increased to ZAR 184 million (£12.9m) • Ferrochrome facility construction completed in January 2007 • Two furnaces produced 49,000 tonnes of ferrochrome for the year Post period highlights • IFL raised an additional £85.2 million in equity • Moved from AIM to the Main List of the London Stock Exchange • Feasibility study on track to increase capacity to 665,000 tonnes per year • Production temporarily disrupted; remedial action to be completed by the end of January 2008 • Expect to have five operating furnaces in production by late 2009 FY 2007 FY 2006 ZAR'000 ZAR '000 Sales revenue 183,963 1,558 Cost of goods sold (168,006) (3,882) Gross profit/(loss) 15,857 (2,324) Net loss after tax (344,269) (242,423) Loss per share ZAR (R82.78) (R72.64) cents Stephen Turner, Managing Director of IFL commented: "2007 has been a year dominated by the construction and ramp up of theferrochrome facility. Despite the recent production disruption, we remainconfident that our proposed expansion of ferrochrome production capacity to665,000 tonnes per annum will be achieved by late 2009. With our recent fundinground and move to the Official List, we are well positioned to become SouthAfrica's fourth largest ferrochrome producer and look forward to expanding intoand taking advantage of the opportunities in the ferrochrome market." The full published accounts for the financial year ended 30 June 2007 will be posted to shareholders shortly, and are available on the Company's web site, www.ifml.com For further information please contact: International Ferro Metals LimitedStephen Turner, Managing DirectorMob: +61 418 440 844www.ifml.com Brunswick GroupPatrick Handley / Carole CableTel: +44 (0) 20 7404 5959 Numis Securities LimitedJohn Harrison / Stuart SkinnerTel: +44 (0) 20 7260 1000 Notes to editors: IFL is a ferrochrome producer that has recently commenced shipments from itsintegrated chromite mine and ferrochrome processing operations in South Africafor use in the global stainless steel industry. Financial ReviewThe completion of IFL's integrated ferro chrome facility earlier this year andits ongoing ramp-up of operations has positioned the Company to become SouthAfrica's fourth largest ferrochrome producer. IFL is now an integral supplier tothe global stainless steel industry. The year to 30 June 2007 was dominated by the construction of the facility withboth furnaces on line from January 2007 followed by a ramp-up period. For the2007 financial year IFL achieved production of 49,000 tonnes of ferrochrome and revenue of ZAR184 million (£12.9m). In line with expectations, we report a loss of ZAR344 million (£24.2m) of whichZAR96 million (£6.7m) is represented by interest expense and ZAR176 million(£12.4m) is attributable to the accounting treatment of options issued to seed capital providers and finance arrangers at the time of IFL's admission to AIM in2005. 19,878,273 options over IFL shares have been exercised over the year and3,551,890 such options remained on issue at 30 June2007. A further 6,000,000options have been issued to directors and senior management since the financialyear end. IFL has an unredeemed capital expenditure balance of approximately ZAR1.4billion, which should be utilised prior to the offset of its tax losses ofZAR220 million before tax is payable by the Company. The proposed capitalexpenditure of over ZAR3 billion to increase production capacity to 250% of thecurrent 267,000 tonnes per year would also be redeemed before tax is payable. OperationsThe Group's Lesedi mine successfully opened this year and has consistentlydelivered chromite to the smelter. Mining of the additional and largerSkychrome deposit is being planned and our consultants SRK are preparing itsmine plan. Work to date on Skychrome continues to support Management's viewthat it is an excellent chromite deposit which will support IFL's continuedexpansion. ExpansionThe Company is progressing well with its feasibility study to increase annualproduction capacity to 665,000 tonnes of ferrochrome. We expect to commenceconstruction in March 2008 and to be in production in late 2009 with fivefurnaces in operation, subject to finalising appropriate debt facilities toprovide the remaining finance for the expansion. The ferrochrome marketDemand for IFL's ferrochrome is strong and our two offtake agents, Jiuquan Ironand Steel Group Company Limited and CMC CoMetals, have increased theiraggregate guaranteed offtake commitment to 400,000 tonnes per year to takeeffect following completion of the proposed expansion. To date the Company hassold product to China, Germany, Italy, Brazil, USA, Thailand, Japan andBelgium. It has been reported that European stainless steel producers currently have lowferrochrome stockpiles and that the outlook for ferrochrome prices is strong.During the 2007 financial year, the price of ferrochrome increased by 40% fromUS$0.71/lb to US$1.00/lb. Our environmentAs a new entrant deploying modern technology, IFL is the only South Africanferrochrome producer which exclusively uses closed furnaces and as a resultdoes not have significant exposure to the environmental liabilities arising fromthe operation of open furnaces. Other ferrochrome producers in South Africa aremoving to close or enclose their open ferrochrome furnaces. This action isbeing encouraged by the South African government through the introduction of demanding environmental guidelines and could lead to a reduction of ferrochromesupply through the change over period. IFL has continued to work with its host communities through its socialresponsibility programme. The South African Minister for Minerals and Energyreferred to IFL in Parliament as an example of successful Black EconomicEmpowerment. Since 30 June 2007Subsequent to the financial year end the Company issued an additional £85.2million in equity, bringing its total issued capital to 504,010,792 ordinaryshares. This funding is expected to provide the full equity component required for construction of the proposed additional three furnaces and the Company is inthe process of negotiating debt finance for the balance of the fundingrequirements. Following the early commissioning of the existing furnaces and bringing theintegrated facility into production under its capital budget, it wasdisappointing that a temporary production disruption occurred earlier this monthafter identifying a design fault in the pressure rings holding electrodeswithin each of IFL's two furnaces. IFL is planning to complete remedial actionto replace the pressure rings by the end of January 2008 by taking a stagedapproach during planned maintenance cycles to the extent possible to minimiseproduction disruptions. The Company expects the complete integrated facility,representing its mine, beneficiation plant, pelletising and sintering plant, andits two furnaces to be operating at full design capacity of 267,000 tonnes perannum from January 2008. Following its admission to the Main List of the London Stock Exchange on 31August 2007, the Directors believe that IFL is well positioned to takeadvantage of opportunities for expansion and consolidation in the ferrochromeindustry. CONSOLIDATED INCOME STATEMENT Consolidated Parent 2007 2006 2007 2006 ZAR'000 ZAR'000 ZAR'000 ZAR'000 Sales revenue 183,863 1,558 - - Management Fees - - 24,000 18,000Received Cost of goods sold (168,006) (3,882) - - Gross profit/(loss) 15,857 (2,324) 24,000 18,000 Other income /expenses Administrative and other expenses 117,864 48,333 19,482 72,739 Non employee share based payment expense - 190,152 - 190,152 Losses on mark-to-market ofderivatives 176,256 28,273 162,127 26,667 Net loss before interest and tax (278,263) (269,082) (157,609) (271,558) Finance income 29,766 29,359 91,388 48,133 Finance costs (95,772) (2,700) (10,795) (2,457) Net loss before tax (344,269) (242,423) (77,016) (225,882) Income tax expense - - - - Net loss after tax (344,269) (242,423) (77,016) (225,882) Attributable to: Minority interest (2,640) (610) - - Members of the parent (341,629) (241,813) (77,016) (225,882) (344,269) (242,423) (77,016) (225,882) Loss per share (cents ZAR ZAR ZAR ZARper share) - basic loss per share (82.78) (72.64) (18.66) (67.85) - diluted loss per share (82.78) (72.64) (18.66) (67.85) CONSOLIDATED BALANCE SHEET Consolidated Parent 2007 2006 2007 2006 ZAR'000 ZAR'000 ZAR'000 ZAR'000Current assets Cash and cash equivalents 43,929 85,348 62,582 8,109 Receivable - Inter-company - - 31,628 - Trade and other receivables 33,073 51,945 127,844 55,045 Prepayments 4,044 3,327 4,044 3,327 Inventories 140,821 772 - - Other current assets 141,916 195,204 - - Total current assets 363,783 336,596 226,098 66,481 Non-current assets Non-current receivables - 697 - 1,297 Other Financial assets - - 1,025,657 1,006,657 Property, plant & equipment 1,632,388 948,498 70,886 75,197 Other non-current assets 124,371 236,576 516 516 Total non-current assets 1,756,759 1,185,771 1,097,059 1,083,667 Total Assets 2,120,542 1,522,367 1,323,157 1,150,148 Current liabilities Trade and other payables 134,406 214,321 10,298 57,997 Derivative liability 20,994 - 5,479 - Provisions 23,118 5,852 13,151 2,870 Total current liabilities 178,518 220,173 28,928 60,867 Non-current liabilities Interest bearing loans and borrowings 898,631 218,475 - - Derivative liability 42,432 19,598 42,432 19,598 Provisions 33,971 5,022 7,261 - Total non current liabilities 975,034 243,095 49,693 19,598 Total liabilities 1,153,552 463,268 78,621 80,465 Net assets 966,990 1,059,099 1,244,536 1,069,683 Shareholder's equity Contributed equity 1,607,075 1,360,675 1,607,075 1,360,675 Share based payment reserve 7,480 1,720 7,189 1,720 Accumulated losses (651,215) (309,586) (369,728) 292,712) Parent entity interests 963,340 1,052,809 1,244,536 1,069,683 Minority interests 3,650 6,290 - - Total shareholders equity 966,990 1,059,099 1,244,536 1,069,683 STATEMENT OF CASH FLOW Consolidated Parent 2007 2006 2007 2006 ZAR'000 ZAR'000 ZAR'000 ZAR'000 Cash flows from operatingactivities Receipts from customers 169,621 1,558 - - Receipts from subsidiary - - 24,000 - Payments and advances to suppliers and employees(inclusive of goods andservices tax) (366,406) (91,513) (16,138) (30,611) Interest paid (8,002) (2,445) (709) (2,457)Net cash flows from operating activities (204,787) (92,400) 7,153 (33,068) Cash flows from investingactivities Payments for property, plant & equipment (501,954) (634,488) (50) (10) Guarantees paid (refer note 21, 25) - (431,263) - - Loan to Minority Shareholder - - - (7,500) Investment in subsidiary - - - (1,025,657)Acquisition of subsidiary (Purity) (64,486) (11,375) (64,486) (15,549) Deposits paid - - - 763 Interest received 29,766 29,371 386 12,349 Net cash flows from investing activities (536,674) (1,047,755) (64,150) (1,035,604) Cash flows from financingactivities Proceeds from issues of shares (net of issue costs) 132,515 1,072,490 132,515 1,089,785 Loans to subsidiary - - (13,136) (15,032) Repayment of shareholder loans - (16,514) - (16,514) Proceeds from borrowings 577,863 151,246 - - Net cash flows from financing activities 710,378 1,207,222 119,379 1,058,239 Net (decrease)/increase in cash held (31,083) 67,067 62,382 (10,433) Cash at the beginning of the financial year 85,348 15,574 8,109 15,344 Effects of exchange rate changes on cash (10,336) 2,707 (7,909) 3,198 Cash and cash equivalents at the end of the year 43,929 85,348 62,582 8,109 Mineral Reserves Mineral Resources (geological losses applied) Tonnage Cr2O3 Cr:Fe Tonnage Cr2O3 Cr:Fe (kt) (%) ratio (kt) (%) ratioProved MeasuredBuffelsfontein Buffelsfontein MG3 4,950 34.93 1.25 MG2T 1,988 36.84 1.33MG2 (1) 4,536 21.3 1.04 MG2B 5,149 37.25 1.33MG1 4,716 32.97 1.11 MG1 5,214 40.25 1.47Probable IndicatedBuffelsfontein Buffelsfontein MG3 1,220 34.46 1.19 MG2T 535 37.14 1.36MG2 (1) 2,215 21.3 1.11 MG2B 1,434 37.93 1.37MG1 1,438 32.97 1.23 MG1 1,564 40.49 1.48 Proved & 12,906 26.87 1.10 Measured & 22,054 37.52 1.35Probable IndicatedReserves Resources Inferred Buffelsfontein MG3 1,882 34.38 1.18 MG2T 730 37.27 1.36 MG2B 2,081 38.00 1.36 MG1 2,188 40.55 1.49 Sky Chrome MG1 44,442 36.63 n/r Inferred 51,323 36.78 (2) ResourcesTotal Reserves 12,906 26.87 1.10 Total 73,377 37.00 (2) Resources 1 Tonnages and grades for the MG2 are before scalping underground and includethe parting between the MG2B and MG2T reefs. 2 The Cr:Fe ratio cannot be calculated for the totals since this value was notreported for the MG1 at Sky Chrome. 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