23 Jul 2009 07:00
23 July 2009
International Ferro Metals Limited
("IFL" or the "Company")
Furnace restart, Working Capital Facility, Financial Results Estimate
Highlights
Second furnace due to restart in mid-August 2009, full ramp-up expected by mid-September
Open pit mining to return to full production, underground mining at Lesedi to restart and MG2 decline to be developed
Three year irrevocable working capital facility of ZAR500 million secured from Bank of China
Full year results in September 2009 expected to show a loss not exceeding ZAR500m on turnover of ZAR780m
Jannie Muller appointed Chief Financial Officer
David Kovarsky, Chief Executive Officer said:
"International Ferro Metals has watched carefully the development of the global ferrochrome market and the Board has decided the time is right to restart production to serve the increased demand from China where the steel industry is now operating at near capacity. The strength of our relationships in China and the resumption of production place us in good stead for the future. The Board and management would like to thank Dion Cohen for his hard work and contribution and to welcome Jannie Muller as our new Chief Financial Officer."
Furnace restart and resumption of mining operations
In light of stronger demand for ferrochrome, the Board of IFL has decided to recommence production from its second furnace. It is anticipated that the restart of the furnace will begin in the middle of August 2009, and will be ramped up to 90 percent production by mid September 2009. The Company is confident that, with Chinese stainless steel mills now operating at or near capacity, both of the Company's furnaces will operate at their Eskom-constrained 90 percent capacity level from that time.
The Company has approximately 240,000 tonnes of run of mine chrome ore stockpiled. The open pit mine has been operating at a reduced level, and will now be returned to full production capacity of approximately 35,000 tonnes of ore per month. The Company expects the open pit to reach full production capacity within the next six weeks.
IFL has also decided to resume its underground mining operations. Tender documents are being prepared for the recommissioning of the existing Lesedi decline and the decision whether to engage a mining contractor or to conduct mining in-house will be made once tender responses have been received. It is expected that underground mining from the Lesedi decline will recommence from February 2010. The Company is also preparing a tender for mining contractors to develop the second MG2 decline. Management expects that the development of that decline will take approximately three months from the date of commencement and an additional three months for commissioning.
Ore from the current stockpile and the open pit will be supplemented by ore purchases to meet production requirements during the return to full production from the Lesedi mine. External purchases are not expected to add significantly to the Company's cost base.
Working capital facility
IFL is also pleased to announce that its South African operating subsidiary has secured a three year irrevocable working capital facility of ZAR500 million from Bank of China's Johannesburg Branch. The facility, together with the existing cash balance of ZAR340 million as at 30 June 2009 provides the Company with additional flexibility to manage its liquidity position and fund the higher working capital requirements arising from the increased production.
Estimate of Financial Results to 30 June 2009
The Company provides the following information ahead of the preliminary announcement of its full year results, expected on 14 September 2009.
In the financial year to 30 June 2009, the Company experienced the full impact of the well-reported decline in global demand for ferrochrome. The final quarter of the financial year showed an improving position and the Company made significant sales. The Production Report of 17 July 2009 detailed a significant reduction in stock balances in the fourth quarter and showed cash balances of ZAR340 million as at 30 June 2009. The results across the full year will show the effects of the low production volume and prices achieved. Reduced pricing levels have also dictated a write down in the carrying value of ore in the Company's stock pile. Losses have also arisen as a result of adverse exchange rate movements affecting funds held in other currencies. On turnover of approximately ZAR780 million, the Company expects to report a loss before tax not exceeding ZAR500 million.
Further details will be provided in the Company's preliminary results announcement.
The figures set out above are subject to the normal process of audit by the Company's auditors and may change prior to the release of IFL's annual financial statements to the market on 14 September 2009.
Appointment of new Chief Financial Officer ("CFO")
A strategy to concentrate key operational roles geographically within South Africa has been adopted by the Group in order to ensure optimal performance of its operating investment and to facilitate communication with UK based investors. In line with this strategy, Mr Jannie Muller has been appointed Chief Financial Officer with immediate effect. Mr Muller, aged 39, is a Chartered Accountant and Chartered Financial Analyst and joined IFL in June 2007 as Group Financial Manager. The Board thanks the Company's former CFO Mr Dion Cohen for his contribution and dedication to the Company and the role he played in its development.
You are invited to join an analyst and investor conference call hosted by David Kovarsky, Chief Executive Officer today at 9.00am (London time). Details of the call are below:
Dial in number: + 44 ( 0 ) 1452 568 060 Conf ID: 21689495
There will be a replay facility available for the next seven days which can be accessed using the following dial in details.
Dial in number: + 44 ( 0 ) 1452 55 00 00 Conf ID: 21689495#
For further information please visit www.ifml.com or contact:
International Ferro Metals Limited
David Kovarsky, Chief Executive Officer
Mob: +27 82 650 1192
Brunswick Group
Patrick Handley / Carole Cable
Tel: +44 (0) 20 7404 5959
Numis Securities Limited
John Harrison / Stuart Skinner
Tel: +44 (0) 20 7260 1000
About International Ferro Metals:
International Ferro Metals produces ferrochrome, the essential ingredient in stainless steel, from its integrated chromite mine and ferrochrome processing operations in South Africa. International Ferro Metals is listed on the London Stock Exchange under the symbol IFL.
Forward Looking Statements
This announcement contains certain forward looking statements which by their nature, contain risk and uncertainty because they relate to future events and depend on circumstances that occur in the future. There are a number of factors that could cause actual results or developments to differ materially from those expressed or implied by these forward looking statements.