30 Nov 2012 10:23
30 November 2012
International Ferro Metals Limited
("IFL" or the "Company")
Trading Update
International Ferro Metals provides the following trading update for the second quarter. During the quarter, the two furnaces experienced productivity issues due to recurring electrode breaks. The root cause was found to be the supply of inadequate quality electrode paste.
The electrode breaks have significantly reduced the efficiency and output of the furnaces, and in addition the cogen plant, and will therefore have a negative impact on production and costs for the second quarter. The Company estimates second quarter ferrochrome production to be approximately 15% lower than first quarter production, which was 58,000 tonnes.
IFL has now sourced an alternativesupply of high quality electrode paste. The new paste is being introduced and is expected to take approximately three weeks for complete replacement. The furnaces have been stabilised and are now operating at full load. The Company is confident that the furnaces will operate sustainably at full production once the paste substitution has been completed.
Furthermore, a softer global ferrochrome market has led to lower achieved prices than anticipated over the quarter. This, combined with reduced efficiencies of the furnaces, will lead to a financial loss in the first half. However, with the furnaces returning to full production and recent signs of improving demand from China, we expect an improved financial performance for the second half of the financial year.
As a result of the financial impact caused by the production issues over the quarter, IFL expects net borrowings to increase from ZAR420m as guided in the last IMS dated 23 Oct 2012 to approximately ZAR460m, before steadily decreasing over the second half.
The Company is currently in discussions with Eskom regarding its new electricity buy-back programme and will update the market when a decision has been made.
Chief Executive, Chris Jordaan, said: "We are disappointed in the negative impact that the deterioration of the quality of the electrode paste has had on our operations, particularly as it coincides with a softening of realised prices received for our product over the quarter. We have rectified the problem and management is confident that the introduction of the new paste will significantly improve the integrity of the electrodes and reliability of higher production levels. The Company is encouraged by recent signs of stronger demand and prices from China as we head into the New Year."
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For further information please visit www.ifml.com or contact:
International Ferro Metals Limited Chris Jordaan, Chief Executive Officer | +27 (0) 82 653 1463 |
Brunswick Group Carole Cable / Clemmie Raynsford | +44 (0) 20 7404 5959 |
Numis Securities Limited James Black / Alastair Stratton / Stuart Skinner | +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 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.