Last checked at 30 May 2018 07:00
Red Rock Resources PLC
("Red Rock" or the "Company")
Steelmin Update
Process of commissioning Furnace V continues
30 May 2018
Red Rock Resources Plc, the natural resource development company with interests in gold and steel feed materials, announces, further to the announcement of 21st February 2018, an update on progress in commissioning the ferrosilicon plant at Jajce, Bosnia owned by a subsidiary of Steelmin Limited ("Steelmin"). Steelmin is 22% owned by Red Rock.
On 5th May 2018 Steelmin began to heat and power up Furnace V at Jajce since when the ramp-up towards commercial production has proceeded to plan. The ramp up is expected to continue over the coming few weeks to build to full power including laboratory checks on material being produced.
Steelmin's plant will initially consist of the refurbished Furnace V of 29,000t of ferrosilicon p.a. and 5,800t of microsilica, and after a planned refurbishment of a second furnace will have a combined annual capacity of 48,720 tonnes ferrosilicon (FeSi 75) and 9,700 tonnes of microsilica.
Andrew Bell, Chairman of Red Rock comments: "On behalf of all our shareholders, we congratulate the team at Steelmin on successfully reaching this important milestone and look forward to announcing further progress in the days to come."
Steelmin - Background
The Steelmin plant and facility is located in central Bosnia, 104 kilometres north west of Sarajevo. The complex, formerly part of Electrobosna, was originally built in the 1970s by Elkem, a major silicon and alloy producer based in Norway, and was one of the largest and best known producers of ferrosilicon and silicon metal in Europe. It was closed down in 1992 due to the Bosnian War, was then privatised and the six furnaces were sold off in two separate parts in 2000. The plant was brought back online until finally being shuttered again in 2004 due to increasing exports pressure from Chinese producers.
Anti-dumping regulations have since been implemented by the European Commission; which significantly reduced both Chinese and Russian exports into Europe, allowing prices to stabilize and rise over time. The second, smaller, facility split off from the original is now being operated by the Italian ferro-alloy producer Metalleghe, and has been successfully producing next to Steelmin's plant for the past 12 years.
Steelmin - Assets
Steelmin controls furnaces IV and V from the original Electrobosna complex. Furnace V has a 48MVA installed power Elkem furnace, and is connected to two chimneys on the roof of the production hall. Furnace IV, the smaller of the two, has a 30 MVA Tagliaferri furnace with three chimneys, preventing the emission of gases in ambient air to comply with EU regulatory requirements. Given its larger total capacity Steelmin decided to bring furnace V on initially and then move to recommission furnace IV later in 2018.
In addition to the two furnaces, the facility in Jajce houses a filtration plant, warehouse storage for raw materials, pouring and dispatch hall as well as a plant for process water recirculation.
Refurbishment for the second furnace is expected to begin later in 2018.
Power remains the most significant input cost to ferrosilicon production and this is provided by abundant and economical hydro-power available across the region. Furnace feedstock such as quartz is also sourced from the region.
Steelmin Products and Markets
Steelmin intends initially to produce ferrosilicon containing 75% silicon and 25% iron, a product primarily used as a deoxidising agent and to add electrical conductivity and corrosion resistance to steel. A by-product of ferrosilicon production will be microsilica, which is a dust used in the manufacture of speciality concretes in the construction industry as well as in advanced refractories and ceramics. Furnace V is expected to produce 29,000t of ferrosilicon per annum as well as 5,800t of microsilica.
Over time Steelmin is expected to produce both ferrosilicon as well as additional silicon alloys that offer higher margins and additional upside. Currently ferrosilicon trades at over €1500 a ton compared with between €1280-1350 a ton at the time of Red Rock's investment in June 2017.
European ferrosilicon production depends critically on access to cheap power (locally generated hydroelectric power in the case of Jajce) since this is up to half the cost of production. Prices are historically driven by steel production levels, the level of Chinese pricing and production allowed into Europe, as well as the associated export and anti-dumping tariffs. Since late 2016 overall Chinese export prices have begun to rise, positively impacting European produce prices. Key input costs such as metallurgical coal are also closely correlated to realized ferrosilicon prices.
For further information, please contact:
Andrew Bell 0207 747 9990 Chairman Red Rock Resources Plc
Scott Kaintz 0207 747 9990 Director Red Rock Resources Plc
Roland Cornish/ Rosalind Hill Abrahams 0207 628 3396 NOMAD Beaumont Cornish Limited
Jason Robertson 0207 374 2212 Broker First Equity Limited
This announcement contains inside information for the purposes of Article 7 of EU Regulation 596/2014.
Glossary
Ferrosilicon: ferrosilicon produced at Steelmin contains 75% silicon, and is primarily used as a deoxidising agent in steel production, adding electrical conductivity and corrosion-resistance properties to steel
Microsilica: a by-product of silicon and ferrosilicon production, used in the construction industry for its added strength and abrasion resistance