SRX.L Regulatory News (SRX)

10 Jul 2006 07:01

Titanium Resources Group Ltd10 July 2006 Titanium Resources Group ("TRG" or "the Group") Trading and Operational Update 10 July, 2006: Titanium Resources Group today issues an update on trading duringthe six month period ended 30 June 2006 ("the Period") ahead of its close periodbefore the publication of interim results on 3 September. The Directors of TRG("the Board") believe that TRG's anticipated trading performance for 2006 is notin line with the market's expectations. Financial Results Trading during the Period has been adversely affected by two important factors: Fuel price Diesel fuel prices were significantly higher than the initial assumptions of US$1.5 per Imperial Gallon. The Group plans to convert the mine's power supply fromdiesel to heavy fuel oil which will bring fuel costs in line with management'sbudget targets. The Group hopes to complete the heavy fuel oil conversionaround the time of the ramp-up of Dredge D2 which is scheduled for mid-2007.Dredge D2 will double rutile production. The Group's bauxite mine has not beenaffected by fuel price increases due to the structure of its operatingcontracts. Production Despite the successful shipment of 15,500 tonnes of rutile and 400,000 tonnes ofbauxite since re-start of the two mines, the Group had expected to ship 20,000tonnes of rutile and the financial results for the Period will be affected as aresult. The production shortfall was due principally to lower equipmentavailability than originally assumed. The Group is confident that thecommissioning production difficulties experienced at the rutile operation havenow been satisfactorily resolved. The Group expects to meet its originalforecast production of 50,000 tonnes in the second half of 2006. The combined effect of the increase in fuel prices and lower production ofrutile will impact negatively on the Group's expected EBITDA by approximatelyUSD 17m for the financial year ending 2006. Expansion Project Construction work on rutile Dredge D2 is underway with first production fromthis unit expected in the second half of 2007. In addition, the Group expectsto complete all the test work for the third dredge (Dredge D3) in the near term.In anticipation of a successful outcome of the test work for Dredge D3, theGroup has acquired an option on an existing dredge. This will expedite theimplementation of the Dredge D3 project and significantly reduce capital costs. Exploration Programme The Group has embarked on an aggressive exploration programme to increase theTRG's proven and probable reserves on both the rutile and the bauxiteconcessions. Areas to be drilled have been identified and the Group isincreasing its drilling capacity to cope with the expanded explorationprogramme. In addition, the Group has secured additional explorationconcessions in Sierra Leone, including the previously announced Rotifunk rutiledeposit. Product Market Status World markets for all TRG's products (rutile, ilmenite, zircon and bauxite)remain strong and the Group has had no difficulty securing long term off takeagreements for its production. At present, the Group has long-term rutile salescontracts in place with a number of major pigment producers. The bauxite minehas long-term sales agreements in place with Alcoa World Alumina LLC andGlencore AG to sell the mine's total estimated annual production of 1.2 milliontonnes per annum. Ends For further information TRGWalter Kansteiner, Non-executive ChairmanTel: +44 (0) 207 321 0000 Aura FinancialMichael OkeAndy MillsTel: +44 (0) 207 321 0000 This press release has been issued by TRG and is the sole responsibility of thecompany. This press release does not contain or constitute an offer orinvitation to purchase or subscribe for any securities of TRG and should not berelied on in connection with any decision to purchase or subscribe for any suchsecurities. The securities referred to herein have not been and will not be registered underthe U.S. Securities Act of 1933 and may not be offered or sold in the UnitedStates absent registration under the Securities Act or an available exemptionfrom it. Notes to Editors Titanium Resources Group Titanium Resources is the holding company of a group of companies that areengaged in the mining, marketing and exploration of mineral resources. The Groupowns two mining operations in the Republic of Sierra Leone - the Sierra RutileProject and the SML Bauxite Project. The Sierra Rutile Project employs conventional dredging and processing methodsto produce mineral sands in the southwest of Sierra Leone, where its productionpreviously represented approximately 30 per cent of the world's annual supply ofnatural rutile. Natural rutile is a high titanium-bearing feedstock employed inthe manufacture of titanium dioxide (TiO2) pigments that are used in paint,plastics, paper and pharmaceuticals and the production of titanium metal andwelding rods. In close proximity to the Sierra Rutile mine is the SML BauxiteProject. Bauxite from the SML bauxite mine is premium grade metallurgicalbauxite which is the primary feedstock used in the production of aluminium. Bothprojects employ proven mining and processing techniques and rutile and bauxitefrom this region are recognised for their high quality. The bauxite operations The SML mining lease covers approximately 580 square kilometres in the southwestof Sierra Leone, 150 km southeast of the capital Freetown. SML is situated on ahigh-grade ore body and employs proven, conventional mining and processingtechniques. In January 2005, SML was granted mining lease ML1/05 for a period of ten yearswith the option to renew for a further ten years. Independent analysis of SML'sexisting bauxite reserves at Gbonge, Gondama, Jenega, Konta and Wunde areestimated at 12.4 million tonnes (as estimated by Mine Development Associatesand included within the August 2005 Admission Document) which should supportproduction for approximately ten years at normal operating levels. It isenvisaged that further exploration work will be undertaken to discoveradditional resources in the Gbonge Hills and the Gondama sector which lie withinthe mining lease area. The bauxite from Gondama/Gbonge is highly-prized gibbsitic bauxite which may beused as feed for low temperature and high temperature digestion as well as feedfor sweetening digestion. This versatility creates significant marketingflexibility. This information is provided by RNS The company news service from the London Stock Exchange