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[Ferro-Alloys.com]International Ferro Metals Ltd shares fell on Thursday after it said production and sales of ferrochrome declined quarter-on-quarter, whilst prices fell and costs increased, but the company still reiterated its full-year guidance for 2015.
International Ferro shares fell 13% to 3.00 pence per share on Thursday morning.
"The temporary shutdown of the metal recovery plant over three weeks in February, following an internal safety inspection, has impacted both production volumes and costs during the quarter; however, March has shown a marked improvement on both fronts and full-year production guidance remains approximately 200,000 tonnes of ferrochrome," said Chief Executive Chris Jordaan.
In the third quarter ended March, ferrochrome production totalled 49,085 tonnes, which was "marginally" down quarter on quarter due to lower metal recovery from slag processing. Ferrochrome sales reached 51,412 tonnes, which is down 4% from the previous quarter when it sold 53,517 tonnes.
Both ferrochrome production and sales were also down year on year by 10% and 15%, respectively.
The company reduced its production guidance for the full year when it released its half-year results in February to 200,000 tonnes of ferrochrome, and the company said Thursday that despite the fall in production, it is confident it can still achieve the target. The company's original production target was around 220,000 tonnes.
"Operationally it is expected that production will increase in the second half as well as a marked reduction in costs. The diversified market into which International Ferro sells its alloy will allow the company to optimise the sales distribution," it said.
As International Ferro sold more ferrochrome than it produced in the quarter, its ferrochrome inventory and stockpile fell to 8,658 tonnes at the end of March, 21% lower than at the end of December.
The Lesedi underground mine produced 45,772 tonnes run of mine, up 31% from the 34,839 tonnes produced in the previous quarter ended December, whilst the Rooderand mine experienced a substantial increase to 22,495 tonnes run of mine from only 8,392 tonnes. However, the ramp up at Rooderand was "more difficult than expected", International Ferro said, leading to higher costs.
"We are pleased with the increase in production at Lesedi, as we continue to make headway with our long-term objective of securing our own chrome ore supply," said CEO Jordaan. International Ferro is revising the mine plan at Rooderand following the cost increases.
International ferro said ferrochrome prices have continued to fall in 2015, falling a further 6% in the first quarter, but said it has benefited from the depreciation of the South African rand against the dollar, with revenue from South African-based producers improving.
"Ferrochrome prices are expected to respond to an improvement in market conditions as well as global cost pressures in the second half of 2015 and specifically electricity cost increases in South Africa," said the company.
Alongside falling prices, International Ferro's costs for the third quarter increased to ZAR8.43 per pound, up 7.8% quarter on quarter, due to lower recoveries on ore beneficiation, lower UG2 consumption due to committed UG2 sales, and a lower ratio of alloy recovery production relative to furnace production, it said.
"The company has also initiated a major new cost-cutting exercise to further reduce costs, both in overheads and operationally. The primary focus areas are operational fixed costs, materials handling, corporate overheads and transport costs," International Ferro said.
"The company's strategy to ensure an uninterrupted long-term competitive ore supply for ferrochrome production, supported by an expanding regional market presence is tailored to meet the demand of the market going forward," it added.
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- [Editor:sunzhichao]
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