TIDMAMI
RNS Number : 6069H
African Minerals Ltd
21 May 2014
21 May 2014
African Minerals Limited
("African Minerals", "AML", or "the Company")
Record Production and Sales for AML in Q1 2014
Highlights
-- Record Q1 production of 5.3Mt (Q4 2013 : 3.9Mt)
-- Record Q1 sales of 4.6Mt (Q4 2013 : 3.8Mt)
-- Average C1 cash costs in Q1 of $37/t (Q4 2013 : $42/t)
-- Infrastructure expansion to 25Mtpa capability underway
-- Front end engineering design for commencement of processing
saprolitic friable haematite nearing completion
-- Group net debt reduced from $473m to $391m in the quarter
Bernie Pryor, Chief Executive Officer of African Minerals,
said:
"The Tonkolili project ramp up programme continues to make good
progress. The first quarter of 2014 marks our best performance yet,
surpassing the record set by Q4 and setting our new operational
benchmark. Cash costs continue to improve, falling to $37 per tonne
as our production volumes increase, with a commensurate building of
cash flow.
Preparations are underway for the annual seasonal impacts of the
coming wet season, and we look forward to testing our
interventions, which should give us the flexibility to successfully
manage the coming months, and importantly also reduce our reliance
on the production of A32, allowing us to achieve higher received
pricing. We are maintaining our guidance of exporting 16-18Mt this
calendar year with C1 cash costs of between $34 and $36 per tonne,
exiting the year at a sustainable run rate of 20Mtpa, and with cash
costs falling to $30/t at that production rate.
We are well advanced in our next stage of growth targeting low
capital cost optimisation and expansion to our infrastructure
capacity. We aim to exit 2014 with a 25Mtpa export capability, and
to start the construction of our first friable haematite
concentrator facility at the end of this year, with up to 10Mtpa of
final product concentrate processing capability being brought
online in 2016. This, together with the increased DSO resource
recently announced, allows us to extend the life of our concurrent
DSO operations and further defer capital for additional
concentrator units.
As ever, the Board remains focused on achieving sustained
targeted production rates, reducing costs and increasing returns to
our shareholders."
SUMMARY
Var
Q1 2014 Q4 2013 % Q1 2013 Var %
MINING
Tonnes DSO Ore Mined Mt 6.8 5.3 30% 2.8 146%
Tonnes Saprolite Ore
Mined Mt 1.3 1.1 23% 0.5 167%
Grade DSO Ore Mined % 57.4 57.6 0% 57.2 0%
Total Mined Mt 8.1 6.3 28% 3.3 150%
PROCESSING
Tonnes DSO Ore Treated Mt 6.6 5.0 31% 2.5 160%
Grade DSO Ore Treated % 57.9 58.1 0% 57.4 1%
Total DSO Produced Mt 5.3 3.9 36% 2.2 145%
End of Period Product Mt at
Stockpile mine 2.7 1.8 1.8 50%
EXPORT
Total Exported (Wet) Mt 4.6 3.8 19% 2.1 118%
Lump Mt - - -
Fines Mt 1.4 1.5 1.1
A32 Mt 3.2 0.4 1.0
Blend Mt - 1.9 -
Grade % 57.9 58.0 0% 57.9 0%
Moisture % 10.5 11.5 -9% 10.8 -3%
Total Exported (Dry) Mt 4.1 3.4 20% 1.9 120%
Number of Vessels # 26 22 18% 12 117%
End of Period Product Mt at
Stockpile port 0.3 0.6 0.1 175%
CASH COST
C1 Cash Cost $/t 37 42 -11% 49 -24%
REVENUES
Period Spot 58% $/t 104 117 -12% 125 -17%
Freight Rate $/t 24 25 -3% 19 28%
Achieved FOB (dry) $/t 61 77 -20% 89 -31%
BALANCE SHEET
Group Cash $m 415 363 496
Group Debt $m 806 836 780
------------------------- ------- --------------- ----- ---------------- ------
Group Net Cash / (Debt) $m (391) (473) (284)
------------------------- ------- --------------- ----- ---------------- ------
*after prior period final invoicing adjustments
SAFETY
The Tonkolili project recorded 10 lost time injuries in the
quarter, down from 12 in Q4 2013, and in the rolling year to date
the All Injury Frequency Rate fell from 1.45 injuries per 200,000
man hours as at the end of Q4 2013, to 1.20 at the end of Q1
2014.
The Company remains focussed on the reduction of malaria
infection rates. Malaria incidences continue to trend downwards; Q1
2014 reported 89 incidences compared to 237 in Q4 2013, and
approximately 324 in Q1 2013.
PRODUCTION UPDATE
Production
Total material mined increased 28% quarter on quarter to a new
record movement of 8.1Mt, of which 6.8Mt was Direct Shipping Ore
("DSO") and 1.3Mt was saprolite, which is being stockpiled ahead of
processing in Phase II.
The process plants together processed 6.6Mt of ore, a 31%
increase on Q4 2013, generating 5.3Mt of product, with an increased
yield of 81% compared to 78% in the previous quarter. Since Q2
2013, the 1B process plant had been run at lower throughput rates
than originally planned as a result of the damaged 2.4km long
overland conveyor belt ("CV02"), but this was successfully changed
out in the first week of January, and the plant has been running at
target throughput rates ever since, producing higher levels of
washed lump and fines products.
Stockpiles across the operation have continued to build towards
the steady state target tonnage (for wet season management) and at
the end of the quarter the finished goods stockpiles stood at
3.0Mt.
Cash costs
As expected, the increase in export tonnages had a marked effect
on cash costs. The Tonkolili operation has a relatively high fixed
cost component, and increased tonnages result in significant
dilution of those fixed costs. As quarterly exported tonnes rose
from 3.8Mt in Q4 2013 to 4.6Mt in Q1 2014, C1 cash costs reduced
from an estimated $42/t to $37/t. The March cash cost, with exports
of 1.75Mt, was under $34/t. The project remains on track to achieve
C1 cash costs of c$30/t at the sustainable 20Mpta production level,
once all cost interventions have been fully implemented.
C1 cash costs for the quarter were $169m.
Exports
Exports for the quarter reached another all-time high, with 26
vessels sailing, which notably included 10 in March.
Total tonnage exported was 4.6Mt, a 19% increase from the
previous quarter, with moisture content falling from 11.5% in Q4
2013 (the end of the wet season) to 10.5% in Q1 2014. Dry tonnes
shipped were 4.1Mt of DSO.
Sales
Sales in Q1 were entirely composed of fines and All in 32
("A32") materials.
In Q1 2014, 39% of production tonnage was delivered into the
6.5Mt (2014) Shandong Iron and Steel Group Discounted Offtake
Agreement ("DOTA"), carrying an additional 7.5% offtake
discount.
70% of export tonnage in Q1 2014 was A32, carrying an additional
reprocessing charge.
The weighted average 58% IODEX Platts index price for the period
was $104/t (dry), down considerably from $117/t in the previous
quarter, while freight rates (in $ per wet metric tonne) also fell
slightly in the period from an average of $25/t in Q4 2013 to $24/t
in Q1 2014.
The realised FOB price in Sierra Leone, after prior period final
invoicing adjustments, was $61/t (dry), down from $77/t in the
previous quarter, as a combined result of the $13/t decrease in the
benchmark price, a $1/t benefit in the freight rate, a higher
proportion of sales into the DOTA (39% vs 13%) and a higher
proportion of sales carrying the additional reprocessing charge
(70% vs 60%).
Sales revenue for the quarter was $260m, which includes $9m of
non cash deferred income release arising from the DOTA.
FINANCIAL
Interest costs were $24m, largely due to the semi-annual coupon
of $17m payable on the $400m convertible bond in February. These
outflows were more than offset by cash flow generated by
operations, a positive movement due to tight control over working
capital and receipt of a prepayment from a customer for deliveries
later in the year, which together resulted in a positive movement
in net debt of $82m. As a result, the Group's net debt decreased
from $473m at the end of December to $391m at the end of the
quarter. The Group continues to evaluate opportunities regarding an
optimum debt structure, including reprofiling of its current debt
facilities and other debt capital market strategies to defer
maturity.
The Group's cash position was $415m, of which $303m is allocated
for the development of Phase II.
CORPORATE UPDATE
Tewoo Transaction
Tewoo's proposed investment in the project and AML continues to
make progress. As the largest iron ore, coal and energy trader in
China, Tewoo is continuing to test the various blending parameters
of Tonkolili ore to achieve optimum products for its clients.
PROJECT UPDATE
DSO Resource
As announced on 13th May, the DSO resource at Tonkolili now
stands at 142Mt. This compares to the original resource (December
2010) of 126Mt, and together with depletion of 44Mt, demonstrates
an inclusion of an additional 60Mt into the original resource
estimate.
The increased life of the DSO resource, now with over 90%
classified in the Measured and Indicated resource categories, will
allow the Company to produce a DSO product to circa 2020.
Production of DSO will continue concurrently with our near-term
expansion to 25Mtpa, and to subsequently move into a higher value
friable haematite concentrate product from 2016.
Infrastructure Capacity
At the time of the Preliminary Results, the Company stated its
intention to expand the mine, process and infrastructure capacity
to 25Mtpa by year end.
Capital expenditure for continued maintenance where required,
sustaining capital expenditure, and expansion towards 25Mtpa
capability is expected to be in the region of $80m to $100m in
2014, with all projects remaining on track and on budget. Q1
capital expenditure was $20m, which also included $10m in respect
of friable haematite concentrate.
Saprolitic Friable Haematite Concentrate
The increase in infrastructure capacity, together with the
additional processing capability of the new 9Mtpa A32 1G plant
(which is being delivered, constructed and commissioned during H1
2014), will allow the Tonkolili project to initially increase
exports at low capital cost, with subsequent concentrate processing
capability being brought online in stages from 2016 as extended
life DSO operations are wound down over time.
The Company is well advanced with its engineering studies for
the establishment of the first 10Mtpa concentrator facility, and is
in the process of carrying out a 1,000t bulk sample processing test
to optimise process parameters at the end of May. Work is now
focussed on accelerating production timelines and further reducing
capital costs. Approximately $300m of restricted funds remain
available to initiate this construction, which is planned to begin
in earnest at the end of the coming wet season.
It is expected that further detail regarding the scope, capital
requirements and schedule of the establishment of the first
concentrate facility will be made available around the end of June
2014.
The amount of friable haematite stockpiled during the mining of
the DSO phase, in advance of processing, currently stands at
approximately 7.8Mt.
Technological Innovations
The wet season usually commences towards the end of Q2. As
previously announced, the Company is progressing several
initiatives to enhance its management of the wet season; polymer
dosing, creation of intermediate lump product, trialling of
moisture reduction systems under stockpiles, product de-sliming and
stockpile covering, all of which are expected to be in place during
Q3 ahead of the most intense part of the wet season.
These interventions will allow both a higher recovery of our
lump and fine product, and will allow more fines to be shipped in
the wet season, reducing reliance on the production of lump blend,
and allowing more lump to be sold as a single product rather than
as a blend with A32. This will both reduce the tonnage that needs
to be sold with the re-processing deduction and will allow more
lump to be sold as a premium product, considerably improving
received pricing.
Contacts:
African Minerals Limited
+44 20 3435 7600
Mike Jones
Tavistock Communications
+44 20 7920 3150
John West / Jos Simson / Nuala Gallagher
Jefferies
+44 20 7029 8000
Nick Adams / Alex Collins
About African Minerals
African Minerals operates the Tonkolili Iron Ore Project (the
"Project") in Sierra Leone, with a JORC compliant resource of
12.8Bnt. The Project, which currently has a 60+ year mine-life, is
being developed in a number of staged expansions. In 2013, African
Minerals completed sales of 12.1Mt to its customers. The current
year sales guidance is for 16-18Mt of exports as the operations
focus on operating at the 20Mtpa run rate design capacity.
Phase II expansion contemplates the production of an expanded
tonnage including the establishment of a high grade friable
haematite concentrate product with the project ramping up to
25Mtpa.
The Company has also developed significant port and rail
infrastructure to support the operation of the Project, via its
subsidiary African Rail and Port Services (SL) Limited ("ARPS"), in
which the Government of Sierra Leone ("GoSL") has a 10% free
carried interest.
The Project companies are currently owned 75% by AML, and 25% by
Shandong Iron and Steel Group ("SISG"), except for ARPS, which is
currently owned 75% by AML and 25% by SISG, with the GoSL having
the right to a 10% free carried interest from AML.
www.african-minerals.com
This information is provided by RNS
The company news service from the London Stock Exchange
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