African Minerals Ltd Market Update (3554O)

TIDMAMI

RNS Number : 3554O

African Minerals Ltd

06 August 2014

African Minerals Limited

("African Minerals", "AML", or "the Company")

Market Update

African Minerals notes the share price fall in recent days. The Company can confirm that it continues to operate in line with market guidance. Building on the 9.1Mt that was exported in the first half of this year, July production was also on target, with nine Cape Size vessels loaded in the month, and the Company remains confident of its performance in August despite now reaching the heights of the wet season.

The iron ore price has been weak through Q2 and into the start of Q3, which has seen realised prices drop considerably, although they have recently started to recover. The Platts 58% iron ore index (against which our products are priced) has fallen from an average of $104/t in Q1 to an average of $83/t in Q2 including the low of just below $70/t in mid-June, with the ratio to the benchmark TSI 62% index widening from 88% average for Q1 to as low as 76%. This gap has started to close again and is currently at 82%, with the Platts 58% index now at $77/t and TSI 62% index at $95/t.

To mitigate the decrease in price, AML continues to focus on cost saving initiatives, actively manage working capital, and capture more of the available revenue through enhanced product management. Operational cashflow at the project level has deteriorated compared to previous quarters, and remains tight. The Board has put in place appropriate plans to resolve this situation.

The next two months are expected to deliver a substantial improvement in both costs and revenues, as follows:-

   --     revised contract terms with several key suppliers are currently being implemented; 
   --     continued focus on increasing export volumes which will dilute fixed costs;

-- commissioning of the new +9Mtpa 1G process plant allowing the Company to de-commission three smaller expensive plants;

-- establishment of de-sliming circuits to service 1B, 1D and, thereafter, 1G will eradicate the All in 32 product and its associated discounts;

-- de-sliming circuits will also decrease moisture levels and freight rates, increase the number of dry tonnes sold, and significantly reduce our re-handling volumes currently associated with stockpiling and drying activities; and

-- increasing the number of vessels that the Company charters itself and sells on a CFR basis, reducing equivalent freight rates as compared to FOB pricing.

The Company continues to closely monitor the Ebola Virus Disease outbreak. Several interventions, principally regarding access control, temperature monitoring, enhanced hygiene, travel restrictions, and community communication and education, have been implemented by the Company, as well as active support for the various emergency and government institutions. No cases have been suspected or confirmed at the Company's sites, and AML continues to operate normally across the mine, plant, rail, port and marine operations. The Company notes that one major airline has suspended flights to and from the region as a result of the outbreak, and it is presently unclear when it will resume normal schedules. AML remains confident that movements of Company personnel can be managed effectively through the remaining international air carriers that continue to operate their services, as well as chartering options via other countries.

As disclosed in our Q1 production report released on 21 May 2014, the Company continues to evaluate opportunities regarding an optimum debt structure. This includes re-profiling of its current debt facilities, issuing bonds, entering into new offtake arrangements, and temporarily accessing the $284m cash jointly held by AML and Shandong Iron and Steel Group for the project, for ongoing working capital purposes.

A document containing the following selected information is available for download from the Company's website at www.african-minerals.com.

-- Certain general corporate information about the Company, Tonkolili Iron Ore (SL) Limited, African Power (SL) Limited, African Railway and Port Services (SL) Limited, TIO Trading Limited, and certain other subsidiaries of the Company.

-- Unaudited interim condensed aggregated financial statements for the period ended 31 March 2014 and unaudited aggregated financial statements for the year ended 31 December 2013, in each case, for the above-mentioned subsidiaries.

Important Regulatory Notice. The announcement of the publication by the Company of the document referenced in the paragraph above, and the materials contained in such document, do not constitute or form a part of any offer or solicitation to purchase or subscribe for securities in the United States or any other jurisdiction. Securities may not be sold in the United States absent registration with the United States Securities and Exchange Commission or an exemption from registration under the U.S. Securities Act of 1933, as amended. The Company does not intend to register any securities in the United States or to conduct a public offering of securities in the United States.

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 12.8 Bt. The multi-generational Project is being developed in a number of staged expansions. In 2013, African Minerals completed sales of 12.1 Mt to its customers. The current year sales guidance is for 16-18 Mt of exports as the operations focus on operating at the 20 Mtpa run rate design capacity.

Phase 2 expansion will see exports increase to 25 Mtpa, and will incorporate production of a high grade concentrate product. Concentrate production is expected to begin in 2015 and will eventually displace current DSO production as concentrate volumes increase and the DSO resource depletes over time.

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

END

TSTSSSEEIFLSESA

African Min. (LSE:AMI)
Historical Stock Chart
From Jun 2024 to Jul 2024