24th Feb 2014 10:54
LONDON (Alliance News) - International Ferro Metals Ltd Monday said it swung to a pretax profit in its first half as increased production, lower production costs and a weaker rand drove up revenues.
The ferro-chrome producer, with operations in South Africa, posted a pretax profit of ZAR31.0M for the six months ending the calendar year 2013 compared with a pretax loss of ZAR121.5 million in the same period the previous year, as revenues increased 22% to ZAR1.00 billion from ZAR824.1 million in 2012.
The company announced in January that its operations are cash generative and it expected to be profitable for the half after record production of 116,469 tonnes of ferrochrome during the six month period, a 58% increase from 73,626 tonnes the year before.
In January, International Ferro Metals said its sales volumes increased to 57,394 tonnes for its second quarter, an increase of 9.8% on the previous quarter, due to a range of operational developments.
The company has been carrying out a major cost-saving initiative and announced in its first quarter production report that it had achieved 88% of its planned cost reductions. However, for the second quarter the company announced that its ferrochrome production cost for the quarter was ZAR6.46 per pound, up slightly from the previous quarter's ZAR6.43 per pound.
International Ferro Metals added on Monday that, in real terms, taking out the impact of domestic inflation, it has now achieved 100% of these cost cutting measures, and its ongoing development plans should continue to drive down costs.
The company also noted that the European Benchmark Price for ferrochrome in the first quarter of calendar year 2014 increased 4.9% to 1.18 US cents per pound, and the South African rand continues to depreciate against the US dollar, both of which should help the company's finances.
The company's Lesedi underground mine remained out of production during the half as a review of the site's most effective strategy moving forward continued.
On Monday, the company said it now plans to both restart the Lesedi mine to reduce its buy-in of high-grade ores, which have recently become more expensive due to tightness of supply, and to increase production from its Sky Chrome mine to provide sufficient ore for internal consumption.
"The restart of Lesedi and ramp up of Sky Chrome means that we can supply ore at a lower cost," Chief Executive Chris Jordaan told Alliance News. "At Lesedi we've selected an in-source process and have set up all the structures necessary, with training progressing as planned and first ore expected in third quarter 2013."
Jordaan said the company plans to start off slow at Lesedi, ramping up towards 60,000 tonnes per month in around six years, while Sky Chrome should be providing 35 to 40,000 tonnes per month in the next few months.
As expected, the company's co-generation plant generated lower output during the half due to scheduled maintenance, but the company is in the process of changing to a new service provider for maintenance and optimisation which is expected to be in place by the end of March.
Ferro-chrome is an alloy of chromium and iron and is used in the production of stainless steel, which relies on ferro-chrome for its appearance and to reduce corrosion.
"We expect demand for ferrochrome to improve over the coming years, especially in China," Jordaan said. "But we remain flexible to market changes and can reduce or increase operations accordingly."
International Ferro Metals shares were trading flat at 11.00 pence Monday.
By Tom McIvor; [email protected]; @TomMcIvor1
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