9th Apr 2015 09:27
LONDON (Alliance News) - Sierra Rutile Ltd Thursday said it produced less of its core rutile product in the first quarter as ilmenite production increased, but the company also suffered from higher cash costs in the period that are quite far off the company's targets, something the company is still confident of achieving.
Sierra Rutile shares fell by 9.3% to 17.01 pence per share on Thursday morning.
The mineral sands producer in Sierra Leone said ilmenite production in the first quarter reached a "record" level of 12,803 tonnes, which is up 86% from a year earlier as mining operations moved into a particularly ilmenite-rich area of the company's deposits.
Ilmenite is a weakly magnetic black or steel-grey solid. From the commercial perspective, ilmenite is the most important ore of titanium.
Rutile is the company's main product and is also linked to titanium, but is also used for the manufacture of certain optical elements and usually contains iron.
Rutile production fell to 23,342 tonnes from 28,218 tonnes a year earlier, but the company said it remains on target to achieve its full year rutile production target of between 120,000 to 130,000 tonnes.
The company was targeting between 25,500 and 27,500 tonnes of rutile production in the quarter, and said this was not achieved due to the increase in the presence of ilmenite, planned maintenance shut-downs, supply delays caused by the Ebola outbreak in the first half of the quarter and a three-day anti-Ebola shutdown which was imposed by the government of Sierra Leone, it said.
"Whilst first quarter rutile production is slightly below our quarterly budget, we remain confident of meeting our full year 2015 rutile production guidance," said Chief Executive John Sisay.
Zircon concentrate production in the quarter fell by 63.7% to 318 tonnes from 877 tonnes.
Sierra Rutile was also hit by higher costs in the quarter, and still have a long way to go to meet its targets for the full year. The company is aiming to get its total operating cash cost to between USD595 and USD615 per tonne in 2015, but this is currently sitting at USD725 per tonne, which is also a lot higher than the USD646 per tonne a year earlier.
The company is also aiming to get its all in operating cash cost to between USD650 to USD670 per tonne, however in the first quarter this averaged USD766 per tonne, which again is also significantly higher than the USD683 per tonne being spent a year earlier.
"Management is confident that the company remains on target to meet full-year cost guidance as production volumes increase significantly during the remainder of the year and the additional ilmenite volume is sold," it said.
In addition, Sierra Rutile said it has hedged 75% of its fuel consumption in 2015 to lock in low-fuel costs and secured deals for the sale of the "majority" of its rutile production throughout 2015.
"Fuel represents a major cost component of Sierra Rutile's operations, with approximately 25% of Sierra Rutile's total operating costs being energy-related. In the first quarter, Sierra Rutile depleted fuel inventories purchased in 2014, and as such, cost reductions from the hedging program will only be fully realized from the second quarter of 2015 onwards," the company added.
By Joshua Warner; [email protected]; @JoshAlliance
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