4th Nov 2008 07:00
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Press Release |
4 November 2008 |
Aricom plc
("Aricom", the "Company", or the "Group")
Interim Management Statement
Aricom (LSE: ORE, OREW), the Anglo-Russian developer of mineral resources, is today publishing its Interim Management Statement, as required by the UK Listing Authority's Disclosure and Transparency Rules, relating to the period from 1 July 2008 to date.
Update
Aricom's Kuranakh mine made its first shipment of titanomagnetite pre-concentrate in June 2008 and commenced regular shipments in October 2008. Work at the mining operation and at the crushing and screening and beneficiation plants is progressing well and the Board remains confident that 2008 production will be in line with the most recently published forecast.
Initial development works are continuing at the K&S project site.
In August 2008, Aricom signed and received relevant formal approvals for a joint venture contract with Aluminium Corporation of China ("Chinalco") to construct a titanium sponge plant in North East China. Aricom and Chinalco will establish the plant in Jiamusi City, Heilongjiang province, China, with an initial production capacity of 15,000tpa of titanium sponge. Commissioning of the plant is expected during 2010. The joint venture has received a number of offers of project financing from Chinese banks and is considering these.
On 30 September 2008, following the announcement on 25 March 2008, the Group exercised the options to acquire the Cypriot companies which indirectly hold the Garinskoye Flanks licence and the Kostenginskoye licence. These licences provide significant natural expansion potential to the existing K&S and Garinskoye projects respectively, nearly doubling Aricom's attributable reserves and resources.
On 8 October 2008, Aricom announced the completion of the feasibility study for the K&S and Garinskoye projects. The Board believes that the findings of this study significantly enhance the Company's portfolio. The study, independently reviewed by industry leading consultants, including Wardell Armstrong International Ltd and Hatch Engineering Ltd, had the following major conclusions:
project optimisation points towards the development of a combined processing plant located at K&S;
the optimum operation will beneficiate 20mtpa ore from K&S and Garinskoye mines to produce fines and direct reduced iron;
the project produces a base case net present value of c.US$2.1bn and internal rate of return c.21%;
good correlation of mineable reserves under JORC to historical Russian GKZ estimates.
The Company and its project finance advisers are currently in discussions with banks, contractors and other potential partners in order to finance the K&S and Garinskoye projects.
On 29 October 2008, it was announced that the Russian and Chinese authorities had reached agreement on a proposal for the construction of the first railway bridge between the countries. Aricom expects that if the bridge is constructed, it is likely to result in a saving of approximately US$4.0 per tonne of iron ore in transport costs to China. Aricom is considering whether to tender for the contract to construct the bridge.
Budgetary control and capital expenditure planning
Against the current background of significant global financial and economic uncertainty, the Company and its advisers are undertaking a review of alternatives to the current development plan with respect to the K&S and Garinskoye projects with a view to significantly reducing the external funding requirements whilst maintaining the projects' underlying value. A slower ramp up schedule, with staged introduction of the various units, is feasible and will result in significantly lower initial capital expenditure, while still eventually producing the same scope of integrated process. The Company is also undertaking a budget review with a view to taking action to minimise all non-essential expenditure. The Company expects to conclude these reviews in the near future.
Save for the effects of the events detailed in the update above, the financial position of the Group at the end of October is not materially different from that reported at 30 June 2008 and the forecast cash balance for the Group set out in the announcement of the feasibility study of c.US$254m, as at 31 December 2008, remains unchanged.
Comment
Jay Hambro, Chief Executive of Aricom, commented:
"Since our interim results, there has been very significant volatility in financial, commodity and currency markets and although the current climate makes our approach to the debt markets more demanding, I am confident that the K&S and Garinskoye projects remain exciting investment propositions for the long term. In the short term, Aricom's portfolio of projects allows significant flexibility in project planning in order to maximise value whilst matching available funds to capital expenditure. Aricom's project development team is studying a number of alternative development programmes which could significantly reduce and postpone the requirement for external funding. Any resulting rescheduling would allow Aricom to ride out the current financial storm utilising our significant cash balance."
For further information:
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Aricom plc |
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Charlie Gordon, Investor Relations Officer |
Tel: +44 (0) 20 7201 8939 |
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www.aricom.plc.uk |
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Abchurch |
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Charlie Jack/ George Parker |
Tel: +44 (0) 20 7398 7700 |
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www.abchurch-group.com |
Notes to Editors
Aricom currently operates four mining projects in the Amur region and the adjoining Jewish Autonomous Region. The Group's projects Kuranakh, K&S, Garinskoye and Bolshoi Seym have combined estimated reserves and resources of over one billion tonnes of iron ore and ilmenite ore. The location of the Group's deposits offers a significant logistical advantage, being close to the Trans-Siberian Mainline and the Baikal-Amur Magistral railways.
Aricom is headquartered in London, with a highly experienced board of Directors composed of UK and Russian citizens. The Company moved from the AIM market to the Main Board on 29 October 2007 and trades under the symbol ORE. For further information please visit www.aricom.plc.uk
Forward-looking statements
This Interim Management Statement contains forward-looking statements. Such forward-looking statements, which reflect management's assumptions made on the basis of information available to it at this time, involve known and unknown risks, uncertainties and other important factors which could cause the actual results, performance or achievements of Aricom or the market and economies in which Aricom operates to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements. The forward-looking statements contained in this Interim Management Statement are made as at the date of this statement, and Aricom undertakes no obligation to update any of its forward-looking statements.
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