7th May 2008 07:01
Noventa Limited07 May 2008 NOVENTA LIMITED ("Noventa" or "the Company") (AIM: NVTA) TRADING UPDATE FOR THE THREE MONTHS ENDED 31 MARCH 2008 Highlights - • Tantalum production increased by more than 40% • The run of mine feed grade rose to an average of 190 parts per million • Recoveries increased month on month during Q1 to around 55% in March • The plant operating problems are expected to be resolved by the end of the second quarter The Board of Noventa provides the following update on its operations: Marropino, Mozambique The planned ramp up of production at the Marropino plant continued during thefirst quarter of 2008. Significant strides have been made towards reachingtargets; nevertheless certain aspects have proved to be more complex than firstanticipated. The Key Performance Indicators ("KPI's") being used to measure progress are: • Plant feed rate The target increased from 165 tonnes per hour (tph) to 175tph during thequarter. In January and February, the Company achieved or exceeded the target ona regular basis. However, during March, the actual feed rate fell below 165tphdue to a number of unforeseen equipment deficiencies, which were rectifiedduring early April. • Run of mine feed grade The target increased from 160ppm to 180ppm during the first quarter. Save fortwo short periods at the end of January and in the middle of February the plantwas consistently fed at or above the targeted grade and an average of 190ppm forthe quarter was achieved. • Run of mine feed oversize Oversize is considered economically barren and represents that portion of thefeed material that the plant is not designed to process. The target is to be ator below 40%. The average of 41% achieved was an improvement on the 50% or moreexperienced last year. • Recoveries This represents the portion of tantalum in our feed that the wet process plantis designed to recover. The target during the quarter was 50%. Recoveries haveimproved from around 40% in January to in excess of 55% in March. • Plant availability The plant is designed to operate 75% of the time, 24 hours a day, seven days aweek including planned maintenance and unplanned shutdowns. While availabilityhas improved from around 50% in January and on occasions exceeded 90% theaverage for the quarter was only 56%; with March at 48% as a result of theequipment deficiencies mentioned earlier. • Finished product Production increased by 43% from an average of 300 to 430 pounds of tantalumconcentrate per day during the quarter. Our target for the period was an averageof 475 pounds per day. All tantalum concentrate produced was to specification. The Company produced 34,100 pounds of tantalum concentrate during the quarter.Due to the delays in achieving targeted production Noventa anticipates havingbetween 300,000 and 330,000 pounds of material available for sale this year. While it is disappointing that the targets mentioned have not consistently beenreached in the time expected the above KPI's confirm the following: • The mine is capable of delivering the anticipated grade of ore as set out in the mine plan and that an appropriate blending program allows the plant to be fed with the requisite grade at the desired percentage oversize. • The plant can be fed and can process material at the designed feed rate exceeding targeted recoveries and producing material to customer specification. This confirms the views of the various independent experts that there are no systemic flaws in the plant design. Plant availability requires further attention. The impact of unexpectedequipment failures has been exacerbated by the remoteness of the plants locationresulting in longer than anticipated downtime and hence below targetedquantities of finished material being produced. Deliveries of spares by trucktake 10 days to reach the mine assuming they are in stock at our logisticaloffice. Downtime caused by operator error has decreased due to the Company'straining initiative. Planned maintenance and predictive spares management arereceiving management's attention. The non delivery of grid power by the state owned utility Electricidade deMocambique EP ("EDM") has required the Company to run it's diesel generatorswell beyond the planned date to shut them down. The Company was originallyinformed that the electrification project would be completed by August 2007 andthat grid power would be available at both Morrua and Marropino. Investigationson the ground confirm that the project in underway and that the majority of theequipment needed is on site. EDM's project management team now anticipate thatthe line will be completed in August 2008. The short term objective is to consistently operate at or above each of the KPItargets simultaneously. Management changes A number of changes have been made since the Chairman, Clinton Wood, took overexecutive responsibility in September 2007. These include the replacement of thefollowing staff at the mine: General mine manager, plant manager, engineeringmanager, administration manager and laboratory supervisor. A number of peoplehave also been appointed or promoted to the position of shift supervisor. Newpeople have been appointed to the positions of finance manager, commercialmanager and purchasing manager at our logistical and support offices. The postof chief operations officer has been abolished. The enthusiasm with which thenew staff have tackled their roles is very encouraging, with the benefits beingevident on a daily basis. Pre shipment facility During April, the Board entered into a pre shipment finance facility of $6.7million. This will reduce the pressure on working capital experienced due to theirregularity of shipping lines servicing southern African ports which arelicensed to carry the Company's finished product. The Board expect finaldocumentation to be signed shortly and the first drawdown on this facility to bein May. The groups balance sheet remains ungeared save for this facility. Cash flow The delay in reaching targeted capacity has resulted in the businesses not yetachieving cash flow breakeven. During March $3 million was raised to supplementworking capital. This was in the form of a zero coupon convertible bond,convertible to ordinary shares at 175 pence each. The mentioned pre shipmentfacility provides cash flow for all finished product at the mine. The delay inthe ramp up process will necessitate the raising of more capital fromshareholders to cover the period until cash breakeven levels are reached. Morrua development The development of the Morrua mine has progressed to the point where thenecessary funding for implementation can now be raised. The project has beenunavoidably delayed as a result of uncertainty around the date for availabilityof line power at Morrua. The additional time has, however, been used to performfurther optimisation work, which has demonstrated the benefit of increasingannual production from 400,000 to 450,000 pounds, at a higher plant throughput.The original plant design was estimated to cost $36 million in October 2006terms and the cost to completion will need to be escalated accordingly. InvestecBank UK Limited has been mandated to secure the capital required for Morrua andthe hard rock circuit at Marropino. Construction will commence when the fundingis available with mechanical completion 12 months thereafter. Tantalum market Tantalum consumption has grown at a compound rate of 5% pa since 1990 and isexpected to continue growing at between 4-6% pa for at least the next fiveyears. Expansion plans by existing producers and known new development projectsare not sufficient to meet the growth in demand and it is expected that theprice of tantalum will continue to strengthen. The spot price for tantalumconcentrate increased from $30 in January 2007 to the current level of around$47 per pound. Tantalum is not traded on a recognised trading exchange like other metals andcommodities, and generally a contract price is established by negotiation of anoff-take agreement between producer and consumer based on product specification,volume and contract duration. Historically the contract price received has beenhigher than the spot price. A significant portion of Noventa's Marropino production is accounted for interms of a long-term off-take agreement. Morganite During November last year a business plan was finalised with the Company's jointventure partners and an agreement relating thereto concluded. This is anexclusive arrangement for the processing and marketing of morganite gemstonesand is structured to enable Noventa to participate in the value added by thesale of the final cut gemstone to retailers / jewelry manufacturers (i.e. inaddition to Noventa being paid for the rough morganite supplied, it alsoparticipates in the profits earned in connection with the sale of the final cutgemstone). During the quarter 750 kilograms of morganite was extracted from the main pit,of which 280 kilograms was delivered to the joint venture. Based on the materialprocessed, run of mine rough is expected to yield around 10% thereof as slicedmaterial. Including Noventa's share of the joint ventures profits this equatesto $700 - $800 per kilogram of rough. These estimates are likely to improve asmore experience is gained in processing and marketing Marropino morganite. TheCompany plans to extract in excess of 5,000 kilograms of run-of-mine roughduring 2008. Due to the time material spends in the processing and distributionpipeline there are delays between extraction and receipt of cash from the saleof the final polished gemstone. Chairman of Noventa, Clinton Wood commented, "I am encouraged by the numerousand significant challenges that the team have dealt with in the last six monthsand I thank them for their untiring effort. They have made significant progressin overcoming the problems encountered and anticipating that this trend willcontinue, consistent achievement of targets can be expected. The growing demandfor and limited new production of tantalum continue to add to the attractivenessof our existing operations and our planned expansion." The Company intends to release its Audited Financial Results for the year end 31December 2007 in June. For further information: Clinton WoodNoventa Limited+27 (0)82 880 3392 / +27 (0)11 823 1400www.noventa.net Ed Portman/Jane StaceyConduit PR+44 (0)207 429 6607 / +44 (0)773 336 3501 Gerard Kisbey-GreenInvestec Bank UK Limited+44(0)207 597 5167 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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