[miningmx.com] – UK-listed ferrochrome producer, International Ferro Metals (IFM), said it had emerged a stronger, cash-generative business amid signs of a degree of upward pressure on the price of the steel-making ingredient.
“I am confident that we have turned the tide,” said Chris Jordaan, CEO of IFM. “The challenges that we faced have been addressed over the past two years and the fact that we are competitive against Chinese producers bodes well,” he said.
Shares in the firm, which produced 57,849 tonnes of ferrochrome in the first quarter of its financial year, a 48% quarter-on-quarter improvement, gained nearly 4% in London trade. In the past three months, however, the stock has rattled along slightly above its 12-month low which it hit in July after a sharp, one-third slump in market value. IFM is currently capitalised at £50m.
Production at the firm’s Lesedi chrome ore mine in South Africa’s North West province, was halted in the previous financial year after the contractor’s contract was cancelled while state-owned power utility, Eskom, unveiled aggressive price increases. The impact of these developments smacked IFM in the first half of its previous financial year and led it to an overall R126m pretax loss after recording a R72m loss in the year before.
“Mining shares have not been in favour lately, but we have had to look inwardly at the company,” said Jordaan in an interview. “It’s clear to the market now that IFM is a turnaround story,” he said.
In the first quarter, however, Jordaan said the company had achieved most of its cost saving measures and had been cash generative, excluding working capital costs. Borrowings increased to R393m as of end-September from R362m end-June, but the increase was lower than anticipated by the company.
In addition to normal inflationary pressures, and a tight market for ferrochrome given a re-focus on the Chinese economy towards consumption over development, IFM has been giving thought to sourcing cheaper sources of ore from third parties.
It currently takes chrome from platinum group metal tailings produced by Anglo American Platinum (Amplats) at its Waterval facility, an asset earmarked for sale in terms of Amplats’ restructuring proposals.
Jordaan said the company was protected by a nine-year supply contract signed with Amplats of which up to 24 months had passed so far. In terms of the agreement, IFM is supplied with 15,000 tonnes per month of UG2 tailings.
Lesedi is still not being mined, while the Sky Chrome mine was not at capacity; but supply was being sought from other third party sources which, combined with low cost ore from Sky Chrome, could provide a workable low cost mix of ore.
Analysts were heartened by the results. “Overall a reasonable result with a good start to running at full pelt. The business continues to improve despite the soft ferrochrome market,” said Numis Securities, which is IFM’s nominated adviser.
Investec Securities commented that IFM had put in “a solid quarter despite facing higher winter power prices.
“The outlook for the market remains tough,” it added.
