[miningmx.com] — IT’S a case of so far, so good for International Ferro Metals’ attempts to regain investors’ confidence, as its strategy to lower costs and cash in on an expected increase in global demand for stainless steel remains on track.
Delivering an interim management statement and quarterly production report on Tuesday, outgoing CEO David Kovarsky said a major pillar of its cost reduction plan – a roof upgrade for its two furnaces – was on track to start yielding results by October.
The group shut down the two furnaces for the upgrades in June and July respectively. Both would be ready to achieve full production by mid-October, enabling IFM to decrease fixed unit costs by an estimated 3 US cents per pound, by virtue of achieving nameplate volumes.
The shutdown did however have a negative effect on IFM’s production figures, which were down 17% on the previous corresponding period at 42,584 tonnes. The disruption would continue during the current quarter, with Kovarsky’s guidance being 27,000 t to 31,000 t for the period.
“The upgrade is on track and on budget,’ said Kovarsky, adding the installation of the first furnace roof was nearing completion.
The start-up of the Sky Chrome mine – which boast 12 million tonnes (mt) of open pit recoverable reserves in the MG1, 2, 3 and 4 seams – was another aspect in the strategy to make IFM more cost competitive. Operations commenced in June.
“The build-up of production at Sky Chrome will enhance the company’s cost base as the open pit mining costs are significantly below those at Lesedi underground mining,’ Kovarsky said.
Total mined tonnages from the Lesedi mine increased from 194,000 t in the previous quarter to 198,000 t end-June.
IFM’s co-generation plant, which is to operate at full capacity once the furnace upgrades are completed, would reduce costs by another 2.3c/lb.
Construction of the UG2 chrome retreatment plant at Anglo Platinum’s operations also remained on schedule, Kovarsky said, with commissioning expected in September. The first feed of 15,000 t chrome concentrate is scheduled for January 2012 and would reduce costs by an estimated 3c/lb from that date.
“The start-up of Sky Chrome is the first milestone that will make IFM more cost competitive,’ said Kovarsky. “The company has a high degree of confidence that the furnace roof upgrades, co-generations and UG2 projects will be successfully implemented by the end of 2011 and the company will then be in a position to take full advantage of underlying stainless steel demand that should reflect record volumes in 2012.
“There are additional opportunities to further reduce IFM’s costs – such as the increased anthracite usage which is expected to reduce costs by 2c/lb – and through fine tuning operations from September 2011 after roof upgrades, reducing overheads and reducing maintenance costs.’
CRU Analysis earlier forecast record stainless steel production for 2011 and again for 2012, increasing from 31.7 mt in 2010 to 33.5 mt in 2011 and to 36 mt in 2012. Numis Securities, in a note to clients, said IFM’s production update was overall positive and in line with forecasts.
“We have revised our ferrochrome forecasts following the recent 15c drop in the. European benchmark, although there is no change to our target price nor buy recommendation,’ it said.
Numis has a target price of 60 pence, with the share currently trading around 19p.
Kovarsky is due to step down as CEO in January, with Christiaan Jordaan designated to take over the reins.
