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Sierra Rutile Limited
15 January 2016
Sierra Rutile Limited
Sierra Rutile Provides Q4 2015 Operational Update
London, UK, 15 January 2016: Sierra Rutile Limited (AIM: SRX)
("Sierra Rutile") is pleased to provide an operational update on
the fourth quarter of 2015 ("Q4 2015").
Highlights
-- Record quarterly production for Q4 2015 with 38,787 tonnes of rutile and 10,484 tonnes of ilmenite(1) :
- 25% increase in rutile production from Q4 2014;
- 14% increase in rutile production from Q3 2015;
- Due to a minor interruption in the last week of December,
1,550 tonnes of rutile that was partially processed at year end
("Rutile In-process"). When adjusting for this Rutile In-process,
production for the quarter was 40,337 tonnes of rutile.
-- Upper range of 2015 annual production guidance achieved with
126,021 tonnes of rutile produced (guidance of 120,000 to 130,000
tonnes).
- 10% increase in rutile production from full-year 2014;
- Representing the highest annual production since operations
restarted in 2006;
- Adjusting for Rutile In-process, production for the year was
127,571 tonnes of rutile.
-- Continued improved cost performance achieved following the
implementation of cost saving initiatives and higher production
volumes:
- Direct Operating Cash Cost(2) of US$537/t for 2015;
- All-in Operating Cash Cost(3,4) of US$666/t for 2015;
- Adjusting for Rutile In-process, Direct Operating Cash Costs
were US$530/t and All-in Operating Cash Costs were US$658/t,
in-line with cost guidance.
-- Gangama Dry Mine construction remains on-schedule and
on-budget for commissioning in late Q2 2016:
- US$21 million of project construction spending completed
to-date;
- Expected commissioning of Gangama in late Q2 2016 will provide
further dry mining production capacity to facilitate higher
production volumes in 2016.
-- The continued transition to a sales-led, flexible production
model provides Sierra Rutile with the flexibility to align
production to focus on maximizing the profitability of sales.
-- Continued demand for high-grade natural rutile from existing
customer base with 80% of maximum targeted sales volumes already
contracted for 2016.
Commenting on Q4 2015 performance, Chief Executive Officer, John
Sisay said:
"We are very pleased to record the highest quarter of rutile
production and the highest annual production since the operation
was restarted in 2006. Sierra Leone was declared Ebola free in
November 2015 and we are proud to have achieved this result during
a difficult backdrop. Looking forward into 2016, we remain focused
on unlocking shareholder value in a disciplined way: aligning
production volumes to customer requirements, continuous cost
improvements and productivity enhancements. We have further
strengthened our position as a leading producer of premium grade
rutile and continue to work in close collaboration with our
customers on long-term rutile demand planning."
1 Highest ever quarterly production since Sierra Rutile
operations restarted in 2006.
2 Direct operating cash cost (includes direct operating costs
but excludes depreciation) less by-product revenue divided by
tonnes of rutile produced.
3 All-in operating cash cost (total operating cash costs plus
stay-in-business capital cost, but excludes depreciation) less
by-product revenue divided by tonnes of rutile produced.
4 Reported cash costs exclude certain exceptional costs incurred
during the year, the most significant of which related to a one-off
donation towards relief efforts for the flooding experienced in
Freetown. These exceptional costs impacted All-in Operating Cash
Costs by approximately $1.50/t.
Production
Q4 2015 rutile production was 25% higher than Q4 2014 with
38,787 tonnes of rutile and 10,484 tonnes of ilmenite produced (Q4
2014: 31,025 tonnes of rutile and 10,574 tonnes of ilmenite),
representing Sierra Rutile's highest quarter of rutile production
to-date(1) .
A minor dryer failure in the mineral separation plant during the
last week of the year caused a temporary processing interruption
and resulted in 1,550 tonnes of rutile being held partially
processed at year end. The material will be processed in early
January resulting in additional finished product. Adjusting for
this Rutile In-process, production for the quarter was 40,337
tonnes of rutile.
This set of results for Q4 2015 represented a 14% increase over
Q3 2015 rutile production (Q3 2015: 33,960 tonnes) and a run-rate
higher than any year of Sierra Rutile's production on an annualised
basis.
Q4 Q3 %
2015 2015 Change
============== ======= ======= ========
Rutile (t) 38,787 33,960 14%
============== ======= ======= ========
Ilmenite (t) 10,484 10,229 3%
============== ======= ======= ========
Zircon (t)5 229 446 (5%)
============== ======= ======= ========
Full-year production was 126,021 tonnes of rutile and 37,633
tonnes of ilmenite, representing a 10% increase and 5% increase on
2014, respectively. Sierra Rutile achieved its upper range of 2015
production guidance (guidance of 120,000 to 130,000 tonnes).
Adjusting for the Rutile In-process, full-year production was
127,571 tonnes of rutile.
2015 2014 %
Actual Actual Change
============== ======== ======= =======
Rutile (t) 126,021 114,163 10%
============== ======== ======= =======
Ilmenite (t) 37,633 35,839 5%
============== ======== ======= =======
Whilst Sierra Rutile achieved the upper range of its guidance,
it made a conscious effort to slow production in December in order
to align production volumes to planned shipments in early 2016 thus
avoiding holding excess working capital. With the shift to multiple
dry mining units underway, Sierra Rutile is now able to profitably
align production volumes with demand in order to minimize finished
goods inventory on hand.
5 Zircon Concentrate is a semi-finished zircon product grading
40-55% ZrO2.
Cost Efficiency
For 2015, Direct Operating Cash Costs were US$537/t and All-in
Operating Cash Costs were US$666/t resulting in a reduction in unit
operating costs for 2015 compared to 2014.(4) When adjusting for
the Rutile In-process, Direct Operating Cash Costs were US$530/t
and All-in Operating Cash Costs were US$658/t, representing the
upper range of guidance for Direct Operating Cash Costs and the
lower range of guidance for All-in Operating Cash Costs.
Cost control continued to be a key focus for Q4 2015 as Sierra
Rutile continues to target producing in the lowest quartile on the
global cost curve. In a challenging marketplace for suppliers to
the mining sector, Sierra Rutile took advantage of improved pricing
and payment terms for goods and services. Lower fuel prices and the
devaluation of certain non-US dollar currencies in which goods and
services are priced also had a beneficial impact. In addition, with
the majority of costs being fixed in nature, higher production
volumes also lowered unit costs.
As planned, mined grades at the dredge were moderately lower in
2015 versus 2014, an effect which was mitigated by contract mining
of historic tailings. With Gangama Dry Mine coming on-line, average
mined grades are expected to increase in 2016.
The recoveries achieved during the ramp-up of contract mining of
tailings underperformed expectations in the first half of 2015,
which resulted in unit costs trending towards the upper end of
guidance. Contract mining performance has improved over the year,
and with the commencement of production from the Gangama Dry Mine
in 2016, contract mining of tailings will represent a substantially
reduced proportion of total production going forward.
In addition, a number of planned maintenance activities were
completed in 2015, and the increased costs of certain supplies and
services as a result of the impact of Ebola on supply chains led to
upward pressure on maintenance costs.
2015 2014 %
Change
=================== ===== ===== ========
Direct Operating
Cash Costs ($/t) 537 541 (1%)
=================== ===== ===== ========
All-in Operating
Cash Costs ($/t) 666 683 (2%)
=================== ===== ===== ========
Expansion Project - Gangama Dry Mining
Construction of the Gangama Dry mine remains on budget and on
schedule for the planned Q2 2016 commissioning. A number of
significant project milestones at the Gangama Dry Mine were
achieved during the quarter, including completion of contractor
camp construction and completion of concentrator plant
fabrication.
In addition, terrace bulk earthworks have been completed,
project procurement remains on schedule, and civil construction is
progressing well, with steel erecting also commencing in Q4 2015.
See Sierra Rutile's website:
http://www.sierra-rutile.com/uploads/gangamaphotos.pdf for
photographs of project construction progress.
As at 31 December 2015, US$21 million had been spent on the
project, in line with planned expenditure. Looking ahead, capital
expenditure for the project is expected to be within budget.
Sales and Marketing
As stated in Sierra Rutile's H1 2015 interim results
announcement, planned rutile sales for the first half of 2015 were
sold at prices consistent with average realized prices in 2014.
Following some weakening in commodities markets in the later part
of the year, realized prices for the full year of 2015 were
achieved at just 3% below average realized prices for 2014. Given
an expected shortage in premium feedstock availability over the
next few years, customers continue to exhibit strong interest in
Sierra Rutile's high-quality product, and agreements to purchase
volumes from the Gangama Dry Mine are already contracted.
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