(Adds comments from CEO and analysts, details, share movement)
By Brenton Cordeiro
April 10 Iron ore miner African Minerals Ltd
said it expected a surge in output this year as it
ramps up production at its flagship Tonkolili mine in Sierra
Leone, sending its shares up as much as 15.6 percent.
The miner, which said it remained on track to meet its
sustainable output target of 20 million tonnes of ore per year
during the second quarter, expects to triple 2013 production to
between 15 million and 18 million tonnes at Tonkolili.
Citigroup analyst Michael Flitton, who rates African
Minerals as one of his key picks within the sector, said the
company's production forecast was better than he expected.
He added that his cash costs-per-tonne expectation might be
too high as costs fall with increased volumes.
The company said cash costs were expected to fall to about
$30 per tonne by the end of the year. The costs were under $45
per tonne in February, the company said.
"While significant progress was made in 2012, delays in
construction and commissioning of the wet process plant and the
prolonged and severe 2012 wet season, impacted operations,"
African Minerals said in a statement.
The company produced 5.1 million tonnes last year. It
exported 4.3 million tonnes, below its 5 million tonne target.
African Minerals said it expected to export between 13
million tonnes and 15 million tonnes in 2013.
"While investors were disappointed by a series of delays to
ramp up targets in the last year, reaching the end of a bumpy
ride should help African Minerals gradually rebuild some
investor confidence," Jefferies anlayst Seth Rosenfeld said.
African Minerals shares rose to 259.75 pence in morning
trading, making the stock the top percentage gainer on the
London Stock Exchange.
"By shipping only fines during the dry seasons and saving
low moisture content and easily drainable lump for the wet
season, African Minerals should not face the same challenges
with ore liquification that arose in 2012," Rosenfeld said.
High moisture content, particularly in fines, makes the
transport of iron ore unsafe as it could lead to liquefaction of
the mineral, which in some instances, has resulted in the
capsizing and sinking of ships.
The miner, which owns the Tonkolili mine that sits on one of
Africa's largest iron ore deposits, said adjusted operating loss
narrowed to $27.9 million in 2012 from $35.6 million a year
Iron ore prices .IO62-CNI=SI have rebounded from their
2012 low of $87 per tonne and are now at about $139 as China's
steel mills replenish their stocks.
African Minerals, which faced a short-term funding crunch
late last year and reworked its finances to meet working capital
needs at that time, said it expected to be cashflow positive on
a sustainable basis during the second quarter.
Earlier this year, the company established a $100 million
facility for general corporate purposes and a separate $250
million facility to provide more working capital flexibility.
"We've got the headroom now ... we did have a tight period
last year and that's exactly why we put that financing in
place," Chief Executive Keith Calder said.
(Editing by Don Sebastian)