LONDON (Reuters) - Kazakh mining group ENRC ENRC.L warned revenue decreased “significantly” in the first quarter compared to a bumper three months a year ago, hit by a drop in prices for the commodities it sells, especially iron ore, and weaker production volumes.
Cost inflation, driven by input materials, energy and labor, was in line with guidance, it said on Thursday. The miner reiterated it expects cost pressures to continue and unit costs to rise up to 20 percent this year.
The London-listed miner said its key ferroalloys division, which accounts for roughly half the group’s earnings, saw revenue deteriorating “very sharply”, with volumes hit by a shutdown of production at its Tuoli operation, as well as its Aksu smelter recovering to full capacity after emergency repairs.
Volumes for ferroalloy products dropped on average 8.4 percent against the first quarter of last year, with total production of saleable ferroalloys down 4.8 percent.
Its iron ore division also showed “severe deterioration” in revenue compared to a year-ago first quarter lifted by record iron ore prices. Iron ore extraction and primary concentrate production dropped by 4.8 percent and 2.5 percent respectively.
Its alumina and aluminium divisions were again hit by lower prices and a drop in alumina sales volumes caused by a processing problem.
Miners have been under pressure from shareholders to be more disciplined in their approach to capital expenditure, and ENRC said it would cut spending on its BMSA project in Brazil due to licensing delays. It still expects capital expenditure to hit $2.7 billion this year.
Reporting by Clara Ferreira-Marques; Editing by Myles Neligan