Sierra Rutile Share Discussion Threads

[eddie catflap] 09/10/2012 10:22

I'm down to about 1/12th of planned holding.

Sticking with a token amount in case of corporate action but will monitor closely.

Medium term should still be a (big) winner.

GLA

[nurdin] 09/10/2012 09:29

I am out as well...for the time being.Outlook looks grim to me despite what the company is saying ..

[staverly] 08/10/2012 19:12

Muted H1 outlook was a clear harbinger for confirmation of Q3's weak demand. All very well to dig the stuff out of the ground in a super efficient manner but you need ready, able and willing buyers. Whilst CP pigment producers have not only been switching away from using high grade feedstocks for some time now (and will continue to do so while global economy in doldrums), they have been and are possibly still dumping their >90% grade ore (aka: thrifting) into a softening market thereby depressing negotiations further. The final straw for me was learning that Japanese sponge producers (material component of SRX sales and hitherto showing a robust appetite) are now in a stressed state and retrenching as evidenced by both Toho and Osaka Titanium having their TPs savaged by a tier one sell-side equity analyst at end of last week. Pending Iluka Q3 figures later this week i'm out for the time being.

[eddie catflap] 08/10/2012 13:21

Agreed nurdin.

I'd posted a while back that I'd suspected the company were only going to be fully forthcoming about the situation once they perceived an improvement. Not yet then!

FWIW I have projected poor Q4 sales,$1500 a tonne (no idea really) and extrapolated 1st half costs across Q3 +Q4.

I prefer a "worst case" scenario and hope to be surprised on the upside. I go for 8.5p eps for the year but this is in no way an attempt to get it right.

At a "back of the envelope" p/e of 9, i think SRX remains a hold until an upturn/catalyst comes.

[nurdin] 08/10/2012 12:44

Yes quite a reasonable deduction.What I find disconcerting is that the company is not upfront with the true state of affairs...too many smoke screens for my liking!Wish they had given us the sales figures for Q3 rather than leaving it to the likes of you and me to work it out!

[eddie catflap] 08/10/2012 12:08

Some quick calcs. Comments appreciated.

And admittedly, I have no idea whether the figures pertaining to the end Q2 stocks that were "sold" were already included in Q2 figures which would dramatically effect the assumptions below. However,

Rutile only.

From six month update:
"SRL also had an inventory of 18k tonnes of rutile at 30 June 2012, a significant proportion of which has already been sold and all of which is expected to be shipped early in Q3."

Therefore
stock end Q2 18,000 as above
production Q3 26,381 from today's update
total 44,381

stock end Q3 31,600 from today's update

Q3 sales therefore 12,781

Considering " ...a significant proportion of which has already been sold and all of which is expected to be shipped early in Q3"; sales of 12,781 reflects
a considerable slowdown.

Provided the upturn occurs and prices stay healthy, increased production and the stockpiles should presage a golden period. Hopefully...

GLA

[corbine] 08/10/2012 08:57

and soft still equates to multiples of extraction costs-which helps the bottom line- profitability :-)
seasonal softness? time will tell.
dry mining ahead of schedule? additional dome factored on new dredge-id build that one now, for additional storage facilitis in case they need to do a glencore with new orleans storage facils n zinc. no harm in stockpiling to help the seasonal adjustments :-)
jmo

[andrbea] 08/10/2012 08:33

they have a higher output (year on year)
but they use the word 'soft' to describe the sector (short-term)
so that muted the rise today methinks

still - as they say - the rutile price is way, way higher than 2 years ago, so that should really help their bottom line.

[nurdin] 08/10/2012 08:30

Disappointing but expected I suppose.

[granitetim] 08/10/2012 07:06

Monday 08 October, 2012
Sierra Rutile Ltd
Sierra Rutile Provides Q3 2012 Operational Update
RNS Number : 1058O
Sierra Rutile Limited
08 October 2012


Sierra Rutile Limited

Sierra Rutile Provides Q3 2012 Operational Update



London, UK, 8 October 2012: Sierra Rutile Limited (AIM: SRX) ("SRL" or "the Company") is pleased to provide an operational update on developments during the third quarter of 2012 ("Q3" or "the Period").





Highlights:

· Record quarterly production of both rutile and ilmenite:

- Rutile production of 26,381 tonnes, 4% greater than highest previous quarter in Q4 2006

- Ilmenite production of 5,315 tonnes



· Year-to-date production of 68,991 tonnes of rutile and 15,630 tonnes of ilmenite, 52% and 49% respective increase on Q3YTD 2011 (45,346 tonnes and 10,470 tonnes respectively)



· Full-year 2012 rutile production guidance increased to 85,000 to 90,000 tonnes of rutile



· Dry mining construction nearing completion. Plant commissioning expected to commence in November

· Extremely positive new dredge feasibility study completed, yielding

o US$472 million project pre-tax NPV10

o 68% pre-tax IRR

o 12-month project payback

o 27-year modelled project life, with significant scope for further extensions to the project life













Production



Q3 2012 production of 26,381 tonnes of rutile was a Company record for a quarter, 4% higher than the highest previous quarter in Q4 2006. Rutile production was also significantly above budget and 45% above the 18,197 tonnes produced in Q3 2011. Q3 ilmenite production was above budget and 23% above the 4,306 tonnes produced in Q3 2011.



SRL's production rates have been steadily increasing for some time due to the renewed investment in existing production assets. Q3 has seen a step change in production rates due to this cumulative investment, as well as the planned one-week shutdown completed in Q2 2012, where critical components on the existing dredge (D1) were overhauled or replaced.



Year-to-date production is now 68,991 tonnes of rutile and 15,630 tonnes of ilmenite, respectively 52% and 49% greater than at the end of Q3 2011. Production guidance for the full year has now been increased to 85,000 to 90,000 tonnes of rutile and corresponding ilmenite.





Expansion projects



The construction of the dry mining plant is expected to be completed during October, with plant commissioning from ore previously stockpiled at the new plant commencing in November. Commissioning is scheduled to continue during the remainder of Q4, and SRL remains confident that production will commence during 2012, thus ensuring that the project will be delivered ahead of schedule and on budget.



A significant proportion of the earth moving fleet has now arrived on site and is ready for use in production and mine preparation after the completion of plant commissioning.



As announced on 3 October 2012 the feasibility study (the "Study") into a new large dredge (D3) was completed, on-schedule, during the quarter. The Study reported an exceptional project pre-tax NPV10 of $472 million, an impressive pre-tax IRR of 68% and a payback period of just 12 months. SRL is now completing an owner's review and value optimization analysis and at the same time developing a project implementation plan.









Financing



As at 30 September 2012, SRL had $16.5 million of cash on hand, having spent, during the quarter, a further $18.1 million on capital expenditures and costs associated with the new dredge feasibility study. In addition, SRL also had an inventory of 31.6k tonnes of rutile at 30 September 2012.





Sales



During Q3 there has been softness in the titanium pigment market. This is typical of Q3, which is often the weakest quarter due to the seasonality of pigment demand, however, there has been underlying slower levels of demand growth than experienced in previous quarters resulting from reduced global growth. SRL remains positive, however, regarding the medium and long-term demand for its products, and expects to see strengthening of the market in 2013.







Commenting on the third quarter performance, CEO John Sisay said: "This has been a very exciting quarter; we have experienced a real breakout in production rates that highlight the effectiveness of our investment strategy over the last 18 months. Our dry mining project has been well executed and we remain on target for it to deliver product in 2012. We have also met our targets to produce a feasibility study into a new large dredge during the quarter, the results of which are outstanding.



While the current market is somewhat soft, we remain confident that the lack of significant new supply and long-term growth patterns will underpin a strong market for our products for years to come. This, of course, is in the context of the current prices, which remain multiples above where they were 12 months ago."



ENDS

[eddie catflap] 05/10/2012 11:20

Iluka 3rd qtr production figs (and poss market update) due Thurs (probably be Friday here)

[arphillips] 03/10/2012 17:12

The New Dredge Feasibilty Study has quite detailed information on production costs but as far as I can see doesnt state what sales prices have been used in the NPV calculations. It does however show a graph showing how sensitive the NPV is to change in sales prices. It is obviously critically important. Does anyone therefore know what sales prices were used as this would establish exactly where we stand at the moment.

[granitetim] 03/10/2012 07:02

Results from New Dredge Feasibility Study

[nurdin] 02/10/2012 17:12

SRX..shortlisted for Aim award.

[eddie catflap] 28/9/2012 21:09

Brief comments on Iluka including pricing forecast.....

•Overall pricing for the year is expected to be maintained at $2,300/t (Z/R/SR) with full year cash cost forecast of $709/t. We also highlight ILU will be able to accelerate sales and production as housing picks up which should go directly to ILU's bottom line.



Oh! Interesting to see that suggested p/e for peer group is 6.5

[corbine] 28/9/2012 07:22

rns- new cfo

[nurdin] 27/9/2012 14:34

Nice 26kish buy there :o)

[eddie catflap] 27/9/2012 11:15

Back to contract pricing for some companies...

"Under the agreement, the pigment producer has agreed to purchase 10,000 tonnes per annum of White Mountain's standard grade, natural rutile concentrate at a fixed price."

[eddie catflap] 25/9/2012 13:45

Ha. Cheers nurdin, I wondered why I couldn't decide if I'd seen it before or not.

It is very quiet out there. I'm hoping the mineral sands companies are awaiting the first signs of improvement so they can say "things have been grim but it's better now."

(Not words to that effect but that actual sentence, word for word) :-] )

[nurdin] 25/9/2012 09:33

Its the same article as the one you were trying to access in the Minerals magazine.

Price drifting again...we need some news :o)

[eddie catflap] 24/9/2012 20:56

Can't recall if this has been posted before but well worth a refresher if so, particularly the explanation regarding the current demand softness.

[eddie catflap] 21/9/2012 11:32

New process development which could eventually lead to increased demand?

[nurdin] 21/9/2012 10:19

Hard to say...I have noticed the rise as well.

KMR rated at 2-3x SRX rating....find that odd.Balance of risks I suppose