Sierra Rutile Limited Sierra Rutile Provides Q3 2015 Operational Update (6022B)

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RNS Number : 6022B

Sierra Rutile Limited

08 October 2015

Sierra Rutile Limited

Sierra Rutile Provides Q3 2015 Operational Update

London, UK, 8 October 2015: Sierra Rutile Limited (AIM: SRX) ("Sierra Rutile") is pleased to provide an operational update on the third quarter of 2015 ("Q3").

Highlights

-- Strong Q3 operational performance with rutile production of 33,960 tonnes, second highest quarter of rutile production ever

-- Full-year rutile production guidance expected to be within the middle-to-upper range of previously stated production guidance of 120,000 - 130,000 tonnes

-- Ilmenite production remains on-target to meet annual guidance of 30,000 - 35,000 tonnes with 27,149 tonnes produced to date

   --      Well-positioned to meet full-year operating cash cost guidance 
   --      Gangama Dry Mine construction remains on-schedule and on-budget 

-- Planned rutile sales now fully contracted for the remainder of 2015 at prices in-line with average realised prices in 2014

Commenting on Q3 performance, CEO John Sisay said:

"We have seen strong operational performance during Q3, reflecting stable operations across our mining units. Our mines continue to benefit from well-executed maintenance programs which were completed earlier in the year. This allowed us to achieve our second highest quarterly rutile production ever. As we enter Q4 2015, we reaffirm our full-year rutile production guidance and expect production will be within the middle-to-upper range of the guidance given increased visibility on operational performance through to year-end. We continue to be well-positioned to achieve both our full-year production and operating cash cost guidance. Gangama Dry Mine construction continues within budget and on-schedule for first production in Q2 2016."

Production

Sierra Rutile produced 33,960 tonnes of rutile, 10,229 tonnes of ilmenite and 446 tonnes of zircon concentrate in Q3.

 
                        Q3 2015   Q2 2015   % change 
---------------------  --------  --------  --------- 
 Rutile                 33,960    29,933      13% 
 Ilmenite               10,229     4,117      148% 
 Zircon Concentrate1      446       333       34% 
---------------------  --------  --------  --------- 
 

Q3 rutile production was Sierra Rutile's second highest quarter of rutile production ever and has demonstrated Sierra Rutile's ability to maintain quarterly production growth this year. Rutile production in Q3 has increased by 13% over Q2 2015 and by 45% over Q1 2015. In addition, Sierra Rutile ended the quarter with 2,000 tonnes of HMC stockpile, containing approximately 700 tonnes of rutile, which will be processed in Q4 2015.

Sierra Rutile's operations continue to benefit from stable operating conditions and planned maintenance shutdowns completed in H1 2015. Both Lanti Dry Mine and Lanti Dredge Mine continue to operate at or above target levels. In addition, a planned transition to higher-grade areas has supported higher production levels in Q3 compared to H1 2015. The Mogbwemo tailings operation continues in its focus to ramp-up to target levels with the successful addition of further production units over the quarter.

Sierra Rutile remains on-target to meet full-year rutile production guidance. Given production to date and increased visibility on expected Q4 2015 production, Sierra Rutile expects that full-year rutile production will be within the middle-to-upper range of production guidance. Q4 2015 rutile production is expected to be higher than Q3, benefiting from dry season operating conditions and continued high grades.

Ilmenite production of 10,229 tonnes over the quarter was also strong. As indicated in Sierra Rutile's Q2 2015 announcement, Q3 ilmenite production benefited from carried over mined tonnes from Q2 2015 which were processed in Q3. Ilmenite production remains on-target to meet full-year ilmenite production guidance of 30,000 - 35,000 tonnes with 27,149 tonnes produced year to date.

1 Zircon Concentrate is a semi-finished zircon product grading 40-45% ZrO(2) .

Operating Cost

Direct operating cash costs(2) and total operating cash costs(3) in Q3 were slightly higher than Q2 2015 despite higher production levels. The increase in direct and total operating costs was predominantly due to a timing effect of by-product shipments planned in Q3, but being committed in Q4. The method of only counting by-products sold during the quarter when calculating cash costs means that the large volume of ilmenite produced during Q3 will now become realised from a cash cost perspective when committed shipments in Q4 2015 have occurred. When normalising for the timing effect of the ilmenite shipment planned for Q3 but now occurring in Q4, cash costs for Q3 were well within the operating cash cost guidance range provided by the company.

The underlying low cash costs for the quarter (once normalised for the timing effect of the ilmenite shipment) were achieved despite cost pressures from high levels of rainfall during a particularly heavy wet season. The heavy rainfall resulted in additional costs including increased road maintenance. As a result of heavy rainfall causing flooding in Sierra Leone, certain other exceptional costs were incurred over the quarter, including one-off donations related to relief efforts for flooding in Freetown.

All-in operating cash costs(4) in Q3 were lower than Q2 2015, benefiting from certain sustaining capital payments being delayed to Q4 2015.

Sierra Rutile remains well positioned to meet its operating cash cost guidance for 2015. Entering Q4 2015, Sierra Rutile expects to realise its highest quarterly by-product revenue for 2015 as committed ilmenite shipments occur. In addition, operating cash costs are also expected to benefit from higher forecast rutile production and normalised expenditures as weather conditions subside.

 
                       Q3 2015    Q2 2015    Full year 
                        Actuals    Actuals      2015 
                                              Guidance 
--------------------  ---------  ---------  ---------- 
 Direct operating 
  cash cost (US$/t)      560        527      520 - 530 
--------------------  ---------  ---------  ---------- 
 Total operating 
  cash cost (US$/t)      647        636      595 - 615 
--------------------  ---------  ---------  ---------- 
 All-in operating 
  cash cost (US$/t)      670        685      650 - 670 
--------------------  ---------  ---------  ---------- 
 

2 Direct operating cash cost (includes direct operating costs but excludes depreciation) less by-product revenue divided by tonnes of rutile produced.

3 Total operating cash cost (includes direct operating costs, general administrative costs and corporate costs but excludes depreciation) less by-product revenue divided by tonnes of rutile produced.

4 All-in cash cost (total operating cash cost plus stay-in-business capital cost, but excludes depreciation) less by-product revenue divided by tonnes of rutile produced.

Gangama Dry Mine

Gangama Dry Mine construction continued over the quarter. Plant terrace construction, a critical path item, is well-advanced and on-schedule for completion in October 2015. Construction remains on-budget and on-track for first production in late Q2 2016.

Sales

As previously stated in Sierra Rutile's H1 2015 interim results announcement, planned rutile sales for 2015 are now fully contracted at prices consistent with average realised prices in 2014. Given an expected shortage in premium feedstock availability over the next few years, customers have exhibited strong interest in Sierra Rutile's expansion volumes expected from Gangama Dry Mine.

The pigment market, while still subdued, has showed signs of recovery with pigment volumes strengthening, and the titanium metal market outlooks continue to be positive.

ENDS

For Further Information:

 
 Sierra Rutile Limited 
  Matthew Hird, Chief Financial 
  Officer 
  John Nagulendran, Company          +44 (0)20 
  Secretary                          7074 1800 
 Investec Bank 
  Nominated Adviser and 
  Joint Corporate Broker 
  Chris Sim / George Price           +44 (0)20 
  / Jeremy Ellis                     7597 4000 
 RBC Capital Markets 
  Joint Corporate Broker             +44 (0)20 
  Jonny Hardy                        7653 4000 
 Numis Securities Limited 
  Joint Corporate Broker 
  John Prior / James Black           +44 (0)20 
  / Paul Gillam                      7260 1000 
 Kreab 
  Marc Cohen / Christina             +44 (0)20 
  Clark / Fiona Cumberland           7074 1800 
 

About Sierra Rutile Limited

Sierra Rutile produces titanium feedstock industrial minerals (primarily rutile, with some associated ilmenite), as well as smaller quantities of zircon. Sierra Rutile's mines, located in the south west of Sierra Leone, are based on one of the largest natural rutile deposits in the world, with a JORC-Compliant Mineral Resource for measured, indicated and inferred resources for the Sierra Rutile mine of over 895 million tonnes (as at 30 September 2014).

www.sierra-rutile.com

This information is provided by RNS

The company news service from the London Stock Exchange

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October 08, 2015 02:00 ET (06:00 GMT)