2nd UPDATE: International Ferro Metals Hopes To Raise Output

20th Jul 2010 09:38

(Rewrites first paragraph, adds analysts comment, more CEO quotes.) By Michael Haddon Of DOW JONES NEWSWIRES LONDON (Dow Jones Newswires)--International Ferro Metals Ltd. (IFL.LN) said Tuesday it hopes to increase ferrochrome production levels with the help of a new electricity plant and the return of its furnace to maximum capacity, after earlier Tuesday announcing production levels that missed analyst expectations. IFM produced 51,331 metric tons of ferrochrome from its operations in South Africa during the fourth quarter ended June 30, down from 54,394 tons during the previous quarter. Andy Davidson from Numis Securities said this output was 'well below our forecast' of 60,000 tons, while Richard Knights from Liberum Capital said production was 'a small miss' compared with his prediction of 55,000 tons, and Martin Potts of Daniel Stewart said this figure was 'slightly below our expectations.' The Australia-headquartered company can produce around 265,000 tons of ferrochrome a year at full capacity, and said this quarter's reduction was due to ore feed inconsistencies and an unscheduled shutdown for four days to repair a furnace roof. Since the beginning of July, furnace production has significantly improved as a result of more consistent ore feed and more stable furnace conditions resulting from the repaired roof, IFM said. Chief executive David Kovarsky told a conference call that the company's furnace would approach nameplate capacity during the first quarter, and maintain it throughout the rest of the financial year. Kovarsky added that the electricity co-generation plant is on track to be commissioned in October and should be fully ramped up by a month later, further aiding its efforts to increase production. IFM began work on the co-generation project in 2007, raising GBP22 million through a share placing in August 2009 to provide capital to build the plant. The London-listed ferrochrome producer sold 55,433 tons of the metal--a key ingredient for preventing corrosion in stainless steel--during its fourth quarter, compared with 64,063 tons in the previous quarter. Benchmark ferrochrome prices are settled on a quarterly basis. The European benchmark price for South African ferrochrome decreased less than expected to $1.30 a pound at the start of July, reflecting a slowing of stainless production particularly in Europe and China. However, IFM said the combination of low global inventories and South African production cuts during winter means the ferrochrome market will stabilize over the next quarter. "I would predict ferrochrome prices of no less than what they are now - stable, and hopefully better than that,' Kovarsky said. The company had a reduced inventory level of 17,976 tons after the fourth quarter, down from 22,748 tons at the end of the third quarter. IFM had a cash balance of 47 million rand ($6.18 million) as of June 30, net borrowings of ZAR26 million as of March 31, and a working capital facility of ZAR500 million. At 0810 GMT, the company's shares were up 3.7% at 28 pence. -By Michael Haddon, Dow Jones Newswires; 4420-7842-9289; [email protected] (END) Dow Jones Newswires July 20, 2010 04:38 ET (08:38 GMT)