Consmin, a leading manganese ore producer with mining operations in Australia and Ghana, announces its quarterly results for the period ended 31 March 2016.
Market and Business Update
Key highlights
| Quarter ended | |||
| Unaudited | 31 March 2016 | 31 March 2015 | % change |
| Manganese ore produced (dry kt) | 389.7 | 713.8 | (45.4%) |
| Manganese ore sales (dry kt) | 490.2 | 575.0 | (14.7%) |
| Average C1 manganese unit cash cost ($/dmtu)1 | 1.74 | 1.97 | (11.7%) |
| Average manganese FOB Sales price ($/dmtu) | 1.44 | 3.59 | (59.9%) |
| Revenue ($ million) | 21.4 | 81.8 | (73.8%) |
| Adjusted EBITDA ($ million)2 | (8.9) | 24.1 | (136.9%) |
| ‘Cash’ EBITDA ($ million)2 | (11.2) | 16.2 | (169.1%) |
| (Loss) / profit for the period from continuing operations | (33.2) | (3.5) | 848.6% |
| At 31 March 2016 | At 31 December 2015 | % change | |
| Cash and cash equivalents ($ million) | 40.7 | 79.1 | (48.5%) |
| Gross debt ($ million) | (387.6) | (390.3) | (0.7%) |
| Gross debt excluding high yield bonds ($ million) | (13.8) | (17.2) | (19.8%) |
| Net debt ($ million) | (347.0) | (311.2) | 11.5% |
1 Average C1 manganese unit cash cost represents the cash cost incurred at each processing stage from mining through to shiploading, divided by the total manganese dmtus produced. Included within the C1 manganese cash costs are an allocation of offsite, non-corporate and support services. Depreciation, government royalty payments, deferred stripping adjustments and stockpile movements are not included in the calculation.
2 “Adjusted EBITDA” is defined as operating profit before depreciation and amortisation, impairment write-back/expense, net foreign exchange gain/loss and exceptional items3. ‘Cash’ EBITDA is defined as Adjusted EBITDA after removing the impact of the non-cash items of deferred stripping and net movement in inventories. Adjusted EBITDA and Cash EBITDA are the key profitability measures used across the business and reflect performance in a consistent manner and in line with how the business is managed and measured on a day to day basis. Adjusted EBITDA and Cash EBITDA are not uniformly or legally defined measures and are not recognised under IFRS or any other generally accepted accounting principles. Other companies in the mining industry may calculate these measures differently and consequently, our presentation of Adjusted EBITDA and Cash EBITDA items may not be readily comparable to other companies’ figures.
3 Exceptional items are material or non-recurring items excluded from management’s assessment of profits because by their nature they could distort the Group’s underlying quality of earnings. These are excluded to reflect performance in a consistent manner and in line with how the business is managed and measured on a day to day basis.
“During the quarter Consmin’s operational performance was adversely impacted by a 45% reduction in Group production compared to the corresponding period in 2015.This was driven by an 81% reduction in Australian ore production as a result of the Company’s decision to suspend operations at the Woodie Woodie mine with effect from 2nd February 2016 and commence the transition into care and maintenance.
The manganese C1 unit cash cost for the quarter was $1.74/dmtu, an improvement of 12% from $1.97/dmtu for Q1 2015, which was largely driven by the Group C1 cash unit cost only including Australian C1 cash unit costs for the period up to 2nd February 2016.
The company’s manganese ore shipments totalled 490k dry tonnes during Q1 2016, a decrease of 15% compared to Q1 2015. Shipments of Australian manganese ore in Q1 2016 were only 72k dry tonnes, a decrease of 80% compared to Q1 2015 due to the company’s decision to suspend operations at the Woodie Woodie mine at the beginning of February 2016 and due to the poor pricing levels seen during the first quarter. Sales tonnes from Ghana were however 97% higher than in Q1 2015, which had been negatively impacted following the termination of the TMI contract in the second half of 2014.
The quarterly average price for manganese lump (CRU, 44%Mn CIF China) in Q1 2016 was $2.07/dmtu, a decrease of 46% from $3.83/dmtu in Q1 2015 and also down 17% from $2.48/dmtu in Q4 2015. By the end of April, manganese prices had more than doubled compared to February 2016 prices as supply curtailments and reduced imports led to a very substantial drawdown of China’s port stocks. This along with a moderate improvement in steel prices gave traders and suppliers the ability to push up prices aggressively due to a shortage of immediately available ore in China. The company has taken this opportunity to contract its stockpiled Australian manganese ore for Q2 shipments at substantially increased prices from that seen during Q1 2016.
Despite the recent improvement in manganese ore prices the pricing outlook remains unclear due to the uncertainty over whether the recent improved steel performance will continue, and whether major seaborne ore suppliers continue to show supply discipline. The company continues to believe that prices seen in January and February 2016 were too low to be sustainable, however, the Company remains cautious about the current strength in ore prices which may entice marginal suppliers to re-enter the market, exerting downward pressure on prices.
Although the Company ended 2015 with net cash and cash equivalents of $76 million, the weakness of pricing for manganese ore in the first quarter, as well as the costs associated with placing the Woodie Woodie mine into care and maintenance have put further pressure on liquidity, with the Company’s net cash and cash equivalents having reduced to US$39 million at 31 March 2016.
As a result of the level and speed of depletion of the Group’s cash balances during Q1 2016 the Company announced on 8 March 2016 that it anticipated discussions with holders of the 8.000% Senior Secured Notes due May 15, 2020 regarding these Notes. Discussions with the noteholders representatives commenced in April 2016 and are continuing with a view to implement a solution to improve the Company’s liquidity.”
Download the full Report for the 3 months to 31 March 2016 (PDF) – Consmin Quarterly Report – Q1 2016
Consmin is a leading manganese ore producer within mining operations in Australia and Ghana. The principal activities of the Company and its subsidiaries (the “Group”) are the exploration, mining, processing and sale of manganese products. The Group’s operations are primarily conducted through four major operating/trading subsidiaries: Pilbara Manganese Pty Limited (Australia), Ghana Manganese Company Limited (Ghana), Manganese Trading Limited (Jersey) and Pilbara Trading Limited (Jersey).
Consolidated Minerals Limited is headquartered in Jersey and the address of its office is Commercial House, 3 Commercial Street, St Helier, Jersey, Channel Islands, JE2 3RU.
For further information, please visit our website www.consmin.com or contact:
Mark Camaj, General Manager, Marketing
Jurgen Eijgendaal, Managing Director, Ghana
Paul Muller, Managing Director, Australia
David Slater, Executive Director and CFO
There will be a conference call for analysts and bondholders, the details of which will be released on the Company website www.consmin.com.
Market, economic and industry data used throughout this report has been derived from various industry and other independent sources. Industry publications, surveys and forecasts generally state that the information contained therein has been obtained from sources believed to be reliable, but that the accuracy and completeness of such information is not guaranteed and such industry forecasts may not have been updated. Forecasts and other forward-looking information obtained from these sources are subject to the same qualifications and uncertainties as the other forward looking statements contained in this report.
This report includes “forward-looking statements” that express or imply expectations of future events or results. Forward-looking statements are statements that are not historical facts. These statements include, without limitation, financial projections and estimates and their underlying assumptions, statements regarding plans, objectives and expectations with respect to future production, operations, costs, products and services, and statements regarding future performance. Forward-looking statements are generally identified by the words ‘plans,’ ‘expects,’ ‘anticipates,’ ‘believes,’ ‘intends,’ ‘estimates’ and other similar expressions.
All forward-looking statements involve a number of risks, uncertainties and other factors. Although Consmin’s management believes that the expectations reflected in such forward-looking statements are reasonable, investors are cautioned that forward-looking information and statements are subject to various risks and uncertainties, many of which are difficult to predict and generally beyond the control of Consmin, that could cause actual results and developments to differ materially from those expressed in, or implied or projected by, the forward-looking information and statements contained in this report. Factors that could cause or contribute to differences between the actual results, performance and achievements of Consmin include, but are not limited to, political, economic and business conditions, industry trends, competition, commodity prices, changes in regulation, currency fluctuations (including the Australian dollar and US dollar exchange rates), Consmin’s ability to recover its reserves or develop new reserves, including its ability to convert its resources into reserves and its mineral potential into resources or reserves, and to timely and successfully process its mineral reserves which may or may not occur. Consmin is also exposed to the risk of trespass, theft and vandalism, changes in its business strategy, as well as risks and hazards associated with the business of mineral exploration, development, mining and production. Accordingly, investors should not place reliance on forward looking statements contained in this report.
The forward-looking statements in this report reflect information available at the time of preparing this report. Subject to the requirements of the applicable law, Consmin explicitly disclaims any obligation or undertaking publicly to release the result of any revisions to any forward- looking statements in this report that may occur due to any change in Consmin’s expectations or to reflect events or circumstances after the date of this report. No statements made in this report regarding expectations of future profits are profit forecasts or estimates, and no statements made in this report should be interpreted to mean that Consmin’s profits for any future period will necessarily match or exceed the historical published profits of Consmin or any other level.
