Financial Results for the three months and nine months to 30 September 2015

27 Nov 2015
All figures in accordance with IFRS and in United States Dollars, unless otherwise stated

Consmin, a leading manganese ore producer with mining operations in Australia and Ghana, announces its quarterly results for the period ended 30 September 2015.

Key highlights

  • Total tonnes of manganese ore production for Q3 2015 decreased 22% compared to Q3 2014. Australian manganese ore production decreased by 41% and Ghanaian manganese ore production decreased by 3% compared to Q3 2014. Overall, total manganese ore produced year to date in 2015 was 17% lower compared to the equivalent period in 2014.
  • The manganese C1 cash cost1 for Q3 2015 was $2.20/dmtu, a decrease of 13% compared to $2.52/dmtu in Q3 2014, The manganese C1 cash cost year to date in 2015 was $2.05/dmtu compared to $2.43/dmtu year to date in 2014, a decrease of 16%, continuing the positive trend seen over recent years.
  • Total manganese sales tonnes increased 53% in Q3 2015 compared to Q3 2014. Australian sales decreased 19% due to lower ore production from smaller pits on transition to the Topvar pit. Ghanaian sales increased 325% compared to Q3 2014 when sales were negatively impacted following the termination of the TMI contract.  Overall, total manganese sales tonnes in the first nine months of 2015 were 2% higher compared to the equivalent period in 2014.
  • Average manganese FOB sales price decreased 37% from $3.83 in Q3 2014 to $2.42 in Q3 2015. Overall, average manganese FOB sales price decreased 31% from $4.04 year to September 2014 to $2.77 in the first nine months of 2015.
  • The average manganese ore price for Q3 2015 (CRU, 44%Mn CIF China) was $3.02/dmtu, a decrease of 3% from $3.10/dmtu in Q2 2015. The Company’s average price for its Australian 46%Mn lump product (CIF China) was $3.27/dmtu in Q3 2015, having started the year at $4.65/dmtu and ended the third quarter at $3.20/dmtu.
  • Adjusted EBITDA2 for Q3 2015 was $4 million, down from $21 million in Q3 2014, principally due to lower pricing partially offset by reduced mining costs. Cash EBITDA for Q3 2015 was $17 million, up from $2 million in Q3 2014 mainly as a result of the higher benefit relating to net movement in inventories in Q3 2015 as stockpiles were drawn down.
  • The Group recorded a loss of $15 million during Q3 2015, which is equivalent to the loss in Q3 2014.
  • During the quarter the Group had an operating cash inflow of $10 million compared to an inflow from continuing operations of $20 million in Q3 2014.
  • Cash and cash equivalents net of overdrafts decreased in Q3 2015 by $12 million to $102 million on 30 September 2015 with net debt reducing by $4 million to $286 million over the same period.
  • During the quarter the Group spent $11 million on the repurchase of a part of its 2020 bonds.
  • Total capital expenditure for the Group in Q3 2015 was $6 million, 52% lower than in Q3 2014, as a result of reduced exploration activity in order to maintain liquidity in light of the difficult current market conditions for manganese ore.

Key Performance Indicators

  Quarter ended Nine months ended
Unaudited 30 Sept
30 Sept
% change 30 Sept
30 Sept
% change
Manganese ore produced (dry kt) 679.5 871.3 (22.0%) 2,160.5 2,601.8 (17.0%)
Manganese ore sales (dry kt) 890.9 583.8 52.6% 2,166.1 2,121.2 2.1%
Average C1 manganese unit cash cost ($/dmtu)1 2.20 2.52 (12.7%) 2.05 2.43 (15.6%)
Average manganese FOB Sales price ($/dmtu) 2.42 3.83 (36.8%) 2.77 4.04 (31.4%)
Revenue ($ million) 75.2 92.7 (18.9%) 218.0 318.0 (31.4%)
Adjusted EBITDA ($ million)2 4.0 20.7 (80.7%) 43.0 107.7 (60.1%)
‘Cash’ EBITDA ($ million)2 17.0 1.5 1033.3% 33.9 61.1 (44.5%)
(Loss)/ profit for the period from continuing operations (14.6) (14.6) 0.0% 3.9 4.7 (17.0%)
  At 30 Sept 2015 At 31 Dec 2014 % change
Cash and cash equivalents ($ million) 106.2 82.1 29.4%
Gross debt ($ million) (392.5) (428.6) (8.4%)
Gross debt excluding high yield bonds ($ million) (20.1) (44.0) (54.4%)
Net debt ($ million) (286.3) (346.5) (17.4%)

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.

Commenting on the results, David Slater (CFO of Consmin) said:

“During the third quarter Consmin’s operational performance was adversely impacted by a 22% lower production compared to Q3 2014. Australian ore production declined 41% as a result of the combination of transition to the Topvar and Cracker pits that required pre-stripping and the uncharacteristically fine nature of the ore encountered in Homestead and Paystar which negatively impacting processing yields and production.

The manganese C1 cash cost for quarter was $2.20/dmtu, a decrease of 13% from $2.52/dmtu for Q3 2014, with the reduction largely driven by beneficial effect of the relative weakening of the Australian dollar. The increase in C1 costs compared to Q2 2015 was in-line with expectation as a result of additional waste stripping in Ghana as a result of increasing production and in Australia regarding the pre-stripping of Topvar and Cracker. The 2015 full year estimate for the C1 cash cost is now expected to be circa $2.20/dmtu based on an exchange rate of for the Australian dollar of 0.73 for the remainder of the year.

Manganese sales tonnes increased 53% in Q3 2015 compared to Q3 2014, driven by a four-fold increase in Ghanaian sales, which were negatively impacted in Q3 2014 by the termination of the TMI contract, offset by Australian sales which declined 19% as a result of the lower production. Despite the increase in sales volumes, revenue in Q3 2015 fell by 19% as a result of the average FOB manganese price decreasing 37% and the lower average grade sold as a result of a larger proportion of sales from Ghana.

As a result of the continuing difficult pricing environment and weaker Australian production, financial performance for the quarter worsened compared to the Q3 2014. Adjusted EBITDA for the quarter was down from $21 million in the Q3 2014 to $4 million, however cash EBITDA increased from $2 million to $17 million as a result of drawing down on stockpiles in the quarter.   

Net cash generated from operations in the quarter at $10 million was lower than the $20 million in Q3 2014 largely as a result of the weaker pricing environment for manganese. This reduction was however partially mitigated by reduced payments for capital expenditure. During the quarter $11 million was spent on the repurchase on a portion of the 2020 senior secured notes. Total cash and cash equivalents net of overdrafts decreased in the quarter by $12 million to $102 million at 30 September 2015.

China’s slowing economy, particularly in the construction sector, continues to exert downward pressure on its domestic steel and alloy industries. Further contraction in China steel production in Q3 has further increased the pressure on manganese ore demand and prices with November shipments coming under severe downward pressure with a further 15% fall in prices. At this level of pricing many producers are expected to be below sustainable cost levels despite recent cost cutting and favourable currency movements. With demand likely to remain muted, substantial production cuts are required to restore market balance and stabilise ore prices. In the absence of such changes the company remains bearish on manganese ore prices in the near to mid-term.

Although Consmin ended the third quarter with net cash and cash equivalents balance of $102 million, the continued downward pricing will result in increased pressure on liquidity. As such the Group will continue to tightly control its capital expenditure and explore further efficiencies and cost reduction programmes.”  

Download the full Report for the three months and nine months to 30 September 2015

About Consolidated Minerals Limited

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: Consolidated Minerals 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.

Company Information

For further information, please visit our website or contact:

Consmin  +44 (0) 1534 513 300

Mark Camaj, General Manager, Marketing
Jurgen Eijgendaal, Managing Director, Ghana
Paul Muller, Managing Director, Australia
David Slater, Executive Director and Chief Financial Officer

Conference Call

There will be a conference call for analysts and bondholders, the details of which will be released on the Company website

Market, Economic and Industry

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.

Forward looking statements

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.