Apologies to SQUAREOO although I sympathise somewhat with your view, but there's plenty of wheat to mill here as this is a one project mining company with production commencing in early 07.
International Ferro Metals (IFM) aims to be one of the world’s lowest cost ferrochrome producers through the use of the very latest mining technology integrating the new underground mine with newly built adjacent furnaces and processing plants.
To fulfil this objective, the company successfully raised equity capital of £99 million and listed its shares on the AIM market in September 2005. These funds, together with the debt finance, have been used to purchase the additional,and conveniently nearby,Sky chromite reserves as well as finance the development of a new integrated ferrochrome processing plant at Buffelsfontein, 100km northwest of Johannesburg in the Bushveld area of South Africa.
The first two furnaces are scheduled for completion in January 2007 (see construction update on company website), at which time IFM will begin to ramp up production to supply around 3% of the world’s ferrochrome. Jiuquan Iron & Steel Group Company (JISCO), the largest stainless steel manufacturer in North West China owns 26% of IFM and has entered into a guaranteed off-take agreement to acquire approximately 40% of the company’s chrome production. Co-metals, a NYSE listed Metals Trading company has also entered into a guaranteed off-take agreement to acquire approximately 20%. The balance of production will be sold by JISCO and Co-Metals acting as brokers.
IFM is on schedule to produce 267,000 tonnes of ferrochrome per annum by the end of 2007. The early switch on of the furnaces is forecast to add an additional 39,000 tonnes of ferrocrome to the first year's production.
IFM forecast that their production costs when the plant is fully ramped up will remain below US$0.40/lb.
Chromite production at it's new Lesedi mine is developing well and is ahead of schedule. Ore is being stockpiled for supply to the furnaces starting in January 2007.
The Company has sufficient ore to feed the first two furnaces currently being finished, along with a further two furnaces of the same size, for over 50 years if the Sky chrome resource is included.
Shares in issue are currently 410m. Thus,if we assume an average $70c/lb ferrochrome price minus $40c/lb total production costs including capital costs, the full expected 2008 run rate of 276k tonnes would translate into an eps of 22p.Clearly this stock is likely to be considerably revalued imo from 43.5p -the current price. As ever, please dyor !
edit: ps. many thanks to Rik Shaw for adding my choice to the list already this evening - great job!
