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RNS Number : 1700Q
Red Rock Resources plc
08 September 2017
Red Rock Resources PLC
("Red Rock" or the "Company")
Update on Steelmin Investment
08 Sept 2017
Further to the announcements of 23 June and 3 July 2017, Red
Rock Resources Plc, the natural resource development company with
interests in gold, manganese and oil production, announces an
update in relation to its investment in Steelmin Limited
("Steelmin")
Highlights:
o Red Rock has now been issued an additional 1% of Steelmin
bringing its total interest to 17%
o Major components ordered and scheduled to be delivered and
installed between October and early to mid-December
o The on-site team has expanded from 45 to 70 with an eventual
planned workforce of 150
o Offsite team training of management to create corporate
culture to begin mid-October
Under the terms of the Loan, an 8 month secured loan note of
EUR3,874,560, announced on 23 June 2017, Red Rock received as
partial consideration for the Loan 16% of the fully diluted equity
of Steelmin, which would increase by 1% if the Loan was not fully
repaid by 1 September 2017 and a further 1% each month until April
2018, 0.9% in May, 1.1% in June, and then 1% per month up to a
maximum holding of 30%.
Andrew Bell, Chairman of Red Rock comments: "A great deal of
progress has occurred since we invested just over two months ago,
and the project appears to be on track and under budget. The
sustained rise in Asian ferrosilicon prices has begun to feed
through to the European market, which is another positive factor.
We look forward to taking key investors and advisors on a field
visit in early October when the final phase of works will be under
way."
Steelmin - Background
The Steelmin plant and facility is located in central Bosnia,
104 kilometres north west of Sarajevo. The complex, formerly part
of Electrobosna, was originally built in the 1970s by Elkem, a
major silicon and alloy producer based in Norway, and was one of
the largest and best known producers of ferrosilicon and silicon
metal in Europe. It was closed down in 1992 due to the Bosnian War,
was then privatised and the six furnaces were sold off in two
separate parts in 2000. The plant was brought back online until
finally being shuttered again in 2004 due to increasing exports
pressure from Chinese producers.
Anti-dumping regulations have since been implemented by the
European Commission; which significantly reduced both Chinese and
Russian exports into Europe, allowing prices to stabilize and rise
over time. The second, smaller, facility split off from the
original is now being operated by the Italian ferro-alloy producer
Metalleghe, and has been successfully producing next to Steelmin's
plant for the past 12 years.
Steelmin controls furnaces IV and V from the original
Electrobosna complex. Furnace V has a 48MVA installed power Elkem
furnace, and is connected to two chimneys on the roof of the
production hall. Furnace IV, the smaller of the two, has a 30 MVA
Tagliaferri furnace with three chimneys, preventing the emission of
gases in ambient air to comply with EU regulatory requirements.
Given its larger total capacity Steelmin has decided to bring
furnace V on initially and then move to recommission furnace IV
later in 2018.
Current activity is aimed at completing the rehabilitation of
the plant and furnace V this year and starting production.
In addition to the two furnaces, the facility in Jajce houses a
filtration plant, warehouse storage for raw materials, pouring and
dispatch hall as well as a plant for process water
recirculation.
Steelmin intends to produce ferrosilicon containing 75% silicon
and 25% iron, a product primarily used as a deoxidising agent and
to add electrical conductivity and corrosion resistance to steel. A
by-product of ferrosilicon production will be microsilica, which is
a dust used in the manufacture of speciality concretes in the
construction industry as well as in advanced refractories and
ceramics. Furnace V is expected to produce 29,000t of ferrosilicon
per annum as well as 5,800t of microsilica.
Over time Steelmin is expected to produce both ferrosilicon as
well as additional silicon alloys that offer higher margins and
additional upside.
European ferrosilicon production depends critically on access to
cheap power (locally generated hydroelectric power in the case of
Jajce) since this is up to half the cost of production. Prices are
historically driven by steel production levels, the level of
Chinese pricing and production allowed into Europe, as well as the
associated export and anti-dumping tariffs. Since late 2016 overall
Chinese export prices have risen, positively impacting European
produce prices. Key input costs such as metallurgical coal are also
closely correlated to realized ferrosilicon prices.
EU supplies of ferrosilicon are generally heavily constrained,
with 70% coming from Norway and Iceland and few if any new
producers coming online. Given Bosnia's ideal location closer to
key steel customers in Germany, Austria and Northern Italy,
Steelmin is well poised to service these major markets.
Steelmin currently projects operating revenues of EUR35m in its
first full year of operations with gross margins expected to come
in around 33%. These figures assume production of 85 tonnes per day
over 339 days a year and a Ferrosilicon selling price of EUR1,200/t
(current pricing cEUR1,350/t).
For further information, please contact:
Andrew Bell 0207 747 9990 Chairman Red Rock Resources Plc
Scott Kaintz 0207 747 9990 Director Red Rock Resources Plc
Roland Cornish/ Rosalind Hill Abrahams 0207 628 3396 NOMAD Beaumont Cornish Limited
Neil Badger 0129 351 7744 Broker Dowgate Capital Stockbrokers
Ltd
Glossary
Ferrosilicon: ferrosilicon produced at Steelmin contains 75%
silicon, and is primarily used as a deoxidising agent in steel
production, adding electrical conductivity and corrosion-resistance
properties to steel
Microsilica: a by-product of silicon and ferrosilicon
production, used in the construction industry for its added
strength and abrasion resistance
This information is provided by RNS
The company news service from the London Stock Exchange
END
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