Consmin, a leading manganese ore producer with mining operations in Australia and Ghana, announces its quarterly results for the period ended 31 March 2015.

Key highlights

• Total tonnes of manganese ore production for Q1 2015 decreased 17% compared to Q1 2014. Australian manganese ore production was consistent with Q1 2014 offset by a 32% decrease in Ghanaian manganese ore production compared to Q1 2014 as a result of the decision taken to reduce production following the termination of the Tianyuan Manganese Industry Co. Ltd (TMI) contract to ensure normalised stock levels by the end of 2015.
• Manganese C1 cash costs1 for Q1 2015 were $1.97/dmtu compared to $2.29/dmtu in Q1 2014, a decrease of 14% continuing the positive trend seen over recent years.
• Total manganese sales tonnes decreased 14% in Q1 2015 compared to Q1 2014. Australian manganese tonnes sold were 14% ahead of the same period but Ghanaian manganese tonnes sold were 40% lower as a result of the termination of the TMI contract in the second half of 2014 and allowing for the time to establish a new customer base in the EMM market in the south of China.
• Average manganese FOB sales price achieved decreased 22% from $4.61 in Q1 2014 to $3.59 in Q1 2015.
• The average manganese ore price for Q1 2015 (CRU, 44%Mn CIF China) was $3.83/dmtu, a decrease of 12% from $4.37/dmtu in Q4 2014. The Company’s average price for its Australian 46%Mn lump product (CIF China) was $4.32/dmtu in Q1 2015, down 7% from $4.65/dmtu in Q4 2014.
• Adjusted EBITDA2 for Q1 2015 was $24 million, down from $48 million in Q1 2014. This decrease is principally due to lower revenues partially offset by lower mining costs. Cash EBITDA for Q1 2015 was $16 million, down from $31 million in Q1 2014.
• The Group recorded a loss for the period of $4 million compared to a profit of $24 million in Q1 2014.
• During the quarter the group had an operating cash inflow of $30 million compared to an inflow of $32 million from continuing operations in Q1 2014.
• Cash and cash equivalents net of overdrafts increased in Q1 2015 by $21 million to $80 million on 31 March 2015 with net debt reducing by $22 million to $325 million over the same period.
• Total capital expenditure for the group in Q1 2015 was only $5 million, 35% lower than in Q1 2014, as a result of the phasing of exploration activity and more specifically to maintain liquidity in light of the current difficult market conditions for manganese ore.

Key Performance Indicators

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, non-cash inventory write-downs 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 quarter Consmin delivered operational performance in line with its expectations. Financial performance for the quarter was lower as a result of the combination of a difficult pricing environment and the termination of the TMI contract along with its impact on the timing of sales of Ghanaian ore whilst the development of the EMM market took place in southern China.

The Manganese C1 cash cost for quarter was $1.97/dmtu, a decrease of 14% from $2.29/dmtu for Q1 2014.  This reduction in the C1 cash cost was a positive achievement benefitting from reduced mining costs and the impact of the relative weakening of the Australian dollar. The 2015 full year estimate for the C1 cash cost is below $2.25/dmtu based on an exchange rate of 0.78 for the Australian dollar.

Consmin remains cautious in its expectations for the remainder of 2015. Manganese prices have recently come under heavy downward pressure due to the slowdown in Chinese steel production, poor liquidity, stricter environmental measures and poor margins for both ferroalloy and steel producers, which have cumulatively led to a weaker demand for Mn ore. The oversupply in the manganese ore market has prompted more aggressive offers by some suppliers driving prices down to below cost levels for some producers. Prices in May appear to have stabilised with market sentiment suggesting that prices have reached or are close to the bottom.

With regard to the TMI agreement the Company continues to contest the injunction in the Chinese courts against the drawdown demand made on the $50 million standby letter of credit with the intention of lifting it. The Company also continues to pursue the arbitration proceedings in London.”

• [Editor:Sophie]