ASX-listed Sierra Rutile has closed the door on a tough quarter, with the miner forced to revise its full year production guidance.
Rutile production in the three months to June dropped to 25 000 t, from the 32 000 t produced in the previous quarter, while ilmenite production dropped from 12 000 t to 9 000 t in the same period.
Rutile and ilmenite production was impacted by the mineral separation plant (MSP) at its Sierra Leone operations being offline for most of June as a result of power generation constraints. Power generation is expected to return to full capacity in the third quarter of this year.
Meanwhile, rutile sales for the quarter decreased only slightly to 28 000 t, from the 30 000 t sold in the March quarter, while ilmenite sales increased from 11 000 t to 16 000 t.
“The June quarter saw Sierra Rutile maintain good sales and cash generation to support the development of Sembehun, despite some specific operational challenges and softening of demand across the industry,” said Sierra Rutile MD and CEO Theuns de Bruyn.
“The Sembehun development continues on track and lab samples were tested by customers in 17 different locations, receiving good feedback and confirming the high purity of the rutile. In the next six to nine months, we are planning to complete the definitive feasibility study and move towards having a robust funding plan and a much longer mine life.
“The June power supply issues impacted production; however, we expect this situation to be rectified early in the second half and heavy mineral concentrate stocks recently built up to be processed to saleable product. Given the current weaker market conditions for rutile, we opted to prioritise heavy mineral concentrate production over rutile production, building substantial ore stockpiles, also in advance of the wet season. This is also expected to materially reduce mining costs during the third quarter,” said De Bruyn.
As a result of the production constraints in June and July, Sierra Rutile has reduced the production guidance from the previously estimated 136 000 t of rutile to between 124 000 t and 126 000 t of rutile, with a corresponding increase to full-year net unit cost guidance to between $990/t to $1 055/t.
“Although production for the quarter was below our expectations, we continue to operate profitably and generate cash to reinvest in future growth. We invested in Area 1 projects with drilling at the Ndendemoia, Pejebu and Mogbwemo deposits, with findings to be incorporated into a new Resource Statement in the third quarter,” said De Bruyn.
“There is a considerable upside from the Mogbwemo tailings to supplement ore from virgin deposits. Realised rutile pricing improved during the quarter on weaker volumes as a result of a higher proportion of sales going to the better-performing titanium sponge/metal market and to China.
“We are seeking to diversify our customer base and to this extent, first significant sales were recently made to a new Chinese customer. Softening of the pigment market remains, particularly in Europe, due to ongoing economic uncertainty in an inflationary environment and this may impact sales in the second half of 2023.
“As a globally significant natural rutile producer, we believe the long-term outlook for our industry and our company remains positive. We have an attractive growth pathway with the Sembehun project, and we are taking steps to preserve our competitive position.”
