JOHANNESBURG (miningweekly.com) – London-listed African Minerals has continued to build momentum since the attainment in June of its targeted 20-million-tonnes-a-year export run rate at Tonkolili, posting quarterly iron-ore production of four-million tonnes – an 81% improvement on the prior three months.

Mining capacity at the Sierra Leone-based operation continued to grow, with 5.5-million tonnes of material moved in the period, a 67% increase over the previous quarter.

Phase 1 direct shipping ore improved by 70% to 4.7-million tonnes, while a total of 4.4-million tonnes was processed, an increase of 75% over the previous quarter.

Exported grade improved slightly from 57.9% iron to 58.2% iron, while moisture levels remained stable at around 11%.

Quarterly sales rose 65% to 3.4-million tonnes.

“African Minerals is making good progress this year, with production levels and sales rising in line with our expectations, and momentum building with the attainment of our target export run rate. It is particularly encouraging that this progress is being made during a wet season at the port,” CEO Keith Calder said in a statement.

As a result of the continued improvement in production, estimated cash costs fell from $49/t in the first quarter, to an average of $40/t in the second quarter.

Calder expected costs to decrease to $30/t by the year-end, as sales continued to perform well and the targeted output rate was maintained.

“We will continue to focus on stabilising this current phase of operation, and bring down costs. Like many other miners, we are focusing, in the short term, on cost reduction and improvements in efficiency and utilisation, and substantially reducing corporate overheads,” he commented.

Meanwhile, with the commissioning of the large second wagon dumper at the end of April, throughput capability at the nearby Pepel port increased significantly in the second half of the quarter, resulting in the sailing of ten ocean going vessels (OGVs) between May 18 and June 16.

A total of 20 OGVs were dispatched during the second quarter, with 12 of these delivering iron-ore into the Shandong Iron and Steel Group discounted offtake agreement.

At the end of the first half of the year, 3.1-million tonnes had already been delivered into the 4.8-million-tonne yearly Shandong commitment.

“The mine continues to stockpile fines material in support of the seasonal shipping strategy, which will see fines being shipped in the coming dry season,” Calder said, adding that freight rates had reduced in the period from an average of $19/t to $18/t.

On the downside, African Minerals' achieved free-on-board price in Sierra Leone declined from $89/t in the first quarter to $70/t in the second, attributable chiefly to a drop in the benchmark price, a higher proportion of sales into the Shandong agreement, adjustments on final invoicing and the additional discount associated with selling lump blend.

The Tonkolili project boasts an estimated 60-year mine life and a Joint Ore Reserves Committee-compliant resource of 12.8-billion tonnes, and was being developed in a number of staged expansions.

The next stage of project expansion would pursue the production of up to 35-million tonnes a year of 64% high-grade hematite concentrate, in conjunction with the expansion of the current port facilities at Pepel.

African Minerals had also developed significant port and rail infrastructure to support the operation of the project, through its subsidiary African Rail and Port Services, in which the government of Sierra Leone has a 10% free-carried interest.

Looking ahead, guidance for sales was reiterated at between 13-million tonnes and 15-million tonnes, in 2013, with production targeted at between 15-million tonnes and 18-million tonnes over the 12 months.

The company will release its interim results for the six months ended June 30 on September 11.