JOHANNESBURG (miningweekly.com) – South Africa-focused ferrochrome producer International Ferro Metals (IFM) on Monday reported a loss of R338,5-million for the financial year ended June 2009, compared with a profit of R578,1-million recorded in the previous year.

IFM CEO David Kovarsky said that the year under review had been “extremely challenging” for the company as demand and prices plummeted.

“Having achieved record production in the first two months of 2009, we found ourselves caught up in the financial crisis that paralysed the economies globally. Owing to dramatic production cuts by stainless steel producers, the demand for ferrochrome dried up.”

The cutback on production caused a slump in sales from 207 862 t recorded in 2008, to 101 835 t for 2009. This, combined with the price falls in the product, resulted in a decrease in revenue from R1,9-billion in 2008, to R782-million in 2009.

Basic loss a share for the year ended June was recorded at 66,13c a share, compared with a basic earning a share of 114,05c a share.

“The company responded quickly and prudently to this new environment by cutting production and focussing on cost cutting, cash preservation, and monetising inventory.”

Kovarsky added that by last November, IFM had cut down on production by shutting down both its furnaces, focussing on selling its inventory, reducing costs, and deferring major capital expenditure. “Our cost reduction programme involved all areas of business, including labour where we reduced the use of contractors, and cut the salaries of all senior employees and board members by 10%.”

He further noted that during April of this year, the company restarted one of its furnaces in order to monetise raw stock material.

“Towards the end of the financial year, the ferrochrome markets started to show signs of improvements. The disciplined reaction of ferrochrome producers, which shut down production, led to global destocking and ultimately restocking. In the last few months, stainless steel production has seen a revival in China, and more recently, we also started to see signs of a more modest revival in Europe and the US.”

Kovarsky stated that the ferrochrome price has also positively responded, and has firmed. “Since the end of the financial year, we have taken a number of steps that will enable us to take advantage of this strengthening market. We have restarted the second furnace, and both furnaces are now working extremely well. We are also reopening our open-pit mining operations, and underground mine development has resumed.”

He noted that the company currently had cash balance of around R340-million, which was supplemented by an R500-million working capital facility from the Bank of China, as well as a £22,2-million placing, set aside to fund the construction of a cogeneration plant which would generate 10% of IFM’s energy requirements.

“The post-period successful £22,2-million capital raising, the restart of the second furnace, and the resumption of mining all highlight market support for the action we took, as well as the market’s positive long-term view on ferrochrome,” Kovarsky added.