JOHANNESBURG (miningweekly.com) – London-listed ferrochrome producer International Ferro Metals (IFM) would restart its second furnace at the Buffelsfontein smelting and mining operation, in South Africa’s North West province, in mid-August, as demand from the Chinese steel industry increases.

“IFM has watched carefully the development of the global ferrochrome market and the board has decided the time is right to restart production to serve the increased demand from China, where the steel industry is now operating at near capacity. The strength of our relationships in China and the resumption of production, place us in good stead for the future,” CEO David Kovarsky said in a statement on Thursday.

The producer shut down its two South African furnaces in November last year in response to falling global demand.

However, Kovarsky has in recent months reported signs of improvements in the ferrochrome market, reporting just last week that the demand and spot prices for ferrochrome had increased “noticeably” in the past few weeks, as a result of the Chinese stimulus programme and low ferrochrome inventories.

The company had restarted the first of its furnaces in mid-April, initially to convert its raw material inventory to finished product to contribute towards fixed overheads.

Both furnaces were expected to reach a 90% capacity level by September, in line with its power supply from South African power utility Eskom.

The company’s openpit mine, which had been operating at reduced levels, would also be ramped up to full capacity of 35 000 t/m of ore within the next six weeks.

Further, IFM would also resume underground mining operations and was preparing tender documents for the recommissioning of the existing Lesedi shaft.

Underground mining from the Lesedi decline was expected to resume in February next year, with the producer saying that it would still decide on whether to use a mining contractor or conduct mining in house.

A tender for mining contractors to develop the MG2 decline, which was an expansion of the current Lesedi mine, was also being prepared, the IFM announced.

The producer currently had a stockpile of about 240 000 t of run-of-mine (ROM) chrome ore.

It would supplement the stockpile and the openpit ROM supply with ore purchases to meet the production requirements of its processing facilities until the Lesedi mine was ramping up to full production.

WORKING CAPITAL

Meanwhile, IFM has also secured a three-year R500-million working capital facility from the Bank of China’s Johannesburg branch.

This, together with its R340-million cash balance, would enable it to fund the higher working capital requirements as a result of the increased production, it stated.

IFM has also appointed Jannie Muller as CFO, in line with its strategy of concentrating key operational roles geographically within South Africa.

Muller is a chartered accountant and a chartered financial analyst who has been working as an IFM group financial manager since 2007. He takes over the position from Dion Cohen.

The group expected to report a loss before tax of R500-million, on a turnover of about R780-million, for the 2009 financial year, as a result of the decline in ferrochrome demand throughout the financial year.

Its results for the year ended June 30, 2009, would be published on September 14.

IFM’s share price rose by 12,1% to 44p a share in early morning trade on the LSE, up from Wednesday’s close of 39,25p a share.