PERTH (miningweekly.com) – Takeover target Northern Iron has initiated a number of cost-saving measures, including suspending its exploration programme and laying off some staff.
The ASX-listed miner, which owns the Sydvaranger project, in Norway, explained that the cost-cutting measures were needed as the margin between the C1 operating cost and the expected third-quarter sales price reduced, while there was uncertainty around the iron-ore price.
The current exploration programme has been suspended pending the recovery of the iron-ore price, while nonessential capital expenditure has also been deferred at its Sydvaranger mine.
Northern Iron said that its sub-4% silica project would now be commissioned on the first quarter of 2013. Northern Iron initially approved a $7-million investment to improve the product quality of its product by lowering the silica content, with completion initially scheduled for the end of 2012.
A restructure of the company’s operations has also been completed, resulting in a number of permanent and contract employees departing, while additional controls on operating expenditure have also been introduced.
“The company is continuing to closely monitor its cash position and production performance against the background of these difficult market conditions and will take action as required to maintain an acceptable working capital position,” Northern Iron said.
Meanwhile, the company also noted that production performance during the first half of September had been impacted by a number of unplanned maintenance outages and operational events, which have prevented the plant from reaching its full operating rates.
Average performance during the first half of September reached the 2.2-million-tons-a-year rate, while the plant was capable of delivering some 2.7-million tons a year.
Northern Iron said that while it was confident that its strategy to improve maintenance performance would result in improved production volumes, it was lowering its 2012 guidance from 2.2-million tons to 2.1-million tons.
The company now expected to produce between 475 000 t and 500 000 t of concentrate in the third quarter, which was on par with second-quarter production.
The reduction in the production volume would also result in an increase in unit costs, Northern Iron warned.
Indian group Aditya Birla in July increased its offer for Northern Iron to A$1.40 a share, after its initial cash offer, ranging between A$1.28 and A$1.35 a share was rejected.