OM HOLDINGS LIMITED (ARBN )

Transcription

1 OM HOLDINGS LIMITED (ARBN ) No. of Pages Lodged: July ASX Market Announcements ASX Limited 4 th Floor 20 Bridge Street SYDNEY NSW 2000 Dear Sir/Madam JUNE QUARTERLY MARKET UPDATE The Board of OM Holdings Limited ( OMH or the Company ) is pleased to provide the following market update. HIGHLIGHTS OPERATING PERFORMANCE EXPLORATION AND MINING (OMM, 100% owned Bootu Creek Manganese Mine) H1 production of 413,240 tonnes grading 36.7% Mn. Mine on track to achieve its projected budget of approximately 800,000 to 850,000 tonnes H1 C1 unit cash costs of A$3.39/dmtu The Q2 C1 unit cash cost of A$4.00/dmtu was impacted by wet conditions in the operating pits as well as by higher than normal logistics and selling expenses incurred during Q2, caused by the rail service disruptions experienced during Q1 Promet litigation OMM succeeded in its action against the process plant design engineers for the Bootu Creek Manganese Mine, and was awarded damages totalling A$5.7 million PROCESSING (OMQ, 100% owned Smelter and Sinter Plant in Qinzhou) Record H1 production of 38,808 tonnes of High Carbon Ferro Manganese ( HC FeMn ). Smelter well on track to achieving its annual budgeted production target of approximately 64,000 tonnes Q2 HC FeMn production of 21,083 tonnes. Record Q2 HC FeMn sales of 21,955 tonnes Q2 production of 59,604 tonnes of manganese sinter ores supported by strong customer demand for the product #08 08, Parkway Parade 80 Marine Parade Road, Singapore Tel: Fax: address: om@ommaterials.com Website: ASX Code: OMH 1

2 MARKET OUTLOOK China s June crude steel production recorded million tonnes, exceeding 60 million tonnes for the fourth consecutive month. This represents a January to June production of million tonnes, an increase of 1.8% from the previous corresponding period Continued strong demand for seaborne high grade ores resulted in 3 consecutive benchmark (BHP 46% Mn grade) price increases, amounting in total to 12.6%, throughout the June. The April benchmark price of US$4.75/dmtu CIF China increased to US$5.00/dmtu CIF China in May and continued to increase to US$5.15/dmtu CIF China in June, followed by a further increase during July to US$5.35/dmtu CIF China. The August benchmark price was announced to roll-over from the July price at US$5.35/dmtu CIF China Latest available Chinese port statistics for May confirmed 1.2 million tonnes of ore imports, up 29% month-on-month, a clear indication of high grade seaborne ores continuing to replace Chinese domestic low grade ores Manganese ore demand remains robust; Chinese port inventories as reported by the International Manganese Institute (IMnI) decreased further to 2.9 million tonnes as at the end of June, down 27% year-on-year TSHIPI BORWA MINE (13% indirect interest) Project remains on track for H2 delivery of first ore Tshipi Borwa mine development continues with pre-strip mining, construction of rail siding, processing plant and infrastructure construction well under way Formal rail contract negotiations with the national rail logistics provider Transnet commenced during the quarter MALAYSIA (OMH 80% interest) Refer to detailed 11 July ASX release Project Finance Information Memorandum ( IM ) for the Sarawak Project completed and dispatched to interested prospective lenders IM updates the November 2011 Definitive Feasibility Study. It demonstrates improved Sarawak Project economics and confirms the Sarawak Project s financial robustness Independently forecast CRU sales price and key raw material input cost assumptions drive improved Sarawak Project IM base case economics OM Sarawak is seeking to secure a Project Finance Facility of approximately US$428 million which will fund, in addition to the Sarawak Project capital expenditure requirements, the funding of working capital. OMH is currently assessing a number of alternatives to secure the balance of its required equity contribution CORPORATE OM Materials (S) Pte Ltd made repayments of US$20 million (A$19.7 million equivalent) during June under the restructured term loan facilities agreement with Standard Chartered Bank ( SCB ). A further repayment of US$10 million was made on 16 July Outstanding borrowings due to SCB stood at US$70.5 million as at 30 June and at US$59.5 million as at today, 18 July 2

3 EXPLORATION AND MINING OM (MANGANESE) LTD ( OMM ) BOOTU CREEK MANGANESE MINE (100%, Northern Territory, Australia) Production from the Bootu Creek Manganese Mine for the June is summarised below: Unit June FYTD March June 2011 Mining Total Material Mined bcms 882,629 1,578, ,288 3,055,918 Ore Mined tonnes dt 353, , , ,713 Ore Mined Mn grade % Production Lumps tonnes dt 126, , , ,486 Lumps Mn grade % Fines/SPP tonnes dt 63, ,517 72,524 85,057 Fines/SPP Mn grade % Total Production tonnes dt 190, , , ,543 Total Production Mn grade % Sales Lumps tonnes dt 144, ,139 58, ,636 Lumps Mn grade % Fines/SPP tonnes dt 94,160 94,160-83,113 Fines/SPP Mn grade % Total Sales tonnes (dry) dt 238, ,299 58, ,749 Total Sales Mn grade % Mining Mining activities during the June predominately centred upon the Masai 2 pit, the newly developed Masai 3 pit and late in the quarter, the Tourag pit. Approximately 0.35 million tonnes of ore was mined from a total material movement of approximately 0.9 million bank cubic metres ( bcms ). A higher proportion of low grade material was processed during the quarter due to wet conditions impacting accessibility to higher grade ores in the operating pits. Remediation works associated with the Masai Sacred Site were completed early in the March following extensive consultation and liaison with the Northern Land Council, the Aboriginal Areas Protection Authority ( AAPA ), Native Title Parties and the Northern Territory Department of Resources. Since the completion of the remediation works, OMM has not reentered the restricted work areas associated with the Masai Sacred Site to conduct mining activities. OMM is currently awaiting approval from the Northern Territory Department of Resources to change the boundaries of the restricted work areas in the Masai 1 pit to allow movement of equipment through the pit below the remediated sacred site area and to allow access to remaining exposed high grade ore. The complaint filed on 24 November 2011 against OMM by the Aboriginal Areas Protection Authority ( AAPA ), alleging 2 counts of contravening the Northern Territory Aboriginal Sacred Sites Act (NT) ( the Act ) was heard in the Northern Territory Court of Summary Jurisdiction on 19 April. The Court adjourned that complaint to 17 May for further consideration. On 17 May AAPA filed in the Court a further complaint of 11 counts of contravening the Act ( 4 charges of desecration of a sacred site pursuant to section 35 of the Act and 7 charges of contravening an Authority Certificate and damaging a sacred site or causing distress to a custodian pursuant to section 37 of the Act). The Court adjourned the complaints to 26 June for further consideration. On 26 June the Court adjourned the complaints to 3 August in order for AAPA to provide to OMM further detailed particulars of the counts. Each charge of desecration carries a maximum penalty of $274,000 and each charge of contravening an Authority Certificate carries a maximum penalty of $137,000. 3

4 Processing Production for the June was 190,071 tonnes at an average grade of 36.3% Mn. Whilst production was in-line with budget expectations, a higher proportion of lower grade ore was required to be fed into the processing plant early in the June due to mining work area restrictions and dewatering of pit water ingress following late March rainfall which required short term mine schedule changes. Production for the first half totalled 413,240 tonnes at 36.7% Mn, which was approximately 7.6% lower than the preceding corresponding half year production. Logistics As previously announced, rail logistics operations were affected during the March due to a Genesee & Wyoming Australia Pty Ltd ( GWA ) freight train derailment that occurred on the Edith River Bridge north of Katherine on 27th December 2011 due to adverse wet conditions caused by Cyclone Grant. The freight train was not carrying any of OMM s manganese product from its Bootu Creek Manganese Mine at the time of the derailment. Following rail service resumption (on reduced axel loads) on 25 February, OMM has increased its rail haulage capacity by utilising two additional services per week of 15 rail trucks connected to the back of the Alice Springs to Darwin inter-model service in order to make up total load capacity. GWA is planning further Edith River Bridge modifications which are scheduled during the September, after which it is expected that the OMM rail service will revert to normal axle load capacities. During the June, a total of 238,342 dry tonnes (248,626 wet tonnes) of manganese product was exported through the Port of Darwin. Unit Operating Costs The C1 unit cash operating cost for the June was A$4.00/dmtu while the C1 unit cash operating cost for H1 was A$3.39/dmtu. The reported C1 unit cash operating cost of A$2.88/dmtu for the March and the June C1 unit cash operating cost of A$4.00/dmtu were both distorted by the effects of the March rail service disruption on logistics costs. A more representative C1 unit cash operating cost can be extrapolated by examining the mine s C1 unit cash cost performance during the full six months H1 period, allowing for normalised logistics and selling costs to mitigate the effects of costs deferred from the first quarter of into the second quarter of. The C1 unit cash operating cost for the six months ended 30 June was A$3.39/dmtu. This normalised cash cost performance provides an appropriate reflection of the mine s operating cost performance during the first half of. Exploration Exploration at the Bootu Creek Manganese Mine re-commenced in early May, following the end of the wet season. Gradient Array IP ( GAIP ) surveys were completed over several prospects including Chugga North Extended, Shekuma North, Looa Bore and Renner North prior to finalising the planned RC drill program. 4

5 The drill program is intended to focus on the discovery of new manganese deposits, and to a lesser extent on the partial replacement of Mineral Resources depleted by mining during. The first phase of the RC drill program consisted of 215 holes for 11,062 metres and was completed at the end of June. Drilling was conducted at Chugga North Extended, Shekuma North, Masai NW, Yaka SE, Fold Nose, Helen Springs and Renner Springs. Chugga North Extended drilling (48 holes for 2,958 metres) included GAIP anomaly testing, minor manganese mineral resource extension and some copper prospecting. The GAIP anomalies generally only returned narrow low to modest grade intersections, though further follow up drilling is required. Minor mineral resource extensions are likely from the modest resource extension drill program. The copper prospect drilling returned a best intersection of 7 metres at 1.12% Cu (from 10 metres), though did not significantly increase the known extent of existing copper in the prospect area. Shekuma North drilling (19 holes for 966 metres) returned minor extensions of previous isolated manganese intersections, including 9 metres at 28.7% Mn (from 23 metres) and 6 metres at 22.8% Mn (from 27 metres). GAIP anomaly testing failed to intersect any economically significant manganese mineralisation. Masai NW drilling (19 holes for 598 metres) testing 2011 GAIP targets returned best intersections of 7 metres at 26.6% Mn (from 15 metres) 6 metres at 21.9% Mn (from 4 metres). Follow up drilling is required. Yaka SE drilling (17 holes for 642 metres) testing 2011 GAIP targets returned best intersections of 5 metres at 21.1% Mn (from 34 metres) and 6 metres at 19% Mn (from 24 metres). Follow up drilling is required. Fold Nose extension drilling (39 holes for 3,066 metres) focused on extending the existing mineral resource model. Results were generally consistent with previous intersections and is likely to result in mineral resource extension. Helen Springs drilling (18 holes for 630 metres) tested the main north-south GAIP anomaly. Several holes returned narrow, modest grade mineralisation (1-2 metres at 14-23% Mn) in surface gravels, with two holes intersecting deeper insitu mineralisation including 3 metres at 35.5% Mn (from 6 metres) and 2 metres at 19.1% Mn (from 16 metres). The strike extent of the deeper mineralisation appears limited. A further 55 holes totalling 2,202 metres were drilled at Carruthers, Renner West and Renner Central prospects in the Renner Springs project area. Assay results are not yet available. A smaller follow up drill program testing recent Looa Bore and Renner North GAIP ground surveys, and follow up of recent Chugga North Extended, Masai NW and Yaka SE drilling is being prepared for August. The information in this report which relates to the Reporting of Exploration Results is based on information compiled by Mr Craig Reddell, a full time employee of OM (Manganese) Ltd and a Member of the Australasian Institute of Mining and Metallurgy. Mr Reddell has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity undertaken to qualify as a Competent Person as defined in the 2004 Edition of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves. Mr Reddell consents to the reporting of this information in the form and context in which it appears. Promet Litigation As previously announced, the Supreme Court of Western Australia ruled in favour of OMM in its action against the process plant design engineers for the Bootu Creek Manganese Mine, and that OMM was entitled to damages of A$5,730, OMM was ordered to pay Londsdale Investments Pty Ltd ( Londsdale ) an amount of A$1, in respect to an alleged claim of A$533,000. 5

6 The proceedings have been adjourned until 25 July for a hearing in respect to the legal costs of the action, and the quantum of interest payable to OMM on the damages it has been awarded. OMM has taken steps to enforce the judgment against Londsdale (being the company previously known as Promet Engineers Pty Ltd) and Promet Engineers Pty Ltd. In accordance with the Rules of the Supreme Court, the parties will have a period of time to review the judgment to determine whether there are any findings that they wish to appeal to the Court of Appeal of the Supreme Court. OMM is unable to provide any comment on whether such an appeal is likely or the prospects of success of any such appeal. OMM Outlook OMM is planning a transition to Owner Operator for part of its mining activities during H2. The transition will see the current incumbent mining contractor demobilise from site during the early part of the September and be partially replaced with a Northern Territory based mining contractor with a smaller fleet of mining equipment specifically tailored to mine in line with the Bootu Creek Manganese Mine s operating strategy for, centering around a low cost, low strip ratio mining operation focused on accessing previously prestripped high grade ore deposits. It is anticipated that operating with a smaller mining fleet should result in a reduction in the unit cost of mining high grade ore as the smaller equipment will be able to mine more efficiently in some of the more confined areas designed under the low cost, low strip ratio mine plan. OMM s Owner Operator fleet will comprise of a combination of owned equipment and hired equipment and will have the flexibility of concentrating on waste removal in advance of the mining contractor. Key operating personnel are currently being recruited and are expected to be on site during the middle of the September. The Owner Operator mining fleet is expected to not only see a significant reduction in the unit mining cost at the Bootu Creek Manganese Mine but it will also allow additional operational production flexibility to ramp-up mining activities in line with global manganese market conditions. The transition to OMM s Owner Operator fleet and the mobilisation of the new mining contractor and demobilisation of the incumbent mining contractor will be funded from OMM s operating cash flows and will occur simultaneously during the September which could potentially cause short term mine schedule adjustments as shared facilities are rearranged for use by the mining operators in the intervening period. During this transitioning period, a low grade ore feed strategy will be implemented. Based on an ore feed strategy comprising partly low grade ore and partly high grade for the September, OMM is forecasting production of between 170,000 to 190,000 tonnes. Production in the December is expected to resume to a normalised higher grade ore feed strategy and should result in production of approximately 220,000 tonnes. The mine's production target for remains at 800,000 to 850,000 tonnes, supported by continued strong demand for the mine's products in the Chinese market, and an ability to immediately respond to changing market conditions during the year. The mine's C1 unit cash operating cost target under the above mining and production strategy is expected to be in the order of A$3.50/dmtu to A$3.80/dmtu, sustainable for a month period. This mining and production strategy ensures a solid operating platform during the current price environment whilst allowing maximum production flexibility. 6

7 PROCESSING OM MATERIALS (QINZHOU) Co Ltd ( OMQ ) (100%, Guangxi, China) Production from the Qinzhou smelter and sinter plant for the June is summarised below: June FYTD Mar June 2011 Tonnes Production High Carbon Ferro Manganese("HC FeMn") 21,083 38,808 17,725 21,361 Mn Sinter Ore 59, ,062 45,458 67,896 Sales High Carbon Ferro Manganese("HC FeMn") 21,955 38,091 16,136 14,750 Mn Sinter Ore 41,969 72,765 30,796 43,022 Production During the June, OMQ produced 21,083 tonnes of High Carbon Ferro Manganese ( HC FeMn ), representing a 19% quarter-on-quarter increase. The production results for the March and June quarters yielded a record half yearly result of 38,808 tonnes of HC FeMn, and the operations are well on track to achieving the annual budget of 64,000 tonnes for. Production of 59,604 tonnes of manganese sinter ores was achieved during the June, representing a 31% quarter-on-quarter increase. With the H1 production of 105,062 tonnes, the sinter plant is on track to achieve its targeted annual production target of 220,000 tonnes. Sales During the June, OMQ secured sales of 21,955 tonnes and 41,969 tonnes of HC FeMn and manganese sinter ores respectively. The continuing strong manganese sinter ore sales represent the entrenched acceptance of OMQ s high value-in-use manganese sinter ore product. MARKETING AND TRADING, AND MARKET OUTLOOK OM MATERIALS (S) PTE LTD ( OMS ) (100%, Singapore) OM MATERIALS TRADING (QINZHOU) CO. LTD ( OMQT ) (100%, Guangxi, China) OM HUJIN SCIENCE AND TRADE (SHANGHAI) CO. LTD ( OMA ) (70%, Shanghai, China) During the June, the Marketing and Trading division sold a combined 239,888 tonnes of ore. Ore sales included manganese, chrome and iron ores. Manganese ore included third party ores used for the production of manganese sinter ore and HC FeMn by OMQ. Total ore sales included 74,034 dry tonnes of iron ore concentrate under the exclusive marketing agency agreement between OMS and Northern Iron Limited (ASX Code: NFE). According to a preliminary report on crude steel production for June, announced by the National Bureau of Statistics of China on 13 July, China produced million tonnes of crude steel during the month of June, exceeding 60 million tonnes for the fourth consecutive month since March. The January to June cumulative crude steel 7

8 production stood at million tonnes, up 1.8% from the corresponding previous period. After completion of the first half of China s annual crude steel production the volume is forecast to reach 700 million tonnes for the calendar year. China imported 1.2 million tonnes of manganese ore in May. May import data represented industry-wide seaborne ore demand in line with expected annual Chinese crude steel production of approximately 700 million tonnes. De-stocking of port inventories continued during the quarter as imported ore inventories were reported (by the IMnI) to have decreased to 2.9 million tonnes at the end of June, down from 3.3 million tonnes at the end of January. High grade manganese ore benchmark prices rebounded strongly during the 2 nd quarter. Continued strong demand for seaborne high grade ores resulted in 3 consecutive benchmark (BHP 46% grade) price increases throughout the June, amounting to a total increase of 12.6%. The April benchmark price of US$4.75/dmtu CIF China increased to US$5.00/dmtu CIF China in May and continued to increase to US$5.15/dmtu CIF China in June, followed by a further increase during July to US$5.35/dmtu CIF China. The August benchmark price was announced to roll-over from the July price at US$ 5.35/dmtu CIF China. OM HOLDINGS LIMITED CORPORATE Tshipi e Ntle ( Tshipi ) OMH has an effective 13% interest in Tshipi through its 26% strategic partnership with Ntsimbintle Mining (Proprietary) Limited, the majority 50.1% owner of Tshipi. The remaining 49.9% share is owned by Jupiter Mines Limited. Tshipi owns 2 manganese prospects in the world class Kalahari Manganese field, namely Tshipi Borwa and Tshipi Bokone, adjacent to the operating Mamatwan and Wessels mines respectively. Tshipi Borwa Activities at Tshipi Borwa included continued pre-stripping and construction of the 2.4 million tonne per annum processing plant and support facilities during the June. The project remains on track to commence production during the later part of H2. The capital budget for the construction of the Tshipi Borwa Mine remains in line with forecasts. As of 30 June, OMH has contributed a total A$14.5 million of its approved US$34 million capex funding requirement (remaining amount: A$19.5 million) towards the Tshipi project s development expenditure commitments. Construction The railway siding construction activities during the quarter included the completion of overhead traction pylon and electric line installation and placement of ballasts, while finalisation of the signalling and final level distressing of the rail line is in progress. The rail line is anticipated to be commissioned in the September. The structure and components of the rapid load out station have been delivered to site, and assembly is expected to commence shortly, while the civil works associated with the load out station is currently underway. The foundation and the structure preparation of the process plant are well advanced and concrete works commenced during the quarter. 8

9 Operations Pre-stripping of the Tshipi Borwa open cut pit continued during the June - the mining contractor moved over 2.7 million bcms of pre-strip material and the pit reached a depth of 40 metres. Ore access is anticipated at a pit depth of 70 metres. Formal rail contract negotiations commenced with the national rail logistics provider Transnet during the quarter for a rail allocation to Port Elizabeth. Good progress has been made todate and contracts are expected be concluded in the September. Tshipi Borwa open cut mine Tshipi Borwa rail siding nearing completion 9

10 MALAYSIA OM MATERIALS (SARAWAK) SDN BHD ( OM Sarawak ) (80%, Samalaju, East Malaysia) On 11 July the Company announced a detailed update on the Sarawak Project including the achievement of several key milestones covering the completion and despatch of a Sarawak Project Finance Information Memorandum ( IM ) to interested prospective lenders, an update within the IM of the November 2011 Definitive Feasibility Study incorporating independently forecast CRU sales price and key raw material input cost assumptions in the IM base case model which primarily accounted for improved Sarawak Project economics, satisfaction of conditions precedent of the power supply contract and the execution of binding off-take term sheets with JFE Shoji Trade Corporation and Hanwa Co. Ltd. Capital As at 30 June the Company had 604,105,150 ordinary shares, 25,000,000 convertible notes and 21,000,000 unlisted options on issue. Financing As announced earlier, OM Materials (S) Pte Ltd ( OMS ), a wholly-owned subsidiary of the Company, completed a loan restructuring process of its term loan facilities advanced by Standard Chartered Bank during the March. OMS has since made repayments of US$20 million (A$19.7 million equivalent) under the terms of the restructured loan facilities during the June. A further repayment of US$10 million was made on 16 July in addition to the standard monthly repayments. As at 30 June US$70.5 million was owing to SCB with the outstanding balance having subsequently reduced to US$59.5 million as at today s date. Debt servicing will continue to occur via operating cash flows and the divestment of non-core investments. Yours faithfully OM HOLDINGS LIMITED Heng Siow Kwee/Julie Wolseley Company Secretary 10

11 BACKGROUND PROFILE OF OM HOLDINGS LIMITED OMH listed on the ASX in March 1998 and has its foundations in metals trading incorporating the sourcing and distribution of manganese ore products and subsequently in processing ores into ferro-manganese intermediate products. The OMH Group now operates commercial mining operations leading to a fully integrated operation covering Australia, China and Singapore. Through its wholly owned subsidiary, OM (Manganese) Ltd, OMH controls 100% of the Bootu Creek Manganese Mine ( Bootu Creek ) located 110 km north of Tennant Creek in the Northern Territory. Bootu Creek has the capacity to produce 1,000,000 tonnes of manganese product annually. Bootu Creek has further exploration potential given that its tenement holdings extend over 2,400km 2. Bootu Creek s manganese product is exclusively marketed by the OMH Group s own trading division with a proportion of the product consumed by the OMH Group s wholly-owned Qinzhou smelter located in south west China. Through its Singapore based commodity trading activities, OMH has established itself as a significant manganese supplier to the Chinese market. Product from Bootu Creek has strengthened OMH s position in this market. OMH is a constituent of the S&P/ASX 300 a leading securities index. OMH holds a 26% investment in Ntsimbintle Mining (Proprietary) Ltd, which holds a 50.1% interest in the world class Tshipi Borwa manganese project in South Africa. OMH also holds the following strategic shareholding interests in ASX listed entities: 14% shareholding in Northern Iron Limited (ASX Code: NFE), a company presently producing iron ore from its Sydvaranger iron ore mine located in northern Norway; and 8% shareholding in Shaw River Manganese Limited (ASX Code: SRR), a company presently exploring for manganese in Namibia, Western Australia and Ghana. 11