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«IRC Ltd» on the verge of a temporary suspension of production

29 July 2014

The sharp decline in the value of the global iron ore was 30%, forced the company «IRC Ltd», included in the group «Petropavlovsk», review their activities and to reflect on the suspension of operations. Such a move due to the rise in price of raw materials to date has made only corporation «Evraz», sending bids to some mines. Despite the fact that the production of the company «IRC Ltd» realized in the largest Chinese market, income from her lower costs. The company was forced to put its investors aware of the fact that the probability of possible temporary stop production of ilmenite and iron ore mine owned by her Kuranah, Amur region. Reducing the cost of raw materials from 135 to 89 USD per tonne has led to the production from January to June at a loss and, given the cost of ore to the middle of July in the amount of 98 USD per ton, it is expected to be loss-making throughout the year. The company is counting on tax and transportation benefits that will allow in some way to support the production, however, without their presence and if the cost of raw materials will remain at the present level, the suspension of production is very likely. If the company decides to take this step, the state of the Kuranakh workers move to Kimkano-Sutarskoye plant with an estimated annual production capacity of the first phase of 3.2 million. Tons, is expected to launch production in November this year.

Last year Kuranah provided production of 150 thousand tons of ilmenite, and more than 1 million tons of ore for the period from January to June 2014, the production volumes totaled 86.7 thousand tons and 500 thousand tons respectively. Plans «IRC Ltd» in addition to start-Kimkano Sutarskoye plant construction Garinsky GOK, whose planned annual production capacity of the concentrate is 2.1 million. Tons. The main deposits — Kuranyi Kimkano-Sutarskoye Garinsky and Mining — provide the raw material reserves of more than 1 billion tons… Overall revenue «IRC Ltd» last year amounted to 160.9 million. USD at a loss to 41.6 million. USD.

According to the company, to clarify the situation, a decision on the Kuranakh will be made in August. The company's specialists believe that production could be profitable if the cost of raw materials will recover at least 30%. Long-term contracts concluded by the company with China for the supply of products, do not provide for penalties when you stop work.

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