African Minerals Shares Fall on Reduced Guidance

PUBLISHED: 24 Aug 2012 @ 22:00 | Comments (0) | More info about Kenneth G. Mondero

Sierra Leone-focussed miner African Minerals Limited (LSE:AMI) revised its guidance for the year to produce only about five to six million tonnes of iron ore, sending shares down 15.42% to £2.535 in early morning trading today.

In a statement, African Minerals said the severe wet season has resulted in material handling issues and delay in project execution at its flagship Tonkolili Project, leading to a lower target by the end of the 2012.

African Minerals was confident back in April 2012 when it said the company will be able to achieve 20 Mtpa capacity by the fourth quarter of 2012, but has now moved the timetable to the second quarter of 2013, much to the disappointment of the market.

Keith Calder, newly-appointed Chief Executive of African Minerals, defended the position saying “final challenges” were not unusual for a big-scale project such as the Tonkolili.

Phase I of the Tonkilili project is developing a world class iron ore deposit with an associated 200-kilometre rail to connect the mine to the port as well as port infrastructure capable to support a 20 Mtpa run rate.

Most aspects of Phase I, according to African Minerals, have already been commissioned and the project is now on the wet commissioning stage, at which point material handling constraints associated with wet season operations will be permanently removed.

The project is currently Sierra Leone’s biggest employer and is instrumental in the country’s first iron ore exports after 30 years, in November 2011.

Moreover, because of the 75% drop in target production by the end of the year, export tonnage for 2013 cannot be ascertained, according to the company, until the 2012 full results are released.

Not a good news at all for investors who will have to wait until next year to feel the results of soon to be Africa’s second largest iron ore project.

Unfortunately, some 4.18 million shares have been traded by 12:50 PM GMT, and African Minerals shares were still down 15% to £2.54, as some investors wanted it out amidst the uncertainty in production.

Company Spotlight

African Minerals Limited is a Canada- and Bermuda-registered mineral exploration and development company with a primary focus on Sierra Leone, where it operates the Tonkolili iron ore project.

The company joined trading on the Alternative Investment Market of the London Stock Exchange in 2005 and also holds its headquarters in London, England.

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