IMX Resources (ASX: IXR, TSX: IXR, IXR.WT) has reduced cash costs at Cairn Hill Mining Operation by 10%, which has continued to operate as cash flow positive during the past three months.
Another plus for IMX at Cairn Hill is that the company is achieving forecast production rates of 150,000 tonnes per month of DSO coarse-grained iron-copper product, which equates to an above-nameplate capacity rate of 1.8 million tonnes per annum.
The operation is a joint venture (IMX 51%) with Taifeng 49%, with a current sales contract with Vingo and spot sales to Taifeng.
The FY13 budgeted free cash is A$35-$40m, based on FY13 forecast Index Prices of US$143/t 62% iron, $8,682/t LME Cu and an AUD/ USD rate of 1.02.
Neil Meadows, managing director, commented: “By engaging early with our main service providers and based on the excellent relationships we have with them, opportunities were identified where costs could be permanently reduced, delayed or deferred.
"The ability to reduce costs during the September quarter whilst maintaining our targeted shipping rate has enabled the operation to continue to be cash flow positive. We will continue to look for opportunities to further reduce operating cash costs to generate sustainable positive cash flow for the company.”
The operations at Cairn Hill have the potential to be extended past the current mine life of late 2015, with exploration for near-mine potential DSO underway.
Cost reductions
By working with major contractors and suppliers including Flinders Ports and Exact Mining Services, along with some modifications to the mine plan, the company has reduced CIF costs during the last three months to around $93/t, which is the equivalent of $77/t on an FOB basis.
This represents a 10% reduction in CIF costs from the previous quarter and provides for a forecast margin in the range of $10-20 per tonne for the December Quarter.
IMX said that it will also look to establish a broader base for sales - while maintaining at a minimum the existing pricing structures with existing customers.
Debt drawn reduced by over 40%
The previously established debt facility that was drawn to $9 million was also reduced to $5 million during the period, providing further evidence of Cairn Hill’s recent relatively strong performance.
Analysis
The ability to reduce cash costs and to operate cash flow positive at Cairn Hill with a forecast margin of $10-$20/tonne at the mine in the next quarter is a strong performance from IMX. To be able to reduce costs during the September quarter while enduring tough global iron ore conditions whilst maintaining targeted shipping rates is also a good sign.
The ability to reduce the debt facility from $9 million to $5 million is another sign of the strength of the operating performance of Cairn Hill and bodes well for the next quarter.
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