African Minerals cuts output and takes $56 mln charge

By Stephen Eisenhammer LONDON (Reuters) - Sierra Leone-focused miner African Minerals cut its production guidance for the year, took a charge of nearly $60 million and pulled back from plans to expand its flagship project on Wednesday. Shares in the company opened down 10 percent, before steadying to trade 7 percent lower, with analysts saying the results were disappointing and the uncertainty over expansion plans would weigh on the stock. Chief Executive Bernie Pryor, in the job for less than a month, said African Minerals would now focus entirely on consistently achieving an export rate of 20 million tonnes per year, which the firm hit in June but has struggled to maintain during the rainy season. "Everything needs to be geared towards hitting targets. Any diversification or M&A is on the back burner," he said. Damage to two transport vessels caused a bottle neck at the port in Sierra Leone resulting in lower iron ore exports in the third quarter, forcing the company to cut its forecasts to 11-13 million tonnes from 13-15 million tonnes for this year. African Minerals also canceled "phase 2" plans to expand the Tonkolili mine to 35 million tonnes per year production. Instead it will work to raise capacity using existing rail and port infrastructure, reducing capital investments. Pryor said he thought an annual rate of 23-27 million tonnes could be achieved in this way. Alon Olsha, analyst at Macquarie, said the results were disappointing. "There's now some uncertainty created about phase 2 which will weigh on the share price," he said. In a separate statement African Minerals said it had agreed to pay investor Shandong Iron & Steel Group compensation for not fulfilling off take agreements and production targets set for 2012. The net charge to the group's 2013 accounts will be $56.2 million. Outgoing CFO Miguel Perry, who leaves next month, said this would be the last charge of this kind and that African Minerals was confident of meeting the remaining terms of the partnership. The company posted revenue of $405 million in the first half, with core profit (EBITDA) of $99 million.