Kazakhstan-based mining group Eurasian Natural Resources Corporation Plc. (ENRC) has announced that it will maintain its cutbacks in ferroalloys production at 35 percent and in iron ore output at 40 percent at least through the first half of 2009, as the company does not expect any sustained recovery before 2010. However, the sales volumes so far in the first half of 2009 have been better than expected, the company has said in a press release.
"We are continually reassessing the production plans for the businesses in the light of the weak global economic situation and end-customer demand but, at this time, are comfortable with the scale of the cutbacks we have announced; however, their duration is uncertain. We also anticipate that pressure on prices will remain. In the present environment underlying cost growth pressures are abating somewhat, which should help the group's efforts to control costs," ENRC chief executive officer Dr Johannes Sittard stated.
In addition, ENRC expects that the 25 percent devaluation of the Kazakhstani tenge should provide further cost reductions, as a large part of its costs are incurred in tenge.
In 2009, ENRC foresees a decrease of 30-40 percent in iron ore prices, while the iron ore demand will remain depressed, and says that the company's advantage is its access to the northwest Chinese markets; however, there are few signs of recovery evident in the Russian steel industry, on which it has traditionally focused. In 2008, 64.1 percent of ENRC's iron ore division sales were to Russian steel producer MMK, with which in 2007 the company signed a long-term iron ore supply contract, which extends until 2017.
Given the current operating environment, in 2009 ENRC will continue to be focused on the tight management of cash and of its balance sheet, on the rigorous control of costs in its businesses, on the pursuit of a range of asset productivity enhancements and replacement, and on selective acquisition opportunities, which are favored by the company's strong balance sheet and current market conditions.
In 2008, ENRC's revenue saw a 66 percent increase to $6.8 billion, its underlying EBITDA rose by 117 percent to $4.2 billion, its operating cash flow increased to $2.8 billion, while its net available funds amounted to $2 billion.