Sierra Rutile hikes production guidance but sees 'soft' demand

Sierra Rutile, the AIM-listed producer of titanium feedstock industrial minerals, saw record production of both rutile and ilmenite in the third quarter, leading it to raise its output guidance for the full year.

The company, which operates in the south-west of Sierra Leone, produced 236,381 tonnes of rutile in the three-month period, 4% higher than the highest previous quarter in the fourth quarter of 2006. The better-than-expected volumes were also 45% ahead of the 18,197 tonnes produced in the third quarter of 2011. Meanwhile, ilmenite production was also above budget and 23% ahead of the 4,306 tonnes produced the year before.

"This has been a very exciting quarter; we have experienced a real breakout in production rates that highlight the effectiveness of our investment strategy over the last 18 months," said Chief Executive Officer John Sisay.

"SRL's production rates have been steadily increasing for some time due to the renewed investment in existing production assets," the company said in a statement on Monday.

"Q3 has seen a step change in production rates due to this cumulative investment, as well as the planned one-week shutdown completed in Q2 2012, where critical components on the existing dredge (D1) were overhauled or replaced."

The company has now produced 68,991 tonnes of rutile and 15,630 tonnes of ilmenite in the year to date, up 52% and 49% year-on-year, respectively. "Production guidance for the full year has now been increased to 85,000 to 90,000 tonnes of rutile and corresponding ilmenite," the firm said.

The company said that there has been "softness" in the titanium pigment market, which is typical of the third quarter, the weakest quarter due to seasonality of demand. However, underlying levels of demand growth have been slower due to reduced global growth.

Sisay said: "While the current market is somewhat soft, we remain confident that the lack of significant new supply and long-term growth patterns will underpin a strong market for our products for years to come. This, of course, is in the context of the current prices, which remain multiples above where they were 12 months ago."