Red Rock Resources (AIM:RRR) Andrew Bell, Chairman PODCAST Steelmin loan repayment

We caught up with Andrew Bell, Chairman of Red Rock Resources today to talk about the Steelmin loan repayment RNS update


Further to the RNS Red Rock Resources announced on the 21st of February 2018, Andrew Bell talks about what this means for the company and updates that can be expected in the future.


Andrew Bell, Chairman of Red Rock comments: “The successful unwinding of these back to back arrangements leaves Red Rock in a solid financial position. We now hold at no net cost a key stake in an emerging European ferrosilicon producer. We look forward to updating the market on further developments as they occur.”

The Steelmin plant and facility is located in central Bosnia, 104 kilometres north west of Sarajevo. The complex, formerly part of Electrobosna, was originally built in the 1970s by Elkem, a major silicon and alloy producer based in Norway, and was one of the largest and best known producers of ferrosilicon and silicon metal in Europe. It was closed down in 1992 due to the Bosnian War, was then privatised and the six furnaces were sold off in two separate parts in 2000. The plant was brought back online until finally being shuttered again in 2004 due to increasing exports pressure from Chinese producers.

Anti-dumping regulations have since been implemented by the European Commission; which significantly reduced both Chinese and Russian exports into Europe, allowing prices to stabilize and rise over time. The second, smaller, facility split off from the original is now being operated by the Italian ferro-alloy producer Metalleghe, and has been successfully producing next to Steelmin’s plant for the past 12 years.


Steelmin – Assets

Steelmin controls furnaces IV and V from the original Electrobosna complex.  Furnace V has a 48MVA installed power Elkem furnace, and is connected to two chimneys on the roof of the production hall. Furnace IV, the smaller of the two, has a 30 MVA Tagliaferri furnace with three chimneys, preventing the emission of gases in ambient air to comply with EU regulatory requirements.  Given its larger total capacity Steelmin decided to bring furnace V on initially and then move to recommission furnace IV later in 2018.

In addition to the two furnaces, the facility in Jajce houses a filtration plant, warehouse storage for raw materials, pouring and dispatch hall as well as a plant for process water recirculation.

Refurbishment for the second furnace is expected to begin later in 2018.

Power remains the most significant input cost to ferrosilicon production and this is provided by abundant and economical hydro-power available across the region.  Furnace feedstock such as quartz is also sourced from the region. The filtration plant refurbishment has been completed and ensures that all outputs of gases will comply with EU regulations.


Steelmin Products and Markets

Steelmin intends initially to produce ferrosilicon containing 75% silicon and 25% iron, a product primarily used as a deoxidising agent and to add electrical conductivity and corrosion resistance to steel.  A by-product of ferrosilicon production will be microsilica, which is a dust used in the manufacture of speciality concretes in the construction industry as well as in advanced refractories and ceramics.  Furnace V is expected to produce 29,000t of ferrosilicon per annum as well as 5,800t of microsilica.

Over time Steelmin is expected to produce both ferrosilicon as well as additional silicon alloys that offer higher margins and additional upside.  Currently ferrosilicon trades at over €1500 a ton compared with between €1280-1350 a ton at the time of Red Rock’s investment in June 2017.

European ferrosilicon production depends critically on access to cheap power (locally generated hydroelectric power in the case of Jajce) since this is up to half the cost of production. Prices are historically driven by steel production levels, the level of Chinese pricing and production allowed into Europe, as well as the associated export and anti-dumping tariffs.  Since late 2016 overall Chinese export prices have begun to rise, positively impacting European produce prices.  Key input costs such as metallurgical coal are also closely correlated to realized ferrosilicon prices.


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