MHM Metals Limited updates Australian aluminum operation

MHM Metals Limited announced Australian aluminium operations.

Financial Results;
MHM’s Australian aluminium subsidiary Alreco Private Limited delivered Gross Quarterly Cash Receipts of USD 1,012,764 million with a Gross Quarterly Operating Surplus of USD 12,237. Alreco also had trade receivables of USD 1,261,849 million at March 31st 2011. A total of 3,647 tonnes of salt cake and non salt cake and 937 tonnes of dross were received during the quarter.

During the reporting period Alreco continued with process improvements and changes to the plant circuitry. These improvements have resulted in the plant being capable of operating with reduced personnel, lower operating costs and lower maintenance costs.

It has been deemed appropriate to regard a majority of the expenses incurred by the company to date as research and development and as such the actual operating profit disclosed is lower than it would be if these expenses were treated differently. Alreco has made application for a Research and Development Grant to assist the company by recovering a benefit from this expenditure.

Additionally Alreco is now processing the stored, partly processed material as well as its daily arisings. This adds operating costs to the quarter’s activities whilst the income for this material was received in prior quarters.

Operational performance;
Alreco’s Geelong facility is successfully processing all salt cake delivered to site and stockpiles are reducing. The technology is working efficiently and daily throughputs continue to increase.

Processing challenges caused by the partly processed material generating larger volumes of gas than expected will be addressed through the implementation of production refinements. This change largely relates to the manner material is moved around the plant and will now be replicated in other areas of the processing facility.

The refinements are being implemented as the plant continues to run as normal. Alreco is processing all material delivered to site and reducing stockpiles of partly processed salt cake. When all changes are implemented production at the Geelong plant will operate at the previously advised capacity of 60,000 tonne per annum.

While these changes were driven by materials handling requirements of the partly processed salt cake, management will also implement this new method in the United States. This is expected to result in reduced capital and operating costs for MHM’s US based salt cake recycling plants. Management is working urgently to confirm the capital cost of the US facility to determine facility funding. It is believed that these production refinements and other site specific measures could reduce the capital cost of the Russellville, Kentucky facility to significantly below the previously estimated USD 25 million budgets.

As previously advised, when reprocessing the stockpile of partly processed salt cake is completed, Alreco will commence processing Alcoa’s 160,000 tonne salt cake landfill. When landfill processing commences Alreco’s earnings are expected to increase to the forecast USD 8 million EBITDA per annum. Geelong plant EBITDA forecast remains unchanged.

AL80 Update;
The first shipment of AL80 has left Alreco’s Geelong facility. AL80 is an aluminium oxide product that results from the closed-loop salt cake processing technology for which MHM has exclusive, perpetual global rights.

During the quarter MHM cancelled an exclusive supply contract with Impex Minerals Private Limited for the offtake of AL80. The contract was cancelled following repeated non-performance by Impex of key conditions precedent to the contract and repeated failure to deliver on time. On February 23 MHM announced that the first anticipated shipment date for AL80 would be March 5th 2012. This date was provided following written and verbal assurance by Impex that shipping would commence on this date. Due to non-compliance by Impex, MHM cancelled the exclusive supply contract with Impex.

MHM immediately proceeded with an alternative buyer of MHM’s AL80 product, signing a Letter of Intent with Australia Bandfield Group for the supply of all AL80 produced in Australia. Established in 1994, Bandfield works with a range of businesses including ship broking, export and sales of mineral and agricultural products and advisory services in mining, port infrastructure and investment. The scope of its business also includes advice and evaluation for Australian or Asian companies seeking joint venture investments and providing shipping solutions for Australian companies seeking to reach Asian markets.