ENRC boosts output but has concerns over climbing costs

Mining group ENRC today posted huge jumps in output of its two most profitable products, ferroalloys and iron ore, but reiterated warnings about rising costs.

First-quarter output of ferroalloys was up 76% and iron ore rose 59%.

The London-listed group, the world's largest producer of ferrochrome, said costs in all divisions except energy rose in the quarter and while prices also climbed, they may not remain high.

"Total cost growth in 2010 will be very significant. The outlook for prices in 2010 is well ahead of those which prevailed in 2009. However, the pace of recent increases may not be sustained."

ENRC said production of ferroalloys, a key component in stainless steel, surged to 446,000 tonnes in the first three months. Ferrochrome output rose 70% to 345,000 tonnes while output of primary iron ore concentrate was 4.24 million tonnes.

This was slightly less than a forecast by Credit Suisse of ferrochrome output of 353,000 tonnes and iron ore concentrate production of 4.5 million tonnes. The ferroalloys division accounted for 48% of 2009 underlying EBITDA (earnings before interest, tax, depreciation and amortisation) while iron ore made up 33%.

ENRC, which has been expanding through takeovers in Africa, sounded a warning on rising costs in March when it posted a drop in annual profits. Kazakh rival Kazakhmys is the group's biggest shareholder with a 26% holding.