IRC Limited (1029) Earnings Call Transcript & Summary

Good morning, good afternoon. Welcome to the conference call. Chairperson today is Kent. Kent, please begin your call, and I'll be standing by for the Q&A. Thank you.

Yes. Good afternoon, everyone. I would like to welcome you. Again to IRC Limited 2021 Third Quarter Trading Update Call. With us today, we have our CEO, Mr. Yury Makarov; and also our interim CFO and Company Secretary, Mr. Johnny Yuen. [Operator Instructions] So as a reminder, this conference is being recorded. So Announcement and PowerPoint slides we'll be using in this call have been uploaded in our website, www.ircgroup.com.hk. [Foreign Language] It's now my pleasure to turn the call over to our CEO, Mr. Makarov. So Mr. Makarov, please start now.

Thank you, Kent, and good morning, ladies and gentlemen. We are really glad to welcome you on this call. This was one of our good quarters. We have increased our sales, as you can see from our presentation on the Slide #5. This fact is reflecting the improving of the situation with the railroads. They were behaving quite good. There were no -- nothing extraordinary during our operations, also the shipments to China, for example, they are affected by the COVID. But still, they managed to deliver much more product to our clients. Our average capacity was around 84%, which is also a bit better than it was previously. We are developing our new deposit called Sutara, which is S from the K&S name. The deposit will be a bit better or which will help us to provide the feedstock for the mine -- to the mine -- to the end of the mine life. Talking about the financial side of our business. We were affected by the sharp increase in the price and which helps us to repay $70 million to our bank lender and which also helps us to accumulate quite a healthy amount of cash on our balance. More details about financial side of our operations. I will add my colleague, Mr. Yuen. I can only add that, we are expecting the operation of the Amur River Bridge somehow early next year. It's according to the latest public information, from the construction of this bridge. We are still a bit affected by the bad performance of our mining contractors, which is improving. From one side, you can see it from the amount of rock mass moved, which is increased up to 30%. That's because of involving of the new contractor whose performance is much better. And -- but you also can see that the amount of ore is not enough, and this is reflecting of the fact that we have inherited quite a bad situation for last couple of years. But once again, it's improving and improving quite quickly. As I mentioned, we are developing Sutara deposit. We are building road there. We are building electricity line there. It's 17 kilometers from our existing processing plant. We believe that this project will be commissioned by the end of the next year. And the channel, which is diverting Sutara River from the deposit will be finished somehow early next year, which is now under active construction. I think that's it what I was going to mention in my part of the presentation, and I would be happy to answer questions during Q&A. And now we'll ask Johnny to pass us through the financial side.

Thank you, Yury. Can I refer to the presentation slide that has been uploaded to our website, talking about which, if you turn to Page 9 of the slides, it shows the financial resources and liquidity of our company at the end of the third quarter. The very, very interesting thing about this quarter is the fact that we managed to early repay a total of USD 70 million to the Gazprombank. So if you look at the chart at the right-hand side of the slide showing the repayment pattern or repayment schedule of our Gazprombank loan, you can see a big USD 70 million at the end of the slide. So we have significantly reduced our debt. Our current debt level at the end of the quarter was $118 million. Now that being said, we are still maintaining a very healthy cash level of USD 58 million at the end of the quarter. So it's a testament of our strong operating cash flow that we achieved in Q2 and Q3. I want to highlight the fact that we have early repaid -- the early repayment is set up against the more expensive tranche with LIBOR plus 7.7%. So we are trying to reduce the finance cost as much as possible. Turning to Slide 10. It shows the other iron ore price movement during the time. As you all know, I mean, we have had a spectacular iron ore price increase in the first half of the year, as well as in earlier part of Q3. But then there's a healthy adjustment in the later part of Q3. But all in all, the quarter 3 iron ore price Platt's 65% was $191 per tonne, which is still almost 57% higher than the average price of 2020. And even at today's price, it's somewhere around $140 per tonne, which is again still around 15% higher than last year's price and still a very, very healthy price for us, generating very, very healthy margin. Next slide is about ruble. As you all know, ruble has been quite stable. It's now around RUB 70 to the U.S. dollar, but it was around RUB 73 to the dollar in quarter 3. Again, ruble is going to be helpful to us because of this -- of the fact that we are paying in rubles while our revenues generated in U.S. dollar. So the ruble -- the weakness in ruble is helpful to us. And then if you look at Slide 12, it shows the price premium. The interesting part is actually on the bottom part, it shows that iron ore is best-performing commodity in the past 3 years. So the price has increased by 44% in this 3 years' time, so 's very helpful. And obviously, the top part of the slide shows the increasing price premium of 65% iron ore versus 62%. The higher the premium, the better we will be because we produce and sell our products at a price which is benchmarked against 65%. Slide 13 is about LIBOR rate. As we all know, we have very low LIBOR, and so our cost -- our finance cost is also quite low. That concludes my part. I will hand the call back to Yury. Yury?

Yes, Johnny. I should probably mention once again for those of our investors or potential investors, who are new for us or going to be new, that we are producing our iron ore concentrate just on the border of China, who is a biggest client in the world. We are enjoying good price label right now. Weak Russian ruble helps us to keep costs low. And simultaneously, our loan. Interest rate decreased because of the LIBOR is decreasing. And generally, addition of the new bridge will increase the stability of our operations since early next year. So from all points of view, we should be considered like a very attractive company for the investment. I think that's it probably. A couple of words about bridge. It's already connected with -- the railroad connection is already established. There was 1 passage of the locomotive through 1 bridge -- through 1 bank to another over the bridge. We are expecting for the test shipment of the product. We believe that it will be our concentrate. And as I mentioned, public sources say that next year, it will be fully operational. I think that's it, Johnny.

Yes.

Should we switch to Q&A.?

Yes. Operator, please start Q&A.

[Operator Instructions]

[Foreign Language] We are now ending the meeting here, and thank you, everyone, for joining us today. We appreciate your time. If anyone have any questions, please feel free to contact us at any time. Contact details can refer to our corporate website, www.ircgroup.com.hk. With that, thank you, and have a great day. Thank you. Bye-bye.

Thank you for your participation. This concludes the conference. Goodbye.

Bye.