After strong first half results, the new boss of Sierra Leone iron ore miner African Minerals disappointed the market with a reduced second half sales guidance and hacked-back expansion plans.
Chief Executive Officer Bernie Pryor, who swung his feet under the desk at the AIM 100 company on August 14th, cited problems with shipping as having reduced exports in the third quarter.
"Our wet season product strategy is performing well, but we have suffered interruptions to our shipping in the third quarter due to major maintenance and operational issues with our contracted trans-shippers."
As a result, he has lowered sales guidance to between 11m tonnes and 13m tonnes of product exported in the full year, from 13m-15m tonnes previously.
He also stated that management was looking to "re-define" previous "Phase 2" expansion plans for its main Tonkolili project to focus on maximising shareholder returns rather than solely volumes.
The previous $2.5bn Phase 2 expansion plan had been to expand from 20m to 35m tonnes per year (mtpa).
"We currently aim that all capital requirements for Phase 2 will be met by available cash and existing debt facilities, plus new project level debt."
At June 30th period end the group had total cash and cash equivalents of $501.6m, of which $460.9m remained ringfenced for funding the Phase 2 expansion.
In the first half African Minerals reported revenue of $405m and earnings before interest, tax, depreciation and amortisation of $99m, which was well ahead of broker forecasts.
The company reported progress towards stabilising Tonkolili's integrated mine, rail and port operations at the 20mtpa level.
"The first half has demonstrated strong volume, production and sales capability, coupled with the benefits of improved financial control and therefore the ability to reduce cash cost," said Pryor.
He stressed that management continued to focus on bringing down cash costs to our targeted $30-a-tonne level, and expected to achieve this by the end of the year as monthly volumes increased.
Broker Jefferies glossed over the short-term issues and looked forward to free cash flow generation rising quickly as iron ore production ramps up, operating costs fall and capital expenditure (capex) investment tapers.
A report from the analyst team said: "We see opportunity to stretch current infrastructure throughput above 20mtpa and phase exploitation of high-grade saprolite resources in order to extend mine life and improve project IRR at limited additional capex.
"However, we are unlikely to receive further clarity from management until mid-2014 once further work is completed on infrastructure upside and saprolite recoveries, and this delay may weigh on investor confidence."
Shares in AMI were down 17.3% to 161.75p at 14:06 on Wednesday.