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IRC FY'15 loss widens YOY to US$509M on impairments, iron ore price plunge

Russian iron ore group IRCLtd. said March 31 that its net loss attributable to owners of the companywidened to US$509.0 million in 2015 from US$317.6 million a year ago on the backof a plunge in the price of its key iron ore concentrate product and one-off assetimpairments.

Revenue during the period fell by about 33% on a yearly basisto US$81.9 million, while the loss was offset by a 36% fall in operating expensesto US$106.1 million.

The company's cost of producing 62% iron ore concentrate fromits now-mothballed mine fell by approximately50% over 2015, to US$55 per tonne.

The majority of the reported loss was due to a one-off, noncashimpairment of US$480 million as a result of a volatile commodities market.

Without the one-off item, the company's 2015 net loss would havenarrowed to US$28.9 million against an underlying loss of US$56.8 million postedin 2014.

IRC CEO Yury Makarov said the result reflected the extreme difficultiesfacing iron ore miners right now.

He said the "macro-economic downturn" and "structuraladjustment" in the steel industry had placed pressure on miners, as the priceof iron ore fell by 43% year on year.

Demand for iron ore from China, the world's biggest consumer,slid by 0.4% last year, and is projected to fall by 4.2% in 2016, according to theChina Metallurgical Industry Planning and Research Institute.

"We reacted swiftly to the changes in the macro environment,since 2014 we implemented a series of cost cutting measures, together with optimizingoperational efficiency to the leanest level," he was quoted as saying in thestatement.

He said the coming year would be transformative for the company,as work wraps up at the flagship K&Sproject, where the company has invested approximately US$500 million building the3.2 million-tonne-capacity mine.

"In the coming weeks, we will be announcing the hot commissioningof the Second Stage of the Crushing and Screening Plant, and the Main ProcessingPlant to follow."

First production from the new mine is expected in the secondhalf of 2016, which is over two years later than originally scheduled.

Despite the company's dispute with its main contractor over paymentof late fines, Makarov also said CNEEC had agreed to delay the final payment of US$23 million under the constructioncontract to three annual installments starting in 2017.

This deal will "ease our cash flow," Makarov said.