The Mineral Commodities Limited (ASX: MRC) share price ended the week on a sour note, closing 15.38% lower on Friday at 22 cents.
While the ASX was a sea of red as investors responded to a potential second COVID-19 wave in the US, Mineral Commodities also released a trading update today which likely weighed on its shares.
Mineral Commodities is a global mining and development company. Its primary focus is on the development of high-grade deposits within the mineral sands and battery minerals sectors.
The company's major projects include the Tormin mineral sands operation in South Africa and the Skaland graphite operation in Norway.
Operations update
In the release today, Mineral Commodities shed some light on trading conditions and recent developments at its major operations.
At Skaland, the company's mining operations and downstream program haven't experienced any major interruptions from COVID-19.
Meanwhile, at Tormin, Mineral Commodities revealed that the pandemic has caused delays for its section 102 expanded mining rights application. Nonetheless, the application has progressed to the Department of Mines Resources and Energy for granting.
Mining and processing operations at Tormin were impacted by South Africa's nationwide lockdown in March and April. However, operations resumed on 13 April and have since returned to normal. Accordingly, the company reported that mining and processing tonnes in May were the highest recorded performance for the year.
Sales
Mineral Commodities revealed it has seen "unabated" demand and continues to sell all the production of its non-magnetic zircon rutile concentrates to China.
However, as flagged back in March, there has been reduced demand for bulk ilmenite concentrate. As a result, no sales for ilmenite concentrate had been secured up until mid-June. However, the company noted it has now secured firm sales for the second half of FY20.
With this, Mineral Commodities stated it has observed improving market conditions as most Chinese tertiary mineral sands processing facilities have returned to production. It expects to start shipping ilmenite concentrates by as early as July 2020.
Meanwhile, graphite sales at Skaland have continued without interruption. The company achieved record sales in the first quarter as product inventory accumulated in 2019 was sold down.
Dispute with GMA Group
In today's release, Mineral Commodities also flagged a technical dispute that has arisen regarding its Life of Mine Garnet Offtake Agreement with GMA Group.
The agreement relates to garnet concentrate from the Tormin operations and involves Mineral Commodities delivering a minimum of 210,000 tonnes per annum to GMA.
The two parties are disagreeing over stockpiled inventory quantities and have reverted to a formal dispute resolution process. Mineral Commodities expects the dispute resolution process to be concluded within 60 days.
Financial position
Turning to the balance sheet, Mineral Commodities has US$18.6 million in current account receivables. This includes US$11.7 million owing from GMA Group, with US$8.6 million past due for payment.
Mineral Commodities noted that budgeted revenue and operating cash inflows have been adversely affected by the disruption to normal ilmenite and garnet sales.
"The Company's business remains sound and on track to deliver the growth profile at Tormin and Skaland, however unforeseen circumstances have ensued, compounded by the COVID-19 pandemic, which require Management and the Board to undertake contingency planning to ensure that the business successfully navigates these challenges," said executive chair Mark Caruso.
