Kazakh mining group ENRC expects its full-year results to be at the low end of management expectations, it said on Wednesday, as it cut production in the fourth quarter due to the economic downturn.

"The outlook clearly has changed dramatically post the end of the third quarter," Chief Financial Officer Miguel Perry said on a conference call.
"We've seen reductions in demand and pressure on pricing, particularly in ferrochrome and iron ore."

ENRC shares, which have shed 82 percent since touching a peak in May, had fallen 2.8 percent to 275 pence by 9 a.m., while the mining index was down 0.5 percent.
Credit Suisse said it was cutting earnings per share estimates for the bank to $2.06 per share from $2.24 for 2008 and to $1.05 from $1.78 for 2009.

"Fortunately, ENRC are the lowest cost (ferrochrome) producer in the world, and management believe their overall cash cost for ferrochrome will fall," the note said, reiterating an "outperform" rating and target of 8.30 pounds.

ENRC said full-year results would be at the low end of management expectations and also released analysts' forecasts for profit attributable to shareholders that ranged from $2.69 billion to $3.19 billion (2 billion pounds).
"We are comfortable with the lower end of analyst expectations," Perry said.

That lower-end result, however, would still be a more than threefold jump from the 2007 result of $798 million.

CUTS PRODUCTION

The company said that due to deteriorating market conditions it was cutting production in its main ferro-alloy and iron ore divisions in the fourth quarter, resulting in full-year output in the two units to be below that of last year.

"We expect market pressures to continue into 2009, with prices and volumes being lower than for full year 2008," the company said in a statement.
Ferrochrome output was being cut in the fourth quarter by 85,000 tonnes, equal to 8 percent of 2007 sales, while iron ore production would fall by 2 million tonnes, or 12 percent of last year's sales, Perry said.

ENRC also said it was reviewing capital expenditure plans and that it now expected that full-year 2008 capex would be "significantly" below the $1.7 billion predicted when it released 2007 results.

"Costs growth pressures in the industry are abating somewhat in response to the economic environment, which will help the group's efforts to control costs," the firm said.

ENRC, the world's sixth-largest iron ore exporter by volume, said its third-quarter production volumes rose across the group, including a 3.2 percent rise in its key product, ferrochrome, to 294,000 tonnes, and a 8.3 percent increase in saleable iron ore.

The company said it was in a solid financial position, with $2.6 billion in cash at end September, and was looking at takeover possibilities.

Share prices of possible targets were at very low levels, but the firm was not in a hurry and would remain financially disciplined, said Jim Cochrane, head of marketing and business development.

Rival Kazakh mining group Kazakhmys is the firm's biggest shareholder, with a 26 percent stake. – MSN Money