Zinifex Shares Fall as Mining Plan to Cut Earnings
2006-01-17 21:07 (New York)
By Tan Hwee Ann
Jan. 18 (Bloomberg) -- Shares of Zinifex Ltd. had a record
decline after the world's second-largest zinc producer said a
new mining plan will increase costs and cut earnings.
The plan will reduce earnings before interest and tax by
A$35 million ($26.3 million) a year, the Melbourne-based company
said in a statement today. It will need to spend A$280 million
($211 million) in cash over three years to bring forward the
removal of waste at the Century mine in Queensland state.
Zinifex's shares reached a record yesterday as zinc prices
surged 79 percent in the last six months because global demand
is outpacing supply. Miners worldwide are struggling to contain
costs as energy and steel prices surge because of competition to
expand capacity to meet rising raw material demand from China.
``The stock had had a good run recently, and this will
trigger profit taking,'' Mark Pervan, head of research at Daiwa
Securities SMBC, said by phone. ``The mine plan change though is
a company specific issue.''
The shares fell as much as A$1, or 12 percent, to A$7.22,
on the Australian Sock Exchange and traded at A$7.35 at 1:05 p.m.
Sydney time. That's the steepest intra-day decline for the
company.
Zinc production of 500,000 tons a year at the mine, the
world's second largest zinc mine, is expected to be unaffected
by the change in plans, said Martin McFarlane, a spokesman for
the company.
Equipment
It will need to spend A$120 million for fiscal 2007, and
the remaining cash over 2008 and 2009 for the waste stripping.
Money will be spent on buying equipment such as shovels and
trucks, the company said in its statement posted on the exchange.
``Costs in the mining industry has increased over the last
few years, so the costs of removing the waste material has
increased,'' McFarlane said over the phone. ``That will flow
into profit impact due to higher amortization.''
Bendigo Mining Ltd., which is developing a gold mine in
southeastern Australia, today also said it expects capital costs
for its processing plant to be between A$2 million and A$4
million higher than its initial A$53 million estimate. The
revision is mainly due to higher labor costs, it said.
--Editor: Gosman |
