Zinifex soars but zinc price may lose shine
Source: Associated Press
metalsplace.com
Metals miner Zinifex has posted a sharp jump in first half earnings, but warned that second half profit may be lower as zinc prices lose some of their shine.
Record zinc prices helped Zinifex to a 230 per cent increase in net profit to $751.2 million for the first half.
Chief executive Greig Gailey said that while he was positive on the outlook for the steel ingredient, prices had deflated slightly so far this year.
"Zinc prices have retreated from the record levels witnessed during the December quarter," he said.
"However, this has to be seen against the backdrop of historical prices and in this context, we are still witnessing a very strong performance."
He said the outlook for zinc remained upbeat.
"With LME (London Metal Exchange) stocks at historically low levels and a moderate deficit expected during 2007, we remain positive on the outlook for zinc," Mr Gailey said. "Similarly, we expect lead stocks to remain tight and continue to support attractive prices."
While Zinifex's total production fell by 10 per cent in the first six months of 2006-07, record zinc and lead prices driven by falling global stocks were the major reasons for its net profit jump lifting by more than three times.
Its pre-tax profit also jumped a sharp 377 per cent to a record $967.3 million.
Last year Zinifex's annual net profit broke the $1 billion mark for the first time thanks to record zinc prices, and while they have come down slightly, at over $US3000 a tonne they are still way ahead of historical averages.
But while Mr Gailey warned that if prices say at current levels Zinifex's earnings will be lower in the second half, he also said production is likely to ramp-up.
"If they (zinc prices) remain where they are today, our profit will be lower, however there will be some offset to that in that we would expect our production to return to more normal levels in the second half," he said.
During the first half the Century Mine in Queensland had lower volumes due to maintenance shutdowns and lower grades.
Mr Gailey added his voice to those of other miners in saying costs are still putting pressure on operations, up 16 per cent in the first half.
"Anything related to energy remains a significant cost pressure," Mr Gailey told a teleconference.
He also pointed to skilled staff, commodities such as copper sulphate and capital equipment as other items putting pressure on costs.
It has been a busy year so far for Zinifex, with the announcement that it plans to spin off and float its smelting assets with those of Belgium-based Umicore.
The plans sparked a push into securing the group's mining future, with the planned $391 million buy of Canada's Wolfden Resources and a move into overseas mining with new tenements in Tunisia, Sweden and Mexico.
Zinifex is also pushing ahead with its hyped Dugald River project in Queensland, which is heading towards a full feasibility study for a 200,000 tonne a year zinc mine.
The study is expected to take about 18 months, at a cost of $25 million and will require an investment of about half a billion dollars if it goes ahead, but Mr Gailey denies it is competing with the Wolfden buy.
"They're quite separate decisions," he said.
Zinifex shares were up 16c at $17.36 in morning trading. |
