Zinc

[Lone Clone]

Zinifex reports 24% profit growth on zinc high prices
27/08/2007 By: Zachary Corones

http://www.egoli.com.au/egoli/egoliStoryPage.asp?PageID=%7BA04C01BB-5E99-4D4E-96FD-E24EC2808293%7D&a...

Zinifex reports profit growth of 24% on zinc high pricesZinifex Limited (ZFX) has reported a net profit after tax of $1.33 billion, up more than 24% on the net profit for the 2006 financial year. The mining business was the major contributor to the result. providing $827.5 million, while the smelting business added $507.3 million.

Profitability of all operations increased with Rosebery, Hobart and Budel nearly double or better, their contributions compared to the year before, the company said.

For the first time, Zinifex’s income statement focused on the performance of the mining business, recognising that in future Zinifex’s smelting operations will be part of Nyrstar, an entity formed to merge Zinifex’s zinc smelting and alloying businesses with those of Umicore, a Belgium listed materials company.

Profit before financing costs and income tax was also a record at $1.74 billion, 82% higher than the year before.

Zinifex said a substantial income tax expense was booked for the period compared with an income tax benefit in the previous financial year, reflecting that substantially all of Zinifex’s tax losses have now been recognised.

This change in tax position was the primary reason why net profit after tax increased by a smaller 23% when compared with the 82% increase in profit before tax.

Cash inflows from operating activities were reported at $1.59 billion, an increase of 83% compared to the previous financial year.

Total production was approximately 5% below last year. The mining heavyweight said this was due largely to longer than normal planned shutdowns at Century and Port Pirie as well as lower lead grades in Century ore.

“In contrast Hobart delivered record zinc production and Budel increased output following the commissioning of an expansion,” the company added.

The miner said a ongoing strong performance of the resources sector had continued to apply upward pressure on costs.

Underlying operating costs excluding exchange rate impacts were up by some 11%, however specific period expenditures associated with the extended Port Pirie shutdowns, final payout to the departing CEO and revised environmental provisions at Port Pirie increased the headline rate to 15%, the company said.

“Operating cost increases were experienced in all areas of the mining business with employees, services, consumables, freight and energy all costing more,” it said.

Looking forward, the zinc and lead producer said movements in zinc prices and the A$/US$ exchange rate would have the greatest impact on its profitability.

“After the very strong metal prices witnessed in the 2007 financial year, both zinc and lead prices have come under pressure in August as uncertainty in global financial markets extends into the metal markets,” the company said.

“Offsetting these falls to an extent has been the fall in the Australian dollar relative to the United States dollar.”

Despite this volatility, Zinifex said underlying metal market fundamentals remained intact and continued to be favourable.

“Demand for both zinc and lead continues to be strong driven by growth in the Chinese economy,” it said.

“Overall we expect that zinc and lead prices, supported by strong fundamentals, will remain at levels that are well above historic long term averages.”

Zinifex announced a dividend of 70c per share, fully franked, bringing total dividends announced to $1.40 per share for the year, a rise of 75% over last year.

By 1107 AEST, shares in Zinifex had gained 60c to $17.35.