zinifex cuts earnings forecast

Zinifex cuts earnings forecast

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* May 13, 2008 - 11:52AM
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Zinifex says it expects lower than expected earnings in the second half of fiscal 2008 due to a drop in zinc prices and rising costs.

In a presentation to the Merrill Lynch 2008 Miami Conference, the lead and zinc miner said it was experiencing cost pressures from energy, labour and other commodities.

It also said zinc and lead treatment charges in the second half of the financial year were higher, while average zinc prices were substantially lower.

Combined with increased exploration activity and merger costs, these factors would more than offset higher zinc and lead production and sales.

On the bright side, lead prices had eased but remained exceptionally strong on low global stocks, the company said.

''Lead prices remain susceptible to further supply shocks,'' it said.

''2008 lead treatment charges have risen in response to Chinese efforts to curb lead exports.

''Zinc prices have fallen and so too have expectations of large surpluses.

''LME (London Metals Exchange) zinc stocks remain low and support a modest 2008 surplus forecast.

''Further disruption to supply could see zinc prices rebound.''

Zinifex said it was yet to determine a new name for the combined entity created through its $6 billion merger with gold and copper miner Oxiana.

The merged company would be the world's second largest zinc producer, with a significant position in copper, lead, gold and silver.

Shares in Zinifex were two cents lower at $10.40 at 11.42am while Oxiana's shares were one cent higher at $3.55.

AAP