Good times to keep rolling says ZinifexThursday Aug 24 14:29...

Good times to keep rolling says Zinifex
Thursday Aug 24 14:29 AEST
Zinifex Ltd's annual net profit has broken the $1 billion mark for the first time thanks to higher zinc and lead prices and the company says the good times will continue.

While the zinc and lead miner warned that cost pressures are still a source of concern, continued high prices will provide some comfort, with average July zinc prices 50 per cent higher than during 2006 year.

"If zinc prices over the course of 2007 continue at similar levels to July, then increased revenue will more than offset expected cost escalation and we would anticipate another excellent year for Zinifex," the company said.

Zinifex posted a more than four-fold increase in annual net profit to $1.08 billion for 2005/06, from $231.6 billion in the previous year, thanks to a strong rise in zinc prices and record average lead prices.







Its shares surged 50 cents to a morning high of $11.60 as Zinifex delivered a positive zinc and lead outlook, although it said some cooling-off in the lead price is expected.

Zinifex declared a final dividend of 70 cents, up from just four cents in same period in the previous year, taking the total dividend for the year to 80 cents.

"We remain positive about the outlook for zinc and anticipate global zinc stocks will decline further in the 2007 financial year, providing continuing support for historically high zinc prices," it said.

"For lead, we expect a modest surplus to further increase LME (London Metal Exchange) stocks, placing downward pressure on prices, although we expect prices to remain well above long-term averages."

The company managed to limit cost increases to seven per cent in the year to June 30, but the flip side of higher commodity prices was still a cause for concern.

Higher electricity prices, linked to oil, at its Dutch Budel refinery represented Zinifex's single largest operating cost increase for the year and it says there is little hope that this will ease.

"At our Century and Rosebery Mines we anticipate incurring higher costs for labour, equipment and consumables that are in short supply or affected by elevated commodity prices," the company said.

Zinifex said its so-called Project Productivity will reach its goal of cutting 450 jobs across the group, with 350 jobs slashed in its first year of implementation, but it warned that despite the job cuts it does not anticipate being able to fully offset cost hikes.

Zinifex flagged increased capital expenditure of $520 million for in this year, from $360 million in 2005/06, based largely on a three-year program announced in January to stabilise the pit walls at its flagship Century Mine through waste stripping.

The northwest Queensland mine is expecting less lead concentrate production, as it mines areas with lower lead grades and plans a two-week maintenance shutdown of a grinding mill.

Also, a 46-day maintenance shutdown of the blast furnace at Port Pirie smelter will affect lead metal production in the first quarter, but this should be partially recouped in the rest of the year.

Chief executive Greig Gailey said identifying additional mine reserves and resources is now key to long-term strategy.

"It has been a very busy year for us with significant capital committed to a number of promising ventures," he said.

"This includes the allocation of a further $19 million over the next three years to extend the mine life at Rosebery (in Tasmania) to 2020 and the initiation of a pre-feasibility study of our Dugald River zinc deposit in Queensland."