report tomorrow, page-9

WMC's Olympic Dam operation in spotlight
February 7, 2004 - 8:05AM


Investors will be hoping for a strong outlook for WMC Resources Ltd's Olympic Dam smelter when the miner reports its 2003 results next week.

Analysts said the market would be looking for more information concerning the smelter's performance so far in 2004.

They will also be hoping for news on the expected annual output of the company's uranium, copper and gold plant at Olympic Dam in South Australia after a series of cost blow-outs and operational break-downs marred its performance in 2003.

Analysts' annual net profit predictions for WMC Resources for calendar 2003 vary with little known about how the cost of the Olympic Dam smelter problems would be accounted for in the results.

Forecasts for net profit before significant items range between $190 million and $270 million with a consensus of around $216 million.

WMC Resources reports its 2003 results on Wednesday next week.

"The difference will probably revolve on the level of capitalised costs associated with Olympic Dam over the last six months," ABN Amro resources analyst Warren Edney said.

"It's a bit of a wild card, how much of the cost base goes into the result and how much is capitalised."


ABN Amro is expecting a net profit for the year of $218 million.

Mr Edney said his brokerage would be looking at what Olympic Dam's cost structure was like now and how the company had been travelling in the first six weeks in 2004.

A revised production forecast for the year was also expected, he said.

A foam-up in the Olympic Dam smelter furnace and the failure of a heat exchanger in its acid plant cost the miner 18,000 tonnes of copper and 340 tonnes of uranium production in the December quarter.

The company has estimated the cost of the three week shutdown as a result of the heat exchange malfunction at more than $30 million.

Despite WMC Resources flagging a modest final dividend for 2003, the majority of analysts said the operational failures at Olympic Dam in the second half meant this was now unlikely.

Of the six brokerages spoken to by AAP, UBS was the only one to forecast a dividend.