Western Australian resources player Consolidated Minerals Limited announced a reduced half-year after tax trading profit of $7.4 million, reflecting the impact of lower manganese and nickel prices.
Western Australian resources player Consolidated Minerals Limited announced a reduced half-year after tax trading profit of $7.4 million, reflecting the impact of lower manganese and nickel prices.
Following adjustments relating to Australian International Financial Reporting Standards conversion and write downs, Consolidated reported a bottom line after tax profit of $3.2 million, compared with a $22 million trading after tax profit for the previous corresponding period.
The key driver for the drop in half-year results was the fall in the manganese and nickel prices from their previous highs, with world manganese markets experiencing a period of volatility and short-term oversupply of alloys.
Notwithstanding these factors, the underlying cash generation of the Company's businesses remained strong, with sales revenue increasing by 21.3 per cent to $103.8 million - against a 2004 figure of $85.6 million.
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CONSMIN $7.4 M FIRST HALF TRADING PROFIT - HIT BY LOWER COMMODITY PRICES
Consolidated Minerals Limited (ASX: CSM, AIM: CNM, FSE: CMN) today announced an after tax trading profit of $7.4 million reflecting the previously announced impact of lower manganese and nickel prices during the first half. In line with its established dividend policy, Consolidated declared a fully franked dividend of 3.00 cents per share.
The Company also announced it would re-activate its capital management on market share buy back program aimed at optimizing Consolidated's capital structure and enhancing shareholder returns.
Following adjustments relating to Australian International Financial Reporting Standards conversion and write downs, Consolidated reported a bottom line after tax profit of $3.2 million. This compared with a $22.0 million trading after tax profit for the previous corresponding period.
The key driver for the drop in half-year results was the fall in the manganese and nickel prices from their previous highs, with world manganese markets experiencing a period of volatility and short-term oversupply of alloys. In addition, despite Consolidated's continuing focus on tight cost control, operating costs increased in line with industry-wide cost pressures.
Notwithstanding these factors, the underlying cash generation of the Company's businesses remained strong, with sales revenue increasing by 21.3% to $103.8 million (2004: $85.6 million) reflecting the inclusion of $26 million in nickel sales revenue from the Kambalda operations, combined with strong production volumes from the manganese and chromite businesses - highlighting the continued strength in underlying demand for Consolidated's mineral products, particularly in the Chinese market.
As at 31 December 2005, Consolidated's cash reserves, receivables and inventories totalled $86 million with net gearing remaining low, providing a strong platform for continued growth.
Managing Director Michael Kiernan said the first half was operationally solid underpinned by continuing strong demand for carbon steel materials in China. The half was overshadowed by a drop in manganese prices, which he said was typical of a period of readjustment in commodity markets. Manganese prices have since firmed.
"This has not changed our view of the robustness of Chinese growth or the continued long-term strength of demand for the high-grade minerals we produce," Kiernan commented. "The first half for Consolidated was a 'speed bump' of the kind which is to be expected during any strong growth cycle."
"The manganese market has stabilised following the announcement of the new benchmark price of US$3.00/dmtu in December which, while below the unsustainable highs of 2004/05, is well above the average price of the last decade," he added. "Recent evidence from other producers suggests that the period of oversupply in the manganese alloy market has now worked its way through the market."
Kiernan said this tightening of the manganese market combined with increased nickel prices, which have rebounded since late 2005, underpin a strong earnings outlook for the company with after tax profit forecast at approximately $85 million for 2006/07 and approximately $115 million for 2007/08 driven primarily with increasing contribution from our nickel operations.
The key growth driver for Consolidated will be the increase in nickel production from the Kambalda operations as the new East Alpha mine development nears completion and other production centres are brought into production.
Executive Director and incoming Managing Director, Rodney Baxter, said Consolidated would remain focused on cost control across its operations to ensure that the benefit of higher commodity prices was fully reflected in its financial performance.
"Exploration will continue to be a key growth driver, both at Woodie Woodie, where we will follow up the successes of last year in continuing to deliver additions to our resource/reserve inventory, and at Kambalda, where we are well advanced on pre-feasibility studies for the development of twin exploration declines to facilitate a major 5-year exploration program to unlock what we consider is the substantial broader nickel endowment of the region."
Baxter said the Company would continue to progress business development initiatives, including the development and intensive exploration of the Jabiru zinc-copper project in Western Australia. Development of this project is currently proceeding well and in line with budget, positioning us to take advantage of strong metal prices and ultimately become, together with nickel, a major plank for Consolidated.
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BACKGROUND INFORMATION
Consolidated Minerals is a diversified, ASX S&P 200 Australian-based resource group (Code: CSM) with a strong growth focus as a supplier of key raw materials to the world's steel and stainless steel industries. The Company is also listed on the Alternative Investment Market (AIM) of the London Stock Exchange (Code: CNM) and the Frankfurt Stock Exchange (FSE) (Code: CMN).
Consolidated has a sound profit base founded on its successful West Australian manganese operations at the Woodie Woodie mine in the State's Pilbara region. Woodie Woodie has a secure position as a reliable supplier of 1 million tonnes per annum of high-grade, low-phosphorous manganese ore to markets in Asia and Europe, representing a sustainable 10% share of the world market.
The Coobina Chromite Project, also located in the Pilbara region, has increased production to capacity levels of 250,000 tonnes per annum of 42% chromite ore, representing a 2.5% share of the world market.
Consolidated's nickel operations are located in the world-class Kambalda nickel district of Western Australia and currently comprise the Beta Hunt nickel mine, the nearby East Alpha development project together with a portfolio of advanced exploration and development prospects in one of the world's premier nickel regions.
The Company has announced an accelerated development program at its Kambalda operations designed to bring the East Alpha project into production during 2006, consolidating a 9-10,000tpa nickel production complex through combined production from Beta Hunt and East Alpha, while continuing to pursue other exploration and growth opportunities in order to reach the target of 25,000tpa nickel production.
Consolidated is also developing a new zinc-copper business through its 33% shareholding in ASX-listed mining company, Jabiru Metals Ltd (ASX: JML). Consolidated supported Jabiru's $81.5 million debt and equity funding package, finalised in early 2006, which underpins development of the Jaguar zinc-copper project located in Western Australia. Jaguar is scheduled to commence production in the June quarter of 2007, producing 20-25,000tpa of zinc in concentrate, 8-10,000tpa of copper in concentrate and 800,000oz of silver in concentrate at world competitive cash operating costs.
The Company has a strong track record in the successful and cost-effective development and operation of mining projects. Consolidated is also pursuing a number of growth opportunities including joint ventures and strategic investments in the carbon steel materials sector. These include a joint venture with Fortescue Metals Group Limited in developing the Mindy Mindy and Shaw River iron ore projects and several other strategic investments.
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