Diversified West Perth-based resources group, Kagara Ltd, has reported an 8 per cent fall in net profit to $35.9 million for the six months to December 2007, on the previous corresponding period's $38.9 million result.
Diversified West Perth-based resources group, Kagara Ltd, has reported an 8 per cent fall in net profit to $35.9 million for the six months to December 2007, on the previous corresponding period's $38.9 million result.
The latest result is almost 30 per cent lower than the $50.9 million profit achieved for the six months to June 2007, and translates to lower earnings per share of 16.7 cents, compared to 19.6 cents in 2006.
Earnings before interest, tax, depreciation and amortisation fell more than 20 per cent to $65.3 million (2006: $82.2 million), while the result was almost 20 per cent down on the $80.9 million EBITDA achieved in the six months to June 2007.
Sales revenue increased by 22 per cent to $150.8 million (2006: $123.9 million).
Kagara's North Queensland base metal operations generated net cash flow of $85 million for the first half, providing a strong foundation for the company's aggressive organic growth and exploration programs.
Kagara executive chairman Kim Robinson said it was very pleased overall with the result, which highlighted the robust nature of its operations and their ability to generate strong cash flow and profits at all phases of the commodity cycle.
"The operational improvements we implemented last year, including the change to owner-operator mining and increased operational flexibility arising from the re-commencement of mining at Mt Garnet, has also given us greater capacity to withstand seasonal rainfall events and other operational challenges."
Copper production increased by 76 per cent to 11,409 tonnes of contained copper (2006: 6,472 tonnes), while zinc production increased by 9.5 per cent to 22,848 tonnes of contained zinc (2006: 20,869 tonnes) and lead production fell by 6 per cent to 6,150 tonnes of contained lead (2006: 6,530 tonnes).
Kagara achieved a copper cash production cost of US$1.45/lb (2006: US$1.49/lb), against a realised copper price for the first half of US$3.29/lb (2006: US$3.31/lb) of payable copper; the zinc cash production cost was US$0.53/lb (2006: US$0.47/lb) against a realised zinc price of US$1.20/lb (2006: US$1.70/lb).
This enabled the company to deliver a cash operating margin for copper - currently the principal contributor to its earnings - of US$1.84/lb of payable copper and a cash operating margin for zinc of US$0.68/lb of payable zinc.
"Although we saw a 30 per cent reduction in the realised zinc price during the half, the continued diversification of our production - with copper currently the main driver of our earnings growth - provided a solid buffer against adverse commodity price movements," said Mr Robinson.
He said Kagara's growing production profile was set to continue, with production of copper and zinc respectively on target to exceed levels of 30,000 tonnes and 40,000 tonnes of copper metal and zinc metal for the 2007/08 financial year.
"We are also continuing to deliver on our growth strategy, with construction of the new $80 million Mungana base metal production centre on track to commence in April," Mr Robinson. "This project, which is being developed as an underground operation, will drive our production and earnings growth through the rest of the decade, enabling us to double out zinc production to 100,000 tonnes of metal by 2010."
Mr Robinson said other recent highlights included the high-grade base metal discoveries at Waterloo, near the Thalanga copper plant, and Victoria, in the Chillagoe region, as well as the highly successful $20 million drilling program at the Admiral Bay Zinc Project in Western Australia.
"The completion of this program and an initial resource scheduled for the second quarter, combined with ongoing exploration programs at Red Dome in Queensland and Lounge Lizard in Western Australia will continue to expand our pipeline of exciting development projects for the future," he concluded.
Kagara shares closed 5 cents down, or 1.03 per cent lower, to $4.80 each.
