West Perth-based base metals producer Kagara Zinc Ltd has recorded a 152 per cent increase in net profit, up to $89.8 million in the 2006-07 financial year, but down on expectations.
West Perth-based base metals producer Kagara Zinc Ltd has recorded a 152 per cent increase in net profit, up to $89.8 million in the 2006-07 financial year, but down on expectations.
The company forecast a profit before tax for the 2006-07 financial year of $130 million in July, down from its prediciton of $175 million in April, due to a 25 per cent shortfall in budgeted production levels at its Mt Garnet and Thalanga copper, lead and zinc projects.
Nonetheless, the company increased sales revenue by 146 per cent over the year.
The full text of a company announcement is pasted below
Diversified base metals producer Kagara Zinc Ltd (ASX: KZL) today announced a record $89.8 million net profit after tax for the 12 months to 30 June 2007, marking its fourth successive year of strong earnings growth as it advances substantial new mine development and exploration opportunities in Queensland and Western Australia which will underpin its continued growth as a leading mid-tier Australian resources company.
Kagara said today (Tuesday) that the excellent full-year result - which represented a 152% increase over the $35.6 million net profit achieved last financial year - was driven by a combination of increased production at its 100%-owned base metal operations in Queensland and strong commodity prices.
The result was struck on a 146% increase in sales revenue to $287.6 million (2006: $116.7 million). Pre-tax profit increased by 155% to $131.9 million (2006: $51.7 million), in line with the guidance issued by the Company in July, with an income tax expense for the year of $42.1 million (2006: $16.1 million). An announcement is expected to be made shortly on the proposed dividend for the 2007 financial year (2006: 10 cents).
Earnings before interest, tax, depreciation and amortization (EBITDA) increased by 122% to $163.1 million (2006: $73.4 million), highlighting the strong cash generation of the Company's North Queensland operations, which currently comprise three operating treatment facilities.
The result was based on increased production of 38,134 tonnes of contained zinc metal (2006: 35,143 tonnes) and strongly increased copper production totalling 18,344 tonnes of contained copper (2006: 6,574 tonnes) from a combination of the Mt Garnet polymetallic plant, the Mt Garnet copper circuit and the Thalanga plant, which was commissioned in December 2006. Lead production increased to 11,510 tonnes of contained lead (2006: 9,341 tonnes).
Kagara's Executive Chairman, Mr Kim Robinson, said the strongly rising trend for copper production was expected to continue into 2007/08, with copper production forecast to increase to approximately 30,000 tonnes of metal in concentrate for the year with zinc production remaining steady at around 40,000 tonnes of metal in concentrate.
"We continued to deliver on our growth strategy during 2006/07, with increased production volumes and strong commodity prices underpinning an excellent financial result," Mr Robinson commented. "The 2007/08 financial year will see a further quantum increase in copper production as the full impact of production from the Thalanga operations is seen over the 12 months period.
"During the year, we also expect to make a final investment decision on development of a new production facility at Mungana, which will really propel the next phase of our growth," he added. "Once Mungana is on stream, we expect zinc production to increase to 70,000 tonnes of metal in concentrate in 2008/09 and further to over 100,000 tonnes per annum by 2009/10 once full production is achieved."
Mr Robinson said other key exploration initiatives across the Company such as the current $15 million resource drilling program at the Admiral Bay zinc project near Broome in Western Australia and the recently commenced drilling program at the Lounge Lizard nickel exploration project in the Forrestania region were also gathering momentum.
"We have been very encouraged by the initial high-grade intercepts reported recently from Admiral Bay, which have reinforced its potential as a world-class zinc project which could add substantial value to our existing asset base," he said. "We have also recently commenced our first diamond drill hole at Lounge Lizard and we will have a second diamond drilling rig commencing operations there shortly."
