30/10/2008 - 10:14

Kagara to save $70m in operation review

30/10/2008 - 10:14

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West Perth-based miner Kagara Ltd expects to save some $70 million this financial year as it releases details from its review of operations and expenditure following a plunge in commodity prices.

West Perth-based miner Kagara Ltd expects to save some $70 million this financial year as it releases details from its review of operations and expenditure following a plunge in commodity prices.

The company said in its quarterly it will scale back exploration expenditure in Queensland and on its Admiral Bay zinc project in Western Australia while seeking a joint venture partner for the latter in order to take it to production.

Meanwhile it will investigate the option of fast tracking its Mungana gold project due to the attraction of the precious metal during the global downturn, and defer the construction of the Mungana base metal treatment plant.

In the meantime, base metals mined from the Mungana project will be trucked to its nearby Mt Garnet polymetallic plant.

"In these difficult times, these changes will have the impact of decreasing our capital expenditure, increasing our copper production for the 2008/09 year to the upper end of previous guidance and decreasing our zinc production, whilst maintaining strong cash flows and profitability for the 2008/09 financial year," Kagara said in a statement.

"These cost benefits and additional revenues will achieve a net cash flow saving of approximately A$70 million in 2008/09."

Over the three months to the end of September, Kagara achieved record copper production from its North Queensland operations of 9472 tonnes.

The company delivered a cash operating margin of $US1.76 per pound of payable copper and US25 cents per pound of payable zinc.

While the results may be cause for celebration, the company said metal prices deteriorated significantly since the end of the quarter, necessitating the review.

"Management does not believe that these low metal prices can be sustained in the longer term as the majority of mines worldwide are cash flow negative and a continuation of current prices would result in whole scale mine closures," the company said.

Shares in Kagara jumped 21 per cent to a high of 71c before cooling to last trade at 67c at 12:19 AEDT.

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