20/08/2009 - 10:54

Mincor recovers with 2nd-half profit

20/08/2009 - 10:54

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Nickel miner Mincor Resources has recovered from a big first-half loss to post a modest profit in the second half of the finacial year but it was not enough to save the group from an annual loss of $16 million.

Mincor recovers with 2nd-half profit

Nickel miner Mincor Resources has recovered from a big first-half loss to post a modest profit in the second half of the finacial year but it was not enough to save the group from an annual loss of $16 million.

Its second half net profit of $6.05 million contrasted with a first-half loss of $22.7 million.

Mincor said the turnaround was generated by a 93 per cent increase in cash margins, with profits recorded every month of the second half, due to its quick response to last years dramatic fall in nickel prices.

Mincor managing director David Moore said the company's extraordinary resilience has shown it can maintain strong cash flows and healthy dividends through a deep downturn.

"It took a Global Financial Crisis to induce Mincor's first ever loss as a mining company, but the turnaround in the second half underlines the strength and flexibility of our operations," Mr Moore said in a statement.

 

 

Poised to Resume Earnings Growth Following Second Half Profit Turnaround

 

Outstanding Operating Performance Drives Second Half Profit, 4 cps Final Dividend

- Second half turn-around generates net profit of $6.05M for 2H FY09 on operating earnings of $38.3M
- Cash margins almost double to A$4.32/lb in 2H 09 as cash costs fall to A$4.83/lb; EBITDA up by 191% over first half
- Overall net loss of $16.7M for FY09 (1H FY09: net loss of $22.7M) after $37.3M in one-off non-cash charges, exploration write-offs and negative provisional pricing adjustments
- Strong underlying FY09 operating earnings of $66.9M (2008: $171.1 million)
- Final fully franked dividend of 4 cents per share declared - maintaining Mincor's unbroken dividend payment record since 2003
- Cash of $75.8M, working capital of $94M and no debt at June 30 2009
- Mincor emerges with strengthened operations and outstanding growth prospects following its quick and decisive response to the Global Financial Crisis

Australian nickel mining company Mincor Resources NL (MCR: ASX) has underlined the effectiveness of its response to the Global Financial Crisis after today reporting a $28 million profit turnaround for the second half and declaring a 4 cents per share fully-franked final dividend, despite recording an overall loss for the 2009 Financial Year.

The Company today announced a net profit of $6.05 million for the second half compared to a first half loss of $22.7 million - a turn-around generated by a 93% increase in cash margins brought about by Mincor's swift and effective response to last year's plunge in the nickel price.

The excellent performance provides a strong platform for the Company to resume its 8-year growth path, underpinned by a strong balance sheet (cash of $75.8 million, working capital of $94 million and no debt as at 30 June), the ability to quickly ramp up production in response to positive moves in the nickel price, and a strong exploration commitment.

Mincor reported a final full-year loss of $16.7 million (2008: full year profit of $64.04 million), a direct result of the collapse in the nickel price between September and October of 2008. This brought about a 58% reduction in the average cash operating margin achieved by the Company's Kambalda Nickel Operations compared to 2008, despite a 16% reduction in average cash costs for the year, to $5.37/lb (2008: $6.40/lb).

While margins were impacted sharply during the first half, the Management Plan implemented by Mincor in November and December of 2008 brought about an immediate return to profitability, with profits recorded for every month of the second half. During this period cash costs dropped to their lowest level in four years and strong net free cash flows were generated.

The full year result was struck on gross revenues of $191.9 million (2008: $329.3 million), with the bottom line result impacted by substantial one-off, non-cash charges. In addition to the $17.3 million in non-cash impairment charges reported in the first half, Mincor's final results include the non-cash write-off of the value of certain exploration properties ($2.5 million) and a further non-cash impairment charge against the value of listed investments ($570,000).

The full-year loss also includes a negative provisional pricing adjustment from the previous financial year of $9.3 million, and, in accordance with its standard accounting practice, the write-off of $7.59 million in exploration costs incurred during the year.
Mincor's underlying operating earnings (revenues minus cash costs, excluding provisional pricing adjustments) remained strong at $66.9 million (2008: $171.1 million). Earnings before interest, tax, depreciation and amortisation (EBITDA) were $45.2 million (2008: $140.8 million).

Mincor mined and delivered 573,124 tonnes of ore at an average grade of 3.08% nickel for 17,652 tonnes of contained nickel (2008: 19,004 tonnes) for the 2009 Financial Year. Cash costs averaged $5.37 per pound payable nickel (2008: $6.40/lb), and these had dropped to $4.45/lb by the last Quarter of the Financial Year.

Management Comment & Outlook

"The best thing about a tough year was the demonstration of Mincor's extraordinary resilience," said the Company's Managing Director, David Moore. "We have shown that we can maintain strong cash flows and healthy dividends through a deep downturn. It took a Global Financial Crisis to induce Mincor's first ever loss as a mining company, but the turnaround in the second half underlines the strength and flexibility of our operations."

"I believe we are in a much stronger position now than at the start of the year - our operations are as lean and efficient as we can reasonably make them, our finances are in great shape, and we have a fabulous series of exploration opportunities ahead of us," he added.

Production from Mincor's currently operating mines is expected to be between 13,000 and 14,000 tonnes of nickel in ore for the 2010 Financial Year. However, Mincor retains the significant optionality of being able to re-start its Miitel Mine, which is currently on care and maintenance. Miitel is capable of generating an additional 5,000 to 6,000 tonnes of nickel in ore per annum at full production.

Mincor has budgeted approximately $19 million in capital development costs for the new financial year, most of this being mine development required to provide ongoing access to ore reserves. The equivalent figure for the previous financial year was $34 million.

The Company has also set aside a baseline exploration budget of $12 million for the year. Mincor currently has six underground drill rigs and one surface drill rig in operation and, over the coming year, will be drill testing targets ranging from potential Ultra-Sized Nickel Ore Bodies at North Kambalda, to high-value extensional targets at all its mines and greenfields targets along the Bluebush Line and elsewhere.

"We have an outstanding opportunity in exploration this year," Mr Moore said. "We have a remarkably strong range of exploration targets, all the financial and human resources we need to tackle them, and an undiminished enthusiasm for the work. We look forward to driving our growth through exploration over next 12 months."

 

 

 

 

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