Perilya optimistic despite $75m FY loss

Miner Perilya has described fiscal 2009 as a "tale of two halves" with the first half recording a $77.2 million net loss while a new operating plan resulted in a $2.1 million net profit in the second half.

In its 2009 financial year report released today, the lead and zinc miner reported a full-year net loss after tax of $75.1 million after accounting for $57.2 million in impairments, write-downs and redundancy costs.

Excluding the one-off items, Perilya reported an underlying net loss of $17.9 million.

It has been an eventful year for Perilya, which successfully fought a takeover attempt by CBH Resources and gave a 50.1 per cent controlling interest to Shenzen Zhongjin Lingnan Nonfemet Co for $45 million.

Perilya also slashed more than 400 jobs at its Broken Hill mine and resized operations.

As a result, production at Broken Hill was lower with 75,421 tonnes of zinc and 48,111t of lead. In fiscal 2008, 91,295t of zinc and 52,412t of lead were produced.

Cash costs at the mine almost halved from US1.08 per pound of payable zinc in the first half to US58c per pound in the second.

Cash at the end of the reporting period was $36.9 million.

The announcement is below:

Perilya (ASX:PEM) today released its preliminary financial results for the year ending 30 June 2009, reporting a second half turnaround to record a net profit after tax of $2.1 million for the second half of 2009 financial year.

Perilya reported a full year result of a loss after tax of $75.1 million after one‐off impairments, sale of investments, redundancy costs and write downs totalling $57.2 million (net of tax). Excluding the effect of these one‐off items, the underlying net loss after tax attributable to members of the Company was $17.9 million.

The 12 months to 30 June 2009 represented a very challenging period for base metal miners that saw a significant fall in zinc and lead prices, both in US dollar and Australian dollar terms. These challenging conditions gave rise to Perilya's decision in August 2008 to resize the Broken Hill Operation and focus on a sustainable production and lower cost profile.

The full year results highlight the success of Perilya's response to the difficult economic circumstances it faced during the period, with the financial year being a tale of two halves. The 6 months to 31 December 2008 saw Perilya record a loss after tax of $77.2 million, whilst the 6 months to 30 June 2009 saw Perilya's resized operations and new operating plan take effect with Perilya turning the first half result around to record a profit after tax of $2.1 million for the period.

Post year end, Perilya completed financial settlement under the terms of the deed of termination of the silver sale agreement with CDE Australia Pty Ltd (CDEA) and Coeur d'Alene Mines Corporation (Coeur) (ASX Code: CXC). Under the terms of the Deed, Perilya paid CDEA US$55 million in consideration for releasing Perilya from its obligation to further deliver approximately 11.2 million ounces of silver to CDEA from its Broken Hill operations. The 11.2 million ounces have a face value of approximately US$157 million (basis US$14.00/oz).

KEY POINTS

- Second half results show a return to an after tax profit of $2.1 million.

- Cash costs at Broken Hill almost halved from US$1.08/lb of payable zinc in the first half to US$0.58/lb of payable zinc in the second, resulting in significant improvement in cash margins.
- A move to positive cashflow and earnings from both the Broken Hill Operation and the continued sale of Beltana zinc silicate stockpiles during the June quarter.

- A material reduction in head office costs post re‐sizing of in excess of 55%.

- Impact of the new operating plan has resulted in continuous improvement at the Broken Hill Operations in productivity (tonnes mined per employee) achieved throughout the year, which saw the Company move to a sustainable production and lower cost profile.

- Impairment, sale of investments, resizing and one‐off write downs after tax of $57.2 million, including a write‐off of deferred tax assets (including tax losses) of $32.7 million.

- Cash on hand at 30 June 2009 of $36.9 million, up from $19.1 million at 31 December 2008.

- Positive start for this financial year, highlighted by the benefit of the silver transaction delivering immediate results at Broken Hill with a positive impact on cashflow and earnings with cash‐costs of production for July well within Perilya's guidance range of US$0.50‐US$0.55/lb of payable zinc at current metal prices and US$/A$ exchange rates.

Perilya's Managing Director, Paul Arndt, commented on the financial year under review, saying that: "Despite the adverse economic circumstances of the past year Perilya has been able to place itself into a fundamentally stronger position having transformed the Broken Hill operation through almost halving the unit costs of production and the development of a sustainable long term production plan." Mr Arndt said.

He added "The completion of the silver transaction post the end of the financial year has further reenforced this and Perilya is now in a position to consider and implement as appropriate organic and acquisition growth opportunities."

"We have successfully met or exceeded the production and operating cost improvement targets we set for ourselves and described to the market in the process of restructuring of Broken Hill and now have a demonstrated skill set that can be applied to these growth opportunities."

"Perilya has the strong support of our major shareholder, as demonstrated by the financing arrangements for the silver transaction and the assistance in opening up improved markets for our zinc silicate ores from the Flinders region. This support, the introduction of a number of new institutions to our register and our solid financial position allows us to enter the new financial year with a high level of confidence around future performance."