Sally Malay interim profit down 25%

Perth-based nickel sulphide producer, Sally Malay Ltd, has reported a net profit after tax of $24.4 million for the half year period ending December 2007, more than 25 per cent down on the previous corresponding half-year.

Total net revenue on a group basis, after including commodity hedge losses and final pricing adjustments, was $107.1 million, which was 28 per cent lower than the previous first half period revenue of $148.7 million.

The result equates to earnings of 12.9 cents per share for the period, down from 17.7 cents in the previous half-year.

In light of this result, the company has already declared on February 6 2008, a maiden interim fully franked dividend of 7 cents per share.

Sally Malay said the result was impacted by a prior period deferred pre-tax mark-to-market loss of $16.9 million on nickel hedges which was required to be brought to account in this period.

The hedges relate to the close-out of 524t of Sally Malay Project nickel hedges in late 2006 that were originally scheduled to be delivered in the current six month period.

On a positive note, the company said total mine production costs (including depreciation and amortisation charges) were well contained between the periods which bodes well for a strong second half earnings result given the higher forecasted production levels for the six months to June 2008.

The company said it was in a strong financial position with cash and receivables of $100 million and no debt (except for $12 million of finance equipment leases.

Sally Malay said exploration success over the half year at both Sally Malay and Lanfranchi mines continued to increase the nickel resource base and mine life at both operations.

An increase in exploration at Sally Malay (Sally Malay Deeps, Northern Ore Zone) and at Lanfranchi (Tramways Dome, Deacon) is expected to again add substantially to the nickel resource base over the coming year, it said.

Shares in the company ended the day 15 cents, or 3.49 per cent, higher to $4.45 each.