Oxiana digs up a record HY profit
Monday, August 28th 2006
Oxiana Limited (OXR) have announced a half year net profit after tax, interest, depreciation and other charges of $263.2 million on operating earnings from ordinary activities of $400.5 million. The company said the record earnings were a result of sound performance from operations and strong prices for the their main metals.
The company predicted that second half-year after tax net profit would be similar to the first half assuming operating performance according to guidance and metal prices similar to the first half.
Managing director Owen Hegarty said this excellent first half result for Oxiana reflected sound operating performance and strong market conditions for the company’s main metals: copper, zinc and gold.
”Oxiana’s strong balance sheet also enables us to continue to grow the company and invest in our pipeline of projects.”
”We are looking to expand copper and gold production at Sepon, increase our base metals production at Golden Grove and bring on Australia’s next major copper gold mine at Prominent Hill in South Australia. This growth will add substantially to Oxiana’s earnings and value,” he said.
SHAW Stockbroking resources analyst Ted Lescke said the result was well ahead of market expectations and up significantly on the pcp figure of $18m.
”The strong 1H result has been partially tainted by the higher Prominent capex figure.”
”However, once the market gets over this then I would expect the focus to return to Oxiana’s strong metal leverage and growth profile,” he predicted.
The company said that sales revenue had increased substantially over the previous corresponding half year with the Sepon Copper operation producing at name-plate capacity, the inclusion of revenue from the Golden Grove operation acquired in July 2005 and higher commodity prices.
The average LME cash copper price for the period was US$2.78/lb with copper revenue at Sepon of $266.5 million for the half, compared to $22.6 million for the previous corresponding half, they company advised.
Average zinc cash prices for the period were US$1.26/lb. Golden Grove gross revenue was $243.7 million for the half, they also reported.
Golden Grove was acquired by Oxiana effective from 1 July 2005.
Gold bullion sales from Sepon also increased, coming in at $64 million for the period, compared to $60.6 million for the previous corresponding half.
Margins also increased, with the average gold price received for the period at U$596/oz compared with U$428/oz in the corresponding prior period.
Limiting the gains, the company advised that operating costs, including employee expenses and other expenses, were substantially higher, but in line with the increased production activity at Sepon, and the inclusion of Golden Grove in comparison with the previous half-year.
”As seen across the industry the cost of energy and consumables has risen since this time last year, however this has been more than offset by higher commodity prices,” the diversified miner explained.
Exploration expenditure of $10.2 million expensed for the half year reflected the company’s strong commitment to an aggressive exploration and development effort, it said.
The Group advised it is currently exploring for base and precious metals in Australia, Laos, China, Thailand and Cambodia, as well as maintaining extensive near mine programs around existing resources at Sepon, Golden Grove and Prominent Hill.
”We also have an outstanding exploration portfolio in Asia and Australia looking to discover further copper, gold and other base and precious metals to ensure our growth pipeline continues to be added to,” confirmed Mr Hegarty.
A $3.4 million profit from discontinued operations was also reported, which arose from the sale of Oxiana’s Philippines assets into the IPO of Royalco Limited (RCO).
The gain represents the float price of 50c on the 17.7% of Royalco Oxiana now holds as an investment, they said.
Directors declared an unfranked interim dividend of 3c per share.
”Our strong cash flow and cash position enable us to further reward our shareholders with an interim dividend, as well as capital growth,” Mr Hegarty concluded.
At 1025 AEST, shares in Oxiana were trading 10c higher at $2.84 on yesterday’s trading
Source: www.egoli.com.au
