2006 was a ‘golden and red letter year’ for medium level miner, Oxiana.
The strong performance has already been well signalled by the company at the interim and in quarterly production reports but yesterday there was final confirmation of just good 2006 was.
Oxiana said net profit for 2006 rose 777 per cent to $553.17 million, from just $71.17 million in 2005.
CEO Owen Hegarty said it was a “stand-out year in 2006 operationally and financially”.
But it was also one where the company was well-placed to ride the surge in gold and copper prices especially, with a dash of zinc thrown in to rev up the bottom line.
Oxiana’s said its earnings before interest, tax, depreciation and amortisation (EBITDA) was $810.4 million for the full year.
“The record earnings are a result of sound performance at Oxiana’s operations and strong prices for the company’s main metals copper, zinc and gold,” it said.
Oxiana declared a final dividend of five cents (partly franked) taking the total for the year to eight cents, compared to one cent a share for 2005.
Oxiana had a solid second half with earnings rising sharply, as they did in the first half.
Copper prices rose 43 per cent last year, zinc prices more than doubled (as we saw with Zinifex yesterday) and gold reached a 26 year high during 2006.
The company bought the Golden Grove mine in Western Australia and boosted production at its Sepon mine in Laos.
“We continue to see strong demand and buoyant prices for our metals — copper, gold and zinc,” Managing Director Owen Hegarty said in the statement.
“We will also continue to look to grow through corporate activity.”
As evidence of this, the company made an agreed $415 million bid to buy Agincourt Resources to boost gold reserves, especially at Sepon. This was after reporting significant new reserves at Prominent Hill in South Australia and at the Scuddles operation in WA.
Oxiana said net profit after tax, interest, depreciation and other charges was $553.2 million.
“The average LME cash copper price for the year was US$3.06/lb, averaging slightly higher in the second half of the year, with copper revenue at Sepon of $578 million for the year, compared to $158 million for the previous year
“The average zinc cash price for the period was US$1.48/lb and was also higher in the second half of the year. Golden Grove gross revenue was $761 million for the year.
“Gold bullion sales from Sepon were $146 million for the period, compared to $117 million for the previous corresponding period. The average gold price received for the period was U$598/oz.
“At 31 December 2006 Oxiana had a group cash balance of $670.9 million and no net debt. The Company said bit has no forward sales of any commodity or currency.”
The shares were a touch firmer yesterday at $2.87, up 9c on very heavy trading volume of more than 25 million shares.
World copper prices were a little stronger as well, which helped yesterday. The shares are off around 10 to 12 per cent so far in 2007 as the prices of copper, zinc and gold have eased.
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Mineral sands miner Iluka Resources was the odd one out yesterday among the mining company reports.
As we suggested a couple of weeks ago there was a major clean out and write down coming with a new CEO in the chair.
And there was and 2006earnings fell, making the year a write-off for the company.
But the company is forecasting a substantial improvement this year, with a forecast net profit of between $90 and $100 million by the end of 2007.
While a recovery that will be the lowest profit (from continuing operations) for three years.
The company has a December financial year.
Directors said yesterday that the result for 2006 was “disappointing” at a net $21.0 million, compared to a net loss of $85.9 million in 2005.
In terms of comparison it wasn’t that ‘disappointing’ but in terms of opportunities missed, it was.
But the shares only shed 5c to $6.45; the idea of write downs and a lower result had been well telegraphed to the market.
The 2006 figure was cut by significant items totalling a loss of $95.9 million due to write downs in asset carrying values and additional provisions.
Iluka’s net profit before significant items was $116.9 million, which was down from a $136.3 million profit in 2005 which it said was consistent with previous guidance.
So the result for 2007 will be lower than for 2006 (before the one off items) and before the 2005 figure, whichisn’t a strong selling point.
The latest result came despite the delay in full commercial production from the new Murray Basin project until later this year and the higher average Australian/US dollar exchange rate in the latter part of the last quarter of 2006.
“Iluka expects to report a 2007 NPAT of between $90 million and $100 million,” it said.
Iluka managing director David Robb, who came to ILU from Wesfarmers, said the company had a disappointing set of financial results for 2006.
The company declared a final dividend of 12 cents per share (fully franked) which took the total payout for the year to 22 cents (fully franked) which was unchanged on the 2005 payout which was partly franked.
Sales revenue increased by 8.9 per cent to $1,003.2 million due mainly to higher zircon prices and volume increases, partially offset by lower currency hedging gains.
The company said group EBIT, excluding Florida/Georgia and other Significant Items, decreased by $21.9 million or 9.9 per cent to $198.8 million, due mainly to significantly lower currency hedging gains (down $21.6 million), a lower contribution from Other Earnings (mainly asset sales – down $13.7 million) and lower non mineral sands earnings (down $5.9 million), which offset a $22.5 million higher contribution from the continuing mi
