Australian zinc miner Zinifex (ZFX) held its annual general meeting (AGM) today, saying that its 2007 operating profit had suffered, dropping below last year's level.
Acting CEO Antony Barnes said that although production was ahead of last year's rate, operating costs had increased by about 11% due to the dark side of the resources boom – higher wage and fuel costs.
"While we do everything in our control to contain costs, we do not see signs that the cost pressures are easing to any noticeable extent."
Nevertheless, Zinifex Chairman Peter Mansell said that the company's net profit this year will exceed that of last year once earnings from the sale of its shares in spin-off smelting company Nyrstar are included, which has put an additional $1.6 billion in the bank for Zinifex.
As regards the speculation about a possible merger or takeover with Oxiana, both Mr Barnes and Mr Mansfield remained silent; they did however mention that Zinifex has a clear strategy to grow the business and was currently seeking copper acquisitions.
The company said it has increased its focus on copper recently because the skills used to mine copper are very similar as for zinc.
Zinifex said it plans to spend about $100 million, a three fold increase on last year, on exploration and development, to enable its plan to discover and develop copper alongside its zinc production.
"We would like not to be a zinc only company, so copper is the big prize for us," said Mr Mansell.
Nevertheless, Mr Mansell said while Zinifex will continue to pursue acquisition options vigorously, the miner will return surplus cash to shareholders if acquisitions are not made.
"If it emerges after a reasonable period that we are not able to make an acquisition that is in the best interests of shareholders, surplus cash will be returned," he said.
"By any measure I believe that Zinifex has an exciting future ahead of it."
Shares in Zinifex rose by 1.4% or 20 cents today to close up at $14.66.
