Profitable Despite Tough Market

Pasminco Limited recorded a profit after tax of $5.4 million for the half year ended 31 December 1998. Profit after tax in the corresponding period in 1997 was $67.7 million, which included an abnormal gain of $23.7m relating to reduction of the environmental provision at Budel Zink. There were no abnormal items in the half year ended 31 December 1998.

Earnings before interest and tax and abnormal items for the six month period reduced from $82m in 1997 to $21m in 1998, a decrease of $61m. The main factors contributing to the decline in earnings were;

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• A 27% decrease in the realised LME zinc price from US$1,342 to US$983/tonne, which reduced earnings by $102m
  
• An 11% decrease in the realised LME lead price from US$587 to US$522/tonne, which reduced earnings by $8m
  
• Higher costs and lower volumes, which together reduced earnings by $33m
  
• Higher treatment charges and lower premiums, which reduced earnings by $6m
  

These factors were offset by the positive impact of;

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• Weaker Australian/US dollar and Australian/Dutch Guilder exchange rate which contributed $86m to earnings
  

"Pasminco experienced a difficult external environment over the past six months but nevertheless recorded a profit of $5.4 million. While the weaker Australian dollar assisted us, it did not offset the dramatic fall in the zinc price" said Managing Director and Chief Executive, David Stewart.

"We were pleased to complete the acquisition of Savage Resources this month. The US zinc assets of Savage will build on Pasminco`s position as the world`s leading zinc producer. Our focus now is to integrate Savage`s US operations and realise the benefits which we expect to flow from the acquisition. At the same time we will be moving to sell the non zinc assets, providing we can achieve a satisfactory price."


"Looking further ahead, during the third quarter of 1999 we will begin commissioning the Century Mine, and expect to make the first concentrate shipment during the fourth quarter. The project remains ahead of schedule and under budget."

Outlook

Although the LME zinc price was generally weaker over the December half, the recent rise to levels above US$1,000 per tonne gives rise for some encouragement. The supply/demand balance for zinc remains favourable, as evidenced by the continued decline in LME zinc stocks which now stand at around 300,000 tonnes, a level last seen in 1992. Offsetting this however, the Australian dollar has strengthened against the US dollar, and this may detract from any improvement in the zinc price over the current six month period.

Dividend

The Directors have not declared an interim dividend and will consider a final dividend based on the result for the year ended 30 June 1999.


For further information, please contact:

Trevor Shard,
Group Manager Investor Relations
(03) 9288 9186


Click here to download the report (not equity accounted) for the half year ended 31st December 1998 (MS Excel 5.0 format).

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