ShalkiyaZinc warns on FY sales; posts H1 pretax profit UPDATE

ShalkiyaZinc warns on FY sales; posts H1 pretax profit UPDATE

	Published : Tue, 30 Oct 2007 12:15 By : Agencies Print this Story

(Adds details on Kentau reconstruction, fund raising)

LONDON (Thomson Financial) - ShalkiyaZinc NV warned that its full-year sales may be 20-30 pct short of its targets due to commissioning problems at its Kentau ore processing plant, although it swung to a pretax profit in the first half as revenues nearly doubled.

The Kazakhstan-focused zinc and lead producer blamed the late delivery of new equipment and the additional time taken to calibrate them for delays of some two to three months in reaching its production targets.

'This bottleneck in the production of concentrate will be removed in November, when the processing plant is expected to start working at full capacity,' chairman Graham McCartney said in a statement.

The company now expects that the reconstruction of the plant -- originally built in 1963 -- and the completed first phase of the Shalkiya mine expansion will allow it to achieve a production rate of 1.5 mln tonnes of ore per annum in 2008.

It sees the production rate rising to 3 million tonnes of ore per annum by 2010 and to 4 million tonnes in 2011.

For the first half, ShalkiyaZinc posted a pretax profit of 1.4 mln usd against a loss of 0.8 mln usd last year, as revenues rose 96 pct to 16.5 mln usd on increased sales and prices.

The company sees a similar increase in profits when production and sales pick up following the rehabilitation of the Kentau plant.

ShalkiyaZinc said the unavailability of the new section of the plant for operation during the reconstruction works temporarily depressed metal recoveries to 58 pct for zinc and 27 pct for lead.

Distribution costs increased by 69.91 pct, primarily related to a 53 pct increase in sales of zinc concentrate.

Besides, the cost of transporting ore increased by 41 pct as the company temporarily switched to road from rail transport during the reconstruction of the plant.

ShalkiyaZinc added that capital requirements for the expansion of the mine are expected to be in the range of 200-250 mln usd, and it hopes to raise at least 150 mln usd to fund the reconstruction and the mine expansion.

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