made booboo about warchest in above post, heres the transcript
Zinc miner delivers record profit
Broadcast: 26/02/2008
Reporter: Ali Moore
Zinc miner Zinifex has delivered a record first half profit up 74 per cent to $1.3 billion.
Transcript
ALI MOORE: Zinc miner Zinifex has delivered a record first half profit up 74 per cent to $1.3 billion off the back of the sale of its smelting assets but ongoing operations had a tougher time. Higher production hit by lower prices and the stronger Australian dollar with revenue for the half down 27 per cent. Also today, Zinifex upped its bid for the Tasmanian based nickel miner Allegiance Mining finally winning agreement from the Allegiance board to recommend the deal to shareholders. Zinifex CEO Andrew Michelmore joined me from our Melbourne studio earlier this evening. Andrew Michelmore, welcome to Lateline Business.
ANDREW MICHELMORE, CEO, ZINIFEX: Thank you, Ali.
ALI MOORE: A record profit thanks to the sale of the smelting assets revenue actually fell. Given commodity prices and the currency are out of your control, how do you change the revenue story?
ANDREW MICHELMORE: I think the revenue, mainly the prices for zinc have been grossly overplayed. The prices were already factored in a significant expectation of excess supply of zinc. We think that's grossly overdone. We don't think that supplies going to come through anything like projected. I think also the funds have been playing that price down. They've been selling short and now we see when the price picks up they start having to cover their positions. I think it's been grossly overshot and so that's why we're quite positive about the future going forward, that prices will pick up.
ALI MOORE: As you noted, prices are down some 22 per cent over the half. What's your outlook for the second half for prices?
ANDREW MICHELMORE: Look, I think it's really the settling out of these funds, also seeing the various projects being delayed. There's production cuts, there's issues with power supply, there's weather issues. And I think as those come through you will see a number of changes. Last week at one stage the zinc price was up over 5 per cent, so it can turn very quickly.
ALI MOORE: You're seeing strong demand for zinc for the rest of the year?
ANDREW MICHELMORE: We are. About 50 60 per cent of zinc's consumption goes into coating steel to give it corrosion resistance. The steel industry as you've seen with the iron ore prices booming in the developing countries, and 13 to 15 per cent of that steel is coated in zinc. So again, it's where we see there's a disjoint between what we're seeing on the zinc being talked down and yet steel being talked up. So we see that the two will come, the message will get out soon.
ALI MOORE: Given that optimistic outlook, can you give us a forecast for full year results?
ANDREW MICHELMORE: I'm in the a position to forecast thing like that. I think it's probably too early and we'll just have to see. The prices can also be effected by the economy, the confidence in the economy. You see that with the subprime having a collateral damage to the economy and expectations. Our performance is so related to the prices that it's just too early to say.
ALI MOORE: Without pinning you down on specifics, you are, though, an optimistic about global growth despite those subprime issues?
ANDREW MICHELMORE: Most definitely. I think what we're seeing is what I'd call collateral damage. The fundamentals for the consumption of zinc, the demand for it are very good and also the supply is going to be tighter than people expect.
ALI MOORE: You've now got a board recommendation in your takeover bid for Allegiance Mining and once that deal goes through it will add a nickel to your stable of led and zinc. You do want to diversify, that's the strategy. What's top of the list next?
ANDREW MICHELMORE: We want to diversify in nickel and also copper. We have a number of opportunities we're looking at in both those areas. As you say, very important to get the Allegiance acquisition under our belt, get that into production and at that point we'll be looking at actually going forward with a couple of other acquisitions. But there's a suite of them we have. I think one of the benefits of the market coming back is that people are more realistic about their values and the prices for these companies and in addition, we have $2.2 billion sitting in the bank. So that cash is worth an enormous amount to us in terms of purchasing power.
ALI MOORE: So after Allegiance, how much will you have left in the kitty?
ANDREW MICHELMORE: About $880 million go on Allegiance, we've got $2.2 billion sitting in the kitty that will leave around $1.3 billion.
ALI MOORE: A suite of acquisitions, can you tell us where and what?
ANDREW MICHELMORE: Now we've got nickel in Australia under our belt it obviously opens up opportunities to use that core investment to then move into other countries. With copper at the moment I think we'd like to we'll continue looking in Australia for opportunities. We'd like to grow our portfolio a bit more to get a more diversified base to it before we look at any significant offshore opportunity. But having said that, you never know what happens. These things come up with a sudden position to be able to move and we have to be prepared for that.
ALI MOORE: You obviously, though, have specific projects on your list ready to buy?
ANDREW MICHELMORE: Yes, we do indeed.
ALI MOORE: What are they?
ANDREW MICHELMORE: No, if I told you that the prices of all those opportunities would immediately go up in anticipation of an acquisition, so we sit on it very tightly.
ALI MOORE: But a couple more purchases before the end of the financial year?
ANDREW MICHELMORE: Look, these purchases take quite a bit of time, they take the effort. Also you need to bed down the ones that you've done. It's too easy to take your eye off the target once you've got it and then you don't actually get the benefits out of it you've originally argued for. Our first job will be to bed down the Allegiance acquisition. But obviously at the same time we will be working out how we do the next one, who it is, which are the priorities and when's the appropriate time to move on them.
ALI MOORE: Is the takeover of Allegiance Mining a done deal?
ANDREW MICHELMORE: No, we have a board recommendation announced today and obviously now the offer closes on 7th March. So we have to work now between this point and the 7th of March to ensure we get as many of the shares in as possible.
ALI MOORE: You'd say it's as close as done as it could be?
ANDREW MICHELMORE: We would like to think that, but you never rest on your laurels, you get in and make sure it happens.
ALI MOORE: Andrew Michelmore, thanks for talking to us.
ANDREW MICHELMORE: That's a pleasure Ali, thank you.