Metal price surge boosts profit at Western Mining

PUBLISHED : Saturday, 21 July, 2007, 12:00am
UPDATED : Saturday, 21 July, 2007, 12:00am


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Western Mining, which completed a 6.2 billion yuan initial public offering in Shanghai earlier this month, said its unaudited net profit rose 55.14 per cent in the first half on surging metal prices.

Net profit at the mainland's second-largest lead miner and fourth-largest zinc miner increased to 858.5 million yuan in the six months to June, from 553.4 million yuan a year earlier, the Qinghai-based metal producer said yesterday.

Sales rose 29.9 per cent to 3.64 billion yuan, from 2.78 billion yuan.

'The faster growth in net profit than sales growth was due to the surge in the average selling prices of metal concentrate, including lead, zinc and copper concentrates,' the company said, without giving exact figures.

Western Mining's gross profit margin surged to 29.9 per cent in the first half from 24.4 per cent a year earlier. Net profit margin was 23.6 per cent, up from 19.8 per cent.

Companies listed in Shanghai and Shenzhen are required to issue earnings forecasts if they expect their profit to grow or decline by more than 50 per cent.

Western Mining, in which United States investment bank Goldman Sachs has an 8.07 per cent stake, said in a separate statement that increases in the mineral resources tax from next month would erode profits.

The company said it would have to pay 15 million yuan more in taxes from August to December this year, based on the new tax rates and this year's production target.

Mining companies will be required to pay taxes of 10 to 20 yuan per tonne on ore containing lead and zinc, depending on the grade, compared with two to four yuan per tonne previously, according to a joint statement of the Ministry of Finance and the State Administration of Taxation on July 5.

Ore containing copper will be subject to a tax of five to seven yuan per tonne, versus 1.4 to 1.6 yuan previously.

Tungsten will face a tax of seven to nine yuan per tonne of ore as against 50 fen to 60 fen previously.

Jiang Yukun, a metals analyst at Shanghai-based Everbright Securities, said the impact of the increase in mineral taxes would be temporary and miners such as Western Mining, whose ore production is larger than its refinery capacity, would easily pass on the tax increases to downstream customers.

Shares in Western Mining closed up 4.83 per cent at 33.88 yuan yesterday after the earnings announcement.

The stock has more than doubled from its offering price of 13.48 yuan since its trading debut on July 12.