Zijin Mining profit rises 45pc to 1.7b yuan on record gold prices

PUBLISHED : Tuesday, 29 July, 2008, 12:00am
UPDATED : Tuesday, 29 July, 2008, 12:00am

Zijin Mining Group, the mainland's largest gold producer by market value, said first-half profit surged 45 per cent amid record gold prices.

Net profit for the six months to June rose to 1.74 billion yuan (HK$1.99 billion) from 1.2 billion yuan a year earlier, the Fujian-based company said.

The first-half earnings were lower than the mean market estimate of 1.89 billion yuan but slightly better than Goldman Sach's forecast of 1.7 billion yuan.

Turnover increased 23 per cent to 8.3 billion yuan.

During the period, Zijin's average gold selling price rose 25.48 per cent to 204.75 yuan per gram or about US$910 an ounce, when the global price of gold shot to a record high of US$1,011.50 an ounce in March.

The average domestic price of gold quoted on the Shanghai Gold Exchange rose 26.7 per cent in the first half to 206.98 yuan per gram.

From January to last month, Zijin's production had risen 19.93 per cent to 858,714 ounces. Gold produced from its own mines amounted to 442,330 ounces, up 33.99 per cent from a year earlier.

Its gold business accounted for 63.85 per cent of its first-half profit.

The Hong Kong and Shanghai-listed firm is also benefiting from rising copper prices.

Zijin produced 23,995 tonnes of copper in the first half, up 12.34 per cent. Copper contributed about 24.91 per cent of its net profit in the first half. Its average selling price for copper concentrate rose 5.8 per cent and, for copper cathode, 6.27 per cent.

Rising metals prices lifted Zijin's overall gross margin 2.03 percentage points to 41.99 per cent in the first half, despite increasing energy and labour costs. Excluding the smelting business, which had a much lower margin, the company's gross margin reached 73.09 per cent, up from 69.26 per cent in the same period last year.

The average unit cost of its gold production rose 18 per cent to 62.30 yuan per gram because of several factors: the increased use of low-grade ore, a rise in raw material and labour costs, and higher resource taxes.

Zijin said it expected gold prices to remain high in the second half of this year because of the weak US dollar and high oil prices. But inflationary pressure would continue to add cost pressures on mining companies, it said.

Investment bank CLSA forecasts that gold prices will rise 32 per cent to an average of US$920 an ounce this year, before retreating to US$850 an ounce next year.

Lasting lustre

Weak US dollar, high oil prices are expected to keep gold at lofty levels

Average price of Shanghai gold in the first half was 206.98 yuan a gram, up: 26.7%