Bullion rise lifts Zhaojin Mining income 35pc

PUBLISHED : Monday, 18 August, 2008, 12:00am
UPDATED : Monday, 18 August, 2008, 12:00am

Zhaojin Mining Industry, a gold miner in Shandong province, has posted 34.6 per cent higher profit for the first half of the year as rising prices of the precious metal offset lower output.

Net profit rose to 214.4 million yuan (HK$244.2 million) for the six months to June from 159.3 million yuan a year earlier. That lags Goldman Sachs's estimate of 88 per cent growth to about 300 million yuan.

Sales jumped 41.8 per cent to 751.4 million yuan but gross margin declined from 63 per cent to 54 per cent because of rising production costs.

'The increase in our revenue was primarily due to higher selling prices of gold and other by-products and hence profit maximisation was attained,' said Zhaojin chairman Lu Dongshang.

Increases in raw material prices, staff remunerations and fees paid to contractors raised costs to 95.10 yuan per gram from 87.70 yuan, he said.

The average price of gold gained 39 per cent to about US$913 an ounce in the first half from US$659 an ounce a year earlier. However, prices have softened in recent weeks, falling to US$787.70 an ounce on Friday, as the US dollar appreciated.

Guotai Junan Securities expects gold prices to average US$900 an ounce this year, up 30 per cent from last year.

Zhaojin's gold production fell 10 per cent to about 270,805 ounces in the first half, as operations at the mine in Yantai, Shandong, were suspended for 13 days for safety checks.

In March, Zhaojin, a pure gold producer with about 39 per cent of its output coming from its own mines, said it planned to invest 1.12 billion yuan this year to acquire mining and exploration rights in about 320 square kilometres of land, mainly in the country's western region.

The area also has gold resources of 53 tonnes and gold mine productivity of 120,565 ounces per year.

Mr Lu said the company would keep an eye on domestic and overseas acquisition opportunities. It aims to boost its total output for this year to 660,300 ounces, up from 622,600 ounces last year.


Profit was maximised by higher selling prices of gold and by-products

The firm's interim net profit rose from 159.3 million yuan a year earlier to: 214m yuan