Higher zinc prices result in profits increase at Lisheen mine company

HIGHER market prices for zinc led the main Lisheen mine company in Co Tipperary to record almost a fourfold increase in pre-tax profits to $82.4 million (€60.2m) last year.

Accounts just filed by Lisheen Milling Ltd, show that the company recorded the sharp rise in pretax profits after the firm increased turnover by 27% from $208m to $264.9m in the 12 months to the end of December last.

The company benefited from a $35m reversal in impairment last year that boosted profits.

The filings show that the company has paid two separate dividends in 2011 totalling $72m.

In their report, the directors of Lisheen Milling Ltd state that “the company performed strongly in 2010, a year in which we saw commodity prices continue to increase as demand growth was driven by the emerging economies, led by China and India and by early stage recoveries in the developed world”.

The report states: “Annual average prices for zinc in 2010 were significantly higher than in 2009.”

Earlier this year, Indian company, Vedanta Resources, completed the purchase of the Tipperary mine along with other bigger mines in South Africa and Namibia from previous owners Anglo American Zinc as part of a €1.34 billion deal, which estimated Lisheen’s value at $308m (€242m).

The figures for Lisheen Milling show that the company’s operating profits increased by 190% last year from $28.6m to $83m.

This takes account of the impairment reversal.

The directors report states that “operating profit increased owing to higher metal and soft commodity prices and tightly controlled costs.

“Ore processed increased by 4% and zinc metal production increased by 2% to 175,100 tonnes. Lead metal production increased by 7% to 20,600 tonnes”.

The report goes on: “The year was marked by yet another major improvement in our safety performance, with a significant reduction in the number of people who were injured on company business.”

The report states that “manufacturing operations continued at production capacity”.

The numbers employed by the company last year dropped from 76 to 71 with staff costs decreasing from $7.8m to $7.4m.

The directors’ report states: “While there remains a number of uncertainties in the immediate term, not least in the developed economies, our medium to long term view of demand growth for our commodities remains very positive, driven the resource intensive nature of economic growth in the emerging markets.”

At the end of 2010, prior to the $72m dividend payout, the company had accumulated profits of $126.9m contributing to shareholder funds totalling $134.5m.

The figures show that the company’s purchase of ore last year increased from $126.8m to $168m with operating costs decreasing from $52.7m to $48.4m.

The company also included a redundancy provision totalling $725,131 last year compared to $5.9m in 2009.

An analysis of the company’s turnover shows that 83% or $220.4m of sales occurred in Europe with the remainder in Asia and Africa.