Charles Needham, Metorex CEO
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» CoM adds voice to Zambia tax hike
» Legal defence mooted on Zambia tax shock
» Metorex takes a plunge into platinum
» Strong copper focus at Metorex finds favour
» Metorex wants 55,000 t/yr copper from Ruashi

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Metorex expects kick-up in earnings
Allan Seccombe
Posted: Thu, 21 Feb 2008

[miningmx.com] -- METOREX forecasts a “significant increase” in earnings over the next two years as its pipeline of projects across a diverse range of minerals bears fruit after a busy period acquiring new assets.

During the six months to end-December 2007, Metorex acquired a 55% stake in gold explorer Pan African Resources in a transaction whereby Metorex reversed its 74% stake in Barberton gold mine into the other company.

Metorex also purchased Phoenix, a platinum tailings treatment company, for R110m in cash and shares. It also acquired a 45.6% stake in London-based Copper Resources Company (CRC) for shares and cash.

“A significant pipeline of new projects is in place including the CRC Kinsenda project, the Phase II Ruashi project, Pan African Resources’ exploration projects, the Vergenoeg expansion and Phoenix which should significantly increase the Group’s earnings over the next two years,” CEO Charles Needham said in a statement accompanying Metorex’s interim results.

Earnings before interest, tax, depreciation and amortisation (EBITDA) leapt to R538m in the period, up from R317m in the previous year.

There was no mention in the statement of the contract review process in the Democratic Republic of Congo where Metorex has its Ruashi copper and cobalt production project and a couple of exploration plays. CRC’s assets are also in the DRC. Under the review, contracts will be changed or terminated.

Metorex made a brief mention of the fiscal regime change in Zambia, which the government is applying to all mining companies operating there. Some companies took part in the privatisation of Zambia’s copper assets in the 1990s and secured favourable fiscal terms.

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Others coming in later also secured terms that left the government and ordinary Zambians unhappy that they are not fully realising benefits from increased commodity prices.

Metorex operates the Chibuluma copper mine in Zambia.

“Chibuluma is protected for a period of 15 years by a taxation stabilisation clause in the Development Agreement signed in 1997 under the Zambian Mining Industry Privatisation Process, governed by English law and established in conjunction with the World Bank,” Needham said.

“The proposed changes to the Zambian mining tax regime are being assessed and negotiations with Government have commenced,” he said.

The government has pointedly said the new regime will apply equally to all players and no exceptions will be made.

“It won’t change. We’ll have dialogue with the mining companies, but we will not change the fiscal regime,” mines minister Kalombo Mwansa at the Africa Mining Congress in Livingstone, Zambia, earlier in February.

The second phase at Ruashi will lift copper cathode output to 45,000 tonnes/year and 3,500 tonnes of contained cobalt/year.

First copper production of first copper is expected in late February or early March and will be ramped up over six months.

Delivery of transformers from India to Ruashi has been delayed.