Minmetals Resources Ltd Interim Results 2011

25 Aug 2010 09:00 AMMedia Release

Key Points

  • Consolidated Net Profit after Tax of US$431.4 million up 49.4% on first half 2010

  • Earnings Before Interest and Tax (EBIT) from continuing operations US$563.6 million up 106.1% on first half 2010 and demonstrating the strength of the continuing mining operations in Australia and Laos

  • Fully diluted earning per share 8.64 US cents up 41.2% on first half 2010 

  • 762,612,000 new ordinary shares issued in April at a price of HKD$5.10 per share to raise approximately US$500 million of new capital.

  • Balance sheet strong – total gearing ratio decreased from 2.9 to 0.5 with net borrowings of the continuing operations reduced substantially to US$659.2 million

Financial and strategic highlights

“MMR has generated a strong consolidated Net Profit after Tax of US$431.4 million”, said Andrew Michelmore, Executive Director and CEO of MMR.

“The operations performed well against operational and financial forecasts, and we made significant progress towards achieving our strategic objectives,” he said.

In the first half 2011 the strategic transformation of the Company was advanced through an equity placement that raised approximately US$500 million of new capital and introduced a number of new institutional shareholders to the share register. This, when combined with the repayment of borrowings, has substantially strengthened the Company’s balance sheet.

Commenting on the Company’s business strategy Mr Michelmore said “We continue to work toward our defined vision to be in the top three of mid-tier, international resources companies within five years. Our strategy will be to focus on upstream assets – mining and first stage processing such as the production of concentrates and cathode.”

“We will focus on base metals; principally copper, zinc, nickel and bauxite. Our existing assets, and our exploration and development opportunities, will be augmented by the pursuit of targeted value-adding acquisitions,” he said.

Mr Michelmore added, “We elected not to proceed with our planned acquisition of Equinox Minerals during the first half 2011 once the price bid for Equinox exceeded our assessment of value. The high price ultimately paid for Equinox enabled MMR to realise an attractive gain on our investment of US$152.1 million (pre tax) from the sale of our 4.2% stake.”

“We continue to identify potential acquisition targets necessary for us to reach our growth targets, but our approach will be disciplined, and focused on the creation of tangible long-term shareholder value,” he said.

A decision on the full commitment to Dugald River, a key project in the Company’s development pipeline, is expected in the second half of 2011. Dugald River’s production is targeted to replace a substantial part of the Company’s zinc production profile when Century ends production. 

Plans to divest the trading, fabrication and other businesses are well-advanced and the Company expects to complete the sale negotiation during the second half 2011.

Following several unsolicited approaches, the Company has started a formal process seeking expressions of interest from prospective acquirers of the Avebury nickel mine. Any firm proposals received will be assessed against the option of re-starting the mine.

Operational overview

The Company’s continuing operations performed well in the first half 2011 with zinc and/or copper production at or ahead of the same time last year at Century, Sepon and Rosebery. Exploration drilling success continues to expand the mineralised zones at Sepon, Golden Grove and Rosebery. A positive development is the drilling of further mineralised intercepts at the new discovery at High Lake East in Nunavut, Canada, approximately 40 kms from MMR’s High Lake deposit.

The Company benefited considerably from higher base and precious metal prices during the first half 2011 as compared to the first half 2010. Copper averaged US$9,397/tonne, gold averaged US$1,446/ounce and lead prices averaged US$2,578/tonne all more than 20% above the average prices of the first half 2010. Zinc prices averaged US$2,324/tonne, 7.8% higher than in the first half 2010 while silver prices averaged US$34.90/oz, nearly twice the average of the first half 2010.

The Company’s continuing operations’ cost of sales was US$575.9 million for the first half 2011, which represented an increase of 29.0% compared to the first half 2010. Operating costs were adversely impacted by the stronger Australian dollar (A$) against the US dollar (US$), price increases, as seen across the mining industry, due to the current resources boom and volume related cost increases.

Financial details


US$ million

1H 2011






Operating profit (EBIT)


Net finance costs


Profit before income tax


Income tax expense


Profit from continuing operations


Profit from discontinued operations


Profit for the period


Profit attributable to equity holders of the Company


Earnings per share – fully diluted (US cents):




  Continuing operations


The Company’s profitability continues to emanate from the continuing operations acquired in the MMG acquisition at the end of 2010, as highlighted in the following table of segmental performance.

US$ million



Continuing Operations









Golden Grove






Other Operations



Discontinued Operations



Trading, fabrication and other






Our balance sheet is strong, and getting stronger,” said Mr Michelmore. 

The total value of the Group’s assets increased by 6.6% to US$3,696.5 million during the first half 2011 while net borrowing of the continuing operations reduced substantially to US$659.2 million as at 30 June 2011. Funds generated from operations and proceeds from the expected sale of the discontinued operations mean that the Company probably will be net cash positive in the future.

(US$ million)

As at 30 June 2011


Cash and cash equivalents


Property, plant and equipment


Working capital (net)


Available-for-sale financial assets


Taxation (net)


Other assets (including intangible assets)


     Continuing Operations:


Borrowings: external


Borrowings: internal




Other liabilities


     Continuing Operations:


Net Assets - Continuing operations


Net Assets - Discontinued operations


Net assets


The Company has not declared a dividend for the first half 2011.

Workplace safety

Mr Michelmore noted that importantly, these results were achieved while maintaining a commitment to the highest standards of health, safety and environmental management.

“We are committed to high standards of sustainable development across our business, none more important than the health and safety of our employees and the communities in which we operate.”

The Company’s total recordable injury frequency rate (TRIFR) at the end of 2010 was 4.8 but was downgraded to 4.7 following the reclassification of an injury. The TRIFR ended the first half 2011 at 4.2, a significant improvement. The lost time injury frequency rate (LTIFR) at the end of 2010 was 0.3 but was upgraded to 0.4 following the reclassification of an injury. The LTIFR ended the first half 2011 at 0.3.

“These results represent the latest in a continuous improvement in safety performance,” said Mr Michelmore.


“The Company is now delivering strong financial and operational performance under an experienced international board and management team,” said Mr Michelmore.

“Overall, we expect a stronger second half as the issues experienced earlier this year recede.”  

“We have well-performing operating assets and a pipeline of significant development and exploration projects that are very important to our future growth. We are well-positioned for the future and we are on track to achieve our clearly-stated strategic objectives.”

“We are based in and focused on a region that boasts a number of large and rapidly growing economies, of which China is the dominant influence.  With the support of China Minmetals Corporation, our major shareholder, we have a unique opportunity to benefit from the burgeoning and continuing demand for base metals that is necessarily a feature of urbanisation and industrialisation throughout the region.”


Media enquiries:

Sally Cox
Group Manager - Communications
T +61 3 9288 0850
M +61 417 144 524


Investor enquiries:

Martin McFarlane
General Manager - Investor Relations
T +61 3 9288 0954
M +61 467 749 759


Kathleen Kawecki                                 

Communications Coordinator                            

T +61 3 9288 0996                                 

M +61 4 0048 1868                                         


Chinese language media:


Shelldy Cheung

Kreab Gavin Anderson

T +852 2218 9966



Media briefing    

Investor briefing

PDF icon 2011 Interim Report - Chinese (PDF, 4.1 MB)

PDF icon 2011 Interim Report - English (PDF, 2.2 MB)

PDF icon 2011 Interims Results Announcement - English (PDF, 426 kB)

PDF icon 2011 Interim Results Announcement - Chinese (PDF, 561 kB)

PDF icon 2011 Interim Results Presentation - English (PDF, 977 kB)