Palamin blames 61% profit fall on low copper prices

SIMON MUNDY

PALABORA Mining ( Palamin ) MD Matthew Gili blamed low copper prices for a 61% fall in profit to R284m for the year to December, though he declared the company’s results “pleasing in light of the global financial crisis”.

SA’s only producer of refined copper experienced higher operating costs in the period due to repairs and maintenance in several production centres. Its cost of sales figure rose 13% to R3,11bn.

Average copper prices were 37% lower last year than in 2008, thanks to sluggish demand from electrical manufacturers.

This was the main factor behind a 6% fall in revenue to R5,83bn, said Gili, though it was “partially offset by a 35% increase in magnetite sales and a 42% increase in magnetite pricing”.

He expected markets to strengthen this year — an outlook supported by Barclays Capital’s prediction last week of a 34% jump in copper prices last year.

Despite a hiring freeze , Palamin’s employee costs increased 12% in the period. A further rise is likely this year, after this week’s announcement of a 9% pay hike for members of the Solidarity labour union.

Palamin’s net cash position more than doubled to R1,29bn because of a “dedicated focus on the working capital management and efficiency programme”.

Negotiations to confirm the terms of Palamin’s black economic empowerment deal had “entered final stages”, with the new structure expected “to be concluded during 2010”.

mundys@bdfm.co.za