IMPAIRMENTS, MINERAL PRICES HURT PANAUST

Written on the 20 February 2014

IMPAIRMENTS, MINERAL PRICES HURT PANAUST

GOLD, silver and copper miner PanAust (ASX:PNA) full-year profit has decreased by two thirds, following a series of impairments in its exploration business and lower mineral prices.

The write downs totalled US$50.9 million, a significant hit to the US$43.7 million profit after income tax for the year to December 31, down from US$158.3 the previous year.

An EBITDA of US$272.5 million is within guidance but down on the previous year, from $US331.1 million.

Higher copper and precious metal sales resulted from higher production, following completion of capital projects at Phu Kham and the first full year of production from Ban Houayxai, offsetting lower commodity prices.

This production boost helped increase sales revenue to US$725.0 million (from $712.7 million).

PanAust managing director, Gary Stafford, says copper production at Phu Kham is at the top end of guidance and gold production at Ban Houayxai exceeded the mid-year upward revision of guidance.

“Despite the higher pay-metal production and competitive costs, materially lower metal prices had an adverse impact on the company’s overall financial performance,” says Stafford.

“The business transitioned to being free cash positive during the second half of 2013 following completing of a three-year capital development phase of our Lao operations which totalled circa US$350 million.

“Completion of these projects together with reduced sustaining capital at Phu Kham and lower project costs as studies are completed should enhance cash flow over the coming years.”

The Puthep Copper Project in Thailand was mothballed and the US$27.1 million invested in the project written off, while the remainder of the impairments came from various discontinued exploration projects.

“Following a review, the company considered it appropriate to recognise impairment charges for the Puthep Copper Project in Thailand, and for exploration projects that were discontinued.”

The final dividend is $0.03 per share, bringing the total dividend to $0.06 per share.

EBITDA for the 2014 year is expected to be between US$200 million and US$225 million assuming an average copper price of between US$3.20/lb and US$3.40/lb.

PNA is trading down 1.51 per cent at $1.960 per unit.


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