OREANDA-NEWS. Chelyabinsk Zinc Plant (LSE: CHZN, RTS: CHZN), Russia’s largest producer of zinc and zinc alloys, is pleased to announce its reviewed IFRS financial results for the six months ended June 30, 2007.

According to the press service of the company, in January-June 2007 Chelyabinsk Zinc Plant (CZP) produced 80,385 tonnes of zinc, 15% more than in the same period of 2006 (70,139 tonnes). CZP sales for the first six months 2007totaled 71,943 tonnes, an increase of 13% compared with the corresponding period of last year. CZP’s domestic sales accounted for 49% of the total sales or 35,114 tonnes, export sales totaled 36,829 tonnes or 51% of CZP’s total sales for the first six months ended June 30, 2007 (1H 2006: domestic sales – 37,282 tonnes, export sales – 26,176 tonnes of zinc and zinc based alloys).

Since the beginning of the year, all zinc concentrate produced by CZP’s subsidiary, Nova Zinc, operator of Akzhal mine in Kazakhstan, has been supplied to the Chelyabinsk Zinc Plant. For the first six months of 2007 Akzhal’s supply to CZP totaled 15,628 tonnes of zinc in zinc concentrate, production of lead in lead concentrate by Akzhal mine totaled 3,147 tonnes for the same period of 2007. CZP’s financial statement for the first six months of 2006 and six months ended June 30, 2007 reflect the consolidation of Nova Zinc, from 1 April 2006.

CZP’s revenues increased by 39% to $305 million in the first six months of 2007 as compared to the same period of 2006 (1H 2006: $219 million). The main reasons for this increase were the increase in LME zinc prices (LME zinc average price: 1H 2006 - $2,761.9 per tonne, 1H 2007 - $3,561.3 per tonne) and growth in the volume of zinc sales. Revenue for the fist six months of 2007 also included $9.1 million (or 3% of the total revenues) generated from the
sales of lead concentrate by Nova Zinc and $15.2 million (or 5% of the total revenues) received from the sales of by-products which include primarily sulphuric acid, cadmium and indium ($11.1 million in the first six months of 2006).

CZP’s gross profit for the first six months of 2007 increased by 11% to $87 million compared to $78 million for the same period of the previous year. Gross profit margin was 28% (1H 2006 Gross profit margin – 36%), EBITDA margin decreased from 36% to 28%. This was caused by an increase in costs and change in the sales structure (domestic vs. export sales). Cost of sales increased by $77 million to $218 million (1H 2006 – $141 million), primarily as a result of higher production requiring greater quantities of raw materials and an increase in the cost of those materials and consumables.

Repairs and maintenance more than doubled from $3.4 million in the six months ended June 30, 2006 to $8.6 million in the first six months ended 30 June 2007 due to consolidation of Nova Zinc and the need of removal of various inconsistencies in procurement and maintenance policies in addition to increased production levels, but in line with the budget.

Staff costs increased by $1.5 million to $4.3 million in the six months ended June 30, 2007 from $2.9 million in the six months ended June 30, 2006 primarily due to the consolidation of Nova Zinc for full six months of 2007 and salary increases.Net income for the fist six months ended June 30, 2007 totaled $48 million compared to $47 million for the same period of the year 2006.

“We’re satisfied with the results and note the fact that the hurdles of consolidation of the mining operations acquired last year are mostly overcome,” Sergei Moiseyev, Chairman of CZP Board, commented on the Company’s results.