Arcon may turn profit this year

Executives in mining company Arcon told shareholders yesterday that they were hopeful the company could make a profit for the first year since 2000, writes Barry O'Halloran

In a presentation after its annual general meeting in Dublin yesterday, outgoing chief executive Mr Kevin Ross said revenues at the end of the first half of this year were 75 per cent of the €22.3 million turnover that the company achieved in 2003.

He added that the listed company could make a small profit by the end of the year. Arcon, which is 72 per cent owned by Sir Anthony O'Reilly and his family, owns the Galmoy lead and zinc mine in Co Kilkenny. It last reported profits in the first half of 2000 but was hit later that year by a fall in zinc prices prompted by a global increase in supply.

Mr Ross said Arcon expected produce about 55,000 tonnes of concentrate this year, which would include 40,000 tonnes of zinc. However, he said a 13-week strike at its maintenance contractor, Sandvik Tamrock, had dented production.

Afterwards, he told The Irish Times that the strike left the company between 5 per cent and 15 per cent behind targets, but that Arcon was still maintaining production. The strike does not involve its workers, and the mining company does not have any role in it. Mr Ross said he was hopeful that it would be resolved.

Finance director and incoming chief executive Mr Peter Kidney said that the company would generate positive cash-flow during the year. A statement released after the meeting said that it was "earnings before interest, tax, depreciation and amortisation positive" during the first half of 2004. "We could make a small profit this year," he said.

Mr Kidney told the meeting that Arcon was well positioned to take advantage of a recovery in lead and zinc prices. He explained that demand for both base metals was on the increase, driven mainly by expanding economies in the Far East.

Consultants hired by Arcon expect that prices for zinc concentrate this year could run at $1,075 (€864) a tonne and at $1,175 (€944) next year, while lead will trade at €730 a tonne this year and €860 next year.

The company has had a positive result from exploratory drilling operations at the R-zone in Galmoy and is preparing to mine this prospect. Mr Ross said he expected it would be "very profitable" for the company over the next six years.

At an extraordinary general meeting also held by Arcon yesterday, shareholders voted to support a one for 10 consolidation of their stock. Chairman Mr Tony O'Reilly jnr told them the move would make the shares more marketable. Arcon shares closed at four cents yesterday, up on their opening quote of 3.9 cents.