Zinc demand drives up earnings at Lisheen group

A company involved in the sale of lead and zinc from the Lisheen mine in Co Tipperary recorded a pretax profit of $108.6 million in 2006, a near five-fold increase on the $21.8 million pretax surplus achieved in the previous year.

This stunning profit performance was aided by strong demand for zinc globally, which pushed prices to record highs.

Accounts recently filed by Lisheen Milling Ltd, a subsidiary of mining giant Anglo American, show that its sales of lead and zinc in the year to the end of December 2006, net of smelter charges, was $396.1 million, compared with $147.1 million in the previous 12-month period.

This indicates an operating margin of 27.3 per cent for the Tipperary mine, which is one of the biggest in Europe.

Lisheen Milling paid $10.1 million in taxation, giving it an after-tax profit for 2006 of $98.6 million.

A director's review of the company's performance included in the accounts described the results as "very satisfactory".

"The increase in turnover has been driven by significantly higher metal prices over the past year, supported by fairly constrained supply-side growth and the significant and rapid inflow of speculative and investor funds into commodities markets," the directors' report states.

Lisheen's operating costs, however, rose sharply during the year to $61.2 million from $17.7 million.

Its employee costs increased to $7.3 million from $5.7 million in 2005.

"There has been considerable pressure on operating costs and margins were affected by significant increases in the costs of energy, labour and most key consumables," the directors state.

The accounts show that Lisheen Milling paid $226.5 million for its ore from the mine in 2006, up from $107 million a year earlier.

The accounts include a charge of $16.4 million for the estimated costs at the end of 2006 of restoring the environmental disturbance at the site.

These costs are expected to be incurred in 2014, the end of Lisheen's estimated life of operation.