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BEIJING, Mar. 24 -- China's Minerals and Metals Group yesterday reported a net profit of $US180.7 million ($198m) for 2009, covering the first seven months since it was formed from a collection of OZ Minerals assets.
MMG reported a strong turnaround for revenue from the company's zinc, copper and gold assets that its parent company, Chinese commodity trading house Minmetals Non-ferrous Metals, acquired from debt-stricken OZ Minerals in June last year for $US1.35 billion. &quot;MMG expects increasing demand from China from continuing fiscal stimulus to fuel good metal demand through 2010,&quot; says MMG, the world's second-largest zinc miner.
MMG's Sepon copper-gold mine in Laos was the company's strongest earner, generating $US161.3m in earnings before interest, tax and amortisation out of a total of $US350.2m.
This means MMG paid only about four times EBITDA, a low multiple compared with other deals in the mining sector, and even lower at 2.7 times when considered on an annualised basis.
Chief executive Andrew Michelmore -- who headed OZ Minerals before the partial takeover -- said he was upbeat about base metal demand for 2010.
MMG has no plans to restart the Avebury nickel mine in Tasmania. London Metal Exchange nickel prices recently reached a near two-year high, but Michelmore said he expected the rally to be cut short as a number of large mines started production.
Zinc output at the Century zinc mine in Australia -- the world's second largest after Teck Resources's Red Dog mine in Alaska -- will recover strongly to 500,000-510,000 tonnes this year after a pipeline spill and other issues affected production last year, with output falling to 176,556 tonnes during June-December.
A number of large zinc mines are set to close in the next few years, including Century in 2015, which may tighten zinc's supply and demand balance.
&quot;We are likely to see more M&amp;A activity in the zinc sector, particularly from smelting companies,&quot; Mr Michelmore said, with the battle between Belgium's Nyrstar and Japan's Toho Zinc for Australia's CBH Resources indicative of this expected trend.
Meanwhile, samples taken around the Rosebery mine in Tasmania and the local town have shown a low correlation of heavy metals with the operation. An increase in cases of heavy metal poisoning has sparked an investigation into the possible causes, which is ongoing.
&quot;A number of samples have been above trigger levels, which means there will be further investigation to find out how the heavy metals got there -- if it's due to the operation or naturally occurring,&quot; Mr Michelmore said.
Total revenue was $US852.8m and cash on hand was $US251.3m, the company says.
Minmetals has recently said it intends to use MMG as a platform for international M&amp;A activity, but &quot;we have nothing specific to state for now&quot;, Mr Michelmore said. &quot;This year we will continue to focus on organic growth, embed identified efficiency improvements and develop a growth pipeline including merger and acquisition opportunities.&quot;
Apart from the recovery in production at Century, MMG plans to raise copper output at Golden Grove to 30,000-32,000 tonnes in 2010 as well as increasing zinc output to 80,000-85,000 tonnes. This compares with 16,658 tonnes of copper and 36,375 tonnes of zinc during June-December.
Output at Rosebery is expected to be 83,000-87,000 tonnes of zinc in 2010, up from 53,692 tonnes for the seven last months of last year.
MMG recently said its parent company planned to list about 25 per cent of the company, likely in Australia, but hasn't given a time.
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