This undated photo shows workers lay a pipeline along a road at CITIC Pacific Mining's Sino Iron Project, an open-cut magnetite iron ore mine in Western Australia. The Chinese investment company said Wednesday it expects the mine to begin production in the first half of 2011. Provided to China Daily

Investment giant posts a 98% increase in H1 net profit; declares an interim dividend of HK$0.15 per share

Red-chip conglomerate CITIC Pacific Ltd said it expects to start shipment of concentrate from its Western Australian magnetite iron ore project in the first half of next year.

"After a recent review of the project, CITIC Pacific is comfortable that major individual components of the first production line should be ready for operational testing by the end of the year," the company said Wednesday in a statement accompanying its interim results, adding that "shipment of concentrate is expected in the first half of next year".

The company has previously targeted a mid-2009 deadline for the start of production in the project, which is the largest planned magnetite project in Australia, with over two billion tons of identified ore reserves.

Rating agency Standard & Poor's has warned earlier this year that any further delays in production could have a negative impact on the profitability and economics of the project.

Addressing concerns on the delay, CITIC Pacific Chairman Chang Zhenming reiterated "our top priority over the next 12 months will be to bring the project into production as early as possible".

The steel-to-property conglomerate reported a net profit of HK$4.88 billion for the first half ended June, up 98 percent from a year ago, thanks to a strong recovery in its special steel business as well as huge one-off gains from asset sales and revaluation gains on investment properties.

CITIC Pacific's special steel business contributed a profit of HK$1.15 billion, up 120 percent year-on-year.

The company also recorded one-off gains of HK$1.77 billion from the disposal of equity stakes in North United Power, CTM and HACTL. Meanwhile, it also booked a revaluation gain of HK$755 million on investment properties.

As the recovery in the global economy boosted domestic and overseas demand for special steel products, special steel sales increased by 20 percent to 3.5 million tons during the period, the company said.

The company plans to expand the production capacity of its Xingcheng and Xin Yegang projects, targeting an annual production of 9 million tons from 2011 onward.

The energy operation also performed strongly in the period, quadrupling its profit to HK$1.43 billion, the company said.

However, the property development business slowed down slightly after the Central Government implemented tightening measures to cool down the property market. The segment recorded a profit of HK$479 million, down 0.8 percent from a year earlier.

Meanwhile, profit from the tunnel business slumped 14.8 percent to HK$241 million.

The company declared an interim dividend of HK$0.15 per share, unchanged from a year ago.

Chang reiterated the company's objection to the Australian government's plans to impose a heavy mineral tax on mineral resources produced in the country.

The company is working with other magnetite miners in Australia to voice their strong objection to the plan, it said.

Looking ahead, Chang said the company remains cautiously optimistic about its business prospects as the full recovery in the global economy will take a longer time than previously anticipated.

CITIC Pacific Ltd shares jumped 4.2 percent in Hong Kong trading Wednesday after it said its first-half net profit nearly doubled.

China Daily

(HK Edition 08/19/2010 page3)