On the one hand, these first-half figures from China-focused Griffin Mining provide ample encouragement for our long-standing but underperforming buy tip: production of zinc, lead and silver in concentrate from the company's Caijiaying joint venture reached a new record high, resulting in record revenues, while the company was able to maintain gross margins at over 58 per cent by keeping costs in line with last year. Likewise, attributable net profits, though down slightly compared with the first half of 2011 because of foreign-exchange losses and higher interest payments on debt, were healthy at $7.5m (£4.7m).
On the other hand, Griffin's large cash pile - $91m as of year-end 2011 - disappeared over the period and was replaced with nearly $18m of net debt. Certainly, the money was put to good use - Griffin spent $110m increasing its stake in the mine from 60 per cent to 88.8 per cent - yet long-suffering investors hoping to reap some dividends will have to wait even longer still. It hasn't helped that the shares have lost a third of their value since January, either.
Zinc prices have been on the decline, too, as the global steel industry - which accounts for 50 per cent of zinc demand - plunges further into recession.
Broker Panmure Gordon forecasts 2012 EPS of 8.9¢ for 2012 (9¢ in 2011), rising to 12.8¢ in 2013.
GRIFFIN MINING (GFM) | ||||
|---|---|---|---|---|
| ORD PRICE: | 32p | MARKET VALUE: | £56.2m | |
| TOUCH: | 31-33p | 12-MONTH HIGH: | 55p | LOW: 29p |
| DIVIDEND YIELD: | nil | PE RATIO: | 6 | |
| NET ASSET VALUE: | 75¢ | NET DEBT: | 14% | |
| Half-year to 30 Jun | Turnover ($m) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (¢) |
|---|---|---|---|---|
| 2011 | 33.9 | 17.9 | 4.79 | nil |
| 2012 | 39.7 | 15.0 | 4.30 | nil |
| % change | +17 | -16 | -10 | - |
£1=$1.58 | ||||
