Shares in Zinifex (ZFX) rose 10.5% to $9.88 on Thursday after it reported favourable second quarter results – an increase of 8% in production compared to the same period last year.
Lead- in- concentrate output was up strongly when compared to that produced during the December quarter last year, recording a 29.5% increase to 18,863 tonnes.
Year to date production was up 12% on last year at 37,406 tonnes.
"Zinifex continues to deliver on its strategy to grow our mining business," acting chief executive officer Tony Barnes said.
The company has cash, lots of it – raised after selling its stake in smelting company Nyrstar NV through an IPO earlier in 2007. Nyrstar holds the processing assets that used to be part of Zinifex.
The Melbourne-based miner says the current volatile market conditions are serving to increase the purchasing power of its war chest.
"The board is fully cognisant of its obligations to maximise shareholder value and will continue to be discliplined in the deployment of this capital," Barnes added.
Shareholders at the company's AGM in November were told that the world's third-largest zinc mining company has more than $2.2 billion to make acquisitions or return to shareholders.
It seems it has followed through with the first option.
In December, it has launched an aggressive offer to acquire all the shares in Allegiance Mining, attracted by the company's 8,500 tonnes per annum Avebury nickel project on the Tasmanian West Coast.
"With nickel production due to start in early 2008, this mine would add immediate growth to Zinifex's existing profit centres, the Century and Rosebury mines," Barnes said.
Zinifex shares have lost considerable ground in 2007 as world zinc prices have tumbled more than 20%.
"The zinc prices in Australian dollars has been further impacted by the continued weakening of the US dollar," Barnes said.
The sharp fall in metal prices is expected to carry over into 2008, according to the Australian Bureau of Agricultural and Resource Economics (ABARE) December 2007 commodities report.
"World zinc prices are forecast to weaken in 2008, falling by 45 per cent year on year to average around US$1780 a tonne."
During the panicked sell-out on Tuesday, shares in Zinifex lost 12.3% to close at a 52-week low of $8.04.
