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. Last Updated: 07/27/2016

High Zinc Prices Boost Chelyabinsk

Chelyabinsk Zinc Plant, which produces nearly 60 percent of the country's zinc, boosted net profit almost twentyfold to $109.1 million in 2006 after selling more of the anti-corrosive metal at record prices, the company said Wednesday in a statement.

Analysts said Wednesday that they expected sustained high prices and a forecast an 11 percent rise in production to spur bigger profits again in 2007, although the increase would not be as spectacular.

"Profits are being driven by continuing production growth, and higher zinc prices will make their contribution as well, but neither will be as impressive as last year," said Sergei Donskoi, metals analyst at Troika Dialog.

Zinc, which gives an anti-rust coating to steel, was the best-performing metal on the London Metal Exchange in 2006. It more than doubled in value on a China-led demand boom, dwindling global supply and investors' appetite for commodities.

The metal hit a record-high $4,580 per ton in November. But it has retreated this year and closed on Tuesday at $3,710.

Chelyabinsk said in a statement that revenues rose 213 percent to $569.1 million. Zinc sales rose 27 percent in volume and prices more than doubled, while sales of byproducts, including indium and cadmium, rose 40 percent.

"We are proud to exceed the consensus expectations on our first year as a public company," chairman Sergei Moiseyev said.

Chelyabinsk sold 133,807 tons of zinc and zinc alloys in 2006, up from 105,500 tons in 2005. Its 2006 revenues also included $53.5 million -- 9.4 percent of total revenues -- from sales of zinc and lead concentrate by Nova Zinc, the operator of the Akzhal mine in Kazakhstan acquired last year.

These gains were offset partly by higher costs. The cost of materials and consumables rose 218 percent, while utilities and fuel cost the company 54 percent more last year than in 2005.

Chelyabinsk produced 148,384 tons of zinc last year -- 56 percent of Russia's total, and more than the company sold.