APAC Resources 2010 profit up 196% to HK$1.1bn

The company to further evaluate opportunities to expand and diversify its commodity trading business and potential acquisitions of direct mine investments and strategic interests.

APAC Resources Limited (“APAC”), an established natural resources investment and commodities trading company, announced on Friday its unaudited results for the twelve months ended 31st December 2010 *.

APAC achieved record turnover of HK$848.7 million, up 182% compared to the same period last year (2009: HK$301.4 million). The surge was driven by significant growth in the commodity trading business which contributed to the turnover and benefited from continuing strength in the iron ore market. Profit from the commodity trading business rose 173% to HK$125.8 million (2009: HK$46 million). APAC recorded a net gain of HK$350.0 million (2009: HK$124.7 million) in its equity portfolio, representing a year-on-year increase of 181%. Share of profit from principal associated companies amounted to HK$536.4 million, a more than three-fold increase than 2009. Net profit attributable to owners significantly increased by 196% to HK$1,104.4 million (2009: HK$372.6 million). Basic earnings per share were HK 16.81 cents (2009: HK 7.15 cents).

Mr. Andrew Ferguson, Chief Executive Officer and Executive Director of APAC, said, “Commodity prices, especially iron ore, rebounded and sustained a strong upward move in the second half of 2010, favourable to our commodity trading business which almost doubled the profit of last year. The improving economic environment in the second half year also yielded strong gains for our securities trading and investment business. Together with the booming share of profit of our key Australia-listed mining assets, Mount Gibson and Metals X, APAC’s business fundamentals have been greatly strengthened in the year of 2010.”

* APAC announced its unaudited second interim results due to the change of its financial year end date so as to align with its principal overseas listed associates which are APAC’s substantial investments. Subsequently, APAC will release its eighteen months audited results of 1st January 2010 to 30th June 2011 on or before 30th September 2011.

Trading and Investments
Profit of trading and investment in listed securities increased 181% to HK$350.0 million from HK$124.7 million in 2009. The Group maintained a long term investment portfolio of HK$115.9 million and a short term investment portfolio of HK$1,371.8 million which focused on listed natural resource companies. The portfolio is dominated by a 14.79% interest in the AIM listed Kalahari Minerals with interests in uranium, gold, copper and other base metals in Namibia. The remaining portfolio comprises mostly minor holdings in various natural resource companies listed on major stock exchanges including Australia, Canada, Hong Kong and United Kingdom.

Trading in Commodities
Turnover of the commodity trading business of iron and coal was HK$848.7 million (2009: HK$301.4 million), up 182% from the previous year. Enjoying generally favourable economic conditions, the business reported a profit of HK$125.8 million (2009: HK$46.1 million), representing a 173% increase from last year.

Principal Associated Companies
APAC has two principal associated companies, namely Mount Gibson Iron Limited (ASX:MGX) (“Mount Gibson“) and Metals X Limited (ASX:MLX) (“Metals X”). The share of profit of the associates (after tax) for the year ended 31st December 2010 was HK$536.4 million (2009: HK$118.0 million), surging 354% from the previous year.

Mount Gibson, the fourth largest iron ore producer in Australia, produces iron ore from Koolan Island and the Tallering Peak mines in Western Australia, with combined production of circa 7 million tonnes per year and a total resources of nearly 109 million tonnes. Its production is expected to increase to circa 10 million tonnes per year by late 2011. In November 2010, the Group entered into a new long-term agreement with Mount Gibson for the purchase of iron ore from Koolan Island and the Tallering Peak mines.

Metals X is Australia’s largest tin producer and an emerging diversified resources group with interests in the producing Renison mine in Tasmania, Australia, and nickel via its world-class wholly-owned Wingellina nickel deposit. Its tin production increased to circa 6,500 tonnes in 2010 with reserves of almost 120,000 tonnes, according to a APAC Resources report.

Prospects
Over the past year, commodity prices have continued to strengthen as China's rapacious appetite for resources has been coupled with a steady recovery in demand from the developed nations. Barring external shocks and likely increased volatility, APAC remains upbeat on the natural resources sector given economic growth expectations in 2011.

“APAC will continue to evaluate opportunities to expand and diversify its commodity trading business as well as potential acquisitions of direct mine investments and strategic interests in natural resource companies. We believe this multi-pronged strategy, combined with our robust financial position, strong expertise and disciplined approach to investments, will provide a solid platform to maximise returns for our shareholders.” Mr. Ferguson concluded.