Navan shares slip after profit setback

NAVAN Resources shares fell 10p in London to 125p sterling after the company announced a sharp fall in 1996 profits.

The company said 1997 will be a year of consolidation at its operations in Bulgaria while it will "reevaluate" future plans in Hungary. Synergy between its Bulgarian and its new Spanish assets has opened up the potential for the integration of new opportunities, according to Navan.

Pretax profits at the exploration company fell to $996,000 from $5,666,000, hit by sharp falls in the price of copper and stagnant gold prices. Turnover rose by 3.2 per cent to $26.8 million, with weaker metal prices depressing growth. The average price Navan received for copper fell from $2,923 in 1995 to $2,218 in 1996.

Navan has exploration operations in Bulgaria and Hungary and completed the acquisition of the Almagrera copper, lead and zinc mining complex in southern Spain in April. The company described 1996 as a difficult year for the mining industry in general.

In a statement Navan said that the Almagrera acquisition is "the key to its development of an economic base and precious metal mining and processing in western Europe". It creates "a new operating arm of the group's business cent red on base metals and chemical production in an EU country with a stable political and economic climate". The company aims to double the capacity of the complex over the next few years.

Operational efficiencies at its 68 per cent owned Bulgarian Chelopech gold/copper mine improved with a 39 per cent rise in production tonnages. But the drop in metal prices and a delay in the final shipment of the year meant that sales fell to $13.7 million from $14 million. Operating profits of $2 million were hit by foreign exchange loss of $1.2 million on conversion of the devalued Bulgarian leva.

This year will be a consolidation year, with the company concentrating on improving unit costs and ore grades and working with its partner Homesake to reevaluate mine expansion plans which require some technical changes.

Homesake has withheld funds provided for under the 1995 Chelopech option agreement pending agreement in the expansion plan. This reevaluation is currently taking place.

Sales in Hungary rose 9.2 per cent to $13 million with steady profits expected to continue this year. But Navan does not see "major growth potential" in Hungary and intends to focus on its base metal activities in Iberia and gold opportunities in Bulgaria and eastern Europe.