CZP Board Chairman Sergey Moiseev outlines key results of 2006 and development strategy until 2010

CZP Board Chairman Sergey Moiseev outlines key results of 2006 and development strategy until 2010.
The strategy of Chelyabinsk Zinc Plant Open Joint Stock Company (RTS:CZP, LSE: CHZN) in the next 3 years will be aimed at further de-bottlenecking the enterprise and expanding mining assets to reach full self sufficiency in concentrate, as well as capitalization on natural location advantages.
Referring to the situation in the Russian zinc sector, the CZP Board Chairman pointed to increased output of galvanized steel, which represents over 60% of zinc consumption. He added that in Russia, in contrast to the world market, there is no deficit in zinc and output (over 240,000 tons in 2006) is growing faster than consumption (over 170,000 tons in 2006). These figures allowed the Russian zinc sector to take up 9% of the European and 2% of the world zinc markets.
Mr. Moiseev pointed out as an important CZP achievement the shift to long-term contracts with core domestic suppliers of zinc concentrate, leading to 78% coverage of CZP requirements in zinc concentrate by domestic suppliers in the last year. This, in turn, has allowed CZP to pay on average approximately 60% of the LME price for zinc concentrate in 2006.
The domestic market remains the enterprise's top priority in sales. According to Mr. Moiseev, Russia accounted for approximately 60% of sales by volume and 50% by revenues. CZP enjoys long standing relationship with its largest customers, representing approximately 50% of total sales volume.
Commenting on CZP’s strategy aimed at development of a vertically-integrated company, Mr. Moiseev referred to the acquisition of Akzhal Ore Mining and Processing Mill in Kazakhstan in 2006 and signing of a license agreement to explore the Amur Zinc Ore Deposit (Chelyabinsk region, Russia). These events will allow CZP to supply own raw material in order to expand production and further increase business efficiency.
The production development strategy, according to Mr. Moiseev, will be aimed at de-bottlenecking in order to increase production output and profit. Total expansion capex in 2006-2009 will require RUR 1.8 billion.