Банкеръ Weekly

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KZM HAS UTILIZED A JAPANESE LOAN

A new workshop for zinc concentrate will be commissioned in January at the Plovdiv-based Non-ferrous Metal Works (KZM). The investment is worth USD60MN. This financial injection has been ensured by the Japan International Cooperation Agency (JICA) and the Black Sea Bank for Reconstruction and Development.Within a few months the old workshop's equipment will be disassembled and the site will be cleared.The new facility is part of the project, worked out in 1996, for reducing the pollution from the works' operation. The Japanese company Marubeni Corporation is the chief contractor under the project. The contract between Marubeni and KZM was signed on December 15, 1998 and enforced half a year later. Construction of a local water treatment station, to be commissioned by March 2003, is projected as well. Another facility worked out by Marubeni is an installation for demineralized water which has been operating since November 2002. In addition to the Japanese company, KZM has also contracted the consortium EcoStroy 2002 to deal with the environmental pollution. The consortium will reconstruct the works' dump for industrial and dangerous wastes.In order to prove that KZM is not so harmful to the environment its management began growing lavender in the surrounding fields in 1996 and harvest is expected next year, provided that enthusiasts are found for the agricultural work.We are satisfied with what we've achieved, but the final financial results are not sufficiently satisfactory, KZM's Executive Director Nikola Dobrev said. Proceeds from the works' operation totalled BGN162MN by November 2002, and its accounting profit was BGN1.6MN. But the company posts losses from its core activity. According to Mr. Dobrev, the disappointing financial performance is due to the low international prices of metals and the USD exchange rate. For example, on the London Metal Exchange, where KZM's products are traded as well, lead is sold at USD442/t, and zinc - at USD765/t. For comparison, in 2000 zinc quoted at about USD1,100/t.Our investment programme for next year is more conservative because there are no indications that the international trade climate will improve, KZM's Executive Director said. Projected investments are around USD11MN. Zinc output is expected to increase 10,000 - 12,000 tons. KZM produced 57,150 t of zinc by November, and the output by the year-end is pre-estimated at 63,200 tons. Lead production capacities are similar - the output is expected to reach 60,000 tons by end-2002.KZM was privatized on July 25, 2000. The buyer - the MEBO KZM 2000 - purchased 80% of the company's capital at USD14.6MN. Presently, the MEBO holds 90% of the works' assets, and the balance, distributed in small portions, is in the hands of small shareholders. The State holds 0.48 per cent.

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