Arcon on track for profitability as €28.75m rights issue is approved

Shareholder approval for a major financial restructuring has left exploration company Arcon on track to achieve profitability in the course of next year, chief executive Mr Kevin Ross said yesterday.

Arcon received approval at its annual general meeting to raise €28.75 million in a rights issue, which will be fully underwritten by major shareholder Sir Anthony O'Reilly. Sir Anthony has also partly facilitated a write-down designed to slash Arcon's debt levels from €105 million to €23 million. The reduction will, according to Mr Ross, see Arcon's annual interest repayments fall from €7.5 million to €1.9 million and will enable the company to aggressively pursue zinc production at its Galmoy mine in Co Kilkenny.

Speaking after the meeting, Mr Ross said Arcon was positioned to become "cash neutral" in the second half of this year. Profitability was now achievable, he said, heralding "a brand new start" for the company.

Mr Ross was presiding over accounts that displayed a loss of €8.5 million last year, based on a turnover of €18.7 million. He attributed the loss to a number of factors, chief among which was the price of zinc, which is now at prices last seen in the 1930s. Projections on Arcon's future profitability were based on the metal having reached its cyclical bottom, he added.

"I haven't seen any analyst research that says the price is going down," said Mr Ross. "That's a very unlikely scenario. The real question is how much is it going to go up by? At long last, I really believe that we can start generating genuine shareholder value," he said.

Arcon is the successor to Atlantic Resources, the Irish exploration company in which hundreds of small investors lost money in the 1980s.

Company chairman Mr Tony O'Reilly junior yesterday described the forthcoming rights issue as a "unique opportunity for shareholders". "While the repercussions for the company would have been severe had we not restructured the business, this should not be seen as a rescue job," said Mr O'Reilly, who described the new-look Arcon as "a totally and fundamentally changed business proposition".