Base metal analysts on average forecast net earnings before one-off items of A$42 million compared to A$70 million in 1996/97. Forecasts ranged between A$34 million to A$49 million.

Most analysts, in fact, predicted a second half loss for Pasminco following a first half net profit of A$44 million.

"Pasminco has been experiencing problems, albeit one-off problems, but it means output from two Australian smelters and two mines has been lower than expected," said a Sydney-based resources analyst.

Last month Pasminco said its Port Pirie smelter in South Australia had operated at 60 percent capacity during June as a new batch refining process was introduced. The group's Hobart smelter in the state of Tasmania also lost output owing to commissioning of new equipment.

Analysts said Pasmico's Broken Hill mine in New South Wales was yielding less lead as its high grade zones were being depleted while production from the underground Rosebery lead and zinc mine in Tasmania had been hit by subsidence.

Pasminco's lead and zinc production fell in 1997/98 with zinc output one percent lower at 518,961 tonnes and lead output 8.4 percent lower at 224,099 tonnes.

In April Pasminco said it posted a small loss in the third quarter due to a combination of lower production and weaker zinc and lead prices and said the group was then trading at or close to break even.

Pasminco's managing director David Stewart has said for some time that it would be difficult for the company to match its 1996/97 full year profit.

Analysts said Pasminco was, however, likely to benefit more from the weaker Australian dollar after the company closed out a hedge which had capped the rate.

The company has previously said a US one cent per pound rise in the price of zinc adds about A$8.8 million to its bottom line. Conversely, for every one cent rise in the value of the Australian dollar against the US dollar, Pasminco suffers a A$7.5 million fall in after-tax profits.

The price of zinc averaged US$51 cents per pound in the 1997/98 financial year compared to US$50.8 cents per pound in 1996/97 while the Australian dollar averaged about US$0.68 cents in the year to June 30 1998 compared to $0.78 in 1996/97.