Noranda maintains strong balance sheet — Major’s restructuring program to focus on mining, metals

Like its competitors, Noranda (NOR-T) experienced drops in third-quarter earnings and revenue as a result of low metal prices.

In the three months ended Sept. 30, the company earned $22 million (or 7 cents per share) on revenue of $1.55 billion, compared with $77 million (30 cents per share) on $1.66 billion during the corresponding period last year.

Noranda reports that $24 million was derived from discontinued forest products and oil-and-gas operations, and that continuing operations lost $2 million.

For the nine months ended Sept. 30, the major earned $660 million (of which $583 million was gained from the sale of 49%-owned Norcen Energy Resources) on revenue of $4.61 billion. For the corresponding period last year, earnings totalled $197 million on revenue of $4.9 billion.

With the past sales of Noranda Forest and Norcen, combined with a recent favorable tax ruling by Revenue Canada, Noranda has completed preparations for a restructuring designed to focus on mining and metals.

In the past quarter, Noranda mined the following volumes: 107,000 tonnes zinc (compared with 121,000 tonnes in 1997’s third quarter); 47,000 tonnes copper (38,000 tonnes); 17,000 tonnes nickel (13,000 tonnes); 18,000 tonnes lead (19,000 tonnes); 226,000 oz. gold (218,000 oz.); and 3 million oz. silver (3.1 million oz.).

In terms of refined metal, Noranda produced 94,000 tonnes zinc (91,000 tonnes); 115,000 tonnes copper (118,000 tonnes); 26,000 tonnes nickel (21,000 tonnes); 24,000 tonnes lead (unchanged); 272,000 oz. gold (313,000 oz.); 10.1 million oz. silver (9.6 million oz.); 55,000 tonnes aluminum (54,000 tonnes); and 67,000 tonnes fabricated aluminum (66,000 tonnes).

The company has launched a program designed to improve pretax earnings from continuing operations by $200 million annually by the year 2000 through both productivity improvements and cost reductions. About $60 million has been generated to date this year, of which 70% is attributed to cost reduction and 30% to additional revenue.

At the same time, Noranda expects to have spent a hefty $1.6 billion on capital expenditures in 1998, including $137 million on the Antamina copper-zinc project, $144 million on the Magnola magnesium plant, $37 million on the Bell Allard zinc project and $660 million on the operations of 49.9%-owned subsidiary Falconbridge (FL-T).

As of Sept. 30, and using pro forma figures from continuing operations, Noranda’s cash and short-term note position stands at $1.74 billion, with long-term debt estimated at $2.85 billion.

While many of Noranda’s activities were included in our coverage of Falconbridge’s third-quarter results (T.N.M., Nov. 2-8/98), there are some new events to report:

• At the Gasp copper smelter in Murdochville, Que., a third, 50,000-tonne-per-year converter was installed, boosting capacity to an annual rate of 300,000 tonnes.
• In the Matagami region of Quebec, development of the Bell Allard zinc-copper mine continues on target for startup in the third quarter of 1999.
• Management of the Brunswick zinc mine in Bathurst, N.B., announced plans to reduce its workforce by 200 people by the year 2000.
• In Missouri, expansion of the New Madrid aluminum smelter is scheduled for completion in the third quarter of 1999. The plant will allow a 15% increase in primary aluminum production to an annual 250,000 tonnes, while simultaneously reducing the smelter’s unit production costs. Meanwhile, in Huntingdon, Tenn., site preparation is under way for a US$240-million, high-speed aluminum foil plant.
• Robert Harding, chairman of EdperBrascan (EBC.A-T), has been appointed chairman of Noranda, replacing Courtney Pratt.