Stronger commodity prices nudged
During the third quarter, Noranda earned $70 million (26 per share, fully diluted) on sales revenue of $1.7 billion, compared with earnings of $63 million (24 per share) on revenue of $1.7 billion in the corresponding period of 1999.
“The third quarter was not too bad for Noranda,” says President David Kerr. “There were some positives and negatives, but certainly the projects continue to go well.”
The company’s third-quarter earnings were reduced by $41 million as a result of higher energy prices, the strike in Sudbury and operational difficulties in the production of aluminum wheels. However, quarterly earnings were increased by $18 million, owing to a change in Ontario’s mining tax rates.
The picture gets better in the longer view: for the first nine months of 2000, Noranda earned $222 million (85 per share) on revenue of $5.3 billion, more than doubling the $97 million (34 per share) on $4.7 billion in revenue recorded for the comparable period last year.
Noranda ended the third quarter with $3.7 billion in debt and $589 million in cash and short-term notes. As a result its walking away from a recent hostile takeover bid of
Noranda also plans to re-purchase Noranda shares, provided regulators approve the transaction.
The company’s total mine production suffered across the board during the third quarter: 105,000 tonnes zinc (compared with 123,000 tonnes a year ago); 77,000 tonnes copper (87,000 tonnes); 9,000 tonnes nickel (13,000 tonnes); 6,000 tonnes ferronickel (7,000 tonnes); 19,000 tonnes lead (22,000 tonnes); and 2.7 million oz. silver (3.1 million oz.). Fabricated aluminum production fell to 35,000 tonnes, from 41,000 tonnes a year earlier.
Highlights of recent activities include the following:
– In late October, Noranda produced its first magnesium from its new, 63,000-tonne-per-year Magnola facility in Danville, near Asbestos, Que.
With construction now completed, Magnola is the largest magnesium-production facility in the world; it is also the first to use proprietary technology developed by Noranda to extract magnesium from serpentine tailings derived from the JM Asbestos mine.
Noranda has commissioned two of 24 electrolytic cells at Magnola and is now casting pure magnesium, as well as magnesium alloys.
The facility, ownership of which is shared by Noranda’s wholly owned subsidiary, Noranda Magnesium, with 80%, and Socit Gnrale de Financement, with 20%, remains on-target to begin commercial production in the first quarter of 2001.
– At Noranda’s CCR copper refinery in Montreal, the $124-million permanent cathode project is approaching production-capacity levels.
– Noranda reports that construction of the Antamina zinc-copper mine in Peru is ahead of schedule and within budget. Detailed engineering is complete, as is 75% of overall construction; the tailings dam is almost complete; about two-thirds of a 300-km pipeline has been installed; and construction of port facilities at Huarmey is more than two-thirds finished.
First concentrate production is expected to begin in the third quarter of next year.
In spite of the recent political unrest in Peru, Noranda says it has had no difficulties at the mine. Company representatives will be meeting with political-risk insurers to keep abreast of the situation.
Antamina is owned by Noranda (33.75%), Rio Algom (33.75%),
– Noranda has boosted, by about 1.5 million tonnes, the resource estimate for its Perseverance zinc-copper project, discovered in March 2000, just 6 km northwest of Noranda’s Matagami concentrator in northwestern Quebec.
The deposit comprises at least three distinct zones — Equinox, Perseverance and Perseverance West — containing a total inferred resource of 5 million tonnes grading 16.8% zinc and 1.3% copper, plus 34 grams silver and 0.4 gram gold per tonne.
Mineralization occurs at depths between 30 and 250 metres and will be easily accessible by a central ramp from surface.
Some 45,296 metres of exploration and definition drilling have been completed to date, and another 11,000 metres of definition drilling remain to be completed by year-end.
The company says exploration will be “pursued vigorously,” as a favourable key tuffite horizon is now thought to extend over a much wider area.
“This clearly has opened up a wide and new area for us to explore in Matagami,” says Michael Knuckey, executive vice-president of exploration and development. “After 40 years of mining in this camp, we are optimistic we’ll be able to improve our ore-reserve situation there.”
Noranda expects to complete a feasibility study of the three known deposits by the end of the first quarter of 2001. Metallurgical tests are already being conducted at the Matagami concentrator.
Noranda holds a 90% interest in the property, while the remainder is held by Socit de dveloppement de la Baie James. The latter’s 10% interest can be converted into a 2% net smelter return royalty, which, in turn, can be reduced to 1% with a $1-million payment from Noranda.
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