Debt reduction key element in plan

Debt reduction will be a key element in Cominco’s 1987 business plan, according to Robert E. Hallbauer, president and chief executive officer. At the annual meeting, he announced plans to “reduce existing debt by a further $250 million” which would include selling the company’s American fertilizer assets.

Cominco lost $48.2 million last year before extraordinary items but reduced its short and long term debt to $643.9 million, a drop of $356 million from the previous year. Among the holdings sold to achieve that debt reduction were: Fording Coal ($87 million), the Con mine at Yellowknife ($64 million) and West Kootenay Power and Light ($80 million).

Regulatory approval is still required for West Kootenay which also assumed $67 million of Cominco’s debt. On a pro forma basis the sale would bring Cominco’s year-end debt down further to $564 million. Cominco recently sold Canada Metal and is negotiating the sale of Transcom Venture, a diamond mine in South Africa.

Higher metal prices helped Cominco post a $5.5 million profit in the first quarter compared to a $26.6 million loss last year, excluding the sale of Fording. Net earnings for the comparable quarter last year were $14.8 million. In the latest quarter, Cominco’s mining and integrated metals business segment earned an operating profit of $26.8 million compared to a $6.5 million loss in 1986; but the fertilizers business segment lost $400,000 against a $1.2 million profit a year earlier.

He noted that steps were being taken to reduce operating costs including the formation of Cominco Resources International, an exploration and mining subsidiary. It is being formed to conduct exploration and development outside Canada, Alaska and the United States and will reduce Cominco’s own exploration expenditures by $10 million per year, he said.

According to Owen E. Owens, vice-president exploration, public money will be used to finance work on its portfolio of properties. A final prospectus should be completed in early May and the funds would allow it to advance 2-3 properties to a production decision as well as provide for several years of exploration. Cominco Ltd. would effectively control the new exploration entity whose focus would be primarily on gold.

Responding to a question about the future of Cominco’s Sullivan mine property at Kimberley, B.C., Mr Hallbauer predicted the mine would produce at its present rate for at least another five years, scaling down thereafter. Planned mine life is about 15 years. He argued that “Cominco has a major investment there” and insisted they want to keep the asset for as long as possible. The company will also be looking at other exploration opportunities in the area, he pointed out.