Cominco nixes QSL technology

After three years of studies and tests, Cominco (TSE) has decided not to proceed with the QSL lead smelting process at its metallurgical operations in Trail, B.C.

The QSL smelter was fired up in late 1989 as part of a major, $750-million modernization program that began on the zinc side in 1976. However, process and mechanical problems forced a shutdown in March, 1990. Lead production continued at the old lead smelter while Cominco tried to resolve the problems and investigate alternatives.

At the recent annual meeting Chairman Norman Keevil explained that the QSL process cannot handle the heavy load of zinc residues that form a substantial portion of Trail’s feed requirements. He acknowledged that supplier Lurgi AG of Germany had demonstrated some success with the process elsewhere, but said these plants are not directly comparable with Trail.

“The Trail lead smelter must be able to treat the zinc-lead residues produced by the zinc plant and consume, over a reasonable period of time, a substantial stockpile of residues that has built up over the years,” Keevil said. “This high residue charge places a much higher demand on the reduction capacity of the lead smelter. In effect, the Trail plant must work as much as five times harder than the other QSL smelters.”

QSL (Queneau-Schumann-Lurgi), a German-North American system, employs a slag bath as a medium for both oxidation and reduction. It is one of five new lead smelting processes, each of which is capable of realizing fuel savings of 50% compared with the sinter-blast furnace system. The systems also have the advantage of rendering the working environment virtually free of dust and gas. Cominco has entered discussions with Lurgi to settle responsibility for costs associated with the project. “If these are not successful, (Cominco) will refer the matter to arbitration as provided for in our agreement,” Keevil added.

The arbitration option provides a safety valve for Cominco shareholders in view of the fact that Lurgi is a division of Metallgesellschaft AG, which holds a 6.5% direct equity interest in Teck. Teck, in turn, owns 22% of Cominco.

Cominco must decide whether to proceed with a conversion to an alternative process. Last year, the company carried out a full-scale commercial test of Trail-type feedstock at a Kivcet plant in the former Soviet republic of Kazakhstan. The test indicated that the Kivcet process has the reduction capacity and plant requirements needed at Trail. Based on preliminary engineering studies, a conversion of the Trail plant to Kivcet is considered feasible.

“The costs will, however, be high,” Keevil warned. “It will take more than $100 million to modify the existing facilities to a Kivcet operation and add a new slag-fuming process, which was always contemplated as the second stage of the modernization project. This assumes that, with some creative engineering, about $100 million of our existing investment in infrastructure can be utilized in the converted plant.”

Kivcet was originally considered by the company before the Teck-led consortium acquired control of Cominco in 1986.

A decision to proceed with a conversion is, however, subject to other issues relating to the long-term future of the smelter complex. These include internal and external technical audits, an agreement with the British Columbia government and what the company describes as “a fair tax regime at Trail and a sound business case for the substantial capital expenditures involved.”

Keevil said the tax burden at Trail amounts to more than $41 million a year while the indirect tax burden on B.C. operations as a whole totals some $62 million per year. “Put another way, we lost $10 million at Trail and paid $42 million in taxes,” he said.

The Trail complex was recently investigated by a government-appointed job protection commissioner, who recommended actions be taken by the company, the union and government, to make the operation more competitive. Last year, changes were implemented which allowed the company to reduce annual costs by about $30 million.

The other major part of the plan was a $14-million reduction in government taxation, with the targeted items being municipal property taxes and provincial water taxes. B.C. Premier Michael Harcourt and senior cabinet members initially told Cominco they would support the plan.

“Unfortunately, while negotiations continue, nothing concrete has yet been achieved on the provincial side,” Keevil said. “In fact, since the release of the report, these indirect taxes have not only not been reduced, they have actually gone up by $8 million a year.”

Keevil noted, however, that recent developments leave him hopeful that something can be achieved, through the process, to secure the future of Trail. “Even with a realistic taxation environment, however, Trail’s inland location disadvantage over other smelters on tidewater will require us to concentrate on cost improvements to remain competitive.”

Cominco reported a loss of $41 million for 1992 and a loss of $36.8 million for the 1993 first quarter ended March 31. The company said these losses reflect low metal prices, high indirect taxes (based on capital or activity rather than on profits) and losses at the Red Dog mine in Alaska, which achieved 70% of its designed output last year.