Metals stage comeback for Cominco Ltd. in 1986

The mining and integrated metals sectors of Cominco Ltd. posted a dramatic turnaround in 1986 but the results were largely offset by continuing weakness in its fertilizers division. Ironically that division was among the most profitable for the company throughout much of the recession.

Operating profit in the mining and integrated metals division for the year was $21.4 million compared with a loss of $22.5 million in 1985. According to Robert H. Hallbauer, president and chief executive officer, the improvement in operating results was “attributed to higher profit margins on sales of refined lead, lead concentrate and gold.” On average, metal prices were below those realized the previous year but he noted both metals were strong in the last half along with zinc.

The loss in the fertilizers division was $18.9 million versus an operating profit of $26.4 million a year earlier. Claiming that 1986 was an “extremely difficult year for the North American fertilizer industry,” he said that worldwide surpluses of grain and fertilizers forced prices down. Inventories were controlled by lengthy plant shutdowns which were also costly.

For the year Cominco reported a consolidated loss of $48.2 million or 95 cents per common share before extraordinary items compared to a 1985 loss of $71.5 million or $1.31 per share. The board of directors has approved a restructuring plan which will see non-core assets disposed of to reduce debt. It has been rumored for some time now that Teck Corp., the controlling shareholder in Cominco, would sell off the fertilizers division and concentrate on the mining end.

As a result of the restructuring plan, Cominco notes it has recorded a provision for loss on disposition of $157 million as an extraordinary loss. Offsetting that charge are extraordinary gains of $53.6 million from the sale of its Con gold mine and the company’s equity in Fording Coal. So the loss for the year was actually $151.6 million or $2.53 per common share.

A modest profit of $1.4 million was reported in the fourth quarter compared to a loss of $37.8 million the year before. Its mining and integrated metals business generated an operating profit of $26.5 million compared to a loss of $21.7 million in the comparable quarter. The fertilizers division lost $13.2 million, about double the previous year’s loss. Metals products and electric power distribution earned an operating profit of $6.9 million compared with $2.6 million the year before.

Cominco stands to realize a gain of $45 million from the sale of West Kootenay Power and Light Co. which must be approved by the B.C. Utilities Commission. Public hearings regarding the sale have been completed but no decision has been announced.

The company will be raising $17 million for mineral exploration on Canadian mineral properties in 1987 and 1988. Cominco will sell shares to CMP 1987 Resource Partnership with the flow-through benefits accruing to the limited partners.