Rio cuts costs, increases production

Second-quarter profits were down for Rio Algom (ROM-T), but the company continued to boost copper production and reduce mining costs.

For the three months ended June 30, the Toronto-based major recorded earnings of $4 million (or a loss of 2 cents per share, after interest payments and dividends) on revenue of $81 million from operations and $411 million from its metals distribution division. In the same period last year, the company recorded earnings of $12 million (16 cents per share) on revenue of $104 million and $408 million.

The decline is attributed to a 14% decrease, to US70 cents per lb., in the company’s realized price for copper.

During the latest quarter, Rio Algom’s share of copper production was 98 million lbs. Attributable to the company during the quarter were 55 million lbs. from its 100%-owned Cerro Colorado mine in Chile, 29 million lbs. from the 25%-owned Alumbrera mine in Argentina, and 14 million lbs. from its 33.6%-owned Highland Valley Copper operation in British Columbia, where production was suspended May 15. Those operations yielded 84 million lbs. of copper for the company in the same period last year.

Average cash costs from Cerro Colorado and Alumbrera fell to US47 cents per lb. from US57 cents a year earlier. The company attributes the lower costs to the elimination of 110 jobs at the mines.

Alumbrera performed strongly in the second quarter. Average mill throughput was 82,000 tonnes per day, which exceeded the design rate of 80,000 tonnes. Although copper recoveries averaged 89%, off slightly from projections of 91%, gold recoveries, at 80%, were well above the design rate of 70%. The mine is owned jointly by Rio Algom and two Australian partners: MIM Holdings (50%) and North (25%).

Second-quarter production included: 48,000 oz. gold, compared with 32,000 oz. a year earlier; 226,000 lbs. molybdenum, compared with 437,000 lbs.; 452,000 lbs. uranium, compared with 173,000 lbs.; and 69,000 tonnes coal, compared with 134,000 tonnes.

During the recent second quarter, cash and equivalents were down to $48 million. Capital spending was $83 million, $75 million of which was related to work at the Antamina copper-zinc project in Peru.