Boliden seeks partners at Lomas Bayas, Myra Falls

Higher production and improved copper and zinc prices helped Boliden (BOL-T) to an operating profit in the three months ended Sept. 30, but further writedowns on the balance sheet — including a US$190-million charge to clear the Los Frailes mine off the books — turned the operating profit into a net loss of US90 per share.

Boliden took a net loss of US$195 million on revenue of US$284 million in the recent third quarter, compared with a loss of US$3.6 million on revenue of US$253 million in the corresponding period in 1999. Also, the company announced it has decided to sell interests in its Lomas Bayas copper mine in Chile and the Myra Falls copper-zinc mine on Vancouver Island.

The principal charge against earnings was the US$190-million writedown of the carrying value of Spanish subsidiary Boliden Apirsa, operator of the struggling Los Frailes zinc mine, northwest of Seville. In early October, Boliden announced it would be making no further investments in Apirsa, prompting Apirsa to apply for protection from its creditors in the Spanish courts.

As a result of Boliden’s decision, a proposed expansion of the Los Frailes open pit will not go ahead (though the present pit will be completed). Boliden has been in discussions with outside parties to sell its interest in Los Frailes.

The parent company has no ongoing costs from the Los Frailes operation and expects that revenue from mining out the present phase of the open pit will cover future expenses.

Meanwhile, Boliden and partner Rio Tinto (rtp-n) recently sold their Norzink smelter at Odda, Norway, to Finnish metal producer Outokumpu for US$180 million (T.N.M., Oct. 16/00).

Boliden is seeking an investor at Lomas Bayas and Myra Falls because both those operations require ongoing expenditures — Lomas Bayas for final completion of its obligations to project lenders, and Myra Falls for redevelopment work done at the end of 1999. Boliden’s management says some potential partners have expressed an interest in making an investment, and there have been site visits to both projects. However, management is also cautioning investors that the carrying value of either project might be affected by the sale of a stake.

The smelting operations — Norzink and the Ronnskar copper smelter — remained the corporate backbone during the third quarter, accounting for an operating profit of US$14.6 million.

Mining, excluding Los Frailes, which incurred a US$10.7-million operating loss, was ahead US$4.6 million on the quarter. Production increases at the Aitik copper mine in Sweden, Lomas Bayas and Myra Falls offset decreased production at the company’s other Swedish operations.

Boliden also announced that one new mine would come into production as part of its Boliden Area Operation. Boliden and North Atlantic Natural Resources — in which Boliden and South Atlantic Resources (SCQ-V) each own 38% interests — have reached a decision to develop the Storliden zinc-copper deposit, about 85 km northwest of Skelleftea. Storliden has a resource of 1.8 million tonnes grading 10.3% zinc and 3.5% copper. Earlier studies had examined a mine-mill complex for Storliden, but the proposed operation will feed the Boliden mill. Under the development agreement, Boliden will finance modifications to the mill while NAN finances development of the deposit. Once the partners have recovered their capital costs, NAN will receive two-thirds of the net smelter return on the Storliden ore and Boliden will get the rest. The two companies are also examining a similar program to bring the smaller Norrliden deposit into production.

For the nine months ended Sept. 30, Boliden reported a net loss of US$248 million on revenue of US$835 million (US$1.38 per share). In the comparable period last year, the company lost US$58 million on revenue of US$750 million.