Copper drives Teck Cominco’s Q1 earnings

VANCOUVER — A higher Canadian dollar and lower coal and zinc prices trimmed the net earnings of Teck Cominco (TCK. B-T, TCK-N) in the first quarter of 2008, despite improved copper prices and the strong contribution of three newly acquired mines.

The company reported net earnings of $345 million or 78 per share on revenue of $1.57 billion for the three months ended March 31,down from net earnings of $360 million or 83 per share on revenue of $1.34 billion a year earlier.

The strong Canadian dollar hit the company’s bottom line as increases in its average U. S. dollar commodity prices were 10-20% lower in Canadian dollar terms.

Don Lindsay, president and chief executive, described the outlook for the balance of the year as “positive” because of robust copper prices and the strong performance of several new mines. The company also expects a “significant increase” in coal prices under its new contracts for the 2008 coal year, which began April 1st.

The copper division contributed $435 million, or 71% of total operating profit in the latest quarter, up from 47% of operating profit a year earlier. This strong performance reflects a 32% increase in copper prices and the acquisition of the Quebrada Blanca, Andacollo and Duck Pond mines through the takeover of Aur Resources last August. These mines contributed $128 million in operating profit in the quarter before a $29-million charge for inventory revaluations related to the transaction.

The zinc division bore the brunt of lower prices, which fell 30% (or 40% in Canadian dollar terms) on average from the first quarter of 2007. The zinc division generated an operating profit of $155 million, or 25% of total operating profit, down from $266 million or 43% of operating profit a year earlier.

The newly opened Pogo gold mine in Alaska helped the gold division generate an operating profit of $9 million, compared with a loss of $2 million in the first quarter of 2007. Operating profit from the coal division fell to $15 million in the quarter from $64 million a year earlier.

The coal and gold divisions together accounted for 4% of total operating profit, an improvement over their combined negative (minus 10%) performance in the first quarter of 2007.

Teck Cominco is looking to Chile for both internal growth and acquisition opportunities, and now also holds the largest foreign-owned portfolio of exploration projects in the mineral-rich nation.

In mid-April, the company announced a $415-million offer to acquire the Relincho copper-moly project through a friendly plan of arrangement with Global Copper (GLQ-T, GOCPF-O). This advanced project hosts an indicated resource of 498 million tonnes containing 5.14 billion lbs. copper and 250 million lbs. moly, plus another 378 million tonnes in the inferred category.

The Relincho acquisition adds a third project to the company’s Chilean copper portfolio, which includes two operating mines, both with near-term potential for further expansion and development.

A drilling program is under way at the newly acquired Quebrada Blanca mine, focused on upgrading and expanding an inferred resource of 1.03 billion tonnes containing about 11 billion lbs. copper and 45 million lbs. molybdenum. The ongoing program is expected to lead to a feasibility study.

Teck Cominco recently exercised a now-disputed right to acquire a 26% interest in the Petaquilla copper project in Panama, and inked a preliminary deal that would see partner Inmet Mining (IMN-T, IEMMF-O) take the lead in operating and financing the large-scale project. Teck Cominco will then have 18 months to decide if it will continue to participate in the project or pursue other options, including selling its interest.