Higher metal prices and increased low-cost production from its new Raglan and Collahuasi mines offset the effects of an ongoing strike at its Sudbury operations, enabling
Falco earned $368.3 million (or $2.01 per share) on revenue of $2.6 billion last year, compared with $153 million (80 per share) on revenue of $2.2 billion in 1999.
The company’s average realized price for nickel rose by 47% to $4.09 per lb., though this was offset by higher oil, gas and electricity prices, which reduced operating income by $63 million over 1999 levels. Higher exploration and research-and-development expenses reduced operating income by another $25 million.
Falco took its hardest hit in the fourth quarter, when earnings dropped to $40.9 million (21 per share) on revenue of $589 million, compared with $93.9 million (51 per share) earned on revenue of $661 million during the corresponding period in 1999.
The drop was mostly due to the strike, which began in August 2000, by 1,250 unionized production and maintenance workers (CAW Local 598) in Sudbury, Ont. The strike reduced the company’s after-tax earnings by $54.8 million (31 per share) in 2000.
“We want an agreement that takes into account the fact that we’d like to extend the life of Sudbury beyond just the mines we have at present,” says Falco President Oyvind Hushovd. “In order to do that, we need to change the work practices and . . . lower the cost structure in Sudbury. That hasn’t really changed, whatever the events have been in the last couple of weeks [a reference to picket-line violence in mid-January].”
Since the strike began, Falco’s Sudbury mines have been operating at about 20% of normal production levels while the smelter has been operating at 50-60% of capacity using feed from three sources: Raglan in northernmost Quebec, stockpiles, and Sudbury mine output.
The Raglan mill operated at the 1-million-tonne-per-year rate during the last half of the year, and production of metal in concentrate increased to 23,100 tonnes of nickel in 2000 from 19,500 tonnes in 1999. For 2001, Raglan’s production is forecast at 24,000 tonnes of nickel in concentrate.
Falcondo, the company’s 85%-owned swing producer in the Dominican Republic, produced 27,800 tonnes of ferronickel in 2000, up from 24,500 in 1999. The company expects to raise this figure to 29,000 tonnes in 2001.
The Nikkelverk refinery in Norway operated below capacity in 2000, owing to reduced feed from Sudbury. Refined nickel output fell to 58,700 tonnes from 74,100 tonnes in 1999.
Falco says its Collahuasi mine in Peru had another good year, with lower ore grades more than offset by higher mine production and mill throughput. The company’s share of Collahuasi’s annual copper production was 186,100 tonnes (25,600 tonnes as cathode; 160,500 tonnes in concentrate), compared with 185,700 tonnes in 1999. Falconbridge’s share of production for 2001 is forecast at 176,000 tonnes.
Collahuasi is co-owned by Falco (44%),
Lower ore grades took their toll on Falco’s Kidd mining division in Timmins, Ont., with production slipping in 2000 to 82,700 tonnes of zinc and 54,900 tonnes of copper in concentrate, from 96,300 tonnes and 67,400 tonnes, respectively, in 1999.
The company says it continues to assess a recent ground movement at Kidd’s No. 1 mine. Production in the affected areas will stay halted for several more weeks until a technical review is completed.
About 15% of Kidd’s overall production tonnage may be affected this year, and the company says it will try to offset production shortfalls by increasing production from other areas of the No. 1 mine, or from the No. 3 mine.
Falco now estimates that Kidd’s production this year will be 80,000 tonnes of zinc in concentrate and 45,000 tonnes of copper in concentrate.
Kidd’s zinc plant, copper smelter and copper refinery continue to operate at normal capacity using purchased and stockpiled concentrates. In 2000, zinc-plant production increased to 141,400 tonnes, from 131,100 tonnes in 1999, while copper-cathode production was unchanged at 123,000 tonnes. For 2001, Falco anticipates zinc production of 147,000 tonnes and copper-cathode production of 145,000 tonnes.
On the South Pacific island of New Caledonia, Falco has completed 70,600 metres of diamond drilling on the Koniambo nickel-laterite deposit and has now boosted inferred resources to 151 million tonnes grading 2.58% nickel.
The company will soon begin a prefeasibility study that will look at developing a ferronickel plant capable of producing 60,000 tonnes of nickel annually. Already, Falco has completed an environmental baseline study, as well as pyrometallurgical tests on Koniambo ore.
Joseph Laezza, vice-president of marketing, says that after two excellent years of growth in global nickel demand above 5%, growth in 2001 will likely fall to 3.8%, owing to reduced stainless-steel production.
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