Falconbridge earnings soar

Higher metal prices more than offset the affects of a three-week strike at its Sudbury operations and helped Falconbridge (FL-T) post a nearly five-fold increase in earnings during the first quarter.

During the first three months of the year, Falconbridge earned a record US$184 million (or US$1.02 per share); operating income nearly quadrupled to US$186 million. Revenue jumped 56% to US$734 million as the company averaged US$6.88 for each lb. of nickel sold, an 80% increase from a year earlier. Realized copper prices rose 55% to US$1.21 per lb., while zinc sold for US52 per lb., a third more than a year ago.

During the quarter, Falconbridge produced 26,858 tonnes of refined nickel, down from 27,450 tonnes a year earlier owing to the strike at the Sudbury operations. Falconbridge figures the strike cost it around US$13 million. Likewise, refined copper production slipped by 2% to 65,348 tonnes. Still the company says most production targets were exceeded.

Elsewhere on the labour front, Falconbridge says that two contracts are set to expire during the second quarter. In Norway, trade unions negotiate a nation-wide collective agreement, which includes unionized workers at Nikkelverk. The current contract at the Collahuasi operation in Chile expires on May 31. In all, the contracts cover about 67% of the company’s employees.

Meanwhile, Falconbridge says it will immediately begin to retrofit its Kidd zinc refinery in Timmins to handle precious-metal-bearing zinc concentrate from Agnico-Eagle Mines‘s (AGE-T) LaRonde mine near Rouyn-Noranda, Que.

The pair have inked a life-of-mine supply and processing agreement under which Falconbridge’s Kidd Creek operations will process 60% to 75% of LaRonde’s concentrate production. Falconbridge will process a maximum of 125,000 tonnes per year; the LaRonde operation processes more than 7,000 tonnes per day.

Zinc production capacity at the Kidd met site is 140,000 tonnes per year; the balance of the zinc concentrate requirements will be provided by the Kidd mine, which is currently completing its Mine D expansion.

“The proximity of Falconbridge’s and Agnico-Eagle’s operations, combined with Kidd’s available zinc capacity and precious-metal recovery capabilities, make this agreement a natural fit for both companies,” said Brent Chertow, president of Falconbridge’s Canadian Copper and Recycling business.

“We are also confident that additional synergies exist in the areas of logistics, concentrate sampling and sharing of best practices for deep mining operations at our respective sites,” he added.

At quarter’s end, Falco had US$791 million in working capital, with US$415.5 million in cash or equivalents. Long-term debt rang in at US$1.34 billion, down slightly from a year earlier.

The company has declared quarterly dividends of 10 per common share and 2 per Series 1 preferred share, payable May 12 and June 1, respectively. A 28.63 per share dividend on Series 3 preferred shares is payable June 1.