Higher Metal Prices propel Teck Cominco

Vancouver — Record first-quarter earnings posted by Teck Cominco (TEK-T) were overshadowed by the company’s decision to halt development of the Pogo gold project in Alaska.

Pre-construction work was halted pending resolution of an appeal by the Northern Alaska Environmental Center (NAEC) in relation to a key environmental permit issued by the Environmental Protection Agency (EPA).

Improved prices for copper and zinc resulted in a first-quarter profit of $96 million (51 per share), compared with $5 million in restated earnings (3 per share) a year earlier. Cash flow from operations rose dramatically from $51 million to $195 million between the two periods.

Higher copper and zinc prices led to operational revenues of $722 million in the first quarter, compared with $574 million a year earlier. The acquisition of an additional interest in the Highland Valley Copper mine in British Columbia contributed $17 million to revenues, while the company’s 22.5% stake in the Antamina copper-zinc mine in Peru contributed $62 million. Revenue was affected by the closure of the Bullmoose and Polaris mines in Canada, which had contributed $48 million in the first quarter of 2003.

Copper and zinc prices on the London Metal Exchange averaged US$1.24 and US49 per lb., respectively, in the recent quarter, or 64% and 37% higher than a year earlier. However, the higher prices were partly offset by the weaker U.S. dollar, which averaged $1.34 in the first quarter, compared with $1.51 a year earlier.

At the Pogo project, mill construction was about to begin when Teck Cominco announced the closure. The company was forced to lay off about 300 workers who had already started pre-construction work.

Teck Cominco is earning a 40% stake in Pogo and is the operator. Subsidiaries of Sumitomo Metal Mining and Sumitomo Corp. own the remaining 60%.

NAEC stated Teck Cominco should not be granted a waste water permit because the discharge of arsenic and other heavy metals from the mine’s tailings dump would exceed federal standards. The environmental organization expressed concern that pollution could leach from the mine’s containment facilities and reach a nearby stream that runs into the Goodpaster River.

Teck Cominco had hoped for an early resolution of the dispute but now appears resigned to a longer battle.

“The Pogo gold project in Alaska could be delayed by as much as a year,” CEO David Thompson told shareholders at the recent annual meeting. He added that even if the EPA’s appeal board rejects the NAEC’s request, the latter would likely take the fight to the courts.

Meanwhile, Teck Cominco is waiting for a response from U.S. officials to Canada’s proposal to resolve a conflict related to its Trail smelter in British Columbia, near the U.S. border. The dispute is over whether the U.S. should have jurisdiction over a study of potential pollution problems at Lake Roosevelt in Washington state. The EPA is attempting to put Teck’s Trail smelter under the jurisdiction of U.S. environmental laws. Teck is willing to pay for the study of impacts of waste slag in the lake but not if it is done under the EPA’s jurisdiction.

In other news, the Elk Valley Coal Partnership, in which Teck Cominco has an effective 41% interest, is proceeding with development of the Cheviot Creek pit at its Cardinal River operations. Production is pegged at 1.4 million tonnes of metallurgical coal per year.