Lornex runs against trend, reports improved profit

Most people would have to look pretty hard to find a porphyry copper mine in North America that is making a decent profit. But the massive Highland Valley Copper project of Lornex Mining and Cominco is doing just that — and it will probably get even better. Production costs are said to be competitive with those in Chile which probably has about the lowest unit costs in the world.

At the Lornex annual meeting, George Albino, chairman, announced first-quarter net earnings of $7.2 million or 87 cents per share. That compares with $4.1 million or 50 cents per share in the same quarter last year. Net earnings for 1986 were $27.3 million ($3.30 per share), the highest in the past five years. “The 1987 first-quarter results reflect our proportional 45% interest in Highland Valley Copper while the 1986 first-quarter results include 100% of Lornex’s copper-molybdenum operations,” he noted.

Lornex and Cominco are integrating their facilities in the Highland Valley under a joint-venture agreement concluded in mid-1986. Their pact conspicuously excluded Teck Corp. (which has a 22% interest in Lornex), whose dormant Highmont mill is newer and much more efficient than the old Bethlehem copper plant, one of two mills used by the joint venture.

Mr Albino confirmed that discussions were under way with the partners in Highmont “with respect to the possibility of bringing the Highmont facility into the Highland Valley copper project.” But he declined to discuss what the main stumbling block was in the negotiations and argued there never was a deal in any form between Teck and Lornex regarding the Highmont mill.

At Cominco’s annual meeting, which was held immediately after Lornex, Teck president Norman Keevil Jr. said that Teck has offered to throw in its Highmont mill for 5% of the Valley Copper project. He claimed that Cominco was agreeable to the plan but Lornex was “low balling” them and holding out for a better deal. He also said that Mr Albino had agreed verbally to have Highmont included and, indeed, had admitted it publicly. Mr Keevil predicted the matter would probably end up in the courts.

The $83 million program to integrate the Lornex and Cominco facilities is well advanced and should be completed by year-end.”It will be 1988 before the full benefits of this partnership will be realized,” said Mr Albino.

One shareholder questioned the adequacy of disclosure in Lornex’s annual report, citing in particular the lack of information about its 39% interest in the Bullmoose coal mine. Teck is operator for the project with 51%. The shareholder said he had to look in Teck’s annual report for earnings statistics. (Teck’s 51% share of Bullmoose earnings was $6.1 million). Mr Albino said Lornex hadn’t received any complaints before and recommended the gentleman write for the information saying they would consider the request.