Low Metal Prices take toll on Teck

Vancouver — Partly as a result of the merger that gave rise to Teck Cominco (TEK-T), the new entity has posted an after-tax net loss for the year of $21 million (or 17 per share) after asset writedowns valued at $122 million.

The loss was offset somewhat by profits from power sales at the Trail refinery in British Columbia and a strong performance from the company’s coal operations. The operating profit from Trail was pegged at $222 million, whereas coal contributed $87 million.

Fourth-quarter earnings totalled $6 million (3 per share) on revenue of $527 million, compared with $43 million (39 per share) on revenue of $716 million in 2000.

“We aren’t benefiting from the power sales we had twelve months ago,” says Chief Executive Officer David Thompson, who adds that the lower earnings are also due to low zinc and copper prices.

Writedowns following the merger were taken on the carrying values of non-operating properties and investments. Cash flow from operations rang in at $418 million in 2001, compared with $239 million in 2000. The increase is a result of the consolidation of the two companies’ cash flow. Operating cash flow in the recent fourth quarter was $53 million, compared with $160 million in the year-earlier period. Low commodity prices are cited for the decline of power prices during the 2001 quarter.

At the end of 2001, the company had $609 million in working capital, down from $760 million a year earlier. Net debt (excluding Inco shares and exchangeable debentures) was $864 million, or 25% of net debt plus equity. The realized price for gold over the past year was US$282 per oz., compared with US$307 in 2000; the realized copper price was US73 per lb., compared with US80; zinc was US$40, compared with US51; and lead was US22, compared with US21.

After being shut down for most of the third quarter so that Teck Cominco could focus on power sales, the Trail smelter reopened its doors in November. Production at Trail in the recent fourth quarter totalled 62,100 tonnes of refined zinc and 9,700 tonnes of refined lead. The smelter posted an operating loss of $15 million during the period, compared with a profit of $113 million a year earlier. The loss is attributed to low copper and zinc prices coupled with significantly reduced profits from power sales.

The Cajamarquilla refinery in Peru produced 31,500 tonnes of zinc in the quarter, compared with 30,900 tonnes in the last three months of 2000. The operating profit fell to $3 million from $6 million.

The Red Dog mine in Alaska cranked out 128,000 tonnes of zinc concentrate at an operating loss of $13 million, compared with 127,400 tonnes at a profit of $36 million a year earlier.

“We’re looking forward to an improvement in performance at Red Dog this year regardless of metal price levels,” says Steven Dean, president of Teck Cominco.

The Antamina mine in Peru started commercial production during the fourth quarter and proceeded to crank out 80,400 tonnes of copper and 56,000 tonnes of zinc in concentrate. TeckCominco’s share of production is 22.5%.

In British Columbia, the Highland Valley Copper mine produced 30,800 tonnes of copper concentrate at an operating profit of $6 million, compared with 31,600 tonnes at $8 million a year earlier.

The Polaris mine in Nunavut produced 33,200 tonnes zinc-in-concentrate at an operating profit of $3 million, compared with 34,300 tonnes at $16 million. The orebody is expected to be depleted in August of this year.

Overall gold production in the fourth quarter was 95,300 oz., down from 101,600 oz. a year earlier. The decline is a reflection of the company’s sale of its PacMin assets.

Production at the David Bell and Williams mines in Hemlo, Ont., totalled 90,600 oz., up from 68,400 in the fourth quarter of 2000. This rise is attributed to higher grades at Williams.

Metallurgical coal production of 1.8 million tonnes during the quarter was up 26% over last year. The wholly owned Elkview mine and 61%-owned Bullmoose mine in British Columbia contributed 1.5 million tonnes and 291,000 tonnes of coal, respectively. Operating profit for the two mines rang in at $31 million during the quarter, up from $8 million in the year-earlier period.

At the San Nicolas copper-zinc project in Mexico, Teck Cominco delivered a final feasibility study to its partner, Western Copper Holdings (wtc-t). A production decision is not expected until metal prices improve.

Meanwhile, rebuilding of the Pend Oreille mine in Washington state continues apace. Startup has been postponed to the first quarter of 2004 as a result of week metals prices.