Noranda bloodied by falling metal prices

Falling metal prices drove Noranda (NRD-T) to a $60-million loss as revenues slipped to $1.46 billion during the recent third quarter.

The 27-per-share loss compares with year-ago earnings of $52 million on revenue of $1.66 billion. So far in 2001, Noranda has chalked up a loss of $8 million on revenue of $4.72 billion.

Noranda’s 55% stake in Falconbridge (FL-T), brought in net operating profits of $8 million. Revenue topped $320 million, essentially unchanged from the third quarter of a year ago.

The company’s zinc business fared the worst with a net operating loss of $13 million on sales of $168 million. Metal prices are the culprit, as zinc production increased from the previous year. Combined cash costs at the zinc operations were US32 per lb. for the quarter, just less than current spot prices. Total costs were US41 per lb.

Metal production for the recent three-month period amounted to: 128,000 tonnes zinc, versus 105,000 tonnes a year ago; 79,000 tonnes copper (76,000 tonnes); 13,000 tonnes zinc (9,000 tonnes); 21,000 tonnes lead (19,000 tonnes); 5 tonnes ferronickel (6 tonnes); and 2.53 million ounces silver (2.58 million ounces).

Refined metal production was: 99,000 tonnes zinc (97,000 tonnes); 121,000 tonnes copper (123,000 tonnes); 22,000 tonnes nickel (19,000 tonnes); 21,000 tonnes lead (28,000 tonnes); 297,000 ounces gold (278,000 ounces); 9.71 million ounces silver (11.78 million ounces); and 54,000 tonnes aluminum (unchanged). Fabricated aluminum production topped 34,000 tonnes in the recent quarter, versus 35,000 tonnes a year ago.

“Compared with the previous quarter, metal prices are “down anywhere from 8-18% for zinc, copper, nickel and aluminum,” says CEO Aaron Regent. “And when you look at the year to-date, zinc is down 19%; copper, close to 10%; nickel, 31%; and aluminum, 5%. So, it’s no surprise that our results have been negatively impacted.”

Looking to stem the flow of red ink, the company plans a cost-cutting campaign including the elimination of more than 550 jobs and a $45-million reduction in the exploration, research and administration budgets. The moves are expected to generate more than $60 million in savings.

At the end of September, Noranda had working capital of $1.3 billion, $547 million of that was cash. Its net debt stood at $4.4 billion, which is 41% to its total capitalization.