Red ink for Sherritt Gordon

Unable to withstand the unrelenting pressure of weak fertilizer prices, the bottom line of Sherritt Gordon Mines has caved in with a loss, before unusual item, of $3.2 million for the year ending Dec 31.

After preferred dividends, the loss per common share before unusual items was 33 cents compared to a profit of 1 cents per share or $4.6 million in 1985.

The remaining asset value of the Ruttan copper mine in Manitoba, including a provision for future shutdown costs, was written off in 1986 at $14.6 million leaving a loss per common share after unusual items and after preferred dividends of $1.45 compared to an 89 cents loss in 1985.

Cash flow from operations after working capital changes increased to $41.5 million from $34.3 million. Capital expenditures amounted to $38.8 million, slightly more than the $36 million spent in 1985. Included in the capital spending was $31 million representing the final stages of SherrGold’s MacLellan gold mine in Lynn Lake, Man.

Revenues for the year totalled $390.8 million, down from $445.3 million the previous year.

Operating profit in the fertilizer division slipped to $22.9 million from $44.1 million. Weak grain markets and surplus fertilizer production had a severe impact on market price levels.

Formetal refining and fabricating, operating profit slid to $9.2 million from $10.5 million. However, the mining division was able to make a hefty cut to its losses. Compared to a loss of $16.3 million in 1985, the 1986 loss was shaved down to $7.6 million.

Interest costs were lower this year at $25.3 million compared to $29.2 million in fiscal 1985.

Despite the gloomy financials, the company did report its share of positive developments for the year. One was the award of the contract for the supply of aureate coinage blanks for the new Canadian $1 coin. Another was the acquisition of a substantial ownership position in natural gas reserves through a partnership agreement with Unocal Canada. As well operating results at the Ruttan mine improved and SherrGold’s MacLellan mine started production.

However, to conserve cash in the face of deteriorating fertilizer markets and continuing low base metal prices, the board of directors has decided to omit the payment of a dividend on common shares in 1986.