Shutdowns cost Falconbridge (October 18, 2002)

Lower nickel sales and precious metals revenues pushed Falconbridge (FL-T) to a third quarter loss of $21.3 million.

The loss translates into 14 per share, and compares with a year-ago loss of $23.9 million (or 15 per share). The recent quarter’s performance is in stark contrast to the $41.1 million earned in the second quarter.

Third-quarter revenue climbed to $538.9 million from $522.2 million, but the company’s operating loss slipped to $17.8 million from $22.9 million. The quarter’s cash flow came to $56.6 million, up about $10.6 million.

Refined nickel production slipped to 18,811 tonnes, compared with 21,680 tonnes a year earlier thanks to scheduled shutdowns at the company’s nickel operations. Operating income from nickel operations was $15.2 million, up from $5.8 million in the same period of 2001 on higher nickel prices.

Production at the 85%-owned Falcondo operations in the Dominican Republic was up slightly from a year earlier and ahead of budget. The operations chipped in $6.2 million to operating income versus a year-ago operating loss of $12.8 million. The turnaround reflects improved ferronickel prices and higher sales volumes.

Falconbridge and Sindicato Unido de Trabagadores de Falconbridge Dominicana, which represents production and maintenance workers at Falcondo, plan to begin contract talks on Oct. 22. The current contract expires at the end of Nov.

Copper production climbed to 79,744 tonnes from the year-ago 77,699 tonnes. Operating income slipped $3 million to $9.4 million, attributed mostly to lower copper prices at Collahuasi in Chile.

Realized prices for the company’s bread-and-butter metals averaged: US$3.23 per lb. nickel; US$3.22 per lb. ferronickel; US67 per lb. copper; US38 per lb. zinc; and US$4.70 per oz. silver — all, save for zinc, slightly higher than year-ago levels.

The company expects improved results in the fourth quarter as operations run at capacity. Still, the company has trimmed its full-year refined nickel production target by 2,000 tonnes to 68,000 tonnes.

Looking forward, Falconbridge says, “The business climate continues to be challenging especially for copper and zinc, however the outlook for nickel remains positive.”

At the end of Sept., Falconbridge had $1 billion in current assets and $529 million in current liabilities. Cash and equivalents at quarter’s end stood at $262 million. Falconbridge’s net-debt-to-net-debt plus equity climbed to 44% from 42% at the end of 2001.

The company has declared a dividend of 10 per common share, 2 per Series 1 preferred share and 36.72 per Series 2 preferred share.