Teck Cominco basks in new record profits

Vancouver Strong metal prices propelled net earnings for Teck Cominco (TEK.SVB-T) to a record $510 million in the fourth quarter of 2005, and $1.3 billion for the full year, more than double the $617 million earned in 2004.

The diversified metal and commodity producer ended the year with its strongest ever balance sheet, with $3.1 billion in cash, which exceeds long-term debt by $1.4 billion.

The strong fourth-quarter earnings reflect significantly higher prices for copper and zinc, which at US$1.95 per lb. and US$0.74 per lb., respectively, were up 39% and 45% from a year ago.

Fourth-quarter operating profit was $700 million, up from $560 million in the third quarter. About half that increase was attributed to the Red Dog mine in Alaska, where high zinc prices contributed to a $61-million increase in operating profits.

Operating profits at copper mines increased by $79 million, owing to higher sales volumes and prices. Coal profits increased in the fourth quarter despite lower sales. The company’s share of operating profit was $159 million in the quarter, up from $32 million a year earlier.

Molybdenum sales slid 55% from the fourth quarter of 2004, while revenue fell to $34 million from $110 million a year earlier. A US$8-drop in moly prices to US$20 per lb. was one factor, but another major factor was reduced moly grades [and production] from the Valley pit at the Highland Valley copper mine in British Columbia.

Gold was not a major contributor in the latest quarter, with production down to 101,000 oz. from 133,000 a year ago at the Hemlo gold mines in Ontario. Teck’s share is half the amount produced.

Gold production is projected to reach 440,000 oz. this year, up from 245,000 oz. in 2005, as the new Pogo gold mine in eastern Alaska begins production. The US$347-million mine was substantially completed by year-end, and is on target to achieve commercial production in the second quarter.

Teck Cominco is also venturing into the oil-sands business. Last fall the company secured a 15% partnership in the Fort Hills project in Alberta. Engineering and design-work are under way and a preliminary cost estimate of the project should be in hand by the end of 2006.