Teck seen recession-proof with cash flow, profit report

The true measure of an individual is best determined under fire, an analogy that is probably more applicable to Teck Corp. than any other Canadian mining company. No matter how hard you look, you simply won’t find another company in this country which has prospered during the recession to the extent that Teck has. The company was one of the first to bite the bullet and get its balance sheet in order by selling assets before they were worth considerably less.(Timing is everything — whether you are a buyer or a seller). Following that, Teck’s strategy has been to augment its existing production base by acquiring or developing new, long-life and low-cost mining operations, Norman Keevil Jr, president, notes in the annual report.

Cash flow and earnings for the year ended Sept 30 were the second highest in the company’s history, he points out. The $56.8 million in cash flow ($1.89 per share) compares with $55.9 million the previous year and a high of $71.9 million in 1980. Net earnings after extraordinary items were approximately 50% higher at $24 million.

Four out of six mining operations which Teck owns or has interests in were profitable including Bullmoose, Afton, Lornex and Niobec. The Beaverdell silver mine operated at a near break-even point but Newfoundland Zinc, which closed last April, reported a loss. Combined mine operating profit from these projects was $56.6 million compared to $61 million a year earlier.

Even the company’s petroleum division made money — an operating profit of $8.2 million compared to $9.6 million the year before. New gas production partially offset the effect of lower oil and gas prices, said Mr Keevil.

The Teck-Corona mine at Hemlo, Ont. has still not been included in earnings but will be after the completion of pre-production underground development. Mine workings have now reached the lower levels and mill rate should be up to 1,000 tonnes per day by the end of the year which should make it a “significant ongoing income source,” he said. The operation has been named the David Bell Mine in recognition of the Corona geologist who discovered the mine in 1981.

Last March, the Supreme Court of Ontario granted the adjoining Williams property to International Corona on payment of $154 million to Lac Minerals. That judgment is being appealed by Lac and a decision is expected shortly. Teck and Corona each have a 50% interest in the David Bell mine and that will also apply to the Williams property if the original decision stands up.

Teck led a group that bought a controlling interest in Cominco in September. Cominco operates the largest zinc refinery in the world at Trail, B.C., and has several zinc- lead mines and a fertilizer division which is rumoured to be a prime candidate for divestiture. Teck’s share of the purchase was funded by cash on hand and the proceeds of a public issue in Europe and Canada. It was completed within a month of the purchase for “no net increase in the company’s borrowings,” said Mr Keevil.

Earlier this month (N.M., Dec 8/86) Cominco announced plans to proceed with its Red Dog mine in Alaska which is one of the highest grade zinc deposits ever discovered. And Teck confirms that negotiations are under way with Cominco to include Teck’s Highmont mill in the Valley Copper development located in B.C.’s Highland Valley. That mill, which is rated at 25,000 tonnes, could handle 40,000 tonnes of Valley ore with “minor modifications to its circuitry,” argues Teck.

Separately, Teck and Cominco have concluded an agreement on the Ajax property near the Afton mine at Kamloops, B.C. Although lower grade, Teck says the “deposit has the potential to prolong the life of Afton for several years.” Drilling is planned early in 1987 once assurances are received that government permits for mining will be available, said Teck.