Falconbridge strike hits Noranda’s earnings

A six-and-a-half-month strike at subsidiary Falconbridge‘s (FL-T) Sudbury nickel operations, combined with lower metal prices and lower production, put a dent in Noranda‘s (NOR-T) earnings for the three months ended March 31.

During the quarter, Noranda earned $24 million (or 8 per share), compared with year-ago earnings of $68 million (27 per share). Sales revenues between the two periods slipped to $1.6 billion from $1.8 billion. Noranda figures the strike at Sudbury cut into first-quarter net income by about $30 million. The company also attributes the poorer performance to lower production at the Kidd Mining Division in Timmins, Ont. (due to a ground movement at the No. 1 mine) and volume curtailments at American Racing aluminum wheel operations.

“Our results reflect the economic slowdown, a reduced demand for our main products and lower metal prices,” said David Kerr, Noranda’s president and CEO, in a prepared statement. “We are disappointed with the first-quarter results, but we are more upbeat about our prospects for the second half of the year and considerably more optimistic about the growth of Noranda over the next few years.”

Mine production during the first quarter amounted to:

113,000 tonnes zinc (compared with 100,000 tonnes a year ago);

68,000 tonnes copper (78,000 tonnes);

9,000 tonnes nickel (15,000 tonnes);

7,000 tonnes ferronickel (8,000 tonnes);

18,000 tonnes lead (22,000 tonnes); and

2.1 million oz. silver (2.2 million oz.).

Fabricated aluminium production fell to 33,000 tonnes from 39,000 tonnes a year earlier.

At the 63,000-tonne-per-year Magnola magnesium plant in Danville, Que., production began in late October, but is not at capacity yet. The commissioning is taking longer than planned. Noranda now expects cost overruns of 25%, bringing the total investment in the plant to about $920 million. The facility is owned 80% by Noranda. The remaining 20% is held by Socit Gnrale de Financement.

Noranda says construction at the Antamina zinc-copper mine in Peru is nearing completion and pre-operational checks and commissioning are under way. The tailings dam is complete and holds enough water for startup. The project is on budget and slated for a June startup. This is more than two months ahead of schedule. Full production (at 70,000 tonnes of ore per day) is expected six months after startup.

The Brunswick mine in New Brunswick produced a record 132,000 tonnes of zinc in concentrate production during the quarter.

The Bell Allard zinc-copper mine reached planned production levels, churning out 2,075 tonnes per day.

At CEZinc, metal production was 5% lower than a year earlier, thanks to lower metal sales.

In February, Noranda and Falconbridge agreed to buy, for US$175 million plus certain adjustments, Boliden‘s (BOL-T) interests in Compania Minera Lomas Bayas and Compania Minera Boliden Westmin Chile. The companies own the Lomas Bayas solvent extraction-electrowinning copper project and the adjacent Fortuna de Cobre copper deposits in Chile. The acquisition, subject to due diligence, would increase copper mine production by about 20%.

During the quarter, Noranda issued US$300 million in unsecured 10-year notes which bear interest at 8.375% annually. The proceeds went to repay short-term indebtedness. Consolidated net debt increased by $500 million.

The company’s board of directors has approved the filing for a common-share listing application with the New York Stock Exchange.

On March 31, Noranda had $821 million in cash. A dividend of 20 per share will be paid to shareholders on June 15.