Noranda takes big hit in 2002 (February 11, 2003)

The decision to shut down the 80%-owned Magnola magnessium plant in Que. drove Noranda (NRD-T) deep into the red in 2002, with the major recording a loss of $700 million, compared with a loss of $92 million in 2001.

The 2002 earnings included an after-tax charge of $630 million against Magnola, which is being shut down and will remain closed until magnessium prices improve. An additional, after-tax charge of $28 million will be recorded in the current quarter.

Excluding non-recurring charges, Noranda lost $110 million last year.

Noranda’s operating and overhead costs actually grew, but were offset by fewer expenses related to raw materials, exploration, research and development. After accounting, restructuring and other charges, the major had an operating loss of $751 million, versus $125 million in the previous year.

Comparable cash from operations rose to $582 million from $401 million.

In the final three months of 2002, Noranda lost $673 million on sales of $1.4 billion, compared with losses of $84 million on sales of $1.4 billion in the similar period of 2001. Again, the Magnola writedown is behind the downfall, without which Noranda would have recorded a loss of $50 million in the recent quarter.

Noranda 2002 production volumes were as follows: 474,602 tonnes copper (compared with 356,743 tonnes in 2001); 553,172 tonnes zinc (compared with 509,291 tonnes); 52,469 tonnes nickel (compared with 49,796 tonnes); 23,303 tonnes ferronickel (compared with 21,662 tonnes); 76,177 tonnes lead (compared with 83,127 tonnes); and 13 million oz. silver (compared with 11 million oz.).

The closure of the Gaspe copper smelter in Quebec and the ongoing strike at the Horne smelter, also in Quebec, saw Noranda produce 128,183 fewer tonnes of refined copper (in cathode and blister form). However, this was offset by increases in refined zinc, nickel and aluminum.

Except for aluminum and lead, Noranda sold its metals for higher prices than a year earlier. The company also benefitted from currency gains on its hedging contracts.

On Dec. 31, Noranda had $964 million in working capital and $4.7 billion in long-term debt. Some of the debt is owned by Falconbridge (FL-T), in which Noranda holds a 60% stake.