Noranda makes cuts at Horne, Perseverance on hold

In an effort to cut operating costs by up to $30 million, Noranda (NRD-T) plans to slash production at its Horne copper smelter in Rouyn-Noranda, Que.

Under the plan, total feed volume to the smelter will be reduced by about 23% to around 650,000 tonnes by mid-2004. Anode production will see a drop off of 20% to 145,000 tonnes per year. The company also plans to intensify recycling activities.

The production cut will be accompanied by the loss of about 100 job by year-end; another 120 will be cut next June. The operation currently employs 700 workers. Noranda says the workforce reductions are needed to ensure the operation’s profitability and long-term viability. The company had warned of up to 125 job cuts in February.

“We are going through a very difficult period and we need to act now to ensure our survival over the short and medium term,” said Al Giroux, the smelter’s general manager. “There is no doubt that we want to continue operating our plant over the long term. The choices we make today should allow us to do that.”

Noranda says Horne has suffered from lower treatment charges (thanks to increased Asian competition), the strengthening Canadian dollar, and lack of domestic feed (and resulting reliance on more expensive European and Latin American concentrates). So far this year, the stronger loonie alone has cut the smelter’s revenues by nearly 15%.

In 2002, Horne processed 689,000 tonnes of copper concentrates, 45,000 tonnes of recycled precious metal-bearing materials, and produced 147,020 tonnes of anode copper and 510,900 tonnes of sulphuric acid. The facility was originally forecast to produce 186,000 tonnes of anode copper.

Operations at Horne resumed in May following a nearly year long strike. The sometimes heated battle centred on job security, sub-contracting and health-and-safety guarantees. Noranda put the cost of the strike at $25 million, before taxes, in 2002, plus $10 million in the first quarter of 2003.

The cuts at Horne come a day after Noranda confirmed it would shut down the Bell-Allard zinc mine in Matagami, Quebec once reserves are depleted late next year. The operation currently employs 230 workers.

Noranda also said that it would continue to wait for zinc prices to pick up before developing the nearby Perseverance high-grade zinc deposit. The operation was to have been staffed by employees from Bell-Allard; those employs now face layoff.

At last count, resources at Perseverance stood at 5.1 million tonnes grading 15.82% zinc, 1.24% copper, 29.4 grams silver and 0.38 gram gold per tonne. The resources are found in three zones — Perseverance, Perseverance West and Equinox.

Noranda has a 90% stake in Perseverance. Following a feasibility study, Socit de dveloppement de la Baie James has the right to participate at 10% or convert its stake to a 2% net smelter return royalty. Noranda can halve the royalty by paying $1 million.

Noranda has been cutting costs associated with its Canadian Copper and Recycling business unit since the beginning of 2002. During that time, the company has permanently closed the Gasp smelter, and reduced its workforce by almost 1,000 people, or 30%.Shares in Noranda were off 23, or 1.4%, at $16.12 in late afternoon trade in Toronto following the news on Oct. 15. Three-month copper prices ended the day at US$1,959 per tonne, up from US$1,919 at Tuesday’s kerb close.