Falconbridge soars on buoyant metals

Higher metal prices helped Falconbridge (FAL.LV-T, FAL-N) more than double its earnings during the first three months of 2006.

The company pocketed US$462 million (or US$1.21 per diluted share) on sales revenue of US$2.9 billion. During the corresponding period of 2005, earnings rang in at US$176 million (US58 a share) on US$1.9 billion.

The improved performance also reflects higher copper and nickel sales volumes and treatment and refining charges at the company’s copper smelters and refineries.

During the quarter, Falco churned out 143,000 tonnes of refined copper, up 18% from a year earlier, owing to expansions at the Horne copper smelter and CCR refinery in Quebec. Refined nickel production edged 2% higher to 28,400 tonnes. On the flip side, refined zinc production slipped by 2% to 37,300 tonnes.

Realized prices for copper and zinc increased 49% and 70% to US$2.29 per lb. and US$1.07 per lb. The company’s realized nickel price fell by 3% to US$6.84 per lb.

Falconbridge CEO Derek Pannell expects the high metal price environment to continue during the second quarter, noting that prices on the London Metal Exchange at the beginning of the second quarter are already exceeding average prices for the first quarter.

Looking ahead, Falconbridge expects to produce 635,000 tonnes of refined copper, 115,000 tonnes of refined nickel, and 210,000 tonnes of refined zinc during 2006.

Meanwhile, Pannell describes talks with the U.S Department of Justice and the European Commission regarding its proposed takeover by Inco (N-T, N-N) as “constructive.”

The Department of Justice is expected to deliver its verdict by the end of April. A decision from European Commission could come as late as August.

Both regulators are concerned about the position the combined entity would have in the high-grade nickel market. Such nickel is used in nickel plating and in superalloys, which are employed in high-tech products like the rotating parts of jet engines.