Boliden, North Atlantic open portal at Storliden

Partners Boliden (BOL-T) and North Atlantic Natural Resources (NAN) have begun development work at the Storliden copper-zinc deposit in northern Sweden.

NAN is a Swedish-listed company in which Boliden and South Atlantic Resources (SCQ-V) each hold a 38% equity interest. The company has 31 million shares outstanding.

Construction of surface facilities and blasting of the portal are under way, and development and mining contracts are expected to be signed shortly. Production is to begin early next year.

Storliden, with 1.8 million tonnes grading 10.3% zinc and 3.5% copper, is expected to yield 25,000 tonnes zinc-in-concentrate and 10,000 tonnes copper-in-concentrate annually over six years. The concentrates will be produced at Boliden’s milling complex, 90 km away, and then sold on the European market.

NAN is financing the capital cost of US$20-25 million, whereas Boliden is footing the bill for modifying its mill.

Net profits are projected to be US$90 million, two-thirds of which will accrue to NAN, with Boliden receiving the rest. NAN is also entitled to a bonus of US$1 million and to recover US$5 million in exploration costs.

Under a similar financial arrangement, and subject to completion of a feasibility study, the partners will also develop the nearby Norrliden deposit. The resource there is pegged at 775,000 tonnes grading 7.85% zinc and 0.8% copper.

For 2000, Boliden reported a loss of US$656 million on revenue of US$1.2 billion, compared with a loss of US$68 million on US$1 billion in 1999. The recent loss, which equates to US$3.45 per share, reflects US$629 million in accounting charges, mostly against the Lomas Bayas and Los Frailes base metal operations in Chile and Spain, respectively. Nonetheless, an operating loss of US$36.5 million was incurred.

Boliden’s cash flow was not much better, with US$21 million drained from reserves. Capital projects were the biggest expense, the largest source of cash being proceeds from a share issuance. Boliden ended the year with US$45 million in cash and equivalents.

On Dec. 31, Boliden had a working capital deficiency of US$670 million. The company failed to comply with certain loan obligations, and, as a result, US$773 million in long-term debt became a current liability.

Boliden is attempting to refinance its loan agreements and has been granted a temporary reprieve from the affected lenders until May 1. A condition of the waiver is that US$110 million be repaid at that time.

Restructuring

As part of the restructuring process, Boliden has relocated its headoffice to Stockholm and inked deals to sell non-core assets, such as Lomas Bayas (T.N.M., March 12/01). It has also decided to withdraw from Spain later in the year; hence the Los Frailes writeoff in 2000.

Also, Boliden has opted not to expand the Aitik mine in Sweden and is currently seeking a partner at its Myra Falls operation in British Columbia. Both decisions are part of the reorganization effort.

Boliden produced the following metal volumes in 2000:

– 247,180 tonnes zinc (versus 190,449 tonnes in 1999);

– 149,701 tonnes copper (127,177 tonnes);

– 121,324 tonnes lead (110,334 tonnes);

– 138,683 oz. gold (141,027 oz.);

– 9,855 oz. silver (8,456 oz.).

Copper production was up at the Aitik, Myra Falls and Lomas Bayas mines, whereas higher zinc output at Los Frailes and Myra Falls offset lower output at the Boliden Area mines in Sweden.

Boliden obtained the following average metal prices:

– US51 per lb. for zinc;

– US82 for copper;

– US21 for lead;

– US$279 per oz. for gold;

– US$4.95 per oz. for silver.

Zinc and copper prices were higher than the 1999 averages, whereas gold was unchanged.

Petter Traaholt is resigning as Boliden’s executive vice president and chief financial officer after three years on the job. Anders Haker, currently the company’s treasurer and controller, will become the CFO on June 15.