Falco’s earnings soar in Q1

Higher metal prices more than offset the effects of a 3-week strike at Falconbridge’s (FL-T) Sudbury operations and helped it post a nearly five-fold increase in earnings during the first quarter.

During the first three months of 2004, Falco earned a record US$184 million (or US$1.02 per share). Operating income more than quadrupled to US$268 million, compared with year-earlier figures, while revenue jumped 56% to US$734 million as the company averaged US$6.88 for each pound of nickel sold (80% higher than in the first quarter of 2003). Realized copper prices rose 55% to US$1.21 per lb., while zinc sold for US52 per lb., a third more than a year earlier.

During the quarter, Falco produced 26,858 tonnes of refined nickel, down from 27,450 tonnes a year earlier, owing to the strike at the Sudbury operations. Mine production there slipped by 30% to 4,404 tonnes. The strike cost Falconbridge about US$13 million. Likewise, refined copper production slipped by 2% to 65,348 tonnes. Still, the company says it exceeded most of its production targets.

Falco expects to produce 22,000 tonnes nickel-in-concentrate in 2004 (down from a previous estimate of 25,000 tonnes); copper production is expected to rise 10% from 2003 levels.

Meanwhile, two labour contracts are set to expire in the current quarter: in Norway, a nation-wide collective agreement that includes unionized workers at the Nikkelverk refinery expires May 31, while the contract at the 44%-owned Collahuasi operation in Chile expires June 30.

Closer to home, at its Kidd zinc refinery in Timmins, Ont., Falco says retrofitting will make it possible to handle precious-metals-bearing zinc concentrate from Agnico-Eagle Mines‘ (AGE-T) LaRonde gold operation in Quebec.

The pair have inked a life-of-mine supply and processing agreement under which Falco will process 60-75% of LaRonde’s concentrate production at the Kidd Creek operations. Falco will process a maximum of 125,000 tonnes per year. (The LaRonde operation processes more than 7,000 tonnes per day.)

The Kidd metallurgical site has the capacity to produce 140,000 tonnes zinc per year; the balance of the zinc concentrate requirements will be provided by the Kidd mine, which is being expanded.

“The proximity of Falconbridge’s and Agnico-Eagle’s operations, combined with Kidd’s available zinc capacity and precious metal recovery capabilities, make this agreement a natural fit for both companies,” says Brent Chertow, president of Falco’s Canadian Copper and Recycling business.

In Labrador, Falconbridge recently pulled out of the South Voisey Bay joint venture, 90 km south of Inco‘s (N-T) Voisey’s Bay nickel project. Joint-venture partners Donner Minerals (DML-V) of Vancourver and Northern Abitibi Mining (NAI-T) of Calgary say the major’s work would have allowed it to maintain its rights until the end of the year.

Drilling on three geophysical conductors last year resulted in poorly mineralized sulphide intercepts. The best hole cut a 0.23-metre-wide intercept grading 1.22% nickel, 0.31% copper and 0.17% cobalt.

At the end of the first quarter, Falco had US$791 million in working capital plus US$415.5 million in cash or equivalents. Long-term debt totalled US$1.34 billion, down slightly from a year earlier.

The company has declared quarterly dividends of 10 per common share and 2 per Series 1 preferred share, payable May 12 and June 1, respectively. A 28.6 dividend on each Series 3 preferred shares is payable June 1.