Increased production and lower cash costs allowed
For the three months ended Sept. 30, Rio Algom posted net earnings of $6 million (or 2 cents per share) on revenue of $515 million ($440 million from metals distribution and $75 million from mining). By comparison, the third quarter of last year saw the company earn $18 million (25 cents per share) on revenue of $447 million ($362 million from metals distribution and $85 million from mining).
The revenue boost in the metals-distribution business resulted from higher volumes of stainless steel and aluminum. The increase in aluminum stemmed largely from Rio’s acquisition of Ideal Metal in May 1998, and exports were bolstered by the weak Canadian dollar.
During the third quarter, Rio Algom’s share of copper production totalled 93 million lbs. from three operations: Cerro Colorado in Chile (40 million lbs.); Highland Valley Copper in British Columbia (30.5 million lbs.); and Alumbrera in Argentina (22.5 million lbs.). Production in last year’s third quarter consisted of 32 million lbs. from Cerro Colorado and 29.4 million lbs. from Highland Valley.
Average daily throughput at Alumbrera reached a high of 87,500 tonnes per day in September, ahead of the daily design rate of 80,000 tonnes.
In addition to copper, Rio Algom produced 33,000 oz. gold, 452,000 lbs. molybdenum, 249,000 lbs. uranium and 110,000 tonnes coal during the past quarter, compared with zero gold, 380,000 lbs. moly, 95,000 lbs. uranium and 147,000 tonnes coal during the same period last year.
During the third quarter, average cash costs for copper production were US49 cents per lb., down from US64 cents per lb. a year ago. However, Rio Algom’s average selling price for copper was reduced by 28 cents to US74 cents per lb.
Rio Algom’s cash and short-term investments, net of current bank loans and overdrafts, were $213 million at Sept. 30, 1998, compared with $82 million at June 30, 1998.
The dramatic rise is due to the issuance of US$150 million in preferred securities. These unsecured subordinated debentures are due in 2047 and pay interest quarterly at a rate of 9.4% annually.
The biggest cash outlay in the third quarter was $91 million spent on capital expenditures, mostly at Cerro Colorado where production was expanded. This expansion is expected to contribute 20-25 million lbs. copper in 1998 and raise total production at Cerro Colorado to about 200 million lbs. in 1999 and 220 million lbs. in the following year.
Exploration spending totalled $6 million in the recent quarter, compared with $7 million a year ago.
In other news, beginning in the first quarter of 1999, Rio Algom will be changing to a quarterly dividend payment from the current semi-annual one.
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