Boliden still bleeding despite cutting costs

With the Myra Falls mine out of production and output reduced at its Ronnskar smelter, Boliden (BOL-T) posted a loss of US$22.9 million for the first quarter of 1999.

The loss, amounting to US21 cents a share, came on first-quarter revenue of US$245 million, compared with revenue of US$290 million in the first three months of 1998. In that quarter, Boliden showed earnings of US$6.3 million. Poor metal prices also played a part in the quarterly loss, with both zinc and copper — Boliden’s two mainstays — significantly lower this year, compared with last.

Boliden produced just over 26,000 tonnes zinc in the recent quarter, down from almost 65,000 a year ago. The lower production reflected the suspension of production at the Myra Falls mine on Vancouver Island, which extended from December 1998 through to late March of this year. During the 3-month suspension, underground workings at Myra Falls were rehabilitated to provide better ground control in the mine. Production in the second quarter is expected to run at about 75% capacity.

Boliden also had to do without production from the Los Frailes mine near Seville, Spain, in the first quarter; that operation was shut down after a tailings dam failure in late April 1998. Production is being restarted and milling is expected to begin before the end of June.

The Ronnskar smelter in Sweden produced less copper in the first three months of the year as well. Unusually cold weather and an unscheduled 4-day shutdown of the main furnace account for the reduction. On the other hand, production increased at Boliden’s secondary-lead plant at Bergsoe and at the Norzink electrolytic zinc plant in Norway.

At Boliden’s Storliden project in the Skellefte district of northern Sweden, partner South Atlantic Resources (SCQ-V) has received an “asset assessment” from consulting firm A.C.A. Howe International.

The assessment concluded that Storliden’s resource — most recently estimated as 1.5 million tonnes indicated, grading 11.5% zinc, 4.4% copper and 0.06% lead, plus 300,000 tonnes inferred, grading 3.4% zinc and 2.4% copper — could be mined at a rate of 1,400 tonnes per day for five years. In that scheme, revenues at current metal prices would provide a pretax discounted cash flow of US$65 million at a discount rate of 10%. A final feasibility study is expected to be ready in a few months.

Boliden’s Gibraltar mine, near Williams Lake, B.C., has been bought by Taseko Mines (TKO-V) in exchange for assuming the care and maintenance of the project. Gibraltar, which Boliden took out of production in December 1998, had produced 290 million tonnes of ore grading 0.35% copper and 0.016% molybdenum between 1972 and 1998.

Boliden will provide $17 million in working capital through an interest-free convertible debenture with a term of 10 years. Boliden can convert the debt into Taseko shares at market prices in the first year, with the conversion price increasing by 25 cents each year thereafter.

Taseko says improved copper prices would ensure that the existing reserves at Gibraltar can be mined economically over a 12-year mine life.

Boliden, which has decided to concentrate on base metal exploration, also dealt a gold property in Burkina Faso to Ottawa-based Orezone Resources (ORZ-M). The 500-sq.-km property, Bouboulou, is about 100 km northwest of Ouagadougou and has a series of gold showings. Orezone can earn a 60% interest for $1.2 million in exploration work over three years.