Trail smelter operation adds to Cominco losses

All mining operations of Cominco (TSE) were profitable in 1992 with the exception of the Trail smelter, which lost $53 million, and the Sullivan mine which lost $19 million. As a result, Cominco reported a $4.9-million loss for its 1992 first quarter, compared with a $10.2-million loss for the comparable 1991 period.

Cominco President Robert Hallbauer told shareholders at the company’s recent annual meeting that the British Columbia operations are closely tied, with results at Sullivan being affected by concentrate treatment charges levied by Trail.

Sullivan mine earnings were also affected by a combination of low metal prices, a decline in silver grades from previous levels, and the inability to sell lead concentrate due to the current market surplus.

“From an operating point of view there is little that can be done to further improve results at Sullivan,” Hallbauer added. “Productivity was good with zinc concentrate production reaching the highest level in the last 25 years.” To stanch losses at Trail, Cominco recently started a program aimed at reducing annual costs by $50 million. This will involve 500 jobs being eliminated by year-end for a saving of about $25 million annually. So far, about 107 management positions (representing about 25% of the work force) have been eliminated, and 320 layoff notices were issued to production, maintenance and office and technical employees effective the end of May. Hallbauer said the workplace restructuring also involves moving to a “team concept,” which means flattening the supervisory structure and streamlining of trade groups.

Cominco expects to realize the remaining $25-million reduction in costs through savings in areas such as transportation, supply contracts, property taxes and reduction in water taxes. The water tax remains as a major factor in Trail’s ability to compete on world markets, “as it negates the advantage of our low cost power plants,” Hallbauer said.

“Of course, the problems associated with the new lead smelter have to be resolved as part of the package to ensure the continued viability of Trail,” he added, noting the company has been criticized for not making a decision on either modifying the plant, or building another plant, or suing the supplier. Cominco recently agreed to provide Lurgi (supplier of the QSL process) with more time to make necessary modifications to the plant, with the latest schedule being the latter half of June. But it has also investigated other alternatives in the event the QSL plant cannot be started.

“At this time there seems to be only one alternative and that is the Kivcet process,” Hallbauer said. “While it is not a foregone conclusion Kivcet is applicable to Trail, work to date has been encouraging.”

Turning to other operations, Hallbauer said the Red Dog mine in Alaska continued to have problems in achieving full production, although previous problems associated with feeding ore to the mill were largely solved by modifications to the feed system last summer.

“Problems this winter have been with metallurgical recovery,” Hallbauer said, adding the deposit comprises several different ore types that require different milling techniques and reagents. “Fortunately, the orebody is large and we are able to isolate the various ore types and treat them separately, and fortunately satisfactory recoveries can be made on the majority of the ore.”