Norcen sale has Noranda poised for growth — Proceeds available for mining, capital investment

Base metal producer Noranda (NOR-T) saw its earnings improve in the fourth quarter, and in 1997 as a whole.

The Toronto-based major made $64 million (or 24cents per share) for the fourth quarter and $261 million ($1 per share) for the year ended Dec. 31, 1997. This compares with earnings of $36 million (12cents per share) and $254 million ($1.02 per share) for the fourth quarter and full year, respectively, of 1996. Cash flow from mining and metals operations before working capital items totalled $664 million for 1997, roughly the same as in 1996.

During 1997, the company invested $812 million on mine projects; most of that was spent on the Raglan nickel mine of 46.3%-owned Falconbridge (FL-T).

Situated in northern Quebec, the mine started production in late 1997. A sizable portion was also spent on its Chilean asset — the Collahuasi copper mine (44%-owned by Falconbridge), which is scheduled for startup in late 1998.

A further $660 million was invested in a program aimed at increasing Noranda’s metallurgical production capacity and reducing operating costs, including improvements and capacity expansions to the Canadian Electrolytic Zinc refinery, the CCR copper refinery and Gaspe copper smelter in Quebec; the New Madrid aluminum smelter in Missouri; the Nikkelverk refinery in Norway; and the Refimet copper smelter in Chile.

Following the successful testing of a proprietary extraction technology earlier in the year, construction of the $720-million Magnola magnesium plant was approved, with commercial operation planned for the year 2000. On completion of that plant, Noranda will be one of the world’s largest and lowest-cost producers of magnesium.

These investments still leave Noranda with a net debt, at Dec. 31, 1997, equal to 27% of its total capitalization, which is within the company’s stated target range of 25% to 35%.

In January 1998, Noranda reached an agreement to sell its 49% interest in Norcen Energy Resources for $1.8 billion. Upon completion of this sale, Noranda will report a net gain of about $590 million, after tax.

“Notwithstanding the current uncertainties, we enter 1998 with considerable optimism about the future,” says Noranda President David Kerr.

“The availability of the Norcen sale proceeds for reinvestment in our mining and metals business, our ongoing capital investment program and the various profitability and productivity initiatives now under way will significantly strengthen our earnings base and shareholder returns.”

The company has declared a dividend of 25cents per share payable on March 15, 1998, to shareholders of record at the close of business on Feb. 27, 1998.