Base metal mining proves profitable

The period ended July 22 was highlighted by several positive earnings reports from some of Canada’s biggest base metals companies.

Inco rose 64 to $30.09 as it announced net second-quarter earnings of US$60 million (or US32 per share) on sales revenues of US$599 million. The nickel giant said that strong performances from its Manitoba and Indonesia operations helped offset lost output from its Ontario operations, where workers have been on strike since June 1. The company calculated that the stoppage had cost it US$23 million in the quarter, after tax.

Falconbridge saw its second-quarter earnings jump 45% to $56 million, reflecting higher nickel prices and a one-time $12-million tax recovery relating to changes in federal resource-sector taxation. The earnings translate into 30 per share, and compare favourably with a year-earlier profit of $38.5 million (20). Consolidated revenue between the two periods climbed by $60.6 million, to $695 million, on increased nickel volumes and a 20% increase in the company’s realized nickel price. Falco was up 20 to $18.20 over the period.

Canadian aluminum producer Alcan wasn’t as lucky as its nickel compatriots, posting a US$89-million (US28 per share) second-quarter loss, compared with a net profit of US$71 million in the year-earlier period. The net-loss figure included an after-tax charge of US$113 million stemming from the proposed sale of nonstrategic packaging assets. Second-quarter revenue rose US$400,000 to a record US$3.5 billion, mainly due to a stronger euro and the impact of its US$339-million acquisition of VAW Flexible Packaging from Norsk Hydro in April. Alcan said that its US$3.9-billion hostile bid for French rival Pechiney would lapse if European competition authorities subjected the offer to a detailed review. Alcan shares traded up $2.42 to $44.24.

Mid-tier base metal miner Inmet Mining sold its 3.3% net proceeds interest in the Antamina copper-zinc mine in Peru to Noranda for US$22.5 million. Noranda already has a 33.75% equity stake in the mine, while the other owners include BHP Billiton, with 33.75%, Teck Cominco, with 22.5%, and Mitsubishi, with 10%. Inmet will use the proceeds to pay down the remaining US$19.5 million owing under its US$40-million revolving credit facility. Meanwhile, Noranda has sold its remaining 12 million priority units of Noranda Income Fund for $9.85 apiece to a group of underwriters led by CIBC World Markets and Scotia Capital. Noranda will use the proceeds to repay debt. Inmet rose 30 to $7.30 while Noranda gained 60 to hit $14.30 and its income fund dropped 14 to $9.65.

In the exploration scene, Ivanhoe Mines surged 33 to $3.60 as it announced a new, independent estimate for the Far North Zone at the company’s Turquoise Hill project in Mongolia. Inferred resources now stand at 618 million tonnes grading 1.19% copper and 0.10 gram gold per tonne, at a 0.60% copper equivalent cut off. This translates into 7.4 million tonnes of copper and 2.0 million oz. gold.