Boliden’s losses narrow in quarter

The losses of cash-strapped Swedish-Canadian miner Boliden (BOL-T) shrank in the latest quarter, thanks to increased mining and smelting production.

For the three months ended June 30, the company posted an operating loss of US$11 million, compared with a loss of US$34.7 million in the second quarter of 2000. Quarterly revenue was US$259.7 million, up from US$258.6 million a year earlier.

With net gains of US$28.4 million on the sales of the Lomas Bayas copper mine and the Norzink zinc plant, net earnings for the quarter came to US$8.6 million, or US2 per share. In the second quarter of 2000, Boliden lost a net US$34.4 million.

For the first half of 2001, the company’s operating loss amounted to US$19.9 million, less than half the US$41.1-million loss in the corresponding period of 2000. Year-to-date revenue is US$571.5 million, up from US$551.4 million a year earlier, and the net loss so far this year is US$12.9 million, compared with US$52.7 million.

Boliden’s mining operations contributed a loss of US$6 million for the quarter and US$14.4 million for the first six months of 2001, compared with losses of US$27.2 million and US$43.3 million in the corresponding periods of 2000. The improvement was due to operating efficiencies and to higher gold and zinc production.

Smelting operations chipped in an operating loss of US$400,000 during the latest quarter and have made US$1.9 million during the half. In 2000, the smelting division lost US$2.2 million in the second quarter and made a profit of US$11.8 million in the first half.

Foreign currency hedge contracts, which have been a drag on earnings for some time, cost the company US$40.4 million for the recent half-year, compared with US$26 million for the first six months of 2000.

Boliden got an influx of cash from the sale of the Norzink zinc plant in southern Norway to Finnish metal producer Outokumpu. Boliden and co-owner Rio Tinto (RTP-N) each pocket US$180 million, leaving a net gain of US$34.4 million on Boliden’s books.

Also, Boliden and Falconbridge (FL-T) closed the sale of the Lomas Bayas copper mine and the adjacent Fortuna de Cobre copper deposit in Chile. Boliden had earlier balked at a May sale agreement, saying that retaining the assets was a condition of the debt restructuring.

Falco and Noranda (NRD-T), which had originally been a party to the deal, filed suit, claiming $250 million in damages. The lawsuit was withdrawn when Boliden agreed to abide by the terms of the original deal.

Falco assumes 100% ownership of the projects and Boliden gets US$175 million, plus cash balances (US$2.1 million) less outstanding third-party debt obligations (US$112.7 million). If Falco exercises its right to retain the Fortuna de Cobre copper deposit before the fifth anniversary of closing, Boliden gets an extra US$15 million.

Lomas Bayas, which has been in production since 1998, is in the Atacama Desert of northern Chile. During 2000, the operation churned out 51,292 tonnes copper cathode. Falconbridge plans to increase production to full capacity of 60,000 tonnes annually.

Boliden also announced that the terms for a proposed share issue, which is part of a bailout package, have been fulfilled.

Under the proposal, US$105 million will be raised in a rights offering to existing shareholders, with another US$138 million raised by a share issue to the shareholders, to a consortium of Swedish investors and to the company’s creditors.

Proceeds from the rights offering are earmarked for refinancing of the company’s operations. The funds from the share offering will be applied against existing debt.

Completion of the share issue, which is expected in August, is a condition for a group of banks to complete a plan to restructure the company’s debts.