Brunswick’s fate questioned after Noranda’s latest loss

Mindful that zinc prices aren’t going to improve in the near future, Noranda (TSE) is attempting to turn its 64.6% owned Brunswick Mining and Smelting (TSE) complex into a more cost-efficient operation.

Still reeling from a recent 10-month strike and low metal prices, Brunswick Mining reported a third-quarter loss of $6.6 million or 17 a share, bringing losses for the first nine month of this year to $21 million. As Brunswick was a major contributor to the $5-million third-quarter loss reported by Noranda Minerals, analysts are betting that the parent will consider selling all or part of the operation unless things improve. According to Terry Ortslan, a base metals analyst at Loewen, Ondaatje, McCutcheon in Toronto, cost reduction is of paramount importance because zinc prices, having fallen to US47 per lb. in the third quarter from US72 last year, will remain sluggish for the foreseeable future.

He and other analysts were told recently that Brunswick is attempting to reduce its operating costs for zinc from US37 to about US33 per lb. to bring it in line with Falconbridge’s Kidd Creek, Ont., mine. While Brunswick President John Carrington refuses to comment on Noranda’s price objectives, he said the efficiency drive is designed to turn the company from a high-cost to a low-cost zinc producer.

Since the strike by mine workers ended in May, Carrington says manpower levels have dropped by about 10% to under 2,000, while productivity has increased by 30% to 13.1 tons milled per man shift from 10.1 last June. Noranda has also attempted to improve relations between management and the Brunswick union by asking Carrington to reside in Bathurst while directing the integrated mining, smelting and fertilizer producing operation. Analysts say union-management relations deteriorated so badly because his predecessors were based in Toronto.

“What we are trying to do is to work with the union and employees to keep them better informed about the nature of our business,” says Carrington, who describes the labor relations situation as “out of touch with the 1990s.” However, even though mill throughput was up to 10,000 tons per day at the end of the third quarter, Carrington expects to see more losses before the bleeding stops. “By doing the kinds of things we are doing, we are positioning ourselves to do very well when the economic situation improves,” he says. “Metal prices and foreign exchange rates are beyond our control.”