Cominco makes production cutbacks

Faced with rising zinc inventories and falling prices, Cominco (TSE) announced temporary shutdowns at its Trail smelter and Sullivan mine in southern British Columbia.

The company plans to reduce zinc production by 50,000 tonnes by shutting down the Trail smelter during April and August. The Sullivan zinc-silver-lead mine in nearby Kimberley will be closed for 11 weeks starting in June, which includes a previously announced vacation shutdown. A shutdown for at least a week is also planned over the Christmas period.

Ted Fletcher, chief operating officer of Cominco Metals, said zinc inventories on the London Metal Exchange tripled in the last year, increasing by more than 300,000 tonnes. He noted that this surplus resulted in low prices, which “if allowed to continue, threaten the viability of Trail and the entire zinc industry.”

Cominco is still involved in negotiations with the British Columbia government over the long-term future of the Trail complex. For months now, the company has been saying the operation’s viability depends on commitments from the government “to a reasonable regime of taxes and levies,” including fees for water used at its power plants.

But so far, the government appears to be ignoring the recommendations of an April, 1992, report by its own Job Protection Commissioner, who identified $50 million of cost reductions in operations, taxes and fees. The company and employees did accept the report’s recommendations, and cost savings of $27 million on an annualized basis were implemented.

Cominco’s problems at Trail aren’t confined to low zinc prices and government intransigence. The company recently recorded a provision of $50 million against the capitalized cost of the QSL smelter which was shut down shortly after startup because of operating problems.

Cominco has yet to decide if it will replace QSL with an alternative technology. Production is continuing from the old lead smelter while the various options are studied.

On the financial front, Cominco reported a $30.2-million loss on sales of $1,467 million for 1992, compared with a loss of $41.3 million in 1991. The board of Cominco recently appointed Teck President Norman Keevil acting chief executive officer, pending the return from medical leave of Robert Hallbauer.