Copper Range prominent in Metall’s healthy profits

With production from the Copper Range mine expected to be 103 million lb cathode this year, Metall has already locked in 50% or 53 million lb of its 1990 copper output at $1(US) per lb. About 26 million lb or 21% of the expected 1991 output has also been sold forward at 96 cents per lb, according to Douglas Scharf, Metall’s chief financial officer.

Not surprisingly, Metall executives are pleased with the Copper Range acquisition which is currently being operated at a cost of around $80 cents (US) per lb. Located near White Pine, Mich., it was a significant contributor to the company’s second quarter earnings of $4.3 million.

“The operation has terrific potential and we have been fortunate to lock in some good prices,” Scharf told The Northern Miner.

The acquisition, announced in February and closed in June, is part of the company’s attempt to shed its “holding company” image and become more directly involved in mine operation.

Metall is a 62.7%-owned subsidiary of West German metals giant Metallgesellschaft AG. As the larger company’s worldwide mining arm, Metall holds a significant stake in Vancouver-based affiliates Teck Corp. (TSE) and Cominco Ltd. (TSE). It also has a stake in the Highland Valley Copper g roup and the Ok Tedi gold copper mine in Papua New Guinea.

But the Toronto company’s search for new mining acquisitions hasn’t ended, according to Scharf. Having recently closed a public offering of $125 million in convertible subordinated debentures, Metall has about $190 million in cash with which to purchase additional projects if and when they become available.

Under discussion are plans for a new affiliate which would operate Metall’s European mining assets.

Those include a 49%-owned Turkish zinc-copper project where a production decision is expected to be made by year’s end. So far, 14.5 million tons of probable reserves grading 8.9% zinc and 4.3% copper have been outlined.

Metall said recently it will add to its European portfolio by acquiring interest in seven mines now held by Metallgesellschaft. But when and how those projects will be transferred has yet to be decided.

Among other things, Metallgesellschaft has interests in a West German mine that produced 54,500 tons of zinc concentrates, 2,900 tons of lead concentrates and 294,000 tons of pyrite.

“There are a lot of tax and structural implications to consider, but setting up a European company is something we are looking at,” said Scharf.

Meanwhile, he claimed to be pleased with the return on Metall’s investments in both Teck and Cominco. Metall’s share of Cominco’s earnings for the six months that ended in June increased to $13.2 million from $6.1 million at the same time last year. Its share of Teck’s first half earnings also increased to $4.3 million from $2.5 million in the first six months of 1988.

On June 30, Metall’s long-term debt position stood at $92.4 million while shareholders’ equity was reported to be $442.8 million.

“All and all we think we are in sound shape and we will keep looking out for new projects to bring more production into the company,” said Scharf.

]]>