Curragh’s earnings buffeted by strong dollar, lower zinc price

A strong dollar and lower zinc prices contributed to a 33% drop in third-quarter earnings for lead-zinc producer Curragh Resources (TSE). Net income was $13.7 million (45 cents per share) compared with $20.5 million (excluding an extraordinary gain of $6.5 million) or 82 cents per share in the third quarter of 1989. The earnings also reflect Curragh’s issue of 5.5 million shares when the company went public earlier this year.

Despite a 12% increase in concentrate production and a 7 cents increase in the lead price in the first nine months of 1990, net income for this period dropped to $43 million ($1.57 per share) from $51.5 million ($2.06 per share) in the first nine months of 1989.

Curragh had reduced its debt load from 58% of total capital at the end of 1989 to 35% at the end of the third quarter and has convinced partner Asturiana De Zinc, a Spanish smelting company, to invest another $10 million in the Cirque property in British Columbia.

Meanwhile, Asturiana has completed the planned purchase of a 5% stake in Curragh for $41.4 million.

Proceeds from the sale of 1.6 million Curragh subordinate voting shares consist of $35 million for the shares plus an additional $6.4 million arising from a price adjustment paid by the Spanish company from June 1 to Oct. 29.

The share purchase follows the acquisition, by Curragh, of a 20% stake in Asturiana for $119.6 million. Curragh, which currently ranks as the western world’s sixth largest producer of lead-zinc concentrates, has invested in Asturiana to secure additional smelting capacity for its lead-zinc mine at Faro, Y.T. Asturiana operates one of the largest integrated smelters in Europe.

Also, Curragh is appealing to the Federal Court of Canada over a Canadian government decision requiring Curragh to put up $15 million worth of financial assurance before expanding its Faro operation. Curragh claims the government doesn’t have the authority to ask for the security.