Net earnings topped $93.9 million (or 51 per share) on revenue of $661.4 million during the three months ended Dec. 31, compared with a loss of $26.8 million (16 per share) on $376.6 million in the corresponding period of 1998.
During the recent quarter, Falco produced:
– 13,683 tonnes nickel plus 7,596 tonnes ferro nickel;
– 32,936 tonnes copper;
– 21,502 tonnes zinc; and
– 1.1 million oz. silver.
Nickel and copper production was buoyed by the new Raglan and Collahuasi mines in Quebec and Chile, respectively; the former began commercial production in April 1998; the latter, in January 1999.
In terms of refined metal, Falco produced 17,457 tonnes nickel, 7,596 tonnes ferronickel, 46,132 tonnes copper cathode and 36,295 tonnes zinc.
The major realized an average of US$3.57 per lb. for nickel and US82 per lb. for copper, or 87% and 11%, respectively, more than a year ago.
The period ended Dec. 31 was the third consecutive quarter in which Falco operated in the black. Earnings for the year totalled $153.1 million (or 80 per share) on revenue of $2.2 billion, compared with a loss of $36.4 million (24 per share) on $1.7 billion in 1998.
Cash flow from operations topped $455 million before working capital changes, or $349.1 million after such corrections.
Collahuasi, which contributed $52 million to 1999 net earnings, produced 435,000 tonnes copper at US38 per lb., or 7% more copper at 16% less the cost than originally forecast. In 2000, the mine is expected to crank out 390,000 tonnes copper (the projected shortfall is a reflection of the lower grade of the ore that will be mined).
Falco owns a 44% interest in Collahuasi; the remainder is divided between
Raglan began operating, as planned, in the third quarter. Higher prices for byproduct credits helped improve the mine’s overall performance.
Mill capacity at Raglan is currently being expanded 25% to 1 million tonnes. The program is scheduled for completion in late 2000.
Raglan is part of the company’s Integrated Nickel Operations division, which includes the Sudbury mine-and-mill complex plus the Nikkelverk refinery in Norway. The division generated net earnings of $130 million in 1999, partly fueled by record output of refined nickel and cobalt.
Falco’s Dominicana mine and ferro-nickel plant, though they generated a profit, were dragged down by higher oil prices. The project’s cash operating costs averaged US$2.12 per lb. in 1999 and have since increased to US$2.50, owing to further hikes in fuel prices.
Despite a 26-day shutdown, the Kidd Creek division in Ontario churned out a record 121,300 tonnes of refined copper. However, cash operating costs rose 8, to US45 per lb. copper, reflecting lower grades fed to the mill.
In 2000, Kidd Creek is expected to produce 55,000 tonnes copper-in-concentrate and 97,000 tonnes zinc-in-concentrate. Output at the metallurgical plant is targeted at 136,000 tonnes copper cathode and 147,000 tonnes zinc; the former is less than previously forecast, reflecting an unscheduled shutdown of the copper smelter in late December 1999.
“Generally, we did better in reducing our costs, though we didn’t meet our targets,” says company president Oyvind Hushovd. He added, however, that all operations should do so this year.
Falco spent $148.1 million on capital projects in 1999, which is significantly less than in the previous year. The decrease is attributable to the completion of Collahuasi.
At year’s end, the major had $101.5 million in cash and short-term investments. Working capital totalled $527.1 million.
A healthy combination of rising metal prices, increased production and improved margins has helped
For the year ended Dec. 31, 1999, Noranda recorded earnings from continuing operations of $186 million (or 70 per share) on sales revenue of $6.5 billion, compared with last year’s $1 million ($2.68 per share) earned on sales revenues of $6 billion in 1998. (The total earnings in 1998 were $658 million, owing to to a $657-million gain from discontinued operations, including a net gain of $583 million on the sale of Norcen Energy Resources.)
Noranda boosted its mine output in most categories, with the following production in 1999: 455,000 tonnes zinc (426,000 tonnes in 1998); 366,000 tonnes copper (180,000 tonnes); 55,000 tonnes nickel (55,000 tonnes); 24,000 tonnes ferronickel (25,000 tonnes); 79,000 tonnes lead (73,000 tonnes); and 11.7 million oz. silver (11.3 million).
Through a cost-reduction program launched in 1997, Noranda’s pretax operating margin improvements were, at year-end, running at an annualized rate of $183 million, compared to a 1997 base.
Noranda is in the midst of a massive capital-expenditure program targetting more than a half dozen projects. Investments in new projects and existing operations totalled $1.4 billion in 1999, compared with $1.6 billion in 1998. The company reports that $943 million and $467 million are earmarked for capital expenditures in 2000 and 2001, respectively.
Noranda’s biggest capital expenditures in 1999 were at the Antamina copper-zinc project in Peru ($291 million spent), the Magnola magnesium plant in Quebec ($355 million), and the Norandal foil plant in Tennessee ($142 million).
“We’re now at the point where we can really start getting excited,” says David Goldman, chief financial officer.
Noranda says it will now proceed with a previously delayed US$170-million expansion at the Altonorte smelter, near Antofagasta, Chile.
A revised feasibility study calls for the expansion to be carried out in two steps. The first, to be completed by the end of 2001, will replace existing equipment with new technology that will transform Altonorte into a cleaner, more competitive custom smelter. The second step will boost smelter capacity to 820,000 tonnes per year of concentrate, while capturing more than 90% of the sulphur content in the concentrate.
Construction at Altonorte will begin in the second quarter of 2000, with startup expected in 2003. By that time, the expansion will have: doubled concentrate treatment capacity to 820,000 tonnes per year; increased annual copper production to 290,000 tonnes from the current 160,000 tonnes; and nearly tripled the amount of sulphuric acid produced to 700,000 tonnes.
A $124-million upgrading of the CCR copper and precious metals refinery in Montreal, Que., is almost complete and should be fully operational in the second quarter of 2000. This project will increase productivity, improve the plant environment and reduce unit costs.
An upgrade of the Gaspe copper smelter in Murdochville, Que., is also complete. The facility now operates as a stand-alone custom smelter with annual throughput of 320,000 tonnes of feed material.
The CEZinc refinery in Valleyfield, Que., had record production in 1999, and, at the Brunswick mine in Bathurst, N.B., a semi-autogeneous grinding mill and paste backfill plant were commissioned (both plants are reportedly performing according to plan).
The Bell-Allard zinc-copper mine near Matagami, Que., started up in the third quarter and entered commercial production in January 2000. The mine’s production will essentially replace production from the Heath Steele mine in New Brunswick, which was closed during the fourth quarter owing to ore depletion.
Construction at the US$2.3-billion Antamina project is 25% complete, and the project remains on schedule and on budget. An accommodation camp and a power transmission line are built, and prestripping is under way, as is work on the concentrator and tailings dam. Commercial production is expected to start in early 2002.
The Antamina project is now owned 33.75% by each of Noranda and
Commissioning of a new single-piece anode process at the New Madrid, Mo., aluminum smelter began during the fourth quarter. The US$73-million expansion will begin to ramp up in 2000 and increase primary aluminum production by 15% to 253,000 tonnes per year when fully operational in 2003.
A US$238-million expansion of an aluminum foil mill in Huntingdon, Tenn., proceeded on schedule. The 90,000-tonne-per-year mill will begin its commissioning phase in the fourth quarter of 2000, with commercial production slated for early 2001. Construction of a $733-million, 80%-owned magnesium plant near Asbestos, Que., is 80% complete, on budget and on schedule. The building’s exterior is complete and most of the manufacturing equipment has been installed. When fully operational, the 63,000-tonne-per-year plant will be the largest in the world and one of the lowest-cost primary producers of magnesium.
Goldman says that while Noranda will first produce magnesium metal in July 2000, it will wait until next year to sell the metal. He says the company only has limited commitments with the major consumers of magnesium, though the company expects to have signed contracts for its magnesium production in the second half of 2000.
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