Falco soars in 2002

Thanks to stronger metal prices and higher nickel production, Falconbridge (FL-T) earned far more in 2002 than in the previous year.

Earnings topped $73 million (or 34 per common share), compared with $16 million (or 2 per share) in 2001, when revenue was $256 million lower. Leaner exploration, research and process development budgets, plus more income from custom feed contracts also helped.

Operating expenses shaved 94% off Falco’s 2002 revenue, leaving it with an operating income of $137 million. Falco recorded $26 million in operating income in 2001.

Cash provided from operations slipped to $341 million from $354 million. However, after investing and financing activities, Falco increased its cash holdings by $62 million to end the year with $260 million.

Falco’s various mines pumped out: 327,302 tonnes copper in 2002 (compared with 289,950 tonnes in 2001); 75,772 tonnes nickel (compared with 71,458 tonnes); 104,083 tonnes zinc (compared with 81,670 tonnes); and 3.67 million oz. silver (compared with 2.86 million oz.).

Cash operating costs for 2002 slipped to US$926 per lb. copper, net of byproduct credits, from US$947 per lb. a year earlier.

Falco’s realized prices were: US$7,518 per tonne for nickel (US$6,151 per tonne in 2001); US$6,967 per tonne for ferronickel (US$6,283 per tonne); US$1,587 per tonne for copper (US$1,543 per tonne); US$860 per tonne for zinc (US$970 per tonne); and US$4.61 per ounce for silver (US$4.39 per ounce).

Falco spent $358 million on capital projects, of which nearly a third was spent at Kidd Mine D. The mine, which will tap deep-seated ore, will add 12 years to the metallurgical plant’s life, extending operations until 2022.

Earnings in the fourth quarter rang in at $33 million (or 17 per share), compared with losses of $20 million (13 per share) in the comparable period of 2001. The turnaround reflects a combination of higher metal prices, currency hedging and more income from custom feed contracts.

During the quarter, Falconbridge produced 19,867 tonnes nickel-in-concentrate and 82,945 tonnes copper-in-concentrate. Refined metal production came to 27,387 tonnes nickel and 67,636 tonnes copper.

On Dec. 31, Falco had $632 million in working capital and $1.9 billion in long-term debt. It’s net debt-to-net debt plus equity stood at 44%, up from 42% a year earlier