Falconbridge profit down on lower nickel price

The company reports that markets for its products continue to be buoyant, although nickel prices have fallen by about $1(US) per lb from the first quarter. That drop is attributed largely to a slowdown in stainless steel production, the company says.

With inventories remaining low, Falconbridge expects that the nickel market will continue healthy through the second half of this year, however.

The company had second quarter earnings of $93 million or $1.40 per share, compared with $95 million or $1.18 per share for the same period a year earlier. Revenues were $616 million, compared with $514 a year ago. The increased revenues were offset by higher operating costs, increased exploration costs and a greater provision for taxes, says Falconbridge.

The average metal prices received for the second quarter were $5.34(US) per lb for nickel, and $6.72 per lb for ferronickel. The average price for copper was $1.14 per lb, while zinc fetched 82 cents per lb. To hedge the effect of price changes the company sells forward a portion of its annual output at fixed prices for various periods. Realized selling prices reflect these forward sales and were lower than current market levels.

The company says that although copper prices declined during the second quarter, demand remains strong because of production disruptions and labor disputes at other producers. Zinc prices are also lower, but demand continues to be strong, driven by the galvanizing sector.

Lower ore grades and production problems were incurred at its Sudbury mines during the first half of this year, but “it is expected that these problems will be overcome in the second half,” says Falconbridge. Production at Kidd Creek and Falconbridge Dominicana was as planned.

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