High metal prices boost Rio Algom financial resultsd

After reporting record earnings of $93.1 million in 1987, Rio Algom (TSE) is coming off what can only be described as a banner year.

And, with first quarter net earnings of $26.4 million (60 cents per share) compared to $16.2 million (36 cents per share) in the same period last year, the Toronto-based resource company is off to what it considers to be a good start to the 1988 financial year.

Chairman Ross Turner, who succeeded George Albino in November, attributed the 1987 results to an amalgamation with Potash Co. of America and the conversion of Rio’s Australian metals distribution subsidiary into a public company.

Boosted by high metal prices, the company’s mining division contributed $123 million (up from $119 million in 1986) to total operating profits of $165.5 million.

A 44% production increase is expected this year at the Highland Valley Copper operation where Rio’s 68.8%-owned Lornex Mining (VSE) holds a 45% interest.

As a result of higher copper prices, which averaged 81 cents (US) compared to 62 cents in 1986, Lornex reported a 63% net earnings increase during the first quarter of 1988.

Production at Rio Algom’s uranium mines in Elliot Lake, Ont., and Utah was down to seven million lb from 8.2 million lb last year due to a strike at Elliot Lake and a reduction in deliveries to Ontario Hydro.

According to a recent report, Rio’s uranium contracts are scheduled to decline to about 1.6 million lb in 1991 from about six million lb in 1990.

But Turner said the reduction in cash flow would be offset to some extent by production from the East Kemptville, N.S., tin mine which Rio reacquired recently from the Bank of America for $41 million cash plus royalties.

The mine is currently operating at what Turner termed “close to a breakeven situation.” The breakeven point for the operation is a tin price of $3.25 per lb, said Rio President Ray Ballmer.

Meanwhile with a year-end working capital position of $665 million, Rio Algom is well equipped to make the uranium and gold acquisition which Turner says is part of new commitment to developing the company’s mining sector.

As part of that strategy, the company has promised to be much more aggressive on the exploration front and to develop some new mining opportunities close to “in-situ” operations.

Turner said his company is looking at several potential investments in the U.S. and Canada but when and where those acquisitions will be made is a subject that he declined to discuss.

A semi-annual dividend of 32 1/2 cents per share was declared payable on May 31, to shareholders of record on May 13.