Higher metal prices buoy Noranda

Higher realized prices for its bread-and-butter metals offset lower production, and powered Noranda (NRD-T) to net income of US$153 million during the first three months of 2004.

The earnings translate to US49 per diluted shares, and is a vast improvement over the year-ago net loss of US$40 million (or 18 per share). The recent quarter also saw revenue jump by 57% to US$1.65 billion, while cash flow from operations climbed six-fold to US$358 million.

The year-ago loss includes a US$19-million after-tax restructuring charge and the effects of the strike at the Horne smelter. The latest quarter’s results were cut into by a three-week strike at the Sudbury nickel operations.

Driven by Chinese demand, Noranda’s average realized price for copper came in 54% higher than a year ago, nickel was up 80% to $6.88 per lb., zinc, plus 29% to US53 per lb., aluminum, 16% higher at US79 per lb., and lead, up 71% to US41 per lb.

Noranda’s mined metal volumes were as follows: 99,614 tonnes copper (versus 113,897 tonnes in the first quarter of 2003); 145,059 tonnes zinc (143,394 tonnes); 11,072 tonnes nickel (12,961 tonnes); 7,999 tonnes ferronickel (6,887 tonnes); 20,287 tonnes lead (18,425 tonnes) and 3.6 million oz. silver (3.1 million oz.). Refined production rang in at 143,508 tonnes copper (109,954); 28,458 tonnes zinc (37,9.35 tonnes); and 26,858 tonnes nickel (27,450 tonnes).

Operating income from the copper business climbed nearly six-fold to US$139 million; cash costs were US25 per lb. Noranda expects copper production to climb by 20% to 440,000 tonnes in 2004 as the Collahuasi expansion in Chile and first phase of the Kidd Mine D project in Ontario come on line in the second half of the year.

The nickel business chipped in US$187 million to earnings (nearly triple that of a year earlier) despite the Sudbury strike. The Integrated Nickel Operations (the Sudbury operations, the Raglan mine in Quebec and the Nikkelverk refinery in Finland) and Falcondo facilities returned cash operating costs of US$2.60 per lb. nickel and US$2.95 per lb. nickel, respectively. INO is expected to churn out 47,000 tonnes of mined nickel in 2004. Ferronickel production from Falcondo is pegged at 28,000 tonnes, refined nickel from Nikkelverk in Norway, at 72,000 tonnes.

The company’s zinc business turned a year-ago loss of US$121 million into income of US$2 million; cash costs were US33 per lb. Zinc metal production for 2004 is estimated at 370,000 tonnes.

At quarter’s end, Noranda’s cash and equivalents totalled US$737 million, up US$107 million from the end of 2003. The company’s total debt was relatively unchanged at US$3.3 billion.