Low metal prices take toll on Teck Cominco earnings

Vancouver — With the merger completed, Teck Cominco (TEK-T) has been cleaning house and posted an after tax net loss for 2001 of $21 million, or 17 per share, after asset writedowns valued at $122 million. This compares with net earnings of $85 million, or 77 per share, in 2000.

The net earnings for the year prior to the writedown rang in at $101 million, or 69 per share, on $2.37 billion in revenue. During the fourth quarter net earnings were pegged at $6 million, or 3 per share, on revenues of $527 million. This compares with net earnings of $43 million, or 39 per share, on revenues of $716 million in 2000.

The company attributes the poor earnings to extremely low zinc and copper prices. The loss for the year was offset somewhat by profits from power sales at Trail and a strong performance from the company’s coal operations. The operating profit from Trail was pegged at $222 million this year and coal contributed additional $87 million.

Writedowns following the Teck and Cominco merger were performed on the carrying values of its non-operating mineral properties and investments. Cash flow from operations was $418 million during 2001 compared with $239 million in 2000. The increase is a result of the consolidation of the two company’s cash flow. Fourth quarter operating cash flow was $53 million and is significantly lower than the $160 million recorded a year ago. Teck Cominco states that low commodity prices are to blame coupled with the decline of power prices during the quarter.

As of December 31, 2001, the corporation had a working capital of $609 million, down from $760 million last year. The net debt excluding Inco shares and exchangeable debentures was $864 million, or 25% of net debt plus equity. The company realized price for gold over the year was US$282 per oz compared with US$307 last year. The realized price for copper was US$0.73 compared with US$0.80 last year. The realized zinc price was US$0.40 compared with US$0.51 last year. The realized price of lead was US$0.22 compared with US$0.21 last year.

After being shut down for most of the third quarter to maximize power sales, the smelter operation resumed in October. The start-up was delayed until early November when contract workers were exposed to high concentrations of thallium in the furnace boiler. Production during the fourth quarter tallied to 62,100 tonnes of refined zinc and 9,700 tonnes of refined lead. The smelter posted an operating loss of $15 million during the fourth quarter compared with a profit of $113 million a year ago. This is a result of low copper and zinc prices coupled with significantly reduced profits from power sales.

The Red Dog mine in Alaska cranked out 128,000 tonnes of zinc concentrate during the fourth quarter compared with 127,400 tonnes a year ago. The mine recorded an operating loss of $13 million during the quarter compared with an operating profit of $36 million in the same period last year. The loss is attributed to the low zinc price which averaged US$0.35 per lb. during the fourth quarter and US$0.49 per lb. last year.

The Antamina mine in Peru commenced commercial production during the fourth quarter and cranked out 80,400 tonnes of copper and 56,000 tonnes of zinc in concentrate during this period. Teck Cominco’s share of production is 22.5%. Antamina is equity-accounted and the company’s equity loss form the operation was $1 million during the fourth quarter after deduction of interest expense.

Gold production in the fourth quarter was 95,300 oz., down from 101,600 oz. a year ago. This is a result of the company selling its PacMin assets during the fourth quarter. Production from the David Bell and Williams mines in Hemlo, Ontario, totaled 90,600 oz., up from 68,400 last year. This is attributed to significantly higher ore grades at the Williams mine. The average cash operating cost per oz was US$157 during the fourth quarter and the averaged realized gold price including hedging gains was US$293 per oz. This was down from last year’s value of US$315 per oz. due to reduced hedging gains.

Metallurgical coal production of 1.8 million tonnes during the quarter was up 26% over last year. The wholly-owned Elkview mine and 61%-owned Bullmoose mine in BC contributed 1.48 million tonnes and 291,000 tonnes of coal, respectively. Operating profit for the two mines rang in at $31 million during the quarter, up from $8 million last year.

The feasibility study for the Pogo gold project in Alaska is being updated to incorporate changes in the project’s physical layout. This will eliminate shaft hoisting and result in a significant capital savings. The detailed water management plan is being updated and will be submitted in early 2002 as part of the Preliminary Draft Environmental Impact study.

At the San Nicolas copper-zinc project in Mexico, Teck Cominco completed the final feasibility study and delivered it to partner, Western Copper Holdings (WTC-T). A production decision will wait until metal prices improve.