Lower prices hit Inco’s earnings

During the first three months of 2001, Inco (N-T) posted net earnings of US$85 million (or 43 per share, compared with year-ago earnings of US$101 million (52 per share). Revenues between the two periods fell to US$586 million from $774 million.

The decreases are attributed to significantly lower average realized prices for nickel and higher nickel unit cash cost of sales. The recent first-quarter results included a US$34-million, favourable non-cash currency exchange adjustment.

During the quarter, cash consumed by operations was US$8 million, compared with cash from operations of US$72 million a year earlier. The decrease is attributed to lower operating earnings and a reduction in income and mining taxes. Capital expenditures increased by US$7 million to $44 million, due to higher spending on the Goro feasibility study.

“Our first-quarter 2001 financial performance clearly demonstrates that we are continuing to achieve satisfactory results in an uncertain economic environment. For the most part, to date we are on track or ahead of our internal targets for 2001,” says Scott Hand, Inco’s new CEO.

First-quarter deliveries consisted of:

• 58,777 tonnes nickel in all forms, 12.6% of which was purchased (compared with 66,6988 tonnes a year earlier);
• 29,945 tonnes copper (34,527 tonnes);
• 434 tonnes cobalt (389 tonnes);
• 93,000 oz. platinum group metals (89,000 oz.);
• 20,000 oz. gold (20,000 oz.); and
• 380,000 oz. silver (350,000 oz.).

Cash costs for nickel, after byproduct credits, fell to US$2,712 per tonne in 2000 from US$2,778 per tonne in 1999. Before byproduct credits, cash costs rose slightly to US$3,263 per tonne, owing mostly to higher oil and gas prices. Cash costs (net of byproduct credits) were US$1.28 per lb., up from US$1.13 per lb. The increase in costs reflects higher energy prices and the processing of higher volumes of purchased intermediate materials.

Inco expects to produce 54,000 tonnes nickel, 34,000 tonnes copper and 125,000 oz. platinum group metals during the second quarter of the year, at a cash cost of about US$ $2,866 per tonne. Production levels for 2001 are essentially unchanged.

At the end of March, Inco had cash and marketable securities totalling US$332 million. The company’s total debt was US$995 million, down from US$1.03 billion at the end of 2000.

In other news, Inco says historical emissions from its refinery in Port Colborne, Ont., were responsible for contaminating the town’s surface soil with nickel concentrations. The company says it will clean the soil.

Inco is among several parties named in a $750-million class action lawsuit by residents of the town. The residents claim that Inco is responsible for exposing them to know carcinogens from the refinery. The suit also targets the Ontario Ministry of the Environment, the region of Niagara, the city of Port Colborne and the city’s public and Catholic school boards.

Hand says the company accepted responsibility for some of the pollution and pledged to purify the soil. However, he told a shareholders’ meeting in Toronto that he did not believe Inco was responsible for the sub-surface nickel levels in one area of the town, which is located on Lake Erie, near the tourist town of Niagara Falls.