The company says it achieved increased profitability in all its business units.
The copper business generated income of $132 million, exceeding the year-earlier profit of $39 million. Revenue for the recent quarter did not fully reflect the business’s recently expanded production capacity, owing to a build-up in inventories. However, inventories are expected to be reduced in the third quarter. The average London Metal Exchange price for copper, excluding premiums, was US$1.26 per lb. for the quarter, almost 70% higher than in the second quarter of 2003. The integrated cost of producing a pound of copper in Noranda’s copper division was 33 in the first half of 2004.
The nickel business generated income of $136 million for the recent quarter, or 160% more than a year earlier. The average London Metal Exchange nickel price of US$5.70 per lb. was 50% higher, though it is lower than in the first quarter (and current pricing). The cash operating cost of producing a pound of nickel at the Integrated Nickel Operations and at the Falcondo facilities was US$2.49 and US$3.42, respectively.
The zinc business generated income of $10 million in the quarter, compared with a loss of $28 million in 2003. Cash generated in these operations was $25 million for the three months and $45 million for the 6-month period. The improved results were attributed to higher zinc and byproduct prices, and to lower operating costs at the Bell-Allard mine in Quebec. The LME zinc price averaged US47 per lb. in the quarter and US48 for the first half of 2004. These compare with US35 for both the second quarter and the first half of 2003. Noranda’s cash cost of producing a pound of zinc was US33 per pound in the second quarter and US33 in the first half of 2004.
The aluminum business generated income from operating assets of $24 million in the recent quarter, up from $7 million a year earlier. Contributing to the better results were an improved production performance, higher sales volumes across all product lines, higher midwest premiums, and higher margins on value-added products. Partially offsetting these positives were higher year-over-year energy costs. The average LME aluminum price improved 22%, year over year, to average US76 per lb. for the quarter. Noranda’s cash cost per lb. of aluminum was US57 per lb. in the quarter and US58 for the first half of 2004.
Noranda has five major development or expansion projects on the go.
In Chile, at the Collahuasi copper mine, the concentrator expansion was complete five weeks ahead of schedule, and design capacity of 110,000 tonnes per day was achieved in June. The expansion is essentially complete at the Ujina-Rosario project, and a conceptual study of a second expansion of the copper concentrator is under way, as is a feasibility study of the molybdenum plant.
In Ontario, the first copper-zinc ore from Kidd Creek Mine D was hoisted up the new shaft in late July, and the rate will be ramped up until it reaches 2.4 million tonnes per year in 2006. Development work is under way at the Montcalm nickel project, which is expected to contribute 8,000 tonnes of additional nickel each year beginning in 2005. Surface preparation and early shaft development are under way at the Nickel Rim South project. The 5-year, $368-million development program is expected to deliver initial nickel production in 2008 with a further $185 million required to bring the mine to full production. Including preproduction revenue of $141 million, the overall net capital cost will be $413 million.
Investments in new production capacity, including the Koniambo nickel joint venture in New Caledonia, totalled $112 million during the quarter and $190 million for the first six months. For the current year, the company’s projected capital investment is $675 million, including $405 million in new production capacity.
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