Noranda in search for new reserves

The minerals division of Noranda (TSE) maintains one of the largest exploration programs in the Western world and is currently testing more than 600 properties directly and in conjunction with partners, the president and chief executive officer of the resources giant told shareholders in Toronto.

“Never before in our history have we had so many good mine prospects all at the same time,” David Kerr said at the recent annual meeting. Exploration expenditures by Noranda Minerals totalled $140 million in 1990, he said, and are expected to be about the same this year.

Recent “notable discoveries” listed by Kerr include the Lynne zinc-silver deposit in Wisconsin, the Holloway gold play in northeastern Ontario and the New World gold project in Montana. In addition, through 50% owned Falconbridge, Noranda is involved in the Raglan nickel deposit in northern Quebec and the Lindsley copper-nickel prospect near Sudbury, Ont.

Of Noranda Inc.’s four divisions (minerals, forestry, energy and manufacturing), minerals performed the best in 1990 in terms of earnings; Noranda Minerals netted its parent $217 million last year.

Noranda Inc.’s net earnings in 1990, after figuring in borrowing and corporate costs, totalled $120 million, well down from $442 million in 1989.

During the first quarter of 1991, Noranda Inc. recorded net earnings of $15 million (0 cents per share) compared with $59 million (26 cents per share) for the same period last year.

Kerr said the latest quarterly results reflect the ongoing labor strike at subsidiary Brunswick Mining & Smelting (TSE) in New Brunswick, a continuation of poor markets for forestry products, a strong Canadian dollar and interest expense. Kerr made a distinction between the company’s consolidated balance sheet which appears in the company’s annual report and Noranda’s unconsolidated balance sheet, which he said bankers look at when an application is made to borrow money.

The debts (currently totalling about $3 billion) of Noranda subsidiaries that are not wholly owned are not Noranda’s debts, he said, and do not appear on the unconsolidated balance sheet. “Therefore, from a creditor’s point of view, Noranda has only 17 cents of debt for every dollar of equity,” he said. (Noranda’s consolidated balance sheet lists total long-term debt, as of Dec. 31, 1990, of $4.4 billion.)

Non-core assets of the company are being considered for sale. One such asset is Canada Wire and Cable, which Alcatel Cable of France has been negotiating to purchase. The dollar value of the deal has not been disclosed, but Noranda Chairman Alfred Powis told reporters the price is more than the $220 million book value listed by Noranda for Canada Wire.

In all, Noranda hopes to raise about $400 million through the sale of Canada Wire and other assets.

Noranda is currently paying a $1-per-share dividend and according to Kerr, there is no plan to reduce this payout. “Noranda has paid a common-share dividend for 62 consecutive years. We do not intend to break this string,” he said.

In his speech to shareholders, Powis commented on the negative effect weaker international markets are having on prices for Noranda’s products.

“As far as the outlook for Noranda is concerned, there’s reason to hope that a recession will be avoided in Europe and Japan and that a recovery will begin soon in the U.S. If so, markets for Noranda’s products should begin to improve,” Powis said. “At the same time, it’s hard to believe that the Canadian dollar can continue to defy gravity for much longer, and a decline to more reasonable levels would do wonders for Noranda’s competitive position.”

The chairman told reporters that a Canadian dollar in the US78 cents range would be more to his company’s liking. Noranda (TSE)* 3 months ended Mar. 31 1991 1990 Revenue $2,188,000 $2,446,000 Net earnings 15,000 59,000

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