Noranda makes cuts at Horne smelter

Determined to cut operating costs by up to $30 million, Noranda (NRD-T) is slashing production at its struggling Horne copper smelter in Rouyn-Noranda, Que.

Under the plan, total feed volume to the smelter will be reduced by nearly a quarter to around 650,000 tonnes by mid-2004. As a result, anode production will drop by 20% to 145,000 tonnes per year. The company also plans to intensify its recycling activities to help boost margins.

The production cuts will be accompanied by the loss of about 100 jobs by year-end; another 120 will be cut next June. The operation currently employs 700 workers. Noranda says the workforce reductions are needed to ensure the operation’s profitability and long-term viability. The company had warned of up to 125 job cuts in February.

“We are going through a difficult period and need to act now to ensure our survival over the short and medium term,” says Al Giroux, the smelter’s general manager. “There is no doubt we want to continue operating our plant over the long term. The choices we make today should allow us to do that.”

Horne has suffered from lower treatment charges (as a result of increased Asian competition), the strengthening Canadian dollar, and lack of domestic feed (and resulting reliance on more expensive European and Latin American concentrates). So far this year, the stronger Canadian dollar alone has cut the smelter’s revenues by nearly 15%.

In 2002, Horne processed 689,000 tonnes of copper concentrates and 45,000 tonnes of recycled precious metal-bearing materials, and produced 147,020 tonnes of anode copper and 510,900 tonnes of sulphuric acid. The facility was originally forecast to produce 186,000 tonnes of anode copper.

Operations at Horne resumed in June following a nearly year-long strike. The sometimes heated battle centred on job security, sub-contracting, and health-and-safety guarantees. Noranda put the cost of the strike at $25 million, before taxes, in 2002, plus $10 million in the first quarter of 2003.

The cuts at Horne come a day after Noranda confirmed it would shut down the Bell-Allard zinc mine in Matagami, Que., once reserves are depleted late next year. The operation currently employs 230 workers.

Noranda also said it would continue to wait for zinc prices to pick up before developing the nearby Perseverance high-grade zinc deposit. The operation was to have been staffed by employees from Bell-Allard; those employees now face layoffs.

At last count, resources at Perseverance stood at 5.1 million tonnes grading 15.82% zinc and 1.24% copper, plus 29.4 grams silver and 0.38 gram gold per tonne. The resources are found in three zones: Perseverance, Perseverance West and Equinox.

Noranda has a 90% stake in Perseverance. Following a feasibility study, Socit de dveloppement de la Baie James has the right to participate at 10% or convert its stake to a 2% net smelter return royalty. Noranda can halve the royalty by paying $1 million.

Noranda has been cutting costs associated with its Canadian Copper & Recycling business unit since the beginning of 2002. During that time, the company has permanently closed the Gasp smelter and reduced its workforce by almost 1,000 people, or 30%.