Vancouver — Artificially high power prices brought on by an energy shortage in the U.S. battered the bottom line of
The world’s largest zinc miner earned $8 million (or 4 per share), down considerably from the $23 million (22 per share) earned in the corresponding period of 2001. Cash flow from operations fell to $46 million from $99 million, while revenues slipped to $521 million from $582 million.
Power prices averaged only US$16 per megawatt hour in the second quarter, compared with the US$232 in year-earlier period, when they were boosted by energy sales to the western U.S. As a result, revenue from power sales plunged to $8 million from $97 million.
The company’s bottom line was also hampered by historically low zinc prices, which averaged US36 per lb. during the quarter, down from US42 a year earlier.
Despite the drop in earnings, the base metal miner increased production levels at most of its key operations.
The Trail smelter and refineries in southern British Columbia cranked out 71,500 tonnes zinc in the second quarter, up from 53,400 tonnes a year earlier. Lead production, at 21,400 tonnes, was down slightly from 2001 levels. Operating profits came in at $9 million, compared with $62 million recorded in the second quarter of 2001. The increase in output and drop in operating profits is due to the return to normal production levels after they were curtailed last year in order to focus on power generation.
The Cajamarquilla mine, near Lima, Peru, produced 19,000 tonnes of refined zinc in the second quarter, down from 27,800 tonnes a year earlier, owing to a 3-month shutdown that began in June. Operating profits hit $1 million, down from $5 million. The US$103.4-million loan drawn on the project for the planned stage-2 plant expansion was repaid to the banks, as the company elected not to ramp up production at this time.
Teck Cominco’s flagship Red Dog mine, in Alaska, produced 136,200 tonnes zinc in concentrate in the second quarter, up from 130,100 tonnes in the corresponding period of 2001. Sales slipped to 86,700 tonnes from 92,800 tonnes last year, and the mine incurred an operating loss of $4 million, compared with a year-earlier operating profit of $3 million.
The Polaris mine in Nunavut produced 28,100 tonnes zinc in concentrate in the second quarter, down from 31,200 tonnes. Polaris is set to close in August, after the ore is depleted.
Teck Cominco’s 63.9% share of production at Highland Valley Copper in British Columbia was 30,300 tonnes of copper in concentrate in the second quarter, up 9% as a result of higher throughput.
Antamina
The Antamina copper-zinc mine in Peru, which began producing late last year, cranked out 340,000 tonnes of copper concentrate during the quarter and 90,000 tonnes of zinc concentrate. Teck-Cominco owns a 22.5% stake in the project.
Even an improving gold price failed to boost the company’s bottom line. Its share of production from the David Bell and Williams mines in Hemlo, Ont., dropped to 61,600 oz. at a cash operating cost of US$245 per oz., compared with 75,800 oz. at a cash operating cost of US$193 in the second quarter of 2001. Operating profit fell to $3 million from $7 million. The production shortfall is attributed to ground-control problems, which led to the mining of lower-grade material from the open pit. The major expects gold production to improve in the second half of the year, when higher-grade material is to be mined.
Meanwhile, coal sales for the Elkview and Bullmoose mines, in British Columbia, climbed to 1.9 million tonnes from 1.7 million tonnes between the two second quarters. Operating profits surged to $31 million, up significantly from the $18 million tallied in the second quarter of 2001. Driving the increase was an 18% jump in production at the Elkview operation and an 8% increase in the price of coal to US$42 per tonne.
On the development front, the Pend Oreille zinc project in Washington state is on-track to start up in early 2004. Development costs are expected to hit US$74 million.
In Alaska, permitting and feasibility work is progressing on the high-grade Pogo gold project. A draft environmental impact study is expected to be in hand by the end of the third quarter.
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