Rio Algom wrestles with low-grade N.S. tin mine

After reporting reduced annual earnings of $73.1 million in 1989, Rio Algom (TSE) is preparing for what could well turn out to be another lacklustre year in its profit picture. The company was hit hard last year by low uranium and tin prices, as well as a 3-month strike which reduced production at its 33.6% owned Highland Valley copper mine in British Columbia.

With first-quarter net earnings of $20.1 million (44 cents per share), compared to $41.9 million (94 cents per share) in the same period last year, the Toronto-based resource company is off to what might be considered a less than spectacular start.

Chairman Ross Turner told the company’s annual meeting that demand is softening for Rio Algom’s products, which include uranium, tin, potash, coal and copper. As the overall level of economic activity slows, many resource companies have been reporting lower profits so far this year.

“It’s difficult to predict the level of demand for Rio’s products in 1990,” said President Colin Macaulay.

Turner said the pace at which political developments evolved last year highlights the difficulty in making accurate short-term predictions.

Low ore grades and higher treatment charges at Rio’s East Kemptville tin mine in Nova Scotia resulted in an operating loss of $6.2 million in 1989. With tin prices currently at around US$2.83 per pound, Macaulay said, “The tin prices will have to improve to achieve a profit.” Last year, the mine processed 3.2 million tonnes of ore grading 0.175% tin to produce 6,555 tonnes of concentrate averaging 54.9% tin. Recoveries averaged 63% for the year, improving to almost 70% at year-end.

In reviewing the company’s other mining operations, Macaulay said that operations could cease as early as August at Rio’s Quirke and Panel uranium mines at Elliot Lake, Ont., where collective agreements with the unionized workforce are set to expire in September. The company is closing down the two mines due to low ore grades and depressed uranium prices, which have made obtaining new long-term sales contracts impossible.

At the company’s uranium properties in Wyoming, innovative in-situ leaching techniques are now under study for potential development. The technique has environmental advantages as well as lower capital and operating costs than conventional underground mining methods.

Bacterial leaching is also being considered at Rio’s 100% owned Cerro Colorado copper project in Chile, where a production decision is expected this year for a mine which would have a 20-year life. At the Highland Valley copper mine in British Columbia, operating profit slipped to $44.4 million in 1989 from $99.7 million a year ago because a strike by the unionized workforce closed operations for three and a half months. A new 2-year agreement which extends to Sept. 30, 1991, is now in place, however.

On the exploration side, the company has completed a major staffing campaign and is now well positioned to take a long-term approach to exploring for new gold, base metal and uranium deposits from its own grassroots programs.0508,0206,0304,0008 Rio Algom (TSE) $000s except per-share items Quarter ended Mar. 31 1990 1989 Revenue $355,484 $512,200 Net earnings 20,131 41,900

per share 0.44 0.94004