Teck tabled earnings of $11 million (or 10 per share) on revenue of $158 million, compared with a loss of $2 million (3 per share) on revenue of $145 million during the second quarter of 1999. The increase is attributed to improved operating earnings and to a significantly higher contribution from Cominco.
Net earnings from operations before contributions from Cominco this past quarter were $3 million, compared with $1 million a year ago, while equity earnings from Cominco amounted to $8 million, compared with a loss of $3 million. The increase stemmed from a higher zinc price, which averaged US51 per lb., compared with US46 per lb. in the second quarter of 1999.
Teck owns 38.6 million common shares of Cominco, or 45.1% of the company.
Teck’s cashflow from operations, before working capital adjustments, was $27 million during the recent quarter, compared with $25 million a year ago. Teck has $196 million in working capital, including cash and short-term investments of $171 million. Its long-term debt totals $450 million, or 18% of its total capitalization.
The company produced 139,500 oz. gold during the second quarter, compared with 133,300 oz. in 1999. The average realized gold price between the two periods fell to US$295 from US$321 per oz., though average cash operating costs slipped to US$177 from US$196 per oz.
The second quarter saw a solid performance at both the David Bell and Williams mines, near Hemlo, Ont. Teck’s 50% share of gold production increased to 79,200 oz., compared with 76,000 oz. in the year-ago quarter. Average cash operating costs at David Bell rang in at US$162 per oz., a 12% decrease over last year. The Williams mine incurred a cash operating cost of US$191 per oz., or 5% lower than a year ago.
An optimization program enabled the Williams mill to sustain throughput at the average rate of 8,200 tonnes per day, and an increase in daily capacity to 10,000 tonnes is planned.
Production at the Tarmoola mine, in Western Australia, increased to 58,181 oz., or 9% more than in the comparable period of 1999, while cash operating costs totalled US$171 per oz., or 13% less. Over the next two quarters, production from Tarmoola is expected to be reduced as a result of waste-stripping requirements for open-pit development.
At the Pogo gold deposit, in Alaska, a decline has been advanced 2,190 metres and is now well into the L1 vein. This has enabled higher-density underground drilling to proceed in order to confirm the resource model. Results from this round of drilling will be incorporated into the feasibility study. Ground conditions in the ore and footwall rock are said to be good. Teck stands to earn a 40% interest in the gold project, which is a joint venture with Sumitomo Metal & Mining of Japan.
To date, Teck has drilled 129 holes, totalling 11,400 metres, in the L1 vein. In addition, 12 holes totalling 2,370 metres. were drilled to test for the L3 vein, discovered by two previous deep drill holes. High-grade intersections were cut in several holes, but Teck reports that the vein does not appear to be as continuous as the L1 and L2 veins. The L3 vein remains open to the northeast, and further drilling will attempt to delineate the structure.
In June, the company kicked of a program of surface exploration, which includes 25,000 ft. of drilling designed to test anomalous zones.
At the Carosue Dam project, in Western Australia, Teck reports that the engineering, design and construction of the plant and surrounding infrastructure are well under way, and that initial mining commenced in July.
At the San Nicolas deposit, in Mexico, Teck has commissioned a feasibility study, which includes 10,000 metres of infill drilling designed to extract bulk samples for metallurgical tests. The project is owned 66.25% by Teck and 33.75% by
In Peru, construction of the Antamina project is on budget and on schedule. Engineering is 94% complete, and the overall construction of permanent facilities is 52% finished. The building housing the grinding section and copper and zinc floatation circuits is complete, and the semi-autogenous grinding and ball mills are in place. In addition, the pipeline contractor has laid 89 km of pipe to date.
Teck’s copper production hit 31 million lbs. during the recent second quarter, compared with 27 million lbs. in the year-ago period. The increase is attributed to the restart of the Highland Valley Copper operation, near Kamloops, B.C. The Highland Valley Copper mine was shut down from May to October 1999, as a result of low copper prices. The company is a joint venture among: Cominco, with a 50% interest;
Copper sales hit 29 million lbs. during the quarter, down from 33 million lbs. a year ago. Teck posted an average realized copper price of US79 per lb., compared with US77 per lb. during the second quarter last year. The cash operating profit rang in at $12 million, which is comparable with last year.
Metallurgical coal production weighed in at 1 million tonnes during the recent quarter, up significantly from 609,000 tonnes a year ago. The company declared a $7-million profit from its coal operations, compared with $2.6 million in the second quarter of 1999. The increase is a reflection of lower operating and transportation costs. The major expects to see higher sales volume from its Elkview mine in B.C. during the second half of 2000.
In July, Teck tendered an offer to buy an additional 4 million shares of Cominco at $25 per share. At the time, the $100-million bid represented a 19% premium over the recent closing price of Cominco shares. The deal, if approved, will boost Teck’s equity interest in the major to 49.8%.
Cominco’s board of directors called Teck’s offer “financially inadequate.” A valuation, prepared by CIBC World Markets for Cominco, pegged the worth of the company’s shares at between $31.29 and $42.15.
According to Teck, its interest in Cominco arises from a new accounting rule, effective this year, which requires the company to reduce its share of Cominco’s earnings by up to 30%. If Teck’s interest were to exceed 50%, it would be exempt from this rule. Teck Chairman Norman Keevil says his company could take a 51% interest in Cominco before year-end.
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