Teck Cominco braces for recession (October 15, 2001)

Vancouver — Plunging base metal prices have prompted Teck Cominco (TEK-T) to reduce the carrying value of non-operating properties by $154 million and take other non-cash charges of $15 million.

The major’s decision preceeds the release of third-quarter financial results (scheduled for October 24), but comes in the wake of the terrorist attacks in the United States. Some analysts are predicting the attacks could cause a recession, which would reduce demand for zinc and copper.

Topping the list of properties is San Nicolas in Mexico. Resources there are pegged at 75 million tonnes grading 1.4% copper and 2.1% zinc, which the major now feels may not meet its economic threshold.

Teck Cominco holds a 74% interest in the project, with the remainder held by Western Copper Holdings (WTC-T). The major can boost its stake to 81% by funding development costs.

A feasibility study is scheduled for completion shortly.

The Kudz Ze Kayah property in the Finlayson district of the Yukon, which hosts an indicated resource of 11.3 million tonnes grading 5.9% zinc, 1.5% lead, 0.9% copper, 1.3 grams gold and 133 grams silver per tonne, will have its carrying value reduced as well. Cominco discovered the deposit in 1993 and subsequently optioned it to Expatriate Resources (EXR-V), only to be handed it back earlier this year after the junior failed to make a scheduled $1-million payment.

Other affected properties include Lobo Marte in Chile; Petaquilla in Panama; Cerateppe in Turkey; and Schaft Creek in B.C. All but Schaft Creek host reserves, though that project does contain a resource of 1 billion tonnes grading 0.33% copper and 0.034% molybdenum.

The non-cash reduction, which will be recorded in the third quarter, diminishes the achievements of the previous period, when Teck Cominco earned $23 million (or 22 per share).