Vancouver — Faced with an oversupply of zinc on the world market,
The Cajamarquilla zinc refinery in Peru, owned 82% by the major and 17% by Japanese-based Marubeni, will be closed from June through August, causing output to be slashed by 30,000 tonnes. The refinery produced 31,500 tonnes of zinc in the fourth quarter of 2001, compared with 30,900 tonnes in the last three months of 2000. The operating profit fell to $3 million from $6 million.
Meanwhile, the Trail zinc refinery in British Columbia is scheduled to shut down in August, reducing zinc production by 25,000 tonnes. After being closed for most of the third quarter of 2001 (so that Teck Cominco could focus on power sales), the smelter reopened its doors in November. In the fourth quarter, Trail yielded 62,100 tonnes of refined zinc and 9,700 tonnes of refined lead. The facility posted an operating loss of $15 million during the period, compared with a profit of $113 million a year earlier. The loss is attributed to low copper and zinc prices coupled with significantly reduced profits from power sales.
On the mining front, the Red Dog operation in Alaska is now slated to ship 1 million tonnes of concentrate in 2002, down from an originally planned 1.2 million. This results in a reduction of 33,000 tonnes of contained zinc.
The Red Dog mine cranked out 128,000 tonnes of zinc concentrate at an operating loss of $13 million in the fourth quarter, compared with 127,400 tonnes at a profit of $36 million a year earlier.
At the massive Antamina copper-zinc mine in Peru, commercial operations began during the fourth quarter, with production during the period totalling 80,400 tonnes copper in concentrate and 56,000 tonnes zinc in concentrate.
Teck’s share of production is 22.5%, with the remainder held by partners
Antamina is equity-accounted in Teck’s books, and the company logged a $1-million equity loss from the operation in the fourth quarter, after deducting interest expenses.
Built at a cost of US$2 billion, Antamina operates at the daily rate of 70,000 tonnes. The partners expect the mine to produce an average of 306,450 tonnes copper and 283,750 tonnes zinc annually over its first 10 years of production. The mine life will be at least 20 years.
At the San Nicolas copper-zinc project in Mexico, Teck Cominco delivered a final feasibility study to its partner,
Meanwhile, rebuilding of the Pend Oreille mine in Washington state has been postponed to the first quarter of 2004 as a result of week metals prices.
According to Teck Cominco, the weak global economy saw zinc demand fall by 4% in 2001, resulting in rising inventories. The company expects demand to grow in 2002 but believes the cutbacks are required to bring supply and demand more into balance. Last year, the company realized an average price of US40 per lb., down from the US$51 per lb. received in 2000.
Zinc-related revenue accounted for 33% of Teck Cominco’s sales in 2001. The major estimates that a US1 rise in the price of zinc would increase after-tax earnings by $14 million (or US8 per share).
In 2001, $122 million in writedowns caused the company to record an after-tax net loss of $21 million (or 17 per share). Fourth-quarter earnings totalled $6 million (3 per share) on revenue of $527 million, compared with $43 million (39 per share) on revenue of $716 million in 2000.
Be the first to comment on "Teck Cominco cuts zinc output (February 25, 2002)"