Teck expanding gold base as revenue and profits soar

Diversification has always paid off well for Teck Corp. and the sharply higher profits show 1987 to be no exception.

Gold takes the front seat this year, boosting net earnings to $33.6 million on revenues of $203 million, up from $23.3 million on revenues of $185 million in fiscal 1986.

But gold was by no means the only headline grabber for Teck in 1987. Gaining control of Cominco was a major coup, as was the arrangement to join its Highmont mill with the other copper-producing giants in British Columbia’s Highland Valley.

Commenting on the profit increase in the annual report, President Norman B. Keevil Jr. attributes it to higher copper and gold prices and the start of commercial production at the David Bell gold mine.

“Teck began as a gold company in 1913 … and gold once again is becoming a substantial part of Teck’s business,” he says.

The David Bell mine at Hemlo in northern Ontario, owned jointly with International Corona, produced 130,122 oz gold this year. Teck’s share of operating profit was $24 million, plus an additional $3 million from production from the quarter claim being mined by Hemlo Gold Mines.

Mill throughput averaged 1,084 tons per day, with an average grade of 0.35 oz gold per ton and recovery of 96%. In 1988 production will come from the higher grade lower levels. Mineable reserves stand at 7.1 million tons grading 0.34 oz.

The annual report includes the adjacent Williams mine in its projections for Teck’s future gold production. Ownership of the property is still under dispute, with Lac Minerals taking its appeal to the Supreme Court of Canada. The Ontario Supreme Court awarded the mine to International Corona in March and upheld its decision in October, 1987. The effect of the court decision to date is that the property would go to the Teck- Corona joint venture, upon payment of $154 million. The appeal could take up to a year to be heard.

Teck’s share of gold production from all its operations, including estimated production from the Williams mine, amounted to 230,000 oz. Annual production by the end of the decade is expected to be in the order of 375,000 oz, Keevil says.

The company has a 60% interest and a 10% royalty in a placer gold mine near Dawson City, Yukon, which produced 5,570 oz of fine gold. Teck’s profit share was $1.3 million. Other gold projects

Other gold activities reviewed in the report are underground exploration at the Lamaque mine, the Casa Berardi gold mine now under construction, and the company’s gold exploration projects.

Engineering studies have begun to determine the feasibility of reopening the Lamaque mine at Val d’Or, Que. The mine closed in 1985 after producing 4.6 million oz gold over 50 years.

Parts of the property were farmed out to Tundra Gold Mines and to Golden Pond Resources, with Teck retaining the main Lamaque mine and mill. Tundra can earn a 50% interest by spending $9 million. Drifting on the 3,400 and 3,600 levels has indicated two potential ore shoots with mineable grades and widths, and drilling at the 2,000-ft level has encountered excellent grade in the No 5 plug. Golden Pond has earned a 50% interest in a separate part of the property, encountering several new veins near surface which will be available if the mine is reopened.

Teck has the right to earn a 50% interest in the Estrades polymetallic property, 20 miles east of Casa Berardi. Additional drilling to enlarge reserves and a possible bulk sampling program are under way (N.M., Dec 21/87).

Another exciting gold prospect in the Casa Berardi area of Quebec is owned 40% by Golden Knight Resources and 60% by Inco. Teck has a 30% share interest in the former company. A 1,300-ton- per- day mill is being built on the site which should be starting up next fall.

Teck holds a 9.6% share interest in Noramco Mining, which has one of the largest exploration budgets in Canada, with funds managed or directly spent in excess of $65 million in 1987. It also has a 29% interest in Cons. Silver Standard Mines. Metal mining operations

Mines operated by the company produce coal, copper, gold, silver, zinc and niobium. Combined operating profit for the year was $55 million compared to $56 million last year.

Lead, zinc and copper were added to the list early in the year when Teck led a consortium to purchase a controlling interest in Cominco. Nunachiaq Inc., in which Teck holds 50%, NIM Holdings (25%) and Metall Mining Corporation (25%), currently has a 30% share interest in Cominco.

Arrangements were completed in September under which the Highmont mill (owned 50%) was acquired by the Highland Valley Copper Partnership. With Teck’ s shareholdings in Cominco and Lornex (23%), the company’s net interest in the largest copper mining operation in Canada became 20%. Net proceeds of production of the Valley Copper and Lornex orebodies goes 50% to Cominco, 45% to Lornex and 5% to Highmont. Production is about 400 million lb of copper a year.

The Afton open pit copper mine near Kamloops, B.C., produced 43.7 million lb copper, 48,100 oz gold and 270,000 oz silver in 1987. Production of all three metals was down from the previous year, as production shifted from the original high grade orebody to the lower grade Pothook deposit. The mill averaged 8,642 tons per day grading 0.81% copper.

The Beaverdell silver mine located south of Kelowna, B.C., produced 367,000 oz silver, up 15,000 oz over the previous year. Operating profit was $381,000, following small losses in the two previous years.

Moving northeast to Tumbler Ridge, Teck has a 60% interest in the Bullmoose open pit coal mine. During the fiscal year, 2.6 million tons of coal was delivered to the wash plant. Coal is sold under long- term contracts for 1.9 million tons per year, plus or minus 5% at the buyer’s option.

In Newfoundland, the company’s zinc mine near Daniel’s Harbour (owned 63%) reopened in September following a 16-month shutdown. The provincial government agreed to provide $2.4 million in loans, repayable from future profits. A surface and underground exploration program, including 20,000 ft of diamond drilling is under way.

The Niobec underground mine near Chicoutimi, Que., operated by Teck in a joint venture with Cambior Inc., produced 6.4 million lb niobium oxide during the fiscal year.

On the oil and gas side, profits rose to $8.5 million from $8.2 million the year before. Teck produced 514,000 bbl of oil and 2.7 billion cu ft of natural gas in 1987.

Teck’s working capital stood at $48 million at year-end and total bank debt was $132 million. Cash, marketable securities and long term investments had a market value of $498 million.