Trail improvements pay dividends for Cominco

Improvements at the lead-zinc smelter in Trail, B.C., and at the Red Dog mine in northwest Alaska gave Cominco (TSE) a boost in the first quarter.

The major posted $2.3 million in consolidated net earnings for the period, compared with a loss of $36.8 million in the comparable period last year. Sales for the quarter were $236.3 million, compared with sales of $291.5 million in the same period last year (which included revenue of $64.6 million from fertilizer operations). Included in this year’s first-quarter results is an after-tax gain of $12.7 million from the sale of the Fish Lake copper deposit in British Columbia.

After providing for dividends on preferred shares, first-quarter income amounted to 2 cents per common share, compared with a loss of 47 cents per common share in the same period last year.

The improvement in operating results is primarily due to a stronger performance at Trail and increased production of zinc concentrate at Red Dog, which was 12% greater than the rate achieved in the first quarter of 1993. At Trail, costs were down as a result of cost reduction measures, and the production of zinc increased by 8%, compared with the prior year’s first quarter. Production of refined zinc and lead also exceeded production quantities for the prior year’s fourth quarter (by 4% and 16%, respectively). In its recent budget, the British Columbian government announced changes to water rental rates, which will benefit all self-generators who use their power for production purposes. This will result in a savings of about $7 million per year.

Production of zinc concentrate at Red Dog continued to increase and first-quarter production reached design levels. Inventory values of Red Dog zinc concentrate are based on a London Metal Exchange price of US43 cents per lb. and this price will be used until there is evidence that prices will be significantly different during the period in which concentrates are sold. Earnings of Highland Valley Copper (in which Cominco has a half interest) were weak as a result of lower copper prices. After seven months of contract negotiations, a tentative agreement was reached between Highland Valley Copper and the union. The agreement is subject to ratification. On March 4, Cominco and the British Columbian government signed agreements in principle, under which Cominco will proceed with construction of a Kivcet lead smelter and slag fuming plant at a cost of about $145 million, as well as zinc expansion at a cost of roughly $25 million. The lead smelter will improve environmental performance and annual capacity will increase to 120,000 tons from the current 100,000. The zinc expansion will increase annual production to 320,000 tons from the current 290,000 tons over the next three years.

During the second quarter, it is expected Cominco will sell British Columbia the rights to expand power production at its Brilliant and Waneta dams for $51.8 million. The comapany has retained a 15% income interest, to commence when the expansion projects are paid off. Meanwhile, it is retaining its existing power sources to meet the needs of its operations and its commitments to West Kootenay Power.

At the Quebrada Blanca operation in Chile, the crushing plants are in operation and ore is being placed on the heap-leach pads. The first three power units have already started up and construction of the solvent extraction-electrowinning plants will be completed in the second quarter.