Weak copper price dents Aur profits

Copper producer Aur Resources (AUR-T) watched its profits slip 34% during the first quarter, despite having its cash flow revved up by the acquisition, last November, of the Quebrada Blanca mine in Chile.

Aur profited US$1 million (or 1 per share) on operating revenue of US$50.6 million, compared with the US$1.6 million (2 per share) earned on US$18 million during the first quarter of 2000.

As Canada’s largest pure-copper play, Aur has interests in three producing mines: a 30% stake in the Louvicourt polymetallic mine in Quebec, which is owned 45% by Novicourt (NOV-T) and 25% by Teck (TEK-T); a 70% stake in the Andacollo copper mine in Chile, which is 30%-owned by Chilean interests; and a 76.5% interest in Quebrada Blanca (QB), which is 23.5%-held by Chilean interests. Aur operates at all three mines.

The company’s attributable metal production during the recent quarter was 59 million lbs. copper (compared with 20.3 million lbs. a year ago), 3.8 million lbs. zinc (1 million lbs.), 64,000 oz. silver (76,000 oz.) and 2,300 oz. gold (2,600 oz.).

Having hedged 62% of its planned copper production for 2001 at US87 per lb., Aur received an average of US86 per lb. for its production during the quarter, compared with an average of US81 per lb. on the London Metal Exchange.

Cash operating costs for the quarter were US54 per lb. of copper sold, net of byproduct credits, compared with US45 per lb. a year ago. Costs were affected by unexpectedly heavy rainfall at QB, which reduced copper production by 2.6%. Overall this year, the QB mine remains on-track to produce 165 million lbs. copper cathode at a cash operating cost of US52 per lb.

Ongoing exploration drilling at QB has almost doubled measured and indicated resources to 295 million tonnes at 0.74% copper, up from 153 million tonnes of 0.87% copper at the end of 2000. This year, Aur has earmarked US$18.7 million of its US$20.7-million capital budget for work at QB.

Aur acquired its stake in QB from Teck and Cominco (CLT-T) for an aggregate US$180.6 million, including US$56.5 million of QB senior project debt owed to Teck. A further US$35 million either in cash or Aur shares must be paid to the two partners by the end of 2003.

Aur also purchased US$69.1 million of senior project debt owed by QB to certain third-party lenders other than Teck, bringing the total cash and non-cash consideration for the QB purchase to US$304 million.

Aur says it remains in full compliance with respect to its US$170-million bank debt and has sufficient cash to service its debt this year.

The company recently assumed control of the greenfields Cerro Colorado project in Panama, where undeveloped primary copper-sulphide resources are pegged at 1.75 billion tonnes grading 0.64% copper plus silver and molybdenum credits.