Noranda takes big hit in 2002 (February 17, 2003)

Reflecting its decision to close the Magnola magnesium plant in Quebec, Noranda (NRD-T) has recorded a whopping $700-million loss for 2002.

The $3.02-per-share loss included an after-tax charge of $630 million against Magnola and compares with losses of $92 million (or 47 per share) in 2001. Excluding non-recurring charges, Noranda would have lost only $110 million last year.

Magnola is expected to close its doors by the second quarter and keep them shut until magnesium prices improve. An additional after-tax charge of $28 million will be recorded in the current quarter.

Overall, Noranda’s operating and overhead costs actually grew in 2002, but they were offset by the fact that there were fewer expenses related to raw materials, exploration, research and development. After accounting charges but before unusual items, the major had an net operating gain of $26 million, or $104 million more than in the previous year.

Comparable cash from operations rose to $582 million from $401 million.

In the final three months of 2002, Noranda lost $673 million on sales of $1.4 billion, compared with losses of $84 million on sales of $1.4 billion in the fourth quarter of 2001. Again, the Magnola writedown accounts for the downfall, without which Noranda would have recorded a loss of $50 million in the recent quarter.

Noranda’s 2002 production volumes were as follows: 474,602 tonnes copper (compared with 356,743 tonnes in 2001); 553,172 tonnes zinc (509,291 tonnes); 52,469 tonnes nickel (49,796 tonnes); 23,303 tonnes ferronickel (21,662 tonnes); 76,177 tonnes lead (83,127 tonnes); and 13 million oz. silver (11 million oz.).

The closure of the Gasp copper smelter in Quebec and the ongoing strike at the Horne smelter, in the same province, saw Noranda produce 128,183 fewer tonnes of refined copper (in cathode and blister form). However, this was offset by increases in refined zinc, nickel and aluminum.

Except for aluminum and lead, Noranda sold its metals for higher prices than a year earlier. The company also benefitted from currency gains on its hedging contracts.

At Dec. 31, Noranda had $964 million in working capital and $4.7 billion in long-term debt. Some of the debt is owed through Falconbridge (FL-T), in which Noranda now holds a 60% stake.