Copper, gold should boost Teck’s earnings in 1988

Norman Keevil Jr. took the podium at Teck Corp.’s annual meeting, apologized for the noises coming from the Ontario Fruit and Vegetable Growers’ Association in the next room, and proceeded to tell shareholders that in 1988 Teck will improve on 1987’s record net earnings.

Net earnings in 1987 increased 40% to $33.6 million or 70 cents per share compared with $30 million or 42 cents per share in 1986.

Keevil, president and chief executive officer of the company, said cash flow from operations at $79 million or $2.37 per share was also a record. In 1986 comparative figures were $57 million or $1.86 per share.

Shareholders approved a 2-for-1 stock split of both Class A and Class B shares at the meeting. Class A shares each carry the right to 100 votes while Class B shares carry the right to a single vote. Voting control is held by Temagami Mining which is 51% owned by Keevil Holding Corp. and 49% by Metall Mining Corp. Keevil said Teck’s interest in Cominco Ltd., Lornex Mining and from its interest in the Hemlo, Ont., gold camp should all make greater contributions in 1988.

Cominco, the world’s largest zinc producer, should benefit from higher copper prices in 1988 and the last three months of 1987. (Teck’s fiscal 1987 ended Sept 30 but the company will record a 15-month fiscal 1988, which will include the last three months of 1987, so that its fiscal year will end Dec 31). Teck has a 50% interest in a consortium that owns 30% of Cominco.

Zinc prices are expected to remain steady.

Teck also holds a 23% interest in Lornex. Lornex is expected to benefit in 1988 from better copper prices, too. Lornex’s main asset is a 45% partnership interest in Highland Valley Copper in British Columbia, one of the largest copper mining operations in the world handling more than 100,000 tonnes per day to produce 380 million pounds of copper a year.

Lornex also has a 39% joint venture interest in the Bullmoose coal mine in northwestern British Columbia.

Cominco and Lornex combined their Highland Valley operations in 1986 to form the Highland Valley Copper partnership. Teck will become a 5% partner in that group, retroactively effective Jan 4, as soon as a final agreement is signed. Robert Hallbauer, a director of Teck and president and chief executive officer of Cominco, says there is no problem in signing the final agreement, but signing it has been delayed three times.

Teck’s 5% direct partnership interest along with its interest in Cominco and Lornex give Teck a 20% net interest in the Highland Valley operation.

Teck will gain it’s 5% direct interest in the partnership by contributing its Highmont mill to the operation. Although the final engineering studies have not been completed, Hallbauer says he expects the mill will be moved about three miles to be connected to the Lornex mill. Another possibility is to transport ore to the Highmont mill by conveyor.

The Lornex mill is already handling about 90,000 tonnes per day. Cominco’s Bethlehem mill is handling about 27,000 tonnes per day and the Highmont mill is expected to handle about 38,000 tonnes per day when it is operating.

Cominco’s debt was also reduced from $1.05 billion shortly before the Teck-led consortium bought its controlling interest to about $300 million at the end of September, 1987 — “a level we feel more comfortable with,” said Keevil.

Cominco will be increasing that debt-load, however, as the $400 million(US) Red Dog zinc deposit in Alaska progresses. Keevil says Red Dog will be “a cornerstone of the company (Cominco) for many years.”

Teck’s 1987 results do not include contributions from the Page-Williams gold mine at Hemlo, although the Supreme Court of Ontario upheld a decision ordering ownership of the mine to be transferred from Lac Minerals to International Corona Resources upon payment to Lac of $154 million. Corona is a 50-50 partner with Teck on all of the two companies’ Hemlo interests. The Page-Williams mine could have a big impact on Teck’s financial statements if an appeal by Lac to the Supreme Court of Canada fails.

Teck’s 50% interest in the David Bell gold mine at Hemlo, however, is contributing to earnings and should increase its contribution in 1988.

The mine has reached its rated capacity of just under 1,000 tonnes per day although daily throughput has been as high as 1,400 tonnes per day.

Production in 1987 totalled 130,000 oz at an operating cost of $111(US) per oz. Total production since start-up in mid-1985 has been 750,000 tonnes of ore to yield 250,000 oz.

Mineable reserves at year-end were 6.4 million tonnes at 0.37 oz per tonne. After 1987 production, the reserve figure is an increase of 6% in tonnes and 9 % in contained oz. Those reserves are up 30% from the 1984 feasibility study figures.

In 1988, the David Bell mine will be nearing maturity as major development of the mine will be largely completed.

“Production at David Bell for the past six months, at 86,000 oz, gives an indication of the potential increase which might be achieved,” said John Anderson, general manager of Teck’s gold operations.