Falconbridge’s earnings quadruple

Higher nickel, copper and zinc prices sent Falconbridge‘s (FL-T) earnings soaring during the final three months of 2003.

During the quarter, Falconbridge’s earnings swelled to US$94 million (or 51 per diluted share), up from year-ago earnings of US$23 million (12 a share). Similarly, revenue rose by 44% to US$636.7 million as the company’s average realized nickel, copper and zinc prices rose 70%, 33% and 21%, respectively. Cash flow from operations (after working capital) jumped 70% to US$141 million.

For all of 2003, Falco’s earnings came to US$194 million ($1.04 a share) on revenue of US$2.08 billion, up from earnings of US$50 million (24 a share) on US$1.5 billion. The year’s average realized prices increased by 40% for nickel, 14% for copper and 34% for cobalt. Cash flow from operations nearly doubled to US$445 million.

Falco’s mined metal volumes during the quarter amounted to 17,776 tonnes nickel (versus 19,867tonnes in the fourth quarter of 2002), 6,490 tonnes ferronickel (6,091 tonnes), 77,742 tonnes copper (82,945 tonnes), 18,095 tonnes zinc (24,259 tonnes), and 785,000 oz. silver (916,000 oz.). Refined production totalled 27,058 tonnes nickel (27,387 tonnes a year earlier), 65,117 tonnes copper (67,636 tonnes), and 20,517 tonnes zinc (38,592 tonnes).

The yearly performance is much the same, except for nickel production, which rose 12,577 tonnes to 104,410 tonnes.

Says Falco’s CEO, Aaron Regent: “The world’s economies are expected to continue to recover, providing a solid backdrop for metal demand. This demand combined with insufficient additions to supply will result in deficits for both nickel and copper and will result in a period of high metal prices.”

Looking ahead, Falconbridge expects copper production to increase, while nickel production will slip by about 2,000 tonnes per month thanks to the labour dispute at the Sudbury operations. The company and Local 598 of the Canadian Auto Workers (Sudbury Mine, Mill and Smelter Workers) Union are looking to an Ontario Ministry of Labour conciliator to help facilitate negotiations.

The major recently shut down mining and milling operations in Sudbury, after two months of failed negotiations. The 1,050 unionized workers (about 80% of the Sudbury workforce) walked off the job on Feb. 1. The smelter continues run at 50% capacity.

Meanwhile, construction of the $100-million Montcalm nickel-copper project, 70 km northwest of Timmins, Ont., has begun. Production of 8,000 tonnes nickel annually over seven years is expected to begin in the second quarter of 2005. Reserves at Montcalm are pegged at 5.1 million tonnes grading 1.46% nickel, 0.7% copper, plus minor cobalt credits.

At the Nickel Rim South property, near Sudbury, surface drilling continues to define resources, which remain open to the northeast. A decision whether to advance to the feasibility stage will await a resolution to the labour dispute in Sudbury. Inferred resources currently stand at 11.7 million tonnes grading 1.6% nickel and 3.7% copper.

At year’s end, Falco had $298 million in cash and equivalents, up from $164.5 million at the end of 2002. Long-term debt increased to US$1.36 billion, with US$70.6 million due within a year.

The company has declared a dividend of 10 per common share, 2 per Series 1 preferred share, and 36.72 per Series 2 preferred share. The dividends are payable on Mar. 1, 2004.

Shares in Falconbridge were $1.10 higher at $30.75 in late afternoon trading in Toronto on Feb. 5.


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