Noranda may venture into magnesium

Faced with having to control capital expenses in tough economic times, Noranda (TSE) will cut its exploration spending to $112 million this year from $147 million in 1991, said President David Kerr at the company’s recent annual meeting in Toronto.

But even though Noranda has been forced to sell assets to maintain its quarterly 25 cents per share dividend, major projects including the Collahausi copper property in Chile and Louvicourt Twp. massive sulphide discovery in Quebec have to be financed.

Noranda is also looking to move into new areas, and may soon add magnesium to traditional product lines that include zinc, copper, nickel and gold. Speaking at a rather subdued meeting, Kerr said he expects auto industry demand for magnesium to increase as manufacturers strive to reduce the weight of cars.

Having developed the technology needed to extract magnesium from asbestos tailings at old mines near Sherbrooke, Que., Noranda is talking with major car manufacturers in a bid to establish long-term supply contracts. “If the project went ahead, Noranda would rank as one of the lowest cost magnesium producers in the world,” Chairman Alf Powis told The Northern Miner after the meeting had ended.

However, the problem with such a project is that the market for magnesium is limited and Noranda would be reluctant to build a plant if demand remains at current low levels, warned another Noranda executive.

Automakers on the other hand are unlikely to switch from using aluminum to magnesium unless they can be sure of long-term supply, said Lance Tigert, senior vice-president business development. “It’s a chicken and egg situation,” he said.

Meanwhile, Noranda is assessing ways in which to raise $45 million to fund its share of development costs at the Louvicourt Twp. base metal project which Kerr called the the best new orebody in Canada since Kidd Creek. As Vancouver-based Teck (TSE) is injecting $55 million into the Val d’Or, Que., project to earn a 25% interest from Aur Resources (TSE), Noranda is under no immediate pressure to come up with affiliate Societe Minere Louvem’s (TSE) 45% share of costs, says Tigert.

But since $45 million would be a “big number” for a junior like Louvem to raise, Tigert indicated that Noranda may go the same route as Teck by earning a direct project interest from Louvem (which is 52% owned by Noranda). In addition, Kerr said the Collahausi orebody in Chile may become one of the best copper mines in the world when it is brought into production by Noranda’s 50% owned Falconbridge and partners Shell Chile and Chevron Minerals.

With an estimated one billion tonnes of 0.92% copper per tonne outlined so far, Falconbridge is scheduled to start contributing to a $22 million work program this summer. Shell Chile and Chevron are each earning a one-third interest in the project.

For the three months ended March 31, Noranda reported earnings of $17 million or 1 cents a share, compared with earnings of $15 million in the same period last year.