Falconbridge Ltd FL
Shares issued 177,041,400 Jul 18 close $18.00
Wed 19 Jul 2000
Mr. Oyvind Hushovd reports
Falconbridge reported consolidated earnings of $126.3-million (70 cents per
common share) for the three months ended June 30, 2000. This compares with
earnings of $30.9-million (16 cents per common share) for the second
quarter of 1999.
Falconbridge president and chief executive officer, Oyvind Hushovd, said:
"Our earnings and cash flow continue to improve. Over the last 12-month
period, we've earned $366-million, or $2 per common share, based in part on
strong contributions from our Raglan and Collahuasi operations. In the
short term, we'll use the improved cash flow to strengthen our balance
sheet to be able to take advantage of future opportunities."
Second quarter 2000 consolidated revenues of $753.6-million compare with
$529.4-million for the same period of 1999, while operating income of
$208.3-million was $154.2-million higher. The increases reflect
significantly higher metal prices and higher revenues from platinum group
metals. In particular, Falconbridge realized its highest nickel price in
over a decade at $4.55 (U.S.) per pound. During the quarter, cash flow from
operations was $253.2-million ($1.41 per common share) as compared with
$51.7-million (28 cents per common share) for the same period on 1999.
Six-month earnings
For the six months ended June 30, 2000, earnings of $235.8-million ($1.30
per common share) compared with earnings of $22.6-million (10 cents per
common share) for the first half of 1999. Year-to-date revenues of
$1,420.2-million were up from $967.1-million, while operating income of
$381.7-million was $331.8-million higher. Both increases reflect
significantly higher metal prices and higher revenues from platinum group
metals.
During the six months ended June 30, 2000, cash balances increased by
$112.1-million to $213.6-million. Cash generated from operations, before
changes in accounts receivable, inventories and payables, totalled
$405.1-million as compared with $166.3-million in the same six-month period
of 1999. Non-cash working capital decreased by $28.5-million. Capital
expenditures totalled $97.8-million for the period. During the six months,
net debt repayments of $160.4-million were made and cash dividends of
$43.9-million were paid. Falconbridge's net debt to net debt plus
shareholders' equity ratio was 35 per cent at the end of the quarter,
compared with 39 per cent at the end of March, 2000.
Integrated nickel operations (INO)
Sudbury's mines and mill operated at normal production levels during the
quarter, with the exception of the Fraser mine which experienced a
rockburst at the Strathcona deep copper zone on April 17. The rockburst
negatively affected copper production during the quarter and its impact on
future production is currently being assessed. The Craig and Fraser mines,
along with the mill, have just commenced a two-week vacation shutdown. At
the smelter, matte production was reduced during the quarter due to a
scheduled two-week shutdown in June. During the shutdown, modifications
were made to the furnace which have improved the smelter's performance
significantly since the resumption of operations.
Contract negotiations with the 1,250 production and maintenance workers in
Sudbury (CAW -- Local 598) are continuing. The current three-year agreement
expires on Aug. 1, 2000.
Raglan operated at capacity during the quarter and is basically on schedule
to increase its milling capacity from 800,000 to one million tonnes by
year-end.
Due to the lower matte production from Sudbury, the Nikkelverk refinery
operated below capacity during the quarter. As a result, nickel production
is now estimated at 75,000 tonnes for the year. Nikkelverk recently
received ISO14001 certification of its environmental management system.
The INO's income contribution for the three months ended June 30, 2000, was
$131.1-million, up from $19.5-million during the same period of 1999. The
improvement reflects higher metal prices for nickel and copper, as well as
higher revenues from platinum group metals.
Kidd operations
At the Kidd mine, production improved during the quarter as the division
made up some of the production shortfall it experienced in the first
quarter related to ground control problems. At the Kidd metallurgical
division, copper operations are now back to normal following the
maintenance shutdown in the first quarter. Copper production year-to-date
is lower because of the shutdown, while zinc production remains on target.
Copper cathode production for the year is now forecast at 123,000 tonnes.
Kidd's income contribution for the three months ended June 30, 2000, was
$17.8-million as compared with $18.8-million for the same period of 1999.
Falconbridge Dominicana, C. por A. (Falcondo)
Falcondo operated at capacity during the quarter. The corporation's share
of Falcondo's earnings for the three months ended June 30, 2000, was
$19.1-million as compared with $4.9-million in the same period of 1999. The
increase reflects higher ferronickel prices and higher sales volumes, which
were partially offset by the impact of higher oil prices.
Collahuasi
Collahuasi had another strong production quarter, with both mine tonnage
and ore grades higher than plan. In addition, operating costs remained
favourable. Falconbridge's share of Collahuasi's annual copper production
is now forecast at 181,000 tonnes as compared with an earlier estimate of
171,000 tonnes.
Falconbridge's share of Collahuasi's earnings for the three months ended
June 30, 2000, was $20.3-million as compared with $5.7-million in the same
period of 1999. The increase reflects higher copper prices and higher sales
volumes.
Other developments
Falconbridge continues to investigate a broad range of nickel and copper
opportunities in order to improve its ore reserve base and to add
world-class properties to its portfolio.
At the Koniambo deposit in the north province of New Caledonia, evaluation
work has now identified resources of 146.5 million tonnes averaging 2.56
per cent nickel. It is expected that the prefeasibility study of the
project will be completed by the end of 2001.
During the quarter, Falconbridge reached a tentative agreement with the
Broken Hill Proprietary Company Ltd. (BHP) on the formation of a joint
venture which may lead to the development of the Gag Island nickel laterite
project in Indonesia. To date, BHP has identified resources of 240 million
tonnes averaging 1.35 per cent nickel. If a number of matters are resolved,
Falconbridge may spend $75-million (U.S.) to earn a 37.5-per-cent interest
in the Gag Island nickel project.
Noranda Inc. has advised Falconbridge that it has acquired additional
common shares of Falconbridge Limited. As a result, Noranda's ownership in
Falconbridge has increased to approximately 50.1 per cent, or 88,615,200
common shares.
Dividend payment
On July 19, 2000, the board of directors declared dividends of 10 cents per
common share payable Aug. 14, 2000, to shareholders of record July 31,
2000, and of two cents per preferred share Series 1 payable Sept. 1, 2000,
to shareholders of record Aug. 18, 2000. For preferred share Series 2, a
dividend of 36.72 cents per share is payable Sept. 1, 2000, to shareholders
of record Aug. 18, 2000.
CONSOLIDATED STATEMENT OF EARNINGS
Three months ended June 30
(thousands of dollars)
2000 1999
Revenues $ 753,573 $ 529,356
---------- ----------
Operating
expenses
Costs of metal
and other product
sales 424,191 362,716
Selling, general
and admin 30,323 27,717
Development and
preproduction 18,238 18,961
Depreciation and
depletion 54,348 54,019
Exploration 12,429 8,382
Research and process
development 5,699 3,407
---------- ----------
545,228 475,202
---------- ----------
Operating income 208,345 54,154
---------- ----------
Interest on debt
and debt expenses 30,791 27,785
Interest and other
(income) expenses,
net 1,389 (12,856)
Income and
mining taxes 46,565 7,499
Non-controlling
interest in
earnings of
Falcondo 3,294 845
---------- ----------
82,039 23,273
---------- ----------
Earnings for
the period 126,306 30,881
Dividends on
preferred
shares 2,931 2,931
---------- ----------
Earnings
attributable
to common
shares $ 123,375 $ 27,950
========== ==========
Earnings per
common share 0.70 0.16
CONSOLIDATED STATEMENT OF EARNINGS
Six months ended June 30
(thousands of dollars)
2000 1999
Revenues $1,420,196 $ 967,125
---------- ----------
Operating
expenses
Costs of metal
and other product
sales 804,068 697,038
Selling, general
and admin 58,549 52,593
Development and
preproduction 38,534 39,370
Depreciation and
depletion 107,032 106,597
Exploration 20,428 14,867
Research and process
development 9,871 6,754
---------- ----------
1,038,482 917,219
---------- ----------
Operating income 381,714 49,906
---------- ----------
Interest on debt
and debt expenses 59,885 57,178
Interest and other
(income) expenses,
net (5,395) (25,314)
Income and
mining taxes 85,948 (4,689)
Non-controlling
interest in
earnings of
Falcondo 5,479 113
---------- ----------
145,917 27,288
---------- ----------
Earnings for
the period 235,797 22,618
Dividends on
preferred
shares 5,862 5,759
---------- ----------
Earnings
attributable
to common
shares $ 229,935 $ 16,859
========== ==========
Earnings per
common share 1.30 0.10
PRODUCTION
Three months ended June 30
2000 1999
Mine
production
(tonnes)
Sudbury
Nickel 9,159 10,272
Copper 8,589 12,418
Raglan
Nickel 5,463 4,705
Copper 1,446 1,232
Kidd mining
division
Copper 13,946 16,619
Zinc 28,590 19,500
Silver
(000s ounces) 712 631
Falcondo
Ferronickel 7,625 8,087
Collahuasi
Copper 48,236 45,879
Metal
production
(tonnes)
Sudbury --
smelter output
Nickel 13,206 12,967
Copper 4,137 4,661
Nikkelverk --
refinery output
Nickel 17,019 19,028
Copper 6,577 7,963
Kidd metallurgical
division
Zinc plant
output -- zinc 35,847 33,639
Copper cathode
-- refinery
output 35,223 36,225
Blister copper 35,911 38,280
Falcondo
Ferronickel 7,625 8,087
Collahuasi
Copper 6,586 5,625
PRODUCTION
Six months ended June 30
2000 1999
Mine
production
(tonnes)
Sudbury
Nickel 18,485 19,731
Copper 17,723 23,062
Raglan
Nickel 10,902 8,809
Copper 2,911 2,254
Kidd mining
division
Copper 28,071 30,074
Zinc 47,584 52,926
Silver
(000s ounces) 1,182 1,795
Falcondo
Ferronickel 15,318 10,074
Collahuasi
Copper 93,231 96,245
Metal
production
(tonnes)
Sudbury --
smelter output
Nickel 26,879 28,245
Copper 9,232 10,026
Nikkelverk --
refinery output
Nickel 34,804 37,913
Copper 15,297 16,138
Kidd metallurgical
division
Zinc plant
output -- zinc 74,898 71,520
Copper cathode
-- refinery
output 50,403 68,534
Blister copper 54,938 73,723
Falcondo
Ferronickel 15,318 10,074
Collahuasi
Copper 12,397 11,140
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