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Strategies & Market Trends : Commodities - The Coming Bull Market -- Ignore unavailable to you. Want to Upgrade?

To: craig crawford who wrote (809)	9/23/2001 6:21:11 PM
From: craig crawford	Respond to of 1643

Tough times for Canadian miners get even tougher biz.yahoo.com Friday September 21, 12:27 pm Eastern Time By Lesley Wroughton TORONTO, Sept 21 (Reuters) - Low prices were already hurting Canadian base metal companies before last week's attacks on the United States -- now the producers are bracing for an even longer period of cutbacks and recovery. Their stocks have been lashed in this week's general market selloff on fears of a U.S.-led war that could force a recession, further cutting demand for their products. Shares of Inco Ltd. (Toronto:N.TO - news) and Falconbridge Ltd. (Toronto:FL.TO - news), the Western World's two top nickel producers, both hit fresh 52-week lows on the Toronto Stock Exchange on Friday, while Alcan Inc. (Toronto:AL.TO - news), the world's second largest aluminum company, and Teck-Cominco (Toronto:TEKb.TO - news), a zinc giant, teetered on the edge of new lows. The Toronto Stock Exchange's main metals and minerals index has slid 22 percent since Sept. 5, the week before the attacks. Base metals demand started falling late last year as the economic downturn started to take hold, forcing manufacturers to cut inventories and pushing metal prices to historical lows. On the London Metal Exchange (LME), major base metals copper, aluminum and nickel are around levels last seen in June 1999, while zinc is at its cheapest since June 1986. ``We were looking for a recovery in early 2002, but now it looks as though the trough of the cycle is going to be extended until later in 2002,'' said Kevin Reid, an associate analyst for CIBC World Markets in Toronto. While there is no talk of layoffs, more companies are now considering deferring capital projects, while others said first to go will be exploration spending. ``It throws out a lot of uncertainty, and we have to acknowledge that there is going to be more of a slowdown than what we would have perceived more than a week ago,'' said Greg Waller, manager for financial analysis at Teck-Cominco Ltd. ``We don't have any real big projects going ahead right now that we would actively defer, but certainly companies are always working on new growth opportunities and this will obviously impact one's willingness to take some risk on some of these things right now,'' he added. Zinc miners are now particularly vulnerable as the metal continues to fall -- currently at 36 cents a pound -- to below operating costs for most producers. ``Generally our assets are in the category that we can operate at the lowest part of the price cycle so we don't foresee anything being shut down now,'' Waller said. ``But certainly it will call into question deferment of capital projects you might otherwise be going ahead with.'' Teck has already announced it is shelving expansion at its Cajamarquilla mine in Peru and deferred the rebuilding of the Pend Oreille project in Washington state. Analysts said Teck-Cominco might now also decide to maintain production cuts at its key Trail facility in British Columbia and continue exporting excess electricity from its hydro power plant there to the United States at more profitable prices than zinc. Since December it has cut 120,000 tonnes of Trail's zinc production to free up power from its Waneta hydroelectricity plant. Mining group Noranda said it had been making small cutbacks since metal demand first started falling and was currently in the midst of planning for 2002. Noranda, which holds a majority stake in Falconbridge, said it had made cuts in personal travel and discretionary spending. It said many of its big expenditure projects were also nearing completion including the Magnola magnesium plant in the province of Quebec and a foil facility in the United States. ``We may defer some of the larger capital projects to a later date or we may have to review them before going forward, but we are always sharpening our pencil looking to optimize our operations as scenarios change,'' said spokesman Dale Coffin. Falconbridge pointed out that its Falcondo ferronickel mine in the Dominican Republic was being shut as planned between October and January in response to market conditions. Spokeswoman Caroline Casselman said the company might keep that facility closed if metal prices remained depressed. Canaccord Capital's Toronto-based mining analyst Greg Barnes said he was confident Canada's miners will survive the downturn, unlike Australia's Pasminco Ltd (Australia:PAS.AX - news), a major zinc and lead producer, which is selling some of its best assets as debts mount. ``I don't think you're going to see any Pasminco's over here. It just isn't going to happen,'' he said. Several investment houses have recently revised earnings estimates for Inco due to lower nickel price forecasts. Inco spokesman Allan Stubbs said the company was closely monitoring the economic and market changes. ``The ground is shifting out there and we are trying to analyze it, read it and see implications, but at this point no conclusions,'' said Toronto-based Stubbs. ($1=$1.57 Canadian)