Teck Cominco first-quarter profits dip

Teck Cominco Ltd. reported a 4.3 percent dip in profits in the first quarter of 2008 due mainly to a higher Canadian dollar and lower coal and zinc prices.

Earnings fell to C$345 million, or C78 cents a share, compared with C$360 million, or C83 cents per share, in the first quarter of 2007.

Teck Cominco President and CEO Don Lindsay said significant income from three copper mines that the Vancouver, B.C.-based major acquired from Aur Resources in 2007 along with a 32 percent increase in the copper price helped the outcome.

Lindsay also said the company's outlook for the remainder of 2008 appears favorable as copper prices remain high and coal prices are expected to rebound.

Alaska results mixed

In Alaska, the Red Dog and Pogo mines both helped and hurt Teck Cominco's overall performance in the first quarter.

Red Dog's operating profit, before pricing adjustments, plummeted to $82 million in the first quarter, compared with $183 million in the same period last year.

Positive pricing adjustments of $5 million were recorded in the first quarter compared with negative pricing adjustments of $37 million in the first quarter of 2007.

The decline in operating profit was due mainly to lower zinc prices, a decline in sales volumes and an increase in the NANA royalty rate. The NANA royalty charge in the first quarter was $25 million, compared with $10 million expensed under the previous advance royalty regime in 2007.

Zinc sales volumes of 103,400 metric tons in the first quarter fell by 31,500 metric tons, or 23 percent, from the same period last year. Sales in the first quarter of 2007 were unusually high due to shipping delays in 2006 which had shifted some sales into the first quarter of 2007.

Mill throughput in the first quarter fell by 13 percent due to high lead grades which restricted throughput and to slowing of the mill feed rate due to frozen ore. Higher zinc grades in the quarter mainly offset the lower throughput resulting in zinc production being 4 percent lower than the same period last year. Lead production increased by 9 percent to 35,500 metric tons compared with the same period last year, due to significantly higher lead grades in the quarter.

At March 31, Red Dog had 136,000 metric tons of zinc in concentrate and 3,000 metric tons of lead in concentrate available for sale from the 2007 shipping season, excluding production inventory at the site.

Progress at Pogo

At the Pogo gold mine in Interior Alaska where Teck Cominco owns 40 percent of gold production, the company reported output of 83,200 ounces, up 87 percent from the first quarter of 2007. Production in the first quarter of 2007 was substantially impacted by limited tailings filtration capacity before a third Larox filter was installed and by effects of an electrical incident in October 2006.

Gold production in the first quarter of 2008 was slightly higher than the fourth quarter of 2007, but remains below expectations due to varying ore characteristics that impacted recoveries and lower mill throughput rates, Teck Cominco said.

Automation of the flotation circuit was completed in the first quarter and commissioning is under way. Reliability of certain unit operations in the process plant continued to limit mill throughput, however recent efforts to improve equipment reliability helped the operation achieve record mill on-line time of 91.3 percent in the quarter, the company said.

Operating costs are expected to improve slightly at Pogo as the year progresses, but will remain high over 2008 and 2009 due to the large number of optimization projects and the need to develop and better define additional areas underground to sustain planned production levels, Teck Cominco said.

Gold sales in the first quarter of 86,600 ounces were higher than production due to the timing of shipments and recent efforts to reduce in-process inventories, and the average realized gold price was US$919 per ounce in the quarter.