The mining newspaper for Alaska and Canada's North
The mining newspaper for Alaska and Canada's North
High copper and coal prices offset weak zinc prices and strong Canadian dollar; the major strikes deal to buy out B.C. coal partner
Teck Cominco Ltd. reported that the second-quarter was highlighted by the strong performance of the Vancouver, B.C.-based major's copper division. Elk Valley Coal was also a large contributor, benefiting from the phase in of the 2008 coal year prices of $275 per ton, up from $93 per ton 2007 coal year prices. The strong copper and coal performance was offset somewhat by weak zinc prices and a stronger Canadian dollar.
In Alaska, Teck Cominco reported a significant decrease in profits from the Red Dog Zinc Mine, while high gold prices contributed to increased profits from Pogo.
The July 23 report revealed a slight increase in profits to C$504 million, or C$1.14 per share, in the second quarter of 2008 compared to C$480 million, or C$1.13 per share, for the same period last year. On a year-to-date basis profits were C$847 million, or C$1.92 per share, down from C$870 million, or C$2.03 per share, for the same period last year.
Teck Cominco president and CEO Don Lindsay said, "The outlook for the rest of 2008 looks favorable as the copper price remains high, and we will have a much higher percentage of coal sold at the significantly higher 2008 coal year prices."
Lindsay also said that due to the decline in zinc prices, the stronger Australian dollar, high operating costs and lower-than-planned production, the Pillara zinc mine at Lennard Shelf became uneconomic and will be shut down in early August.
Teck agrees to buy Elk Valley
As a result of increased coal prices, Teck Cominco's 40 percent share of Elk Valley Coal's second-quarter profit was C$309 million, compared with C$79 million in 2007. In a move to capitalize on high coal prices, Teck Cominco July 29 said it entered into an agreement with Fording Canadian Coal Trust to purchase 100 percent of Fording's share of Elk Valley for $12.4 billion in cash and about 36.9 million Teck Class B subordinate voting shares. The transaction is valued at $14.1 billion.
Elk Valley Coal is the world's second-largest producer of seaborne hard coking coal from its six operating mines in British Columbia and Alberta. The high-quality coal, needed for blast furnaces, is bought by steel mills in Asia, Europe, North and South America.
Red Dog profits slip with zinc prices
The Red Dog operator reported its zinc division's profit was $99 million in the quarter, compared with $256 million a year ago. Profits decreased significantly as zinc prices declined by about 50 percent in terms of the Canadian dollar compared to the second-quarter of last year.
Low zinc prices and a strong Canadian dollar resulted in more than a 50 percent dip in profits at Red Dog. Before pricing adjustments, profits from the world's largest zinc mine were $55 million in the second-quarter down from $114 million in the same period last year. Negative pricing adjustments of $5 million were recorded in the second quarter, compared with $5 million of positive pricing adjustments in the second quarter of 2007.
Zinc production at the Northwest Alaska mine in the second-quarter was down by 8 percent to 130,000 tons, compared with last year due to unanticipated scaling in generator cooling lines resulting in an extended maintenance shutdown and lower recoveries as a result of ore characteristics.
Teck Cominco said it anticipates shipping 970,000 metric tons of zinc concentrate and 240,000 metric tons of lead concentrate during the 2008 shipping season which began July 11. This is about a 9 percent decrease from a record-setting 2007 season.
The company is still seeking approval of a Supplemental Environmental Impact Statement for the Aqqaluk deposit, the next ore body scheduled to be developed at Red Dog. The mine's effluent discharge permit will be renewed in conjunction with the SEIS.
In the interim, Teck Cominco said it is working with NANA Regional Corp. and the U.S. Environmental Protection Agency to ensure that the mine can discharge sufficient water to maintain a reasonable water balance in the tailings impoundment under its existing water discharge permit.
Pogo production on track
With a C$10 million profit in the second-quarter, the company's gold division more that doubled its C$4 million profit a year ago. The increased profit was due to higher gold prices and the contribution from the Pogo mine in eastern Interior Alaska, which achieved commercial production in the second quarter of 2007.
Teck Cominco realized a C$6 million operating profit from its 40 percent share of the Pogo Gold Mine during the second-quarter of 2008 compared with break-even results during the same period a year ago. The company got an average price of $898 an ounce for 86,000 ounces of gold during the quarter.
Teck Cominco said it is on track to reach its gold production target of 340,000 ounces of at Pogo in 2008 and expects operating costs to remain near current levels for the balance of the year.
Over his more than 16 years of covering mining and mineral exploration, Shane has become renowned for his ability to report on the sector in a way that is technically sound enough to inform industry insiders while being easy to understand by a wider audience.
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