DOING SOME DIGGING – 2004: A year of living profitably

All types of Canadian mining companies are reporting record earnings for last year. A two-year period of strong com...
All types of Canadian mining companies are reporting record earnings for last year. A two-year period of strong commodity prices has boosted their bottom lines. That is good news for the industry, suppliers and investors. Let's take a quick look at their fortunes.

INCO LTD. reported adjusted net earnings for the year of US$848 million compared with $276 million (restated) in 2003. The fourth quarter of 2004 saw adjusted net earnings of $251 million, roughly double the amount of a year earlier for the same period. CEO Scott Hand says he expects nickel demand, driven by Chinese growth, will again outpace available supply next year, leading to even higher prices. With three major projectsgreenfields developments at Voisey's Bay in Newfoundland and Goro in New Caledonia and an expansion of PT Inco in IndonesiaInco is expecting continued excellent results.

NORANDA had a net income of US$551 million in 2004 on revenues of $6.98 billion, compared with $23 million on $4.66 billion revenues in 2003. A glance at realized metal prices is all it takes to see why the company's numbers improved: copper was up 59%, nickel up 45%, zinc up 21%, aluminium up 24% and lead up 59%. The NORANDA INCOME FUND, which is based on production from the CEZinc refinery, reported net earnings of Cdn$27.7 million in 2004 compared with $19.3 million for 2003.

TECK COMINCO set both fourth quarter and 12-month records for net earnings with Cdn$285 million and $617 million, respectively. Cash flow from operations before changes to non-cash working capital items was $1.1 billion for the year compared with $314 million in 2003. Even with lower sales volume, high prices for zinc, copper, gold and coal made the record numbers possible.

AUR RESOURCES posted record net earnings of Cdn$96.9 million and record cash flow from its operating activities of $163.4 million in 2004. The company's share of metal production from the Louvicourt, Andacollo and Quebrada Blanca mines totalled 236.0 million lb copper, 13.6 million lb zinc, 188,000 oz silver and 7,000 oz gold in 2004. Aur has also committed itself to the $92-million development of the Duck Pond base metal mine in Newfoundland. Production should begin in late 2006.

INMET MINING had net income of Cdn$80.4 million in 2004, compared with $38.7 million a year earlier before special items, on operating revenues of $154.6 million and $79.6 million for the same periods. The company cites lower production at its ayeli mine in Turkey and reduced sales plus higher operating costs at its Ok Tedi mine in Papua New Guinea for the drop.

FNX MINING enjoyed positive financial and operating results for 2004, due to its 75% interest in the McCreedy West nickel mine. The company reported revenue of Cdn$55.9 million and net earnings of $6.5 million for the year, compared with no revenues and a net loss of $10.1 million in 2003. During 2004, the company's Sudbury Joint Venture (with DYNATEC) produced 6.6 million lb of payable nickel and 3.1 million lb of payable copper. Those numbers will go up as pre-production and development ore from the PM deposit and Levack mine are added to the total this year.

CAMECO CORP. had 2004 revenues of Cdn$1.05 billion, up 27% from the previous year. Net earnings were $279 million in 2004 compared with $208 in 2003. As uranium prices surged to 20-year highs, the company set records for revenues in all four business segments and record production in all segments except conversion services. Cameco forecasts a 10% rise in consolidated revenue for this year.

FORDING CANADIAN COAL TRUST calls its 2004 results "strong", based on the fourth quarter net income numbers: Cdn$85.5 million in 2004, nearly triple the $30.6 million in 2003. However, year-over-year net income was only $150.1 million on revenues of $1.17 billion in 2004 compared with $240.9 on revenues of $1.04 billion in 2003. Continuing higher sales and stronger prices for metallurgical coal are forecast, and the company's mining arm, ELK VALLEY COAL, is increasing its capacity to 30 million tonnes/year by the end of 2007.

CANADIAN OIL SANDS TRUST, based on its share of the SYNCRUDE project, also had a record-setting year. Funds from operations in 2004 were Cdn$576 million, almost double the level of 2003, due to both higher production levels and higher crude oil prices. Net income in 2004 was $509 million compared with $310 million in 2003. The Syncrude oil sands project sold 31 million barrels during 2004. The trust is expecting net revenues of $1.4 billion in 2005.

SUNCOR ENERGY had 2004 earnings of Cdn$1.1 billion from all sources thanks to the higher price of crude oil. The company did not separate revenue figures for its oil sands operation, but did provide some production numbers. The oil sands averaged 226,600 bbl/day; 215,600 bbl were from conventional mining and 10,900 bbl from the Firebag in-situ project. Suncor is expanding its oil sands production to 260,000 bbl/day by the end of this year and has begun work to further increase production to 300,000 bbl/day in 2008.

POTASH CORPORATION OF SASKATCHEWAN was another record-breaker during 2004. On sales of US$3.24 billion, it recorded a gross margin of $681.4 million last year, compared with sales of $2.80 billion and a gross margin of $380.4 million for 2003. PotashCorp's net income for 2004 was $298.6 million, a substantial improvement from its net loss of $126.3 million in 2003.

ALCAN LTD. is still fine-tuning its integration with Pechiney, but the aluminum giant had a net income of US$66 million in 2004, compared with $64 million for the previous year. Reinforcing the notion that size matters, Alcan had sales and operating revenues of $24.9 billion in 2004 on shipments of 5.83 million tonnes of aluminum last year, compared with $13.85 billion and 4.50 million tonnes a year earlier.

BARRICK GOLD CORP. will be reporting its year-end results on Feb. 17, not in time for this week's Net News. The bottom line will undoubtedly be good given the company's 2004 gold output of 4.96 million oz at an average total cash cost of US$212/oz. PLACER DOME INC. likewise has not made its 2004 numbers public yet.

We are also awaiting results from KINROSS GOLD CORP., which announced it had gold equivalent production of 1.65 million oz at total cash costs of US$242/oz. The company has recently increased its proven and probable reserves to 19.41 million oz during 2004 from 14.13 million oz. Much of the increase is attributable to the acquisition of the Paracatu mine in Brazil.

Likewise, we await numbers from GOLDCORP, whose shareholders recently agreed to the combination of the company with WHEATON RIVER MINERALS. Wheaton shareholders have also voted in favour of the deal and have until 5 p.m. EST Feb. 28, 2004, to trade in their shares for those of the new Goldcorp company.

GLAMIS GOLD produced 234,433 oz of gold in 2004, which generated US$94.7 million in revenue for the company. These numbers were up from the 230,294 oz and revenue of $84.0 million in 2003. But when it comes to net earnings, Glamis reports only $20.9 million for 2004, compared with $18.2 million in 2003.

There were some losers, too, among reported earnings.

GRANDE CACHE COAL lost Cdn$6.0 million in its third quarter, ending Dec. 31, 2004. For the first nine months of its fiscal year the loss was $8.7 million. Much of that money was spent on mine development. With coal now being shipped to customers and continuing strong coal prices, Grande Cache's red ink will hopefully be replaced by the black variety.


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