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Falco management and union differ on causes for sharp decline in profits

By Keith Lacey Sudbury's bitter seven-month strike hit Falconbridge's bottom line in a significant way.
By Keith Lacey

Sudbury's bitter seven-month strike hit Falconbridge's bottom line in a significant way.

"Up until the strike, it's fair to say the company was looking at least $100 million in profits this year, but they finally admitted they lost an opportunity to make money," said Rick Grylls, president of Local 598 of the Mine Mill/CAW.

"Our members suffered for seven months, but the year-end results indicate the company also lost big-time...we said all along nobody wins during a strike that lasts that long."

After achieving healthy 2000 profits despite the seven-month strike between August 2000 and late February last year, Falconbridge Ltd. saw its bottom line sink dramatically in 2001. The company puts most of the blame on falling metal prices.

The nickel giant reported Wednesday consolidated earnings of $16 million or two cents a common share for 2001. This compares to profits of $368.3 million or $2.01 per common share for 2000.

In the fourth quarter of 2001, Falconbridge recorded a consolidated loss of $20.5 million (a loss of 13 cents per common share), compared with a profit of $40.9 million (21 cents per share) in the same quarter of 2000.

Falconbridge CEO and president Oyvind Hushovd said in a press release "metal prices fell continuously during last year due to weak demand and seem to have hit their cyclical lows during the last quarter of the year.

"Since then, prices have improved as a result of market expectations of healthier demand later this year."

Revenues of $2.14 billion in 2001 were down $476.3 million from 2000 while operating income of $26.1 million declined by $509.6 million, which are all attributable to significantly lower metal prices, said Hushovd.

The company's average realized price for nickel fell by 32 per cent from $4.09 (US) to $2.79 per pound. Realized prices for copper, zinc and cobalt fell by 17, 20 and 30 per cent, respectively.

The company recognized annual earnings were adversely affected by an after-tax cost of $35.6 million associated with the strike by 1,250 members of Local 598.

Nickel prices fell by 34 per cent as compared to the same quarter a year ago, while copper prices declined 24 per cent; zinc prices fell 30 per cent and cobalt prices 43 per cent.

The company said Sudbury operations had a very good quarter despite the disappointing results as production increased from the corresponding quarter to 8,200 tonnes.

Since full production resumed last February, the Sudbury mines have met their production targets and produced 25,200 tonnes of nickel in 2001 compared to 23,200 tonnes in 2000, says the company.

Due to a revision of mining plans for the Lockerby and Fraser Mines, Sudbury mine production is now planned at 27,000 tonnes for 2002.

Grylls said the massive reduction in profits isn't surprising considering the strike and tremendous slowdown in nickel prices, however, the good news is the company still made a profit in very difficult times.

"Operations at Raglan (northern Quebec), Sudbury and Nikkelverkk (Norway) did make lots of money and that's great news," he said. "That's a credit to all the workers here in Sudbury who went back to work after the strike and earned their pay.

"The smelter is running good and we're producing record tonnage...we've always contended the workers in Sudbury are outstanding workers and we've proven that, despite the bad taste left after the strike."

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