Inco Ltd. issued a warning this week suggesting this summerÂ?s strike in Sudbury and Port Colborne, as well as a higher Canadian dollar, will affect the companyÂ?s share profits in the third quarter by as much as 15 cents.
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A strike of the unionized workforce in Sudbury and Port Colborne began June 1 and a new collective agreement ending the strike was entered into at the end of August.
The Ontario operations experienced unanticipated problems principally at its smelter and related facilities which were associated with the ramp-up of those facilities after the strike.
Those problems included water leaks in the copper coolers in some furnaces and problems at SudburyÂ?s oxygen plants.
These ramp-up problems adversely affected production of nickel, copper and platinum-group metals for the third quarter of this year beyond what the company had assumed in its projection for its 2003 nickel unit cash cost of sales after by-product credits.
As a result of these lower production levels, the company anticipates that its nickel unit cash cost of sales after by-product credits for the third quarter of 2003 will be about $2.25 (US) to $2.30 per pound as compared with the companyÂ?s July projected average nickel unit cash cost of sales after by-product credits of $2.05 per pound for 2003.
Inco currently expects that its nickel production for 2003 will be about 410 to 415 million pounds.
Higher than planned production at the Manitoba and PT International Nickel Indonesia Tbk (Â?PT IncoÂ?) operations is expected to largely offset the shortfall in production at the Ontario operations for the third and fourth quarters.
The company projects its overall nickel unit cash cost of sales after by-product credits for 2003 will average about $2.20 to $2.25 per pound, also based upon currently prevailing exchange rates.
Â?The Ontario smelter facilities have now been operating extremely well and we believe that the ramp-up problems at these facilities are behind us,Â? indicated Peter C. Jones, president and chief operating officer.
While the Ontario operations have sufficient intermediate concentrate to smelt and refine to meet current planned production levels for these operations for the fourth quarter of 2003, one of the Ontario operationsÂ? mines has experienced an ore pass problem which may not be resolved until the first quarter of 2004 and could adversely affect production in 2004.
The company continues to evaluate a range of actions to reduce costs and to offset cost increases experienced as a result of the appreciation of the Canadian dollar, higher energy costs and increased pension costs.
The companyÂ?s objective remains to reduce controllable costs by 10 to 15 per cent over the next 12 to 18 months. It has reduced employment levels at its Ontario operations by some 160 positions or about three per cent since the strike at those operations.
To reach this cost reduction objective, the Inco is developing and intends to put in place new productivity programs and other actions.
The appreciation of the Canadian dollar relative to the American dollar in the third quarter of 2003 is expected to negatively affect tax accruals and this occurrence is currently projected to reduce net earnings in accordance with Canadian generally accepted accounting principles (Â?GAAPÂ?) for that quarter.
With files from Canada NewsWire
