Boliden Limited reports first quarter 2001 results

BOLIDEN LIMITED REPORTS FIRST QUARTER 2001 RESULTS (All dollar amounts are in United States dollars) Overview Rönnskär +200 expansion project reaches full production. Lower operating income due to lower metal prices and lower treatment and refining charges (TCs/RCs) at the Rönnskär smelter. Sale of 50% interest in Norzink completed. TORONTO, CANADA and STOCKHOLM, SWEDEN (April 27, 2001) - Boliden Limited today reported its operating results for the first quarter of 2001. The Company reported an operating loss of $8.9 million for the quarter compared with an operating loss of $6.4 million for the first quarter of 2000. The operating loss for the quarter compares with operating income of $0.4 million (excluding pension income and write-down and unusual charges) for the fourth quarter of 2000. The principal reasons for the changes between the quarter and the first and fourth quarters of 2000 are lower metal prices and lower treatment and refining charges (TCs/RCs) at the Rönnskär smelter. The Company's foreign currency hedge contracts negatively affected the Company's operating results by $18.0 million for the quarter, $10.2 million for the first quarter of 2000 and $15.8 million for the fourth quarter of 2000 (see Metal Prices, Currencies and Interest Rates below). After accounting for interest expense and income taxes (including $5 million of non-recurring items), the Company reported a net loss of $21.5 million or $0.11 per common share for the quarter compared with a net loss of $18.3 million or $0.18 per common share for the first quarter of 2000. Cash used in operations before non-cash working capital changes was $5.6 million or $0.03 per common share for the quarter compared with cash provided by operations of $11.2 million or $0.10 per common share for the first quarter of 2000 and $6.1 million or $0.03 per common share for the fourth quarter of 2000. Cash used in operating activities after net change in non-cash operating working capital was $19.3 million for the quarter compared with cash provided by operating activities of $9.3 million for the first quarter of 2000 and $4.1 million for the fourth quarter of 2000. CAPITAL MANAGEMENT PROGRAM The Company is carrying out a Capital Management Program aimed at restoring its financial strength and operating flexibility. The capital management program includes reducing costs, increasing productivity, postponing discretionary expenditures, securing partners for those operations that require non-discretionary expenditures and selling assets. On April 17, 2001, the Company's subsidiary, Boliden Mineral AB, and Rio Tinto completed the sale to Outokumpu Oyj of their respective 50% interests in Norzink A/S, the owner and operator of the Norzink zinc smelter and refinery and aluminum floride plant located near Odda on the west coast of southern Norway, for a total cash purchase price of $180 million. The Company realized a net gain before tax of approximately $30 million on the sale. This gain will be reflected in the Company's operating results for the second quarter of 2001. On February 28, 2001, the Company signed a letter of intent to sell its interests in Compañía Minera Lomas Bayas and Compañía Minera Boliden Westmin Chile Limitada, the owners of the Lomas Bayas SX-EW copper project and adjacent Fortuna de Cobre copper deposit located in Chile, to Noranda Inc. and Falconbridge Limited (Purchasers) for a purchase price of: (a) $175 million plus cash balances ($2.1 million) less outstanding third party debt obligations ($112.7 million); plus (b) $15 million if the Purchasers exercise their right to retain the Fortuna de Cobre copper deposit before the fifth anniversary of closing. The transaction is subject to completion of satisfactory due diligence, negotiation and settlement of satisfactory definitive agreements, receipt of all required regulatory and other third party consents and approval of the boards of directors of the Purchasers and the Company. On April 2, 2001, the Company and the Purchasers agreed to extend the term of the letter of intent to April 30, 2001 to enable the Purchasers to complete their due diligence and the parties to complete their negotiations with respect to an agreement of purchase and sale. The possible transaction announced in the fourth quarter 2000 report with respect to the sale of the BCZ Group has been put on hold pending resolution of regulatory issues. The possible transaction announced in the fourth quarter 2000 report with respect to the sale of Gusum has been cancelled for lack of purchaser financing. METAL PRICES, CURRENCIES AND INTEREST RATES Prices for the metals produced by the Company as reported by the London Metal Exchange (LME) and the London Bullion Market Association (LBM) for the quarter compared with the first quarter of 2000 were as follows: Three months ended Average March 31, LME/LBM 2001 2000 Prices Zinc $/lb 0.46 0.51 Copper $/lb 0.80 0.81 Lead $/lb 0.22 0.21 Gold $/oz 264 290 Silver $/oz 4.54 5.17 The Company periodically manages its exposure to changes in prices for the metals that it produces through hedge transactions, including forward sales contracts and put and call options. The Company's exposure to changes in metal prices was largely unhedged at the end of the quarter. Most of the Company's costs are in Swedish, Canadian and Norwegian currencies. The average rates of exchange for Swedish kronor (SEK), Canadian dollars (C$) and Norwegian kroner (NOK) per United States dollar for the quarter compared with the first quarter of 2000 were as follows: Three months ended Average March 31, Exchange Rates 2001 2000 per US$ SEK 9.75 8.60 C$ 1.53 1.45 NOK 8.88 8.21 The Company has had a program to manage its ongoing exposure to changes in exchange rates through the use of forward contracts and put and call options to hedge future transactions and investments denominated in foreign currencies. The program was designed to fix foreign currency, principally Swedish krona, exchange rates against the United States dollar at levels which were considered advantageous in relation to historical levels and which were above the Company's long-term planning levels. The Company does not have credit facilities available to it to continue the program beyond the current positions. At March 31, 2001, the Company had in place forward contracts covering approximately one and one-quarter years exposure to changes in foreign currency, principally Swedish krona, exchange rates against the United States dollar. The mark-to-market position of the contracts at the end of the quarter was negative $147.2 million, of which $14.2 million is accrued in the accompanying unaudited consolidated financial statements. Assuming that foreign currency, principally Swedish krona, exchange rates against the United States dollar remain at their current levels, the contracts will negatively affect the Company's cash flow over the remaining terms of the contracts. See Other Matters - Hedge Facilities below. The Company periodically manages its exposure to changes in interest rates through interest rate swaps. The interest rates on the Company's debt are floating rates and were largely unhedged at the end of the quarter. OPERATIONS The operating income (loss) at the Company's operating segments for the quarter compared with the first quarter of 2000 was as follows: Three months ended March 31, Operating Segment 2001 2000 ($ thousands) Mining $(8,434) $(16,114) Smelting 2,329 14,066 Fabrication 778 890 Corporate and other (3,544) (5,249) Total $(8,871) $(6,407) Mining The Company's mining operations reported an operating loss of $8.4 million for the quarter compared with an operating loss of $16.1 million for the first quarter of 2000. The operating loss for the quarter compares with operating income of $1.4 million for the fourth quarter of 2000 (excluding write-down and unusual charges taken during that quarter). The principal reasons for the change between the quarter and the first quarter of 2000 are lower depreciation and deferred stripping charges because of the write-off of Los Frailes in the third quarter of 2000 and lower depreciation because of the write-down of Lomas Bayas in the fourth quarter of 2000 partially offset by lower metal prices and lower metal production. The principal reasons for the change between the quarter and the fourth quarter of 2000 are lower metal prices and lower metal production partially offset by lower depreciation because of the write-down of Lomas Bayas. The Company's mines produce primarily copper and zinc, with by-product lead, gold and silver. Contained metal production at each of the Company's mines for the quarter compared with the first quarter of 2000 was as follows: ------------------------------------------------------------ This information was brought to you by BIT http://www.bit.se The following files are available for download: http://www.bit.se/bitonline/2001/04/27/20010427BIT00300/bit0002.doc The full report http://www.bit.se/bitonline/2001/04/27/20010427BIT00300/bit0002.pdf The full report