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Upswing in zinc helps Red Dog mine Teck Cominco posts third-quarter profit in remote Alaska mine; metal price increase, streamlined operations contribute Patricia Jones Petroleum News Contributing Writer
Higher zinc prices and lower operating costs put the world’s largest zinc mine, located in remote northwest Alaska, in the black for the third quarter of 2003, boosting operating profits for its operator Teck Cominco.
Located near Kotzebue, Alaska, the Red Dog zinc, lead and silver mine posted an operating profit of $8 million in the third quarter of 2003, a significant turnaround from a loss of $10 million for the same period in 2002, according to the company’s Oct. 22 press release.
The company hopes to continue improving the mine’s bottom line, through a cost-cutting program that will eliminate a total of 60 workers.
Zinc production increased — 150,400 tonnes in 2003 versus 143,200 tonnes in 2002 — for the three months ending Sept. 30. In addition, the company realized a slightly higher average price for zinc, 37 cents per pound compared to 34 cents per pound for the same period in 2002, a 9 percent increase.
Average lead prices have also increased by 21 percent in the same period, jumping from 19 cents per pound in 2002 to 23 cents per pound in the third quarter of 2003.
During the third quarter of 2003, Red Dog produced 31,600 tonnes of lead in its concentrate, versus 28,000 tonnes in the third quarter of 2002.
The grade of ore processed at Red Dog during the third quarter also helped the mine’s bottom line. Red Dog ore averaged almost 22 percent in the third quarter of 2003, versus 20.9 percent in 2002.
Recovery of zinc declined slightly, due to an increase in lead production in the concentrate. Optimization reduces workers In addition, total production at Red Dog increased in the third quarter, thanks to a higher throughput at the facility. Earlier this fall, Teck Cominco announced plans to cut operating costs at Red Dog, a move expected to reduce costs by about $11 million year, or about 1 cent per pound from the existing 9.5 cents per pound for zinc.
“With the roughly 1.1 billion pounds of zinc we process annually, a 1 cent (reduction in costs per pound) is a very significant number,” Teck Cominco’s Senior Vice President Mike Lipkewich told investors in late September.
The company said then that they hoped to trim costs through a combination of automation and optimization, which would reduce mine employment by about 60 people. The mine employs about 500 full time workers and about 60 temporary workers, mine manager Rob Scott told Petroleum News this fall.
The mine supports a $42 million payroll annually. A little more than half of its workers are NANA Regional Corp. shareholders. NANA is the Native corporation for Northwest Alaska.
Since it started producing in 1990, Red Dog has brought in millions of dollars in benefits to locals, according to Helvi Sandvik, president of NANA Development Corp, a subsidiary of NANA Regional Corp, owner of the mine.
Sandvik said Red Dog generated a $6.6 million royalty payment for NANA last year, and paid more than $5.5 million to the Northwest Arctic Borough as payment in lieu of taxes, said Bob Jacko, Red Dog general manager.
The mine has turned a profit in only five of the past 12 years, Sandvik said. In 2001 and 2002, it lost $25.3 million and $32.6 million respectively, said Jacko.
High labor and energy costs were under the microscope for cost cutting, Lipkewich said in September. The company holds four shallow gas leases on more than 23,000 acres of state land adjacent to the mine site. Plans to conduct exploratory drilling last summer were put on hold.
The Associated Press contributed to this story.
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