Red Dog Mine posts loss

Operating loss comes despite higher production

Posted: Wednesday, December 11, 2002

ANCHORAGE - The Red Dog mine near Kotzebue posted an operating loss of $10 million in the third quarter despite higher zinc production, according to Teck Cominco, the mine operator. Mine operations lost $6 million during the same quarter last year.

Canadian-based Teck Cominco blamed the loss on low zinc prices but company officials said they are not planning layoffs and predicted the mine will survive the downturn.

"We strongly suspect we can weather this. We are probably the biggest and the best zinc mine in the world and if it's causing us problems it's surely causing greater financial problems for other zinc mines, and in the long-term there will be others that are more expensive to run that will close, and the supply and demand balance will come back into being and things will get better," said Charlotte MacCay, Teck Cominco's senior administrator for environment and government affairs in Alaska.

Third-quarter revenue grew 19 percent to $113 million at Red Dog, the company reported.

Meanwhile, Teck Cominco and the state-run Alaska Industry Export and Development Authority are renegotiating terms of a $23 million reserve fund. The fund was established in 1997 to protect the state's interests in developing Red Dog's port and ore-concentrate haul road, said John Wood, an AIDEA staffer who handles Red Dog matters.

AIDEA provided about $180 million in financing for the road and port construction in the late 1980s.

Teck Cominco wants to free up some of the money in the reserve fund for use on capital projects, said company and state officials. At a recent AIDEA board meeting, the directors voted to authorize staff to negotiate a lower minimum limit for reserve fund. AIDEA chairman Wilson Hughes said he couldn't reveal the amount because it was set in executive session and the negotiations are ongoing.

The third-quarter loss came despite Red Dog producing 143,000 metric tons of zinc concentrate compared to 133,000 during the same period the year before, according to Teck Cominco. But prices dropped 3 cents a pound over the course of the year, from 37 cents to 34 cents, MacCay said.

For the first nine months of this year, revenue fell 8 percent to $245 million, the company said. The operating loss during that period was $17 million compared to a $17 million profit a year earlier.



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