Noranda Takes Steps at Copper Smelter

Noranda announced that the company is taking significant steps to improve its profitability at its Horne smelter in Quebec. To accomplish this, the company announced a series of measures aimed at restoring the smelter's profitability, as well as its long-term viability. The restructuring measures will include significantly decreasing the smelter's production level between now and next June, and reducing staff by close to one-third.

The decision was made to scale back treating material that offered the lowest margins, especially offshore materials, and to bring smelter production back to its optimum levels.

Total feed volume will decrease from 840,000 metric tons to about 650,000 metric tons by the middle of next year. Anode production will be reduced by 20 percent, with production falling from 186,000 metric tons to 145,000 metric tons per year. Noranda also intends to intensify its recycling activities.

The measures announced today reflect three principal factors that have had a negative impact on the Horne's profitability:

The company attributed difficulties with the smelter to a host of reasons, including the growing Asian involvement in the copper concentrate market, particularly from China, has driven treatment charges to historically-low levels; The strengthening of the Canadian dollar against the US dollar; and the decline of ore reserves from local mines has resulted in an increase in demand for more costly 'off-shore' concentrates.

Low treatment charges have caused the smelter's revenues to drop at the same time as its operating costs are expected to rise considerably, largely due to the gradual disappearance of better-priced local supply sources. Concentrates from Europe or Latin America cost more for the smelter since they need to be shipped by sea and then by rail.

"We are going through a very difficult period, and we need to act now to ensure our survival over the short and medium term. There is no doubt that we want to continue operating our plant over the long term. The choices we make today should allow us to do that," said Al Giroux, general manager of the Horne smelter. "One of the positive aspects of the measures we announced today is the possibility of restarting the idled parts of the plant should there be a significant and sustained rise in treatment charges or an increase in locally-sourced concentrates."

Since the beginning of last yer, Noranda has implemented several measures to improve the profitability and the long-term viability of its Canadian Copper and Recycling business unit. Last year the company’s Gaspe smelter was permanently closed. Over the last two years, the CC&R workforce, including the Gaspe smelter, has been reduced by almost 1,000 people. Noranda has also opened a new electronics recycling facility and is continuing its efforts to reduce inventories and costs within all of its business groups and operations.