Cominco Limited, incorporated in 1906, is the largest producer of zinc concentrate and the fourth-largest zinc refiner in the world. The Company's Red Dog mine in Alaska holds approximately 23 percent of the Western world's zinc reserves and produced 521,000 dry tonnes of contained zinc in 1999. Cominco also produces significant quantities of lead, copper, silver, gold and other metals from facilities in Canada, Alaska and Peru. Teck Corporation is the Company's single largest shareholder and holds almost 50% of Cominco's common shares.

Cominco is a low-cost, integrated mining company that refines zinc and other base metals. The Company's reserves in Alaska are some of the largest zinc deposits ever discovered and the Red Dog mine is the world's largest. Cominco's focus on cost controls, operating efficiencies and production increases generated a profit despite average zinc prices of only US$0.49/lb in 1999. In fact, the Red Dog mine yielded a return on capital employed of 15%, well in excess of the Company's cost of capital. Zinc inventories have declined throughout the year and the supply and demand conditions are expected to remain tight in 2001, which should bolster zinc prices.

Cominco has key smelting and refining operations in British Columbia at the Company's Trail facility that produce approximately 5% of the Western world's refined zinc. Moreover, this division has a unique and sustainable competitive advantage over other similar plants worldwide. Trail satisfies its power requirements with electricity from Cominco's Waneta Dam hydroelectric generating plant. Surplus energy is sold on the open market and the contribution of this arrangement to the financial performance of the Company is significant. In the most recently completed quarter, electricity sales generated $36 million in revenue, almost 15% of Trail's total revenue, without a material increase in operating costs. Current demand for electricity is so great that Cominco received US$171 per megawatt hour compared to only US$25 last year.

As natural gas costs escalate, electricity prices continue to skyrocket, especially in the northwestern United States, with volatile spot prices fluctuating between US$350 and US$1000 per megawatt hour. Management quickly and astutely recognized that at these prices, it was more profitable to sell electricity than zinc. On December 7, Cominco announced that it had entered into a fixed price power swap agreement with a major US energy company for US$86 million, or approximately $130 million in Canadian dollars, from December 11, 2000 to January 31, 2001. Existing sales of surplus power are unaffected but Cominco will cut zinc production by approximately 20,000 tonnes over this seven-week period. Contractual obligations to supply zinc will be fulfilled by the purchases on the open market and employees will be reassigned temporarily to other tasks.

ABC Funds originally purchased Cominco because of its industry leadership position as a low-cost zinc producer. However, given the recent electricity shortages, management realized that foregoing zinc sales in order to sell electricity at the prevailing market rates would have a greater impact on earnings. Despite higher tax rates on the sale of electricity, this deal could increase EPS by $0.80 to $1.00, spread over Q4/00 and Q1/01. Should management continue such sales, the impact on 2001 earnings could be substantial. By unlocking the value of Cominco's power plant assets, management has unveiled a catalyst that could enhance the valuation of this fundamentally cheap company. Furthermore, because Teck owns approximately 50% of Cominco, the possibility of a buyout of the minority shareholders, at a premium, always exists.

ABC Funds
December 15, 2000