Despite an increase in gold reserves, Homestake Mining (NYSE) posted lower profits in 1995. The decrease was caused by a combination of a high tax rate and low gains from the sale of assets.
The company earned US$30.3 million (or 22 cents per share) for 1995, which was down from the previous year’s total of US$78 million (or 57 cents per share).
The company gained only US$5.5 million from the sale of assets in 1995, compared with US$23.8 million in 1994.
The effective income and mining tax rate was 46% in 1995, compared to 18% in 1994. The increased tax rate reduced earnings by about US$23 million.
On a positive note, gold reserves increased by 20%. The company added 3.5 million contained ounces (net of production), bringing total proven and probable reserves to 21.5 million oz. The increase was largely the result of the 2.2 million oz. added from operations in Western Australia (including 1.2 million oz. gained as a result of acquiring the minority interest in its Australian subsidiary). Other sizable increases came from operations in the U.S.
Homestake has another 11.8 million oz. gold in mineralized material. Increased gold sales caused revenue to rise by 7%, to US$675.2 million from US$629.2 million in 1994.
Total gold production for the year amounted to 1.9 million oz., which was up from 1.7 million oz. in 1994. Cash production costs were up slightly, to US$258 in 1995.
Homestake recently made the production decision to go ahead with the Ruby Hill gold project near Eureka, Nev. The board of directors has authorized US$65 million for the development of the West Archimedes deposit.
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