Higher copper production and hedging gains are translating into healthier profits for
During the three months ended Sept. 30, Aur pocketed US$7 million (or 8 per share) on revenue of US$52 million, compared with earnings of US$1.9 milion (2 per share) on US$19.5 million in the third quarter of 2000.
Similarly, net earnings for the first nine months of the year topped US$16.1 million (19 per share) on US$159.8 million, versus US$3.9 million (5 per share) on US$55.3 million a year ago.
Meanwhile, cash flow has more than doubled year-over-year, providing Aur with US$51.9 million (57 per share) in the recent 9-month period.
Much of the upswing reflects last fall’s acquisition of the Quebrada Blanca copper mine in Chile. In November 2000, Aur acquired
Aur also holds a 30% stake in the Louvicourt polymetallic mine in Quebec and a 70% interest in the Andacollo copper mine in Chile. The company operates both.
Hedging is contributing to the company’s improvement, having added US$15.1 million to the 9-month revenue. For 2001, Aur sold forward 154 million lbs. copper at US87 per lb.; for 2002, 106 million lbs. at US83 per lb.; and for each of the following two years, 50 million lbs. at US83 per lb.
Consequently, Aur realized an average price of US85 per lb. copper — US11 more than the London Metal Exchange average of US74 — on its 9-month attributable production of 159 million lbs. The price includes pre-negotiated premiums over LME prices. Realized prices for other metals were not reported, but copper sales account for most of the company’s income.
Net of byproduct credits, cash costs across the board averaged US50 per lb. copper sold in the first nine months of the year.
On Sept. 30, Aur had 6.7 million lbs. cathode still in inventory.
“We’re pretty pleased with our operating and financial performance in the third quarter,” says President James Gill. “We’ve continued to maintain good operating costs, reasonably strong earnings and good cash flow despite the weak metal-price environment, which has been deteriorating continuously throughout the year.”
Quebrada Blanca
Quebrada Blanca, now by far Aur’s largest producer, cranked out a total of 41.6 million lbs. cathode in the recent quarter, bringing 9-month output to 120.7 million lbs. About 95% was Grade A quality.
Cash costs averaged US45 per lb. in the quarter and US49 per lb. over the nine months. Mining expenses were noticeably less than budgeted, offsetting the slight shortfall in production. Aur has reforecast its 2001 cash cost estimate to US48 per lb., or 6% less than originally planned.
About 152 million ounces of contained copper are currently under leach, keeping the mine on-track to produce 165 million lbs. in 2001.
By 2003, an expansion project, currently under way, should have increased annual cathode production to 176 million lbs. (all Grade A) and reduced cash costs to less than US50 per lb. The project will cost US$50 million to complete.
“We expect Quebrada Blanca to set new records in 2001 in terms of production and quality,” said Gill. “Overall, the mine is doing very well, and this can be expected to continue in the years ahead.”
At the Andacollo copper mine, cathode production topped 11.1 million lbs. during the third quarter, adding to 23.1 million lbs. produced in the previous two 3-month periods. By year-end, another 12.8 million lbs. are expected to be produced, bringing the full year’s amount to 47 million lbs.
Until Sept. 30, miners had extracted 12 million tonnes of rock from the pit at a stripping ratio of 3.3-to-1. Headgrades averaged 0.72% soluble copper, which is less than anticipated, but Aur expects these to improve over the remainder of the year.
Cash operating costs averaged US57 per lb. in the quarter and US55 per lb. in the 9-month period. Both are more than expected, but Aur expects costs to settle in the current quarter to push the year’s average down to US53 per lb.
Aur’s share of 9-month production from Louvicourt topped 25.8 million lbs. copper, 6.7 million lbs. zinc, 194,000 oz. silver, and 7,300 oz. gold. The company expects to net just under 34 million lbs. of the red metal and 12 million lbs. of the white metal (plus byproduct silver and gold) in 2001.
Copper production is up and zinc output down from original forecasts, owing to necessary changes in the mine sequencing. Nonetheless, Gill said the mine is performing reasonably well.
Cash costs are on budget and should average US47 per lb. (net of byproduct credits) for the full year’s worth of production.
Meanwhile, Aur has tapped more than 70% of its US$4.5-million exploration budget for the current year. Some of the remaining funds are earmarked for drilling at Louvicourt, where three seismic anomalies are to be tested.
At Sept. 30, Aur had US$86.9 million in working capital and US$62.1 million in cash.
The company expects to reduce its Quebrada Blanca loan to less than US$150 million by March and satisfy all remaining payments scheduled for 2002, assuming current copper prices. The company borrowed US$170 million to finance the acquisition.
Be the first to comment on "Aur reaps rewards at Quebrada Blanca"