Dynatec eyes producer status (November 04, 2002)

With demand for contract mining slumping, Dynatec (DY-T) saw its third-quarter profit fall to $20,000 (or nil per share) from year-earlier earnings of $2.7 million (2.4 per share). Revenue between the two periods fell nearly $27 million, to $34.9 million.

Over the first nine months of this year, the company suffered a loss of $1.4 million, compared with earnings of $4.3 million in the corresponding period of 2001. Revenue between the two periods fell 36.9%, to $98.2 million.

Dynatec attributes the 9-month loss to the cessation of work at Newmont Mining‘s (NEM-N) Ken Snyder mine and reduced contract work at Barrick Gold‘s (ABX-T) Meikle mine complex, both of which are in Nevada.

The only ray of light for Dynatec during the recent quarter was provided by its drilling division, which posted a 47.5% increase in revenue. The increase reflects a higher volume of drilling contracts. Over the 9-month period, the drilling division’s revenue climbed 29.6%.

Meanwhile, in Sudbury, Ont., Dynatec, and joint-venture partner FNX Mining (FNX-T) have advanced rehabilitation work at McCreedy West to a depth of more than 300 metres, providing access to the 700 zone and the Upper Main zone for definition drilling and test mining.

Recent infill drilling on the North zone of the Norman nickel-copper deposit confirmed mineralization at vertical depths of around 165 metres, cutting nickel, copper and precious-metal mineralization in massive-sulphide rock. Copper grades ranged from 2% to 6%, nickel grades were mostly 0.1-0.5%, platinum and palladium generally graded 1-3 grams each, and gold graded a fraction of a gram per tonne. The mineralized zones are typically between 1 and 4 metres wide.

The Sudbury Basin joint venture, held 75% by Fort Knox and 25% by Dynatec, is in the midst of a $14-million exploration campaign on the past-producing McCreedy West, Levack, Victoria, Kirkwood and Norman properties. FNX picked up the projects from Inco earlier this year. Dynatec agreed to acquire a quarter-interest by covering half the initial $14 million in spending. The company is also responsible for $4 million in additional expenditures.

The partners plan to sink at least 122,000 metres of surface drilling on the properties by May 2003. Underground drilling on the McCreedy West property has begun. Drills will target the Levack property later this year once underground workings have been rehabilitated.

Production mining at the McCreedy mine is expected to start in the fourth quarter.

At quarter’s end, Dynatec had $33 million in cash and long-term debt of $11.1 million.