Exploration planning keeps Lac ahead of game

With gold production last year of 306,000 oz and earnings nearly triple what they were in 1986, Lac Minerals (TSE) isn’t about to forget the value of field work in uncovering new deposits.

“Our exploration strategy over the next several years will be to focus on known mineralized gold belts in various regions and advanced-stage projects in North America, at locations where the company already has operating mines or where we have done considerable work in the past, such as Geraldton and Harker Twp.,” President Peter Allen told shareholders at the recent annual meeting.

Planned exploration work includes:

* At the producing Doyon mine (a 50/50 partnership with TSE- listed Cambior Inc.) in northwestern Quebec, the company will follow up on encouraging drill results from an area a mile east of the main shaft.

* Drilling will continue at the producing Bousquet No 1 mine, also in northwestern Quebec, to investigate the extension of the deposit at depth.

* At the producing Macassa mine at Kirkland Lake, Ont., the company plans to spend $2 million this year on an underground and surface drilling program.

* In the U.S., exploration work will continue at Ortiz in New Mexico, in Nevada and at the Prince of Wales Island in the Alaskan panhandle.

At the annual meeting, where hardly a word was spoken about the Page Williams mine at Hemlo in northern Ontario which has been the subject of a legal dispute with International Corona Resources (TSE) for several years (see separate story), Allen said Lac is projecting gold production of 500,000 oz by 1991.

(This year, Lac chose not to include production or financial results from the Williams operation in its annual report.) Impressive balance sheet

In 1987, Lac recorded earnings of $38.7 million on revenues of $200.6 million, compared with earnings (restated) last year of $13.9 million (before extraordinary items) on revenues of $154.8 million. Earnings per share in 1987 (reflecting a 3-for-1 split) were 44 cents , compared with 16 cents the year before.

In addition to the three gold- producing projects mentioned above, Lac plans to have a fourth mine, Bousquet No 2, in operation by the end of 1989. Last year the company announced a $60-million development program for the project, which was first drilled in 1986 and is located on the eastern side of the Bousquet property.

Doyon is Canada’s largest open pit gold mine and Quebec’s largest gold producer. By next year, the open pit operation will be completed and all mining at Doyon will take place underground. The 1987 operating cost at the mine (depreciation and amortization excluded) was $243(C) per oz, with a 93% average gold recovery rate.

At Bousquet No 1, the production cost averaged $409 per oz with a 92% recovery rate, while at Macassa, cost of production was $366 per oz with a 97% recovery rate. Tailings project

At Kirkland Lake, the company is expecting to boost gold production from its new $16-million mill and tailings operations. The mill, to be completed this year, will have the capacity to treat 500 tons per day of Macassa ore and 750 tons per day of old area tailings. Annual output of 20,000-30,000 oz gold at an operating cost of $140 per oz is anticipated from the tailings.

Allen said Lac, which is projecting total gold production of 315,000 oz this year, has sold forward 253,000 oz, against 1988 production, at $479(US) per oz.

During the past five years, Allen said Lac has increased its gold reserves by 75% to 4.1 million oz.

Lac also has interests in non- gold properties, one of which is the Stillwater platinum-palladium project in Montana. Lac has a one- third interest in Stillwater, which is North America’s only operating platinum project.

In Chile, Lac last year made its first investment outside North America by acquiring an 85% interest in a zinc-silver mine and some related gold-exploration properties.

Lac also reported a profit in 1987 from its Milton limestone operation west of Toronto and recorded improved revenue and cash flows from its oil and gas operations.