Costs at White mine approach break-even

Production costs at the Arthur White mine near Red Lake, Ont., averaged $510 per oz during the first half of this year, Cambior Inc (TSE) says. Current gold prices are about $525(C).

Cambior, which sold its 34% interest in the mine to Dickenson Mines (TSE), reported the cost figure in its quarterly statement to shareholders. Dickenson, which now owns 100% in the mine, paid $52 million for the Cambior interest last month.

John Kachmar, president of Dickenson, refused to comment on the situation at the mine or on the reasons for the high costs when contacted by The Northern Miner. However, during the company’s annual meeting in April, Kachmar told shareholders that operations at the White mine were being “adversely affected by the limited number of available workplaces necessary to sustain production.” At that time, the Dickenson president also forecast go ld production of 80,000 oz this year.

The high costs, however, appear to be precluding profitability and output will probably be closer to 60,000 oz this year. During the first half of 1988 the mine yielded 30,200 oz of gold from 123,200 tons grading 0.28 oz gold per ton.

The drive to increase the amount of working stopes appears to be the reason behind the current high unit costs says Ernest Nutter, a mining analyst with Pemberton Securities.

“They’re spending a lot of money going from 18 stopes to 32,” Nutter said. The high unit costs result from Dickenson’s decision not to capitalize the development expenditures but rather to record them as direct expenses against mine cash flow.

Despite the dearth of profitability from the mine this year, the positive benefits of the stope development program should become evident sometime next year. The added flexibility at the mine will enable cheaper mining and improved productivity. This should maximize returns from such high grade zones as the quartz carbonate which was discovered last year on the Dickenson property. Commonly found at the nearby Campbell Red Lake gold mine, the carbonate zone is yielding assays averaging 0.95 oz gold per ton on Dickenson’s ground.

Problems at the White mine are not new. In 1982 Dickenson was on the verge

of bankruptcy until Peter Munro, Dickenson’s late president turned the organization around and brought the White mine back into the black.

In 1981 before Munro arrived production costs averaged $607(C) per oz of g old. Following the change of the mining method from long hole stoping to cut and fill in order to reduce dilution, the cost to produce an oz of gold was reduced to $285 per oz by the end of 1982.

Gold production has also been on the rise increasing from 36,000 oz in 1982 to the 60,000-oz level in 1984 where it has remained faily constant.

In 1987 Dickenson reported a profit of $6.4 million or 44cent per share.