Tundra writeoff cuts Hemlo Gold’s earnings

A $10.8-million writeoff of exploration expenditures from the huge Tundra gold project in the Northwest Territories was reflected in the 1989 annual earnings of Hemlo Gold Mines (TSE). The company recently reported 1989 net earnings of $32.8 million or 37cents per share, compared with $44 million or 50cents per share a year ago.

For the fourth quarter ended Dec. 31 earnings were $3.1 million or 3cents per share, compared with 13cents per share for the same period in 1988.

The writeoff from the Tundra gold project, found to be uneconomic last year, reduced earnings in the fourth quarter by 8cents per share. Hemlo Gold has a one-quarter interest in the project where $35 million was spent on exploration and underground work.

At the company’s Golden Giant mine near Marathon, Ont., annual gold output reached a record 378,400 oz., an increase of 12% from the 336,700 oz. produced in 1988. Meanwhile, costs per oz. for the year averaged US$128, up from US$115 the previous year due to lower-than-expected production in the first and fourth quarters.

According to Hemlo Gold, production delays resulted from the use of temporary ore-handling arrangements while new underground crushing and tramming installations were being put into place at the mine. The company said stope sequencing also delayed production from a high-grade area of the mine, but production resumed in January from that area.

Gold recovery from the Golden Giant mill for the year was 95.1%, according to the company.

On the exploration front, Hemlo Gold funded 50 precious metal exploration projects throughout North America for a total expenditure of $8.4 million in the fourth quarter, while $28.8 million was spent for all of 1989 on a total of 122 projects. Joint venture partners contributed $4.9 million in the fourth quarter and $13.4 million for the year. Hemlo Gold has budgeted $15 million for grassroots exploration this year, half of which has already been allocated.

Effective Jan. 1, the company entered into a joint venture agreement with its parent Noranda (TSE) which will see the latter company expand its exposure to gold exploration by sharing equally and contributing equally to all new gold properties acquired in Canada and the U.S. after Jan. 1. Under a previous agreement, the area of mutual interest for the two affiliated companies was restricted to Western Canada.

As a result of the new agreement, Noranda will now own a direct interest in the joint venture’s future gold projects, as well as the indirect interest it already holds by way of its 50% interest in Hemlo Gold.

Last year, grassroots exploration work in Western Canada was conducted on 32 properties. Nine were drill tested in Ontario, Manitoba, British Columbia and the Yukon Territory. A large land package was also consolidated in the Birch Lake area, east of Red Lake, Ont. Hemlo Gold Mines (TSE) Year ended Dec. 3119891988 Revenue (000s)$192,651$194,241 Net earnings (000s)$32,780$43,972 Net earnings

(per share)0.370.50004