Quarterly earnings drop as Rayrock boosts exploration

Despite higher revenues, Rayrock Yellowknife Resources (TSE) reported a 50% drop in second- quarter earnings this year. Net income for the three months ended June 30 was $1.65 million (16 cents per share) compared with $3.1 million (32 cents per share) in the second quarter of 1989. Rayrock spent more on exploration this quarter, while depreciation expenses increased by $1.2 million. Operating costs also jumped: US$243 per oz. of gold in 1990 compared with US$202 in the second quarter of 1989.

Production from the new Marigold mine in Nevada and additional interest in the Dee mine boosted Rayrock’s share of gold production by 53% to 23,779 oz. Rayrock has a 23.3% interest in Marigold and a 44% interest in Dee.

But the higher production was offset by lower-than-expected grades at the Dee mine. To compensate for the lower grades, Rayrock has decided to increase the tonnage mined and milled, resulting in higher operating costs. Rayrock expects grades to remain below budget for the rest of the year.

As a result of increased exploration activity, Rayrock’s exploration expenses jumped to $1.3 million from $800,000 during the second quarter of 1989. Work focused on the Stonehouse deposit on the Marigold property, where Rayrock drilled 150 holes into several mineralized zones. Rayrock is also actively exploring five other gold prospects in the southwestern U.S.

One of Rayrock’s subsidiaries, Minera Rayrock (TSE), has outlined new zones of copper oxide mineralization just north of the Ivan-Zar deposits in Chile. Another, Discovery West, has recently announced that it will raise more than $7 million to acquire producing oil and gas properties and finance ongoing oil and gas exploration expenditures. Discovery says an institution has agreed to purchase 3.2 million special warrants. Rayrock, which holds a 61.1% interest in Discovery, will purchase 450,000 of the warrants. Rayrock Yellowknife Resources (TSE) $000s except per share items 3 months ended Jun. 30 1990 1989 Revenue $36,700 $28,900 Net earnings 1,654 3,111

per share 0.16 0.32