Increased production and lower costs at the Cortez gold mine in Nevada, combined with improvements at other operations, enabled
The 60%-owned Cortez mine continues to be Placer’s lowest cash-cost producer. The mine contributed a record 606,580 oz. gold at a cash cost of US$46 per oz. and a total cost of US$117 per oz. during the recent 9-month period, compared with 458,017 oz. at US$53 and US$150, respectively, a year ago. The higher production is a reflection of a 36% increase in the average grade to 11 grams per tonne. Cortez is now forecast to produce 1.3 million oz. this year at an average production cost of less than US$50 per oz. and a total cost of below US$120 per oz.
North American’s third-largest gold mining company earned US$17 million (or 6 cents per share) in the third quarter, up from US$14 million (4 cents per share) a year ago, though cash flow fell to US$99 million from US$128 million.
Earnings for the first nine months amounted to US$28 million (9 cents per share), compared with US$16 million (5 cents per share) a year ago.
“Despite the poor performance of the gold price and merger and restructuring charges, Placer Dome has been generating strong financial results,” says President Jay Taylor. “This is attributable to the quality of our assets, our strong operating performance, our focus on cost reductions and a successful hedging program.”
Placer produced 792,000 oz. gold in the third quarter at an average production cost of US$155 per oz. and a total cost of US$233 per oz., compared with year-ago output of 874,000 oz. at an average cost of US$209 and a total cost of US$232.
The company’s hedging program resulted in a realized gold price of US$338 per oz. — US$65 more than the average spot price.
The mark-to-market value of Placer’s precious metals hedge position was about US$350 million. (The mark-to-market value represents the amount of money the company would receive as a result of closing out all of its hedge positions.)
Placer’s total hedge commitment amounts to less than 15% of its total reserves, and its mark-to-market value is expected to remain positive at gold prices of up to US$350 per oz.
On Sept. 30, Placer had US$291 million in cash, with long-term debt estimated at US$899 million.
The major’s share of gold production from its operations is projected to total 3 million oz. in 1999 at an average production cost of US$170 per oz. and a total cost of US$240 per oz. Annual gold production from operations through to 2003 is expected to average 800,000 oz. (Placer’s share being 480,000 oz.) at a cash cost of less than US$80 per oz. and an average total cost of US$175 per oz.
Placer has identified a resource at Cortez, of 33.4 million tonnes grading 1.1 grams gold per tonne. Most of this new resource is reported to be amenable to heap leaching. Mineralization remains open in three directions, and drilling is ongoing.
The 60%-owned Granny Smith mine in Australia cranked out 228,045 oz. gold at a cash cost of US$90 per oz. during the first nine months of 1999, compared with year-ago production of 248,958 oz. at US$100 per oz.
Despite lower grades and recoveries that caused an 8% drop in gold output, Granny Smith remains Placer’s fourth-largest producer.
The geological resource at Wallaby stands at 50 million tonnes averaging 2.7 grams gold, equivalent to 4.4 million contained ounces.
Meanwhile, production at the wholly owned Campbell mine, in northwestern Ontario, fell by 21% to 186,231 oz. during the first nine months of 1999, owing to a 24% decrease in the head grade. Cash costs rang in at US$147 per oz., compared with US$126 a year ago. However, these figures are expected to improve in the fourth quarter as Placer gains access to higher-grade zones.
Low head grades also took their toll on the 50%-owned Porgera mine in Papua New Guinea, where production dipped to 271,066 oz. in the first nine months, or 2% lower than a year ago. Cash costs rang in at US$182 per oz., compared with US$170 in the first nine months of 1998.
Placer’s third-quarter share of gold production from the 50%-owned South Deep mine in South Africa was 46,555 oz., mined at a cash cost of US$247 per oz. In the previous (second) quarter, output there totalled 38,220 oz. at US$320. Placer’s joint-venture partner at the mine is Western Areas.
Recently, the mine’s workforce was slashed by 30%, prompting the union to stage a protest. However, the layoffs were “necessary and well-administered,” says Taylor. “Organized labour petitioned the court, but our position was upheld.”
South Deep produces 30,000 oz. per month at a cash cost of US$230 per oz., though this is expected to fall to US$200 by December.
Closer to home, in Nevada, the Getchell mine produced 110,873 oz. gold in the first nine months of 1999, or 10% less than a year ago. Cash costs between the two periods increased by 20% to US$394 per oz.
Placer expects to have spent US$56 million on exploration in 1999, compared with US$89 million last year. About US$20 million is earmarked for Getchell.
Over the first nine months, Placer produced a total of 190.5 million lbs. copper at a cash cost of 46 cents per lb., compared with 167.9 million lbs. at 56 cents a year ago. The 50%-owned Zaldivar mine in Chile produced 123.5 million lbs. of the red metal (14% more than a year ago), while the Osborne mine in Australia cranked out 66.9 million lbs. (12% more).
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