Gold price weakens performance of Royal Oak

Royal Oak Mines (RYO-T) reported a first-quarter loss of $8.1 million, compared with earnings of $1.4 million for the same period last year.

Gold production for the first three months of the year totalled 87,080 oz., compared with 88,196 oz. for same period of 1996. The shortfall is attributed to the temporary closure, in January, of the Hope Brook mill in southwestern Newfoundland. The Hope Brook mine remained open, though production rates declined.

Some mine and mill equipment from Hope Brook will be dismantled and moved to the Matachewan gold project, near Timmins, Ont., which is expected to enter production in the second quarter of 1999.

Royal Oak says that even though the startup of its Kemess project in northern British Columbia has been delayed by six months, the extra time may see a rise in gold prices.

Compared with the first quarter of 1996, gold production was 5% higher at the Giant mine and 4% higher at the Colomac mine, both of which are in the Northwest Territories. At the Pamour and Nighthawk Lake operations, in northern Ontario, gold output rose by 8%.

First-quarter revenue was $47.5 million, compared with $51 million a year ago. Contributing to the loss were lower gold production and a lower realized gold price.

An increase in the average cash cost to US$372 from US$348 per oz. is attributable to higher costs at Hope Brook and Colomac, whereas cash costs at the Giant, Pamour and Nighthawk Lake operations were lower than in the 1996 first quarter.

In light of a weak gold price, Royal Oak says it is re-evaluating its high-Cost producers and that it may suspend operations that do not generate positive cash flow at a gold price of US$350 per oz.