Battle Mountain battles low gold prices

Despite considerable progress in cutting production costs, Battle Mountain Gold (BMG-N) posted a net loss of US$11.1 million (or 5 cents per share) for the quarter ended June 30.

The loss, which includes accounting charges of US$5.9 million related to debt incurred by a Canadian subsidiary, compares with a loss of US$4 million (2 cents per share) in the second quarter of last year.

For the first half of 1998, the Texas-based company posted a net loss of US$14.6 million (6 cents per share), compared with a loss of US$17.7 million a year earlier.

Attributable gold production was 461,000 oz. in the 1998 first half, down slightly from 425,000 oz. in the first six months of last year. However, cash costs between the two periods fell to US$160 from US$204 per oz.

Battle Mountain says it is on track to produce 875,000 attributable ounces this year at an average cash cost of less than US$175 per oz. The cornerstone Golden Giant mine in Ontario’s Hemlo region is expected to turn out 345,000 oz. of the yellow metal this year. Cash costs averaged US$121 per oz. in the first six months of this year, compared with US$145 per oz. in the corresponding period in 1997.

Farther afield, in Bolivia, the company is pressing ahead with several initiatives aimed at improving recoveries and reducing the impact of refractory ores in a portion of the pit at the Kori Kollo gold mine. This 88%-owned operation is targeted to produce 300,000 attributable ounces this year. Cash costs in the 1998 first half averaged US$176 per oz., compared with US$195 a year earlier. Battle Mountain notes that a bio-oxidation test pad at the nearby Llallagua resource is returning “excellent results” and that more testing is planned. This area contains a resource of 35 million tons grading 0.05 oz. gold per ton.

Progress is also reported at the 84.65%-owned Holloway gold mine, near Matheson, Ont., where cash costs fell to US$244 per oz. in the first half of 1998, down from US$333 a year earlier. Operating improvements also were reported from the 50%-owned Vera/Nancy mine in Australia, where Battle Mountain hopes to double production over the next few years. The mine turned out 25,000 attributable ounces in the first half of 1998 at a cash cost of US$131 per oz.

During the same period, the new Lihir gold mine in Papua New Guinea contributed 23,000 oz. gold to Battle Mountain’s bottom line. The company holds an 8.65% interest in the producer, which is expected to turn out 600,000 oz. gold annually.

On the exploration front, Battle Mountain tested numerous projects around the world, including four properties along the eastern flank of the Sierra Madre Occidental in Mexico. The most advanced is a grassroots discovery on the El Cairo property in Durango state. More than 80 holes (80,000 ft.) have been drilled and the company has reported “preliminary resource calculations” of 700,000 contained ounces in oxides and 485,000 contained ounces in sulphides. More work is planned.

The Vera South project in Australia returned encouraging drill intersections, including: 22 ft. grading 0.82 oz. gold per ton; 18 ft. of 0.21 oz.; 13 ft. of 0.35 oz.; 35.5 ft. of 0.94 oz.; 12.5 ft. of 0.65 oz.; and 9.8 ft. of 0.31 oz. A resource estimate is expected later this year.

Encouraging results were also received from the Dunkwa joint venture in Ghana, including 20 ft. of 0.38 oz. gold, 54 ft. of 0.27 oz., and 8 ft. of 0.22 oz. Work is continuing on the property, in which Battle Mountain can earn a 65% interest.

In Brazil, the company withdrew from the Volta Grande joint venture in the Amazon River area of Para state, saying the project “no longer met criteria for further investment.”