Richmont edges into black (March 04, 2002)

Despite a $4.2-million writedown on its Nugget Pond mine in Newfoundland and a $1-million provision for site restoration in the second quarter, Richmont Mines (RIC-T) dramatically reversed course in 2001 to post earnings of $518,090 (or 3 per share).

By comparison, in 2000, the Montreal-based company incurred a loss of $3.4 million (22 per share). Revenue between the two years slipped slightly to $35.3 million from $35.5 million, whereas cash flow from operations increased to just under $12 million from just less than $11 million.

For the last three months of 2001, Richmont earned $2.9 million (19 per share), up from a year-ago loss of $6.7 million (44 per share). During the 2000 fourth quarter, the company suffered a $6-million asset writedown. Cash flow jumped to $6.9 million, compared with the $3,148 consumed by operations in the corresponding period of 2000. The turnaround is attributed to record fourth-quarter gold production amounting to 31,206 oz. at a cash cost of US$141 per oz., more than twice the 14,200 oz. produced at US$184 per oz. in the 2000 fourth quarter.

In all of 2001, Richmont churned out 73,344 oz. at US$163 per oz., down from 79,268 oz. at US$191 per oz. in 2000. The decrease in production stems from the closure of the Beaufor mine in northwestern Quebec so that geotechnical studies could be carried out. Richmont bought Aurizon Mines‘ (ARZ-T) half-interest in the mine during the year. The company averaged US$271 for each ounce produced in 2001, down from US$292 per oz. in 2000.

Before depleting its reserves, the Francoeur mine in Quebec pumped out 30,586 oz. at US$185 per oz., its best-ever performance. Mining at Francoeur wrapped up at the end of November; the mine had produced more than 340,000 oz. during its lifetime.

In February, Richmont agreed to acquire the adjacent Norex property from a private company. Richmont plans to look at the possibility of depth extension to Francoeur’s main zone. Plans include drifting from level 17 (at a depth of 824 metres) at the mine to facilitate deep drilling.

During the quarter, work aimed at securing the Beaufor mine continued, and at the end of the year, Richmont received authorization to reopen the mine. Operations resumed gradually in early January. So far, more than 20,000 tons of material have been sent to the Camflo mill for processing.

Exploration at Nugget Pond during the year was unsuccessful, and the mine was permanently closed in December 2001.

Looking forward, Richmont Mines expects to produce 100,000 oz. gold from the Beaufor mine and the Hammerdown mine in Newfoundland at an average cash cost of US$170 per oz. during 2002. Forty per cent of the company’s 2002 production is covered by hedges averaging US$300 per oz.

Richmont ended the year with no long-term debt, and cash and equivalents of $15.6 million. The company also has an unused line of credit of more than $5 million.