First Mississippi pre-tax profit from mining division $2.5 million

First Mississippi Corp. has reported a pre-tax operating profit of $2.5 million from its minerals division for the year ended June 30. The profit, which compares with a $200,000 loss a year ago, reflects higher gold prices plus increased production and sales from its Getchell project in Nevada.

Gold production for the year was 20% higher at 19,500 oz and the new conventional milling facility at Getchell is expected to increase over-all production to 174,000 oz annually for the first three fiscal years of operation beginning in 1989. Heap leach production, which began in 1986, is expected to generate 15,000 oz during fiscal 1989.

Capital cost for the new mine/ mill complex is estimated at $79.1 million, excluding financing costs. A 150,000 oz gold loan is providing $71.3 million and a public offering a further $23 million.

The gold loan will be repaid from approximately 18% of anticipated production during the first five years of operation, the company says. The loan also includes a five year hedging program that guarantees a $400 minimum price on 202,600 oz of production in return for a commitment to deliver 70,600 oz at a maximum price of $450. “The hedging program will enable the company to service debt if gold prices decline below breakeven.”

The initial public offering of 3.25 million shares or 18% of the common stock in its precious metals subsidiary, FirstMiss Gold, was completed in May at $8 per share. First Mississippi retains an 82% interest in the company.

Located 40 miles northeast of Winnemucca, the Getchell mine property has proven and probable reserves of 1.3 million oz with an average grade of 0.155 oz. These reserves are located on 1,000 acres of ground surrounding old mine workings but there is plenty of exploration potential elsewhere on the property.

Until now, exploration work has largely concentrated on proving up and extending reserves and on condemnation drilling for new roads, mine dumps, tailings pond, and mill site. But the focus has shifted to the 29,000 acres outside old mine areas where several anomalous gold areas have been outlined, the company notes.