River expects higher production

With another strong quarter under its belt, River Gold Mines (RIV-T) expects to surpass its 1998 production target for the Eagle River gold mine near Wawa, Ont.

As of Sept. 30, the company had achieved 70,500 oz. of its year-end goal of 85,000 oz. Of this, 23,200 oz. were produced in the third quarter at a cash cost of US$132 per oz., bringing the 9-month average to US$143 per oz. The figures are substantially better than those reported for the same periods of 1997.

Exploration is also yielding good results, with year-end reserve estimates expected to match the 1.6 million tonnes grading 10.9 grams gold per tonne calculated at the end of 1997. It is expected that future reserves will be mined via a shaft that will extend to the 700-metre level (ore is currently hauled to surface via a ramp). More than 90% of the hoist has been constructed and, when finished, it is expected to decrease material handling costs.

These and other operational improvements translated into strong financial results. For the three months ended Sept. 30, River earned $2 million (or 6 cents per share) on revenue of $9.9 million, compared with $1.3 million (or 5 cents per share) on $8.9 million in the corresponding period of 1997. Cash flow from operations rose to $4.6 million from $1.1 million.

During the quarter, River paid down $500,000 of its debt while declaring a 4 cents-per-share dividend for shareholders. At the end of the 3-month period, the company had cash and gold bullion totalling $5.8 million.

Earnings in the 9-month period ended Sept. 30 totalled $8.3 million (27 cents per share) on revenue of $30.5 million, compared with $3 million (10 cents per share) on $24.1 million in the equivalent period of 1997. Cash flow between the periods rose 77%, to $13.7 million.

Meanwhile, development continues at the periodically mined Edwards deposit, with 28,000 tonnes of ore slated for treatment at the Eagle River mill by year-end. River has been operator of the mine since early 1996 and, under a deal signed at that time with mine-owner Vencan Gold (VCG-M), receives half of all operating profits.

Work is also ongoing at the Mishi Lake gold deposit, 2 km west of the Eagle River mill. To accommodate the extra feed, River is expanding its mill by 20% to 800 tonnes per day, at a cost of $1.2 million.

River acquired the deposit for $1.4 million from vendors MacMillan Gold (MMG-T) and Mishibishu Gold (MGO-V). Both companies retain a royalty on production exceeding 700,000 tonnes, set at $1 and $2 per tonne, respectively, for open-pit and underground mining, as well as their joint interests in 300 claims and two mining leases surrounding the deposit.

Reserves are pegged at 1.4 million tonnes grading 4.26 grams gold, more than half of which is considered amenable to open-pit mining.

Production is targeted for mid-1999, with payback anticipated in one year.