Placer Dome loosens reins — Independent-minded Gibraltar

Since production started in 1972, Gibraltar Mines (TSE) has adapted to adversity several times and survived. It hopes to continue that strategy partly by expanding mill capacity at its Gibraltar open-pit copper mine near McLeese Lake, B.C.

The cost of the expansion is estimated at $35 million. Financing will come from a proposed $50-million equity issue. Placer Dome (TSE), which holds 68.1% of the companys 12 million outstanding shares, has committed to take $10 million of the issue and allow its shareholding to dilute. This dilution (likely to below 50% ownership) is in line with the parents plan to give Gibraltar autonomy.

Gibraltar is a high-cost producer, and the recent drop in the price of copper to US85 per lb. (compared with US$1 per lb. at the end of last year) prompted the company to take steps to minimize its losses. Two rather large steps involve cutting mine production in half and laying off 94 workers next month.

Meanwhile, a $500,000 final feasibility study on modifying the mill is in progress. By boosting capacity to 57,000 from 38,000 tons per day, the company hopes to decrease operating costs by US7-8 per lb.

The following figures pertain to the first six months of 1993, with parenthetical figures referring to the same period a year ago: Realized price: US84 per lb. (US$1); cash cost: US81 per lb. (unchanged from US81); head grade: 0.31% (0.34%); recoveries: 74.6% (73.1%). As part of the final feasibility, the company will re-evaluate reserves, taking into account projected lower costs.

Depending on the price of copper used in the calculation, reserves could be expanded by including peripheral mineralization which grades below the cutoff. As of Dec. 31, 1992, proven and probable reserves totaled 162.6 million tons at 0.301% copper and 0.0084% molybdenum. The calculation is based on a copper price of US$1 per lb. as well as a 0.18% copper cutoff in the Gibraltar East pit and 0.2% in the other two pits.

Funds in excess of the expansion cost will be used for working capital and to fund exploration or acquisition of new deposits. Gibraltar will focus on copper opportunities in North America, extending as far south as Mexico, said William Myckatyn, president and chief executive officer.

He added that the company will continue to evaluate mineral potential near its Gibraltar mine, including a re-evaluation of the Newcoast property. (Earlier this year, a feasibility study concluded that the Gibraltar North deposit, part of the Newcoast property, is uneconomic.) Newcoast Silver Mines (VSE) holds a 30% net profits interest in the property.

For the six months ended June 30, Gibraltar reported a loss of $3 million on revenue of $22 million. That compares with net earnings of $1.1 million in the first six months of 1992 on revenues of $27.1 million.

The company has more than $15 million in working capital and no long-term debt.