Battle Mountain posts improved second quarter

Higher realized gold prices enabled Battle Mountain Gold (BMG-N) to post improved results for its second quarter.

The Houston-based producer received US$287 per oz. gold during the 3-month period, compared with US$271 per oz. in the second quarter of 1999. Higher metal prices chipped away at the loss in the recent period, with the company recording a net deficit of US$9.2 million (or 4 per share), compared with a net loss of US$17.2 million (7 per share) a year ago.

This year’s second quarter was also hurt by US$4.4 million in foreign exchange losses, though the comparable period last year included a US$14.2-million loss related to the company’s stake in Lihir Gold (LIHRY-Q).

For the first six months of 2000, Battle Mountain posted a net loss of US$12.7 million (6 per share), including foreign exchange losses of US$3.9 million, compared with a net loss of US$31.7 million (14 per share) in the first half of 1999, which included a US$26.4-million loss related to Lihir.

Higher gold prices resulted in increased cashflow during the first half of 2000. Cashflow from operations grew to US$21.2 million from US$4.7 million in the first half of last year. The company’s cash position was US$65.9 million, including US$42.4 million in restricted cash.

Battle Mountain produced 196,000 oz. gold in the second quarter and 395,000 oz. in the first half of 2000. The company remains committed to producing more than 760,000 oz. for the year.

Cash operating costs were slightly better than anticipated — US$164 per oz. in the second quarter and US$167 in the first six months. Total production costs were US$245 and US$249 per oz., respectively.

Battle Mountain is proceeding with plans to merge with Newmont Mining (NEM-N). The transaction has already received anti-trust clearance and should be completed in the fall, following the necessary approvals of regulators and Battle Mountain shareholders. Noranda (NOR-T), Battle Mountain’s largest (28%) shareholder, has already agreed to vote in favour of the deal.

During the second quarter, Battle Mountain completed the final feasibility study of the Phoenix project in northern Nevada, and the results show improvements over those contained in the interim study from March.

The company expects to produce 415,000 oz. gold, 2.2 million oz. silver and 28.8 million lbs. copper per year from Phoenix at cash operating costs of US$170 per oz. gold. The company believes it can achieve those results by increasing the daily milling rate to 32,500 tons. Capital costs increased slightly to US$206.5 million from the previous study, though the pretax internal rate of return improved to 17%.

Meanwhile, the company’s operating mines performed well in the second quarter. The Golden Giant, near Marathon, Ont., contributed 84,000 oz. at a cash cost of US$149 per oz., and shaft-deepening and further development of Block 5 mineralization remain on schedule.

Ontario mines

The Holloway mine, also in Ontario, produced slightly more gold than expected — 21,000 oz. at US$218 per oz. However, depreciation, depletion and amortization pushed total production costs to US$353 per oz.

Drilling continues to expand mineralization at the Blacktop deposit, east of Holloway, and should be completed by the third quarter. The company is also drifting on the western side of Holloway. The first phase of drifting on the 505 West level toward the Lightning and Middle zones is intended to outline reserves equivalent to one year’s production, or 100,000 oz.

Cash costs at the 50%-held Vera-Nancy mine, in Australia, were US$99 per oz. on production of 35,000 oz. In Bolivia, production was down to 56,000 oz., while costs were up 12% to US$219 per oz. at the 88%-owned Kori Kollo gold mine. Battle Mountain recently completed a 34-hole drilling program to upgrade the nearby Llallagua resource after the company received positive results from the bio-oxidation demonstration plant. The results contained several higher-grade intercepts from three targets, including 35 ft. of 0.17 oz. gold per ton, 29.5 ft. of 0.12 oz., and 59 ft. of 0.11 oz.

Based on these results, the company expects to resume drilling with a 40-hole program, the objective being to amass information for resource grade, stripping ratio and ore controls.

Farther to the south, at the Casposo project in Argentina, Battle Mountain has calculated a preliminary resource estimate. At a gold price of US$300 per oz., the deposit contains 350,000 oz. gold and 6.4 million oz. silver in 1.9 million tons grading 0.19 oz. gold and 3.4 oz. silver per ton. The company expects to expand the resource further by means of additional drilling.