With $88 million in working capital and no debt,
The mid-tier producer already operates one mine in each of Chile and Quebec and has interests in 100 exploration properties throughout the Americas. Neither of its mines requires a major tune-up, and Aur does not anticipate its cash reserves of $76 million will become eroded.
“Aur remains financially strong, generates cash flow and is in a position to acquire assets at reasonable prices during the current depressed state of the mining sector,” said Gill. “The steps required to join the ranks of the major companies are big, but achievable.”
The company plans to spend $6.6 million this year exploring 20 select properties spread across Quebec, Manitoba, Saskatchewan, Nevada and Chile. Funding will be evenly split between gold and base metals projects.
As for potential acquisitions, Gill said both direct interests in projects and mergers with suitable partners are being considered. Any acquisition, however, must be projected to produce at least 35 million lbs. copper or 100,000 oz. gold annually and have 10 years worth of reserves.
“Our aquisition program is now in high gear,” said Gill. “Our geographic focus is the Americas, though other jurisdictions will be considered.”
These efforts have so far included an attempt to gain Finnish major Outokumpu’s half-interest in the Zaldivar copper mine in Chile, though that deal ultimately proved too rich for Aur’s blood and was terminated earlier this year (T.N.M., Feb. 15/99).
The company has meanwhile acquired a 26-month option on Tiomin Resources’ (tio-t) giant Cerro Colorado copper project in Panama in return for a US$2-million loan. Primary copper-sulphide resources at the deposit are pegged at 1.75 billion tonnes grading 0.64% copper, based on a 0.4% cutoff grade. Included in this estimate are 877 million tonnes of 0.78% copper, based on a cutoff of 0.6%. Significant gold, silver and molybdenum credits are also present.
A feasibility study completed last May envisaged the building of a US$200-million heap-leach operation that would be gradually replaced by a high-capacity, conventional milling operation. Aur hopes to outline a higher-grade (more than 1% copper) resource amenable to underground block-caving mining methods. The company is currently relogging core in an attempt to confirm the project’s potential; drilling may follow.
To earn its interest, Aur must pay Tiomin US$4 million upon exercising its option and another US$10 within 90 days of achieving commercial production (T.N.M.,/I>, Jan. 11/99).
The company enjoyed another strong year of production at its partially owned underground Louvicourt mine in Quebec and at its open-pit Andacollo mine in Chile. In 1998, Aur’s combined share of production topped 70 million lbs. copper, 12.3 million lbs. zinc, 267,000 oz. silver and 9,500 oz. gold. Both mines exceeded their production targets and reduced operating costs to record lows of US49 cents per lb. copper (net of byproduct credits) at Louvicourt and US51 cents per lb. at Andacollo.
“Louvicourt has met or exceeded all of its performance targets [since production began in 1995] and has provided a stable source of cash flow to Aur and its partners,” said Gill. “The mine is an example of what can be achieved by a dedicated workforce and a constant attention to detail.”
He went on to cite Andacollo’s similar performance since it began producing in late 1996, saying “it is one of a select group of [solvent extraction-electrowinning] copper mines in South America to experience no operating problems from day one.”
In 1999, Louvicourt is expected to crank out a record 134 million lbs. copper, 49 million lbs. zinc, 1 million oz. silver and 38,600 oz. gold at an average cost of US42 cents per lb. copper. Production at Andacollo is expected to stabilize at 47 million lbs. copper yearly, and operating costs are expected to decline even further, owing partly to the cessation of contract mining in early August.
No unpleasant surprises surfaced in the first three months of 1999, with Aur’s combined share totalling 18.6 million lbs. copper, 3.4 million lbs. zinc, 84,000 oz. silver and 3,500 oz. gold. Comparative results from the first quarter of 1998 are 15.98 million lbs. copper, 2.25 million lbs. zinc, 49,000 oz. silver and 2,000 oz. gold.
At Louvicourt, operating costs dropped to US43 cents per lb. from US57 cents, while, at Andacollo, they fell to US48 cents from US58 cents.
Exploration at both mines continues. At Louvicourt, crews are attempting to prove up existing resources of 5.1 million tonnes grading 2.4% copper and 1.7% zinc, plus 26 grams silver and 0.77 gram gold per tonne. At the end of 1998, reserves stood at 8.5 million tonnes grading 3.6% copper, 1.7% zinc, 28.5 grams silver and 0.89 gram gold, sufficient for six years of production.
Oxide and supergene reserves at Andacollo are pegged at 25.6 million tonnes grading 0.73% copper, with another 26.2 million tonnes grading 0.62% copper considered as a separate resource — enough to sustain production till 2007. Moreoever, an underlying primary resource of 312 million tonnes grading 0.46% copper and 0.15 gram gold could add 15 years to the mine life if copper prices surpass US95 cents per lb.
Aur operates both the Louvicourt and Andacollo mines, holding a 30% interest in the former and 70% in the latter. The remaining interest in Louvicourt is divided between
In 1998, Aur lost $2.5 million (or 3 cents per share) on revenue of $97.9 million, compared with earnings of $3 million (4 cents per share) on $116 million in 1997. Weak copper prices, combined with a $6.6-million writedown on certain securities, properties and exploration costs, account for the poorer performance. Cash flow between the periods dropped to $22 million from $37.4 million.
Quarterly results were brighter, with Aur earning $526,000 (1 cents per share) on revenue of $23.6 million in the 3-month period ended March 31, 1999, compared with $377,000 (1 cents per share) on $21.4 million a year ago. Cash flow between the two quarters jumped to $4.4 million from $3.6 million, while working capital increased by $2 million, to $88 million.
Aur declared a dividend of 5 cents per share on June 30, 1998 — the second-consecutive year it had done so. The previous year’s dividend was 5 cents per share as well.
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