Vancover — Power restrictions in Brazil have slowed production at
During the recent second quarter, Eldorado tabled a net loss of US$991,000 (or US1 per share) on gold sales of US$8.8 million, compared with earnings of US$88,000 (nil per share) on gold sales of US$13.2 million in the corresponding period of 2000.
The poor performance is attributed to a decrease in revenue, following lower production at Sao Bento, in Minas Gerais state, combined with a lower realized gold price.
Over the first six months of the year, the company incurred a loss of US$1.9 million (US2 per share) on gold sales of US$18.1, compared with year-earlier income of US$1.1 million (US$1 per share) on gold sales of US$27.7 million.
Gold production during the second quarter amounted to 26,654 oz., compared with 38,791 oz. a year earlier. The 6-month figure slipped to 54,740 oz. from 82,169 oz. Production in 2001 has been sourced entirely from Sao Bento, whereas, in 2000, output in the second quarter included 25,867 oz. gold from the La Colorada mine in Mexico, and output in the first half of last year included 57,010 oz. from that operation. Eldorado sold La Colorada in November 2000.
Sao Bento’s cash costs during the recent quarter rang in at US$243 per oz., compared with US$214 per oz. a year earler. The increased costs reflect a US$39-per-oz. negative adjustment to the hedge position, as well as reduced production.
During the recent quarter, the government of Brazil issued a resolution requiring all consumers of electrical power to reduce usage by 20%. Brazil relies heavily on hydroelectric power and has been suffering drought conditions. Operators at Sao Bento have complied with the mandate by shutting down the processing plant, which subsequently reduced gold production by 15%. There is no time limit to the power restriction.
Sao Bento mined 107,504 tonnes grading 9.36 grams gold per tonne during the quarter, compared with 136,288 tonnes at 6.92 grams a year ago. The reduction is attributed to a decision to modify the mining method in order to reduce dilution.
For 2001, Eldorado expects to produce 94,000 oz. gold at an average cash cost of US$225 per oz. Cash costs for the second half of this year are pegged at US$219 per oz.
At the end of the second quarter, Eldorado closed-out its gold hedge position beyond the end of 2001. This has the effect of increasing the company’s leverage to the gold price, as well as reducing the risk of exposure to margin calls associated with a sudden increase in the price. NM Rothschild is Eldorado’s senior lender and holds all of the company’s hedge positions. The junior reduced its debt by US$5.3 million, to US$16.2 million, during the quarter.
Meanwhile, the company continues to advance its Turkish assets. Eldorado spent US$363,000 during the past quarter at its Kisladag project, which is envisaged as a 103,600-oz.-per-year gold mine. Cash costs there are pegged at US$154 per oz.; capital costs, at US$47.4 million.
Kisladag has a measured and indicated resource of about 125.9 million tonnes grading 1.2 grams gold, or 4.4 million contained ounces. The inferred portion of the resource weighs in at 55.5 million tonnes grading 1.02 grams gold, or 1.8 million contained ounces. Only the measured and indicated resources have been incorporated into the mine design.
Proven reserves are believed to be 6.4 million tonnes grading 1.44 grams gold, or 297,000 oz. Probable reserves stand at 33.3 million tonnes grading 1.44 grams gold, or 1.5 million oz. The resources and reserves were classified in accordance with standards adopted by the Canadian Institute of Mining, Metallurgy and Petroleum.
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