FMC Gold expanding its exploration efforts

With cash overflowing in its coffers, and reserves almost depleted at the Paradise Peak mine in Nevada, FMC Gold (NYSE) is expanding exploration to find additional deposits.

The exploration budget for 1993 is US$13.5 million, up from US$12.2 million last year.

FMC produced a total of 418,000 oz. of gold and 1.93 million oz. of silver in 1992, netting an operating cash flow of more than US$51 million. After capital expenditures, dividends and financing costs, the increase in cash and cash equivalents of US$28.9 million pushed up working capital to more than US$138 million. Long-term liability consists of an accrued charge of US$10.2 million relating to estimated reclamation and closure costs. Net earnings for 1992 were US$14.4 million or US20 cents per share on more than US$150 million in revenue. This compares with earnings of US$7.0 million in 1991 on revenues of US$139.4 million.

By mid-year, Paradise Peak’s mill reserves of 570,000 tons grading 0.075 oz. gold per ton will be exhausted. Moreover, heap-leach reserves totaling 5.8 million tons grading 0.027 oz. gold will be depleted by the end of 1993. Of 1992 production, Paradise Peak accounted for 251,000 oz. of gold and all the silver, underscoring the need to generate additional projects. Development of the Beartrack project in Idaho will remain on hold until gold prices improve. FMC has an 87% interest with MINEX holding the balance. Current studies indicate the deposit could be brought into production for about US$55 million. Heap-leach production would total about 100,000 oz. gold per year at an average cash cost of US$205 per oz.

Proven and probable reserves at Beartrack are estimated at 27.6 million tons grading 0.035 oz. gold. Permitting is virtually complete, but deferral was deemed prudent given current gold prices.

At year-end, FMC retained 18 active projects.

It signed an agreement in principal to increase to 100% its interest in the Humboldt joint venture in Nevada’s Carlin trend.

Deep drilling on Humboldt over the past three years has been encouraging and FMC expects spending in 1993 to exceed last year’s US$2.2 million. In 1992, 75 holes were drilled on the Ramshorn project in Montana, outlining a small geological gold resource. More definitive drilling is planned in 1993. Also in 1992, subsidiaries were set up south of the border with two favorable prospects identified in Mexico and one in Chile.

Of its US$13.2-million exploration budget, FMC expects to spend about US$5 million on foreign targets and reconnaissance.