Vancouver — Higher gold prices helped
The company earned US$116 million (or US$33 per share) on sales revenue of US$1.21 billion for the year, compared with a loss of US$133 million (US41 per share) on revenue of US$1.22 billion in 2001.
Cash flow from operations over the year amounted to US$320 million (US92 per share), whereas mine operating earnings totalled US$324 million.
Proven and probable gold reserves increased by 19% over 2001 to 52.9 million oz., reflecting the acquisition of Australian-based gold producer AurionGold.
Proven and probable copper reserves decreased 18% as a result of lowering the copper price assumption to US85 per lb., as well as depletion.
Last year, Placer’s hedge program realized a US$32-per-oz. premium over the average spot price of US$310 per oz. This added US$82 million to corporate coffers. After integrating AurionGold’s hedge book, Placer saw its committed ounces rise to 12.6 million. This year, 77% of Placer’s forecast production of 3.5 million oz. is fully exposed to the gold price. The remaining 20% is committed at an average price of US$365 per oz. Next year, Placer intends to reduce its committed-ounce position by at least 1 million.
During the fourth quarter, the company tabled net earnings of $6 million (2 per share) on sales revenue of $355 million, compared with earnings of $29 million (9 per share) on sales revenue of 292 million in the year-earlier period. Cash flow from operations came in at $47 million, up from $43 million in the corresponding period of 2001, and mine operating earnings increased to $83 million from $80 million.
Net earnings during the quarter were hampered by $40 million in unexpected charges. A portion, $12 million, went to pay for upgrading the facilities and infrastructure at the closed Equity Silver mine in British Columbia; another $12 million was spent on increased exploration at the Getchell, Cortez and Kalgoorlie mines; and $14 million was applied to inter-company debt balances for the South Deep mine in Africa.
A $12 million pretax mark-to-market loss was recorded on a portion of AurionGold’s hedge book.
Placer produced 917,000 oz. in the quarter, compared with 657,000 oz. a year earlier. The increase is attributed to the addition of two months of production from AurionGold.
Quarterly copper production totalled 108 million lbs. at cash and total cash costs of 47 and 56 per lb., respectively, compared with 111 million lbs. at 46 and 58 per lb. in the final three months of 2001.
“Our mines continue to perform well and our successes over the past year have built a solid foundation for the future,” says President Jay Taylor, who adds that “undoubtedly the pivotal event for Placer during 2002 was the acquisition of AurionGold, which gives us an additional 1 million ounces per year of low-cost production.”
The major now holds the largest land package in the Kalgoorlie gold district of Western Australia.
Closer to home, in the Timmins area of Ontario, Placer formed the Porcupine joint venture with
Farther south, at the Getchell property in Nevada, Placer has been test-mining the Turquoise Ridge deposit. The Getchell property has proven and probable reserves of about 3.5 million tonnes grading 23.9 grams gold per tonne, or 2.7 million contained ounces, and is forecast to produce 90,000 oz. gold in 2004. Ore will be processed at Newmont Mining’s Twin Creeks facility.
The 60%-owned Cortez mine, in the same state, cranked out more than 1 million oz. for the fifth straight year. Placer’s share of production was 649,000 oz., down 9% over 2001. The mine sent 2.2 million tonnes of ore to the mill grading 7.5 grams gold per tonne. Cash and total costs were US$129 and US$168 per oz.
At the Pueblo Viejo project in the Dominican Republic, Placer expects to complete a feasibility study by 2005. The project hosts a measured and indicated resource of 159 million tonnes averaging 3.3 grams gold, or 16.8 million contained ounces.
At the South Deep mine in South Africa, the company has constructed both a new shaft and a new mill. About 889,000 tonnes were sent to the mill last year, averaging 7.1 grams gold per tonne. Production was up 14% over 2001, to 194,238 oz. gold, at cash and total costs of US$204 and US$241 per oz.
The Granny Smith mine, in Australia, increased production by 57% to 326,894 oz. gold last year, as a result of shifting activity to the Wallaby deposit and including two months of consolidated production from AurionGold’s share. Granny Smith sent 2.5 million tonnes of ore to the mill, averaging 4.3 grams gold. Cash and total costs for 2002 were US$124 and US$161 per oz.
The Campbell mine, in Ontario’s Red Lake camp, boosted reserves to 1.3 million oz. and produced 193,150 oz. gold last year, up 8% over 2001, at cash and total costs of US$172 and US$244 per oz. The mine sent 357,000 tonnes to the mill, averaging 17.5 grams gold.
This year, Placer expects to produce 3.5 million oz. gold at cash and total costs of US$194 and US$256 per oz. The cost increase over 2002, when US$178 and US$231 per oz. were reported, is attributed to strengthening currencies, higher royalty costs, and the impact of higher fuel and energy costs.
The major plans to produce 400 million lbs. copper at cash and total costs of US49 and US64 per lb.
Taylor sums up the company’s overall performance: “We had an excellent year, producing 2.8 million ounces of gold, with record high production in the fourth quarter. More importantly, we recorded net earnings of $116 million — the highest since 1990.”
This year, Placer intends to reinvest US$220 million into existing operations, such as South Deep, Zaldivar and Campbell. The company has earmarked US$60 million for exploration, compared with US$52 million last year, and of that total, about US$36 million will be spent in and around existing operations.
“We will continue to optimize the existing assets,” says Taylor, “we will work to convert our 75 million ounces of measured and indicated mineral resources into reserves, and we will begin to realize the rewards of our ongoing investment in research and technology.”
Meanwhile, Placer intends to spend US$10 million on several research-and-development projects. The company, together with Vehicle Projects of Denver, Colo., recently demonstrated the first fuel-cell-powered vehicle in an operating underground mine. The next step will be to develop a fuel-cell-powered load-haul-dump machine for testing. Also, the first prototype of the MiniMole machine has been built and quarry testing is under way. The device is designed to improve safety by removing workers from the rock face. In addition, it may reduce the amount of development and waste dilution in conventional mining.
Placer Dome is also testing an alternative to cyanide in the processing of certain carbonaceous ore types.
As a result of a change in accounting practices, Placer will have a 1-time, after-tax charge of $15 million to the earnings during the first quarter of 2003.
Placer has declared a semi-annual dividend of 5 per share payable on April 7 to shareholders of record at the close of business on March 7.
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