Hemlo posts earnings, makes exploration plans

Toronto-based Hemlo Gold Mines (TSE) made more money last year than at any other time in its 8-year life.

The gold-producer boosted earnings by 40% over the previous year to $64.5 million (or 67 cents a share) from $45.6 million (or 47 cents a share). Revenues were also up, rising to $254.5 million from $217.1 million. At a meeting with financial analysts, Hemlo President Ian Bayer said 1994 was the third consecutive year the company had posted “very strong results.” He added that this year’s goal is to achieve the same level of earnings and production, while continuing to develop projects and explore grassroots targets.

The improved results were attributed to three chief factors: a weaker Canadian dollar, a higher gold price and increased gold production. The company produced 488,980 oz. in 1994, up 7% from the previous year as a result of improved grades at the Golden Giant and Silidor mines. A higher average realized price for gold, US$383 per oz., was also achieved. In Canadian dollar terms, the price was up 12%.

Almost half of Hemlo’s $31.5 million in capital expenditures was dedicated to the Holloway and New World gold projects in northeastern Ontario and Montana, respectively.

By amalgamating with Freewest Resources, Hemlo increased its interest in the Holloway joint venture to 85% from 51%. As operator, Hemlo completed 95% of the surface construction and is sinking a development shaft. It is also carrying out underground development through an existing exploration shaft. All development work should be completed by the end of the second quarter of 1996, with production scheduled to begin shortly thereafter. Under an agreement with Barrick Gold (TSE), two-thirds of Holloway’s production will be processed at the Holt-McDermott mill, which is currently being expanded. Hemlo has yet to announce plans for milling the remaining one-third of production.

Minable reserves at Holloway stand at 6.4 million tons averaging 0.19 oz. per ton. Annual production is expected to average 100,000 oz. over 13 years, and the deposit remains open at depth.

Meanwhile, in Montana, Hemlo’s 60%-owned affiliate, Crown Butte Resources (TSE), learned that its New World project will not receive the draft of an environmental impact statement (EIS) until June.

Addressing the gathering of analysts, Hemlo Vice-president Joseph Baylis said that once mining is finished, “we will leave the site in better shape than we found it.” He added that the site was mined several times in the past — in the 1890s, 1920s and 1950s. Construction is expected to begin in 1996, with production earmarked for late 1998.

Bayer said that, in addition to a strong financial position and key development projects, Hemlo’s future growth is tied to exploration. In this light, the company is re-evaluating where and how it will explore for gold. In 1994, Hemlo spent $13.7 million on exploration, about 49% of which was applied to Canada, 29% to the U.S., 2% to Australia and 20% to Mexico and Chile.

The company has five exploration offices — three in Canada, one in the U.S. and another in Mexico. A management staff of three is based in Toronto, with 60 explorationists deployed in the five offices. This year’s exploration budget is $15 million, half of which will be spent in Canada and 35% in the U.S. An international focus is said to be under consideration.