Homestake aiming for one million oz gold production in early 1990s

According to Harry Conger, chairman and chief executive officer, additional production will come from aggressive mine expansion programs plus acquisitions and exploration. The last two activities increased gold reserves to 11.4 million contained ounces by year-end, he noted.

In the company’s annual report, Conger emphasized that “production cost reductions continue to be the primary focus of our management efforts.” Last year the company’s cash production cost averaged $275(US) per oz, slightly higher than 1987. “We continue to work to lower costs through expansion of existing facilities, improvement of efficiencies at existing mines and acquisition and development of new mines,” he said.

Since production first started in the Open Cut at its Homestake mine in South Dakota two years ago, all of Homestake’s mines have undergone substantial expansion programs. A new $25-million oxide processing circuit has been installed at its McLaughlin mine in northern California for the treatment of lower grade oxide ores. The company is also investing $33 million for its share (25%) of the expansion program at the Round Mountain mine in Nevada (Echo Bay is operator) which will yield some 80,000 oz gold to Homestake’s account.

Improved mine scheduling, higher grade ore blocks, and strict grade control led to a 17% increase in the grade of underground ore at the Homestake mine in South Dakota. The average grade there rose to 0.187 oz; the underground and open pit mining operations produced 390,162 oz of gold, the highest output since 1972. Average production costs at the mine dropped to $298 per oz from $329 the previous year.

At the McLaughlin mine 70 miles northeast of San Francisco, gold output reached a record 203,827 oz from an average mill head of 0.194 oz gold per ton. The average cash cost was $235, slightly higher than the previous year. The new oxide processing circuit is expected to add an estimated 50,000 oz per year to McLaughlin’s previous forecast output for at least five years, said Homestake.

The $131 million expansion program at Round Mountain is nearly completed which will more than double processing capacity to 45,000 tons per day. Gold production is expected to rise to 320,000 oz this year, one quarter of which will go to Homestake.

Additional production is expected this year from Homestake’s Mineral Hill mine in Montana, the Wood Gulch heap leach operation in eastern Nevada, and the El Hueso mine in Chile.

Production at Homestake Gold of Australia’s (80%-owned) Super Pit in the Kalgoorlie mining camp in Western Australia is expected to generate 300,000 oz gold per annum to the parent company in the early 1990s. Expected to be Australia’s largest gold mine, HGAL’s share of additional capital required to construct a new mill there is $50 million. Earlier this year, HGAL acquired a further 2% interest in Kalgoorlie Mining Associates and a 50% interest in adjoining gold properties controlled by Bond International Gold’s Australian affiliates, the North Kalgurli Mines Group. The acquisition cost HGAL $100 million and allowed the various parties to optimize production from their respective properties.

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