Since announcing a reserve estimate for its Veladero gold-silver project in northern Argentina,
In late March, the California-based company reported reserves totalling 4.8 million oz. gold in 92.5 million tons averaging 0.052 oz. gold and 0.71 oz. silver per ton. Its 60% share of the reserves amounts to 2.9 million oz.;
More recently, Homestake encountered significant mineralization in 50 drillholes. Using nine reverse-circulation rigs and two core rigs, the company focused its efforts between the Filo Federico and Amable deposits, intersecting long intervals of mineralization in three deep holes in what is now known as the Cuatro Esquinas zone.
The intercepts sit deeper than most mineralization on the property, indicating the presence of a series of gold zones stretching over the 2-mile flank of Cerro Pelado, between Filo Federico and Amable.
Hole 197 cut 466 ft. of mineralization grading 0.077 oz. gold and 0.76 oz. silver, starting at a depth of 856 ft. below the surface. This interval included 157 ft. (from 1,050 to 1,207 ft.) grading 0.12 oz. gold and 0.48 oz. silver.
Hole 231 hit 492 ft. averaging 0.045 oz. gold starting at 879 ft., including 194 ft. of 0.071 oz. gold. Hole 252 hit 522 ft. of 0.096 oz. gold and 0.46 oz. silver, starting at 748 ft., including 289 ft. of 0.14 oz. gold and 0.52 oz. silver.
Southwest of Amable, the company extended mineralization outward to the newly defined Breccia Agostina. Of particular note are two holes, 250 ft. apart, which intersected a northwesterly trending high-grade structure. Hole 203 cut 476 ft. averaging 0.086 oz. gold and 1.16 oz. silver, including 233 ft. of 0.14 oz. gold and 1.87 oz. silver. Hole 258 hit 269 ft. of 0.16 oz. gold and 0.93 oz. silver, including 112 ft. of 0.31 oz. gold and 0.94 oz. silver. The depth to mineralization is about 300 ft., much shallower that at Cuatro Esquinas.
The drilling also expanded known mineralization at Filo Federico, with three holes to the southeast and one hole to the northeast. Homestake cut two zones of mineralization in hole 214. Starting at a depth of 404 ft., the hole intersected 128 ft. of mineralization grading 0.028 oz. gold and 0.03 oz. silver. Farther down-hole, at 597 ft., the hole cut another 266 ft. grading 0.038 oz. gold and 0.86 oz. silver.
Collared to the southwest, hole 237 hit 656 ft. of 0.024 oz. gold, starting at a depth of 135 ft. Farther to the southwest, hole 260 cut 495 ft. of deeper mineralization, starting at 801 ft. and averaging 0.041 oz. gold.
On the northeastern side of Filo Federico, Homestake intersected 292 ft. of 0.069 oz. gold in core hole A-16, starting at a down-hole depth of 305 ft. Included in the interval were 112 ft. of 0.14 oz. gold.
Homestake plans to continue drilling through May, as the South American winter approaches. It will also build an underground decline into Filo Federico to collect a metallurgical sample and map out geologic ore controls. The company expects to announce a new reserve estimate and mineralized inventory by June 2000, before determining its 2000-2001 exploration program.
Startup at Veladero is slated for 2003, and capital costs are projected at US$370 million. At full production, the mine will crank out 450,000-500,000 oz. gold annually at cash operating costs of US$150 per oz.
Cash costs steady
In the first quarter, Homestake produced 596,339 oz. gold and gold-equivalent (528,093 oz. gold and 3.81 million oz. silver), up 6% from a year ago. Average cash costs held steady at US$192 per oz., while total costs amounted to US$249 per oz.
“While we are disappointed by the protracted weakness in the price of gold, which clearly has a negative impact on our earnings, we continue to be encouraged by the strength of our operations,” says Homestake Chairman John Thompson.
The company saw standout performances from several operations, including the Eskay Creek gold-silver mine in British Columbia. Production in the quarter was up 24% from a year ago, to 152,680 oz. gold-equivalent (84,434 oz. gold and 3.81 million oz. silver). Cash operating costs were US$131 per oz.
The production increase reflects higher mill throughput, more shipments of concentrates and better grades, compared with year-ago levels.
The Hemlo, Ont., camp’s contribution to Homestake amounted to 82,333 oz., based on the company’s half-interest in the David Bell and Williams mines. Cash costs dropped to US$195 per oz. as both mines supplied ore to one mill.
Production at the Ruby Hill mine in central Nevada grew to 28,284 oz., while cash costs there fell to US$106 per oz.
In Western Australia, Homestake reported a 16% rise in output from its 50%-held Kalgoorlie operation, to 96,073 oz. Cash costs held firm at US$211 per oz. Also, higher output pushed Homestake’s Yilgarn operations (Plutonic, Darlot and Lawlers mines) up to 110,905 oz. for the quarter.
Cash flow rises
Despite a US$3-per-oz. drop in the realized price of gold, cash flow from the major’s operations improved to US$38 million. The company realized US$295 per oz. during the first quarter of this year.
Homestake posted a quarterly loss of US$16.1 million (or 6 per share), compared with a loss of US$900,000 (nil per share) in the corresponding 3-month period of 1999.
Most of the loss is attributable to a US$14-million non-cash charge related to a decline in the value of the Australia dollar. The charges included US$8.2 million in losses in foreign currency exchange contracts and US$5.8 million related to inter-company loans in Australian dollars.
In contrast, Homestake posted foreign currency gains of US$9.4 million for the first quarter of 1999.
At the end of March, the company had gold hedging commitments valued at US$18 million. These cover 5% of its existing reserve base, with no unprotected call options, no floating lease rate exposure and no margin call requirements.
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