Homestake posts record gold output

Denver — With gold production up, Homestake Mining (HM-N) has reported its lowest cash costs in more than two decades.

Fourth-quarter production hit a record 589,100 oz. gold, up 9% from the corresponding period in 1999.

Cash operating costs were US$168 per oz., down US$20 per oz. from the fourth quarter of 1999. Total costs were US$234 per oz.

For all of 2000, Homestake produced 2.2 million oz. gold, up 3% from the previous year, and total costs declined $3 to US$239 per oz.

The strong quarter is attributed to increased ownership of the Round Mountain mine in Nevada. In July 2000, the company doubled its stake in the open-pit mine to 50%, making it the company’s largest producing American mine.

Round Mountain generated 183,400 oz. in the recent quarter, contributing 91,700 oz. to Homestake’s account, compared with 132,100 oz. (33,025 oz. to Homestake) in the year-ago period. Cash operating costs dropped 5% to US$183 per oz.

Production for the past year was up 18% to 640,100 oz. (320,050 oz. to Homestake), at a cash operating cost of US$206 per oz.

British Columbia’s Eskay Creek mine production increased to 83,100 oz. in the fourth quarter, though lower silver byproduct credits and higher fuel and third-party processing costs pushed cash costs up to US$45 per oz. In the fourth quarter of 1999, cash costs were US$33 per oz., reflecting a change in reporting (specifically, counting silver as a byproduct instead of gold equivalents).

Higher production and lower costs translated into increased cash flow in the fourth quarter. Operating cash flow grew to US$32.6 million, despite a lower realized gold price of US$280 per oz. In the corresponding quarter of 1999, cash flow was US$17.2 million with a realized gold price of US$303 per oz.

Net earnings for the recent quarter were US$5.2 million (or 2 per share), compared with US$3.9 million (2 per share) in the last three months of 1999.

For 2000, Homestake posted a net loss of US$104.4 million (40 per share), compared with earnings of US$4.9 million (2 per share) in 1999. The loss is largely attributed to US$68.6 million in writedowns, including closure of the Homestake mine in South Dakota and US$28.6 million in foreign currency losses.

Since October 2000, Homestake has drilled another 100 holes (totalling 115,000 ft.) at the 60%-held Veladero gold project in northern Argentina. In the process, the resource has been updated to 9.8 million oz. gold within 224 million tons averaging 0.044 oz. gold per ton, using a cutoff grade of 0.015 oz. per ton. Previously, the company reported a resource of 9 million oz. within 259 million oz. at 0.035 oz. per ton, using a cutoff of 0.01 oz. per ton.

Homestake and joint-venture partner Barrick Gold (abx-t) expect to spend US$30 million on delineation drilling, engineering and metallurgical studies through 2001. Meanwhile, Homestake is evaluating various design and processing options, including pulp agglomeration, 100% heap leaching, and a combination of conventional milling and heap leaching.

Homestake envisions construction costs topping US$450 million. Production could begin as soon as 2003.

At the end of 2000, Homestake’s proven and probable reserves had grown to 20.8 million oz., net of depletion and despite lower gold price assumptions.