LAC plans `slower, safer’ spending

President Peter Allen told shareholders at the annual meeting that “to some extent, LAC’s spending will be slower and safer this year and tight cost controls will continue. At the end of 1989, the results should be improved financial and mine reserve strength.”

Allen was commenting on the current world gold market situation, which is marked by rising bullion production and soft prices hovering in the $390(US) per oz. range.

The gold price outlook, Allen said, depends on continued offtake by Asian consumers and central bankers, Far Eastern demand for the precious metal having been strong the past two years.

LAC, he said, is hedged for two years on its gold output through forward sales and a gold loan. The company has sold forward more than 400,000 oz to 1990 at an average price of $446.

The company recorded earnings in 1988 of $45.8 million (50 cents per share) o n revenue of $207.9 million, compared with $38.7 million (44 cents per share) on revenue of $194.4 million in 1987. Healthy cash position

Assets at the end of 1988 stood at $805 million, including more than $315 million in cash. Long- term debt totalled $168.3 million. The company had about 92.3 million shares outstanding at the end of the year.

LAC’s average cash production cost in 1988 from four Canadian gold-producing operations was $324(Can). In northwestern Quebec, the company has a 50% interest in the Doyon mine, a 100% interest in the Bousquet #1 mine and a 50% interest in the Francoeur mine. In the Kirkland Lake area of northeastern Ontario, LAC owns the Macassa mine which has been in continuous production since 1933. Also in the Kirkland Lake area, LAC started up its Lake Shore tailings recovery project towards the end of 1988.

Scheduled to come on stream in 1990 is the Bousquet #2 gold project. It is estimated the mine will turn out 50,000 oz that year and by late 1991 or early 1992 become LAC’s largest producer with annual output of 140,000-150,000 oz.

At the 85%-owned Toqui zinc mine in Chile, which Lac has operated since early 1988, production totalled 257,000 of tons ore and 33,000 tons of zinc concentrate. Gerald Gauthier, senior vice-president operations, said the mine’s capacity has been increased to 50,000 tons concentrate. Proven and probable reserves at Toqui exceed 2 million tons grading 6.5% zinc. Drill-indicated reserves bring that total to more than five million tons. The company also has found other base and precious metals in the Toqui ore.

On the exploration side, LAC continues to look for new reserves at its producing properties. It is active at the grassroots level elsewhere in northern Quebec, northern Ontario and Chile, and has become an exploration player in Nevada, New Mexico and Australia.

Allen said about $75 million has been budgeted for capital and exploration spending for 1989. Exploration work will account for about $15 million of that total.

A lengthy court battle with Corona Corp. (TSE) over ownership of the Page-Williams gold mine in northern Ontario awaits a final verdict by the Supreme Court of Canada. Corona was awarded the mine by the Supreme Court of Ontario in 1986, but LAC appealed all the way to the Supreme Court of Canada. The court reserved judgment after hearing arguments by both sides last October.

Lac no longer publishes information about the Page-Williams mine in its annual report; the above financial and operating data exclude any such statistics for the Hemlo area mine.

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