LITERATURE REVIEW — Santa Fe’s Nevada mines come of age

Having set a gold production record at its Nevada and California operations in 1996, Santa Fe Pacific Gold (GLD-N) says it is on track to join the 1-million-oz. club this year, climbing to a projected annual rate of 1.25 million oz. by 1998.

President Patrick James says several Nevada projects — Trenton Canyon, Mule Canyon and the new Sage mill at Twin Creeks — have helped the company deliver on its production promises. “We have also maintained our history of increasing gold reserves after deductions for production during the year, while significantly increasing the ounces of gold contained in mineralized material [resources].”

Santa Fe’s technical accomplishments have not gone unnoticed by other majors.

Two gold mining giants — Newmont Gold (NGC-N) and Homestake Mining (HM-N) — are currently vying for control of the company through merger and takeover proposals. A decision is not expected for several weeks.

Santa Fe began producing at the annual rate of 1 million oz. during the fourth quarter of 1996, when a record 257,167 oz. were cranked out. This represents a sizable increase over the 213,991 oz. produced during the comparable period of 1995.

In 1996, the company produced 851,619 oz. at an average cash cost of US$215 per oz., compared with 845,796 oz. at US$194 per oz. in 1995.

Lone Tree

The Lone Tree mine complex, southeast of Winnemucca, Nev., produced 64,102 oz. and 53,273 oz. for the fourth quarters of 1996 and 1995, respectively.

The increase was attributed to startup at the the Mule Canyon mine, and at Lone Tree mine (Section 14), as well as to initial production from the Trenton Canyon mine.

The Twin Creeks mine, northeast of Winnemucca, produced 150,113 oz. gold in the fourth quarter of 1996 and 459,084 oz. for the full year, compared with 101,226 oz. in the fourth quarter of 1995 and 424,467 oz. for all of that year. The increase was largely attributed to startup of the oxide circuit at the new Sage mill.

In southern California, the Mesquite mine produced 186,797 oz. in 1996, compared with 193,361 oz. in the previous year. The decrease is a reflection of the lower recoveries realized as a result of mining ore with a high sulphide content.

At the end of 1996, Santa Fe reported that its total proven and probable reserves totalled 18.1 million contained ounces. — an increase of 253,000 oz. from 1995 (net of production).

Resources were increased to 13.9 million contained ounces from 11.3 million oz. in the previous year. Three new properties contributed to this increase: the 50%-owned Rosebud mine in Nevada (100,000 equity ounces); the 50%-owned Gurupi project in Brazil, where 1.2 million oz. have been outlined; and the 75%-owned Golden Eagle project in Washington state, which contains 700,000 oz.

Santa Fe spent US$32.9 million on exploration in 1996, of which about 57% was spent on foreign projects, compared with 51% in 1995.