Low costs offset gold prices for FMC

In the company’s latest annual report, Raymond Tower, chairman and chief operating officer, said FMC Gold as a low cost producer is “better shielded than many gold companies” against the downward swing in prices.

As a matter of policy the company does not hedge its gold and silver production, which in 1988 reached 331,00 oz gold and more than four million oz of silver from three Nevada mines. To offset lower prices that prevailed throughout much of the past year, the company increased gold and silver production and at the same time managed to reduce costs.

In 1988, cash costs of production averaged $122(US) per gold equivalent oz, a 13% improvement from 1987, and well below the North American average of more than $200 per oz.

Much of this can be attributed to the $97 production costs achieved in 1988 at the Paradise Peak mine in Nevada, which holds 60% of the FMC Gold’s reserves. Tower noted that high ore grades and low stripping ratios, combined with extraction and processing efficiencies contributed to this low production cost.

These results are reflected in the company’s 1988 financial results which show revenues up 12% to $171 million(US), and net income up 23% to $61 million.

This year, Tower projects the company will produce about 300,000 oz of gold and more than six million oz silver, with gold production falling slightly and silver production rising in 1990.

In fact FMC Gold expects to produce 8.0 million oz of silver next year, a dramatic increase from the 4.0 million oz produced in 1988.

Like most companies of its size, FMC Gold places considerable importance on maintaining its reserve base. During 1988, the company said reserve expansion once again replaced gold production. At year end, total reserves stood at 2.0 million oz gold, and 33.9 million oz silver.

About two-thirds of FMC Gold’s exploration budget of $13 million in 1988 was for joint ventures and original prospecting by the company’s 30 geologists. The company’s finding costs (exploration costs divided by reserves identified) have historically been below $20 per oz.

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