Low silver prices subdue United Keno Hill meeting

With silver prices at their lowest level since 1977, the subdued atmosphere at United Keno Hill Mines’ (TSE) recent annual meeting in Toronto was understandable. United Keno must wait for an upswing in the price of silver to bolster the flagging fortunes of its six dormant silver mines.

United Keno Hill is a 44.9% owned affiliate of Toronto-based Falconbridge Ltd. which in turn is controlled by Noranda (TSE) and Trelleborg. While the company’s six Yukon silver mines were placed on care and maintenance in January, 1989, revenue from the sale of stockpiled ore should cover the company’s $100,000 per month cash costs until mid-1990, President J.C. Cowan said.

But if silver continues to trade at US$5.05 per oz., as it did on the day of the annual meeting, it could be a long time before United Keno’s mines are brought back into production, said Cowan. He indicated that Falconbridge is currently soliciting offers for its stake in the company as part of a plan to shed non-core assets.

Last year, United Keno reported a consolidated net loss of $5.6 million or 97 cents per share, compared with a loss of $12.9 million or $3.54 per share for the same period in 1988. Revenues of 1989 from stockpiled metal sold declined to $1.7 million from $17.5 million last year.

Proven and probable reserves at the Yukon operations were unchanged from last year. They remained at 322,000 tons grading 28.0 oz. silver per ton and 4.6% lead.

After the government announced plans to kill the Canadian Exploration Incentive Program, United Keno elected to shut down its Whitehorse exploration office. However, Cowan said, $1.3 million will be spent on surface exploration in the Yukon, if flow-through financing can be obtained.

Depending on recent attempts to reduce operating costs at the Yukon operations, silver would have to trade at US$6-8 per oz. for the mines to become economic again, said Cowan.

However, in a bid to cut costs, the company is planning to change its mining method to cut and fill from its traditional square-set mining system. United Keno Hill Mines (TSE) $000s except per share items Year ended Dec. 31 1989 1988 Revenue $1,710 $17,568 Net earnings (loss) (5,639 ) (12,912)

per share (0.97 ) (3.54)004