Lower costs at White mine help Dickenson up earnings

The new management team at Dickenson Mines (TSE) has achieved a 40% jump in earnings for the first five months of the year, said Rob McEwen, chairman, president and chief executive officer at the annual meeting in Toronto.

While net income for the first quarter was $1.56 million (nine cents per share), earnings per share had increased to 17 cents by May 31, McEwen said. The results compare with earnings of $1.3 million (seven cents per share) in the first quarter of 1990, and 12 cents per share for the first five months of last year.

“These results are very gratifying,” McEwen said. “Especially in light of the dire predictions made by a former director at last year’s annual meeting.”

In 1990, Dickenson management changed dramatically with the departure of several directors and the replacement of former president John Kachmar with the 41-year-old McEwen, who also serves as president of CSA Management and Goldcorp Investments. Goldcorp has a controlling interest in Dickenson.

The brightening income picture is attributed mainly to lower costs. In the first quarter, Dickenson reduced overall expenses by 9%. By the end of June, the company expects average production at the A.W. White gold mine, its biggest revenue earner, to be in the order of $380 per oz., compared with $459 in the first quarter. Seventy employees have been laid off, reducing the Red Lake, Ont., mine’s workforce to 310.

Dickenson also has a solid hedging policy. About 88% of Dickenson’s production is sold forward at US$404 per oz., McEwen said. Last year, the company wrote down the carrying value of the 45-year-old White mine by $45 million to an estimated recoverable value of $22.7 million after a disappointing operating performance.

“The mine has gained a reputation for being costly and inefficient but this is changing,” said John Cook, vice-president of operations. “The Red Lake mine may be old but it is not yet over the hill.”

Cook said that construction of a bio-leach plant at the mine is almost a certainty. While recoveries using straight cyanidation are in the order of 80%, the bio-leach oxidation system would increase recoveries to about 90% by conditioning flotation concentrates before cyanidation.

In South Dakota at the heap leach gold mine owned by Dickenson affiliate Wharf Resources (TSE), the operators are aiming to stabilize production at 90,000 oz. this year. Wharf’s first-quarter earnings increased by 43% to $1.7 million (nine cents per share) in 1991, attributed mainly to increased gold sales. Cash production costs at the mine increased to US$219 per oz. from US$198 a year ago while gold production dropped to 15,773 oz. from 16,378 oz. in the first quarter of 1990. Dickenson owns 36.2% of Wharf.

While the Dickenson group’s gold operations may draw most of the attention, about one-third of the company’s revenues are derived from Dickenson’s industrial mineral operations, including Havelock Lime in New Brunswick and sodium sulphate producer Saskatchewan Minerals. First-quarter sales for both operations were reported to be on the increase.