Magnacon gold mine failure means lower Hemlo earnings

Writedowns totalling $17.4 million tarnished an otherwise sterling earnings record at Hemlo Gold Mines (TSE). The company reported net income of $23.6 million (27 cents per share) for the year ended Dec. 31, compared with $32.8 million (37 cents per share) a year ago. Despite record gold production and lower operating costs at the Golden Giant mine near Hemlo, Ont., writedowns, mainly related to the failure of the Magnacon gold mine near Mishibishu Lake, Ont., boosted 1990 exploration expenditures to $33.8 million. Hemlo Gold owns a 29.3% interest in Windarra Minerals (TSE), which holds a 25% interest in Magnacon.

For the fourth quarter, writedowns totalled $5.8 million while earnings dropped to $2.4 million (3 cents per share) from $3.1 million (3 cents per share) for 1989. Before the writedowns, earnings were 10 cents per share for the quarter and 47 cents per share for the year.

As a result of increased high-grade ore mining, production for the year increased by 15% to 435,000 oz. and costs fell to US$124 per oz. from US$128 a year ago. Meanwhile, underground drilling in the western and lower portions of the mine outlined an additional 500,000 tonnes of ore.

Reserves at Golden Giant, as of Dec. 31, stood at 16.2 million tonnes grading 11.01 grams gold per tonne compared with 16.9 million tonnes grading 10.65 grams at the end of 1989. (Hemlo Gold reports its production in imper- ial units and reserves in metric units).

Noranda (USE), which has a 50.8% stake in Hemlo Gold, is considering selling its gold assets to Hemlo. If completed, Hemlo would become the principal gold vehicle in the Noranda group, with interests in the Holloway project in northern Ontario, the New World project in Montana and the Silidor mine in Quebec.