NEVADA & THE WESTERN STATES — Placer, Kennecott keep production in the Pipeline

The Pipeline gold mine in Nevada’s Crescent Valley is to Placer Dome (PDG-T) what the Goldstrike property is to Barrick Gold — a production cornerstone.

The mine is owned, on a 60-40 basis, by Placer Dome (PDG-T) and Kennecott Exploration, a subsidiary of London-based Rio Tinto (RTP-N).

Although Pipeline has some distance to go to top Goldstrike’s annual production level of 2 million oz., it is still a sizable operation. This year alone, the mine is expected to churn out more than 1.1 million oz. (In 2000 and 2001, output is expected to fall to 850,000 oz.)

Production levels are benefitting from higher head grades, which average 10.2 grams gold per tonne in the first quarter. By comparison, head grades in the corresponding period of 1998 were only 3.2 grams per tonne.

Output in the first quarter amounted to 315,800 oz. at the astonishing cash operating cost of US$53 per oz., beating Barrick’s cash cost of US$75 per oz. at the underground Meikle mine at Goldstrike.

Total production costs were only US$123 oz. Placer’s share of production was 189,511 oz.

Denver’s Royal Gold (RGL-T), which recently began trading on the Toronto Stock Exchange, holds a sliding-scale net smelter return royalty on production at Pipeline. At current gold prices, the royalty stands at 2.25%, and Royal will receive revenues beginning in July.

The operation contains reserves of 8.3 million oz. within 157 million tonnes grading 1.6 grams per tonne in the Pipeline and South Pipeline deposits.

In the meantime, Placer continues to add to the resource. At the GAS claims south of the mine, the partners have spent US$3 million on exploration. Assay results on the drilling are pending.

To the north of the mine, Placer and Kennecott have completed 24 drillholes on the Robertson gold property, held by Coral Gold (CLH-V). While Coral has yet to release any results, the company stated that all drillholes encountered gold mineralization.

Drilling located extensions to the northeast and southwest of known mineralization at the 39A zone.

Placer and Kennecott are planning another phase of exploration at Robertson, including trenching and 30 more drillholes.

Placer Dome has other mines in the western U.S., including the Golden Sunlight mine near Butte, Mont., where 1988 production fell marginally to 158,483 oz. while cash costs slipped 7% (compared with last year’s first quarter) to US$131 per oz.

Production at the Bald Mountain open-pit mine, near Ely, Nev., increased by 15% last year to 130,053 oz., owing to higher grades. At the same time, cash production costs declined 24% to US$148 per oz. from US$195 in 1997.

Placer Dome intends to spend US$75 million on global exploration this year, a 16% reduction over 1998.