New contract to lower costs at Florida Canyon

A new mining contract at the Florida Canyon mine owned by Pegasus Gold (TSE) is expected to lower costs by about US$25 per oz.

Mining at the open-pit, heap-leach gold mine near Winnemucca, Nev., is contracted out to N.A. Degerstrom.

Degerstrom agreed to re-negotiate the contract over a new 3-year term to December, 1995.

Werner Nennecker, now president of Pegasus following John Willson’s move to Placer Dome, stated that the company is pleased to meet its cost savings objectives while maintaining Pegasus’ long-term relationship with N.A. Degerstrom. He added that Florida Canyon is the company’s highest-cost producer and the re-negotiation assures the continued viability of the operation.

Florida Canyon produced at a rate of about 85,000 oz. per year while cash operating costs for the first nine months of 1992 averaged about US$293 per oz.

As part of the re-negotiation and resulting adjustment for the past year, Pegasus will receive about US$600,000 in over-payments.

Exploration at the mine is ongoing and Pegasus expects current reserves to last through 1996.