Placer Dome has 3 gold mines to open in 1989

In 1987 the company was formed through the largest mining merger in Canadian history, swallowing Dome Mines and Campbell Red Lake in the process. Besides giving it some much needed exposure to Eastern Canada, Placer Dome inherited two of this country’s most prolific underground gold producer s, the Dome mine at Timmins and the Campbell mine at Red Lake, Ont.

Anthony (Tony) J. Petrina has been with the company for 28 years; and probably better than anyone else there he knows the company from the ground up.

Petrina seems comfortable in his new position and he accepts the present day Placer Dome as a natural process of evolution. Besides increasing the company’s asset base, Petrina told The Northern Miner that the merger offered other significant benefits including a better earnings base in North America and some much needed exposure to underground mining for what was then Placer Development. Dome and Campbell obtained the benefits of Placer’s international connections among other things.

The fact that Placer Development’s area of expertise was predominantly open pit made the merger much simpler. Petrina said there were no staffing redundancies because their operations were so different.

“So we didn’t have to rationalize the companies by laying off people,” he said, adding that, “in some ways, it’s easier to manage.” He did concede, however, that some people in the organization now “have to do a lot more travelling.”

Regarded as one of the top operations men in Canada, Petrina, a Queen’s University mine engineering graduate, keeps close tabs on the company’s various operations.

“Each mine manager reports to someone who reports to me,” he said, shortly before excusing himself to take an urgent telephone call in another room.

Petrina emphasized that Placer Dome is a mining company and it was going to stick to what it knows best. “Our strength is in our ability to develop orebodies, design the mine for it, finance it, then build and operate it,” he said.

Not ruling out an acquisition sometime in the future, he said they are “looking hard at what might make a suitable acquisition but only at the right price.” (With $836 million in cash and almost no debt, the company could swallow a major mining entity but Petrina cautiously avoided discussing any potential target).

Besides, the company has plenty of new projects on its plate at the moment with three new gold mines scheduled to come on stream in the new year; the $43 million Dona Lake project near Pickle Lake, Ont. is expected to produce 40,000 oz per year beginning this January. The project brings to six the number of 100%-owned mines Placer Dome operates in Canada.

Misima in Papua New Guinea is expected to come on stream this March at or below the $261 million(C) projected budget. The Misima deposit is deeply weathered with oxide forming the majority of the mill feed for the life of the mine.

“This allows high tonnage, low cost production with high gold recovery,” he said. Indeed, the situation is analagous to Kidston where an oxide cap was used to optimize production and quicken payback.

During the two month commissioning period and the first 12 months of operations, Misima should produce over 400,000 oz gold at a projected cost of $100(US) per oz. Over mine life, production will average about 200,000 oz per annum. The government of Papua New Guinea has agreed to purchase a 20% interest in the project so Placer Dome’s direct interest will be 61%. Development logistics are excellent because the mine site is located on an island just a few miles from the coast unlike the Porgera project.

Big Bell, 330 miles north of Perth, Australia, came to Placer Dome in 1985 “due in part to the success of the Kidston project,” Petrina said. Exploration focused on near surface mineralization which led to the concept of a large, high strip ratio, open pit to be followed by an underground mine. Placer Dome has a 38% direct interest in the mine which will produce 160,000 oz gold per year during the first six years at an average cost of $200(US) per oz. Underground mining begins in the seventh year.

Development logistics for the Porgera gold project located at 8,000 ft in the highlands of Papua New Guinea are not quite as favorable. A 3-year construction period is anticipated and initial gold production about 18 months after construction begins.

“The ball for Porgera is in the government’s court and we hope to have a reaction in the new year,” he said. The government is expected to take 10% of the project.

One big problem at Porgera is the lack of power, he said, adding that Placer Pacific is negotiating with BP for a supply of natural gas. A capped gas well is located about 40 miles from the mine site which could be utilized to generate power.

The project will be developed as an underground operation initially, followed by open pit mining.

“This will reduce our cash exposure during the construction period,” he said. High grade underground ore will be mined initially and it will be processed through a section of the plant which will be put into operation while the main construction program is continuing, he pointed out.

Revenue from this operation will finance over one third of the $940 million capital cost so the peak investment for the joint venture will drop to $580 million(US). When the open pit operation comes on stream, the combined plant capacity will be 9,000 tonnes and annual gold output will reach 800,000 oz during the first six years. Cash costs during this period should be less than $90(US) per oz. Should the government participate, Placer Dome’s net ownership would be 23%.

The company is very high on its Granny Smith deposit in Western Australia for which a feasibility study should be completed this February. Mine development would begin shortly after.

“Our projects people can already picture a mine and processing plant here,” he said. Three deposits have been outlined containing drill-indicated geological reserves of 30 million tons grading 0.047 oz gold.

Group gold production in 1987 was 952,000 oz of which Placer Dome’s share was 781,000 oz. The latter is expected to jump to 815,000 this year, and to 1.1 million oz in 1989 when three new mines begin production.

Slightly lower production at some mines and a weaker U.S. dollar increased this year to $239(US) per oz during the first nine months. But lower costs are expected next year, probably to about $216, he predicted.

Placer Dome is currently exploring more than 100 properties around the world and this year the company will spend $52 million on exploration, 96% directed at gold.

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