Despite incurring US$95 million in merger and write-down costs,
North America’s third-largest gold mining company earned US$35 million, (or 11 per share) in 1999, compared with US$50 million (15 per share) in 1998, whereas revenue generated by gold sales increased to US$1.16 billion from US$1.14 billion. Unusual expenses last year included US$49 million in merger and restructuring costs and US$46 million in mining interest writedowns. Excluding these, Placer earned US$115 million (35 per share) in 1999, compared with US$93 million (29 per share) in 1998.
Earnings during the fourth quarter of 1999 totalled US$7 million (2 per share) on US$315 million in revenue, compared with US$34 million (10 per share) on US$297 million in the corresponding period of 1998.
“We achieved record production and continued to lower costs,” says Placer’s President Jay Taylor. “Our acquisition team doubled our reserves and our exploration team increased reserves at four of our mines during the year.”
Hedging during 1999 enabled the company to realize an average price of US$341 per oz. gold — US$62 per oz. higher than the average London market price of US$279 per oz. The company’s hedge positions generated US$210 million in 1999, compared with US$160 million in 1998. Nonetheless, Placer does not intend to add any new hedge positions this year.
“We believe the price will rise as producer hedging decreases and market sentiment improves, and we will manage our existing positions accordingly,” says Taylor. “Although we are confident of gold’s long-term outlook, we will not rely on price increases to drive our future growth and profitability.”
Cash flow from operations in 1999 totalled US$346 million, compared with US$372 million in 1998. The decrease is attributed to merger and restructuring costs.
On Dec. 31, 1999, Placer’s consolidated cash and short-term investments totalled US$204 million, down from US$547 million at the end of 1998. The decrease is attributable to the purchase of a half-interest in the South Deep gold mine in South Africa and the remaining half of the Zaldivar copper mine in Peru (Placer already had a 50% interest in the latter).
Placer cranked out 3.15 million oz. gold during 1999 at a cash cost of US$159 per oz. and a total cost of US$231 per oz, compared with year-ago figures of 3.11 million oz. at a cash cost of US$153 per oz. and a total cost of US$224 per oz.
The company’s share of copper production between the two periods rose to 267 million lbs. at an average realized price of US71 per lb. from 228.4 million lbs. at US82 per lb. Its share of silver production increased to 10.8 million oz. at US$6.09 per oz. from 10.4 million oz. at US$5.43.
In the fourth quarter of 1999, Placer’s share of gold production totalled 802,000 oz. at a cash cost of US$150 per oz. and a total cost of US$216 per oz.
“In year 2000, we expect nine of our mines, including our mature operations, to increase their aggregate production by 24%,” says Taylor “We will maintain production of about 3 million oz. and continue to control costs.”
The Cortez mine in Nevada and the Granny Smith mine in Australia — both 60%-owned by Placer — are the lowest-cost gold mines operating in their respective countries. Cortez produced a record 797,115 oz. gold during 1999 at a total cost of US$109 per oz. and a cash cost of US$48 per oz., while Granny Smith cranked out 313,855 oz. at a total cost of US$106 per oz. and a cash cost of US$98 per oz.
At Cortez, new mineralization was discovered at the Pediment zone, across the valley from the existing Pipeline deposit. The new discovery, which remains open in three directions, increased reserves by 1 million oz.
At Granny Smith, exploration crews discovered the Wallaby deposit, estimated to contain a resource of 3.8 million oz. A feasibility study of this zone is currently under way.
Farther afield, in Peru, the Zaldivar copper mine produced a record 332 million lbs. of the red metal in 1999, at a cash cost of US39 per lb. and a total cost of US$61 per lb. Exploration of the flank of the pit, combined with infill drilling at depth, enabled Placer to replace all the mine’s production for the year, while adding an additional 1.2 billion lbs. As a result, total reserves now stand at 6.3 billion lbs.
In South Africa, Placer’s 50%-owned South Deep mine contributed 39,907 oz. gold in the fourth quarter, during which time cash and total costs averaged US$213 and US$232 per oz., respectively.
“The addition of 50% of the South Deep mine helped to more than double Placer’s reserves to nearly 66 million oz. gold for 1999,” says Taylor. “We are pleased with the progress there.”
Placer and its partner, African-based Western Areas, plan to upgrade the operation to yield 700,000 oz. annually by 2003, up from its current 350,000 oz.
In June 1999, Placer assumed control of the Getchell mine in Nevada, where, currently, 33 drill rigs are testing depths of up to 1,000 metres. A new resource calculation is expected by the second quarter. The mill, which was shut down in July, will not restart until the company puts the finishing touches on an expansion plan.
“Our concept of this huge mineral system is evolving rapidly,” says Taylor, “and we are building a whole new geological model for the property.”
Exploration crews are focusing on the N zone, where numerous high-grade intercepts have been intersected. So far, they have identified four separate mineralized zones, all of which remain open along strike to the north and south.
Drilling has also intersected what is believed to be southern extensions of the N zone, directly underneath the existing Turquoise Ridge mine. This effectively doubles the strike length of the zone to about 4,000 ft.
Placer reports that a newly discovered mineralized zone extends underneath the existing mine structure, and that exploration crews have followed this unit from the N zone south to within 400 ft. of the A zone. The unit lies 700 ft. below the existing workings. The last two holes drilled into the southerly extension of this unit hit 40.4 ft. grading 1.2 oz. gold per ton and 75 ft. averaging 0.931 oz. gold per ton, respectively.
In order to test the northern extensions of the N zone, Placer drilled two stepout holes. The first of these was collared 800 ft. north of the existing boundary and intersected 80 ft. averaging 0.7 oz. gold; the second, collared 2,000 ft. from the northern boundary, cut 65 ft. of 0.77 oz. gold. Taking into account the southern extension of the N zone, Placer believes it has identified a mineralized system that extends in a north-south direction for almost three miles.
The company plans to spend US$20 million exploring Getchell in 2000.
Meanwhile, at the Las Cristinas gold-copper property in southeastern Venezuela, Placer has suspended all construction as a result of low gold prices.
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