Placer drops Cerro Crucitas

Placer Dome (PDG-T) has decided to sell its interest in the Cerro Crucitas gold property in northern Costa Rica, stating that the property does not fit its strategic objectives.

Since discovering the Cerro Crucitas deposit in 1992, Placer Dome has identified a measured and indicated resource of 59 million tonnes grading 1.2 grams gold per tonne, for about 2.2 million contained ounces.

“We recently completed a drilling program and the results have been carefully evaluated,” says John Willson, president of Placer Dome. “It was decided that the property does not meet our criteria for advancing the project further. We believe Cerro Crucitas will be a mine, but not a mine that fits Placer Dome’s strategy.”

In a release, Placer states that another company with a greater focus on Central America would be better suited for the project.

In other news, Placer released its first-quarter results, posting earnings of $17 million (or 6cents per share) compared with $14 million (5cents per share) in the corresponding period of 1997. The company credited higher gold production and lower costs for the increase.

Cash production costs were pegged at US$184 per oz., a drop of US$41 from 1997. The average realized price for gold sales was US$363.

“Placer Dome is thriving by most measures of performance, even in this low gold price environment.” says Willson. “We have reduced our costs by almost as much as the decline in the gold price and we have the protection of our hedging program, which guarantees prices of US$350 per oz.

“We will be profitable in 1998, even at US$300 gold and with the most aggressive exploration spending in the industry of US$115 million.” Placer brought in revenue of US$294 million in the first three months of 1998; gold sales accounted for US$241 million of that figure. First-quarter 1997 revenue and gold sales figures were US$285 million and US$217 million, respectively.

Cash flow from operations amounted to US$108 million in the first quarter, compared with US$82 million a year earlier.

The major produced 638,000 oz. gold in the first quarter, compared with 535,000 oz. in first-quarter 1997. Total production costs rang in at US$259 per oz., compared with US$303 per oz. a year earlier.

Placer’s gold hedging program realized an average price of US$363 per oz.

gold in the first quarter, well above the average spot price of US$294 per oz.

Placer attributes its lower production costs to cost-cutting measures undertaken by its mines during 1997 and 1998, as well as the increased contribution from lower-cost mines and the devaluation of the Australian, Canadian and Papua New Guinea currencies relative to the American dollar.

Gold production from Placer’s Canadian operations increased to 229,272 oz.

in the first quarter of 1998, 14,420 oz. (or 7%) higher than in the corresponding period of 1997. The company pins the increase on the commencement of operations at the Musselwhite mine in Ontario, as well as production growth at all of its other Canadian mines.

Placer’s 68% share of Musselwhite’s first-quarter production was 31,105 oz.

gold, produced at a cash cost of US$188 per oz. Placer’s share in first-quarter 1997 was 4,515 oz. gold (the mine didn’t reach full commercial production until April 1).

First-quarter production at the Campbell mine, situated near Red Lake, Ont., was 79,270 oz. gold, 9% greater than in first-quarter 1997. Cash production costs were US$136 per oz., compared with US$166 per oz. a year earlier.

The Dome mine, near Timmins, Ont., produced 85,305 oz. gold during the first quarter, an increase of 24%. Cash production costs decreased to US$198 per oz. from first-quarter 1997’s US$219 per oz.

At the Detour Lake mine, situated in northeastern Ontario, production increased by 46% to 33,592 oz. during the first quarter of 1998. Cash production costs rang in at US$310 per oz., compared with US$556 per oz. a year earlier.

In the United States, Placer’s gold production increased by 43% to 117,883 oz. in the first three months of 1998 compared with the same period in 1997.

Placer’s 60% share of gold production from the Cortez mine in Nevada amounted to 64,061 oz. gold during the first quarter, an increase of 164% over first-quarter 1997. Placer attributes the increase to the start up of the new mill, as well as to ore derived from the Pipeline pit. Cash production costs in the first quarter were US$95 per oz., compared with US$234 a year earlier.

Production at the Golden Sunlight mine in Montana dropped 13% to 35,896 oz., and cash production costs rang in at US$151 per oz., compared with US$132 in first-quarter 1997.

The Bald Mountain mine in Nevada yielded 17,926 oz. gold during the first quarter, an increase of 8% over last year. Cash production costs rang in at US$248 per oz. gold, compared with US$351 a year earlier.

In Western Australia, Placer’s 60% share of gold production from the Granny Smith mine was 87,750 oz., 21% more than in first-quarter 1997. Cash production costs were pegged at US$113 per oz., compared with US$159 in first-quarter 1997.

Gold production at the Kidston mine in Queensland declined by 2% to 42,981 oz. because of reduced grades and recoveries. Cash production costs for the first quarter were US$349 per oz. gold, compared with US$352 a year earlier.

The Osborne mine, also in Queensland, yielded 7,270 oz. gold, compared with 3,723 oz. a year earlier. The mine produced 17,985 lbs. copper during the first three months of 1998 at a cash cost of US69cents per lb., net of byproduct credits.

The Misima mine in Papua New Guinea produced 53,329 oz. gold at a cash cost of US$301 per oz., compared with 54,314 oz. at US$276 a year earlier.

Placer’s 50% share of first-quarter gold production at the Porgera mine, also in Papua New Guinea, was 104,440 oz., compared with 116,082 oz. in first-quarter 1997. The reduction was said to be the result of lower grades and mill throughput. Cash costs inched up to US$187 per oz. gold from US$185 a year earlier.

At La Coipa, a Chilean gold-silver mine half-owned by Placer, the company’s share of first-quarter production was 18,502 oz. gold and 911,000 oz.

silver, down 20% and 32%, respectively, from first-quarter 1997 figures.

Placer blamed the drop on lower grades and mill throughput. Cash production costs per gold-equivalent ounce decreased by 10% to US$211.

Placer Dome’s 50% share of copper production at the Zaldivar mine in Chile amounted to 35,729 lbs. in the first quarter of 1998, a 39% increase over the corresponding period of 1997. Cash costs rang in at US43cents per lb.

copper, a 27% reduction from first-quarter 1997 figures.

Placer’s total copper production in the first quarter of 1998 was 53,714 lbs. This contributed US$1 million to operating earnings, compared with US$8 million a year earlier. Copper revenues increased 17% to US$45 million, reflecting higher sales volume, but the average realized price of copper declined by 27% to US82cents, resulting in reduced earnings.

Consolidated silver production during the first quarter decreased by 30% to 1 million oz. Placer pins the drop on lower grades and the mill shutdown at La Coipa.

The company’s investment income during the first three months of 1998 was US$11 million, which was down about US$2 million from first-quarter 1997, when the company chalked up significant gains on the sale of investments.

Placer Dome spent US$20 million on exploration and feasibility work during the first quarter, compared with US$22 million spent in first-quarter 1997.

The company expects to spend about US$115 million on exploration and feasibility work this year, including about US$20 million slated for an exploration program and feasibility study at the 51%-owned Aldebaran project in Chile. Placer Dome has planned about 20,000 metres of drilling to test targets close to the Cerro Casale deposit.

Exploration at the company’s 70%-owned Mulatos project in Mexico continued to increase the resource in the area of the main deposit. However, development of Mulatos has been deferred until gold prices are more favorable.

At the Donlin C
reek project in Alaska, Placer geologists are using a new gold mineralization model to help increase the reliability and level of confidence of the resource estimates. The explored section of the property is said to contain an indicated and inferred resource of 61 million tonnes grading 3.4 grams gold per tonne, based on a cutoff grade of 2 grams. This works out to a contained resource of 6.7 million oz. gold.

The first quarter saw Placer Dome purchase a 16.8% interest in Vengold (VEN-T) for US$29 million. Vengold has a 10% interest in the Lihir gold mine in Papua New Guinea and intends to increase its participation.

Placer’s general and administrative expenses totalled US$11 million in the first three months of 1998, down from US$12 million a year earlier. Placer plans to continue to reduce overhead costs worldwide by over 10%. The company has also reduced the annual common dividend to US10cents per share from US$30cents.

With greater contributions expected from its low-cost mines, Placer is forecasting that gold production will reach the 2.8-million-oz. mark this year, at an average cash cost of US$175 per oz. gold. Total production costs are expected to slide in at US$245 per oz. Copper production is expected to increase by 14% as a result of the Zaldivar mine being brought to full operating capacity.