Porcupine JV to reactivate Pamour

The Porcupine Joint Venture plans to start up a large open-pit mine on the Pamour property, 15 km east of Timmins, Ont., to replace production from its Dome open pit and underground operations.

Placer Dome (PDG-T), operator of the project and 51% owner, and partner Kinross Gold (K-T) announced the go-ahead for the new Pamour pit at the beginning of March, along with their annual financial results. Placer said it would start stripping in the summer and production could be expected in the summer of 2005.

Permits have been applied for, including a rerouting of provincial Highway 101 and a plan to cut off part of Three Nations Lake.

Pamour, which previously produced from an open pit under the ownership of Royal Oak Mines, is slated to produce an average of 160,000 oz. gold annually for 10 years. This will replace some production from the Dome super-pit, which will have mined out its existing reserves early in 2005. The joint venture expects the Dome pit to produce about 230,000 oz. gold this year.

A further push-back of the Dome pit is under study.

The joint venture is also losing production from the Dome underground mine, which is scheduled to shut down in May. Its budgeted production for the first half of the year was just over 11,000 oz. That underground production may be replaced by new resources outlined at the Paymaster mine, immediately southwest of Dome. Definition drilling on that resource is to continue this year.

The joint venture’s other producing mine, Hoyle Pond, is to produce 136,000 oz. in 2004.

In 2003, the joint venture produced 457,060 oz. gold at an average cash cost of US$206 per oz. and a total cost of US$262. Both cash and total costs were about 11% lower than in 2002. Cash costs for 2004 are estimated at US$230 per oz.

Another Placer-Kinross operation, the Musselwhite mine in northwestern Ontario, produced 223,000 oz. in 2003 at a cash cost of US$250 per oz. Cash costs and production are expected to be steady in 2004. (Placer, which owns 68%, is operator).

Placer Dome earned US$229 million, or US56 per share, on revenues of US$1.8 billion in 2003. Gold production was 3.9 million oz. In 2002, the company posted earnings of US$116 million on revenues of US$1.2 billion, out of 2.8 million oz. production.

The increased production and revenue mainly reflected the incorporation of Australian producer AurionGold into Placer. Placer’s buyout of East African Gold Mines, which brought the North Mara gold mine in Tanzania into the Placer fold, also increased production during the last half of the year.

Cash production costs, company-wide, rose to US$218 from US$178 per oz., mainly as a result of rising U.S.-dollar values for the Australian and Canadian dollars and the South African rand. The AurionGold operations, which were higher-cost than their Placer counterparts, also contributed to increased production costs. Total production costs, including reclamation and financing, rose to US$274 per oz. from US$231 in the previous year.

Kinross returned to profitability in 2003, earning US$9.7 million (US6 per share) on revenues of US$572 million and producing 1.6 million oz. during the year. Production, revenue and earnings figures reflected the 3-way merger with Echo Bay Mines and TVX Gold for the last 11 months of 2003. In 2002, the pre-merger Kinross lost US$30.9 million on revenues of US$261 million, from production of 889,000 oz. gold.

The average cash production cost across all Kinross operations was US$211 per oz. in 2003; the total production cost, US$318.

Kinross’s best performer in 2003 was the Crixas mine in Brazil, which produced 87,000 oz. gold at a cash cost of US$109 per oz. and a total cost of US$215. Two Canadian operations, New Britannia in Manitoba and Lupin in the Northwest Territories, both of which are nearing the end of their mine lives, posted high costs. New Britannia, a 50-50 joint venture with High River Gold Mines (HRG-T), produced 70,000 oz. at a cash cost of US$329 over the whole of 2003 and is scheduled to close in the first half of 2005 as existing reserves are depleted.

Lupin produced 56,000 oz. between February and August 2003 at a total cash cost of US$407 per oz. and a total production cost of US$458 per oz. Remnant mining of the shaft and crown pillars and remaining reserves at Lupin is scheduled to start in March.

Both Placer and Kinross pared down their hedge books in 2003. Placer, whose hedging program maintained an average US$17-per-oz. premium over spot prices in 2003, closed out 2.9 million oz. in hedge contracts, though it acquired an 800,000-oz. hedge book with its acquisition of East African Gold Mines. Placer’s maximum commitment under existing hedge contracts is now 10.5 million oz., of which 8.5 million oz. are forward sales and 1.3 million oz. are deliverable under call options.

Kinross said it has reduced its hedge position to “less than 2%” of reserves, which were calculated at 14.1 million oz. at year-end. Through to the end of 2005, Kinross has 175,000 oz. hedged at an average of US$281 per oz., plus obligations to deliver on 50,000 oz. of call options at average strike prices of US$340. The mark-to-market value of the hedges is a negative US$27.9 million. Kinross is delivering gold into these contracts as they mature.