Production rise at Con, Giant benefits Miramar

Though it remains in the red, Miramar Mining (MAE-T) reports that increased production at the Con and Giant mines in Yellowknife has strengthened its bottom line. Moreover, the company expects lower operating costs for the balance of the year.

Miramar tabled a loss of $1.3 million (or 2 per share) during the second quarter, compared with a loss of $5 million (9 per share) in the corresponding period of 1999. The results include consolidated losses incurred by Northern Orion Explorations (NNO-T), in which Miramar holds a 54.8% interest.

Miramar has decided to sell 42.4 million of its 55.5 million shares of Northern Orion, as well as $1.9 million of its $2.7-million note and a Northern Orion convertible debenture (maturing in September 2003) valued at $23.6 million. In return, Miramar will receive $8.4 million in cash. The company entered into an agreement with a Canadian securities dealer whereby the dealer will obtain and sell Miramar’s stake in Northern Orion on a best-effort bases. Miramar will retain about 13 million shares (a 15% interest) of Northern Orion, as well as its $18-million royalty on production and a $800,000 2-year note.

“This transaction would complete the reorganization of Miramar, which commenced in March 1999,” says the company’s president, Anthony Walsh. “Northern Orion has some excellent copper assets with significant upside potential, and we would have considerable exposure to that upside by retaining about 13 million shares and the existing production royalty.”

Northern Orion plans to complete a financing for $6-8 million in order to continue its exploration efforts. As a result of the ensuing transactions, Northern Orion will emerge as a well-financed, debt-free exploration company well-positioned to advance its copper properties in Cuba and Argentina.

“We [Miramar] have decided to focus on gold in the North, particularly the exciting Hope Bay project [in Nunavut], where we have had tremendous results this year,” says Walsh.

Miramar reported a consolidated cash flow from operations of $1.5 million during the quarter. At June 31, the company had a working capital of $26.9 million.

During the first half of the year, Miramar incurred a loss of $2.8 million (5 per share) on revenue of $25 million, compared with a loss of $7.5 million (13 per share) on revenue of $11.3 million in the first six months of 1999.

The company produced a second-quarter total of 30,030 oz. gold from the Con and Giant mines at a cash cost of US$269 per oz., compared a first-quarter total of 26,142 oz. at US$285 per oz.

The recent quarter also saw Miramar realize an average selling price of US$289 per oz. gold, whereas the average spot price was US$280 per oz.

“We have completed most of this year’s capital expenditures and expect lower operating costs for the balance of the year,” says Walsh. “As a result, our Yellowknife operations are expected to be cash-flow-positive on a total-expenditure basis for the remainder of this year and next, at current gold prices.”

The improved performance of the Con mine was attributed to a better-than-anticipated grade in the free-milling ores. The mine’s refractory production was on budget. In total, the mine cranked out 78,775 tons grading 0.33 oz. gold per ton, with 23,597 oz. produced at a cash cost of US$279 per oz.

The Giant mine produced 25,682 tons grading 0.31 oz. gold per ton, equivalent to 6,463 oz. gold at a cost of US$236 per oz.

Miramar is improving mine efficiencies by simplifying ore-handling (the objective being to eliminate the second shaft at the Con mine) and improving flotation capacity.

Meanwhile, exploration drilling has begun to test for extensions of the Con mine at depth. Miramar is in the midst of a 40,000-ft drill program that is testing for reserves up to 700 ft. below the current reserves. Work is also progressing on drill platforms to test the southern extension of the Con mineralization. Drilling in this area is scheduled to commence in early 2001. In addition, the company will drill-test two refractory gold targets in an area where previous drilling returned numerous high-grade gold intercepts over minable widths.

Miramar’s hedge position at the end of the second quarter was as follows:

– Spot deferred gold sales: 17,500 oz. at US$286 per oz.

– Gold calls sold in July and August: 10,000 oz. at US$303 per oz.

– Gold puts held: 18,000 oz. at US$270 per oz.

– Gold calls sold (July 2002 and June 2003) 36,000 oz. at US$285 per oz.

Miramar and partner Hope Bay Gold (HGC-T) have authorized an additional $4 million for exploration on their jointly owned properties in the Hope Bay greenstone belt.

The companies will contribute equally to the new funding, which will be in addition to a previously approved exploration budget of $15 million. The joint venture has been doing definition drilling on the Boston and Doris gold deposits in the belt, near Bathurst Inlet.

The funds are earmarked for three programs:

– surface drilling, designed to test for structural extensions of known gold mineralization at Boston and Doris;

– drilling on possible extensions of high-grade zones at the Madrid deposit; and

– initial drilling of several targets in the Hope Bay and neighbouring Elu greenstone belts.

At the Boston deposit, where the joint venture already intends to perform deep drilling in the early part of next year, crews will test structural extensions of the deposit’s North and South zones. Previous sparse drilling in both areas returned mineralized intersections.

Seven new drill holes at Doris will test the strike extension of the main Central Zone vein (about 1 km north of the known mineralization) and the structural projection of a fold-hinge zone (defined by drilling earlier in the year).

Madrid, which has a resource of 5 million tonnes grading an average 5.3 grams gold per tonne, has not been drilled recently. The new work includes a provision for nine drill holes on the Perrin and Matrim zones, where previous operator Broken Hill Proprietary (BHP-N) intersected some significantly higher-grade mineralization.

In related news, Hope Bay Gold has completed a $1-million private placement with CMP Resources.