Richmont shifts focus to Newfoundland

With activity at its Quebec mines winding down, junior miner Richmont Mines (RIC-T) is drawing financial strength from its low-cost operations in northwestern Newfoundland.

The company’s wholly owned, underground Nugget Pond mine, near Baie Verte, produced 38,000 oz. gold in 2000 at a cash cost of US$141 per oz., compared with 43,500 oz. at US$138 per oz. in 1999.

The production drop is due to a 49-day interruption in the milling of Nugget Pond ore, to allow for the processing of a bulk sample from the company’s nearby Hammerdown property. The latter was acquired a year ago and boasts high-grade reserves of 443,000 tons grading 0.47 oz. gold per ton, or 210,000 contained ounces.

In October and November, Richmont processed 19,300 tons of Hammerdown ore grading 0.46 oz. gold per ton, yielding 8,700 oz. gold. The company says the work confirms the deposit’s high grade and an excellent gold-recovery rate of 97.5% by the Nugget Pond mill.

Efforts to drive a 2,000-ft. access ramp to the second level at Hammerdown are under way, with more than 1,400 ft. completed to date, and the company should be able to begin commercial production during the second quarter of 2001.

The addition of Hammerdown ore could boost production from Richmont’s Newfoundland division to beyond 55,000 oz. gold annually at a cash cost of under US$140 per oz.

Things are less rosy for Richmont in Quebec, with mining at its Beaufor gold mine suspended by operator Aurizon Mines (ARZ-T) in August 2000, owing to concerns over pillar stability.

Aurizon and Louvem Mines (LOV-M) each have a half-interest in Beaufor, with Richmont holding a 69.3% interest in Louvem.

The partners have hired a consulting firm to assess the problem and are now reviewing an ensuing report.

Louvem lost $5.3 million (20 per share) on revenue of $7.2 million in 2000, compared with a virtual break-even year in 1999 on revenue of $9.4 million.

For the eight months of operation in 2000, Louvem’s share of production totalled 17,100 oz. gold at an average cash cost of US$234 per oz., compared with 22,400 oz. at US$236 per oz. in 1999.

At Richmont’s wholly owned Francoeur mine, near Rouyn-Noranda, reserves will be depleted toward September 2001, after the production of some 340,000 oz. gold since opening in 1991.

During 2000, Francoeur produced 24,200 oz. gold, compared with 18,100 oz. in 1999, when operations were interrupted for three months.

Richmont’s total attributable production in 2000 was 79,300 oz. gold mined at an average cash cost of US$192 per oz., compared with 84,000 oz. at US$191 per oz. in 1999. The average selling price in 2000 was US$290 per oz., compared with US$260 per oz. in 1999.

During 2000, almost $6 million worth of writedowns resulted in a loss for Richmont of $3.3 million (or 22 per share) on revenue of $36 million, compared with a 1999 loss of $8.2 million (53 per share) on revenue of $35.2 million.

The writedowns in 2000 related to the book value of the Beaufor mine, as well as goodwill associated with Richmont’s interests in Louvem and the associated Camflo mill. In 1999, the company took a $13-million writedown on its Francoeur mine.

Richmont’s cash flow shot up 56% to $11 million, or 72 per share. The company ended 2000 with no long-term debt and working capital of $14.4 million. With contributions from Francoeur and the Newfoundland division, Richmont expects to produce 75,000 oz. gold this year at an average cash cost of US$165 per oz.