River Gold reports quarterly loss

Underground drilling at the Eagle River mine near Wawa, Ont., is returning heartening results for River Gold Mines (RIV-T).

The latest intervals include 9 metres (true width) averaging 10.6 grams (cut) gold per tonne and 8.8 metres averaging 21.56 grams. Both came from below the No. 6 zone and consequently are expected to expand reserves of 243,000 grading 16.8 grams gold per tonne.

The exploration success offsets a dismal second quarter in which River Gold lost $770,000 (3 cents per share) on revenue of $7.67 million, compared with earnings of $5.5 million (18 cents per share) on $13.15 million in the corresponding period of 1998. The shortfall reflects lower gold prices and output.

Losses in the first six months of the year were $484,000 (2 cents per share) on revenue of $16.85 million, compared with earnings of $6.3 million (20 cents per share) on $20.7 million in the first half of 1998. Cash flow for the periods was $2.5 million and $9.2 million, respectively, with the difference attributable to higher production.

In the recent quarter, River Gold produced 19,200 oz. at a cash cost of US$215 per oz. Eagle River and the nearby Edwards mine of Vencan Gold (VCG-M), which the company mines and custom-mills in return for half the profits, contributed roughly equal amounts.

During the quarter, the mill’s capacity was expanded 50% to 900 tonnes daily, and a shaft-sinking project at Eagle River was suspended. The expanded capacity is expected to boost production in the second half of the year to 52,000 oz. and lower cash costs to less than US$200 per oz.

River Gold has 229,000 tonnes of broken ore in stockpile, and $2.25 million in debt. The company expects to pay down the remaining debt by the fourth quarter, using cash flow and proceeds from short-term financing.