Samatosum profits fall short of Rea Gold’s expectations

Although profit from the Samatosum mine owned 30% by Rea Gold (TSE) came in below expectations, it would be difficult to call the numbers disappointing. Operating profit from the mine accruing to Rea totalled $920,000 plus an additional $447,000 from its 5% net smelter royalty interest during the three months ended June 30.

For the first half of 1990, the company reported an operating profit from the mine of $3.3 million plus $1.2 million from the 5% net smelter royalty.

Minnova (TSE) is the operator and holds the remaining 70% interest of the Samatosum mine, near Kamloops, B.C.

Mill throughput during the second quarter reached 45,000 tonnes, over plan by 10.7%. Operating costs for the quarter were lower than expected, averaged $114 per tonne while operating costs for the first half were $124 per tonne.

Operating costs per ounce of silver produced, including gold and base metal credits were US$2.11 per oz. for the quarter and US$1.69 for the half. Before gold and base metal credits silver costs were US$2.47 and US$2.52 per oz. respectively.

The per-ounce cost was adversely affected by lower than expected grades. The company attributed the lower grades to over-extrapolation of high-grade intersections.

Costs were also adversely effected by a slide in the pit caused by a cross fault in the pit wall.

Silver production for the half totaled 3.62 million oz. while gold production was 6,401 oz.

Revenues for the joint venture during the quarter were $8.9 million, or about 18% less than planned due to lower metal prices and the high value of the Canadian dollar.

Rea reported earnings for the six months ended June 30 of $1.6 million on revenues of $8.2 million. Cash flow for the half was $3.4 million, compared with $905,000 for the second quarter.

As a result of the success of the Samatosum, Rea’s balance sheet has improved markedly over the period, with no long-term debt remaining and working capital of about $2.8 million. The company has about 13.5 million shares outstanding and recently traded near the year low of $1.50 per share.

Rea Gold (TSE) 6 months ended June 30 1990 1989 Revenue $8,169 $199 Net earnings (loss) 1,567 (219)

per share 0.11 (0.01)