White mine’s value cut by 66%

The estimated recoverable value of Dickenson Mines’ (TSE) Arthur White gold mine at Red Lake, Ont., has been reduced to $22.7 million, a $45-million writedown of its undepreciated carrying value. While ore reserves are not a problem at the mine, costs and metallurgy are. Gold recoveries are in the 84% range and studies have been carried out seeking an improvement into the 90% range. A decision is expected before year-end and, according to mine manager Bruce Bried, interviewed on a recent trip to the Red Lake operation by The Northern Miner, a bioleaching system for the mine’s refractory ore is a strong possibility.

Ore reserves are healthy, amounting to 3.1 million tons (proven and probable) at a grade of 0.32 oz. gold per ton, and an additional 770,000 tons grading 0.3 oz. in the “possible mineral inventory” category. In total, there are 14 years’ reserves at the present rate of production (285,000 tons per year) with the possibility of expanding this figure as normal mine development proceeds.

Overall costs at the mine are high and largely attributed to the age of the operation and the geometry of the underground workings. Distances from the shafts to the working places are major, starting at about 3,500 ft. and in-creasing to more than a mile. (There are two shafts, one from surface and one from the 23rd level.)

For the three months ending Dec. 31, the cash production cost was $515 per oz. gold versus a realized price of $466. For the 12 months ending Dec. 31, the figures were $436 (cost) and $485 (realized).

To check spiralling costs, a hiring freeze has been in effect for some time and the mine recently reduced its active work force by 51 people to 326 through attrition and by layoffs. According to R.C. Francisco, Dickenson’s senior vice-president and chief financial officer, there is no plan to implement further layoffs.

Dickenson’s total 1990 writedown amounted to $49.9 million arising from the Arthur White writedown as well as a $4.9-million writedown attributable to Wharf Resources (TSE) and Dickenson’s own exploration properties. Wharf, 36.2% owned by Dickenson, operates an open pit, heap leach mine in South Dakota.

The total writedown contributed to Dickenson’s loss for 1990 of $39.1 million. Taking into account recovery adjustments for deferred taxes and minority interest, the net writedown was $34.3 million.

Before the writedowns, the loss was $4.8 million on revenues of $60 million, compared with earnings of $6.1 million on revenues of $53.5 million in 1989.

Output at the Red Lake mine totalled 76,644 oz. in 1990, up by more than 1,000 oz. from the previous year.

Wharf reported a loss of US$5.8 million. The loss for 1990 included a writeoff of Wharf’s investment in United Coin Mines (TSE) of US$11.5 million. Before the writeoff, earnings were US$5.7 million on revenues of US$29.5 million, compared with earnings of US$6 million on revenues of US$29.4 million in 1989.