William looks to boost output — Hedging program enables junior company to almost double revenue

After a year of involvement in acquisitions and takeovers, William Resources (WIM-T) is turning its attention to improving gold production.

“We are now focusing on operations,” President Stan Bharti told shareholders at the recent annual meeting. “The year of acquiring, wheeling and dealing has ended, and our new goal is to prove to our shareholders that we can perform.”

Last year, 50,682 oz. were produced from the Rustler’s Roost and Jacobina mines in Brazil and Australia, respectively.

The former is an 80%-owned open-pit operation which William acquired in March 1996 as a result of taking over Valdora Minerals. The mine produced 33,561 oz. from March to year-end. The Valdora takeover also gave the company full ownership in the advance-staged Ballarat East mine, from which limited production is expected this year.

Jacobina, which William acquired in early August 1996 from Anglo American, consists of two separate underground mines. These share a common processing plant, which yielded 42,391 oz. gold in 1996 (less than half of which was produced from the time of the takeover to year-end).

For the current year, total production is expected to reach 227,500 oz., which breaks down as follows:

* The Bjorkdal open-pit operation in Sweden, which is expected to produce 102,000 oz. by year-end at US$216 per oz., accounts for 45% of total production. The mine was acquired in late 1996 through the takeover of formerly Swedish-listed Terra Mining and represents William’s flagship operation.

* At Jacobina, a new mining fleet and expanded plant capacity are expected to increase gold production to 65,000 oz. at cash costs of US$286 per oz..

* The Pahtavaara open-pit operation in Finland, also acquired in the Terra acquisition, is expected to crank out 36,000 oz. at cash costs in the range of US$274 per oz.

* The Rustler’s Roost and Ballarat East mines are projected to yield a total of 24,500 oz. at operating costs of US$301 and US$325 per oz., respectively.

At Rustler’s Roost, the company is currently mining depleting oxide reserves.

Future production will come from underlying sulphide material, which will be treated in a $25-Million resin-in-leach sulphide plant, now under development. About $5 million of the project’s capital costs will be spent this year.

.SHedging

Meanwhile, to secure sales against fluctuating gold prices, William has initiated a hedging program.

About 95% of this year’s production has been sold forward at a price of US$374 per oz., whereas 99% of next year’s anticipated production of 250,000 oz. has been sold forward at US$372 per oz. The program also allows for participation at higher gold prices, should the value of gold exceed the set minimum value.

For the three months ended March 31, William produced 47,391 oz. gold at an average cash cost of US$295 per oz. The company intends to lower its cash cost to US$266 per oz. this year.

Revenue for the period totalled US$21.1 million, compared with US$4.5 million for the same period in 1996. However, the increased cost base allocated to the mining acquisitions contributed to a loss of US$6.8 million (or 5 cents per share), compared with earnings of US$652,000 (2 cents per share) in the previous first quarter.

Working capital at the end of the quarter amounted to US$8.3 million, compared with US$18 million at the end of 1996. The decrease is attributed to recent capital expenditures.

In other news, William intends to sell 93% of its interest in the currently suspended Mexican Velardena gold mine to ECU Gold Mining (ECU-M).

Shareholders and regulators have yet to approve the deal, which would require ECU to issue 7.5 million shares to William, priced at $1 per share. William would retain a 30% net profits interest in any future production from the mine, up to a maximum of $12 million, after which it would receive a 2% net smelter return royalty.

The company is also subscribing for a further 1.4 million shares of ECU, at 70 cents per share. If acquired, William would own 14.9 million shares of ECU, representing a 38% interest.