Vancouver —
Despite record cash flow and operating earnings, the company incurred a loss of US$92 million (or US28 per share) for the year. Excluding the writedowns, the balance sheet shows a respectable profit of US$141 million (US43 per share), compared with a profit of US$35 million (US11 per share) in 1999.
Sales amounted to a record US$1.41 billion, up 22% from US$1.16 billion in 1999, and, although gold sales dropped 3% in 2000, to US$1.06 billion, copper sales soared to US$343 million, up from US$61 million in 1999. The increased copper sales are attributed to a 15% rise in prices during the year and Placer’s acquisition of the Zaldivar mine in Chile.
The major cranked out 3 million oz. gold in 2000 at cash costs of US$159 per oz. and total costs of US$232 per oz., compared with year-ago cash costs of US$159 per oz. and total costs of US$231 per oz. Placer also produced 430 million lbs. copper at cash costs of US45 per lb. and total costs of US64 per lb., compared with cash costs of US44 per lb. and total costs of US67 per lb. in 1999.
“Ten of our mines increased production for our account, and nine reduced total unit costs,” says Chief Executive Officer Jay Taylor. “We have maintained an operating margin of US$114 per oz. over total production costs, giving us tremendous financial strength and flexibility.”
The company realized an average gold price of US$346 per oz. in 2000, a US$67 premium over the average spot price of US$279 per oz. In February 2000, Placer announced it would cease adding new hedge positions. By year-end, the company had reached its target and reduced its committed ounce position to 7.7 million oz. Placer’s current position is 7.5 million oz. Chief Financial Officer Rex McLennan says Placer will maintain a balanced program of forward-selling to provide downside protection to its gold earnings and cash flow.
“This adjustment to the forward sales strategy is necessary in light of our revised expectations for gold prices,” he explains. “While we have not increased our committed ounce position, our forward sales program remains an integral component of our strategy.”
In response to lower gold prices, the company has lowered its long-term price target to US$300 from US$325 per oz. It also reduced overall proven and probable reserves to 47 million oz. gold — a considerable drop from the 65.9 million oz. reported at the end of 1999. In the indicated category, the total jumped to 62 million oz., up from 23.9 million oz. at the end of 1999.
Las Cristinas affected
Writedowns in 2000 reduced, by US$116 million, the carrying value of the Las Cristinas project in Venezuela. Other writedowns include US$111 million for the Porgera mine in Papua New Guinea, US$66 million for the Getchell mine in Nevada, and US$32 million for the Osborne mine in Australia.
The recent fourth quarter contributed 760,000 oz. gold at a cash cost of US$161 per oz. and a total cost of US$240 per oz, compared with 802,000 oz. at US$150 and US$216 per oz., respectively, a year earlier.
Net earnings during the last three months of 2000 were affected by non-cash charges of US$212 million. These charges were recorded against the Porgera, Getchell and Osborne mines, as well as against the Bald Mountain mine in Nevada, and resulted in a quarterly loss of US$89 millon (27 per share), compared with earnings of US$7 million (US2 per share) in the year-ago period.
In South Africa, the 50%-owned South Deep mine contributed 163,000 oz. gold, a 30% increase over last year, at a cash cost of US$193 per oz. and a total cost of US$202 per oz. Placer attributes the increase to productivity gains it achieved in 2000: the mine introduced the first of seven trackless fleets that will help complete the conversion to mechanized mining by 2003.
In Nevada, the 60%-owned Cortez joint venture cranked out 1 million oz. gold for Placer at cash and total costs of US$60 and US$136 per oz., respectively. These results reflect an agreement Placer reached with
Getchell
Meanwhile, at the Getchell mine, workers continued to advance on the N zone over the past year. Placer expects to complete a prefeasibility study at the end of 2001 and a feasibility study sometime in 2002. Getchell has measured and indicated resources of 9.5 million oz., up from 8.3 million oz. at the end end of 1999, at a cutoff grade of 0.2 oz. gold per ton. At a cutoff grade of 0.3 oz. per ton, the measured and indicated resource totals 6.7 million oz.
Closer to home, near Pickle Lake, Ont., Placer saw considerable improvements at its 68%-owned Musselwhite mine. The operation produced 167,000 oz. gold for the company, up 17% over 1999 levels, at cash and total costs of US$158 and US$231, respectively.
In Papua New Guinea, the Porgera mine turned in record production of 910,000 oz. Half went to Placer’s account. Cash and total costs came in at US$132 and US$236 per oz., respectively.
The 60%-owned Granny Smith mine, in Western Australia, cranked out 247,000 oz. gold (a 21% decrease compared with last year) at cash and total costs of US$207 and US$221 per oz., respectively. Development of the new Wallaby deposit has been approved, and Placer expects it will add at least eight years of production. Wallaby is expected to come on-stream in 2002.
The Zaldivar mine produced 326 million lbs. copper at cash and total costs of US41 and US59 per lb., respectively, during the year. Reserves were increased by 69%, extending the mine life to at least 20 years.
In 2001, Taylor expects Placer to produce 2.9 million oz. gold and 430 million lbs. copper at costs similar to current levels. Capital expenditures are expected to total US$275 million over the year, and the company will spend about US$50 million on exploration, half of which will go toward existing mines.
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