NEVADA AND THE WESTERN STATES — Getchell posts big first-quarter loss

Although Nevada miner Getchell Gold (GGO-T) posted a substantial first-quarter loss, reserve expansion at its namesake mine, ongoing construction at the Turquoise Ridge project and hedging leave it well-positioned for the future.

The company lost $4.9 million (or 18 cents per share) in the quarter ended March 31 on revenue of US$10 million, compared with a loss of US$8 million (31 cents per share) on revenue of US$14.9 million in the corresponding period of 1997. Getchell attributed the loss to lower gold prices and decreased production at the Getchell mine in Nevada following the decision to halt processing of stockpiled low-grade ore.

However, with the recent closing of a public equity offering, the company has raised the funds necessary to complete construction of the US$92-million Turquoise Ridge underground project, 1,800 ft. northeast of the Getchell mine’s main pit. Getchell raised US$70 million through an offering of 4 million shares priced at $18.25 each, and will put US$20 million of the proceeds toward completing work at Turquoise Ridge. The rest will be used to increase mill capacity and for exploration.

Commercial production at Turquoise Ridge is expected to begin later this year at an initial rate of 1,000 tons per day and increase, at a later date, to 2,000 tons.

First-quarter construction work at Turquoise Ridge included the driving of a development drift and sinking of the production shaft to 1,550 ft. To date, the company has completed 7,000 ft. of development drifting and ramping and has extracted about 8,000 tons of development ore. The processing of development ore in the first quarter yielded 1,551 oz. gold. Also, 23,000 ft. of underground infill drilling confirmed reserves at the mine to be 14.9 million tons grading 0.3 oz. gold per ton.

In addition, the company received encouraging results from four of seven holes which tested an area north of the main deposit. Results include: * 32.9 ft. of core length grading 0.32 oz. gold per ton, 5 ft. grading 0.46 oz. and 33.5 ft. grading 0.513 oz. in hole 100;

* 166.1 ft. grading 0.43 oz. gold in hole 101;

* 14.3 ft. of 0.39 oz. gold and 50 ft. of 0.43 oz. in hole 102; and * 8.7 ft. of 0.37 oz. gold, 45.2 ft. of 0.25 oz. and 22.9 ft. of 0.29 oz. in hole 5.

The holes were sunk to depths ranging from 2,735 ft. to 2,992.6 ft.

At the Getchell mine, the company processed 87,607 tons of ore, primarily from the high-grade Northwest zone. Although production was down from the 105,578 tons mined in the first quarter of 1997, the ore grade was up. Cash costs during the recent quarter were US$400 per oz., down from US$462 in 1997.

Underground drilling at the Getchell mine in the first three months of the year continued to expand the Northwest zone. Results included: 17 ft. of core length grading 0.33 oz. gold in hole 19200-07; 31 ft. grading 0.34 oz.

in hole 19200-09; 25 ft. of 0.9 oz. in hole 19300-07; 61 ft. of 0.49 oz. in hole 19300-08; 40 ft. of 0.3 oz. in hole 29300-11; 31.5 ft. of 0.58 oz. in hole 19300-16; 24 ft. of 0.91 oz. in hole 19350-03; 85.5 ft. of 0.74 oz. in hole 1350-06; 82 ft. of 1 oz. in hole 19400-15; 47 ft. of 1.22 oz. in hole 19400-17; 59 ft. of 1.05 oz. in hole 19400-19; and 11 ft. of 1.08 oz. in hole 19450-05.

Getchell’s hedging strategy enabled it to sell 31,021 oz. gold in the first quarter at an average price of US$348 per oz., well above the average spot price of US$297 per oz. In comparison, Getchell sold 37,217 oz. gold at US$394 per oz. in the first quarter of 1997. Sales revenue in the first three months amounted to $10.8 million, compared with US$14.9 million in the corresponding period of 1997. The company blamed the loss on a lower realized gold price and fewer ounces sold.

Also, the company sold ahead, to 2000, 250,000 oz. gold at an average price of US$323 per oz.