Richmont pushes to cut costs

Short-term pain for long-term gain appears to be the rationale behind Richmont Mines‘ (RIC-T) decision to suspend production at the Francoeur gold mine in northwestern Quebec. When production resumes next February, the Montreal-based company hopes newly developed zones at the mine will help turn its red ink into black.

Richmont suspended production at Francoeur Sept. 25 in order to develop new zones that can be mined at a profit. Development work is now focused on the No. 7 zone. Before the closure, third-quarter production was reported at 5,400 oz. at a cash cost of US$270, compared with 7,700 oz. at US$216 a year earlier.

Including its other operations in Quebec and Newfoundland, Richmont produced 22,300 oz. gold at a cash cost of US$197 per oz. in the third quarter, compared with 25,300 oz. at US$175 per oz. a year ago.

The company reported a loss of $313,876 (or 2 cents per share) on revenue of $9 million, compared with net earnings of $1.4 million on revenue of $12 million in the third quarter of 1998.

Richmont posted a net loss of $827,882 on revenue of $27.6 million for the first nine months of this year, compared with net earnings of $3.8 million on revenue of $36.8 million a year earlier. Gold production between the two periods fell to 67,500 oz. at a cash cost of US$199 per oz. from 74,000 oz. at US$181 per oz.

The Nugget Pond mine in Newfoundland produced 10,000 oz. gold at a cash cost of US$150 per oz., compared with 11,200 oz. at US$142 per oz. a year ago.

The 50%-owned Beaufor mine in Quebec’s Val d’Or camp contributed 6,900 oz. gold at a cash cost of US$208 per oz.

Richmont has no long-term debt and working capital of $12.6 million, in addition to a credit facility of $7 million.