Batle Mt. plans a Canadian office

Battle Mountain Gold has a problem. With a steady cash flow, healthy profits and no debt, the Houston-based gold producer is trying to decide where best to spend its growing cash reserves.

It could be Canada. Four of the company’s senior executives were in Toronto recently as part of a continuing effort to keep investors up to date on the company’s progress. They tell The Northern Miner that the companyis planning to open a Canadian office but are undecided about the best location — Toronto or Vancouver.

A decision on where and when to open the office could come by the end of the month.

Although Battle Mountain has no Canadian operations and virtually no exploration exposure here, it does have a fairly well-established Canadian connection. When the former wholly-owned subsidiary of Pennzoil went public in mid-1985, it gained a listing on the Toronto Stock Exchange — its first listing other than on the U.S. over-the- counter trading system — in order to increase its visibility.

And John Sharpe, Battle Mountain’s vice-president of exploration, was born in Canada and helped set up an exploration office for Battle Mountain’s predecessor company in Canada in the 1960s.

“I like Canada,” says Mr Sharpe. “It’s one of the easiest places in the world to develop a mine.”

As well as a pool of mining expertise available in Canada, President Theodore Pate says working in Canada offers “more bang for the buck” based on prevailing currency exchange rates.

Mr Pate says one of the things Battle Mountain is learning is how to “interface with juniors” in the Canadian milieu. The company must also consider whether to increase its exposure here by acquisition or grassroots exploration, he says.

While the company realizes that precious metals exploration in Canada today is highly competitive, vice-president administration Joseph Mazur says he believes there’s “always room for a professional operation.”

Battle Mountain seems to fit that bill. Although fewer than two years old and with only one full operating year under its belt, Battle Mountain is already a well-respected gold miner. It seems to be a hybrid of a major gold producer — it turned out 259,000 oz of gold and 969,000 oz of silver from its Fortitude mine in Nevada during 1986 — and an aggressive explorer. It has one property in Australia, the Pajingo, slated to go into production in October at a capital cost of less than $10 million and expected to turn out about 60,000 oz of gold a year. As well, it has a second deposit at its Fortitude property, the Surprise mine, expected to start producing as a “satellite mine” in 1988 although it will add only about 15,000-18,000 oz of gold annually.

At the Fortitude mine, the cash cost of producing an ounce of gold in 1986 was $147 (with sales of silver, considered a byproduct, offsetting some of the operating costs). In the first quarter of 1987 the stripping ration has been brought down from 16-to-1 to about 5-to-1 and the realized price for each ounce of gold produced has risen from a 1986 average of $363 to $401.

In 1986 the company reported net earnings of $27 million or 63 cents per share after a 10 cents -per-share dividend.