Gibraltar revises production forecast

The recent annual meeting of Gibraltar Mines (TSE) revealed a pleasant surprise for shareholders anticipating a reduction in throughput at the company’s copper mining operation near Williams Lake, B.C. Gibraltar’s 1989 annual report had forecast a reduction in mill throughput on the expectation that harder ore would be mined in 1990 and 1991 from the Pollyanna East zone. The drop in milling rates, combined with the lower grades found in the zone, would have resulted in a drop in concentrate copper production to 52 million lb. from the 61.6 million lb. produced in 1989.

But Gibraltar subsequently discovered that the ore is not as hard as predicted, and by increasing the mining rate to 100,000 tons from 80,000 tons per day, the forecast production for copper in concentrate was revised upward to 63 million lb.

Cathode copper production is forecast at eight million pounds, slightly less than the 8.8 million lb. produced in 1989. Cathode copper is produced by leaching waste dumps followed by electrowinning of the pregnant solutions.

Copper leach reserves are estimated at 110 million tons grading 0.116% copper, representing about 10 years of production. Mining reserves total 184 million tons grading 0.313% copper and 0.009% molybdenum, good for well over 10 years of production.

The company makes no specific price forecasts for copper, but attempts to address some trends in the copper industry. Noting that there were a number of supply interruptions 1989 which kept copper inventories low, Gibraltar does not expect a repeat in 1990, and therefore sees higher world production.

Gibraltar noted that an increase in world supply coupled with an industrial slowdown would result in lower copper prices. Recognizing the potential for prices to come down, Gibraltar has sold forward about half of its 1990 production at US$1.14 per lb.

The company estimates that its cash production costs are US$0.40 per lb. and US$0.54 per lb. for cathode and concentrate copper production respectively. Total production costs, including depreciation, are US$0.54 per lb. and US$0.95 per lb. for cathode and concentrate production respectively.

Gibraltar is in very strong financial shape with more than $30 million in working capital and no long- term debt. Of the 12 million shares outstanding, Placer Dome (TSE) owns 8.2 million shares or about 68% of the company.