Royal Oak production falls short

Lower-than-expected gold production triggered a rise in cash production costs for Royal Oak Mines (TSE) in the first quarter.

Costs increased to US$360 per oz., compared with US$317 in the same period last year.

The company produced 86,960 oz. of the yellow metal during the quarter — about 11% below budget, but up from the 66,273 oz.

produced in the same period in 1994.

Net income for the quarter totalled $3.5 million on revenue of $47.4 million, while cash flow amounted to $5.8 million, or 5 cents per share.

The principal cause of the production shortfall was

lower-than-budgeted mill head grades at both the Giant mine in Yellowknife, N.W.T, and the Pamour mine in Ontario. A

contributing factor was lower-than-budgeted mill throughput at the Hope Brook mine in Newfoundland.

Average head grades of 0.24 oz. per ton at the Giant mine were 13% below expectations, owing to the combination of ore dilution and out-of-sequence mining. However, ore grade control procedures have been instituted in an attempt to minimize dilution, and production in April reached planned levels.

Head grades at the Pamour mine averaged 0.059 oz. gold, about 17% lower than planned. The company attributed the lower grade to a higher tonnage of low-grade ore mined from the open pit while development work was accelerated underground to gain access to higher-grade ore in the lower Hoyle.

Head grades at Hope Brook were in line with expectations, but an unscheduled 10-day shutdown limited output to 18,452 oz. — about 16% below budget.

On a more positive note, operations at the Colomac mine in the Northwest Territories are on track. First-quarter production of 29,375 oz. was 3% over-budget while average head grades at 0.053 oz. gold were 8% above budget.

Daily throughput at Colomac is running at 9,300 tons, and the company expects to meet this year’s production forecast of

135,000 oz. Cash costs are expected to average US$300 per oz. in 1995, dropping to US$275 per oz. next year.

Despite budgetary shortfalls in the first quarter, Royal Oak expects to meet its production forecast of 425,000 oz. this year at a cash cost of US$300-310 per oz.