Placer Gold largest contributor to Placer’s ’86 earnings

Reflecting the sale of a 21.4% interest in an Australian subsidiary, Placer Development reported net earnings of $70.3 million or $1.59 per share in 1986 compared to $35.3 million or 82 cents per share the year before. The sale of equity in Placer Pacific for $90.1 million was partially offset by a $45.8- million writedown of United States oil and gas assets.

The writedown was prompted by lower energy prices and a year- end re-evaluation of reserves by Prairie Producing Co. which Placer owns. Analysts expressed doubts about the purchase several years ago given the infighting among OPEC producers and its possible effect on oil prices.

Not surprisingly, gold was the largest contributor to Placer’s earnings, led by the Kidston mine in Queensland, Australia. Placer’s share of gold production from all operations was 331,000 oz compared to 309,000 oz in 1985, making it one of Canada’s largest gold producers, the majority of it offshore North America.

The company is also a major silver producer, the bulk of its production coming from the Equity Silver mine near Houston, B.C., and its 34% equity in the Real de Angeles mine in Mexico. Silver production for the year was ahead 15% to 8.2 million oz but the average price received was 67 cents lower at $5.47(US). Equally as important, gold prices were $51 higher at $368.

The Endako molybdenum mine began production last August and is operating at a break-even point compared to losses in previous years. In many cases, it’s cheaper keeping such operations running because there are standby charges (property taxes, hydro, etc.) charged to the mine and no revenues.

The company says its strong financial position was significantly enhanced during the year by an operating cash flow of $167.8 million or $3.81 per share, the receipt of $107 million from the public offering in Australia, and the $82.4 million from the exercise of the 2,978,192 share-purchase warrants which expired last September. By year-end long-term debt had been reduced to $117.4 million.

Placer shareholders will be asked to approve a 2-for-1 stock split at the company’s annual meeting. There are approximately 46.5 million shares issued at present. A dividend of 10 cents per share will be payable on March 23 to shareholders of record on March 6, subject to a 15% withholding tax for United States shareholders.

Negotiations for a mine development agreement on the company’s Misima gold property in Papua New Guinea are continuing. Meanwhile, feasibility work on the Porgera gold property is well advanced and reserves have been recalculated. They total some five million tons at 0.64 oz gold per ton within the previously defined high grade zone V11 and 86 million tons averaging 0.11 oz in the remainder of the deposit.

On the exploration front, Placer confirms that the main emphasis will continue to be gold. The company is evaluating prospects in the La Ronge area of Saskatchewan, in northern and western Quebec, and also in Western Australia.