Hemlo boosts output by 16$% further improvements in store

Despite weaker metal prices, gold production from Hemlo Gold’s (TSE) Golden Giant mine continues to place the company in an enviable financial position. Due to a sharp increase in production, Hemlo Gold reported first- quarter earnings of $9.1 million or 10 cents a share, compared with $6.4 million or 7 cents a share in the same period year.

First-quarter revenues also increased to $48.8 million from $45.2 million in the 1989 period.

But even though quarterly production at the Hemlo, Ont., mine was 99,357 oz., or 13,400 oz. higher than in the first three months of 1989, management at Hemlo apparently expected more from one of the world’s lowest-cost gold producers.

“The delayed stoping cycle in a high-grade area of the mine cut mine output,” said Vice-President Wilson Barbour, who expects production to be back on track by mid-year.

Nevertheless, cash flow from Golden Giant will enable Hemlo Gold to spend $21 million on exploration this year, said President John Harvey at the company’s annual meeting in Toronto.

The mine, Hemlo Gold’s core asset, produced a record 378,400 oz. gold at a cost of just US$128 per oz. in 1989, up from 336,700 oz. in 1988. Head grades at the Golden Giant also increased slightly to 0.35 oz. from 0.34 oz. the previous year.

However, due to lower gold prices, earnings and revenues both fell to $378 million from $437 million and 37 cents per share, compared with 50 cents per share respectively.

“Hemlo can generate cash flows even at US$375 per oz. that will provide funds very satisfactorily for exploration ventures and any production expansion plans,” said Barbour.

To prepare for future growth, the 50.6% owned Noranda (TSE) subsidiary will spend $15 million on some of its 82 grassroots projects in North America. The remaining $6 million will be used to complete a feasibility study at the 60% Hemlo Gold, 40% Central Crude (TSE) joint venture at Mishibishu Lake, Ont.

A small amount has also been set aside for the Tundra gold project near Yellowknife, N.W.T., which is considered uneconomic at current gold prices. A joint venture involving Noranda, Hemlo and Total Energold (TSE), Tundra is estimated to contain 32.5 million tons of grade 0.20 oz. gold per ton at a cutoff of 0.12 oz.

With Tundra sidelined for the moment, Hemlo Gold has only one exploration project — Central Crude — in the feasibility stage. But Harvey declined to say which of the company’s other four advance projects would be the next to reach the feasibility stage.

Via hedging plans, Hemlo Gold has locked in an average price of US$440 for 30% of the 420,000 oz. it expects to produce this year. “We believe there will be a recovery (in the price of gold which traded recently at US$368.50), although it may be slow and painful said Barbour.006 0508,0206,0304,0008 Hemlo Gold Mines (TSE) $000s except per-share items Quarter ended Mar. 31 1990 1989 Revenue $48,891 $45,181 Net earnings 9,090 6,438

per share 0.10 0.07004