Francoeur’s a little mine with a big profit

er the past half-dozen years, Jean Guy Rivard has patiently built a little gold mining company. Its head office is not on Toronto’s Bay Street or Vancouver’s Howe Street.

stead, Rivard and his company, Richmont Mines (TSE ME), are headquartered in modest facilities in Rouyn-Noranda, Que., only a few miles from the gold mine that is his company’s most important asset.

Rivard has carefully nurtured the mine from being an ex-producer with “potential” in the flow-through days of the late 1980s to a profitable little enterprise today.

Last year, for example, the Francoeur mine produced 21,016 oz. of gold — a pittance compared with what American Barrick spins in a year, yet Richmont nevertheless turned a profit of $2 million or 17 cents per share. Gold production has steadily risen from 10,000 oz. in 1991 (and a net loss of roughly $600,000) to a target of 32,000 oz. this year. Rivard’s earnings target for the year is 24-25 cents per share. First-quarter earnings are on target at $675,528.

By 1994, Rivard plans to crank up production to 250,000 tons per year, which should yield 50,000 oz.

“My key aim is to show continuity in growth,” Rivard told The Northern Miner in a recent interview. So far, he has achieved just that.

He has also established a solid reserve picture — in the proven category, 458,262 tons grading 0.235 oz. gold per ton; in the probable, 625,184 tons grading 0.193; and in the possible, another 1.3 million tons at 0.207. On the financial side, Rivard takes a cautious approach: At the end of 1992, Richmont’s assets included $1.8 million in cash and short-term investments and another $1.4 million in gold bullion. There was no long-term debt. About 75% of 1993 production is hedged at US$335 per oz.

The company also secured a heavyweight investor in the giant, government-run Caisse de Depot et Placement du Quebec, which bought a 9.7% stake in the company from a former shareholder at about $1.10 per share. Richmont has about 11.9 million shares outstanding.

Despite its small size, Richmont is not afraid of innovation. The company recently introduced a suspended platform from which miners drill, load and blast the low-dipping (40) orebody. The platform, developed by the Centre de Recherche Industrielle du Quebec (CRIQ) and built by Posi-Plus Technologies, paved the way for room-and-pillar mining, an alternative to the less productive shrinkage and longhole stoping.

According to the October, 1992, Canadian Mining Journal, the new method boosts productivity to 38.5 tonnes per manshift as opposed to 22 or so tonnes conventionally.

Total costs per oz. average US$250. In addition to mining and milling costs, this includes royalties, corporate costs, depletion and amortization. On the exploration front, Richmont has identified a new zone from current workings. Unlike the producing ore zones, all of which dip to the north at 40, this one dips south at 70. Average width is 12 ft.

Beginning in June, the zone will be probed for continuity along strike and at depth. Richmont has budgeted $1 million for the program.

Until last year, Francoeur was owned 50/50 by Richmont and Lac Minerals (TSE). Richmont bought the Lac interest for $3.5 million in June. A contractor hauls ore to the Deak Resources (TSE) mill at Virginiatown, Ont., about 20 miles distant. Ore is batch-milled in 22,000-ton campaigns.