The harsh realities of operating gold mines in a stagnant low-price environment have forced
The grim outlook for gold, attributed to ongoing central bank sales and lower demand, prompted the company to reduce the long-term price assumption on which its reserves are calculated to US$300 from US$325 per oz. After reviewing all assets under the new price assumption, proven and probable reserves at the end of 2000 fell to 47 million oz., from 65.9 million oz. at the end of 1999. However, less than 20% of the reserve reduction involved operating assets, with only the Bald Mountain and Porgera operations feeling the pain of the exercise.
The vast majority of the reduction came from a reclassification of reserves to resources at Las Cristinas, a 70%-held gold project in Venezuela, and the Mulatos gold project, in Mexico.
Reserves at the Getchell mine in Nevada were also reclassified as resources, in part because not enough information was available to complete a reserve calculation. Placer Dome has taken considerable heat for shelling out more than US$1 billion to acquire the past-producing mine, which had a track record of underperformance, even at higher gold prices.
Despite a multi-million-dollar exploration effort, Placer Dome concedes that the delineation of resources and reserves in the N zone at Getchell “has not progressed as quickly as expected due to challenging ground conditions and [the] complexity of the orebody.”
At present, Getchell has measured and indicated resources of 9.5 million oz., up from 8.3 million oz. a year earlier, at a cutoff grade of 0.2 oz. gold per ton. At an 0.3-oz. cutoff grade, the measured and indicated resources total 6.7 million oz.
Placer Dome has no intention of throwing in the towel at Getchell despite the challenges it has faced there to date. Ongoing work will focus only on the N zone, and the company remains confident that, as development progresses, a significant amount of resources will be converted into reserves. In the meantime, mining methods are being refined in response to the difficult ground conditions. Based on work to date, Placer Dome says Getchell remains on-track to achieve the targets set in its 2001 work program. A prefeasibility study will be in hand by year-end, to be followed by a final study in 2002.
On the copper front, the company reported a 48% increase in reserves over 1999. A major contributor was the Zaldivar mine, in Chile, which now boasts reserves of 10.7 billion lbs., up from 6.3 billion lbs. a year earlier. The profitable mine is expected to operate for more than 20 years.
As for writedowns, the carrying value of Las Cristinas was reduced by US$116 million last year. Other writedowns include US$111 million for the Porgera mine in Papua New Guinea, US$66 million for Getchell, and US$32 million for the Osborne mine in Australia.
Placer Dome produced more than 3 million oz. gold from its global operations last year.
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