Six gold mines close, six open while gold slumps

Plagued by declining profits, four of the country’s highest-cost gold mining operations have shut down their stopes until higher bullion prices return.

But gold miners could be in for better days ahead since a recent rally in the price of the yellow metal has led some analysts to predict a new bull market in 1990.

Gold started off the year in the $410(US)-per-oz range but has been in a slump during most of the year at around $360 per oz. One has to look back to 1986 to find similar price levels. Recently, however, a short-lived rally pushed the gold price to a high of $388.25 in London.

The most recent victim of low gold prices and high operating costs is LynnGold Resources (TSE) which is closing its MacLellan gold mine near Lynn Lake, Man., this month. During the first six months of the year, the mine was producing gold at a cost of $390 per oz and production was running at 80% of forecast as a result of production difficulties and lower than expected grade of ore. The company attempted to reach an agreement with MinGold Resources and Manitoba Mineral Resources, a provincial Crown corporation, to acquire the nearby Farley Lake deposit, which would have provided additional feed to LynnGold’s mill.

In October, Granges Inc. (TSE) suspended operations at its Tartan Lake gold mine, also in Manitoba. Operating costs were reported at $393 per oz for the current year.

Among some of the other companies that have suspended gold mining operations recently are Bachelor Lake Gold Mines (TSE), Golden Shield Resources (TSE), Citadel Gold Mines (TSE) and Granges Inc. (TSE).

The high-cost Bachelor Lake gold mine at Desmaraisville, Que., will be placed on a care-and-maintenance basis while awaiting better bullion pr ices. With production costs at around $390 per oz, the mine reported a first-half loss of $1.9 million or 24 cents per share this year. The deposit still hosts reserves of 927,900 tons grading 0.16 oz gold per ton. On an adjacent property, Aur Resources (TSE) has outlined about 144,000 tons grading 0.18 oz on its Hewfran project.

After a brief attempt to produce gold from the Surluga mine near at Wawa, Ont., Citadel Gold Mines (TSE) last month suspended operations there. A test mining program completed by the company concluded that higher gold prices would be needed to make the project a money-maker.

Meanwhile, the year-long price slump hasn’t prevented a new crop of gold mines from sprouting up across the country. Among the newest batch are the Dona Lake mine of Placer Dome (TSE) and the Magnacon mine, owned by Flanagan McAdam Resources (TSE), Muscocho Explorations (TSE) and Windarra Minerals (TSE) in northern Ontario. Opened in September was Cambior Inc.’s (TSE) Beliveau gold mine in Quebec, while NovaGold Resources (TSE) opened its Murray Brook mine in New Brunswick in October. In August, Cheni Gold (TSE) poured the first gold from its Lawyers mine, officially opened in north-central British Columbia.

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