Faced with weaker copper prices and lighter sales volumes,
Net earnings topped US$2.6 million (or 2 per share) on 3-month revenue of US$48.4 million, compared with US$8 million (8 per share) on US$57.3 million in the second quarter of last year. The difference would have been greater if not for a 10% reduction in mining expenses.
Cash flow, on the other hand, rose to US$16.5 million from US$15.7 million. The improvement is solely a reflection of net changes to non-cash working capital items.
Aur cranked out 27,512 tonnes copper, 1,498 tonnes zinc, 1,900 oz. gold and 50,000 oz. silver in the recent period. These are similar to volumes achieved in the year-earlier quarter, though a small reduction was evident in gold and silver.
Cash operating costs averaged US$1,058 per tonne copper sold, net of byproduct credits. This is US$66 less than a year earlier.
The flagship Quebrada Blanca mine in Chile contributed US$3.9 million to operating profits — three times less than in the 2001 second quarter. Operating costs were actually lower and production higher, so the shortfall is due solely to metal prices and sales volumes.
Attributable production totalled 15,816 tonnes copper cathode, and cash operating costs averaged US$1,036 per tonne sold. Aur had expected more metal, and was simply unable to sell all it did produce before the period ended.
A total of 8.3 million tonnes of rock were extracted from the pit, of which 2.5 million tonnes were ore, putting the stripping ratio at 2.3-to-1. The ore averaged 1.46% copper, or 1.36% on a soluble basis. The soluble grade is the sum of the acid soluble and cyanide soluble assays, reflecting the different ore types mined.
Quebrada Blanca is now expected to produce 74,910 tonnes copper cathode in all of 2002, or 5% less than forecast. Bad weather is partly to blame, but operating costs should remain under budget and average out at US$1,080 per tonne copper sold.
Aur owns 76.5% of the operation but is entitled to a greater portion of the operating cash flow for a period. The remaining stake is held by private companies.
The 30%-owned Louvicourt mine in Quebec contributed just over US$1 million, or three times more than a year earlier. Revenues rose and costs fell, partly reflecting settlement dates for smelting contracts.
Attributable production came in at 10,624 tonnes copper, 4,949 tonnes zinc, 50,000 oz. silver and 1,900 oz. gold. Compared with last year’s second quarter, output was lower in the case of copper and higher in the case of zinc, both being functions of head grades.
Average cash operating costs fell US$88, to US$1,169 per tonne copper.
Aur’s share of 2002 production is now expected to top 42,858 tonnes copper and 19,023 tonnes zinc. This is worse than expected, as is also the case for cash costs, which should now average US$1,102 per tonne copper sold.
Andacollo
The 70%-owned Andacollo mine, also in Chile, contributed US$343,000 to operating profits, eclipsing the year-earlier contribution. Much less was spent on tangential projects.
Andacollo produced 5,448 tonnes copper cathode in the recent period, from which Aur reaped 4,060 tonnes. Cash operating costs rang in at US$1,125 per tonne.
By year-end, Andacollo is expected to have churned out 21,610 tonnes copper cathode.
Aur spent US$5.5 million on capital projects during the quarter and expects to have spent nearly US$27 million before year-end. A portion of the money already spent covered the acquisition of the Duck Pond base metals deposit in Newfoundland.
Situated 30 km southeast of Buchans, Duck Pond hosts a reserve of 5.2 million tonnes grading 3.3% copper, 5.8% zinc and 0.9% lead, plus 59 grams silver and 0.8 gram gold per tonne. A feasibility study commissioned by vendors
Duck Pond is viewed as a replacement for Louvicourt, which has 4-5 years of life left. It would have a mine life of just over 10 years and produce, annually, 14,500 tonnes copper, 27,000 tonnes zinc, 400,000 oz. silver and 2,100 oz. gold. Capital costs are estimated at $79.6 million, and construction would take 18-20 months.
Decision time
“What we have to decide on is, When is the best time [to develop it], given our financial circumstances and our view of when we want Duck Pond to start production,” says Aur Resources Chairman James Gill, adding that the company will not be in a position to decide until sometime this fall.
On the exploration front, Aur had budgeted US$4.1 million for the remainder of the year, having spent US$1.9 million. A portion is allocated for the RLM property in the Snow Lake camp of northern Manitoba, where a drill program is under way.
Aur and minority partner Thundermin plan to sink 2,500 metres on the property, their initial objective being to test the down-plunge extension of the Linda 2 deposit. Past drilling put the deposit’s volume at 11.8 million tonnes and its average grade at 0.3% copper, 0.8% zinc, 10.3 grams silver and 0.9 gram gold per tonne.
Mineralization strikes for 1,300 metres and plunges along the hinge line of a regional fold, at 20-30* from horizontal. The deepest intersection, which is now thought to belong to a separate but parallel massive sulphide lens, began 700 metres below surface and ran 0.7% copper, 0.7% zinc, 8.9 grams silver and 0.8 gram gold over 19.9 metres.
The first hole is a 245-metre stepout from the last intersection. Should results prove favourable, a wedge will backtrack 55 metres.
On June 30, Aur had US$77 million in working capital and US$62 million in cash.
“Overall, 2002 is expected to be solid year again for the company,” says Gill.
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