Black Hawk posts small quarterly loss

With production from the Limon gold mine in Nicaragua down from last year, Black Hawk Mining (BHK-T) lost US$432,000 on revenue of US$4.3 million in the three months ended Sept. 30.

For the first nine months of the year, Black Hawk has a loss of US$923,000 (or US1 per share) on revenue of US$12.7 million. In 2001, the company made a third-quarter profit of US$440,000 on revenue of US$5 million and was showing a US$1.7-million profit at the nine-month mark, with revenue of US$15.4 million.

Lower production from Limon was one factor in Black Hawk’s financial performance, as production from the mine declined to 16,030 oz. in the quarter, compared with 16,652 oz. in the corresponding period of 2001. Between the two periods, the mine saw its head grade fall to 6 grams gold per tonne from 6.7 grams, though mill throughput increased to 96,583 tonnes from 90,230 tonnes. Production after the first three quarters of 2002 was 46,707 oz., down from 54,135 oz. in the first nine months of last year.

Another factor was an average realized price of only US$271 per oz., US$33 below spot, reflecting 12,480 oz. of gold subject to options that were called at US$270 per oz. Black Hawk, which sold the call options in 1998 as a condition of a loan facility, now has 16,640 oz. of call options outstanding. Forward-sale contracts at US$284 cover a further 13,000 oz.

Operating costs at Limon rose slightly, partly as a result of lower production. In the third quarter, Limon produced gold at US$205 per oz., and since the beginning of 2002 the mine’s average cash operating cost has been US$204 per oz. The comparable figures last year were US$197 and US$182 per oz. Lower head grades contributed to the increased costs, because cash operating costs per tonne declined to US$36 in the first nine months of the year, from US$37 in the corresponding period of 2001.

About two-thirds of the Limon workforce walked off the job in mid-October, though the company continues to operate the mine with a reduced staff. Four days later, the Nicaraguan Labour Ministry ruled that the walkout was illegal. Following talks mediated by the government, picket lines came down on Nov. 19.

Exploration continues in areas around Limon, though Newmont Mining (NEM-N) has dropped its option to earn a 55% interest in Black Hawk’s Nicaraguan properties (T.N.M., Oct. 21/02). In the Santa Rosa area, about 3 km south of the Limon mill, gold-bearing quartz breccia boulders have been traced to to steep-dipping veins. Surface exposures of those veins indicate widths of 5-8 metres and grades of up to 0.5 gram gold and 8.5 grams silver per tonne.

Drilling has identified hydrothermal alteration patterns in rocks in the San Gil and Talavera Sur areas, also near Limon. Further work is planned.