Black Hawk posts small third-quarter loss

With production from the Limon gold mine in Nicaragua down from last year, Black Hawk Mining (BHK-T) lost US$432,000 on revenues of US$4.3 million in the three months ended Sept. 30. Added to that, the mine is now the scene of a labor dispute.

For the first nine months of the year, Black Hawk has a loss of US$923,000 (US1 per share) on revenues of US$12.7 million. In 2001, the company made a third-quarter profit of US$440,000 on revenues of US$5 million, and was showing a US$1.7-million profit at the nine-month mark, with revenues 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 to last year’s 16,652 oz. The mine saw its head grade fall to 6 grams gold per tonne from 6.7 grams, though it increased mill throughput to 96,583 tonnes from 90,230 the year before. Production after the first three quarters was 46,707 oz., down from 54,135 oz. at the same time 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. 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, and since the beginning of 2002 the mine’s average cash operating cost has been US$204. The comparable figures last year were US$197 and US$182.

About two-thirds of the Limon work force walked off the job on Oct. 24, although the company continues to operate the mine with a reduced staff. The Nicaraguan Labor Ministry ruled the walkout was illegal four days later but the dispute has not been settled.