Fourth quarter pushes Homestake into black

A strong fourth quarter propelled Homestake Mining (HM-N) to profitability in 1999.

The company earned US$4 million (or 2 per share) in the quarter, contributing to income of US$4.9 million (2 per share) for the year.

By comparison, Homestake incurred a loss of US$196,000 (nil per share) in the fourth quarter of 1998 and a loss of US$233.8 million ($1.01 per share) for all of that year, after a sizable asset writedown.

The company benefitted from low operating costs and healthy production levels in 1999, which helped to offset low gold prices.

Homestake produced 2.4 million oz. gold and gold-equivalent last year, while average cash costs fell to US$192 per oz. Revenue totalled US$748.1 million.

The company’s brightest star was the Ruby Hill gold mine in central Nevada, which contributed 123,800 oz. at a cash cost of US$104 per oz.

The Eskay Creek gold-silver mine in British Columbia increased production to 558,400 oz. gold-equivalent (309,000 oz. gold and 13.1 million oz. silver) in 1999, compared with 504,800 oz. gold-equivalent (282,100 oz. gold and 11.7 million oz. silver) in the previous year.

Cash operating costs held firm at US$131 per oz. in 1999.

In Australia, Homestake’s 50%-owned Kalgoorlie operation completed the transition to owner mining in the fourth quarter. Production for the year reached 360,100 oz., down slightly from 1998, at US$235 per oz.

At the end of 1999, Homestake was maintaining a hedging portfolio covering 5% of proven and probable reserves. The contracts have a market value of US$30 million.

In October 1999, the company began an exploration program at the 60%-held Veladero property in Argentina. By the end of the year, Homestake and partner Barrick Gold (ABX-N) had completed 34 holes totalling 36,000 ft.

The program, expected to run through to April 2000, will ultimately span 140,000 ft.

So far, Homestake has confirmed previously identified resources at the Amable and Filo Federico deposits. The total combined resource now stands at 5.6 million oz. gold and 100 million oz. silver in 147.5 million tons grading 0.038 oz. gold and 0.68 oz. silver per ton. Homestake’s share amounts to 3.4 million oz. gold and 60.1 million oz. silver.

Homestake has also drilled 17 holes (totalling 12,500 ft.) in the adjacent Rio Frio property.

Meanwhile, to reduce overhead costs, the company is planning to relocate its head office to Walnut Creek, Calif., from San Francisco.