Vancouver — A US$292-million writedown on the Getchell mine, near Winnemucca, Nev., pushed North America’s fourth-largest gold miner deep into the red during the third quarter.
The one-time charge caused
“We were disappointed in our findings at Getchell,” says Chief Executive Officer Jay Taylor. “While this is a large gold system, with 15 million oz. of resources identified, the mine’s economics, at today’s gold prices, do not meet our criteria for further investment.”
Placer picked up the project in 1999 in a $1.1-billion merger with Getchell Gold. Some two months after the deal was complete, Placer stopped production at problem-plagued Turquoise Ridge, one of two underground gold mines on the property. Placer went on to spend US$24 million trying to prove up the geology in the hope that a larger-scale operation would prove more economic. The latest work, expected to amount to another US$24 million, focused on the N zone, where a prefeasibility study is being completed.
“Three years ago, with the industry valuing the reserves based on a gold price of US$350 per oz., we assumed the longer-term outlook for gold would be stronger,” says Taylor. “After careful and methodical investigation, we have learned a great deal about the complex geology of the Getchell orebody and have concluded it will not support a high-level mining rate, which is necessary in order for it to be financially attractive.”
The geology and poor ground conditions dictate that a highly selective mining method, specifically drift-and-fill, would have to be employed. As a result, the effective mining rate would be in the range of 1,500-2,500 tonnes per day.
Stockpiled ore will be sold over the next three months to
Excluding the one-time charge, the major recorded earnings of US$63 million (or US19 per share) in the latest quarter, compared with US$49 million (US15 per share) in the corresponding period of 2000.
Placer Dome produced 658,000 oz. gold during the three-month period at a cash cost of US$160 an oz. and a total cost of US$231 per oz., compared with year-earlier output of 723,000 oz. at US$162 and US$237 per oz., respectively.
Sales revenue fell to US$288 million from US$343 million between the two periods. Earnings from mine operations in the recent quarter totalled US$74 million; cash flow from operations, US$95 million.
All six countries where the company has mines contributed lower revenue during the latest quarter.
“We are managing effectively through these difficult times,” says Taylor. “We have held the line on costs despite lower production from some mines that are moving into the latter stages of their productive lives.”
Under its gold forward sales program, the company realized an average price of US$334 per oz. in the quarter, compared with an average spot price of US$274 per oz. Placer Dome produced 48,600 tonnes. copper at a total cost of US$1,255 per tonne, compared with year-ago output of 47,300 tonnes at US$1,390 per tonne. The company realized an average price of US$1,565 per tonne in the quarter, compared with an average spot price of US$1,475 per tonne. For 2001, Placer expects to produce 2.7 million oz. gold and 184,000 tonnes copper.
During the first nine months of the year, Placer’s share of production from the 60%-owned Cortez mine in Nevada was 535,701 — a 25% increase over the year-earlier period. The company attributes the increased to higher heap-leach production from the South Pipeline deposit, which came on-stream during the second quarter. Cash costs over the nine months rang in at US$73 per oz. gold, with total costs amounting to US$160 per oz. gold
In October, the joint venture entered into an agreement with
Meanwhile, the Golden Sunlight mine in Montana has managed to secure a stable power contract through to the end of its life, which is expected in mid-2002, when milling of stockpiled material is to be completed. The mine cranked out 161,677 oz. gold during the first nine months of the year, a 2% increase over last year. Cash and total costs were pegged at US$88 and US$226 per oz. gold, respectively.
Farther afield, at the Granny Smith gold mine in Australia, development of the Wallaby deposit is ahead of schedule, and processing of that material is to begin in the fourth quarter. The 60%-owned operation produced 161,677 oz. during the first nine months of the year, or 28% less than in the comparable period of 2000. Cash and total costs for the period amounted to US$192 and US$203 per oz., respectively.
In Canada, the Campbell mine is expected to average 180,000 oz. gold per year for the next three years. Exploration drilling continues to provide positive results, and Placer intends to focus on converting a new discovery into reserves. Production over the 9-month period weighs in at 135,651 oz., a 20% decrease over the year-ago period.
In South Africa, the main shaft at the company’s half-owned South Deep mine is expected to be commissioned during the second half of 2003. Construction of the mill should be finished early next year. Once the new facilities are up and running, Placer expects the mine to produce 700,000 oz. gold per year. In the first nine months of 2001, the mine cranked out 127,000 oz., or 6% more than a year ago. Cash and total costs were US$198 and US$234 per oz., respectively.
About 60% of Placer’s exploration budget is focused on existing operations, with the remainder applied to Western Australia, Alaska, China, Indonesia and South Africa.
Earlier this year, the government of the Dominican Republic awarded Placer the right to negotiate an agreement to develop the Pueblo Viejo gold deposit, north of Santo Domingo. A final deal is expected before year-end.
The deposit contains an existing resource of 34.6 million oz. gold and 204 million oz. silver contained in 544 million tonnes of material grading 1.98 grams gold and 11.7 grams silver. Placer is considering treating the metallurgically complex sulphide ores using a combination of traditional technology and bioleaching.
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