Gold price fortifies Placer’s quarter

Vancouver — Higher gold prices and lower cash costs propelled Placer Dome (PDG-T) to a healthy profit in the first quarter of 2002, despite an 8% drop in production.

The major earned US$43 million (or US13 per share), compared with a profit of US$16 million (US5 per share) in the first three months of 2001.

Cash flow from operations fell to US$99 million from US$121 million between the two periods, whereas operating earnings rose slightly to US$96 million from US$93 million.

“Our focus on the fundamentals is paying off,” says Chief Executive Officer Jay Taylor. “We hit all of our targets this past quarter.”

Despite a fall in sales revenue to US$303 million, from US$341 million in the year-earlier quarter, Placer benefited from higher gold prices and lower gold production costs. Gold production rose between the two first quarters slipped to 660,000 oz. gold at a cash cost of US$173 per oz. from 694,000 oz. at US$185.

Gold operating earnings jumped 14% to US$83 million, and gold sales revenue fell to US$230 million, from $260 million a year earlier. The production shortfall was due to mechanical problems at the Dome mine in Ontario, combined with closure of the Kidston mine in Australia and declines at Golden Sunset and Misima, which are approaching the end of their mine lives.

On the plus side, Placer’s forward-selling realized a US$65-per-oz. premium over the gold spot price of US$290 per oz., adding US$40 million to mine operating earnings.

In Canada, the Campbell mine in northern Ontario experienced a 33% rise in production to 51,103 oz., compared with 38,422 oz. in the year-earlier quarter. Cash and total production costs came in at US$161 and US$233 per oz., respectively, compared with the US$281 and US$363. The improvement reflects a 76% increase in grades to 18.7 grams gold per tonne.

In the U.S., production from Placer’s 60%-owned Cortez mine in Nevada declined 6% as a result of lower grades. Placer’s share came to 166,805 oz., down from the 177,106 oz. recorded in the first three months of 2001. This downward trend is expected to continue for the remainder of the year, with gold production in 2002 estimated to fall 16% from 2001 levels. Cash production costs at the operation are also expected to rise, by 15% to US$139 per oz.

The nearly depleted Golden Sunlight operation saw production in the recent quarter drop 56% to 23,306 oz. Cash and total costs to produce an ounce of the yellow metal were also affected, rising to US$291 and US$322 per oz., respectively, from US$116 and US$233 a year earlier.

In Australia, the major’s share of quarterly production from its 60%-owned Granny Smith mine soared 64% to 71,136 oz., owing to production from the higher-grade Wallaby deposit. Cash and total production costs fell, respectively, to US$109 and US$134 per oz. from US$275 and US$284 a year earlier. Production this year is slated to increase by 19% over 2001 levels.

Porgera

In nearby Papua New Guinea, production from Placer’s half-owned Porgera mine was 6% below 2001 levels, reflecting lower throughput. In 2002, Placer’s share of gold production is expected to be around 338,000 oz, 11% lower than in 2001. Unit cash and total costs in 2002 are expected to rise to US$245 and US$301 per oz., respectively.

At its 50%-held South Deep mine in South Africa, higher throughput resulted in a 20% increase in Placer’s share of production for the first quarter. The operation contributed 45,397 oz. to Placer. Cash and total production costs declined by 14% to US$170 and US$202 per oz., respectively.

The quarter also saw the company make strides in replenishing their reserves. In April, Placer signed a letter of understanding with Kinross Gold (K-T) to form a joint venture that will combine the operations of the Dome mine and Kinross’s Hoyle Pond, Pamour and Nighthawk Lake mines and the Bell Creek mill. Subject to due diligence, Placer Dome will own a 51% interest and Kinross a 49% interest in the joint venture.

In the Dominican Republic, Placer completed a special lease agreement with the government there to develop the Pueblo Viejo gold project. Pueblo Viejo lies 110 km north of Santo Domingo at an altitude of around 300 metres. The existing sulphide resource contains 34.6 million oz. gold and 204 million oz. silver in 544 million tonnes grading 1.98 grams gold and 11.7 grams silver per tonne, plus 0.55% zinc, based on a cutoff grade of 1 gram per tonne. The agreement has yet to be approved by the Dominican Congress.

Copper production increased to 106 million lbs. with cash costs coming in at US41 per lb., compared with 100 million lbs. in the first quarter of 2001 at US$45. Copper operating earnings totalled US$16 million, or 24% lower than a year earlier. The shortfall is attributed to an 11% drop in the company’s realized copper price.

The Zaldivar mine in Chile saw copper production increase by 10% during the recent quarter, reflecting higher recoveries. In 2002, production is targeted at 327 million lbs., 5% higher than last year.

In 2002, Placer expects to pour more than 2.5 million oz. gold and produce 420 million lbs. copper.