Vancouver — Higher production costs, brought about by continued appreciation of foreign currencies against the U.S. dollar, trimmed
The Vancouver-based gold miner earned US$60 million on revenue of US$508 million, compared with a profit of US$63 million on sales of US$409 million in the corresponding period of 2003.
Cash and total production costs rose to US$233 and US$287 per oz. gold, respectively, in the latest quarter, up 13% and 8% from a year earlier.
Placer Dome is on track to produce 3.6 million oz. gold this year, at cash and total costs of US$225-230 and US$290-295 per oz., respectively. Copper production is projected to total 400 million lbs. at cash and total costs of US51 and US67 per lb., respectively.
The company is forging ahead with mine expansions and development projects, and has set aside US$295 million for capital expenditures this year. However, political changes in several key mining jurisdictions, namely Chile and South Africa, could affect some of those plans.
The government of Chile intends to send a legislative proposal to congress that, if passed, would require mining companies to make increased contributions to state coffers. Draft legislation is expected to be introduced shortly, but initial announcements suggest companies will pay up to 3% of their gross sales, depending on the level of a mine’s operating profit. Placer Dome notes that the legislation, if enacted, would affect the Zaldivar and La Coipa mines, as well as potential development of the US$1.65-billion Cerro Casale mine.
The South African government also introduced legislation affecting the mining sector. The Mineral and Petroleum Resources Development Act, which took effect May 1, provides for a “use it or lose it” policy for mineral properties, more in keeping with the system used in North America.
Also introduced was the Empowerment Charter, which is designed to expand mining opportunities to historically disadvantaged persons. While it was not formally enacted as legislation, the charter sets goals of 15% ownership by disadvantaged groups in mining ventures within five years and 26% ownership within 10 years.
Earlier this year, Placer Dome signed an agreement with the Bakgatla Da Kgafela Tribe for a platinum project on the western limb of the Bushveld igneous complex. The empowerment project satisfies the 26% black ownership requirements of the charter while still allowing Placer Dome to earn a 50% ownership by carrying out a feasibility study.
On the operations front, Placer saw its production costs climb in South Africa as the rand continued to appreciate relative to the U.S. dollar. Unit cash costs at the South Deep mine increased 23% in the latest quarter, reflecting a higher rand, an 8% inflation rate, and the implementation of continuous operating arrangements that lowered throughput and grades.
Placer’s share of production from South Deeps was 45,857 oz. in the first quarter, down 6% from a year earlier. As a result, the company’s share of forecast 2004 production was trimmed by 21,000 oz. to 227,000 oz.
Worldwide, Placer Dome produced 929,000 oz. gold to its account in the first quarter, up 3% from a year earlier. Copper production was up 8% at 109 million lbs.
On the development front, a feasibility study for the Pueblo Viejo project in the Dominican Republic is on schedule for completion by mid-year. An 11,000-metre drill program is under way to define a higher-grade portion of the deposit that could be mined in the initial years. Metallurgical tests of autoclave processing are also in progress.
Placer plans to spend $75 million on exploration this year near existing mines and on promising early-stage projects. At the end of 2003, proven and probable reserves stood at a record 60.5 million oz., up from 52.9 million oz. a year earlier. Resources climbed to 85.8 million oz., from 74.8 million oz. at the end of 2002.
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