Investment Comment Placer geared to strong growth

Like everyone else, investors like to have something to look forward to. And strong growth in their stocks is high on the list of what they want to see.

Toronto-listed Placer Development fits into this strong growth category and, therefore, is recommended by the British investment firm of Kleinwort Grieveson Securities as a core stock for North American mining portfolios.

In the near-term, Placer’s growth is likely to come mainly through the use of its strong balance sheet for acquisition. Further out, the expansion of the gold interests particularly in Papua New Guinea will lead to substantial increases in gold production and higher earnings.

Main points to look forward to in the company’s development are:

* Placer Pacific (78.4% owned) is about to make the go-ahead announcement on Misima Island in Papua New Guinea and is now only waiting for government approval. Production from the project is expected to start in 18 to 24 months time averaging 200,000 oz gold per year in the early years.

Reserves, proven and probable, stand at 55.6 million tons averaging 0.04 oz gold and 0.582 oz silver per ton.

* A decision on whether to proceed with a feasibility study at Placer Pacific’s 50% owned Big Bell property in Western Australia is expected by the end of March. Exploration has delineated 15 million tons grading about 0.088 oz (open pit) and 5 million tons of 0.13 oz (underground).

* A feasibility study has already started at Placer Pacific’s one-third- owned Porgera property located in the western highlands of Papua New Guinea. Construction could start in 1988 and take three years. Placer is not interested in making any hasty decisions on this huge property, says Kleinwort Grieveson.

* A positive decision on a mill expansion for the Kidston open pit gold m ine in North Queensland, Australia, in which Placer has a 70% interest could be taken any day now. This will mean that the prospectus forecast of a decline in production will not now occur, says Kleinwort Grieveson.

* North American operations are performing well now. After an initally poor start to leaching at the new Bald Mountain mine in Nevada, in which Placer holds an 84% interest, costs are now coming down and production is back on target at 4,000 oz per month. Golden Sunlight and Cortez are both operating satisfactorily.

* Exploration for gold elsewhere is running at a very high level. Projects at Seabee in the La Ronge area of Saskatchewan, Eastmain in northern Quebec and Omai in Guyana are the most promising and advanced.

* Output at Gilbraltar Mines (71.7% interest) in the Caribou area of B.C. will go up this year as copper leach production rises and rock mining moves into softer ore. Breaking even and cash generative at present, Gilbraltar could become very profitable if copper prices rose even slightly. Gilbraltar shares could be an interesting leveraged investment in their own right, says Kleinwort Grieveson.

* The mill expansion at Equity Silver Mines (68.2% interest) located in the Omineca division of B.C. is now bearing fruit and 1986 production reached 5.5 million oz of silver and 43,000 oz of gold. Silver cash production costs are only $3.15(US) per oz.

* Real de Angelis (34% interest) is now becoming a major success story, and cash silver costs are only $1.31 per oz. What a shame that the mine is in Mexico, says the investment firm.

* The reopened Endako molybdenum mine (100% interest) in B.C. is now operating profitably at one-third capacity of 5.7 million lb per year.

* A dip in gas prices at year-end led to an $45.85-million writedown in U.S. oil and gas properties. Overall, Placer’s oil and gas interests are expected to remain profitable for the forseeable future.

Placer trades on the TSE at the current level of $42.