Miramar scales back Con operations to cut costs

In response to continued low gold prices, Miramar Mining (MAE-T) is scaling back mining and milling at its Con gold mine in Yellowknife, N.W.T, and taking a $40 million write-down against the project.

Miramar’s efforts to reduce high operating costs at the underground mine will result in the loss of 130 jobs.

Miramar is slashing the mining rate to 600 tons per day from the current 1,200 tons per day and the company will now focus on mining only those areas where ore reserves have been significantly developed. As a result, mill throughput will be lowered to match the supply of ore from the mine.

Gold production in 1998 is expected to be between 70,000 and 80,000 oz.

All exploration and underground development programs at Con have been halted in an effort to reduce costs, and non-essential capital expenditures at the mine have been eliminated.

Miramar says it will be re-evaluating the minable ore reserve base of the mine in light of sustained low gold prices. At the end of 1996, proven and probable reserves at Con stood at 3.5 million tons grading 0.33 oz. gold per ton, equivalent to almost 1.2 million oz. gold. An additional resource was estimated at 3 million tons grading 0.26 oz.

The estimated reserves were calculated with a gold price of US$380 per oz.

Miramar expects the ore reserve base will be reduced, with a significant portion reclassified into the resource category.

During the first three quarters of 1997, the Con mine produced 72,021 oz.

gold from 293,466 tons of milled ore grading 0.29 oz. gold per ton. Cash operating costs averaged US$324 per oz. over the nine months. While fourth quarter results will not be available for some time, production for the year is expected to be in the order of 100,000 oz.

Earlier this year, Miramar took steps to lower costs by deferring development of higher cost refractory ores to focus on free milling ores, which have been the predominant ore mined at Con. Historically, sulphide ore grades have been lower than the freemill ore grades.

During the third quarter, Miramar wrote down the carrying value of the Con mine and other mineral properties to the tune of $16.8 million. The company will be writing down a further $40 million in the fourth quarter against the asset values of the mine, including a charge for employee severance costs.

Gold production at the Con mine has declined steadily since reaching a record level of 125,519 oz. in 1994 at a cash operating cost of US$282 per oz. In 1995, gold production slipped to 122,010 oz. with a higher cash operating cost of US$323 per oz. In 1996, production was down further, at 111,021 oz., with cash costs increasing to US$336 per oz.

The mining of lower ore grades and a reduction in the milled tonnage have been contributing factors.

At the end of the third quarter of 1997, Miramar had a working capital of $122 million and 56.7 million shares outstanding. A total of 133,050 oz.

were sold forward at an average price of US$441 per oz. up to 1999.