NEVADA & THE WESTERN STATES — Royalty sisters open Nevada mine

Low gold prices are not preventing affiliated companies Euro-Nevada Mining (EN-T) and Franco-Nevada Mining (FN-T) from basking in the success of their equally owned Ken Snyder mine, in Nevada, north of the Carlin trend.

The mine — the first ever developed by the partners — entered commercial production in February, on budget and four months ahead of schedule. Annual production is projected at 250,000 oz. gold-equivalent, with cash costs expected to average US$80 per oz. and total costs, including all depletion and amortization, anticipated at US$120 per oz.

The fast start provided each company with $7.1 million in extra income for the fiscal year ended March 31. During that period, Euro-Nevada earned a record $24.8 million (or 26 cents per share) on revenue of $57.74 million, up 18% and 30%, respectively, from the previous fiscal year. Fourth-quarter results were equally impressive, with earnings up 14% from a year ago, at $7.4 million, and revenue up 73%, at $19.6 million.

In fiscal 1999, Franco-Nevada earned $43.7 million (55 cents per share) on revenue of $77.85 million, compared with $52.7 million (70 cents per share) on $82.9 million a year ago. Earnings in the final three months of the recent fiscal year were down 14%, at $12.8 million, though revenue was 13% higher, at $24 million. Low prices for gold and oil are responsible for the earnings dip, whereas revenue was affected by a shift in activity at the Betze-Post mine to an area where Franco has yet to earn a net profits interest. (This type of royalty differs from a net smelter return, which Franco also holds, in that capital expenditures are considered.)

At the newly opened Midas mine, the pair spent US$5.9 million exploring the immediate mine area from surface, resulting in a 43% increase in mine resources; the figure now stands at 5.4 million tons averaging 1.3 oz. gold-equivalent per ton. Little activity occurred elsewhere, as environmental permits for the bulk of the 26,000-acre property were not issued until November.

This year’s budget is set at US$4.5 million, with crews testing possible strike extensions to known veins and seeking new targets. This excludes funds set aside for ongoing underground drilling, which is aimed at augmenting existing reserves of 2.7 million tons grading 1.12 oz. gold per ton. That figure is based on a gold price of US$300 per oz. and a silver price of US$6 per oz., and is 36% more than that calculated at the end of the previous fiscal year.