Vancouver — Despite a drop in production, higher gold prices and lower cash costs propelled Placer Dome (PDG-T) to a much improved profit during the first quarter of 2002.
The major earned US$43 million, or US$0.13 per share, in the period ended March 31, 2002. This marks a significant improvement over the profit of US$16 million, US$0.05 cents per share, tallied in the year-earlier period. Cash flow from operations came in at US$99 million, down from US$121 million in the first quarter of 2001, while mine operating earnings rose slightly to US$96 million, from US$93 million.
“Our focus on the fundamentals is paying off,” says the company’s Chief Executive Officer, Jay Taylor. “We hit all of our targets this quarter and we are implementing our strategy to increase shareholder value.”
Despite a fall in sales revenues to US$303 million, from the US$341 million recorded in the first quarter of 2001, Placer’s profit picture was helped by higher gold prices and lower costs to produce an oz of the yellow metal. The company produced 660,000 oz. of gold in the quarter at a cash cost of US$173 an oz., compared with 694,000 oz. at a cash cost of US$185 an oz. a year earlier.
Gold operating earnings jumped 14% to US$83 million, while gold sales revenue fell to US$230 million, compared with $260 million in the first quarter of 2001. The reduction in gold production was due to mechanical problems at its Dome mine in Ontario, the closure last year of the Kidston mine in Australia and declines at Golden Sunset and Misima, which are approaching the end of their mine lives. Boosting the bottom line was the company’s forward selling, which 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 put in a strong performance, with production increasing by 33% to 51,103 oz., compared to 38,422 oz recorded in the first quarter of 2001. Cash and total production costs came in at US$161 and US$233 per oz., compared with the US$281 and US$363 per oz tallied in the first quarter last year. The significant improvement is attributed to a 76% increase in grades to 18.7 grams gold per tonne.
In the United States, production from Placer’s 60%-owned Cortez mine in Nevada declined by 6% due to lower grades. Placer’s share came to 166,805 oz., down from the 177,106 oz. recorded in the corresponding period last year. This downward trend is expected to continue for the remainder of the year with gold production in 2002 estimated to be 16% lower than 2001. Cash production costs at the operation are also expected to rise some 15% to US$139 per oz. Also impacting output in the United States was the nearly deleted Golden Sunlight operation, which saw gold production in the first three months of 2002 drop 56% to 23,306 oz. Cash and total costs to produce an oz of gold were also negatively impacted rising to US$291 and US$322 per oz, from last year’s US$116 and US$233 per oz., respectively.
Placer’s Australasia operations got a boost from its 60%-owned Granny Smith mine is Australia. The major’s share of production for the first quarter soared 64% to 71,136 oz, due to production from the higher grade Wallaby deposit. Cash and total production costs showed an impressive improvement dropping to US$109 and US$134 per oz, from the US$275 and US$284 recorded in the same period of 2001. This year, production is slated to increase by 19% over 2001 levels.
In Papua New Guinea, production from its 50%-owned Porgera mine was 6% below 2001 levels due to lower throughput. In 2002, Placer’s share of gold production is expected to be around 338,000 oz, 11% lower than 2001. Unit cash and total costs in 2002 are also 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 added 45,397 oz to Placer. Cash and total production costs declined by about 14% to US$170 and US$202 per oz., respectively. Driving the improvement was a 40% depreciation of the South African currency against the US dollar over the 12-month period ended March 31, 2002. For the entire year, the operation is expected to produce 16% more gold than 2001 with cash cost moving 13% lower.
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’ 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 Domincan Republic, Placer completed a special lease agreement with the Government 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 1-gram cutoff. At a higher 3-gram cutoff, the resource stands at 70 million tonnes of 4.18 grams gold, 25.1 grams silver and 0.91% zinc, equal to 9.4 million oz. and 56.3 million oz. silver. The agreement is now awaiting approval by the Dominican Congress.
“We continue to make steady progress on maximizing our existing assets and in adding quality ounces to replace maturing production,” adds Taylor.
Copper production increased to 106 million lbs with cash cost coming in at US$0.41 per lb, compared to 100 million lbs at a cash cost of US$0.45 cents per lb in the corresponding quarter last year. Copper operating earnings tallied US$16 million in the first quarter of 2002 , some 24% lower than 2001. The shortfall is attributed to an 11% drop in the company’s realized price for copper. Copper sales revenue came in at US$73 million, compared with US$80 million in 2001.
The Zaldivar mine in Chile saw copper production increased by 10% due to higher recovery. In 2002, production is targeted at 327 million lbs, 5% higher than 2001. The increase is due to a higher percentage of faster leaching oxide ore and recovery improvements. Higher costs and depreciation charges will raise cash and total costs for the operation during 2002 to $0.44 and $0.60 per lb., respectively.
This year the company will sink US$160 million into operations including US$52 million at South Deep for the shaft, mill and underground development, US$23 million at Porgera for Stage 5 and underground development and US$16 million at Cortez for new heap leach infrastructure.
Placer expects to pour over 2.5 million oz. of gold and 420 million lbs of copper in 2002.
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