Profit on growth curve for Kerr Addison Mines

With two new high grade mines waiting in the wings, Kerr Addison Mines expects this year’s bottom line to look better than ever.

This expectation is already unfolding as it should.

Net earnings of $4.3 million or 25 cents per share were realized in the first quarter of this year, up markedly from the $1.8 million or 11 cents posted in the year earlier period.

Though the reason for the improvement is due to gains from the sale of investments over the quarter, the goal now is for operations to play more of a role in boosting profit, President Ian Bayer told the annual meeting.

And Kerr is counting on two key projects — both inherited in last summer’s $120 million purchase of Corporation Falconbridge Copper — now named Minnova Inc.

The first is the high grade Winston Lake zinc project near Schrieber, Ont. which will be brought into full capacity production in the second quarter of 1988 (N.M., May 4/87). As Mr Bayer notes, this project dovetails nicely with Kerr’s corporate interests. Kerr’s interest in annual zinc concentrate production from Winston Lake will approximate its share of concentrate requirements for the Canadian Electrolytic Zinc reduction plant, in which Kerr holds a 9.8% joint venture interest.

Probable and proven reserves at Winston Lake stand at 3.4 million tons of 1.0% copper, 16% zinc, 0.96 oz silver and 0.03 oz gold per ton.

The high grade Ansil copper project is second on the production agenda. A decision is expected to come down in this year’s third quarter with production anticipated to start 12 to 15 months later. (N.M., May 4/87).

Located in the Lac Dufault camp near Rouyn-Noranda, Que., the Ansil hosts drill indicated reserves of 2.1 million tonnes grading 7% copper, 0.5% zinc, 24 g silver and 1.7 g gold per tonne.

Even before these projects have come on stream, Minnova has already had a positive impact on Kerr’s balance sheet. Production revenues have increased to $24.7 million in this year’s first quarter from $12 million in the comparable period last year.

Operating income has come out ahead at $7.1 million, up from $4.1 million posted in the first quarter of 1986.

Cash flow for the quarter from all sources was $23.6 million, which included $16.8 million of proceeds from the sale of investments. In the comparable period last year cash flow amounted to $15.2 million.

Capital expenditures this quarter totalled $15.9 million, of which $12.8 million was directed to mining projects and $3.1 million went to oil and gas exploration and development.

As of March 31 of this year, cash and term deposits stood at $68.9 million, a significant increase from its more then healthy position of $41.2 million at the end of the same period last year.

Long-term debt was reduced by $10 million this quarter to a balance of $40 million at quarter end. Debt will be trimmed back by some $21.5 million realized from Kerr’s recent sale of its 24% interest in MFC Mining Finance Corp. to Brohm Resources, a subsidiary of Ventures Trident Ltd., says Mr Bayer. The sale is expected to close this month.

Gold production this quarter amounted to 33,000 oz compared to 12,000 oz in the first quarter in 1986. Mr Bayer expects some 140,0000 oz to be produced this year from the Kerr Addison, Lac Shortt and Opemiska operations. (See N.M., May 4/87 issue for exploration news at the latter two divisions).

Other exploration projects of note this year include the Delbridge/Kerralda gold project near Noranda, Que. Here, diamond drilling, funded by Toronto-listed Syngold Exploration on an earn-in arrangement, has outlined a narrow but apparently continuous mineralized quartz vein structure interpreted to be an extension of the formerly productive Donalda No 1 gold vein. Mineral potential of the zone is currently estimated at 450,000 tonnes grading 9.3 g gold per tonne.

Fill-in drilling to confirm continuity and grade as well as drill testing of other targets is on the books for this year.

Additional drilling is also planned this year on the optioned Rea Gold property in the Adams- Barriere region of B.C.

Here, drilling and trenching have outlined a complex sulphide deposit with potential for 670,000 tonnes grading 0.95% copper, 2.43% lead, 2.08% zinc, 717.5 g silver and 1.23 g gold per tonne.