River Gold turns quarterly profit

Although earnings are down, River Gold Mines (RIV-T) remains in the black.

For the three months ended Sept. 30, the junior earned $306,000 on revenue of $9.3 million, compared with $2 million on $9.9 million in the corresponding period of 1998. The decrease is attributed to weaker gold prices, which were partially offset by higher throughput at the Eagle River mine in northern Ontario.

For the 9-month period ending Sept. 30, River Gold lost $177,000 on $25.9 million, compared with earnings of $8.3 million on $30.5 million a year ago. The first nine months of 1998 were skewed by unusually high production in the second quarter, whereas the comparable period of 1999 was affected by the low gold price and treatment of development ore.

During the recent quarter, an average of 860 tonnes per day were treated at the Eagle River mine, near Wawa, Ont., yielding a total of 23,200 oz. gold, essentially unchanged from a year ago, when 620 tonnes were treated daily. Cash costs averaged US$162 per oz., or 23% more than in the third quarter of 1998, and the company realized US$270 per oz. for its production, or 7% less.

Cash flow topped $3.1 million, prompting the company to resume shaft-sinking at Eagle River. The program is budgeted at $5 million and should reach the 400-metre level in late 2000. Currently, ore is transported to surface via a decline.

Drilling from surface has extended by 50 metres the strike length of the mine’s No. 8 ore block. Highlights include 31.9 grams gold per tonne over 3.1 metres, 76.5 grams over 2.1 metres and 27.8 grams over 1.6 metres.

At the end of 1998, Eagle River hosted proven and probable reserves of 1.2 million grading 10.39 grams gold. Another 61,000 tonnes averaging 11.53 grams were classified as possible.

On Sept. 30, River Gold had 192,000 tonnes of ore broken and stockpiled, representing roughly seven months of production. The working capital deficit stood at $2.2 million.

River Gold will not declare a dividend for 1999, owing to the weak price of gold and renewal of shaft-sinking. Such dividends are typically 10% of cash flow when declared.

An arbitration hearing between River Gold and Vencan Gold (VCG-M) will begin in mid-December. Vencan owns the Edwards mine, where River Gold periodically mines ore, custom-milling it at Eagle River for a share of the profits. Vencan disputes the calculation of such profits from early 1996 to the end of 1997, stating it is owed at least $1.5 million.