Denver — Weakening of the Australian and Canadian dollars relative to the greenback forced
The loss is attributable to loans denominated in Australian and Canadian currencies, resulting in an aftertax charge of US$14.5 million.
On the bright side, the company recorded an aftertax gain of US$2.4 million through leasing the Just-in-Case property in Western Australia to the neighbouring Granny Smith joint venture, operated by
Before non-recurring items, Homestake recorded earnings of US$100,000, compared with a loss of US$1.9 million in the first three months of 2000. The company posted similar foreign currency losses in the first quarter of last year, resulting in a net loss of US$$16.3 million (6 per share).
Attributable gold production was up nearly 10% to 579,200 oz., primarily because of increased ownership of the Round Mountain mine in Nevada. In 2000, the company doubled its interest to 50%.
In the first quarter, the open-pit mine produced 200,700 oz., up 40% as a result of higher average grades and increased recovery. Homestake’s account raked in 100,350 oz., up from 36,000 oz. a year ago. Cash costs fell by a third, to US$173 per oz.
The wholly owned Ruby Hill mine, in east-central Nevada, remains one of the company’s lowest-cost producers. Production reached 30,200 oz. at cash costs of US$108 per oz., compared with 28,300 oz. at US$106 per oz. in the year-ago quarter.
In Canada, Homestake’s low-cost leader was Eskay Creek, which contributed 77,100 oz. at cash costs (including considerable silver credits) of US$51 per oz., compared with year-ago production of 84,400 oz. at US$7 per oz. The higher costs in 2001 reflected lower silver output and lower silver prices, as well as higher fuel costs.
The company recently began production from the C-zone, which is smaller than other active areas in the mine. As a result, output for the year is projected to reach 313,700 oz., down from 333,200 oz. in 2000.
Homestake saw a greater contribution from its 50%-held Kalgoorlie operation in Australia, where production totalled 196,300 oz. at an average cash cost of US$199 per oz., compared with 192,100 oz. at US$211 per oz. in the first quarter of 2000.
Homestake says the improvements were achieved despite several power outages and a re-lining of the grinding mill at the sulphide treatment plant. In February, Kalgoorlie commissioned an ultrafine grinding unit for processing refractory sulphide concentrates. The unit liberates the gold, making it amenable to conventional recovery methods.
The company also saw improved production from the Darlot, Plutonic and Lawler mines, all of which are in Western Australia.
Overall, Homestake’s operations averaged US$173 per oz., down $8 per oz. from the first three months of 2000. Cash costs are expected to continue to fall, finishing the year at US$163 per oz., which would be their lowest in more than two decades. Attributable production for the year should reach a new high of 2.3 million oz.
Cash flow from operations dropped to US$14.5 million, reflecting a US$21-per-oz. drop in the realized gold price. The company’s balance sheet remains strong, with cash and equivalents totalling US$193.5 million, with a debt of US$23.8 million.
Homestake’s hedgebook consists of forward sales totalling 2.1 million oz., or about 10% of the company’s reserves.
At the 60%-owned Veladero project in northwestern Argentina, exploration drilling is winding down. An updated mine plan and process design should be completed by July, including new capital estimates, operating costs and financing models.
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