Financial Post article today
Gold is now trading at its lowest level in 12 years, and producers are under more pressure than ever to lower costs and get rid of high-cost assets.
ÿAnother producer, Kinross Gold Corp., said yesterday it is seeking a buyer for its small Golden Kopje mine in Zimbabwe, which had a cash cost of US$416 an ounce in 1996.
ÿHowever, both Kinross and Royal Oak say they are interested in buying new gold properties, believing bargains can be had in this gold-adverse climate.
ÿKinross chief executive Robert Buchan said yesterday the company is in talks on one potential deal, but didn't elaborate.
ÿ"This is a market that should give us opportunities to deploy our capital efficiently," he said.
ÿ"The only issue is do you wait a week or do you wait two years?" he asked, referring to the current guessing game on how low gold prices will go and for how long.
ÿBoth Buchan and Eacott said their companies want low-cost gold properties, which can produce about 100,000 ounces a year or more.
ÿBuchan said a mine's combined operating and capital costs would have to be "well below" US$300 an ounce to be worthwhile.
ÿKinross' average cash cost of production of US$311 in the three months ended March 31 make it one of North America's four highest-cost gold producers.
ÿHowever, the company says the first-quarter number was a fluke, brought about by difficulties at its Hoyle Pond and Macassa mines in northern Ontario.
ÿKinross expects its average cash cost in 1997 to be about US$255 an ounce, Buchan said.
ÿIf the gold price falls much further, the company will consider temporarily shutting some of its eight gold mines.
ÿBut at today's price, Kinross believes each of its mines can be run without losing money, if not generating profits.
ÿThe miner is taking steps to bring down costs at its higher-cost operations, Buchan said, with exploration spending as one of the main targets.
ÿAt Royal Oak, Eacott denied speculation the Giant mine in the Northwest Territories is on shaky footing.
ÿGiant had a 1996 cash cost of US$357 an ounce, but is currently operating at about US$310, he said.
ÿKirkland, Wash.-based Royal Oak is largely staking its future on the Kemess gold-copper mine in British Columbia, which is expected to start production next April.
ÿThe mine will produce gold, at a predicted US$200 an ounce, and copper, at about US50› a pound. Kemess is expected to produce an average 250,000 ounces of gold and 60 million ounces of copper a year for 16 years.
ÿMeanwhile, yesterday, shares of Kinross (K/TSE) rose 30› to $5.25 on volume of more than seven million, making Kinross the most heavily traded issue on the Toronto Stock Exchange.
ÿRoyal Oak's stock (RYO/TSE) fell 1› to $2.61 on volume of 90,200. |
