Fortunes mixed for Cdn. gold miners in Chile
Wednesday, October 7, 1998
DENVER, Oct 7 (Reuters) - Chile has emerged as one of the most alluring targets of
exploration-hungry mining companies, but the recent experience of two Canadian gold
producers demonstrates that potential rewards are sometimes tempered by unforeseen
pitfalls.
For the moment, the ancient Andean gods seem to be smiling upon Dayton Mining
Corp., an emerging gold producer with 100-percent ownership of the Andacollo gold
mine in central Chile. Vancouver-based Dayton announced on Wednesday that
Andacollo chalked up record gold production in the third quarter at an operating cost
below the company's target.
"Andacollo as an operation is not a company maker, but it is a solid cornerstone that
can serve for the basis of growth in the company," Dayton Chief Executive Bill
Myckatyn told delegates at the Denver Gold Group's annual conference.
"I am very encouraged with the results we are achieving at Andacollo," Myckatyn
said.
Andacollo, which began commercial production in 1996, produced 25,076 ounces
of gold at a cash operating cost of $226 per ounce for the quarter ended September
30, 1998 and is on target to produce more than 91,000 ounces of gold this year at a
cash cost of $235 an ounce.
Dayton forecasts production of 145,000 ounces of gold in 1999 at a cash cost of
$210 an ounce.
Gold climbed to $301.30 an ounce on Wednesday.
With its prized project meeting expectations, Dayton is now looking to expand with
the addition of one or more other gold mining developments, either through merger or
outright acquisition.
The past year's crisis in the gold sector has made it difficult for small exploration
companies to raise the equity for their projects. Recent declines on international equity
markets have made that task even more burdensome.
Dayton hopes that its improving balance sheet and growing reputation as a gold
producer will encourage troubled firms to come knocking.
"We are looking to add a development property that is ready for production or at a
fast stage of feasibility. Dayton, for its size, developed at Andacollo in Chile one of the
largest gold mines over the last couple of years. We think we are well positioned to
develop properties in the right environment," Myckatyn said.
One of Dayton's rivals, Bema Gold Corp., also based in Vancouver, has not had as
smooth a ride in Chile.
The gold producer's Refugio mine in Chile's northern Andes has been plagued by
winter storms, mechanical problems and mine shutdowns. A series of mishaps
involving the mine's crushers and conveyors will reduce Refugio's 1998 production by
about a third.
Bema said it expected Refugio would produce about 160,000 ounces of gold at an
operating cost of $300 an ounce. The mine, located high in the Chilean Andes, is
designed to produce more than 230,000 ounces of gold per year at a cost of $240 an
ounce.
Bema and Toronto-based Kinross Gold Corp. each own a 50-percent stake in
Refugio.
This year's mechanical problems follow on the heels of severe winter storms in 1997,
which forced a temporary shutdown of the mine.
"1998 was a disappointing year as well because we thought we were going to get a
lot better production and the key issues for that were mechanical problems with the
crushers and conveyors," Bema Chief Executive Clive Johnson said at the conference.
Johnson blamed the mechanical problems on poor construction and said Bema was
seeking mediation to resolve the issue with the builders.
Analysts still view Chile as an ideal place for mining companies to do business. They
argue that problems like those experienced by Bema have little to do with the overall
environment for mining in the country.
"The problems at Refugio are mechanical They occurred because of the construction
and because it was run by a committee, a 50-50 committee, so there wasn't one mine
manager handling it full time. It is a unique situation," said Catherine Gignac, an analyst
with Deacon Capital Corp. in Toronto.
Dayton Mining closed up C$0.14 to C$1.05 in Toronto Stock Exchange trading of
45,300 shares on Wednesday. Shares of Bema Gold closed up C$0.08 to C$2.21 in
Toronto with 474,543 shares changing hands.
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