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Gold/Mining/Energy : Crystallex (KRY) -- Ignore unavailable to you. Want to Upgrade?

To: marcos who wrote (9979)	7/10/1999 12:59:00 PM
From: alan holman	Respond to of 10836

Saturday, July 10, 1999 Placer Dome may mothball Las Cristinas mine Project wound down: Falling gold price may herald wave of mine closures Keith Damsell National Post Placer Dome Inc. said yesterday it may mothball its troubled $575-million (all figures in U.S. dollars) Las Cristinas gold project in Venezuela, signalling what analysts fear may be a new wave of restructuring and mine closures as the industry grapples with the plunging price of gold. "The project has been wound down and we're making no more financial commitments," Hugh Leggatt, a spokesman for Placer, said in an interview. Officials from the Vancouver-based Placer were scheduled to meet their Venezuelan partners in Caracas yesterday to discuss their options. "No final decisions have been made whether or not to proceed," said Mr. Leggatt. Placer holds a 70% stake in Minera Las Cristinas, a joint venture with the state-owned Corporacion Venezolana de Guayana. The 11.7-million ounce deposit in southeastern Venezuela was slated to begin production in 2001. Gold touched a new 20-year low of $255.75 an ounce on Tuesday following a disappointing auction of 25 tonnes of gold by the Bank of England. The price of the metal has improved slightly since, up 40¢ to $257.70 yesterday. Central banks are unloading bullion in favour of better-performing securities, and industry watchers fear future auctions will pummel the price of gold further. Britain plans to unload another 390 tonnes of bullion over the next few years and Switzerland is widely expected to sell 1,300 tonnes of reserves in the second quarter of 2000. Gold's tumble has played havoc with the economics supporting Placer's expansion plans, especially Las Cristinas. Thanks to copper credits from the mixed metals deposit, cash costs to mine the low-grade gold are a slim $155 an ounce. But when capital costs are included, total mining costs leap to $240 an ounce. Placer planned to self-finance the project. "At today's gold prices, [Las Cristinas] gets tougher and tougher," said Dorothy Atkinson, an analyst at Vancouver's IPO Capital Ltd. Las Cristinas has a history of problems. In 1997, Crystallex International Corp. began a protracted legal battle for control of the mine. The Vancouver mining junior eventually lost its fight in Venezuela's Supreme Court of Justice, but signalled last month it plans to renew litigation. Meanwhile in Caracas, CVG and the ministry of energy and mines continue to debate who had the final jurisdiction to award mining concessions. In addition to Venezuela, analysts expect Placer to scale back ambitious expansion plans in Africa and the United States. In November last year, Placer spent $235-million for the right to co-develop the 52-million ounce South Deep property in South Africa. Two weeks later, Placer agreed to take over Getchell Gold Corp. of Denver in a $1-billion stock deal. Getchell has two underground mines in Nevada. The two acquisitions were slammed by critics who said Placer had paid top dollar for high-risk assets. Placer confirmed yesterday Getchell and South Deep are undergoing an "optimization study" to achieve the greatest value. If restructuring targets are met, the two projects will be "bullet proof," and "will be the cornerstone of our future growth, even at these gold prices," said Mr. Leggatt. The gold crisis stems well beyond Placer. If prices fail to recover within the next six months, "dozens of mines" around the world will close, predicted Glenn Brown, analyst at Haywood Securities Inc. South African producers, the world's largest gold producer, sit near the top of most danger lists. Despite massive layoffs and favourable exchange rates, the country's production costs averaged $273 per ounce last year. In Canada, investors can expect "a fairly massive round of writedowns" across the industry before the fiscal year ends, said David Davidson, analyst at Newcrest Capital Inc. Small producers are under the closest scrutiny. During the first three months of 1999, production costs at Toronto's Campbell Resources Inc.'s Joe Mann mine were $301 per ounce. "We're basically trying to cut costs and weather the storm as best we can," said Steve Dawson, Campbell spokesman. Richmont Mines Inc. of Rouyn-Noranda, Que., reported production costs of $286 per ounce at its Francoeur mine during the first quarter. Grades are expected to improve and costs drop to an average of $240 per ounce for the year, said Jean-Guy Rivard, chief executive. "There is no panic here yet," said Mr. Rivard. "It's a tough situation, but we're optimistic."