Placer Dome Inc -
Placer Dome to suspend hedging; record production
Placer Dome Inc PDG
Shares issued 401,030,718 2000-02-03 close $12.65
Friday Feb 4 2000
Mr. Jay Taylor reports
All dollar amounts are in U.S. currency.
Placer Dome is suspending its hedging activities in expectation of improving gold market sentiment and reduced producer hedging.
According to Placer Dome president, Jay Taylor, the gold producers need to rethink their current hedging policies. "We believe that gold prices will move higher. The agreement by European central banks to limit their sales and lending was an important first step towards improving gold market sentiment, but industry needs to do its part. We acknowledge that producer hedging is an important factor," Mr. Taylor explained. "So as of today, the company has ceased adding any new hedge positions. As a result, we expect to see our hedge book reduced by at least two million ounces of gold by the end of this year," he said.
The corporation's balanced hedging program allowed it to realize an average $480 per ounce on its gold forward sales during 1999. The average price realized on all of the company's gold production was $341 per ounce, or $62 per ounce over the spot price.
During the fourth quarter of 1999, the company added to its hedge position as the gold price rallied to two-year highs. Hedged production at Dec. 31, 1999, comprises 7.4 million ounces in forward sales and 2.5 million ounces in call options at expected prices in excess of $400 per ounce with a total positive mark-to-market value of $350-million. Approximately 85 per cent of the company's reserves remain unhedged. The details of the corporation's hedging position will be released with the company's year-end results on Feb. 24, 2000.
"We have a very successful hedge program, however, we believe it is time to adjust our approach," Mr. Taylor said. "We will continue to manage our existing positions, but we want to be clear about the need for the industry to show leadership and confidence in gold."
WARNING: The company relies on litigation protection for "forward-looking" statements.
Mr. Taylor also reports
All dollar amounts are in U.S. currency.
Placer Dome produced 3.15 million ounces of gold for its account in 1999 at cash and total costs of $159 per ounce and $231 per ounce, among the lowest costs in the industry. The corporation also reported significant progress at its South Deep and Getchell mines. Complete financial information will be released with the company's year-end results on Feb. 24.
Placer Dome president, Jay Taylor, praised the company's exceptional operating results. "All of the mines contributed to Placer Dome's outstanding operational performance in 1999, with particularly strong showings from Cortez, Granny Smith and Campbell mines."
Cortez produced a record 797,115 ounces of gold for Placer Dome's account at a cash cost of $48 per ounce and a total cost of $109 per ounce, maintaining its position as the lowest-cost gold mine in North America.
Granny Smith maintained its position as Australia's lowest-cost gold producer, contributing 313,855 ounces of gold to Placer Dome's account. The mine produced at a cash cost of $98 per ounce and a total cost of just $106 per ounce.
Campbell mine's production of 262,015 ounces benefited from a continuing focus on cost reductions with cash and total costs remaining low at $145 per ounce and $201 per ounce. The commissioning of the Reid shaft in 1999 will provide increased production in 2000.
Placer Dome also recorded significant progress on its latest acquisitions, the South Deep gold mine in South Africa (50 per cent) and the Getchell mine in Nevada.
South Deep contributed 39,907 ounces of gold to Placer Dome's account in the fourth quarter. Cash and total costs for the quarter averaged $213 per ounce and $232 per ounce, reflecting the successful restructuring of operations and reduction in the work force. An optimization study has charted a clear course for South Deep for the transition from the current annual total production of 3.35 million ounces out of the existing shaft complex to the mechanized operation of 700,000 ounces per year from the new South Deep shaft system in 2003.
Plans call for the completion of a mill expansion by December, 2001, that will increase mill capacity by one million tonnes per year to 2.6 million tonnes annually. Implementation of mechanized mining is expected to increase productivity by 60 per cent, lowering cash costs to $160 per ounce and total costs to $180 per ounce by 2003. A two-year expansion study is also under way to evaluate opportunities to increase production beyond these levels after 2003.
At the Getchell mine in Nevada, exploration activity continues to deliver excellent results. Upon taking control of the property in June, 1999, the company began an aggressive exploration program focusing on the N zone. This work has led to a significant improvement in the understanding of the controls and distribution of ore. In the N zone, four separate mineralized zones have been identified, all of which remain open along strike to the north and south. Drilling has also intersected what is believed to be southern extensions of the N zone directly underneath the existing Turquoise Ridge mine, more than doubling the strike length of the zone.
Engineering studies have confirmed the potential for large-scale mining of the N zone. The size, dimensions and ground quality within the zone all lend themselves to long-hole mining, which will have a significant impact on operating costs. The corporation will focus its efforts during 2000 on the development of this zone. Given this priority, the company has decided not to restart operations at the existing plant capacity. In order to optimize the value of the property, the company is preparing a plan for an expanded operation combining production from the Getchell, Turquoise Ridge and N zone deposits. Operations will resume as soon as an expanded production plan can be implemented.
Mr. Taylor expressed his enthusiasm for Getchell's outlook. "Based on the exploration results and the progress of our development work, we are confident that we can achieve higher throughput rates, which will bring operating costs down to less than $200 per ounce. To do this right, we will focus on completing development and delineating the new orebody," Mr. Taylor said. "We remain confident that Getchell will deliver more than 20 million ounces of reserves."
The corporation expects to produce approximately three million ounces of gold in 2000 at a cash cost of $165 per ounce and a total cost of $245 per ounce.
WARNING: The company relies on litigation protection for "forward-looking" statements.
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