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Gold/Mining/Energy : Royal Oak-RYO -- Ignore unavailable to you. Want to Upgrade?

To: Michael Bidder who wrote (1474)	11/16/1998 11:39:00 PM
From: roger fontaine	Read Replies (1) \| Respond to of 1706

The Financial Post VANCOUVER -- Continuing weak metals prices have dealt another blow to Royal Oak Mines Inc., the struggling mid-sized gold producer run by Margaret Witte, a gritty U.S.-born metallurgical engineer. The company yesterday announced an $86.4-million writedown an all of its mining assets except for its recently opened Kemess gold-copper mine in B.C. The assets have been restated to reflect the current gold price of about $300 (US) an ounce. Royal Oak is the latest North American mining company to bite the bullet. On Thursday, Sunshine Mining and Refining Co. of Boise, Idaho, one of the oldest silver producers in the U.S., took a $54.5-million (US) writedown on its Sunshine Mine, again reflecting weak prices. Several producers have been driven either into bankruptcy or into restructuring by the gold price collapse over the past 18 months. For example, Pegasus Gold Corp. of Spokane, Wash., has been under court protection from its creditors and is just completing a reorganization. Royal Oak also is negotiating with its bankers, trying to grapple with a long-term debt that stood at $450-million at Sept. 30, largely reflecting the cost of developing the Kemess mine. "Kemess is the key asset in the company and the jury is still out on how well this asset can go," said one mining analyst who asked not to be identified. The mine, located in northern B.C., has been producing concentrates since May and went into commercial production in October. Ms. Witte said its operating performance "is meeting our expectations." It has produced 41,000 ounces of gold and 11.1 million pounds of copper to date. Royal Oak is counting on this mine to cut production costs dramatically and increase cash flow. The company was put together in 1990 by Ms. Witte by amalgamating a number of old high-cost gold producers in Canada with the intention of getting costs down and building Royal Oak into a million-ounce-a-year company. So far, the strategy has been only partly successful. This year, Royal Oak expects to produce 228,000 ounces of gold, mostly from mines in Timmins, Ont., and Yellowknife at an average cash cost of $240 (US). The low-cost Kemess mine is meant to be the asset that gets Royal Oak back on track, enabling it to begin reducing its debts. "They are in an extremely tight corner," the mining analyst said. This month Royal Oak settled debts of $8-million with trade creditors by issuing seven-million shares at $1.13 each. It has been getting its costs down. The average cost for production in the first nine months at its mines, excluding Kemess, was $252 (US) an ounce, down 16% from a year earlier. The drop reflected "sustained cost-cutting measures" and the decline in the Canadian dollar.