Battle Mountain profit reflects higher sales

Anticipating sales of 305,000 oz in 1988, Battle Mountain Gold (TSE) is proving to be one of the more profitable gold producers in North America. Third quarter net income jumped 26% to $15.3 million and nine month earnings were ahead 57% to $47.3 million.

Chairman Douglas Bourne says the gains are largely from higher gold sales. Prior to 1988, Battle Mountain was essentially a one mine company; but that has changed with the development of the Surprise and Canyon placer operations (Nevada) and the Pajingo mine in Australia. The first two are adjacent to the company’s Fortitude deposit and combined production from the three operations should be 240,000 oz this year, down 15,000 oz from 1987 levels.

Lower grade ore will probably be mined from Fortitude and Surprise this year so cash costs are expected to rise to about $135(US) per oz. This is still well below the North American industry average.

The Canyon placer mine should yield 18,000 oz gold next year and cash costs are estimated at $200 per oz. The grade of the placer material is very low (about 0.005 oz per cu yd) and there is some skepticism that Battle Mountain can actually achieve those production costs. The company is joint venturing the San Juan placer project in Nevada with Centurion Gold (TSE) so its experience at Canyon placer will have an impact on that situation.

Pointing to its modest market rating on an earnings and production basis and low cost profile, one analyst recommends Battle Mountain as a short term hold. Overhanging the company’s future is the relatively short life of its various operations. Fortitude and Surprise have approximately six years of reserves left and Pajingo slightly more, the analyst notes, adding that Battle Mountain has “very few development projects.”