First-quarter earnings for Cheni Gold Mines (TSE) took a turn for the worse this year with the company reporting a net loss of $1.5 million on revenues of $5.2 million.
The company reported a cash flow deficit of $186,000 for the period, compared with cash flow of $3.1 million in the first quarter of 1990.
The loss was primarily the result of a jump in cash operating costs at the company’s Lawyers mine in north-central British Columbia. Costs jumped to $101.91 per ton from an average of $79.79 in the first quarter of 1990.
The company noted the increased cost was the result of development work in the Cliff Creek zone as the company prepares to mine the first blasthole stope. Cliff Creek is in a separate area from the AGB zone, the major source of the mine’s ore to date.
Results were also affected by lower mill throughput during the period. For the three months ended March 31, the mine processed 47,640 tons of ore, or about 529 tons per day compared with 49,080 tons, or 545 tons per day, in the first quarter of 1990.
Millfeed grade also dropped, averaging 0.21 oz. gold and 5.28 oz. silver per ton during the first quarter compared with 0.29 oz. gold and 6.67 oz. silver in the year-earlier period.
As a result, cash operating cost per oz. of gold equiva- lent production jumped to US$348.10 from US$199.99 in the first quarter of 1990.
Proven, probable and possible reserves at the Lawyers mine at the end of 1990 totalled about 800,000 tons grading 0.22 oz. gold and 6.09 oz. silver. Of the total, about 150,000 tons of proven reserves remain in the AGB zone grading an average of 0.24 oz. gold and 5.49 oz. silver.
Production for the first quarter totalled 9,512 oz. gold and 192,969 oz. silver. Chairman Edwin Phillips said the first-quarter results were an “aberration,” and he expects an improvement in the second quarter.
Despite poor first-quarter results, Phillips said production for the year is forecast at 47,000 oz. gold and 800,000 oz. silver.
The company expects to spend about $3.4 million on development and exploration in and around the Lawyers mine during 1991. This, along with expenditures of about $2.4 million at the company’s J&L joint venture near Revelstoke, B.C., will be funded out of cash flow. Cheni expects to cover any shortfalls through its operating line of credit.
Cheni can earn a 60% interest in the J&L property from joint owners Equinox Resources and Pan American Minerals.
In the meantime, work at the Lawyers mine will include further underground development in the Cliff Creek zone followed by underground drilling.
The company expects to complete a 14-mile road to the nearby Al property shortly. Cheni plans to mine the 50,000-ton BV deposit during the year from a small open pit for a projected recovery of about 15,000 oz. gold.
Phillips also said the company’s labor contract with its unionized employees expires on June 28. A number of employees walked off the job for about 12 days in April, 1989, as a result of a strike.
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