Placer Dome moves to rectify tailings spill at Philippine mine

The accidental escape of tailings at its 40%-owned Marcopper mine in the Philippines is reflected in the second-quarter earnings of Placer Dome (PDG-T).

The company lost US$32 million (or US13 cents per share) on sales of US$299 million, compared with a loss of US$25 million (US11 cents per share) on sales of US$235 million for the same period in 1995.

The loss includes a US$40-million after-tax provision against earnings, representing the estimated net impact of the spill. The provision reflects: US$21 million in loans to Marcopper, which were guaranteed by Placer; US$4 million owed to Placer by Marcopper; and US$15 million, which is the estimated cost of repairing the drainage tunnel through which the tailings escaped.

The Marcopper mine has remained closed since operations were suspended in late March. The Philippine government has revoked its environmental compliance certificate and is reviewing its mining licence.

In a written statement, Placer Dome President John Willson said: “Earnings have, of course, been hurt by the provision representing the estimated impact of the accidental escape of tailing at the Marcopper mine. . . .We at Placer Dome highly value our environmental track record and are extremely unhappy to have it tarnished by this accident.

“We feel strongly that Placer Dome must do everything it can to correct the situation at Marcopper. That is why we have taken 100% responsibility for setting things right, even though we have only a 40% interest. This is an unplanned investment in our future ability to develop mines worldwide.” Higher production costs

For the first half of 1996, Placer recorded a loss of US$24 million (or US10 cents per share) on sales of $562 million, compared with net earnings of US$12 million (US5 cents per share) on sales of US$471 million for the same period in 1995.

Gold production for the second quarter was 477,000 oz., bringing production for the first half of 1996 to 935,000 oz. — 13% higher than in the first half of the previous year. However, cash production costs for the half rose to US$246 per oz. from US$224 in the first six months of 1995.

Placer now expects to reach 1.9 million oz. in 1996, down from the original forecast of 2 million oz. And cash costs for the year are projected at US$235 per oz., up from the initial estimate of US$220 per oz.

Operating difficulties at some of Placer’s mines are taking their toll on production levels, costs and earnings, Willson stated.

“There are no quick solutions when poor ground conditions are encountered, as at Porgera and Sigma; nor [are there quick solutions] to the development constraints experienced at Detour Lake as a result of having to interpret the geologic model.”

(The Porgera, Sigma and Detour Lake mines are, respectively, in Papua New Guinea, northwestern Quebec and northeastern Ontario.)

Lower molybdenum prices resulted in operating earnings of US$6 million for the first six months, compared with US$58 million in the first half of 1995.

On a brighter note, construction of both the 68%-owned Musselwhite project in northern Ontario and the 60%-owned Pipeline project in Nevada is progressing ahead of schedule and within budget.

Musselwhite on track

The Musselwhite is being built at a cost of US$190 million, and Placer expects it will produce an annual 200,000 oz. for more than 10 years at a cash cost of US$200 per oz. TVX Gold (TVX-T) owns the other 32% interest. A proven and probable reserve stands at 9.8 million tonnes grading 5.6 grams gold, with an additional 3 million tonnes of mineralized material grading 5.8 grams.

The US$390-million open-pit Pipeline project is a joint venture with Kennecott, which owns the remaining 40% interest. Production is pegged at 310,000 oz. per year over 12 years at a cash cost of US$110 per oz. Proven and probable reserves within the Cortez mine and the Pipeline deposit are estimated at 82.3 million tonnes grading 2.8 grams gold.

In the meantime, feasibility studies on the Mount Rawdon project in Australia and the Mulatos project in Mexico are due in the third and fourth quarters, respectively. And a prefeasibility study on the Cerro Crucitas gold project in Costa Rica is due by year-end.

As the company ponders a development decision on the Las Cristinas deposit in Venezuela, it has increased reserves by a further 1 million oz. for at total of 9 million oz. gold. The deposit was previously estimated at 205 million tonnes grading 1.22 grams gold and 0.12% copper,

Placer continues to await payment of a US$35-million refundable deposit from the government of Kazakhstan, which, more than nine months ago, withdrew from the Vasilkovskoye gold project.