Royal Oak boosts earnings

Gold producer Royal Oak Mines (TSE) earned $7.05 million in the first quarter, a whopping 470% increase from the same period last year.

The dramatic improvement reflects a 17% increase in the average spot gold price, as well as the end of a labor dispute at the Giant mine near Yellowknife, N.W.T.

The company produced 66,273 oz. from all operations during the quarter, about 1% higher than in the same period a year ago. Cash costs of US$317 per oz. were 3% higher than last year.

Royal Oak produces gold from operations in Yellowknife and Timmins and from the Hope Brook mine in southwestern Newfoundland. A small amount was recently poured at the Colomac mine from startup of the gold-stripping circuit. This recently acquired former producer is 137 miles north of Yellowknife. Production at Colomac is slated to resume in late June. Prestripping of waste in the open pit is on schedule, with less than half of the 6-million-ton total having been removed to date.

The mine is expected to produce 75,000 oz. this year, thereby boosting the company’s overall production to about 375,000 oz. in 1994.

Royal Oak is debt-free and had working capital of about $81 million at the end of the quarter. The long-term objective is to increase annual production to 1 million oz. within the next five years. Such a production level would, in effect, double the size of the company and would likely be achieved by large acquisitions or a merger.