Santa Fe Pacific reports higher earnings, revenue

Despite a rock slide at its Twin Creeks mine in Nevada last December, Santa Fe Pacific Gold (NYSE) saw its overall earnings, reserves and production increase in 1994.

The company earned US$56.7 million (or US46 cents a share) from its three gold mines, on revenue of US$375.6 million, significantly higher than the US$27.7 million (or US25 cents a share) earned on US$233.7 million in 1993. The three mines — Twin Creeks and Lone Tree in northern Nevada, and Mesquite in southern California — contained proven and probable reserves of 15.4 million oz. in 1994, compared with 14.1 million oz. in the previous year. The increase is largely attributed to a 17% rise in reserves from the Section 30 and Section 18 zones at Twin Creeks.

Total production soared by 53%, rising to 936,310 oz. in the past year, making Santa Fe one of North America’s largest gold producers. Production at Twin Creeks rose by 45% to 501,891 oz. at a cash cost of US$174 per oz. Of the 10 million oz. in reserves, about 60% are classified as refractory and will require suitable processing. Towards that end, the company will spend US$250 million on a sulphide processing plant and on the purchase of additional equipment. Two autoclaves will be commissioned in 1997, and a third in 1999, all of which are expected to add 100,000 oz. to production.

In 1995, output at Twin Creeks is expected to range between 415,000 and 425,000 oz. at a cash cost of US$180-190 per oz. This lower production forecast, relative to 1994, is the result of a rock slide in late December, in which 3 million tons of material fell 700 ft. into the pit, covering an active ore block and disrupting haulage patterns.

Over the next six months, Santa Fe will remove this material, as well as about 3 million tons of unstable material along the pit wall. Meanwhile, at the Lone Tree mine, production for the year rose by 43% to 226,911 oz. at a cash cost of US$210 oz. The increase was attributed to ore treated at a sulphide processing plant, which was commissioned last February. Tests on the heap-leach material indicate that crushing ore does not improve recoveries significantly, so the practice has been discontinued. Furthermore, recoveries from leached sulphide ores were found to be only 25%, rather than the expected 40%. To compensate, Santa Fe developed a proprietary flotation method which is expected to enhance recoveries to 75-80%. In addition, the method is expected to lower the processing costs of the low-grade sulphide ore, which will be stockpiled until the flotation plant is constructed. The plant will enable ore to pass through the flotation circuit; a concentrate will then be run through the autoclave. (Any excess concentrate will be shipped to the Mule Canyon site, once that project is deemed viable.) Santa Fe’s third mine, the Mesquite, produced 207,508 oz. at a cash cost of US$180 per oz. in 1994. Heap-leach recoveries are declining because of increasing sulphide grades. This year, the mine is expected to crank out 220,000 to 225,000 oz. at US$200-210 per oz.