Spokane’s Pegasus Gold Inc. didn’t have a year to cherish in 1996, but the gold company believes its future holds better earnings performance and growth prospects.
The company lost $21.6 million, or 53 cents a share, compared with a 1995 loss of $3 million. The bulk of the loss came from write-downs to cover equipment depreciation and higher environmental costs for mine cleanup.
A failed merger with Vancouver, B.C.’s Dayton Mining didn’t help the company’s earnings or its stock price, which slid to decade-long lows in the latter part of 1996.
Pegasus mining costs weren’t something to cheer in 1996. The total cost of removing an ounce of gold, including depreciation and royalties, averaged $409, highest since 1989. Last year the figure was $347 an ounce.
Thanks to Pegasus’ aggressive hedging system, where the company takes options to sell gold at higher prices than spot markets, Pegasus received an average of $426 for each ounce produced. The spot price for gold fell to around $370 an ounce for parts of last year.
Company costs will drop as its investments in new mines pay off, said John Pearson, head of investor relations for Pegasus.
The company’s flagship gold mine, Mount Todd in Australia, has been running its new mill facilities and expects to be at full production this spring. If all goes well, Mount Todd will give Pegasus 200,000 ounces of gold in 1997, and up to 300,000 ounces in 1998.
Mount Todd’s costs, which were at $853 an ounce in the fourth quarter of 1996, will drop to below $300, and eventually settle around $250 an ounce, Pearson said. Pegasus saw encouraging results at its Florida Canyon gold mine, where it upgraded milling facilities. The mine produced more than 180,000 ounces of gold, the company’s largest producer last year, and a record amount for the mine.
The company still hopes to produce a million gold ounces each year by 2000, according to chief executive Werner Nennecker. Pegasus produced just under half a million ounces in 1996.
Pegasus cited a weak gold market for delaying building the Zortman Extension project in Montana, which it hopes to start in spring 1998.
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