Mineral Exploration Scaled Back Mining Companies Blame Low Gold Prices For Reduction

The low price of gold has mining companies looking for ways to shave expenses in 1998.

One of the first places they’re cutting back is exploration.

Analysts have predicted industrywide cuts of up to 20 percent, ending a five-year exploration run that peaked in 1997. Last year, mining companies invested $5.1 billion in the search for new deposits.

Two of mining’s biggest names - Barrick Gold Corp. and Placer Dome - have reduced their exploration budgets by $30 million and $20 million respectively.

“Prices are affecting everybody,” said Bruce Rubin, editor of Paydirt Magazine, an industry trade publication based in Arizona.

Beyond shrinking exploration expenditures, the 18-year low in gold prices is adding names to what could be a long casualty list by year end.

Spokane-based Pegasus Gold filed for Chapter 11 bankruptcy protection on Jan. 16, citing an unprofitable selling environment. Pegasus’ Florida Canyon project in Nevada is marked for closure if gold prices don’t rally.

According to Rubin, Pegasus is one of several mining companies poised to pull the plug in Nevada.

“They’re planning shutdowns all over the place,” he said, adding that the Hycroft gold mine is one of the most recent to announce suspended operations, scheduled for March.

Rubin said mining firms are still investing in Latin American exploration, while rethinking investments in the U.S. and Canada. With $1.17 billion going into exploration, Latin America now claims 30 percent of worldwide exploration budgets, he added.

Gold Reserve Corp. of Spokane has invested $60 million in its Brisas mining concession over the past 4-1/2 years. The Venezuelan mine is expected to produce 7.3 million ounces of gold and 950 million ounces of copper.

Even though prices of both metals are down in today’s markets, Gold Reserve Vice President Douglas Belanger said the firm will proceed with its Brisas prefeasibility study.

“We’re more concerned with what the price of gold will be in the year 2000 when we have start-up,” he said.

Two North Idaho mining firms will review exploration costs this year.

“We will cut back slightly, but not drastically for 1998,” said Bill Booth, vice president of Hecla Mining Co.

At the Rosebud gold project in Nevada, Hecla has a partner who spends two dollars for every dollar the Coeur d’Alene company puts into exploring potential ore bodies.

“So we’ll be spending money there,” Booth said. “We’ll also be spending more money looking at property around our Greens Creek project in Alaska - looking for silver.”

Closer to home, the New Jersey Mine, an 80-year-old gold property about to be revived near Kellogg, has set aside immediate plans for a gold milling plant in favor of short-term investment in silver exploration.

Coeur d’Alene Mines is taking a “formal relook” at the Kensington gold project in Alaska, said Luke Russell, director of environmental and governmental affairs. Coeur hopes to have all permits in hand for Kensington in the next few months. Meantime, the company is studying ways to cut costs and pin down reserves at Kensington.

“From an exploration standpoint, we’re still committed to Kensington, whether or not we pull the trigger on it in 1998,” Russell said. “In this price structure, if you can improve reserves, it makes your project look a whole lot better.”

At the McDonald Gold Project along the Blackfoot River in Montana, the reserve picture is strong at about 9.8 million ounces of gold.

McDonald’s parent company, Canyon Resources Corp., believes it can extract gold at a cost of $150 an ounce.

“That’s what makes this such a robust deposit, even at today’s prices,” said William Snoddy, director of public and governmental affairs.

“If we had a permit in hand, we could still mine,” he added. “We would still mine.”

, DataTimes