By Rose Ragsdale
For Mining News 

Precious prices for precious metals

Kinross Gold, Hecla Mining and Coeur d'Alene Mines react to stellar markets with record second-quarter profits

 

Last updated 8/27/2006 at Noon



Higher metals prices contributed to record earnings in the second quarter across the mining spectrum. Three companies heavily invested in Alaska, Coeur d'Alene Mines Corp., Hecla Mining Co. and Kinross Gold Corp., posted stronger financial results for the period and noted how their Alaska properties fared.

Fort Knox battles escalating costs with high gold output

Kinross, owner of the Fort Knox mine near Fairbanks, posted record earnings of $65.6 million, or 19 cents per share for the second quarter of 2006, compared with a net loss of $16.4 million in the same period last year. The results include a $2.9 million pre-tax gain on disposal during the period.

Kinross revenue totaled $252.3 million in the second quarter, up 45 percent from the same period in 2005. The company sold gold for an average of $625 per ounce, up 48 percent from a year ago.

Kinross produced 385,514 gold equivalent ounces in the second quarter of 2006, including 99,437 ounces at the Fort Knox mine near Fairbanks. Kinross remains on track to produce approximately 1.44 million gold equivalent ounces for the year.

Cost of sales of $311 per ounce on 403,507 gold equivalent ounces sold remains in line with projections of $305 to $315 per ounce average cost of sales for the full year.

Fort Knox output rises

Production at Fort Knox rose 15 percent during the quarter as a result of increased tonnage and a higher grade, partially offset by lower recovery as the mine processed a zone of metallurgically complex ore.

Revenues from metal sales improved by 84 percent at Fort Knox as the number of ounces sold increased by 26 percent and the company realized higher gold prices.

Cost of sales increased 28 percent due to the higher number of ounces sold partially offset by the increased tonnage processed and increases in the cost of fuel and freight, along with higher prices for maintenance supplies.

Kinross is on track to meet its gold equivalent production target for 2006 of 1.44 million ounces at a cost of sales of $305 to $315 per ounce for 2006. Capital expenditures are expected to be approximately $285 million. Aggregate exploration and business development expense is expected to be about $30 million for the year and reclamation and remediation expenditures are expected to be $32 million.

Kinross said its capital investment of nearly $77 million during the first half of 2006 included $21.5 million in costs related to accessing phase six ore zones at Fort Knox.

Greens Creek delivers silver, gold profits for Hecla

Hecla Mining Co. reported second-quarter income of $9.1 million, or 8 cents per common share, up sharply from a loss of $6.4 million during the same period a year ago. The Coeur d'Alene, Idaho-based company also posted a 125 percent jump in quarterly sales to set a record of $56.9 million.

Hecla said increased prices for gold, silver, zinc and lead, buoyed its financial results along with the sale of the Noche Buena gold exploration property in northern Mexico, which generated a pre-tax gain of $4.4 million. The gain was partially offset by a charge of $1.2 million for stock option expense.

Hecla produced 1.3 million ounces of silver, while cutting average cash cost per ounce 24 percent to $1.98, and 42,234 ounces of gold at an average total cash cost per ounce of $340 during the second quarter.

Hecla holds a 29.73 percent interest in the Greens Creek silver mine, a joint venture with Rio Tinto, on Admiralty Island near Juneau.

Hecla's share of second-quarter production at Greens Creek included 520,750 ounces of silver at the low average total cash cost of negative $2.28 per ounce, made possible by high prices of by-product metals: zinc, gold and lead. The mine also contributed 3,750 ounces of gold for Hecla's account during the three months that ended June 30.

Output down

Silver production has decreased at Greens Creek from a year ago primarily because of a 25 percent lower silver ore grade, a rehabilitation work program completed on major underground intersections in the mine, as well as less favorable timing for accessing higher-grade work-faces due to development work.

Mine production was hampered in the second quarter by significant waste haulage and power outages necessary in order to tie into the public utility services, the company said. The tonnage mined is expected to improve in the third and fourth quarters of the year.

However, the ore grade at Greens Creek would need to show significant improvement for the mine to achieve its earlier projected level of production for the year, said Hecla President and CEO Phillips S. Baker Jr.

Resource up

A successful 2006 exploration program at Greens Creek, meanwhile, has defined a new resource in the West Gallagher Zone that will be calculated and added to the resource report at year-end. This ore zone is anticipated to grow in size over the next year as drilling continues in the open-ended resource.

In addition, ore-grade intercepts have been intersected about 750 feet and 1,000 feet updip from the mining faces in the area known as the 5250 zone. If the ore proves to be continuous between the current work area and the new intercepts, significant new tonnage could be added to reserves, extending the life of the already long-lived Greens Creek mine even further, the company said.

Kensington owner pursues aggressive mine development program

Coeur d'Alene Mines Corp. posted record earnings of $32.6 million, or 11 cents per share, in the second quarter, up dramatically from a net loss of $1.7 million, a year ago. The performance reflected a one-time pre-tax gain of $11.2 million on the sale of Coeur Silver Valley and pre-tax income of $1.4 million from CSV operations at the Galena mine.

Coeur d'Alene officials said the company sold Coeur Silver Valley as part of its strategy to focus future growth on lower cost, longer-life mines. They said Coeur d'Alene's performance also benefited from higher silver production totaling 3.5 million ounces, lower per-ounce cash production costs for silver, and sharply higher realized prices for silver and gold. Gold output totaled 29,097 ounces for the quarter.

For the first six months of 2006, the company reported record net income of $47 million, or 16 cents per diluted share, compared with a net loss of $2.8 million for the first half of 2005. Excluding the one- time gain from the sale of Coeur Silver Valley, Coeur d'Alene said its income for the first six months of 2006 still set a record of $33.9 million, or 12 cents per diluted share.

Construction at Kensington

The company had $393.3 million in cash and short-term investments as of June 30. Capital investment during the second quarter totaled $25.7 million, $20.9 million of which was spent on the Kensington gold project in Southeast Alaska. At Kensington, the company continued with an aggressive construction schedule. Coeur d'Alene aims to complete the project and start producing gold near the end of 2007. Recent activity has focused on construction of the mill building and completion of major earthworks. Kensington is expected to produce 100,000 ounces of gold annually.

Exploration in the second quarter focused primarily on existing properties, with an emphasis on reserve development/delineation drilling and discovery of new mineralization at Kensington and two other properties. Drilling totaled about 23,000 feet at Kensington.

Coeur d'Alene is a leading silver producer and has a strong presence in gold with mining interests in Argentina, Australia, Bolivia, Chile, and Nevada as well as Alaska.

 

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