Prime Resources Reports Second Quarter Earnings.VANCOUVER Vancouver, city, Canada Vancouver, city (1991 pop. 471,844), SW British Columbia, Canada, on Burrard Inlet of the Strait of Georgia, opposite Vancouver Island and just N of the Wash. border. , BRITISH COLUMBIA--(BUSINESS WIRE)--July 24, 1998-- Prime Resources(TSE See Tokyo Stock Exchange. TSE 1. See Tokyo Stock Exchange (TSE). 2. See Toronto Stock Exchange (TSE). :PRU PRU Prudential Financial PRU Pupil Referral Unit PRU Photographic Reconnaissance Unit PRU Potomac Rugby Union (Washington, DC) PRU Provincial Reconnaissance Unit PRU Projets de Rénovation Urbaine PRU Pruhonice .) (VSE See DOS/VSE. VSE - Virtual Storage Extended :PRU.) (AMEX AMEX See: American Stock Exchange :PRU) Prime Resources Group Inc. ("Prime") (TSE, VSE, AMEX: PRU), today reported net income of $8.5 million or $0.11 per share for the three months ended June June: see month. 30, 1998 compared with net income of $7.6 million or $0.10 per share for the second quarter of 1997. Net income for the first six months of 1998 was $19.8 million or $0.26 per share compared to $16.6 million or $0.22 per share in the prior year. -0-
HIGHLIGHTS
-- Production in the quarter was a record 156,760 ounces of gold
equivalent.
-- Total cash costs declined to US $145 per ounce of gold
equivalent.
-- Prime is considering Homestake Mining Company's ("Homestake")
proposal for all Prime shares held by the public.
CONSOLIDATED RESULTS Prime's total production of gold and gold equivalent contained in ore, dore and concentrates increased by 19 percent to 156,760 ounces compared with 132,212 ounces reported in the second quarter of 1997. Total cash costs, which include third-party smelter costs, declined 15 percent to US $145 per gold equivalent ounce ounce, in zoology ounce, in zoology: see leopard. ounce, unit of measurement ounce: see English units of measurement. compared with US $171 per ounce in the second quarter of 1997. Revenues from gold, concentrate and ore sales in the second quarter of 1998 increased 2 percent to $53.8 million compared to $52.7 million in 1997. Increased gold equivalent production and increased silver prices more than offset the decline in gold prices. Prime's average realized gold price in the quarter decreased US $46 per ounce to US $297 and the average realized silver price increased US $0.68 to US $5.48 per ounce compared to the second quarter of 1997. Approximately 38 percent of the Company's sales revenue in the second quarter of 1998 was attributable attributable emanating from or pertaining to attribute. attributable proportion see attributable risk (below). attributable risk to Eskay Creek silver production. The mine produced 3.1 million ounces of silver during the quarter compared to 3.2 million ounces in 1997. Cash flow from operating activities during the second quarter increased 7 percent to $28.9 million in 1998 compared to $27.0 million in the second quarter of 1997 due to increased production, higher realized silver prices and lower tax installments partially offset by lower gold prices and higher foreign exchange losses. The Company paid income and mining taxes of $10.7 million in the second quarter of 1998 as compared to $13.1 million in 1997. At June 30, 1998 Prime had $200.1 million in working capital, including cash and short-term Short-term Any investments with a maturity of one year or less. short-term 1. Of or relating to a gain or loss on the value of an asset that has been held less than a specified period of time. investments of $185.8 million. The Company remains debt free. OPERATIONS: ESKAY CREEK MINE: The Eskay Creek mine produced 69,978 payable ounces of gold and 3.12 million payable ounces of silver or 129,916 ounces of gold equivalent in the second quarter, compared to 100,937 ounces of gold equivalent in 1997. This increase was due to production from the new gravity/flotation mill, 11 percent higher gold grades in direct ore sales and a lower silver to gold equivalency equivalency the combining power of an electrolyte. See also equivalent. ratio partially offset by a planned 18 percent reduction in direct ore sale tonnage TONNAGE, mar. law. The capacity of a ship or vessel. 2. The act of congress of March 2, 1799, s. 64, 1 Story's L. U. S. 630, directs that to ascertain the tonnage of any ship or vessel, the surveyor, &c. . Total cash costs at Eskay Creek, including third-party smelter costs, decreased 15 percent to US $134 per gold equivalent ounce compared to 1997. Increased production and a favourable silver to gold equivalency ratio were the primary reasons for the decline in cash costs. Discussions with one of the Company's primary ore smelters resulted in an agreement to extend the term of the contract by an additional eight years to December December: see month. 31, 2007. With the completion of this agreement, long-term Long-term Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. markets have been secured for the sale of Eskay Creek ore at current production levels. SNIP snip a white mark on the muzzle extending into one nostril. MINE: Gold production at the Snip mine was 26,844 ounces in 1998 compared to 31,275 ounces in 1997. This decrease primarily was due to 11 percent lower ore grade Ore grade is a measure that describes the concentration of a valuable natural material (such as metals or minerals) in its surrounding ore. Ore grade is used to assess the economic feasibility of a mining operation: the cost of extracting a natural material from its ore is directly in 1998. Total cash costs per ounce were 6 percent lower at US $203 in 1998 compared to US $216 in 1997 primarily due to the higher expenses incurred in 1997 to transport concentrate inventory and a more favourable exchange rate in 1998. Based on the 1998 proven and probable ore reserves, which were calculated assuming a US$325 gold price, the Snip mine is scheduled to cease production in the second quarter of 1999. Gold prices were below $325 during the first half of 1998 and if prices do not improve, some of the remaining reserves may not be economic. As a consequence, amortization and depreciation of the remaining capital costs are being written off at an accelerated rate. EXPLORATION: Exploration expenditures were $1.6 million during the second quarter of 1998 compared to $2.6 million in 1997. The lower expenditures reflect reduced activity at Snip and by the Homestake Canada Canada (kăn`ədə), independent nation (2001 pop. 30,007,094), 3,851,787 sq mi (9,976,128 sq km), N North America. Canada occupies all of North America N of the United States (and E of Alaska) except for Greenland and the French islands of Inc./Prime exploration joint venture, partially offset by increased drilling in the Eskay Creek region. At Eskay Creek, follow up work is underway to review mineralized min·er·al·ize v. min·er·al·ized, min·er·al·iz·ing, min·er·al·iz·es v.tr. 1. To convert to a mineral substance; petrify. 2. To transform a metal into a mineral by oxidation. 3. drill hole intersections underlying the existing ore body. This rhyolite rhyolite, fine-grained light-colored acidic volcanic rock. Rhyolite is chemically the equivalent of granite, and is thus composed primarily of quartz and orthoclase feldspar with subordinate amounts of plagioclase feldspar, biotite mica, amphiboles, and pyroxenes. hosted mineralization Mineralization The process by which the body uses minerals to build bone structure. Mentioned in: Rickets mineralization, n the bioprecipitation of an inorganic substance. is below the current cut-off cut-off Anesthesiology The point at which elongation of the carbon chain of the 1-alkanol family of anesthetics results in a precipitous drop in the anesthetic potential of these agents–eg, at > 12 carbons in length, there is little anesthetic activity, grade. Studies will determine the quantity, grade and potential for mining this material utilizing a bulk method. In June, exploration drilling intersected high-grade High-grade Credit quality of AAA or AA. high-grade Of, relating to, or being a bond with little risk of default on the part of the issuer. High-grade is usually reserved for bonds rated AAA or AA by the rating services. material below No. 4 stope stope n. An excavation in the form of steps made by the mining of ore from steeply inclined or vertical veins. tr.v. stoped, stop·ing, stopes To remove (ore) from or mine by means of a stope. of 21B zone which was not in the ore reserves. Preliminary estimates indicate that this area will add in excess of 100,000 ounces of gold and four million ounces of silver to the reserves. Further drilling is underway to delineate this extension to the No. 4 stope. Geological ge·ol·o·gy n. pl. ge·ol·o·gies 1. The scientific study of the origin, history, and structure of the earth. 2. The structure of a specific region of the earth's crust. 3. A book on geology. and geochemical field work in the optioned Prime Block of the Corey Cor·ey , Elias James Born 1928. American chemist. He won a 1990 Nobel Prize for developing techniques of creating synthetic compounds. property commenced in May in an attempt to define targets for drill testing. During the quarter, Kenrich Mining Corporation ("Kenrich") spent a total of $454,000 exploring the Prime Block from the proceeds of the private equity placement made by Prime during 1997. OTHER BUSINESS On May 25, 1998 the Company received an all stock proposal from Homestake to acquire the 49.4 percent of Prime held by the public. Under the terms of the proposal, Prime shareholders would receive 0.675 Homestake common shares, or an equivalent number of exchangeable shares of Homestake Canada Inc., for each Prime share held by them. The Board of Directors of Prime has established a special committee of independent directors to consider the proposal. The committee has retained RBC Dominion Securities
American politician. A U.S. senator from Wisconsin (1947-1957), he presided over the permanent subcommittee on investigations and held public hearings in which he accused army officials, members of the media, Tetrault as its legal counsel and Roscoe Postle Associates Inc. to review Eskay Creek ore reserves. During the quarter Prime hedged an additional 200,000 ounces of silver. As at June 30, 1998, Prime had the following silver hedge positions: 3.0 million ounces at an average price of US$6.34 in 1999, 3.0 million ounces at US$6.33 in 2000, and 1.2 million ounces at US$6.00 in 2001. OUTLOOK Operating performance for the first six months has been better than expected. As a result, Prime is increasing its production target for 1998 to 360,000 ounces of gold and 11.5 million ounces of silver at an average total cash cost of US$150 per gold equivalent ounce. Although Prime plans to explore across Canada Across Canada was an afternoon program that formerly aired on The Weather Network. The segment ran from early 1999 until mid 2002. The show ran from 3:00PM ET until 7:00 PM ET. in 1998, particular emphasis is being placed on the region around the Eskay Creek mine, where the Company continued to acquire land through option agreements and staking. The 1998 exploration budget has been set at $6.9 million. Prime is a precious metals Precious Metals Valuable metals such as gold, iridium, palladium, platinum, and silver. Notes: Investing in precious metals can be done either by purchasing the physical asset, or by purchasing futures contracts for the particular metal. mining company that owns the Eskay Creek and Snip gold mines located in northwestern north·west n. 1. Abbr. NW The direction or point on the mariner's compass halfway between due north and due west, or 45° west of due north. 2. An area or region lying in the northwest. 3. British Columbia British Columbia, province (2001 pop. 3,907,738), 366,255 sq mi (948,600 sq km), including 6,976 sq mi (18,068 sq km) of water surface, W Canada. Geography . Homestake Canada Inc., a wholly owned subsidiary Wholly Owned Subsidiary A subsidiary whose parent company owns 100% of its common stock. Notes: In other words, the parent company owns the company outright and there are no minority owners. of Homestake Mining Company of California California (kăl'ĭfôr`nyə), most populous state in the United States, located in the Far West; bordered by Oregon (N), Nevada and, across the Colorado River, Arizona (E), Mexico (S), and the Pacific Ocean (W). , (NYSE NYSE See: New York Stock Exchange :HM), owns 50.6 percent of Prime's shares and has been contracted by Prime to provide exploration, managerial and administrative services. CERTAIN STATEMENTS CONTAINED IN THIS PRESS RELEASE that are not statements of historical facts are "forward looking statements" within the meaning of the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995. Such statements are based on beliefs of management, as well as assumptions made by and information currently available to management. Forward looking statements include those preceded by the words "believe," "estimate," "expect," "intend," "will," and similar expressions, and include estimates of future production, costs per ounce, dates of construction completion, costs of capital projects and commencement of operations. Forward looking statements are subject to risks, uncertainties and other factors that could cause actual results to differ materially from expected results. Some important factors and assumptions that could cause actual results to differ materially from expected results are discussed below. Those listed are not exclusive. Estimates of future production for particular properties and for the Company as a whole are derived from annual mine plans that have been developed based on mining experience, reserve estimates, assumptions regarding ground conditions and physical characteristics of ore (such as hardness and metallurgical met·al·lur·gy n. 1. The science that deals with procedures used in extracting metals from their ores, purifying and alloying metals, and creating useful objects from metals. 2. characteristics), and expected rates and costs of production. Actual production may vary for a variety of reasons, such as the factors described above, ore mined varying from estimates of grade and metallurgical and other characteristics, mining dilution Dilution A reduction in earnings per share of common stock that occurs through the issuance of additional shares or the conversion of convertible securities. Notes: Adding to the number of shares outstanding reduces the value of holdings of existing shareholders. , actions by labor, and government imposed restrictions. Estimates of production from properties and facilities not yet in production are based on similar factors but there is a greater likelihood that actual results will vary from estimates due to a lack of actual experience. Cash cost estimates are based on such things as past experience, reserve and production estimates, anticipated mining conditions, estimated costs of materials, supplies and utilities, and estimated exchange rates. Estimates of capital costs for new projects are based on a variety of factors and include past operating experience, estimated levels of future production, estimates by and contract terms with third-party suppliers, expectations as to government and legal requirements, feasibility fea·si·ble adj. 1. Capable of being accomplished or brought about; possible: a feasible plan. See Synonyms at possible. 2. reports by Company personnel and outside consultants, and other factors. Capital cost estimates for new projects are subject to greater uncertainties than additional capital costs for existing operations. Estimated time for completion of capital projects is based on such factors as the Company's experience in completing capital projects, and estimates provided by and contract terms with contractors, engineers, suppliers and others involved in design and construction of projects. Estimates reflect assumptions about factors beyond the Company's control, such as the time government agencies take in processing applications, issuing permits and otherwise completing processes required under applicable laws and regulations. Actual time to completion can vary significantly from estimates. -0-
PRIME RESOURCES GROUP INC.
CONSOLIDATED BALANCE SHEETS
(Expressed in thousands)
(Unaudited)
June 30, Dec 31,
1998 1997
ASSETS
Current
Cash and short-term
investments $ 185,824 $ 148,236
Other current assets 32,326 31,572
Investments 1,586 1,586
Resource assets 175,776 195,699
----------------------------
$ 395,512 $ 377,093
----------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities $ 18,011 $ 16,047
Deferred taxes and other 47,209 47,511
Shareholders' equity 330,292 313,535
----------------------------
$ 395,512 $ 377,093
----------------------------
PRIME RESOURCES GROUP INC.
STATEMENTS OF INCOME
(Expressed in thousands, except per share amounts)
(Unaudited)
Three Months Six Months
Ended June 30 Ended June 30
1998 1997 1998 1997
Revenues:
Gold and ore sales $ 53,806 $ 52,695 $ 110,463 $ 99,984
Interest and other 2,265 1,056 4,068 2,115
----------------------------------------
Total Revenue 56,071 53,751 114,531 102,099
Costs and Expenses:
Production 20,739 22,226 39,722 39,545
Depreciation and
amortization 10,154 8,616 19,825 16,988
Administrative and
general 1,113 987 2,500 1,957
Exploration 1,640 2,568 2,708 2,980
Interest 320 135 551 266
Foreign exchange loss 2,057 570 3,736 478
----------------------------------------
Total costs and
expenses 36,023 35,102 69,042 62,214
----------------------------------------
Income before taxes 20,048 18,649 45,489 39,885
Income and mining taxes
Current (13,877) (11,829) (29,953) (25,068)
Deferred 2,331 786 4,264 1,785
----------------------------------------
Net Income for
the Period $ 8,502 $ 7,606 $ 19,800 $ 16,602
----------------------------------------
Net Income Per Share $ 0.11 $ 0.10 $ 0.26 $ 0.22
----------------------------------------
Average Number of Shares Used
in the Computation 76,074 76,074 76,074 76,074
----------------------------------------
PRIME RESOURCES GROUP INC.
STATEMENTS OF CONSOLIDATED CASH FLOWS
(Expressed in thousands)
(Unaudited)
Three Months Six Months
Ended June 30 Ended June 30
1998 1997 1998 1997
Operating Activities
Cash flows from
operations $ 16,521 $ 15,786 $ 35,854 $ 32,460
Net decrease (increase) in noncash
working capital: 12,403 11,247 5,728 (27,454)
---------------------------------------
Cash provided by
operating activities 28,924 27,033 41,582 5,006
Investment Activities
Additions to resources
assets, net (282) (3,102) (951) (4,045)
Financing Activities
Dividends paid on common
Shares (3,043) (3,043) (3,043) (3,043)
---------------------------------------
Increase (decrease) in cash and
short-term investments 25,599 20,888 37,588 (2,082)
Cash and short-term investments,
beginning of period 160,225 102,515 148,236 125,485
---------------------------------------
Cash and short-term investments,
end of period $185,824 $123,403 $185,824 $123,403
---------------------------------------
PRIME RESOURCES GROUP INC.
Production Highlights
(Unaudited)
Three Months Six Months
Ended June 30 Ended June 30
1998 1997 1998 1997
Eskay Creek Mine Results
Tons Milled 15,767 29,975
Mill Grade-Gold (opt) 1.20 1.26
Mill Grade-Silver (opt) 33.4 39.6
Mill Recovery-Gold
(percent) 92.7 92.4
Mill Recovery-Silver
(percent) 95.9 95.4
Tons Floatation
Concentrate Sold 2,432 4,245
Tons of Ore Sold 25,457 31,157 50,521 61,215
Direct Ore Shipment
Grade-Gold (opt) 2.13 1.91 2.29 1.97
Direct Ore Shipment
Grade-Silver (opt) 96.12 106.7 97.0 99.5
Gold Production (oz) 69,978 56,527 143,418 110,864
Silver Production
(oz) 3,122,944 3,204,150 6,293,829 6,026,444
Production - Gold
Equivalent (oz)(1) 129,916 100,937 271,084 195,516
Total Cash Costs
(US$/oz) $ 134 $ 157 $ 127 $ 161
Noncash Costs (US$/oz) 31 31 30 33
Total Costs (US$/oz) $ 165 $ 188 $ 157 $ 194
Snip Mine Results
Tons Milled 41,244 42,561 79,286 82,839
Mill Grade - Gold (opt) 0.72 0.81 0.71 0.79
Mill Recovery - Gold
(percent) 91.6 92.1 91.7 92.0
Gold Production (oz) 26,844 31,275 50,536 59,523
Total Cash Costs
(US$/oz) $ 203 $ 216 $ 213 $ 210
Noncash Cost (US$/oz) 134 116 135 117
Total Costs (US$/oz) $ 337 $ 332 $ 348 $ 327
Prime Consolidated
Total Gold and Gold
Equivalent (oz)(1) 156,760 132,212 321,620 255,039
Total Cash Costs
(US$/oz) $ 145 $ 171 $ 141 $ 173
Noncash Costs (US$/oz) 49 51 46 52
Total Costs (US$/oz) $ 194 $ 222 $ 187 $ 225
(1) Gold and Silver are accounted for as co-products at Eskay Creek.
Silver is converted to gold equivalent, using the ratio of the silver
market price to the gold market price. These ratios were 52 ounces and
49 ounces of silver equals one ounce of gold for three month and six
month periods ended June 30, 1998, respectively (1997 - 72 ounces and
71 ounces of silver equals one ounce of gold for three months and six
month period ended June 30 respectively).
CONTACT: Prime Resources Group Inc. Michael Michael, archangel Michael (mī`kəl) [Heb.,=who is like God?], archangel prominent in Christian, Jewish, and Muslim traditions. In the Bible and early Jewish literature, Michael is one of the angels of God's presence. Steeves, 415/981-8150 or Prime Resources Group Inc. Geoffrey Geoffrey (jĕf`rē), 1158–86, duke of Brittany (1171–86); fourth son of Henry II of England. Betrothed (1166) to Constance, heiress of Brittany, he was recognized as heir to the duchy in 1169 and succeeded to it on the death of her A. Burns, 604/684-2345 or Prime Resources Group Inc. Walter Wal·ter , Bruno 1876-1962. German conductor noted for his interpretations of Mozart and Mahler. Noun 1. Walter - German conductor (1876-1962) Bruno Walter Segsworth, 604/684-2345 http://www.prime-res.com |
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