Doug Ashbury
Northern News Services

NNSL (May 20/98) - Royal Oak Mines' first quarter financial results improved dramatically.

A move from red to black was largely due to cost reductions.

Last year, Royal Oak, which owns Giant mine, shut its Hope Brook mine in Newfoundland and the Colomac mine in the NWT in September and December respectively.

For the three months ending April 31, Royal Oak reports a $2.3 million profit.

For the same frame a year earlier, Royal Oak lost $8.1 million.

Revenues fell to $22.4 million from $48 million.

In first quarter, the company lowered its average cost of production from continuing operations at Giant and Pamour-Nighthawk by 16 per cent to $280 US per ounce from $332 US over first quarter 1997.

The $280 US cash cost reflects "major cost-cutting initiatives implemented in fourth quarter," Royal Oak said.

In fourth quarter 1997, Giant Pamour-Nighthawk mines' average cash cost was $285 US an ounce.

Gold production from these mines was 45,557 ounces, down five per cent from 47,999 ounces produced in first quarter 1997.

Royal Oak's total gold production from all its operations was 45,557 ounces over the year's first three months.

Total gold production in first quarter 1997 was 85,080. That included production from Hope Brook and Colomac.

Over the quarter, Royal Oak realized and average gold price of $345 US, a premium of $51 US per ounce above the average spot price of $294 US but well below the $11 US realized in first quarter 1997.

Royal Oak president and chief executive officer Peggy Witte said, "The last 12 months have been a difficult time for Royal Oak as we have had to overcome a number of challenges at our Kemess project and have taken steps to improve our cost structure going forward by closing the high cost Hope Brook and Colomac mines."

"I believe the worst is now behind us as we are about to commence production at Kemess and complete our financing."

Witte described the building of Kemess as challenging. Closing of $120 million in debt financing will allow the company to resolve its short-term liquidity problems, she added.

While Royal Oak has brought Kemess to production, the company has increased its debt position significantly.

As of April 31, debt was up to $334.7 million from $274.1 million three months earlier ($132.9 million March 31, 1997).

Assets as of March 31, 1998, were $842.5 million compared to $810.2 million a year earlier.

Cash as of March 31, 1998, was 623,000, down from $114.4 million a year earlier.

The company's operating income for the quarter was $3.2 million compared to a $9.2 million loss in first quarter last year.