Revett profits take dip

While precious metal prices continue to dip, the profits for the Revett Minerals Corp. followed suit, reducing profits considerably in the second quarter.

Several factors came to a head in the period, including retrofitting equipment and an unrelenting rainy season.

These are the main reasons the net income for Revett dropped from a profit of $7.9 million in the 2011 second-quarter to a loss of $2.2 million. Of course, a large number of that $10.1 million discrepancy was a full $2 million to extend stock options to all employees of Revett Minerals and Troy Mine, Inc. 

According to President and CEO John Shanahan, if the cash-flow costs are looked at, Revett stays firmly in the black.

“There are no alarm bells ringing,” Shanahan said. “Could it have been better? Absolutely. Those May-June rains killed us. But it wasn’t a disaster.”   

With silver down more than $7 an ounce compared to last year’s second-quarter prices, it seemed like Revett might suffer heavy losses, and unfortunately, the rainy months of May and June prevented increased tonnage of high-grade ore because of water in the mine, said Corporate Secretary and Director of Investor Relations Monique Hayes.

“There is a normal amount of water that you pump out of the mine,” Hayes said. “But we had a buildup of water and not as much of an ability to pump it out.”

   This water in the Troy Mine, a relatively shallow mine (and as such has less problems with water than deeper, steeper mines) knocked down production tonnage considerably. Total silver production dropped 64,000 ounces and copper is down nearly 1.1 million pounds compared to last year’s production, attributed partly to the lack of accessibility to flooded areas of the mine.

   Another cost was the retrofitting of equipment to run on biodiesel, which not only took capital, but also vehicles and equipment temporarily out of service while they were updated.

   Despite the lower metal prices, weather-related costs, increased employee benefits and environmental upgrades, Shanahan expects silver production to be up over last year and copper to have similar production amounts.