First-Quarter Profit Posted by St. Joe Gold
St. Joe Gold Corp., formed last fall by Irvine-based Fluor Corp. as a separate, publicly traded company, reported Thursday that it had a net income of $4.05 million in its first quarter of operations, ended Jan. 31.
The same gold, silver and copper mining assets that were spun off from Fluor to form St. Joe Gold on Nov. 1, 1985, produced a $719,000 loss in the prior year’s first quarter.
Net sales in the first quarter of fiscal 1986 were $28.7 million, a 61% increase over net sales of $17.9 million produced by the same assets under St. Joe Minerals subsidiary of Fluor a year earlier.
“I think it was a very good first quarter,” said Alvan H. Sage III, president of St. Joe Gold.
The net income reflects higher gold prices and a better grade of ore being produced at St. Joe’s mines, he said. “We expect both our earnings and the price of our stock to move pretty much with the trend on the gold market.”
Industry analysts watching Fluor redeploy its assets during a year in which it lost $633.3 million said the profits posted by St. Joe Gold were encouraging.
“They’re starting out in a reasonably promising way,” said Herbert Hart, an analyst with S.G. Warburg, Rowe & Pitman, Akroyd Inc. in San Francisco. In addition to the higher gold prices and higher-quality ore, Hart pointed to Fluor’s overall belt-tightening throughout its organization as a factor in St. Joe Gold’s profits.
One of the problem areas for Fluor has been its metals and minerals operations under St. Joe Minerals, analysts said. In the last year, Fluor sold its Denver-based oil and gas subsidiary and spun off St. Joe Minerals’ more profitable precious metal mining operations to create St. Joe Gold.
Sage said his company raised $35.7 million in its initial public offering by selling 3 million shares, about 10% of its stock. The shares are now traded on the American Stock Exchange. The remaining 90% of St. Joe Gold stock is owned by the St. Joe Minerals subsidiary of Fluor. Fluor has said it eventually plans to sell up to 49% of St. Joe Gold to the public.
“The rationale behind the minority sale (of St. Joe Gold stock) is to establish a market value for worldwide gold operations,” said Terence M. York, an analyst with Drexel Burnham Lambert Inc. in New York. “It’s an opportunity for Fluor to participate in any expected rise in gold over time and it could represent a vehicle with which to raise additional capital.”
It also helps to set a price for any future sale of St. Joe Gold, he said.
The net proceeds of the initial offering are to be used for the exploration and development of precious metals properties, primarily in the United States and Canada. The company’s principal operations now are the El Indio Gold Mine in Chile and the Yuba Placer Gold Co. in Northern California.
In the first quarter, St. Joe Gold mined 84,787 troy ounces of gold, 213,941 troy ounces of silver and 4,557 tons of copper. In the same quarter last year, St. Joe Minerals mined 54,754 troy ounces of gold, 201,616 troy ounces of silver and 4,125 tons of copper.
