Pegasus acquires interest in Australian gold producer

The purchase of 38.4 million treasury shares of Zapopan NL gives Pegasus Gold (TSE) a 35% interest in the Australian miner’s 111 million outstanding common shares.

Pegasus paid A65 cents per share for the stock, injecting A$25 million into the company.

Zapopan owns the Tanami gold mine in the Northern Territory of Australia and is expected to produce over 100,000 oz. gold this year at a cash cost of about A$346 per oz.

Reserves in all categories at Tanami are estimated at six million tons grading 0.067 oz. gold per ton.

Pegasus’ primary reason for the investment is Zapopan’s Mt. Todd project about 190 miles south of Darwin. Preliminary estimates put reserves at about 50.6 million tons grading 0.048 oz. gold.

Zapopan recently completed an agreement with Billiton Australia to increase its interest in the project to 100%.

The company paid Billiton an initial installment of A$5.5 million and must make a final payment of A$5 million by April 7, 1993, to complete the purchase.

Zapopan is now working on a prefeasibility study on the project with initial order-of-magnitude estimates putting production at the 4.5 million ton-per- year level for an annual gold output of about 160,000 oz.

Pegasus could afford the acquisition, finishing 1991 in excellent financial shape with more than US$96 million in working capital and only US$79.6 million in long-term debt and other liabilities.

Pegasus produced 315,300 oz. in 1991 at an average cost, net of byproduct sales, of US$226 per oz. Cash flow for the year after changes in working capital amounted to US$31.9 million. This compares with cash flow of US$30.2 million in 1990.