Faro mine slated for new lease — Swiss firm to buy lead, zinc in 1998

Short-term financing from Cominco (CLT-T) and a sales agreement with metal merchants Glencore Group should enable Anvil Range Mining (ARO-T) to resume production at the Faro lead-zinc mine in the Yukon.

Cominco has advanced a $5-million loan, which Anvil may call on or after March 15, 1998, to supplement a $15-million loan already advanced in August.

Like the original loan, the new one bears interest at 8.5%; at maturity it will be worth $7 million.

Under a separate agreement, the Swiss-based Glencore Group has contracted to buy the mine’s lead and zinc concentrates for the perod ending March 31, 1998, and has undertaken to pay part of the value of the concentrate on delivery to the port at Skagway, Alaska. The purchase agreement can be extended at Glencore’s option to cover the rest of 1998.

When the Faro operation was shut down in November 1996, operating costs were close to US52cents per lb. of zinc. A 1994 feasibility study, on which Anvil based its production decision, had assumed prices of US$5.50 per oz. for silver and US28 cents per lb. for lead.

At the time Faro closed, Anvil officials were suggesting the operation needed US50cents per lb. for zinc and US35cents for lead to be profitable.

At presstime, the spot price for zinc was US51cents per lb., but lead was languishing at US24cents per lb. and silver was still only US$5.24 per oz.

Stripping at Faro began again in August, and some ore was moved in September. Consulting firm Strathcona Mineral Services is assessing ways to lower operating costs at the mine, and Anvil will be re-assessing its cash needs when Strathcona’s report is ready.

For the 9-month period ended Sept. 30, Anvil reported a loss of $11.6 million (61cents per share) on revenue of $31.2 million, compared with a loss of $25.8 million on $150.9 million in the last three quarters of Anvil’s previous financial year, which ended Oct. 31, 1996.

For the quarter ended Sept. 30, Anvil lost $6.9 million on revenue of $500,000, compared with a loss of $11.6 million on $42.4 million in the three months ended Oct. 31, 1996.