Kassandra division upheld

The Court of Appeal for Ontario has dismissed opposing appeals brought forth by a group of investors known as the Alpha Group and TVX Gold (TVX-T) in relation to their advanced Kassandra property in Greece.

Citing TVX’s use of confidential information owned by Alpha, the appeals court upheld a lower court decision granting Alpha a 12% carried interest and the right to a 12% participating interest in Kassandra upon payment of applicable costs. However, the court rejected Alpha’s claim to the entirety of Kassandra and its alternative request to have its interest converted into a damages award.

TVX, which keeps its own interest and still maintains control of the project, is reviewing the decision and may apply for an appeal to the Supreme Court of Canada.

The decision also clears the way for 1235866 Ontario Inc. to pursue its own legal action against Alpha. The numbered company, which is the successor to bankrupt Curragh Resources, claims that Alpha improperly took Curragh’s opportunity to acquire the Kassandra mines and misused confidential information. Regardless of the outcome, an earlier deal between the numbered company and TVX ensures that the latter company’s interest will not be affected.

Meanwhile, the Central Archaeological Council in Athens has given the go-ahead to the Olympias portion of the project. Construction permits are expected by the summer’s end and, once in hand, will enable the start of a 24-month development schedule.

To resume production at Olympias, TVX will require a new underground conveyor and decline, a new mill, refurbishments to the existing mill, and a gold recovery plant with bio-oxidation and pressure-oxidiation circuits. In all, the project is expected to incur a capital cost of US$248 million.

The Olympias mine, which has been shut down for almost a decade, has reserves of 11.5 million tonnes grading 6.09% zinc and 4.6% lead, plus 9 grams gold and 138 grams silver per tonne. A final feasibility study, tabled in late 1999, proposed a 1,650-tonne-per-day mine, starting in 2003, growing to 2,700 tonnes per day by 2007, which would produce about a 250,000 oz. gold and 2.3 million oz. silver annually. The feasibility study showed that the project would yield a 17% internal rate of return at a US$325-per-oz. gold price, net of byproduct credits.

Negotiations between TVX and Deutsche Bank of London for US$130 million in recourse debt financing and US$40 million in bridge financing are in the final stages.