Cheni’s financial health shows marked improvement

The financial health of Cheni Gold Mines (TSE) took a turn for the better in the year ended Dec. 31, 1992.

Following premature depletion of reserves at the Lawyers mine in north-central British Columbia last year, Cheni renegotiated its bank and trade creditor debt. As well, it arranged for a future cash infusion from French mining company SEREM.

At year-end, Cheni had about $240,000 in working capital. Long-term debt was $9.3 million, of which $3.7 million relates to a government assistance loan due only when the combined price of one ounce of gold and 50 oz. of silver totals US$868.

This compares with a working capital deficit of more than $9.4 million at the end of 1991. At that time, long-term debt consisted of the $3.7-million loan. The reorganization calls for long-term bank and trade creditor debt to be repaid through future private placements from SEREM.

SEREM agreed to buy up to 15 million common shares between 1993 and 1996 for 50 million francs ($11.5 million).

The private placements are conditional on SEREM receiving revenue from one of its properties.

Consequently, Cheni has completed a private placement to SEREM of 1.4 million common shares at 75.5 cents each, netting the company just over $1 million. In its annual report, Cheni says its prospects depend on the discovery of additional reserves on the Lawyers property and, ultimately, on the acquisition of other properties. It will spend about $300,000 further exploring Lawyers this year.

Last year, Cheni outlined a small, high-grade reserve in the Phoenix zone, mining 5,439 tons to yield 6,713 oz. gold and 296,084 oz. silver. This year, exploration will focus on a quartz breccia discovery along strike from the Phoenix zone. As well, more work will be done on three resistivity targets.

Cheni decided not to mine the nearby Mets property in 1993 because development, mining and processing costs were deemed too high. Diluted reserves at Mets have been reduced to about 58,800 tons grading 0.35 oz. gold per ton, down from previous estimates of 75,000 tons grading 0.38 oz. gold. Mets is jointly owned by Golden Rule Resources (TSE) and Manson Creek Resources (TSE). Cheni holds the right to develop it subject to a 10% gross royalty on the first 75,000 tons and 17% on any additional tonnage. Cheni must mill at least 10,000 tons by September to keep the agreement in good standing. It has requested a one-year extension.

For the year ended Dec. 31, 1992, net loss was $3.7 million including property writeoffs totaling $2.2 million.