MVP’s first-auarter loss raises shareholders’ ire

Trading from a high of $1.75 in 1988, MVP has been hitting new lows lately of less than 35 cents per share. MVP, which holds a portfolio of junior mining stocks, has been ravaged by the downturn in junior exploration companies — a downturn exacerbated by low gold prices.

In an effort to eliminate the traditional discount attached to the shares of holding companies, McAvity has moved MVP into the role of an active mining finance house with direct control of gold production. This was completed through the acquisition of 91% of Camindex Mines last year. Camindex owns a 51% interest in the Valdez Creek placer mining operation in Alaska.

However, the Valdez Creek investment, expected to act as a cash flow stream to MVP, has done the exact opposite — lost money. During the first quarter of this year, the operation produced 13,753 oz of gold at a cost of $484(US) per oz. MVP’s share of the operating loss was $1.4 million for the period.

After adding management fees, administrator fees and interest expense, another $705,827 was added to the loss which swelled to $2.46 million for the quarter. This compares to a loss of $1.44 million in the same period last year.

“I don’t think this company is going to survive another nine months,” one shareholder told the officers, complaining that MVP could not afford to continue paying out big management fees to its officers while sustaining such large losses. McAvity responded: “over my dead body.”

Burdened by $25.5 million in debt, used to finance the acquisition of Camindex, MVP is servicing the loan from “modest portfolio liquidations,” McAvity explained. Interest expense this year will be about $1.2 million. In total, the company will require $2.5 million for operating expenses in 1989, McAvity told the meeting.

At Valdez Creek, operations during the first quarter were severely affected by a record cold snap which hindered operations. Although unit gold production costs were well above gold prices, McAvity maintained that costs would come down this year to an average of $320(US) per oz.

“I believe that we’re turning it around,” McAvity said, noting that in April costs were around $326 per oz. However, he would not predict if this low cost would continue. He added that the operation might be shutdown for up to two months this year in order to divert the river resulting in increased unit costs. Also, lower grading material is expected to be mined in June.

Planned production from Valdez Creek this year is 70,000 oz of gold, 35,700 oz of which would go to MVP’s account. MVP says the mine will generate positive cash flow in 1990 when production is scheduled to increase to 90,000 oz of gold per year.

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