Pegasus Gold’s 2-year growth “extraordinary,” president says

After the 1986 start-up of two properties and a third this year, Pegasus Gold Corp., is flying high, President James Foreman told shareholders at the annual meeting.

“It has been an extraordinary feat to grow from a one-mine, $40-million company only two years ago to a 4-mine, $200-million company today,” he said.

Mr Foreman, heading a new, aggressive management team pursuing an unprecedented expansion program for the company, termed 1987 a year of transition — moving from start-ups into a smooth operations phase. Once the three new mines are producing at full capacity, he said, production is expected to exceed 280,000 oz gold and 1.9 million oz silver per year.

Last year also saw Pegasus soar from the red into the black financially. The company recorded its second highest level of earnings in history with 1986 net earnings of $4,653,565(US) (35 cents per share) on sales of $35,054,395. This compares to a net loss in 1985 of $l1,167,325 or 11 cents per share on sales of $18,014,588.

Sales of gold during 1986 totalled 92,000 oz at an average price of $381 per oz, compared to 57,700 oz at an average price of $312 in 1985. As well, its share price has increased by 340% over the past 12-month period.

The two 1986 properties placed into production were Florida Canyon and Relief Canyon. The third start-up this year, is Pegasus’s gold, silver and base metals Montana Tunnels mine. Mr Foreman told the gathering that the mine began operations March 25, three months ahead of schedule and $6 million below budget.

Guests were also supplied with a copy of an April 10-released U.S. investment analysis report on Pegasus which discusses the latest start-up. The Goldman Sachs research report says: “excluding Montana Tunnels, 1987 gold production will rise 74% to 160,000 oz. Including 45,000 oz of gold from a partial year of production at Montana Tunnels, annual gold production will be increased 123% to 205,000 oz.”

The report also says “cash cost, net of byproduct credits, will be less than $200 per oz of gold when the project is fully operational by late 1987,” It predicts that “although earnings should be up significantly in 1987 due to volume gains, the full earning power of Montana Tunnels will not show up on Pegasus results until 1988 when 88% of the company’s production will be unhedged.” Overburden removed

A company spokesman said later the mine’s overburden has been removed and currently 12,000 tons of ore are being processed daily.

Earlier this year, Pegasus acquired a working interest in Montana Tunnels from usmx, subject to a 5% net profits interest during payback of capital costs and a 50% net profits interest payable to usmx, thereafter. Pegasus owns a 29.4% equity interest in usmx.

An aggressive 1986 reacted on company operations by realizing a gain of 44% in shareholders’ equity and increasing company assets from $80 million to $191 million by year- end. This increase leaves it in the “strongest position in its history,” Mr Foreman said.

In other business, Pegasus increased its directors from six to seven, issued 20 million common shares without par value to give greater capital-raising capabilities, passed a “fair price” article prohibiting the offering of premium share prices to select shareholders’ groups and authorized a stock option plan with two-thirds of the shares to go to the company’s 300 employees. Australian joint venture

A further move by the company this year has been the increased share position in Pan Australia Mining, moving from 3% to 10%. Pegasus and Pan Australia have a 50/50 joint-venture interest in a project located in Queensland.

Mr Foreman said he did not think 1987’s acquisition growth would parallel that of the previous year, but he noted the company was still searching for new prospects. He admitted the company was not only restricting its targets to the large high grade mines that every company wants, but also to smaller or lower grade operations that still see a high return on investment. The company claims the acquisition costs of its mines have been one of the lowest in the industry.

Looking ahead for the company, Mr Foreman said: “1988 will be the first year in which all four mines will be operating at full capacity and further growth in production from record levels in 1987 is expected.”