Property writedowns keep TVX in red ink

Lower cash costs at several of its operations were not sufficient to prevent TVX Gold (TVX-T) from reporting a loss of US$50 million (or 36cents per share) for 1997.

The medium-tier producer reduced total cash costs by between 5 and 10% at four mines: La Coipa in northern Chile, Crixas in central Brazil, Musselwhite in northern Ontario, and New Brittania in western Manitoba.

However, writedowns for the year were considerable, totalling US$43.4 million. These include: US$17.5 million relating to the closure, in 1996, of the Mineral Hill gold mine in Montana; US$18 million relating to the scrapping of the Pachicutza exploration project in Ecuador; and US$7.8 million relating to a reduction in the company’s investment in Valerie Gold (VLG-V), which is exploring for precious and base metals in south-central Mexico.

The previous year was marked by even more substantial writedowns, totalling US$94.7 million, which stemmed largely from the company’s decision to dispose of both the Mineral Hill and Casa Berardi mines (the latter being situated in Quebec). The loss for 1996 amounted to US$86 million (53cents per share).

The Toronto-based company’s share of 1997 production from its five joint-ventured operations was 318,300 oz. gold and 5.1 million oz. silver, compared with 335,100 oz. and 6.8 million oz., respectively, in the previous year.

These five projects include La Coipa, a 50-50 partnership with Placer Dome (PDG-T); Crixas, a 50-50 partnership with Luxembourg-based Minorco (MNRC-Q); Musselwhite, in which Placer Dome holds a 68% stake, and TVX the remainder; New Brittania, a 50-50 partnership with High River Gold Mines (HRG-T); and the Brasilia mine in eastern Brazil, in which the Brazilian subsidiary of Rio Tinto (RTP-N) owns a 51% interest.

TVX realized a gold price of US$398 per oz. gold in 1997, compared with US$396 per oz. in the previous year. Total cash costs between the two years fell to US$223 from US$239 per oz. gold-equivalent. Meanwhile, cash flow from operations slipped to US$24.5 million from US$35.6 million.

At the end of 1997, the company had US$50.7 million in cash on hand and $US151.9 million in debt. Total proven and probable reserves had increased by 15% to 4.4 million oz. gold and 99.8 million oz. silver, and TVX stressed that reserves were expected to double in 1998 when resources of more than 6 million oz. gold are upgraded to reserve status at the Olympias and Skouries projects in Greece. (The upgrading is expected to occur once feasibility studies are completed.)

Production levels at all five joint ventures met or exceeded expectations, with the exception of the Brasilia operation. A longer-than-anticipated startup period at that mine’s recovery plant resulted in a 10% reduction in planned output. The plant allows the different metallurgy of the B2 mineralization to be processed economically.