Rea files for bankruptcy — Subsidiary Bisset also goes belly up

Rea Gold (REO-T) and its wholly owned subsidiary, Bissett Gold, have filed for protection under the federal Bankruptcy Act.

he announcement spells the end of the Bissett gold mine project near Bissett, Man. Underground development was completed in mid-October, bringing the total capital cost of construction to $59 million. Only low-grade development ore had been processed since the mine’s reopening in July. To date, no production figures have been released.

In addition, Rea’s directors and officers have resigned, as have those of the subsidiary.

Bissett Gold owes its principle lender, NM Rothschild & Sons, about US$23 million and was unable to reach a satisfactory compensation agreement prior to the resignations. The debt is backed by Rea Gold and secured by charges over the assets of Bissett and Rea.

Rea Gold’s other subsidiaries could be affected by the bankruptcy, specifically its Uruguayan division, which operates the San Gregorio gold mine. The mine’s assets are charged under a project finance facility in favor of Standard Bank London to the tune of US$31 million.

Rea Gold’s third quarter was marked by a loss of $19.8 million (or 17 per share), compared with a $21.8-million loss (24 per share) over the same period last year.

The loss of the third quarter is mainly attributed to the writedown of the Mt. Hamilton mine, near Ely, Nev.

During the first nine months of 1997, the company suffered a loss of $28.3 million (27 per share), compared with a $23.2-million loss (38 per share) in the corresponding period last year.

A combination of spot and hedged gold sales meant that Rea realized an average gold price of US$358 per oz. over the recent third quarter, compared with US$385 per oz. in the year-ago period. Gold production between the two quarters slipped to 17,646 oz. from 24,385 oz.; silver output, to 20,058 oz.

from 28,642 oz.