TVX board OKs note conversion

The board of directors of TVX Gold (TVX-T) has unanimously approved a proposal to force an early conversion of the company’s US$250-million, gold-linked convertible notes.

The move would be highly dilutive, resulting in the issuance of 321.5 million new shares, compared with the 35.7 million that are now outstanding.

The proposal has yet to be approved by the noteholders and existing common shareholders, who will meet at separate meetings before August.

To become a reality, the proposal must be approved by noteholders owning two-thirds of the notes voted and by shareholders holding a majority of the shares voted.

TVX says it has already entered into support and lock-up agreements with holders of about 44% of the notes, by par value.

“Once the notes issue is resolved, management can focus on moving the company forward,” says TVX Chairman Sean Harvey, who has replaced long-time chairman Eike Batista.

Last summer, the TVX board formed a special committee to review the direction of the company and retained NM Rothschild & Sons as financial advisors and Donahue Ernst & Young as legal counsel.

The review was prompted by years of declining share value and the stymied development of the company’s prized gold assets in Greece.

The share collapse has been dramatic and relentless: In the glory days of 1996, when gold prices were high and TVX enjoyed great success raising capital, the company’s shares traded as high as $15.50, or the equivalent today of $77.50 after adjusting for the 1-for-5 share consolidation carried out last year; Today, in the cold reality of 2001’s gold market, TVX shares are flitting about the $1 level.

TVX shareholders can at least take solace in the fact that their company remains profitable. During the first quarter, the company posted consolidated net earnings of US$3.7 million (US2 per share after adjustments relating to the convertible notes), compared with last year’s first-quarter earnings of US$4 million (US3 per share after adjustments and restated to reflect the July 31, 2000, share consolidation).

First-quarter revenue fell by almost US$3 million to US$39.3 million, owing to lower gold-equivalent production and lower realized prices for gold and silver.

Attributable first-quarter, gold-equivalent production from TVX’s interests in five mines in the Americas totalled 59,300 oz., a 3% increase over plan but a 5% drop over the 62,200 oz. produced during the comparable period last year.

TVX’s realized gold and silver prices in the first quarter were US$304 and US$4.07 per oz., respectively, compared with US$365 and $4.30 per oz. in the first quarter of 2000.

Upon completing the note conversion, TVX expects to have a cash position of about US$50 million, excluding mine operating cash.

Consolidated current and long-term debt at March 31, 2001, stood at US$109.6 million, down from US$115.2 million at the end of 2000.

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