The partnership, announced in April (T.N.M., May 3/99), sees the creation of TVX Normandy America to oversee each company’s existing projects, including TVX’s various interests in five gold mines: La Coipa (50%) in Chile; Crixas (50%) and Brasilia (49%) in Brazil; and New Britannia (50%) and Musselwhite (32%) in Canada. TVX holds 50% plus one share in the joint venture, leaving Normandy with 50% less one share.
For its interest, Normandy paid US$211 million in cash, which includes its acquisition of 17.8 million TVX treasury shares at $2 per share, making it the company’s second-largest shareholder. Also, the major has provided TVX with a US$150-million line of credit and will fund up to three years of that company’s share of acquisition costs incurred by the joint venture.
“We have created a dynamic company that has the backing of Normandy,” TVX President Eike Batista told shareholders at the company’s annual meeting in Toronto. “Looking forward, TVX is now positioned to develop Olympias [a depost in Greece].”
Olympias, the largest project under development by TVX, hosts underground reserves of 9.1 million tonnes grading 8.7 grams gold and 138 grams silver per tonne plus 4.6% lead and 5.8% zinc, as well as stockpiled material and tailings. Both a revised feasibility study, which allows for the addition of pressure oxidation to the processing circuit and a reserve update, and an environmental impact statement are scheduled for completion in the coming weeks.
Production, in each of the first five years of operation (from 2002 to 2006), is projected at 210,000 oz. gold, 2.1 million oz. silver, 50,000 tonnes zinc concentrate and 35,000 tonnes lead concentrate. Cash costs are anticipated at below US$100 per oz. gold net of byproduct credits.
Closing of the joint venture satisfies certain conditions for a US$170 million project-debt facility with an international bank. Also, 35% of capital costs may qualify for economic-development grants from the European Union.
In the first three months of 1999, TVX earned US$4.8 million on revenue of US$41.1 million, compared with US$600,000 on US$37.3 million in the corresponding period of 1998. Cash flow dropped to US$3.6 million from US$41 million, with the year-ago period including a one-time gain of US$38.4 million from a restructured hedge position.
Attributable production topped 143,000 oz. gold-equivalent in the quarter, with cash costs averaging US$158 per oz. gold-equivalent. This compares with output of 106,900 oz. at US$210 per oz. in the first three months of 1998, reflecting the devaluation in the Brazilian real and improved silver grades and recoveries at La Coipa.
TVX expects its attributable production in 1999 to top 355,000 oz. at US$175 per oz. The revision reflects Normandy’s interest in the mines, with which it will net 154,000 oz. gold-equivalent.
Closing the meeting, Batista praised everyone involved in forming the joint venture and noted that the restructured TVX maintains a solid resource base of 15.7 million oz. gold-equivalent, of which 9.5 million oz. are proven and probable reserves. He added that the deal leaves the company financially strong and that its hedging position ensures it a gold price of US$280 per oz. till 2002.
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