TVX stymied at Olympias

The Greek Conseil d’Etat, the country’s highest administrative law court, has ruled invalid and annulled permits already issued by the Greek government for TVX Gold‘s (TVX-T) Olympias gold project.

Said TVX’s president and CEO Sean Harvey: “We are very disappointed with the decision from the Conseil d’Etat. We have more than fulfilled our contractual obligations under the acquisition agreement and have spent in excess of US$250 million in Greece with the understanding that, as specified in the ratified acquisition agreement, we would be given valid permits to enable us to develop a gold recovery plant at the Olympias site.”

TVX singed a deal with the Greek government in 1995 finalizing the purchase of the Kassandra Mines assets, which included the Olympias mine and mill facilities, the Stratoni mill and associated mines, and the Skouries deposit.

Under the deal, which was ratified by the Greek Parliament into law, it was specified that, among other things, the Greek government would issue the required permits to TVX’s Hellas division for the development of a gold recovery plant at the Olympias site.

First put into production in 1976 for lead, zinc and silver, TVX laid plans to turn Olympias into a gold operation and refurbish existing operations to include a gold recovery plant. Before TVX got its hands on the project, the refractory gold mineralization was either stockpiled or disposed of with the tailings. At the end of 1999, stockpiled reserves tallied to 285,000 tonnes running 22.9 grams gold and 24.5 grams silver per tonne. The tailings contained more than 2.4 million tonnes averaging 3.42 grams gold.

In two underground zones, Olympias is also host to reserves of 11.5 million tonnes of 9 grams gold, 138 grams silver, 6.1% zinc and 4.6% lead.

The reserves are based on metal prices of US$325 per oz. for gold; US$5.50 per oz. silver, US25 per lb. lead and US50 per lb. zinc.

In 2000, SNC-Lavalin pegged Olympias’ capital costs at US$258 million. Average production in the first five years was pegged at 235,000 oz. gold, 2 million oz. silver, 19,700 tonnes zinc and 18,200 tonnes lead. Over the subsequent 14 years, production would average 153,000 oz. gold, 2.4 million oz. silver, 31,300 tonnes lead and 25,000 tonnes zinc. Cash costs are pegged at US$72 per oz. gold (net of byproduct credits) for the first five years and US$50 per oz. thereafter.

The operation’s internal rate of return is estimated at 16.7%, and the net present value is about US$199 million, at a 5% discount. Tax credits are not considered, but the required metal prices are: US$325 per oz. for gold, US$5.50 per oz. for silver, US55 per lb. for zinc and US25 per lb. for lead.

Olympias is a stratabound replacement orebody occurring at the contact between marbles and overlying gneisses. Base metal mineralization consists primarily of sphalerite and galena with largely refractory gold mineralization associated with pyrite and asenopyrite.

TVX is reviewing all of its options, including possible legal remedies. The company notes that its Stratoni base metal operation and Skouries development project are unaffected by the latest decision.

TVX’s Stratoni operation was recently given the green light by the Greek government, which has issued a permit allowing for the continuation of mining activities at the Mavres Petres mine, part of the Stratoni zinc-lead-silver operations.

Mining recently resumed at Stratoni after a study by a committee of six independent professors from the National Technical University of Athens (NTUA) concluded that TVX’s proposed mining method was both safe and appropriate considering the nature of the Mavres Petres orebody. The plan includes drilling underneath the village of Stratoniki.

The permit comes with a set of conditions, including the installation of monitors to measure noise and vibration levels, limits on the amount of explosives used and on the speed of vibrations.

TVX has struggled with protestors and local officials over permitting issues since it acquired the Hellenic gold complex, which includes the Madem Lakkos and Mavres Petres zinc-lead-silver mines and the nearby Stratoni mill. Local protesters have vowed to continue their fight for a cancellation of the permit.

Situated about 20 km southwest of the Olympias mine, the Skouries porphyry deposit hosts reserves of about 130 million tonnes grading 0.9 gram gold per tonne and 0.6% copper, based on a gold price of US$300 per oz. and a copper price of US80 per lb. TVX’s plan is to develop Skouries after Olympias. No permits have been obtained to date. A 1999 feasibility study concluded that the deposit could support a 16,000-tonne-per-day operation over 20 years. Production in the first five years is forecast at 200,000 oz. gold and 32,500 tonnes copper. Cash costs are pegged at US$22 per oz., net of copper credits. Capital costs are estimated at US$240 million.

On Mar. 1, TVX shares dropped sharply in the morning and by midday were off 13 or 11.4% at $1.01 on the Toronto Stock Exchange. The issue trades in a 52-week range between 45 and $2.75.