Writedowns sink Ivanhoe in 2001

Ivanhoe Mines (IVN-T) ended 2001 with a net loss of US$85 million thanks to US$59.2 million in writedowns on its iron ore assets in Australia and Norway.

The loss translates into 66 per share, and compares with a year-ago net loss of US$17.9 million (or 24 per share). Revenue between the two periods more than tripled to US$75.3 million. Cash flow from operations was US$8.2 million, off from US$9.3 million.

Much of the year’s loss (US$66,2 million) came in the form of a US$53.8-million writedown of the Savage River mine in Australia. The mine also chipped in a foreign-exchange loss of US$7.9 million. The mine’s carrying values was revaluated in light of the softening world iron ore markets during 2001.

Savage river produced about 2 million tonnes of iron ore pellets during the year, about 2% off the year-ago pace. Sales totalled 1.8 million tonnes at an average of US$31 per tonne, down 14% from 2000. Operating cash costs rang in around US$24 per tonne.

In Norway, Ivanhoe says it plans to drop its interest in the Bjrnevatn mine, which has been on care and maintenance. The company has been unable to secure third-party equity financing to develop the project. Ivanhoe wants to its lenders in return for the cancellation of existing project debts, all of which are non-recourse to the company. Ivanhoe hopes for a deal in the second quarter of 2002.

During the year, Ivanhoe sank US$6.3 million after-tax into exploration, including US$3.8 million in Mongolia.

From the second half of 2001, the company has raised US$72.7 million via the issuance of 44.6 million common shares. The funds are being used to advance the company’s exploration and development projects.

At the end of the year, Ivanhoe had working capital of US$3.7 million, including US$25.8 million in cash.

Looking ahead, Ivanhoe expects annual copper production at the S&K Mine to increase to 29,500 tonnes while annual pellet and iron concentrate production at the Savage River should remain around 2 million tonnes.