Convertible notes continue to dog TVX

TVX Gold (TVX-T) earned US$3.7 million in the first three months of 2001, but adjustments to the company’s gold-linked convertible notes and issuance costs took out a hefty bite and left the company with adjusted earnings of US$600,000 (or 2 per share).

Revenue during the quarter was US$39.3 million, down 7% from the year-ago US$42.1 million. During the first quarter of 2000, the company had adjusted earnings of US$1 million (3 per share).

Interest on the convertible notes cost the company US$2.6 million. Issuance costs, which are amortized over time, amounted to US$500,000.

TVX recently announced plans to issue 321.5 million common shares upon the early conversion of the company’s $250-million gold-linked convertible notes. The company has 35.7 million common shares outstanding. Upon completion of this proposed transaction, it will have 357.2 million common shares outstanding. It has entered into agreements with holders of 44% of the notes. The proposal will be presented to the note holders for approval.

TVX’s share of production amounted to 59,300 oz. gold-equivalent from operations at the TVX Normandy joint venture with Normandy Mining (NDY-T). Cash costs came in at US$174 per oz. In the same period of 2000, TVX’s share was 62,200 oz. at cash costs of US$172 per oz.

Production was lower at all of the TVX Normandy operations except the La Coipa mine in Chile, where the company is participating in an equal joint venture with Placer Dome (PDG-T). There, equivalent gold production increased 7% to 19,700 oz. (683,000 oz. silver and 7,800 oz. gold), despite a 14% decline in grade. Mill throughput and gold-equivalent recovery increased by 10%. Cash costs fell 13% to US$188 per oz. Stockpiled ore constituted about 30% of the quarter’s milled material.

In Greece, TVX’s wholly owned Stratoni operation produced 500,300 oz. silver, 7,500 tonnes zinc and 7,200 tonnes lead — increases of 91%, 78% and 71%, respectively, over a year ago. The improvements are attributed to increased mining and mill rates brought about by a new labour agreement at TVX Hellas last fall. Under the deal, the underground work schedule now consists of six days instead of five and the mill operates on a continuous basis.

In early January, the Conseil d’Etat heard challenges to certain permits (including the environmental impact study approval) relating to the development of the Olympias gold project in Greece. The judge who reviewed the challenges recommended that the court reject them.

TVX recently said that, contrary to reports in the Greek press regarding a negative ruling from the Conseil d’Etat, there has as yet been no official decision. The company does not expect a judgment before the end of the second quarter.