Viceroy faces financial woes

Vancouver — A low gold price and high operating costs continued to wreakhavoc on Viceroy Resources’ (VOY-T) bottom line during the firstquarter of 2001.

The company reported a loss of $5.7 million, or 10 per share, on salesof $20.3 million during the quarter.

At its flagship Bounty mine in Australia, first-quarter production hit23,094 oz at a cash operating cost of US$336 per oz. The company’s share ofproduction from the Castle Mountain mine in Nevada hit 20,076 oz. at a cashoperating cost of US$237 per oz.

Viceroy has already taken a $30.6-million writedown on its Brewery Creekmine in the Yukon. The operation produced 5,668 oz. gold during the quarter.Heap-leaching is expected to continue throughout the year and mining willnot re-commence unless higher gold prices are achieved.

As of Dec. 31, 2000, Viceroy had a net working capital deficiency of $6.2million, arising from its debt due on the Bounty mine in Western Australiaand its reclamation liability on the Castle Mountain operation.

So far this year, the company has missed a total of A$9.5 million in debtpayments due on the acquisition of the Bounty mine. Under the loanagreement, the unpaid principal payments allow NM Rothchild and Sons todemand immediate and full payment. Viceroy is in discussions with thefinancial group about restructuring its debt and is looking into raisingequity through private placements, as well as asset sales to third parties.

Calgary-based Propriety Industries (PPI-T) has reached apreliminary agreement to take a 49% stake in Viceroy Resource.

Under the terms of the deal, Propriety would subscribe for 28 millionunits of Viceroy at a price of 30 each. One unit would hold one share andone warrant. For every two warrants, the holder could acquire one share at35 for a period of two-years. The deal would put $8.4 million intoViceroy’s coffers.

Propriety owns and manages a portfolio of financial, natural resource andreal estate assets. Once the deal closes and all the warrants are exercised,the company would hold a 49% equity interest in Viceroy.

Viceroy acquired the Bounty gold mine in 1999 from LionOre MiningInternational (LIM-T) for US$24.6 million in cash and shares. At the endof 1998, Bounty was host to proven and probable reserves of 2 million tonnesgrading 5.17 grams, equivalent to 331,000 oz. The total resource stood at8.8 million tonnes grading 3.92 grams, equivalent to 1.1 million containedounces.

Bounty is an underground operation supplemented by smaller, lower-grade,open-pit deposits, with a carbon-in-leach plant capable of processing750,000 tonnes per year.

In 2000, the gold miner cranked out 263,000 oz.