TVX Gold sustains lower precious metal production

Although TVX Gold (TVX-T) has yet to release its 1997 earnings and updated reserve estimates, the gold and silver producer has announced its 1997 production figures, its projections for 1998 production, as well as changes to its hedging program.

TVX’s production during 1997 amounted to 318,000 oz. gold and 5.1 million oz. silver, down from 335,100 oz. and 7.8 million oz., respectively, during 1996. The average cash cost per gold-equivalent ounce was about US$225 during 1997, down from US$239 during the previous year.

TVX’s projected 1998 production is 372,000 oz. gold and 12 million oz.

silver, at a cash operating cost of US$200 per gold-equivalent ounce, with the following highlights:

* At the Brasilia mine in Brazil, increased throughput, higher grades and an increase in TVX ownership to 49% from 33% (the rest belongs to Brazilian firms) should boost TVX’s gold production to 123,000 oz. in 1998, up from 53,000 oz. in 1997.

* At La Coipa mine in Chile, which TVX shares equally with Placer Dome (PDG-T), the partners will oversee a transition from the production of silver and gold to silver only, on July 1, 1998 — three months earlier than originally planned. This transition coincides with the start of production from a satellite silver deposit, Chimberos. TVX’s share of La Coipa production in 1998 is expected to be about 70,000 oz. gold and 7.8 million oz. silver.

* At the 50%-owned Crixas mine in Brazil, a 10% increase in mill throughput should boost TVX’s share of 1998 production by 4,900 oz. to 69,000 oz. gold.

Ownership of the mine is shared with several Brazilian firms.

* Gold production at the New Britannia mine in Manitoba, operated and 50% owned by TVX, is forecast to hold steady at 1997 levels of roughly 46,000 oz., with cash costs expected to decline to the US$260 per oz. gold range.

High River Gold (HRG-T) holds the remaining interest in the mine.

* TVX’s share of production at its 32%-owned Musselwhite mine in Ontario, operated and 68%-owned by Placer Dome, is expected to be 63,000 oz. gold in 1998, its first full year of operation. TVX’s share was 48,900 oz. gold in 1997. Though cash costs are expected to rise in 1998, January’s costs remained below US$200 per oz. gold.

In 1998, TVX is chopping its exploration budget to US$6 million, down from the US$13 million spent last year. The company says it will focus its exploration efforts on the Kassandra Mines project in Greece, Musselwhite and La Coipa. Recently, the company withdrew from its joint-venture exploration program at La India, in Nicaragua, which was shared with Triton Mining (TTM-T).

As well, the company says it will write down, in 1997, certain non-core assets, to an amount not exceeding US$40 million. Most of the write-down total will stem from the Mineral Hill gold mine in Montana and the Pachicutza gold project in Ecuador.

TVX has been restructuring its gold and silver hedge positions and expects to net about US$60 million in cash upon completion. The company is cashing out on the majority of its gold position and is reducing the net number of silver call options it sold last year to finance put options.

Operating cash flow for 1998 was previously forecast at US$64 million, based on US$300-per-oz. gold and US$5.30 silver prices. As a result of the hedge restructuring, it is now forecast at approximately US$105 million.

At TVX’s controversial Kassandra Mines project, the Olympias feasibility study and the Skouries pre-feasibility study (which is to be augmented to include a larger underground mining component) are on schedule for completion in March.

TVX says that there are no firm indications yet as to when the judgment will be made by an Ontario court regarding the company’s ownership of Kassandra (which includes both Olympias and Skourias).

The company has also announced that as of Jan. 28, 1998, it had bought back one million of its own shares at an average price of $4.02 each, in accordance with a program launched in August 1997.