Gold and silver miner Cheni Gold Mines (TSE) reported net earnings for the year ended Dec. 31 of $4 million, or 36 cents per share, on revenues of $26.7 million. Since 1989 marks the first year of production at the company’s mine in the Toodoggone area of north-central British Columbia, there are no comparable results for the previous year. Metal production for the period was 48,500 oz. of gold and 918,300 oz. of silver, with cash operating costs amounting to US$215 per oz. of gold equivalent. The company received an average price of US$388 per oz. for gold and US$6.04 per oz. for silver during the period, resulting in cash flow from operations totalling $9.3 million.
Paul Girard, president of Cheni, expects the company to produce 55,000 oz. of gold and 1.2 million oz. of silver in 1990 with production costs equivalent to those in 1989. He indicated that Cheni had sold forward about 40% of its 1990 production but declined to disclose prices.
A significant factor affecting company earnings is its taxable position. Girard noted Cheni had about $70 million in tax pools to draw from and the company did not pay any income tax in 1989. He anticipates the company will have to pay British Columbia mining taxes in 1990.
The company is financially healthy with about $2.8 million in working capital at year-end. Cheni has a $5.3 million loan from the parent company as well as what Girard termed a “soft loan” of $3.2 million from the British Columbia government issued for construction of the mine’s access road. This loan is only payable if the price of gold reaches US$460 (calculated on a gold-silver equivalent basis).
Cheni has about 11 million shares outstanding plus 2.1 million warrants exercisable at $6 per share until Nov. 29. With the stock sitting at $4.30, it will need quite a move to ensure the exercise of the warrants. Girard did not dismiss the possibility, however, noting the company was significantly undervalued on the basis of both cash flow and earnings multiples relative to other junior producers. Cheni Gold Mines (TSE) Year ended Dec. 31 1989 1988 Revenue (000s) $26,674* Net earnings (000s) 4,002 Net earnings
(per share) 0.36004
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