LITERATURE REVIEW — Nelson’s first half marred by red ink

London-based Nelson Gold (NLG-T) suffered a loss of US$2.29 million (or US3 cents a share) for the 6-month period ended June 30, compared with a loss of US$1.69 million (US3 cents a share) in the same period of 1996.

Nelson attributes the negative earnings to a US$2.75-million loss on disposal of a 5% interest in the Tajikistani-incorporated Zeravshan Gold Company (ZGC). ZGC owns the Jilau open-pit mine, which represents Nelson’s sole producing asset.

In March, Nelson sold the interest to International Finance Corporation (IFC) for US$7.5 million, thereby reducing its stake to 44% from 49% (T.N.M., July 28/97). The remaining 51% in ZGC is owned by the Tajikistani government.

Nelson’s portion of operating profits for the 6-month period was US$464,000, which offset some of the losses incurred by the transaction with the IFC.

Cash costs for the first half averaged US$204 per oz. gold, whereas total operating costs averaged US$287 per oz.

In the second quarter, the company lost US$2.67 million on revenue of US$3.71 million, compared with a loss of US$959,000 in the same period of 1996.

Nelson received no revenue in the second quarter of 1996, given that Jilau was still in preproduction at that stage.

Lower head grades caused gold production to fall to 17,900 from 19,753 oz.

between the first and second quarters. The low head grades resulted from the first phase of expansion in the carbon-in-leach plant, which will see annual production increase to 100,000 from 72,000 oz.

Nelson says the lower head grades will continue for the remainder of the year, as the volume of ore fed to the mill is increased to 1.7 million from 780,000 tonnes per year.

Capital costs for the expansion program are pegged at US$12 million, to be funded by internal cash flow generated by ZGC’s existing gold production.