Record production keeps Nelson in black

Record gold production and lower cash costs at the Jilau gold mine in northwestern Tajikistan continue to keep Nelson Gold (NLG-T) profitable.

The London, England-based company earned $421,000 during the three months ended June 30, compared with a loss of $2.7 million in the corresponding period of 1997. Revenue for the periods was $5 million and $3.7 million, respectively.

Earnings in the first six months of 1998 were $635,000 on revenue of $7.1 million, compared with a loss of $2.3 million on $6.3 million in the first half of 1997.

Gold production at the Jilau mine, Nelson’s sole producing asset, topped 28,303 oz. in the recent quarter, up 10,403 oz. from output a year ago. Conversely, cash costs at the mine dropped to US$183 from US$212 per oz., while total cash costs fell to US$194 from US$224 per oz.

The mine’s higher output is attributable to higher mill throughput of 327,595 tonnes in the recent quarter, against 215,272 tonnes in the year-ago period. This, in turn, reflects the successful expansion, completed last November, of the mill’s annual capacity to 1.7 million tonnes from 780,000 tonnes.

Meanwhile, at the nearby Taror deposit, Nelson has begun an environmental impact study and is nearing completion of an underground diamond drill program. The 2,000-metre drill program is aimed at proving up resources below the 1,500-metre level and at providing samples, in addition to bulk samples from workings, for metallurgical testing.

Nelson hopes to begin transporting sulphide material to the Jilau mill in the third quarter of next year, and oxide material in late 2001. This schedule, however, is dependent on the outcome of the metallurgical studies and on a due diligence review by International Finance Corp. (IFC), with which Nelson is attempting to arrange project financing.

Elsewhere in Tajikistan, the company has begun resampling rock exposures on two old levels at the Chore gold deposit. Situated 145 km east of Jilau, the deposit was previously estimated by Russian geologists to host 10 million tonnes grading between 4 and 5 grams gold.

Nelson owns a 44% interest in several gold projects in Tajikistan through an equivalent equity interest in Zeravshan Gold, a joint venture with the Tajikistani government. All projects, including Jilau, are operated by the company.

On the financial front, Nelson recently raised $7.25 million by issuing 30 million shares at 27 cents per share; it issued another 6.4 million shares to cover a convertible debenture of $1.2 million. Some of the proceeds were used to repay a $3.6-million loan to Liverpool Limited Partnership and Westgate International.

Nelson has roughly 114 million shares outstanding, of which Liverpool and Westgate each hold just shy of 16 million shares.