TVX chalks up quarterly loss (November 19, 2001)

Lower realized prices and the devaluation of the Brazilian real saw TVX Gold (TVX-T) end the third quarter in the red.

Net losses in the three months ended Sept. 30 totalled US$1.1 million on revenue of US$40.1 million, compared with net earnings of US$5.1 million on US$41.5 million in the corresponding period of 2000. (The recent period includes US$2.3 million in foreign exchange losses.)

Cash flow, on the other hand, was up 48% at $24.9 million, reflecting an $8.7-million gain arising from the restructuring of the company’s hedge book.

TVX now has put options on 550,000 oz. produced between 2003 and 2006. The average strike price is US$250 per oz.

In the first nine months of this year, TVX earned US$79,000 on revenue of US$119.3 million, versus US$9.9 million on US$130.3 million in the year-ago period. A relatively strong first quarter kept the company in the black.

Quarterly production was off 1% at 61,500 equivalent-gold ounces. Unscheduled repairs to two of the five ball mills at the 24.5%-owned Brasilia open-pit mine in Brazil saw attributable production there sink 17% from a year ago, to 11,200 oz.

Cash costs were up 3% at US$195 per oz.

Both mills have since returned to normal operations and are expected to make up for the production shortfall in the current quarter.

Meanwhile, Rio Tinto (RTP-N), which operates and holds a 51% interest in Brasilia, has accused TVX and its affiliate, Normandy Mining (NDY-T), of breaching the shareholders’ agreement. Rio intends to rescind the agreement, whereas the pair say they will fight the accusations.

Production was also down, by 7%, at the Musselwhite mine in Ontario. Operator Placer Dome (PDG-T) had to divert miners to a low-grade zone when a cement-filled stope collapsed and blocked access to the scheduled stope.

TVX’s 16% share of production amounted to 9,300 oz. in the quarter. Cash costs averaged US$206 per oz., or 28% more than a year earlier. Operations are expected to improve in the current quarter.

Operating improvements were seen at the La Coipa, Crixas and New Britannia mines. TVX holds a quarter-stake in each and doubles as operator at New Britannia.

Combined, the mines cranked out 41,000 oz. for TVX at an average cash cost of US$144 per oz. Better head grades accounted for some of the increased production.

Until Sept. 30, TVX’s North and South American mines had provided it with 177,500 equivalent-ounces at a cash cost of US$177 per oz. Accounting and other charges add US$80 to the operating cost. Overall, production is off 8% from a year ago and is 2% below budget. The cost picture is better.

The wholly owned Stratoni polymetallic mine in Greece provided the company with another 1.5 million oz. silver, plus 19,600 tonnes lead and 21,300 tonnes zinc. Of that, 505,000 oz. silver, 6,400 tonnes lead and 7,200 tonnes zinc were produced from 92,000 tonnes of ore in the recent quarter.

Stratoni milled 84% more ore than in the first nine months of 2000. The improvement reflects the implementation of a 6-day mining schedule and the use of mechanized mining methods.

TVX has converted its gold-linked notes into 321.5 million shares to increase its number of shares outstanding to 357 million. The former noteholders own about 90% of the stock.

On Sept. 30, TVX had $84.1 million in working capital and long-term debt of US$74.2 million. The latter includes the amount then due in one year, or US$3.5 million.