TVX reaps rich rewards from projects in Brazil

It was incorporated to take advantage of opportunities in Brazil’s burgeoning gold industry and as Consolidated TVX Mining enters its third year of activity, the Toronto-based company is achieving what it set out to do, and then some.

Despite the failure of the Cruzado Plan which failed to impact on Brazil’s rampant inflation rate, TVX continues to be potentially one of the world’s most profitable mining companies.

Since prices paid by the Brazilian government or private gold buyers reflects the world gold price plus the parallel currency premium in Brazil, TVX was receiving over $600(US) an oz for its gold. This makes gold mines in Brazil among the most profitable in the world.

With production from the company’s four gold mines and five exploration projects expected to total 192,000 oz this year, the TVX group has become Brazil’s second largest gold producer.

During 1986, TVX signed a letter of intent with Montana Power do Brasil to increase its interest in the Brasilia project by 8%. Located 240 km southeast of Brazil’s capital, the open pit gold project is operated by RTZ Mineracao, a subsidiary of the Rio-Tinto Zinc Corporation of England. The agreement increases TVX’s interest in the property to 23%, while Montana Power maintains 16% and RTZ 51%.

Reserves on Brasilia stand at 86.3 million tonnes averaging 0.017 oz gold per ton.

According to TVX’s annual report, the ore reserves consist of soft weathered rocks which will be mined from surface at a rate of 5.6 million tonnes per year. As there is no overburden and less than 10% of the ore requires blasting, the mining costs are extremely low.

The report says a $60 million plant is in the final phase of construction and the run in of equipment is expected to start in late l987 with full production by year end.

In l988, production is expected to be 110,000 oz and the project should average 100,000 oz annually for 17 years.

In August, 1986, TVX made its first investment in gold mining in North America with the acquisition of 16% of Golden Shield Resources’ outstanding shares. With proceeds of the recent flow though issue, TVX has increased its interest in Golden Shield to 20%. Toronto-based Golden Shield acquired the old Kerr Addison Mine last month.

“During l986, TVX also made progress on the financial and organizational side,” said President Ian Telfer at the company’s recent annual meeting. Three weeks before the meeting, TVX completed an underwriting agreement with Burns Fry where the Toronto brokerage house purchased 1,500,000 convertible TVX warrants at $17,125 each for a total of $25.6 million.

Each warrant was to be exchanged into one common TVX share and the proceeds of the issue used to purchase the 8% interest (for $12.5(US) million) in the Brasilia project and to make funds available for the Golden Shield agreement.

With cash flow in excess of $25 million, shareholders equity standing at $140 million and an additional $10 million in marketable securities, the company considers itself in a good position to pursue its objectives in 1988.

“This availability of cash combined with strong future cashflows puts the company in the position of being able to pay dividends for the l988 fiscal year,” said Mr Telfer.

Consolidated TVX shares were trading recently on the Toronto Stock Exchange at $15.88, below its 52-week high of $20.38 but well above its $4.85 low point.