TVX’s Stratoni halted

TVX Gold (TVX-T) has declared force majeure at its wholly owned Stratoni polymetallic mine in Greece after a local mining inspector delivered a suspension order.

TVX says all mining and milling activities will cease on Dec. 11, 2001, and will impact about 500 employees at its TVX Hellas division.

TVX’s president Sean Harvey says that mining operations would resume if, “restrictions placed upon Stratoni are lifted, the required permits for extension are granted, and certain obligations by the Greek State pursuant to the acquisition agreement are fulfilled.”

TVX has struggled with local officials over permitting since acquiring the Kasandra mines, which include the Madem Lakkos, Mavres Petres mines and the nearby Stratoni milling complex in 1995. The company insists that it has met all its obligations and has spent more than US$250 million, ranking it as one of the largest private foreign investment projects in Greece.

In September, TVX applied for permits to extend Startoni’s mining operations underneath the nearby village of Stratoniki. TVX Hellas CEO John Raisbeck told Reuters, “That request is currently being examined. But a mining inspector ordered us to move back 100 metres from our existing boundary.”

Raisbeck says the company’s immediate future lies underneath the village.

Stratoni provided TVX with 1.5 million oz. silver, plus 19,600 tonnes lead and 21,300 tonnes zinc during the first nine months of 2001. 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 third quarter.

During the first nine months of 2001, Stratoni milled 262,200 tonnes, 84% more than in the corresponding period of 2000. The improvement reflects the implementation of a 6-day mining schedule, continuous milling and the use of mechanized mining methods.

Meanwhile, TVX still awaits a decision by the Greek Conseil d’Etat, the country’s highest administrative law court, regarding the validity of permits already issued for the nearby Olympias project. The company says a decision could come in the next few months.

Assuming the court rules in TVX’s favour, the company figures that it will take at least another six months before it receives the final, construction permit. This assumes no other legal challenges are brought forth.

In 2000, SNC-Lavalin pegged Olympias’ capital costs at US$258 million. The company says that US$40-50 million of that amount can be covered by European grants.

TVX sees Olympias’ production in the first five years averaging 235,000 oz. gold, 2 million oz. silver, 19,700 tonnes zinc and 18,200 tonnes lead. Over the subsequent 14 years, production would average 153,000 oz. gold, 2.4 million oz. silver, 31,300 tonnes lead and 25,000 tonnes zinc. Cash costs are pegged at US$72 per oz. gold, net of byproduct credits, for the first five years, and US$50 per oz. thereafter.

The operation’s internal rate of return is estimated at 16.7% and the net present value is pegged at US$199 million, at a 5% discount. Tax credits are not considered, but the required metal prices are: US$325 per oz. for gold, US$5.50 per oz. for silver, US55 per lb. for zinc and US25 per lb. for lead.