TVX seeking deal on big Brazilian nickel deposit

Toronto-based Consolidated TVX Mining (TSE), a growing gold producer with interests in four projects in South America, is moving toward becoming a nickel miner. Shareholders at the recent annual meeting were told TVX has teamed up with Inco to bring a property in Brazil into production with projected output of 25 million lb. nickel per year at an estimated cash cost of US$2.50 per lb.

President Ian Telfer said Inco, the world’s largest nickel producer, would design and construct the treatment facilities and act as operator. A feasibility study is expected to be completed in 1991, with production commencing in 1994 or 1995.

Telfer said the property, with an estimated 100 years of reserves (all classes) at an average grade of 1.8% nickel, contains 50-60% of Brazil’s current nickel reserves. TVX’s interest in the project, he said, will likely be in the 25-35% range when the final agreement is formalized.

TVX has interests in three gold mines in Brazil and one in Chile. The La Coipa gold-silver project in Chile, a joint venture project with operator Placer Dome (TSE), is shaping up to be TVX’s major producer. A 15,000-tonne-per-day processing plant currently under construction is expected to be in operation by May, 1991. (A 1,000- tonne-per-day plant is currently in operation there.) La Coipa gold output in 1991 is expected to total 400,000 oz.

Both Brazil, where inflation has been rampant, and Chile recently elected new presidents, and Telfer commented on the political situations in each country.

He described the new Brazilian president, Fernando Collor, as dedicated. “We believe, in the longer term, he is on the right track,” Telfer said. In March, Collor placed a freeze on both prices and 80% of all bank accounts for 18 months. He also claimed a 1-time 8% tax on all shares and gold held.

Brazil does not permit the exportation of gold. TVX does, however, receive a premium well above the world price for its gold production; in 1989, the Brazilian gold price peaked at US$950 per oz.

In Chile, Telfer said the economic policy of the freely elected government remains unchanged from that of the former military regime. Foreign investment is encouraged and gold may be exported, he said, adding that the Chilean economy is the fastest growing in South America.

Guest speaker at a supper hosted by TVX during the week of the annual meeting was Jose Pinera, a former Chilean minister of mines. Now a consultant, Pinera counts TVX among his clients.

During 1989, TVX boosted its gold production to 79,000 oz. (from 65,000 oz. in 1988) but suffered a decline in net earnings to US$4.2 million (from US$11.2 million). By the end of 1992, the company projects production of about 250,000 oz. Cash operating costs averaged US$249 per oz. in 1989; the company is projecting a cash cost of US$149 by the end of 1992.

Telfer said for the short-term his company will eliminate grassroots exploration. TVX has been investigating possible asset acquisitions in North America, he said, but has yet to make any purchases.