Saddled with a US$115-million debt load and a first-quarter net loss of US$16.7 million,
Several voiced concerns related to the company’s decision to forgive about 75% of the relocation loans granted to President Ian Telfer and three other executives.
Vengold paid a total of $1.1 million in bonuses last year, which were then used to pay down interest-free housing relocation loans.
“What we find extraordinarily unusual and inappropriate at this time is that the loans were forgiven in way of a bonus,” said shareholder Borden Putnam, a representative of California-based Robertson Stephens Funds. “We feel that with the reduced treasury and a US$115-million debt, which does not appear to be obviously servicable at this point, it is inappropriate that these moneys should be taken from the treasury.”
Telfer responded by saying: “When the bonuses were paid in April 1998, the company had US$100 million in cash, and the stock was significantly higher.” He added that the bonuses were brought to the attention of the shareholders this year because of the timing of the annual meeting. The bonus plan was fully disclosed and approved at a previous annual meeting, two years ago.
Telfer assured shareholders that the company would not grant bonuses under the present financial conditions, while adding that all of Vengold’s outstanding loans are backed by about US$200 million worth of
“The company is in the process of restructuring its debt obligations and is confident its loans will be refinanced,” he said.
Another point of contention was the plan to consolidate the company’s shares on a 1-for-10 basis. Putnam said experience dictates that every time a rollback is attempted, there is usually a reduction in the market valuation of the company. In addition, he felt that moving from the Nasdaq open market to the over-the-counter market would be deleterious to the company since most of the shares are traded in Canada.
Despite this opposition, most shareholders passed special resolutions to complete the share rollback and subsequently change the name of the company to Lions Gold.
Telfer said the timing of the rollback and name change will depend on the outcome of certain business issues that are now under discussion.
As a result, the company will continue to trade under the name Vengold and will be delisted from the Nasdaq National market as of May 11. Trading of the company’s shares in the U.S. will occur on the Nasdaq Bulletin Board.
Ian Austin, an executive vice-president with
On the financial side, Vengold tabled a first-quarter loss of US$16.7 million (US12 cents per share), compared with a net loss of US$1.9 million (US2 cents per share) in the corresponding period last year.
Management attributes the US$16.7-million loss to several factors, including: an interest expense of US$3.6 million on the company’s long-term debt; a foreign exchange loss of US$4.1 million on the Australian-denominated component of the long-term debt; and a US$7.2 million loss on the disposition of its 5% interest in Australian-based Niugini Mining. Proceeds of the sale were used to reduce the outstanding loan with ANZ Investment Bank.
The consolidated cash position of the company by the end of the first quarter stood at US$20.1 million, of which US$9.8 million is in cash; the remaining US$10.2 million represents Vengold’s pro rata share of cash held by Lihir Gold.
Revenue from gold sales amounted to US$8 million during the recent quarter, compared with US$4.4 million a year ago. The increased revenue is attributed to an 8.2% increase in Vengold’s interest in the Lihir gold mine over the past year.
Production in the first quarter of 1999 totalled 128,329 oz. gold at a total cash cost of US$227 per oz., compared with 139,525 oz. at US$178 per oz. in the first quarter of 1998. Vengold’s share of production increased to 23,741 oz. from 14,300 oz. over the same time period, owing to its increased interest in the mine. The increase in cash costs is a result of lower production, higher mining rates and expenses associated with the autoclave remediation program.
Mining operations experienced a loss totalling US$818,893 during the recent 3-month period, compared with earnings of US$375,783 a year earlier.
Vengold mined 8.5 million tonnes of material in the recent quarter, of which 1.5 million tonnes were ore. By comparison, 4.9 million tonnes were mined a year ago, of which 638,000 tonnes were ore.
Lihir sold 127,146 oz. gold at an average price of US$342 per oz. in the quarter. The company hedged all its forecast production at an average price of US$362 per oz.
Most of the ore at Lihir is refractory sulphide ore that must be oxidized before the gold can be leached by cyanidation. Pressure oxidation technology is used to treat the refractory ore. A new oxygen plant is producing at the rate of 270 tonnes of oxygen per day.
As of Dec. 31, 1998, Lihir’s total proven and probable reserves stood at 96.3 million tonnes averaging 3.81 grams gold, equivalent to a contained resource of 11.8 million oz. The measured, indicated and inferred resource weighs in at 500 million tonnes averaging 2.65 grams gold, or 42.6 million contained ounces.
In related news, the company has acquired six exploration properties in Nevada. The most advanced of these is the Pamlico property, in the southern half of the state.
The Lihir mine is owned by Papua New Guinea-based Lihir Gold. The main stakeholders include Vengold, with an 18.5% interest,
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