The real problem for TVI is the price of gold.
We seem to be living in a new world. But there could be a big shake-up
in the markets in the not too distant future that could change the
prevailing attitude towards gold and miners in general.
One thing for sure, TVI isn't alone with its' problems.
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www2.cdn-news.com
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<http://www.tvipacific.com>
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FOR: TVI PACIFIC INC. TSE, ASE SYMBOL: TVI
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JUNE 28, 1999
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TVI Signs Letter Of Intent With Major Japanese Companies To Develop The Canatuan Polymetallic Project
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CALGARY, ALBERTA--TVI Pacific Inc. is pleased to report that it has signed a Letter of Intent (LOI) with two major Japanese companies (JG) to enter into a joint venture agreement (JVA) to develop TVI's Canatuan polymetallic (copper, zinc, gold, silver) massive sulphide project on the island of Mindanao, Philippines. The LOI provides that upon fulfillment of certain conditions, TVI and JG will form a Joint Venture Company (JVC) to proceed with development of the Canatuan project, the ownership of which will be TVI 60 percent and JG 40 percent. JG will earn its 40 percent interest by making a cash payment to TVI, and by arranging or providing project financing for 75 percent of the total cost of the project, presently estimated to be US$18.5 million based on TVI internal studies. The JVC will provide the remaining 25 percent of the total cost in the form of equity. Establishment of a formal JVA and consequent JVC will be subject to satisfactory completion of a number of prerequisites, including the following: - metallurgical test work to the satisfaction of JG; - execution of a Memorandum of Agreement (MOA); - a feasibility study on the current project plan, to the satisfaction of JG; and - an advance cash payment to TVI, upon Board approval by JG to proceed with the project. The metallurgical test work and feasibility study costs are estimated at US$350,000 and will be funded initially by JG, who will be repaid in full by TVI, upon finalization of a formal JVA, from the cash payment required for earn in by JG. If, however, JG decides not to proceed, TVI will be responsible for 60 percent of these costs. If, alternatively, TVI decides not to proceed, it will be responsible for 100 percent of the costs and under either case any reimbursement to JG will be payable in shares of TVI at the market price prevailing at the time of payment. The proposed JVC would simultaneously mine by open pit methods, and separately process both the gossan (gold and silver) and sulphide (copper, zinc, gold and silver) ore types on the property, thereby providing a source of dore bars, and copper and zinc concentrates for purchase by JG under a Concentrate Sales and Purchase Agreement, the principal terms of which have been agreed. The current plan calls for the expansion of TVI's existing pilot plant to 300 tpd to process the deposit's near-surface gossan reserves by CIL/Merrill Crowe methods and the building of a separate, new, 850 tpd sulphide-processing unit which will use conventional flotation technology to concurrently produce copper and zinc concentrates containing gold and silver. According to the current plan, but subject to the conclusions of the feasibility study to be undertaken, gold and silver production is expected to commence in the third quarter of 2000 with concentrate production beginning in January, 2001. The first full production year of copper concentrate is estimated at 46,044 tonnes; zinc concentrate at 11,697 tonnes; gold at 40,000 ounces; and silver at 2,015,000 ounces. Based upon TVI's internal financial analysis of the current plan, the project continues to remain financially attractive, even at metal prices of US$265/oz gold, US$5/oz silver, US$0.65/lb copper and US$0.45/lb zinc. At these prices, the project would yield an overall, after-tax internal rate of return (IRR) on an all equity basis of approximately 36 percent, and first year cash flow to TVI of approximately US$7.6 (Cdn$11.3) million. Based on the prices used for silver, copper and zinc, the gold price would have to fall to approximately US$176/oz before an after tax IRR of 15 percent would be reached, which demonstrates the overall robust nature of the project, and its relative insensitivity to gold price. (The debt/equity financing structure planned for the project would increase these IRR values, enhance overall project economics, but reduce initial cash flow after debt service.) TVI will be the project operator throughout the initial 9 year mine life. Preliminary exploration work, including drilling on several prospects located near the main orebody, has demonstrated significant exploration potential for additional massive sulphide deposits, similar to the Canatuan orebody, which, if developed, could extend the life of the project. TVI Pacific Inc. is an emerging, Canadian producer focused on the development, exploration and acquisition of precious metal-rich, polymetallic properties located primarily in the Southeast Asian region. TVI's project portfolio consists of a large land position on 14 properties throughout the Philippines, offering near term production to longer - term grassroots exploration potential. The statements herein that are not historical facts are forward-looking statements. They involve risks and uncertainties that could cause actual results to differ materially from targeted results. These risks and uncertainties include but are not limited to future changes in copper, zinc, gold, and silver prices, which could render the project uneconomic; differences in ore grades, recovery rates, and tonnes mined from those expected; changes in mining and milling rates from currently planned rates; conclusions of feasibility studies; and changes in project parameters as plans continue to be refined. -30- |
