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Gold/Mining/Energy : Gold Price Monitor -- Ignore unavailable to you. Want to Upgrade?

To: long-gone who wrote (24826)	12/23/1998 4:37:00 PM
From: goldsnow	Read Replies (2) \| Respond to of 116762

Gold producer Royal Oak Mines halts debt repayments 02:54 p.m Dec 23, 1998 Eastern By Paul Simao TORONTO (Reuters) - Royal Oak Mines Inc. said Wednesday it had halted debt repayments of more than $320 million, a desperate bid by the embattled Canadian gold producer to put itself on a sounder financial footing. Royal Oak, which operates the prized Kemess gold mine in British Columbia as well as several high-cost gold mines, blamed tumbling gold bullion prices for the drastic measure. Gold, historically a hedge against financial uncertainty and international crisis, fell last summer to 18-year lows near $270 an ounce from a 1997 high of $363.95 an ounce. The yellow metal traded at $285.60 an ounce Wednesday. ''Low commodity prices are reducing cash flow available to service existing debt. This requires that existing interest and principal repayment terms be amended to reflect current circumstances,'' Royal Oak Chief Executive Margaret Witte said in a press release. Royal Oak set a deadline of February 15 to renegotiate $120 million in short-term senior secured debentures, $26 million in commodity hedged debt, $175 million of secured notes and C$19.5 million in equipment loans from Canada's Export Development Corp. Witte said the company was confident it could negotiate a restructuring package with its increasingly impatient creditors. Royal Oak's debt dilemma is merely the latest problem to befall a company that seems to possess a feline's sense of survival. The company almost disappeared early this year before it managed to secure $120 million in last-minute financing from Toronto-based merchant bank Trilon Financial Corp. . Trilon's infusion allowed Royal Oak to complete the construction of the $470-million Kemess gold mine in north-central British Columbia. In September, Royal Oak took an $81-million writedown on its assets, a move prompted by the company's lack of a gold hedging program and growing fears bullion prices would stay weak. Analysts, however, said the company would be hard-pressed to pull yet another rabbit out of the hat. ''It means they have no money and the last financing was unsuccessful. It also means that Kemess, which I am told is not yet at full capacity, has not performed up to snuff,'' said John Ing, president of Maison Placements Canada Inc. The low-cost Kemess mine, designed to produce about 250,000 ounces of gold annually at a cash cost of $79 an ounce, was to be the asset that helped restore Royal Oak's diminished credibility in Canada's gold sector. Royal Oak is expected to have produced about 278,000 ounces of gold in 1998 at a cash cost of $240 an ounce, mostly from its mines in Timmins, Ontario and Yellowknife in the Northwest Territories. Ing said other small gold producers would face similar financing pressures if the price of gold does not rebound quickly. Shares of Royal Oak fell C$0.04 or almost 8 percent to C$0.48 after touching a 52-week low of C$0.45 on the Toronto Stock Exchange Wednesday. ($1-$1.55 Canadian) Copyright 1998 Reuters Limited.