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FORM 6-K
SECURITIES EXCHANGE COMMISSION
Washington, D.C. 20549
REPORT OF FOREIGN ISSUER
Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934
COMMISSION FILE NUMBER 0-15577
FOR THE MONTH OF DECEMBER 1997
CONSOLIDATED NEVADA GOLDFIELDS CORPORATION
(Translation of registrant's name into English)
1801 BROADWAY, SUITE 1620
DENVER, COLORADO 80202
(Address of Principal Executive Office)
Indicate by check mark whether the registrant files or will file annual
reports under cover Form 20-F or Form 40-F.
Form 20-F X Form 40-F
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Indicate by check mark whether the registrant by furnishing the
information contained in this Form is also thereby furnishing the information
to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange
Act of 1934.
Yes No X
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If "Yes" is marked, indicate below the file number assigned to the
registrant in connection with Rule 12g3-2(b): 82- .
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ENCLOSED IS: 1) SECOND QUARTER REPORT 1997.
Pursuant to the Requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
CONSOLIDATED NEVADA GOLDFIELDS CORPORATION
(Registrant)
Date: Dec. 2, 1997
/s/ JAMES S. STIRBIS, JR.
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By: James S. Stirbis, Jr. - Corporate Secretary and Treasurer
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CONSOLIDATED NEVADA GOLDFIELDS CORPORATION
SECOND QUARTERLY REPORT TO SHAREHOLDERS
During the second quarter of calendar 1997, Consolidated Nevada Goldfields
Corporation (the Company) continued to ramp up production at its two most
important operations - Pachuca, in the state of Hidalgo, Mexico, and Nixon
Fork, in Alaska. With six producing mines and over 1,300 employees in the
United States and Mexico, the Company now has reserves of approximately
560,000 ounces of gold, 51.4 million ounces of silver, 38 million pounds of
copper and 4 million tonnes of barite. Gold equivalent, precious-metal
reserves and resources totaled 4.2 million ounces as of June 30, 1997.
This report is for the second quarter of the new fiscal year, April 1 through
June 30, 1997.
RESULTS OF OPERATIONS
During the quarter, the Company's various operations produced 18,407 ounces
of gold, 486,661 ounces of silver, 1.3 million pounds of copper and 6,991
tonnes of barite for a combined production of 25,156 gold equivalent ounces,
based upon market prices on June 30, 1997.
The Company reports a net loss for the quarter of $4.0 million on revenues of
$9.61 million compared to a net loss of $4.24 million on revenues of $7.3
million for the first quarter of 1997. Included in the quarter's net loss
are non-cash charges of $3.2 million for depreciation, depletion and
amortization.
Current accounting standards and industry practice require the measurement of
an impairment in the carrying amount of an asset when events or changes in
circumstances indicate the value may not be recoverable. The conventional
treatment of computing an impairment to the carrying value of an asset is
based on several factors, including the price of gold, at a specific point in
time. The impairment calculation, however, does not reflect the results of
commodity prices to be realized in the future. As a result of the recent
decline in the price of gold, the Company is assessing the carrying value of
the Nixon Fork mine in conjunction with the operations taken as a whole. The
matter is under study and the Company will record an adjustment as
appropriate based on views of trading prices of gold and the Nixon Fork
operations.
We are optimistic regarding future production for the Company properties. As
we increase production, particularly at Nixon Fork and Pachuca, we anticipate
that operations will be on solid, positive cashflow basis by the end of
calendar year 1997.
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Following are updates on each of our significant producing properties.
PACHUCA
With the Pachuca mine, located in the south-central part of the state of
Hidalgo, Mexico, the Company acquired 465 years of mining history. The
Company now owns 100 percent of the Pachuca underground mine complex,
processing plant, refinery, and mining concessions covering the entire
Pachuca district--over 46,900 hectares of highly prospective ground. The
potential for developing more orebodies and increasing production within this
district is excellent.
During the quarter, Pachuca produced 465,414 ounces of silver and 2,872
ounces of gold, representing a 12 percent and 49 percent increase
respectively over the first quarter of 1997. The Pachuca complex includes a
flotation/cyanidation process plant which is rated at 2,400 tonnes per day.
The facility also includes the only precious-metal refinery in Mexico
producing 99.99% pure gold as well as Comex-registered silver. All silver
and gold mined and processed at Pachuca is refined on site through its
facility. Production at Pachuca is steadily increasing as a result of the
addition of more equipment and working places in the mine. At the end of
calendar year 1996, the plant was processing approximately 850 tonnes of ore
per day. This increased to about 1,200 tonnes per day at the end of March,
1997 and to about 1,300 tonnes per day at the end of June, 1997.
The Company is currently accelerating its expansion plans for Pachuca with
the goal of reaching full capacity of 5.4 million ounces of silver and 24,000
ounces of gold per year by mid-1998. Expansion plans in the mine include
sinking of shafts and the development of new haulageway and stopes.
Equipment upgrades and replacements are also planned.
EXPLORATION AT PACHUCA
Although Pachuca has operated almost continuously for more than 465 years,
excellent potential exists for the discovery of extensions of ore on known
veins. The El Chico/Zumate area, north of the existing mine, is an
outstanding exploration target with potential several times that of Pachuca's
historic workings. More than 1,500 meters of underground exploration and
approximately 200 diamond-drill holes in this area have just begun to define
the extent of this potential. Drill-indicated and inferred resources of 3.3
million tonnes have been delineated at an average grade of 298 grams of
silver and 2.4 grams of gold per tonne for a total additional resource of 31
million ounces of silver and 250,000 ounces of gold.
MAGISTRAL DEL ORO
At Magistral del Oro, located in the Mexican state of Durango, the Company
had been reprocessing tailings from a mine which closed down in 1962 and had
produced
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approximately 700,000 ounces of gold during its life. These gold-bearing
tailings have been agglomerated and stacked for heap leaching. Gold recovery
has been achieved using conventional cyanide leaching followed by
absorption/desorption and recovery in electrolytic cells. In late 1996, this
operation was shut down due to metallurgical problems. While no tailings have
been agglomerated and stacked since last year, leaching continues and the
operation is producing 450-500 ounces of gold per month.
EXPLORATION AT MAGISTRAL DEL ORO
The Company controls most of the Magistral del Oro district and has
identified a resource of 676 tonnes at a gold grade of 4.87 grams of gold per
tonne (106,000 ounces of contained gold), primarily in quartz veins similar
to that mined in the past. In addition, exploration has identified
significant surface gold mineralization. Samples averaging 2.06 grams of
gold per tonne suggest an epithermal deposit with significant potential.
BARITA DE SONORA
Barita de Sonora is located in the south-central part of the state of Sonora,
Mexico. At this property, the Company mines high-grade barite ore using
conventional open-pit mining methods. Processing consists of crushing the
ore followed by gravity concentration to produce high-density granular barite
for use in oil-well drilling additives as well as small lots of ground barite
for various custom applications. Most of the production from Barita de
Sonora is sold to Pemex, Mexico's national petroleum company.
EL BAZTAN
At El Baztan, in the state of Michoacan, Mexico, copper ore is mined at two
underground sites. At the Vista Hermosa mine, skarn ore is mined from an
andecite host. At the Arroyo mine, ore is produced from vein deposits. Ore
from both deposits is processed by conventional flotation in a
450-tonne-per-day plant. The operation produces copper concentrate with
minor gold and silver credits.
Total proven and probable reserves at El Baztan are 890,000 tonnes averaging
1.87 percent copper (34.3 million contained pounds of copper). Of this
total, 706,000 tonnes at 1.7 percent copper (26.5 million contained pounds of
copper) are in the Vista Hermosa deposit, and 110,000 tonnes at 3.2 percent
copper (7.8 million contained pounds of copper) are in the Arroyo mine.
During the quarter, El Baztan operations mined and processed 27,084 tonnes of
ore from which 1 million pounds of copper and 405 ounces of gold were
produced.
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Production at El Baztan has been somewhat controlled by Mexican smelting
capacity. As a result, a small stockpile of copper concentrate has
accumulated at the property. The Company recently entered into a new smelter
agreement which will allow the shipment and sale of concentrate, in
quantities large enough to draw down the stockpile by year end.
EXPLORATION AT EL BAZTAN
Underground diamond drilling at the Vista Hermosa mine has outlined an
additional inferred resource of 453,000 tonnes at 1.5 percent copper. The
Company believes there is a high probability that further drilling could
nearly double the Vista Hermosa reserves.
NIXON FORK
The Nixon Fork mine, located near McGrath, Alaska, produced 10,462 ounces of
gold during the quarter. New equipment purchased for the mining operations
allowed ore production to increase during the quarter, and in June the
operation produced 4,488 ounces of gold.
EXPLORATION AT NIXON FORK
During the quarter, 3,000 meters of surface diamond drilling was completed on
four targets. Although analysis of these data are not yet complete, it
appears that reserves at all but one of the targets will be increased.
Assays completed to date show many favorable intercepts of ore-grade
material, including 4 meters at 102 grams of gold per tonne and 3.9 meters at
68 grams of gold per tonne. These surface holes will be augmented by
underground drilling during winter.
The Whalen Glory Hole area is especially promising. A 1- meter intercept of
120 grams of gold per tonne visible gold in unassayed core, and a history of
high-grade production indicates the possibility of a mine similar to the
Crystal Garnet. More drilling will be done next season on this target.
The evaluation of the Mystery Mine reserves is nearly completed. Indications
are that a mineable ore body will be confirmed with more tonnes, but at a
lower grade than previously reported. Total ounces of gold are expected to
be substantially the same.
AURORA
Aurora, southwest of Hawthorne, Nevada, produced 3,825 ounces of gold during
the quarter. Negotiations continue for the acquisition of the neighboring
Humbolt deposit, with a reserve of approximately 180,000 ounces.
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A prefeasibility study was completed, with positive results on expanding the
throughput of the plant from 350 to 700 tonnes per day. This expansion,
coupled with the reserves from the Humbolt and Martinez deposits, would allow
Aurora gold production to increase to 25,000-30,000 ounces per year for at
least seven years.
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Consolidated Balance Sheets
Consolidated Nevada Goldfields Corporation and Subsidiaries
(Amounts Stated in Thousands of U.S. Dollars and Shares - Unaudited)
ASSETS June 30,1997 December 31,1996
Cash and cash equivalents $ 333 $ 6,960
Accounts receivable:
Production 2,452 1,060
Other 1,287 1,433
Affiliated companies and related parties 366 345
Inventories:
Ore in stockpiles and ore in process 4,172 3,317
Supplies and materials, net 3,028 2,589
Prepaid expenses and other 297 551
Total current assets 11,935 16,255
Restricted cash 629 805
Mineral properties at cost, net of
accumulated depletion and allowance
for impairment 42,403 43,678
Plants, buildings and equipment at cost, net
of accumulated depreciation, amortization
and allowance for impairment 60,365 62,307
Deferred loan costs and other assets at cost,
net of amortization 1,464 580
Total assets $116,796 $123,625
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable:
Suppliers and contractors $ 4,242 $ 4,071
Other 3,538 2,475
Related parties 9,472 790
Accrued liabilities 2,719 3,011
Current portion of Accrued interest payable 750 825
Current portion of accrued mine reclamation
costs 985 1,326
Current portion of long-term debt and deferred
gain on gold loan of $931 and $568 at
June 30,1997 and December 31,1996,
respectively 14,854 13,497
Total current liabilities 36,560 25,995
Long-term debt 17,028 18,489
Accrued interest payable 86 111
Accrued mine reclamation costs 1,563 1,517
Convertible subordinated debentures 12,062 12,155
Due to related party 2,890 11,176
Deferred foreign exchange gain 254 161
Other 1,144 1,149
Total liabilities 71,587 70,753
Shareholders' equity
Common shares, without par value,
unlimited shares authorized,
131,101 and 129,837 shares issued
and outstanding, at June 30,1997 and
December 31,1996, respectively 99,740 99,163
Accumulated deficit from April 1,1991 (54,531) (46,291)
Total shareholders' equity 45,209 52,872
Commitments and contingencies
Total liabilities and shareholders'
equity $116,796 $123,625
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Consolidated Statements of Operations
Consolidated Nevada Goldfields Corporation and Subsidiaries
(Amounts Stated in Thousands of U.S. Dollars and Shares, Except Per Share
Amounts - Unaudited)
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Three Months Ended Three Months Ended Six Months Ended Six Months Ended
June 30, 1997 June 30, 1996 June 30, 1997 June 30, 1996
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Revenue:
Net sales of precious metals
and mineral products $ 9,063 $ 5,246 $ 16,095 $ 11,252
Forward and futures contract
gains (losses), net 545 (261) 840 (609)
9,608 4,985 16,935 10,643
Operating costs and expenses:
Production costs 7,936 5,303 14,489 8,811
Depreciation, depletion and
amortization 3,157 2,138 5,624 4,856
Impairment of mineral properties, plants,
buildings and equipment, and supplies
and minerals inventory - - - -
General and administrative 941 504 2,583 951
Exploration costs 15 50 36 104
12,049 7,995 22,732 14,722
Operating loss (2,441) (3,010) (5,797) (4,079)
Other income (expense):
Interest expense, net (1,485) (445) (2,930) (1,110)
Loss on sale or disposition of
mining claims, equipment and inventory - (6) - (6)
Cumulative translation adjustment (519) - 268 -
Other, net 524 (14) 388 (5)
(1,480) (465) (2,274) (1,121)
Loss before income tax expense (3,921) (3,475) (8,071) (5,200)
Income tax expense (81) - (169) -
Net loss $ (4,002) $ (3,475) $ (8,240) $ (5,200)
Loss per common share $ (0.03) $ (0.06) $ (0.06) $ (0.10)
Weighted average number of
common shares outstanding 130,869 53,771 130,618 52,644
Gold equivalent ounces produced 25,157 16,207 44,322 30,523
Increase (decrease) in inventory 329 1,763 1,937 (62)
Gold equivalent ounces sold 24,828 14,444 42,385 30,585
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Produced (oz)
Gold
Nixon Fork 10,462 12,449 17,378 23,568
Aurora 3,825 3,644 6,986 6,686
Pachuca 2,872 - 4,804 -
El Baztan 405 - 1,157 -
Magistral del Oro 843 - 1,274 -
------- ------- ------- -------
18,407 16,093 31,599 30,254
Silver
Nixon Fork 6,017 3,606 8,423 7,270
Aurora 10,567 5,064 18,917 13,181
Pachuca 465,414 - 879,773 -
El Baztan 4,663 - 10,256 -
------- ------- ------- -------
486,661 8,670 917,369 20,451
Gold 334.55 382 334.55 382
Silver 4.64 5.03 4.64 5.03
Sold
Gold
Nixon Fork 10,187 12,308 15,842 25,377
Aurora 3,862 2,022 6,813 4,939
Pachuca 2,869 - 4,801 -
El Baztan 402 - 1,050 -
Magistral del Oro 757 - 1 165 -
------- ------- ------- -------
18,077 14,330 29,671 30,316
Silver
Nixon Fork 6,017 3,606 8,423 7,270
Aurora 10,567 5,064 18,917 13,181
Pachuca 465,509 - 879,932 -
El Baztan 4,627 - 9,445 -
------- ------- ------- -------
486,720 8,670 916,717 20,451
Gold 334.55 382 334.55 382
Silver 4.64 5.03 4.64 5.03
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Consolidated Statements of Cash Flows
Consolidated Nevada Goldfields Corporation and Subsidiaries
(Amounts stated in Thousands of U.S. Dollars - Unaudited)
Six Months Six Months
Ended Ended
June 30, 1997 June 30, 1996
Cash flows from operating activities:
Net loss $(8,240) $(5,200)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Amortization of deferred gain or loss on hedged
sales and gold loan conversion, net (290) 682
Depreciation, depletion and amortization 5,624 4,856
Mine reclamation costs accrued, net (295) 15
Amortization of deferred loan costs, net 222 305
Increase in amounts due from affiliated companies and
related parties (21) -
Increase in amounts due to related companies 416 18
Increase in current assets, net (2,286) (1,038)
Increase in current liabilities, net 908 1,190
Change in accrued interest non-current 50 877
Other 5 -
Net cash (used in) provided by operations (3,907) 1,705
Cash flows from investing activities:
Capital expended for mineral properties and
plants, buildings and equipment (1,581) (8,505)
Retirements of property, plant and equipment (322) -
Increase in other assets (1,103) (352)
Net cash used in investing activities (3,006) (8,857)
Cash flows from financing activities:
Borrowings 3,585 -
Repayments of debt (3,446) (3,313)
Proceeds from issuance of common shares, net (29) 6,574
Net cash provided by financing activities 110 3,261
Net decrease in cash and cash equivalents (6,803) (3,891)
Cash and cash equivalents at beginning of period 7,765 6,295
Cash and cash equivalents at end of period $ 962* $ 2,404*
*Includes restricted cash of $629, and $853 at June 30, 1997 and June 30,
1996, respectively
