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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 NOVEMBER 1997
CONSOLIDATED NEVADA GOLDFIELDS CORPORATION
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(Translation of registrant's name into English)
1801 Broadway, Suite 1620
Denver, Colorado 80202
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(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) THIRD 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
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(Registrant)
Date: Nov. 26, 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
A QUARTERLY REPORT TO SHAREHOLDERS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1997
SUMMARY
During the Third Quarter, Consolidated Nevada Goldfields Corporation (the
Company) continued to improve operations at the Company's two most important
operations -- Pachuca, in the state of Hidalgo, Mexico, and Nixon Fork, in
Alaska.
With the addition of a neighboring property at the Aurora operation, the
Company now has gold reserves of 740,000 ounces. Gold-equivalent precious-
metal reserves totaled 1.5 million ounces, as of September 30, 1997, with
additional resources of almost 3 million gold-equivalent ounces.
This report is for the Third Quarter of the new fiscal year, July 1 through
September 30, 1997.
RESULTS OF OPERATIONS
During the quarter, Company operations produced 15,951 ounces of gold, 419,504
ounces of silver, 1.02 million pounds of copper, and 11,780 tonnes of barite.
This production represents 27,990 gold-equivalent ounces, based on market
prices as of September 30, 1997.
The Company reports a net loss of $7.1 million on revenues of $8.6 million for
the quarter compared to a net loss of $2.5 million on revenues of $3.6 million
for the same period last year. Included in the quarter's net loss are non-cash
charges for depreciation, depletion and amortization of $2.8 million and $1.4
million for the three months ended September 30, 1997 and 1996, respectively.
For the nine months ended September 30, 1997 the Company reports a net loss of
$15.4 million on revenues of $25.5 million compared to a net loss of $7.7
million on revenues of $14.2 million for the same period last year. Non-cash
charges for depreciation, depletion and amortization of $8.5 million and $6.3
million are included in the net loss for the nine months ended September 30,
1997 and 1996, respectively.
Decisions have been made to put two of the Company's smaller operations on
standby. These are Magistral del Oro, a tailings reprocessing project, and
Barita de Sonora, a barite producer -- both in Mexico. Company efforts will be
concentrated on the continued improvement of Pachuca and El Baztan in Mexico,
as well as Nixon Fork and Aurora in the United States. We are optimistic that
these operations will be on a solid, positive cash-flow basis by the end of
calendar year 1997.
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PACHUCA
The Company owns 100 percent of the Pachuca underground mine complex,
processing plant, refinery, and mining concessions covering the entire Pachuca
district in the state of Hidalgo, Mexico. The process plant includes flotation
and cyanidation circuits, which are rated at 2,400 tonnes per day.
During the quarter, production at Pachuca hit a plateau of about 1,200 tonnes
per day because of an almost-continuous plugging of a seven-kilometer, buried
tailings line installed decades ago. Plans call for the replacement of this
line with a 10-inch HDPE pipe that has been carefully engineered to carry a
minimum of 2,400 tonnes per day. Permitting efforts are underway for this
installation, which is expected to be complete around year end. With the
installation of the new tailings line, Pachuca will be able to continue its
plan to reach full annual production of 5.4 million ounces of silver and 25,000
ounces of gold by mid-1998.
EXPLORATION AT PACHUCA
Company-held mining concessions cover the entire Pachuca district -- about
50,000 hectares of highly-prospective ground. Although Pachuca has operated
almost continuously for about 465 years, excellent potential exists for the
discovery of extensions of ore in 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. Drill-indicated
and inferred resources of 3.3 million tonnes have been delineated at an
average grade of 298 grams of silver and 2.40 grams of gold per tonne, for a
total additional resource of 31 million ounces of silver and 250,000 ounces of
gold in this area.
EL BAZTAN
Copper ore is mined at two underground sites at El Baztan in the state of
Michoacan, Mexico. Skarn ore is mined from an andesite host at the Vista
Hermosa mine. Ore is produced from vein deposits at the El Arroyo mine. Ore
from both deposits is processed by conventional flotation in a
450-tonne-per-day plant. The operation produces copper concentrate with minor
gold credits.
During the quarter, El Baztan operations mined and processed 23,214 tonnes of
ore, from which 791,000 pounds of copper and 405 ounces of gold was produced.
El Baztan normally operates three of four grinding mills; however, during the
quarter, the operation was hampered because of cracked trunnions on two of
these grinding mills. As a result, for most of the quarter, only two grinding
mills were operative, and lower-than-expected copper production resulted. The
IMMSA smelter at La Caridad, in the state of Sonora, agreed to take larger
shipments of concentrate from El Baztan, and as a result of this combined with
lower production, concentrate inventory at El Baztan was
<PAGE>
significantly reduced. Despite the increased concentrate shipments,
profitability at El Baztan was hampered by the cost of trucking concentrate to
the northern part of Mexico and also by lower copper prices.
Proven and probable reserves at El Baztan total 890,000 tonnes with an average
grade of 1.87 percent copper (34 million contained pounds of copper).
EXPLORATION AT EL BAZTAN
Diamond drilling at the Vista Hermosa mine has delineated an additional
inferred resource of 450,000 tonnes with a grade of 1.5 percent copper.
Indications are that the ore structures are continuous and extensive. The
Company believes that an ambitious drill program would have a high probability
of dramatically increasing the reserve to a point where the construction of a
new and much larger plant would be justified. The Company intends to carry out
a conceptual feasibility study of significantly increasing production at
Baztan.
NIXON FORK
The Nixon Fork mine, located near McGrath, Alaska, produced 9,433 ounces of
gold during the quarter.
The operation experienced difficulties in keeping a full complement of skilled
miners onsite due to competition from new underground mines in Alaska. This
caused ore-production shortfalls which, in turn, resulted in less-than-
anticipated gold production.
Underground drilling in the Crystal Garnet mine delineated ore one level below
the formerly existing reserve. It is unknown at this time how deeply ore
mineralization in the Crystal Garnet mine extends.
Rehabilitation of the access decline in the Mystery mine was completed during
the quarter, which will give the Nixon Fork operation additional working places
as the Crystal Garnet deposit is depleted.
EXPLORATION AT NIXON FORK
The exploration program in the Eagle Creek stock area, about six miles south of
the Nixon Fork mine, continued until the end of the summer. This program,
consisting of surface sampling and trenching, intersected several good gold
hits and is expected to continue next year. Negotiations terminated with a
foreign entity that had expressed interest in forming a joint venture with the
Company to explore the Eagle Creek stock. A second foreign entity has now
expressed a strong interest in forming a joint venture to explore the district.
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AURORA
The Aurora mine, located southwest of Hawthorne, Nevada, produced 3,183 ounces
of gold during the quarter. This production was down from the second quarter
due to a slide in the Chesco Pit which forced mining to divert to the lower-
grade Ann Pit for a portion of the quarter.
The Company completed acquisition of the neighboring Humboldt deposit, with
reserves of approximately 180,000 ounces. A prefeasibility study has shown
that this new reserve, coupled with the existing Aurora reserve, will provide a
sound economic base to expand the throughput of the plant from 350 to 700
tonnes per day. The Company will be looking for alternative ways to fund this
expansion, and is optimistic that the expansion can be underway early in 1998.
BARITA DE SONORA
This barite operation in the state of Sonora, Mexico, has been a financial
drain over the past year, and the Company has made the decision to place the
operation on standby. The Company is examining the alternatives of either
moving the barite-grinding operation to the east coast of Mexico, with raw
barite being supplied from the Sonora mine, or selling the operation. The
Company has received several expressions of interest from potential buyers.
MAGISTRAL DEL ORO
The Magistral del Oro operation in the state of Durango, Mexico, had been
reprocessing tailings from a gold mine which closed in 1962. These
gold-bearing tailings had been agglomerated and stacked for heap leaching.
With the current price of gold, the operation could no longer support the cost
of handling, agglomerating, and stacking these tailings. Over the past 12
months, only leaching operations have been carried out. These have provided
very small, but positive cash flow from the operation. Recently, gold
production diminished to a point that it could no longer support the cost, and
the decision has been made to place the Magistral operation on standby.
EXPLORATION AT MAGISTRAL DEL ORO
Geologic reconnaissance work being carried out on the Magistral property has
identified several areas of strong hydrothermal alteration. These altered
areas appear promising for the discovery of large, bulk-minable orebodies and
the reconnaissance work is being followed up with surface sampling.
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MANAGEMENT
The Company greatly strengthened its management team during the quarter with
the appointments of Jack Haptonstall, Senior Vice President, Operations; Mike
Clarke, Vice President, Exploration; James S. Stirbis, Jr., Corporate Secretary
and Treasurer; and Frank Filas, Environmental Manager. All of these
individuals have proven track records and extensive experience in their
respective fields.
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Consolidated Balance Sheets
Consolidated Nevada Goldfields Corporation and Subsidiaries
(Amounts Stated in Thousands of U.S. Dollars and Shares - Unaudited)
<TABLE>
<CAPTION>
ASSETS September 30,1997 December 31,1996
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<S> <C> <C>
Cash and cash equivalents $ 2,329 $ 6,960
Accounts receivable:
Production 3,011 1,060
Other 835 1,433
Affiliated companies and related parties 391 345
Inventories:
Ore in stockpiles and ore in process 4,123 3,317
Supplies and materials, net 2,534 2,589
Prepaid expenses and other 457 551
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Total current assets 13,680 16,255
Restricted cash 22 805
Mineral properties at cost, net of accumulated
depletion and allowance for impairment 43,982 43,678
Plants, buildings and equipment at cost, net of accumulated
depreciation, amortization and allowance for impairment 59,572 62,307
Deferred loan costs and other assets at cost,
net of amortization 1,486 580
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Total assets $118,742 $123,625
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LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable:
Suppliers and contractors $ 5,093 $ 4,071
Other 2,744 2,475
Related parties 9,808 790
Accrued liabilities 2,453 3,011
Current portion of accrued interest payable 485 825
Current portion of accrued mine reclamation costs 858 1,326
Current portion of long-term debt and deferred
gain on gold loan of $969 and $568 at
September 30,1997 and December 31,1996, respectively
14,777 13,497
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Total current liabilities 36,218 25,995
Long-term debt 17,198 18,489
Accrued interest payable 75 111
Accrued mine reclamation costs 1,586 1,517
Convertible subordinated debentures 12,062 12,155
Convertible unsecured debentures 7,500 -
Due to related party 2,967 11,176
Deferred foreign exchange gain 254 161
Other 1,198 1,149
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Total liabilities 79,058 70,753
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Shareholders' equity
Common shares, without par value, unlimited shares authorized,
134,005 and 129,837 shares issued and outstanding,
at September 30,1997 and December 31,1996, respectively 101,341 99,163
Accumulated deficit from April 1,1991 (61,657) (46,291)
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Total shareholders' equity 39,684 52,872
Commitments and contingencies
Total liabilities and shareholders' equity $118,742 $123,625
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</TABLE>
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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)
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended Nine Months Ended Nine Months Ended
September 30, 1997 September 30, 1996 September 30, 1997 September 30, 1996
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<S> <C> <C> <C> <C>
Revenue:
Net sales of precious metals
and mineral products $ 8,585 $ 3,640 $ 24,680 $ 14,892
Forward and futures contract
(losses) gains, net - (75) 840 (684)
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8,585 3,565 25,520 14,208
Operating costs and expenses:
Production costs 8,915 3,669 23,404 12,480
Depreciation, depletion and
amortization 2,839 1,426 8,463 6,282
General and administrative costs 1,801 500 4,384 1,451
Exploration costs 4 42 40 146
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13,559 5,637 36,291 20,359
Operating loss (4,974) (2,072) (10,771) (6,151)
Other income (expense):
Interest expense, net (714) (461) (3,644) (1,571)
Gain (loss) on sale or disposition of
mining claims, equipment and
inventory 23 - 23 (6)
Cumulative translation adjustment (623) - (355) -
Other, net (708) (10) (320) (15)
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(2,022) (471) (4,296) (1,592)
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Loss before income tax expense (6,996) (2,543) (15,067) (7,743)
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Income tax expense (130) - (299) -
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Net loss $ (7,126) $ (2,543) $(15,366) $ (7,743)
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Loss per common share $ (0.05) $ (0.05) $ (0.12) $ (0.14)
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Weighted average number of
common shares outstanding 131,930 54,658 131,088 53,411
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Gold equivalent ounces produced 22,532 10,387 68,523 39,085
Decrease (increase) in inventory (526) (155) (4,084) 1,501
Gold equivalent ounces sold 22,006 10,232 64,439 40,586
</TABLE>
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Consolidated Statements of Cash Flows
Consolidated Nevada Goldfields Corporation and Subsidiaries
(Amounts stated in Thousands of U.S. Dollars - Unaudited)
<TABLE>
<CAPTION>
Nine Months Nine Months
Ended Ended
September 30, 1997 September 30,1996
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<S> <C> <C>
Cash flows from operating activities:
Net loss $(15,366) $ (7,743)
Adjustments to reconcile net loss to net cash
(used in) provided by operating activities:
Amortization of deferred gain or loss on hedged
sales and gold loan conversion, net (290) 975
Depreciation, depletion and amortization 8,463 6,282
Mine reclamation costs accrued, net (399) (178)
Amortization of deferred loan costs, net 278 404
Increase in amounts due from affiliated companies and
related parties (46) -
Increase in amounts due to related companies 809 18
(Increase) decrease in current assets, net (2,010) 167
Increase in current liabilities, net 742 985
(Decrease) increase in accrued interest, non-current (101) 956
Other (48) -
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Net cash (used in) provided by operations (7,968) 1,866
Cash flows from investing activities:
Capital expended for mineral properties and
plants, buildings and equipment (2,898) (9,441)
Retirements of property, plant and equipment (1,125) -
Increase in other assets (1,102) (633)
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Net cash used in investing activities (5,125) (10,074)
Cash flows from financing activities:
Borrowings 3,585 -
Repayments of debt (3,377) (3,313)
Proceeds from issuance of convertible unsecured
debentures 7,500 -
Proceeds from issuance of common shares, net (29) 6,574
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Net cash provided by financing activities 7,679 3,261
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Net decrease in cash and cash equivalents (5,414) (4,947)
Cash and cash equivalents at beginning of period 7,765 6,295
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Cash and cash equivalents at end of period $ 2,351* $ 1,348*
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</TABLE>
*Includes restricted cash of $22 and $248 at September 30, 1997 and 1996,
respectively
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CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
Consolidated Nevada Goldfields Corporation and Subsidiaries
(Amounts Stated in Thousands of U.S. Dollars and Shares)
<TABLE>
<CAPTION>
Number Common Number of Total
of Shares Common Common Shareholders'
Common Without Par Shares Shares Accumulated Equity
Shares Value Subscribed Subscribed Deficit (Deficit)
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<S> <C> <C> <C> <C> <C> <C>
Balances at June 30, 1994 41,332 $25,743 - $ - $(22,871) $ 2,872
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Issuance of common shares for cash 39 24 - - - 24
Issuance of common shares as payment of interest of
3% convertible subordinated debentures 188 240 - - - 240
Net loss - - - - (5,763) (5,763)
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Balances at June 30, 1995 41,559 $26,007 - $ - $(28,634) $(2,627)
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Issuance of common shares for cash 8,095 6,574 - - - 6,574
Issuance of common shares as payment of interest on
3% convertible subordinated debentures 244 259 - - - 259
Issuance of common shares upon conversion of
3% convertible subordinated debentures 3,750 3,295 - - - 3,295
Issuance of common shares for a mining lease 537 445 1,073 889 - 1,334
Net loss - - - - (6,666) (6,666)
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Balances at June 30, 1996 54,185 $36,580 1,073 $889 $(35,300) $ 2,169
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Issuance of common shares for cash 22,493 18,350 - - - 18,350
Issuance of common shares as payment of interest on
3% convertible subordinated debentures 119 104 - - - 104
Issuance of common shares upon conversion of
3% convertible subordinated debentures 750 664 - - - 664
Issuance of common shares in exchange for acquisition
of subsidiaries 52,290 42,576 - - - 42,576
Net loss - - - - (10,991) (10,991)
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Balances at December 31, 1996 129,837 $ 98,274 1,073 $889 $(46,291) $ 52,872
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Issuance of common shares for cash 53 (29) - - - (29)
Issuance of common shares as payment of interest
on 3% convertible subordinated debentures 234 203 - - - 203
Issuance of common shares in exchange for
acquisition for mineral properties 2,788 1,500 - - - 1,500
Issuance of common shares for a mining lease 537 445 (537) (445) - -
Issuance of common shares in exchange for services
related to acquisition of subsidiaries 556 504 - - - 504
Net loss - - - - (15,366) (15,366)
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Balances at September 30, 1997 134,005 $100,897 536 $444 $(61,657) $ 39,684
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</TABLE>
