Falling gold prices take toll on mining company

Saturday, Jan. 17, 1998 | 4:56 a.m.

The Spokane, Wash.-based company took the action in U.S. Bankruptcy Court here Friday to restructure its $197 million in combined debt and $16 million in foreign currency losses.

Officials from Pegasus, which also operates four Montana mines, blamed the company's cash crunch on plunging gold prices, which hit an 18-year low earlier this month.

But Chief Executive Officer Werner Nennecker said he's confident the company can recover.

"I am convinced the company's foundation is strong," Nennecker told the Reno Gazette-Journal, adding the reorganization coupled with a boost in gold prices would help Pegasus rebound.

The company currently has about $16 million in available cash. But it faces a total of $213 million in obligations, including $68 million under a revolving credit program.

The American Stock Exchange has delisted Pegasus. Company officials said they will not appeal the ruling.

As part of its reorganization, Pegasus may temporarily suspend mining operations at the Florida Canyon Mine in Imlay, said John Pearson, vice president of investor relations.

In August, the company laid off 65 employees from the operation.

Pearson said it costs $335 to produce an ounce of gold at the mine. The company produces gold at $232 per ounce at its Montana mines, Montana Tunnels and Diamond Hills, he said.

Gold closed Friday at $290.60 per troy ounce, close to the $284 of 12 years ago.

The company only produces gold and silver at Florida Canyon. It produces gold, silver, lead and zinc at the two Montana mines.

Pegasus is one of several mining companies facing troubled times because of the slumping gold market.

Vista Gold Corp. announced last week that it is temporarily suspending mining at its Hycroft mine northwest of Winnemucca because of the slump and plans to lay off 135 workers in phases until mid-May.