Financial problems reported at gold mining company

Wednesday, March 31, 1999 | 11:27 a.m.

HENDERSON -- Alta Gold Co. said it took a $9.3 million charge to reflect the reduced value of two of its mines -- and that its accounting firm is questioning Alta's ability to continue operating as a going concern.

The charge reflects the lowest gold prices in more than 19 years and start-up problems and cost overruns caused by delays in obtaining permits for Alta's new Olinghouse mine in Northern Nevada.

For the quarter ended Dec. 31, Alta reported a loss of $9.6 million or 29 cents per share on $4.8 million in revenue. In the 1997 quarter, the Henderson company earned $200,000 or 1 cent per share on revenue of $3.8 million.

As a result of the start-up problems and permitting delays at Olinghouse, gold production at Olinghouse in 1998 was less than expected and the cash cost of gold production exceeded $430 per ounce, resulting in negative cash flow from operations at Olinghouse.

Alta said that at Dec. 31, its line of credit was drawn to its maximum amount, the majority of its accounts payable were past due, production at Olinghouse was below expectations and available cash was limited, all of which required that the company's independent public accountants include a "going concern" qualification in their audit opinion.

"Although the start-up problems and permitting delays at Olinghouse have caused liquidity problems for the company, we still believe that Olinghouse will be a successful mining property," said Chief Executive Robert Pratt.

He said production from the company's second mine, Griffon, continues to generate positive cash flow and that Olinghouse's cash costs fell to $218 per ounce by last month.

Alta said it is pursuing outside sources of capital, including equipment refinancing, sale or lease of assets, other debt or equity financing, and the sale of royalty interests.

"However, there is no assurance that the company will be successful in its efforts to obtain additional capital," Alta said in a statement.

Alta Gold said it had $953,000 in cash assets at Dec. 31, down from $3.3 million at the end of 1997. Its accounts payable shot up from $829,000 at the end of 1997 to $4.4 million at the end of 1998.