PEGASUS GOLD CLOSES HEDGE BOOK
SPOKANE, WA - JANUARY 9, 1997 - Pegasus Gold Inc. (PGU - AMEX, TSE, ME)
announced that the lenders under the Company's revolving credit facility have
notified Pegasus that they consider all amounts payable under the credit
facility accelerated, although they have not yet demanded repayment.
"After consultation with counsel, we have informed our lenders that we disagree
with their interpretation of the revolving credit agreement and have reserved
our rights concerning their actions," said Werner G. Nennecker, President and
Chief Executive Officer.
Under the Company's convertible subordinated notes, acceleration of the
revolving credit indebtedness would constitute an event of default. The Company
disagrees that its revolving credit indebtedness is accelerated, due and
In addition, over the past several weeks the majority of the Company's gold and
other hedge contracts, including foreign exchange contracts, have been closed
out. The repurchase of the gold hedges generated a gain of approximately $74.5
million. Pegasus still has forward contracts on 48,000 ounces of gold for
delivery in 1998 at an average realized price of $524 per ounce. The remaining
gold hedge position has a mark-to-market value of approximately $10.8 million at
a gold price of $285 per ounce.
The termination of the Australian dollar hedges generated a loss of
approximately $18.6 million. The lenders have notified the Company that they
have exercised their right to set-off proceeds of approximately $58 million from
the termination of gold contracts against foreign currency losses of $2.4
million and the balance against amounts owing under the revolving credit
facility. The remaining foreign currency losses of $16.2 million have not been
settled with the financial institutions.
Statements in this release which are not historical data are forward looking and
involve a number of risks and uncertainties, including but not limited to the
price of gold and other commodities and currencies, production, construction and
permitting or regulatory delays, reserve estimation of tonnage, grade and
metallurgical recoveries, exploration success and reserve growth, litigation,
capital costs, and other risks that are detailed in the Company's SEC filings.
Pegasus Gold Inc. is an international gold mining company headquartered in
Spokane, Washington. Pegasus, a Canadian company by incorporation, currently
produces about 475,000 ounces of gold from its operations. The Company carries
out exploration internationally through offices located in Santiago, Chile; and
Panama City, Panama. The common shares of Pegasus are traded under the symbol
PGU on the American, Toronto
and Montreal stock exchanges. Options on the Company's common shares are traded
on the Chicago Board Options Exchange and the Montreal Exchange.
FOR FURTHER INFORMATION:
John W. Pearson
Vice President, Investor and Public Relations
Pegasus Gold Corp.