Emperor, which mines gold at Vatukoula in Fiji, has watched its stock price crash from more than 70c in February to 38c today as investors factor in concerns over the stability of the island nation following the George Speight-led coup.

According to CIBC World Markets' mining analyst, Tony Lethlean, Emperor was already tackling a difficult operation in Vatukoula before the Fiji political crisis erupted.

The mine is situated in the north-west of Fiji's main island Viti Levu. Fortunately this area has been relatively isolated from the violence that has dogged the capital Suva and other large cities. And as the country's largest private employer, generating 6% of Fiji's national foreign income, the military are maintaining a presence nearby.

"The military are doing a good job in monitoring the situation, as are our staff," said Emperor's finance director, Greg Starr.

However, the political situation has obviously had repercussions for the project. Logistical operations have become something of a nightmare for the company, particularly getting supplies to the site.

Insurance premiums are likely to climb sharply, and trying to obtain necessary government approvals is a headache because it is often unclear who is in charge, said Starr.

If threatened trade sanctions against Fiji are actually imposed it would prove a problem for the operation, he said.

But with gold languishing at about US$280 an ounce it is not only the political tension that is affecting the mine, CIBC's Lethlean said.

Vatukoula is virtually identical in terms of mining techniques used to the narrow vein longwall mines found throughout South Africa that are battling to continue operating at these gold prices, he said. Many have lost the fight and have been forced to close.

The deep, narrow vein Vatukoula mine is very similar to operations found in South Africa.

The March quarter showed just how hard it is to get a run of consistent quarters in a deep narrow vein mine with fairly hostile conditions, the analyst said.

Emphasising the point, gold production for the year was 143,038oz - the highest achieved in 65 years of mine operations - but a disappointing 27,198oz was produced in the final quarter.

Lack of alternative working areas also highlights the difficulties when a main production area has problems.

A collapse in the 13 level at Philip Shaft meant alternate access had to be driven up to the 13 level stopes from the 15 level, and stoping had to be suspended on the 17 level after increased inflows of hot ground water sent temperatures soaring above acceptable working levels.

"Complex faulting at Matanagata East caused a drop in grade down to 7.54gpt for the final quarter, resulting in a net loss before once off significant items and tax of $6.16 million in the fourth quarter for a full year $5.35 million operating loss," the company said in its final quarterly report for fiscal 2000.

The Matanagata complications, the deferral of the deepening of the Philip shaft in deference to the political situation, and greater dilution while mining high grade pillars at the decline section have seen the company write its Fiji assets down by $21.49 million, using a long term gold price of US$285.

"But Emperor has done well to reduce costs from extreme highs of over A$500/oz in 1998 to just over $400/oz in 1999 to $340/oz in the third quarter," Lethlean said.

"However, Vatukoula is a capital hungry operation, spending around $14 million a year on capital works and equipment."

Management will have to continue to watch costs hawkishly, particularly at current gold levels, in what is an inherently difficult mining operation.