Wheaton River takes out Miranda (September 04, 2003)

Vancouver — Wheaton River Minerals (WRM-T) is continuing its strategy of growth through acquisition by inking deals with Teck Cominco (TEK-T) and Miranda Mining (MRM-V) to acquire the Los Filos gold deposit, along with a 21.2% interest in the El Limon gold deposit, both in Mexico’s Guerrero state.

“Los Filos and El Limon will be another step forward in the growth of Wheaton River as a dynamic global gold producer,” says the company’s Chief Executive Officer, Ian Telfer. “We are confident we can bring Los Filos into production by 2006, which should increase our projected annual production to over 700,000 ounces at cash costs of less than US$140 per ounce.”

The first deal has Wheaton taking over Miranda for US$38.62 million. The all-cash deal pegs the value of Miranda shares at $0.74, this marks a 49% premium over its $0.50 per share trading price before the deal was announced. Miranda’s large shareholders, who hold about 61.5% of the 71.9 million fully diluted shares, have agreed to tender their stock.

“After completing a thorough review of all options available to maximize value to Miranda shareholders, we are pleased to have reached an agreement with Wheaton River,” says Miranda President, Enrique R. Miranda Paz. “The Wheaton River offer represents a 136% premium to the volume-weighted average trading price of Miranda shares over the last 20 business days.”

Miranda Mining was formed on Nov. 21, 2001, when Miranda Mining & Development, a private Mexican company, amalgamated with Malaspina Capital. The company’s main assets include 100% of the small Nukay gold operation and a 30% carried interest in Minera Nuteck S.A. de C.V. (Nuteck), which hosts the Los Filos deposit. At last count, the project holds a measured and indicated resource of 38.4 million tonnes grading 1.44 grams gold using a 0.5 gram cut-off for 1.77 million ounces of gold. The property also hosts an inferred resource of 11 million tonnes grading 1.35 grams gold.

In connection with the deal, Wheaton will buy Teck’s 70% interest in the Los Filos property. The price tag comes in at US$48.4 million. With Miranda’s 30% interest in the project, Wheaton will wholly-own the property.

Miranda put itself on the auction block in May, when in conjunction with Teck Cominco, the partners agreed to sell Nuteck.

“Miranda and Teck Cominco have advanced the Los Filos gold deposit to a stage where it should be developed into an operating mine” says Miranda Paz.

The junior also has a 21.2% stake (14% carried interest) in Minera Media Luna S.A. de C.V., the company that holds the El Limon deposit. El Limon lies 15-km north of Los Filos and hosts some 1.5 million oz. of gold from material grading 3.53 grams gold. In 2001, drill crews completed 29 holes and, in the process, outlined a section of gold-bearing skarn mineralization covering a 1,000-by-300-metre area at El Limon. Mineralization is associated with magnetite, pyrrhotite, chalcopyrite and pyrite. The northern part of the zone is near the surface, whereas the southern portion occurs at depths exceeding 100 metres.

Moving to the west, similar skarn and oxide mineralization have been identified near or along the hornfels-marble contact. The best previous values came from hole 37, which yielded 8.44 grams gold over 4.6 metres and 1.6 grams gold over 4.6 metres.

At the 1-sq.-km La Amarilla target, the area is interpreted as the northern extension of the El Limon West hornfel-marble contact. A previous drill hole returned 22.8 metres grading 1 gram gold.

Preliminary metallurgical tests on seven composite samples from the 2001 drill program showed that gold can be recovered from the sulphide-rich portions of the mineralization by a simple flow sheet consisting of a grinding circuit followed by cyanide leaching and then a carbon-in-pulp circuit using activated carbon.

Teck, which holds a 78.3% stake in the project, picked up the 260-sq.-km property, 150 km southwest of Mexico City, in 1998, when the Mexican government auctioned-off unclaimed parts of the 500-sq.-km Morelos national mining reserve. Bidding US$3.1 million, Teck considered the area prospective for skarn-style mineralization similar to the nearby Nukay project, which hosts a total resource of 4.4 million tonnes grading 4.47 grams gold in three separate zones.

Last year, Miranda picked up a 30% equity stake in Compania Minera Nukay, S.A. de C.V. from Teck Cominco giving the junior 100% of Nukay. The price tag came in at $700,000 payable by issuing 2 million shares and 500,000 warrants. Each warrant is exercisable into one share by July 16, 2004, at any time after the simple average of the closing price of the shares during any 60 consecutive days is $1 or higher per share.

The Nukay mine has been in operation for almost 20 years and hosts several deposits that combined contain 300,000 oz of gold reserves in material grading 4.17 grams gold and 700,000 oz of gold resources contained in material grading 3.64 grams gold. The Nukay operation has produced roughly 90,000 ounces of gold over the last five years at an average cash cost of US$164 per oz.

The take-over bid requires at least 90% of the Miranda shares to be tendered. The bid will also be subject to Wheaton River completing the acquisition of Teck Cominco’s interest in Nuteck.

“Wheaton currently produces over 500,000 gold equivalent ounces at a cash cost of approximately US$100 per ounce and has over 4 million ounces of in proven and probable reserves,” adds Telfer. “This acquisition will add significantly to both production and reserves going forward.”,

The company aims to have a feasibility study for the Los Filos project in hand by next year. The project would mark Wheaton’s first mine to develop from scratch. The company previously bought into existing operations.

Last summer, Wheaton River acquired the Mexican company Minas Luismin and then in mid-March, the junior acquired, from Rio Tinto (RTP-N), an initial 25% interest in the Bajo de la Alumbrera gold-copper mine in Argentina; in return, Rio Tinto received US$210 million. Wheaton and partner Northern Orion Explorations (NNO-T) then picked up a further quarter-interest in the operation, this time from BHP Billiton (BHP-N) in June. The two split the US$180-million price tag and each take home a 12.5% share. At the same time that it acquired Alumbrera, Wheaton added the Peak gold mine in New South Wales, Australia.

In the second quarter ended June 30, Wheaton River tallied net earnings of US$11.1 million, or US$0.03 per share. This marks a five-fold increase over second quarter of 2002, when the company earned US$1.8 million, or US$0.02 per share.

Production rang in at 92,600 oz. of gold and 1.5 million oz. of silver at a total cash cost of US$90 per gold equivalent ounce (net of copper credits). Copper sales for the quarter totalled 28 million lbs.

“Wheaton’s record performance reflects our focused growth strategy and the strong operating results of each of our mines,” says Telfer. “Earnings and cash flows are expected to be further enhanced in the third quarter of 2003 when the Company’s June 24, 2003 acquisition of an additional 12.5% interest in Alumbrera is included for an entire three month period.”