Dakota and Ariel propose merger

By acquiring Costa Rica’s only gold producing company, Dakota Mining (DKT-T) intends to capitalize on growing interest in Central America.

Dakota President Alan Bell had spent a year seeking merger opportunities before settling on Ariel Resources (AU-T), a company with all its operations in Costa Rica. Historically, Ariel’s properties have produced 1.6 million oz.

gold.

“What we are really getting are existing mines with production, infrastructure, and a great deal of exploration potential,” Bell tells The Northern Miner.

Ariel’s 55-sq.-km concession in northern Costa Rica includes three small underground mines (the Tres Hermanos, San Martin and El Recio) and the Matapalo carbon-in-pulp mill. The company expects to produce more than 15,000 oz. gold in 1996.

“Ariel has traditionally been known as an underground miner,” says Bell, “but we think the opportunity lies in the lower-grade, higher-tonnage scenarios.” Ariel hopes to boost gold production to 80,000 oz. per year in the coming years by starting up two open-pit mines, Fortuna and San Rafael, which are adjacent to the San Martin.

The environmental impact statement has already been approved for Fortuna, which hosts about 939,100 tonnes grading 2.21 grams gold per tonne. The deposit has a low stripping ratio of less than 1-to-1.

The San Rafael deposit, meanwhile, contains about 5 million tonnes grading 1.56 grams gold. The adjacent Gaitan zone contains another 5.7 million tonnes grading 1 gram gold, though additional drilling is required before the extent of mineralization can be fully evaluated.

Following the merger, Dakota intends to test for deeper potential in the underground mines and install more mechanization so as to achieve higher tonnage.

Ariel’s proven and probable reserves stand at 634,900 oz. gold, plus an additional resource of 376,900 oz. Also, the company has identified three additional targets surrounding the Boston, Gongolona and Ano Nuevo mines, which lie east of San Martin.

Dakota operates the Gilt Edge and Stibnite gold mines in South Dakota and Idaho, respectively, and owns a production interest at the Golden Reward mine in South Dakota.

The company is expected to crank out 75,000 oz. gold in 1996, increasing to 135,000 oz. by 1998. Current oxide reserves stand at 443,000 oz. gold, to which exploration is expected to add 100,000-200,000 oz.

In terms of minable gold reserves, Dakota and Ariel bring 2.8 million and 634,900 oz., respectively, to the merger. The new entity will have reserves in excess of 3.4 million oz. and is expected to lift annual production beyond 200,000 oz.

Ariel’s shareholders will receive one Dakota share for every two shares of Ariel. Dakota has 35.5 million shares outstanding and will issue an additional 8.2 million shares to Ariel’s shareholders.

Final due diligence will be completed by the end of October, and the transaction should be completed by the end of the year. Ariel would then become a wholly-owned subsidiary of Dakota.

William Bennett, Ariel’s president, and two others would be appointed to Dakota’s 7-member board of directors.