Affiliates Wheaton, Kit propose marriage

Merger mania has taken hold of Wheaton River Minerals (WRM-T) and Kit Resources (KIT-T).

An agreement-in-principal calls for Kit shareholders to exchange each of their shares for 0.408 share of the merged company and for Wheaton shareholders to exchange their shares at par. The merged entity will retain the name Wheaton River Minerals and have 52 million shares outstanding.

Kit brings to the table its George Lake gold project, 70 km south of Bathurst Inlet in Nunavut, where indicated resources stand at 4.2 million tonnes grading 9.8 grams gold per tonne. Kinross Gold (K-T) can earn a 70% interest in the property by spending $20 million by Nov. 30, 2004.

The backbone of Wheaton’s interests is the Golden Bear heap-leach gold mine in northwestern British Columbia. The company operates and owns an 89% interest in the seasonal operation, which churned out 71,600 oz. gold this year at a cost of US$159 per oz. Reserves are sufficient for another two years of profitable operations.

Wheaton is also developing the Bellavista gold project, in the Miramar area of Costa Rica. Annual production is projected at 60,000 oz. over a mine life of more than seven years, with cash costs expected to average US$179 per oz. Proven and probable resources stand at 11.2 million tonnes grading 1.54 grams gold.

Capital costs are pegged at US$28.3 million and will be funded through debt and cash flow. (Wheaton had $11.7 million in cash on Sept. 30.)

Wheaton currently has 40.2 million shares outstanding and holds 8.6 million of Kit’s 37.5 million outstanding shares. Homestake Mining (HM-N) holds a 9.5% stake in Kit and has agreed to vote in favour of the merger.

The deal is subject to an appropriate valuation, fairness opinions, shareholder approval and approval by the two boards of directors, regulators, and the Ontario Supreme Court.