Rayrock, Discovery swap oil, gas for mining assets

The boards of directors of Toronto-based Rayrock Yellowknife Resources and Discovery West Corp. have agreed to a major rationalization of the mining and oil and gas assets of both companies.

Under the plan, Rayrock is responsible for gold mining and exploration, industrial minerals and investments, while Discovery assumes accountability for oil and gas exploration, development and production.

Rayrock has also agreed to acquire all but two of Discovery’s mineral assets for $6,025,000.

They include a 50% interest in Johnsby Mines’ Colomac gold property in the Northwest Territories. As part of an agreement to earn 60% of Colomac, Neptune Resources has already spent $4.5 million.

The two remaining grass roots gold properties — the MacBean Lake and Burchell Lake — where drilling programs are already in progress, will be transferred at a price determined by an independent appraisal.

At the 200-claim MacBean Lake property eight miles south of Longlac, Ont., Discovery is involved in a joint venture with Vancouver-based Rea Gold and Long Lake Gold Mines of Calgary. With five surface drill holes already complet e no assays are available yet.

Diamond drilling started last week at the Burchell Lake property 70 miles west of Thunder Bay where Discovery is joint venturing with Rea Gold.

“We don’t want to exchange these two properties until we know what is in them,” explained Rayrock Vice-president Walter Steuerman.

Meanwhile, Discovery has agreed to acquire Rayrock’s 65% interest in some heavy oil leases in Alberta’s Cold Lake and Seal areas. Steuerman says the transaction is valued at Rayrock’s carrying cost for the property with payment in cash.

The Cold Lake leases are currently being developed by Norcen which has the right to an additional 15% interest and Discovery will assume obligations to finance a $5.2-million-test pilot project on the property.

The 4,480-acre Cold Lake leases, are close to Esso Resources’ May- Ethel and Lemming projects and their Cold Lake commercial phases 1-6. Esso’s leases are in production and a major expansion is planned.

In addition, Rayrock has agreed to a $4 million private placement of subordinate voting shares to Discovery at $7.71 per share. When complete, Discovery’s equity interest in Rayrock on a fully diluted basis, will be 23.7%.

Rayrock holds a 62% equity interest in Discovery.