Northgate to acquire stake in five junior explorers

In its latest foray into the acquisition market, Northgate Exploration (TSE) will spend about $40 million to gain a major interest in five Vancouver exploration companies and a problem-plagued California gold mine which is expected to produce 90,000 oz gold this year.

Under the terms of an extremely complicated transaction, Northgate has agreed to spend $22.8 million to acquire all the shares of ABM Mining Group which owns approximately 45% of the equity and approximately 88% of the voting shares of ABM Gold Corp.

Formed in by Vancouver explorationists Charles Ager and Mauro Berretta, ABM Mining has accumulated varying interests in a number of public companies.Those interests, which include a 32.5% stake in Sonora Gold Corp. (TSE) and a 15% net operating profits interest in the Jamestown mine in California, are held through ABM Gold. Incorporated last year, ABM Gold is currently listed on the American Stock Exchange.

ABM Gold’s other assets include a 58.4% stake in Goldenbell Resources (TSE) which owns an advanced California gold project called the Pine Tree property, a 59.9% stake in United Gold Corp. (VSE) and 20.5% of Inca Resources (TSE).

“Ager and Berretta were interested in selling and negotiations began about a month ago,” said Northgate spokesman Gregory Bowes.

In a separate transaction, Northgate will spend $12.4 million to acquire four million or 20% of Sonora’s treasury shares. According to Bowes, Sonora will use the funds to iron out some glitches in the Jamestown operation where production has been lower, and costs much higher than originally anticipated.

The company is mining from Jamestown’s Harvard pit where proven and probable reserves stand at nine million tons of grade 0.074 oz gold per ton.

During the first three months of 1988, Jamestown produced 20,600 oz gold at an average cost of $344(US) per oz. According to Bowes, the relatively high production costs are due to a low grade oxide cap on the Jamestown orebody.

A bottleneck on the crusher and poor recoveries have also contributed to high unit costs, which Bowes claims can be lowered.

The Jamestown property also hosts five additional deposits where drilling has outlined 15 millon tons of grade 0.06 oz to a limited depth.

Northgate will gain a significant interest in a mine that has the potential to produce in the order of 100,000 oz of gold annually as well as exposure to a number of exploration/development projects and a large land position in California’s Mother Lode gold belt.” said Northgate President John Kearney. “Northgate now has a great deal of flexibility with respect to further acquisitions as the company’s investments now provide the means to internally build a major North American gold producer.”

In the immediate future, Bowes said Northgate will attempt to modify the structure of a series of assets into a formation that the market can more easily understand. The assets include $160 million cash and interests in eight mines capable of producing 135,000 oz gold this year.

“Our next move will be to simplify the ownership of the Jamestown mine in which Pathfinder Gold Corp. (a subsidiary of Cogema Inc., a uranium mining concern controlled by the government of France) holds a 30% interest.

“At the moment, there are too many people with their fingers in the pie,” he said.