Northgate bails out Neptune

But the money may be too late to allow the company to meet its construction target in time or on budget.

Bill Hanna, traffic manager at Edmonton-based Robfam Transport said hauling would not begin until new terms of credit are set up.

“We won’t haul until the money is in place,” said Hanna who called a halt to trucking operations a week before Northgate and Neptune outlined the terms of the financing agreement. Neptune had fallen behind with payments to his company, he explained.

As Northgate and Neptune attempt to close the deal, responsibility for hauling $25 million worth of equipment along frozen highway to the Colomac property rests with Robfam Transport.

Before the frozen road begins to thaw, the company will attempt to transport all of the equipment needed to build a 10,000-ton-per- day carbon-in-pulp milling facility.

With about four weeks left in the trucking season, some 100 trucks will make the trip from Edmonton, through Yellowknife and across a number of frozen lakes to the site.

But even if equipment is hauled on a 7-day round the clock basis, Hanna doubts that all the equipment will be in place before the road starts to thaw.

“We’ll give it a good lick’n, but I don’t think we can get it all in,” said Hanna.

Equipment that doesn’t make it in time will be flown by Hercules aircraft to the Colomac site where Neptune is building a 5,000-ft runway.

After weeks of negotiations with financially stricken Neptune, Northgate has advanced $22 million to the Vancouver company and can provide up to $40 million to develop the Colomac project where production is scheduled to begin at a rate of 200,000 oz annually next April.

Northgate emerged as Neptune’s financial backer after the federal and territorial governments decided not to back the project with a $18- million working capital loan guarantee. While reserves at Colomac stand at 28 million tons grading 0.056 oz gold per ton, the project is considered risky because of its grade and remote location.

The guarantee was crucial to Neptune’s financing plans because without it the company couldn’t draw on a $90-million project loan which was negotiated with the Bank of America Canada.

Gold Reserve Corp. of Spokane, Wash. and Northgate had previously agreed to contribute $43 million to the financing package in exchange for an equity stake in Neptune.

Under the terms of the $40-million agreement, $10 million will be convertible upon bank drawdown into five million common shares of Neptune representing a 28% interest.

The agreement, which required Neptune President Margaret Witte to relinguish her position, gives Northgate share options and conversion rights that could add up to a 50% undiluted stake in the company.

Northgate President John Kearney refused to speculate on the reasons for Witte’s resignation. He said Neptune will be run by an executive committee consisting of personnel from both companies during an unspecified transition period. Witte, who remains on the Neptune board of directors, was unavailable for comment.

While Colomac’s 1990 production estimates have been reduced by about 30,000 oz, Kearney said the scope of the project hasn’t changed. “It is now in the lap of the gods,” he said.

A halt trading order was placed on the Neptune issue March 2, but it was expected to be trading again once the announcement was made.

]]>