CoCa, Geodome merger planned this quarter

A formal takeover agreement was finalized in early December which, if approved, will give the merged company approximately 1.2 million oz of gold equivalent reserves, he confirmed.

The acquisition involves a share swap whereby CoCa will issue approximately 3.8 million common shares and warrants to purchase an additional 1.9 million shares at $4.30 each. The warrants, which are exercisable over five years, can expire after May 15, 1990 depending on the moving average price of CoCa shares.

CoCa has agreed to loan Geodome a minimum of $1 million secured by a mortgage on Geodome’s properties. Over the past decade, Geodome has spent more than $10 million for exploration and development of its Sunbeam mine near Stanley, Idaho.

Geodome has an 87% interest in the property which has a proven reserve of 3.3 million tons grading 0.077 oz gold. “Although environmental permits were recently issued for Sunbeam by the Environmental Protection Agency, they are under appeal by two environmental groups,” Matheson confirmed.

Exploration drilling on the Grouse Creek zone immediately north of Sunbeam has delineated reserves of 2.8 million tons averaging 0.05 oz gold per ton and 2.7 oz silver, he added.

Separately, gold output from CoCa’s Middle Buttes mine totalled 16,900 oz for the first nine months of 1988, compared to 22,000 a year earlier. In 1987, 86% of production came from the higher grade Winkler deposit whereas in 1988 it came from the lower grade Ella and Trent deposits. “To partially offset the decline in ore grade, Middle Butte’s crushing plant capacity was increased from 1,000 tons per day in 1987 to 2,300 tons in 1988,” he said.

Construction work on the nearby Shumake mine west of the Cactus Gold Mines property was completed in October and crushing began in November. Cash operating costs associated with Shumake are expected to be $215(US) to $230 per oz over its minimum mine life of five years, he said. Combined production from Middle Buttes and Shumake is expected to equal 55,000 oz in 1989.

CoCa and Minven Gold are evaluating an exploration program which could lead to a third phase of operations. Exploration work to date has indicated potential underground reserves of 98,000 tons averaging 0.995 oz gold and 0.81 oz silver. “Continued exploration will require an expenditure of several million dollars over two to three years,” he pointed out.

An independent technical and financial evaluation has been received for CoCa’s Hog Heaven project in northwestern Montana. The study, which was prepared by American Mine Services, reported 2.8 million tons of ore containing 13.4 million oz silver and 60,000 oz gold. “Should the Geodome acquisition and permitting be completed in early 1989, CoCa mines may delay development of Hog Heaven in favor of proceeding with development of Geodome’s properties,” said Matheson.

For the nine month period ended Sept 30, CoCa had earnings of $1 million or 12 per share compared to $2.6 million or 33 a year earlier. The 1988 earnings included pre- tax gains of $2.3 million from the sale of stock in Equity Silver mines versus $3.3 million for the sale of stock in 1987.

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