First Toronto tables offer for Australian gold company

Forsayth, which produced 121,000 oz gold last year, holds a 50% stake in the Mt Gibson open pit mine project where laterite and lode reserves stand at 4.7 million tonnes of grade 2.26 g (0.68 oz) gold per ton.

Results from three holes drilled to a depth of 820 ft suggest that the property could contain as much as 20 million tons of open pittable reserves, according to Mohamed El-Ansary, First Toronto’s General Manager of Mining.

Until the holes were drilled, all previous exploration at Mt Gibson had been above the 500-ft level. With some five miles of strike length still to be explored, production is expected to increase to 170,000 oz next year from about 70,000 oz in 1988.

“Our view is that it is a major camp at the preliminary stage of development,” said First Toronto President Chrisilios Kyriakou, who plans to pursue a $157.7-million bid for Forsayth even though it was recently rejected by Forsayth’s directors.

Under the bid, First Toronto is offering three common shares and one $5(C) gold-indexed bond for 10 shares of Forsyth. Scheduled to mature in five years at a rate of 6% annually, the bonds are convertible into First Toronto at $8 for three years after the proposed agreement closes. In the fourth and fifth year, the bonds are convertible at $9 and $10 respectively.

First Toronto shares were trading recently at $5.25 on the Toronto Stock Exchange in a 52-week range of $3.70 and $7.25. With 13.5 million shares outstanding, the company has a market capitalization of about $70.9 million.

At year end First Toronto reported a net loss of $10.2 million or $1.34 per share and it was carrying a debt load of over $60 million.

Although first quarter production from a group of Australian companies controlled by Forsayth added up to 44,963 oz, compared to 31,646 oz at the same time last year, the price of Forsayth shares has remained fairly steady recently. They were trading recently at $2.03(A) ($1.85(C)) in a range of $1.80(A) and $3.20.

If First Toronto succeeds in acquiring all of Forsayth’s 160 million outstanding shares, Kyriakou is hoping to have a direct interest in 500,000 oz gold production by 1995. He said the decision not to sell the 30% control block (announced in late June) was a function of First Toronto being a very young company and will not affect its future direction.

As a mining investment firm, First Toronto’s assets already include interests in the 30 million ton Cirque lead zinc project in British Columbia and a Newfoundland asbestos deposit held by Toronto- based Cliff Resources.

Forsayth chairman John Morris has called the bid “completely unwelcome.” But Kyriakou said, “We are confident that the bid is good and that it will be well received (by Forsayth shareholders).” The offer is conditional on First Toronto acquiring a minimum 51% interest in the Australian company.

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