Audrey, Minnova officials blame brokers for rumors

Rumors sparked by a 55 cents increase in the price of Audrey Resources (TSE) shares and a shortage of reserves at four mines held by Minnova (TSE) recently led investors to conclude that Audrey may be the subject of a takeover bid. As Minnova is earning a 50% interest in a large massive sulphide lens at Audrey’s Mobrun polymetallic mine near Rouyn-Noranda, Que., the takeover rumor seemed plausible.

But senior officials from both companies say there have been no discussions regarding a takeover. A spokesman for Northgate Exploration, which owns 18% of Audrey, declined to comment on the rumor. A press release issued by Audrey added that apart from a feasibility study at Mobrun, there have been no developments to justify the Nov. 2 share price increase.

A member of the Noranda (TSE) group, Minnova is Audrey’s second largest shareholder (behind Northgate) with 8%.

According to Minnova’s Senior Vice-President Dave Watkins, the rumors may have been circulated by brokers who were hoping to make trading profits as investors moved in to purchase the stock.

“From time to time, people go out to deceive the public for their own gain,” said Watkins.

The rumors were given some credibility by a Globe and Mail article which pointed to Minnova’s need for new ore reserves. Quoting from a report by Yorkton Securities Inc. analyst Andrew Muir, the article described Mobrun as an excellent source of new ore for Minnova. “Production at a planned rate of 3,000 tons per day could add 3.5 million lb. of copper and 60 million lb. of zinc annually to Minnova’s output,” the Yorkton report said.

Later this month, Audrey is expected to table a feasibility report containing development plans for the 1100 lens, the largest of five lenses discovered on the Mobrun property since 1988.

The 1100 is estimated to contain 15.5 million tons of grade 0.83% copper, 4.64% zinc, 1.05 oz. silver and 0.035 oz. gold per ton.

Watkins says the 1100 could prove large enough to sustain a 3,000-ton-per-day mining operation. If it did, half of the ore would be milled at Mobrun while the other 50% is trucked to Minnova’s Lac Dufault mill in Rouyn.

Meanwhile, Audrey Vice-President Michel Bouchard said it would take much more than $3.35 (the recent market price of the shares) to persuade him to sell out to any bidder. Management currently controls about 7% of the company. By contrast, Watkins indicated Minnova’s view that Audrey is overvalued by the market. Referring to the recent trading price versus the 15.5 million shares outstanding, Watkins said, “from our perspective, Audrey doesn’t look that attractive.”