$50-million mining finance house McDonald’s Noramco to go public

The flagship of R. A. Bruce McDonald’s growing mining empire is going public. Noramco Mining Corp., which is being touted as a mining finance house, plans to raise $50 million via a unit offering being arranged by lead underwriter, Levesque, Beaubien Inc.

Mr McDonald, the Vancouver- based trader and promoter who came to prominence after successfully financing the Golden Pond gold discovery in Casa Berardi Twp., Que., told an audience of brokers and analysts that “we will stand or fall on this. We’re intending to make it work.”

As a private entity, Noramco Capital has already enjoyed considerable success — raising more than $210 million during the last three years. The money has funded the Golden Pond and Estrades gold and polymetallic discoveries in northwestern Quebec.

As a public company, Noramco Mining plans to engage in four core businesses. The first, and most important sector will be gold production. “We see 100,000 oz of gold production per year from Highland- Crow and Emerald Lake,” Mr McDonald said. First gold production is expected in July from the Emerald Lake Resources property north of North Bay, Ont. Controlled 29.6% by Noramco Mining, Emerald Lake will mill at 400 tons per day. Reserves in all engineering categories total 2.4 million tons grading 0.23 oz gold per ton.

Noramco President Gordon Keevil, told the meeting that the mine is expected to payback its $11.8 million capital cost in one year.

Another future source of gold production is the Highland-Crow Resources project near Pickle Lake, Ont. Controlled 28.9% by Noramco, Highland-Crow has outlined more than 7 million tons in various zones, grading 0.23 oz gold per ton. A headframe and hoist have been completed over the No. 1 shaft, and additional underground work is planned. Noramco also has a 30.36% stake in Golden Hope Resources, which is participating in the Estrades project, operated by Teck Exploration in Quebec. Canada’s largest exploration company

In total, Noramco will hold varying interests in more than 20 public exploration companies. “We are the largest exploration company in the world,” Mr McDonald noted. “We are also the largest landowner in Canada with active acres under our control.”

The bold assertion comes backed by 1986 exploration expenditures of $60 million. This year, companies under the Noramco umbrella plan to spend up to $85 million, Mr McDonald said. The bulk of the cash will come from the Golden Day Limited Partnership; a flow- through company being put together by Noramco. Expected to come to market in April, Golden Day will raise $75 million.

“We plan to maintain total control over this money by keeping the flow-through internal.” A major beneficiary of such a policy is Noramco Exploration, the wholly- owned exploration affiliate of Noramco Mining. Noramco Exploration charges a flat 5% management fee for operating the exploration programs of all the companies in Noramco. From June, 1986 to the end of February, Noramco expects to earn $1.45 million in management fees. Based on exploration spending forecasts for 1987, these fees are expected to increase substantially. Teck has stake

The final business of the company will be portfolio trading, which Mr McDonald stressed will only constitute a small part of the total business. However since November, 1986, trading gains have totalled $1.2 million. “We believe in profitably stabilizing our markets,” Mr McDonald said with a grin.

Upon completion of the issue, control of the company will rest with Noramco Capital (21.7%), Teck Corp. (9.5%) and Noramco officers (7%). Teck will also provide technical assistance when the need arises. The Teck-McDonald association goes back to early 1984, when Teck first realized the potential of the Casa Berardi gold discovery and took down a private placement of Golden Knight Resources common shares at $1.60 per share. At that time, Golden Knight, which holds a 40% interest in the Golden Pond discoveries made by Inco Ltd. was controlled by Mr McDonald through Noramco Capital. Noramco still has a 2% interest in the company whereas Teck holds 30%.

Indicative of the wide interest in the issue, approximately 50% of the offering is expected to be placed in Europe. The remainder will go to Canadian investors. The offering consists of 5 million units comprised of one common share and one half of one warrant to purchase a common share. The price is $10 per unit.