U.S.REPORT Galactic, Cornucopia merger may come following share

Vancouver-based companies Galactic Resources (TSE) and Cornucopia Resources (TSE) are preparing to follow the example set by other mining firms by laying the ground work for a possible merger. Galactic recently reached an agreement with a number of Cornucopia shareholders to acquire by way of a private placement 3.1 million Cornucopia shares representing a 16.28% interest.

Under the agreement, the Cornucopia shareholders, including Galactic Chairman Robert Friedland and his wife, will receive 0.5 shares of Galactic for each of their shares.

Galactic says it is acquiring the shares for investment purposes and it may buy more.

According to Galactic director James Foreman, a merger makes sense because the two companies are closely affiliated through their joint venture interest in the Ivanhoe gold project in Nevada. Held equally by both companies, Ivanhoe is being developed toward a fourth- quarter startup and should produce 60,000 oz. annually.

While Ivanhoe will be Cornucopia’s only producing asset, Galactic has interests in two U.S. mines — the Summitville and Ridgeway — which last year produced more than 200,000 oz. gold. Having sold 116,602 oz. of the yellow metal in 1989, Galactic is planning to boost its gold output to around 300,000 oz. by 1994.

Galactic has already proposed that a future “business combination” would be on the basis of an 0.5 Galactic for each Cornucopia share. However, any future decision on the proposal would be subject to regulatory approvals and a fairness opinion from Galactic’s independent financial advisers.

“For us it makes sense to work at this in a methodical and proper way,” Foreman told The Northern Miner.

Cornucopia shareholders might receive additional Galactic shares under the merger if within one year Galactic acquires, other than by normal market purchases made through the facilities of a stock exchange, additional Cornucopia shares for more than the proposed arrangement of 0.5 Galactic for one Cornucopia common share. But that too is still under consideration.