Belmoral to eliminate debt through asset sale to Aur

For the second time this year, Belmoral Mines (TSE) and Aur Resources (TSE) have worked out a deal designed to rescue Belmoral from its financial predicament and expand Aur’s influence in the Val d’Or, Que., mining camp. Toronto-based Belmoral, which last year lost $34.5 million, has agreed to sell Aur a 50% stake in a package of Val d’Or properties that include Belmoral’s Dumont and Ferderber gold mines, a 1,200-ton- per-day mill, and 21,000 acres of mining properties.

In return, Aur will forgive the $4.5 million it is owed by Belmoral and put up $2 million for exploration on the two mines which are expected to produce 55,000 oz. this year. All of the ore mined from Aur’s nearby Kierens mine has been processed at the Belmoral mill and production attributable to Aur from the three mines should more than double the company’s projected output to 48,000 oz. from 21,000 oz. this year.

Pending regulatory approval, the deal will enable Belmoral to repay debts worth $9 million and fund exploration at Dumont where long- term productivity rests on the discovery of new reserves.

Belmoral recently netted $5 million through the sale of its 50% stake in the Astoria gold project near Rouyn-Noranda, Que., and 40.4% interest in partner Yorbeau Resources (ME).

As part of the new agreement, Aur will lend Belmoral $3.5 million on closing, including the $2 million for underground exploration at Ferderber and Dumont. Aur will also become operator of all of Belmoral’s projects in the Val d’Or camp, and both companies will have equal representation on a 4-person joint operating committee.

The terms of the loan require no principal repayments until Feb. 28, 1992, after which the loan is to be repaid over an additional two years.

Scheduled to close on July 31, the agreement comes just six months after Aur elected not to proceed with a plan to purchase up to 47% of Belmoral’s issued shares. Under that deal, Belmoral would have issued to Aur 10.4 million common shares in return for a number of Aur shares equal to $6 million divided by the weighted average trading price of the shares for 20 days before the transaction was scheduled. In March, Aur was proposing to subscribe for 3.2 million Belmoral shares at 60 cents each, plus an identical number of warrants exercisable for two years at 60 cents.

While that agreement was scuttled by Aur for reasons that haven’t been revealed, Belmoral President Gordon Strasser said he prefers the new one to the original. “It (the new agreement) doesn’t dilute the stock, and funding contributed by Aur will enable the joint venture to spend $4 million for exploration,” he told The Northern Miner.

Per-ounce production costs at the Ferderber and Dumont operations, which produced 39,272 oz. gold last year, have been reduced to about US$350 from more than US$400, according to Strasser. Cost per ounce figures include development and exploration costs.

Ron Coll, a base metals analyst with Toronto-based McLean McCarthy, said the deal was an attractive one for Aur shareholders. “Paying $4.5 million for a mill and two mines represents a pretty decent price,” he said.