KWG Resources poised to take over Far East Gold

With a little help from its parent company, KWG Resources (KWG-T) has initiated a takeover bid for Far East Gold (FEGI-C).

St. Genevieve Resources (SGV-T), the controlling shareholder of both KWG and Far East, has entered into an agreement with Midland Walwyn Capital, CIBC Wood Gundy and C.M. Oliver & Co. to complete a special warrant financing to raise a minimum of $25 million and a maximum of $40 million. St. Genevieve will use the proceeds to subscribe for a minimum of $21 million of additional equity in Far East Gold.

KWG, in turn, has announced its intention to acquire all the outstanding shares of Far East Gold on the basis of one common share and one-third of one common share purchase warrant of KWG for every 2.7 common shares of Far East Gold. Each whole warrant will be exercisable at a price of $10 per share. St.

Genevieve has agreed in principle to tender its shares of Far East Gold pursuant to such an offer, subject to an independent valuation and a favorable fairness opinion.

Far East Gold will, in turn, use these proceeds to begin mining the Ametistovoe gold deposit in Far Eastern Russia, in which it holds an 80% interest through shares of Koryakiya Mining, a Russian joint stock.

Ametistovoe, which lies in the northern region of the Kamchatka Peninsula, contains 80 known zones of highly anomalous gold occurrences. Of these, only 27 have received significant work.

Reserves to date stand at 10.4 million tonnes averaging 9.12 grams gold per tonne and 43.45 grams silver per tonne. The company expects to be producing 125,000 oz. gold per year by June 1997.

St. Genevieve’s offering will consist of a minimum of 16.7 million and a maximum of 26.7 million special warrants at $1.50 each. Each special warrant will entitle the holder to acquire one unit consisting of one common share and half a common share purchase warrant. Each whole common share purchase warrant will be exercisable for a period of 18 months into one common share at a price of $2.

St. Genevieve intends to file a prospectus to qualify the common shares and common share purchase warrants issuable upon exercise of the special warrants. In the event that receipts for the prospectus are not obtained within 120 days of the closing of the private placement, each special warrant will entitle the holder to acquire a unit consisting of 1.1 common shares and half a common share purchase warrant.

Proceeds will be held in escrow and released to St. Genevieve upon the satisfaction of certain conditions. If St. Genevieve has not satisfied the conditions within 180 days of closing, the holders of special warrants can elect to have their subscription proceeds returned to them.

Shareholders of St. Genevieve were scheduled to meet on Sept. 23 to grant their approval to the placement, which closes Oct. 1.