Under a revised plan,
In January, Geomaque announced plans to merge with Australia-listed St Barbara Mines of Perth in order to create a new company called Defiance Mining. The plan also included Midas Gold, a private, U.K.-based company controlled by Strata Mining (St Barbara’s biggest shareholder with a 39.2% stake).
In the end, Defiance would have been held 64.4% by St Barbara shareholders, 19.8% by Midas shareholders, and 15.8% by Geomaque.
The new deal calls for Geomaque to acquire all of Midas’s shares at a rate of 3.52 of its own shares for each Midas share, and thereby beget Defiance. With about 51.7 million shares outstanding, Defiance will be owned 50.1% by Geomaque shareholders and 49.9% by Midas shareholders.
After the new company attains a listing on the Toronto Stock Exchange, it will negotiate a business combination with St Barbara.
The new deal is subject to all the usual conditions; Geomaque’s shareholders are expected to vote on the new plan in June.
In related news, Geomaque has advanced Midas another US$1.95 million under an existing secured loan agreement. Midas will use the funds to complete its acquisition of the Tasiast gold property in Mauritania, West Africa, from
The advance comprises US$700,000 from Geomaque’s working capital plus a US$1.25-million bridge loan (accruing interest at 5% annually) from Resource Capital Fund II. The loan is to be repaid from proceeds of the eventual sale of Midas’s Ocean Resources Capital Holdings shares. Ocean Resources is a U.K.-based resource investment fund.
The Tasiast property comes with a price tag of US$6.5 million. Newmont will retain a 2% net smelter royalty on gold production exceeding 600,000 oz.
A scoping study at Tasiast suggests annual production of around 120,000 oz. at an average life-of-mine cash cost of less than US$185 per oz. Initial capital costs are pegged at US$37 million. Another US$11 million of sustaining capital would also be required.
An ongoing program of reverse-circulation and diamond drilling is aimed at boosting Tasiast’s indicated and inferred resources into the measured category. A bankable feasibility study is expected by year-end.
When the dust settles, Defiance will boast three mines producing more than 350,000 oz. annually by the end of 2005. Total cash costs are projected to fall to less than US$195 per oz. by the end of 2005 from US$255 per oz. in 2003.
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