Homestake wins battle for North Amer. Metals

The takeover battle for North American Metals appears to be over with U.S. gold producer Homestake Mining emerging as the victor. By midnight April 15, shareholders had tendered approximately 5.4 million shares or 68% of North American’s outstanding stock at $5 per share.

Subject to resolving various deficiencies in the acceptance of the offer, Homestakes says it “expects to take up and pay for all of the approximately 5.8 million shares deposited.”

Speaking from Homestake’s head office in San Francisco, Richard W. Stumbo Jr, chief financial officer, told The Northern Miner there are “no formal plans” to buy out the remaining shareholders.

North American and Chevron Minerals are expected to begin work on their Golden Bear project in northwestern B.C. May 1. Development costs are estimated to be $36 million, including nearly $10 million for road access. That capital cost has struck many people as being low, given the lack of infrastructure in the area and the expensive road access. In any event, the combined open pit and underground mining operations are expected to yield about 64,000 oz gold per year, half of which would go to North American .

A Wright Engineers study projects an operating cost of $136(US) per oz which Stumbo said was important to Homestake because its unit costs are quite high. “As you can appreciate, Homestake, particularly with the Homestake mine, which is 111 years old, is a relatively high cost producer and the opportunity to leverage that down a bit is very important to us. Also, it (Golden Bear) is a great deposit. There’s some additional Blue Sky, if you will, and we are pleased to be there.”

Robert Hunter, president of North American, said he was reasonably happy with the end result but he thought “the thing was worth more” even though the fairness opinion from Wood Gundy concluded the $5 offer price was fair. “I was the guy that was hanging out for higher numbers and went 31 hours negotiating with them,” he noted.

Hunter expects that Homestake will finance its participation in the project internally. “They have a number of things they can do. First, they can vote for that private placement that Montagu has, they can do a convertible debt, loan North American the money, or do a private placement into the company. They have nothing but money in the bank.”

Pezgold Resource Corp., part of Murray Pezim’s Prime Capital group, has muddied the waters somewhat by issuing a Writ of Summons over an earlier agreement it had with North American involving a private placement of shares. The placement was subject to a right of first refusal by Montagu Mining Finance which Montagu exercised; but the Montagu placement is also in jeopardy because it’s subject to shareholder approval and could be voted down by Homestake which now controls North American. Major shareholders in Montagu Mining include the Samuel Montagu Group and the Hong Kong Shanghai Bank.

Hunter denied Pezgold allegations that his company breached its written financing agreement with Pezgold and also that there were any “side understandings” with Montagu. “The company is considering a counterclaim against the plaintiffs and will proceed to file one in the event the plaintiffs have damaged the company,” he emphasized.