Muscocho Explorations (TSE) and Echo Bay Mines (TSE) say they have completed a private placement agreement designed to finance development at a number of projects including the Magino gold property near Wawa, Ont.
Under the agreement, Echo Bay has acquired 3.8 million Muscocho shares representing a 12.5% interest for $13.3 million. The companies say they are also working on an $11-million convertible loan which is scheduled to close May 20.
Pending shareholder approval, Muscocho can convert the loan to common shares at $3.56 per share during a 30-day period six months after closing. That represents 3.1 million Muscocho shares.
If shareholders fail to approve, the loan is eligible for conversion to an 8.3% interest in Muscocho’s share in the Montauban, Magino and Magnacon properties. If conversion is not requested, the loan is repayable in 60 equal monthly installments of principal and interest.
The agreement allows Echo Bay to maintain a 20.7% interest in Muscocho for one year and increase its interest to 33% for an additional six years.
However, the provisions will not apply under the following circumstances:
* If a person, or corporation other than Echo Bay acquires or publicly announces an intention to acquire directly or indirectly more than a 20% interest in Muscocho.
* If both Terry Flanagan and John McAdam resign as directors or officers or cease to be involved with the company.
Under the agreement, Echo Bay can nominate two representatives to the Muscocho board of directors and three if its interest increases above 33%.
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