First-refusal rights alter Homestake, Esso deal

Earlier this year, Homestake made a $29-million bid to acquire nearly 100 of Esso’s Canadian exploration projects, subject to rights of first refusal by various joint venture partners.

One of the key assets in the deal — a 24% interest in the Musselwhite gold project — hasn’t gone to Homestake. It was sold elsewhere for $19.5 million.

“We knew it was unlikely that we’d get all the projects we wanted,” said a spokesman for Homestake.

The San Francisco-based company pursued the Esso acquisition in an effort to expand its Canadian mineral property base and increase its exploration activity across the country. According to Robert Boyd, Homestake’s vice-president of Canadian exploration, the properties in the Esso package still hold significant potential.

About 15-20 of the properties in the deal are subject to first refusal rights, and if the rights are exercised, Homestake’s total purchase price will be reduced considerably.

Excluded from the deal were Esso’s 35% interest in Les Mines Selbaie and its royalty interest in the Midwest uranium deposit.

During the past few months, a number of Esso’s partners have already plucked out some of the key assets in the package, leaving Homestake with what’s left over.

This month, Homestake should learn whether Cameco and Trimin Resources (VSE) will exercise their right of first refusal on Esso’s 25.5% interest in the Hanson Lake base metal prospect in northern Saskatchewan.

Cameco and Trimin have reported encouraging results on the Hanson Lake project, but the low price of uranium has forced Cameco to cut costs and the company may not be in a buying mood.

Although firm ore reserve figures have not yet been established at Hanson Lake, at least one mineralized zone is reported to host three million t onnes averaging 7.5% zinc and 0.8% copper.

By making a combined payment of $2.1 million for Esso’s share of the project, Cameco’s interest would rise to 67% and Trimin’s to 33%.

One of the key assets in the Homestake/Esso deal has already been snatched up by other partners. Esso’s 23.95% interest in the Musselwhite gold project was sold last month for $19.5 million to Placer Dome (TSE), Inco Ltd. (TSE), and Corona Corp. (TSE).

The Musselwhite interest was considered a key asset in the deal. Its value, at nearly $20 million, would have accounted for a major share of Homestake’s total bid of $29 million.

However, Homestake has been successful in obtaining Esso’s 26.25% interest in the Back River property in the Northwest Territories. The 80-claim property is in the advanced exploration stage with diamond drilling and field work under way.

On another joint venture project in the Homestake/Esso deal — the SB property north of Stewart, B.C. — 50% partner Tenajon Resources (VSE) has said it fully intends to exercise its right of first refusal. A major exploration program is scheduled this year for that property where geological reserves of 308,000 tons grading 0.50 oz gold and 1.07 oz silver per ton have been outlined.

Homestake Mining Canada is a recently organized wholly-owned subsidiary of San Francisco-based Homestake Mining (NYSE).

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