Total Erickson shopping for another acquisition

With no bank debt and a $10-million line of credit, Total Erickson Resources is looking for a new acquisition in either the oil and gas or mineral sectors. President Jean-Pierre Januard also told the annual meeting recently that $6 million of its $14-million debenture had been converted and he predicted the rest would be “converted soon.”

The company has all but completed its takeover of Ranchmen’s Resources which is still subject to review by Investment Canada. Mr Januard predicted the decision would be favorable which would give it a 43.9% interest after conversion of Ranchmen’s convertible preferred shares. Total Erickson’s consolidated asset base will increase to more than $150 million because of the acquisition, the company noted in its annual report.

Ranchmen’s has more than 2,000 bbl per day of oil production and no debt, he pointed out, adding that Total Erickson has also made an offer to Trans-Canada Resources for eventual control. Because of sagging oil and gas prices, Trans- Canada experienced cash flow problems last year and has been granted protection under the Companies Creditors Arrangement Act. Total Erickson’s 9% equity in the company was written down by $2.6 million at year-end to reflect its true market value. An agreement with Trans-Canada will allow Total Erickson to increase its equity to 22%.

At the company’s Mt. Skukum gold mine south of Whitehorse, Yukon, head grades averaged 0.59 oz gold during the quarter compared to a 0.39 average for the year. The company changed to a longhole stoping method last year because of difficult ground conditions in the Cirque zone and encountered lower grade material in the north section of the orebody. As a result, grades were lower than forecast.

A summer exploration program in the Brandy and Lake zones increased proven and probable reserves to 104,610 tons grading 0.48 oz gold per ton uncut. The Lake vein, which has been accessed by adit, is still open to depth and also to the south. Proven and probable reserves as of Oct 31, 1986, were 226,854 tons grading 0.373 oz. A production grade of 0.4 oz is anticipated for 1987 which is similar to that forecast for the Erickson mine at Cassiar, B.C.

The Erickson mine is producing at 300 tons per day and a number of significant discoveries have been made there recently including the Michelle vein which is parallel to the high grade Eileen vein, it says. Average feed grade for the last six months of 1986 was 0.93 oz gold per ton. Some material was processed at the nearby Taurus mill because Erickson’s new plant was not available until October. (The old facility was destroyed in a fire.) Proven and probable reserves at year-end were 233,684 tons grading 0.332 oz gold.

Total Erickson has concluded an agreement with Fischer-Watt Gold to develop a heap leach property in the western U.S. which could be in production later this year. Under a separate agreement the two companies will jointly fund exploration work on selected properties in the U.S. and Mexico.

Underground work has commenced at the Dome Mountain project near Smithers, B.C., which could be in production by the end of 1988. Total Erickson has the right to earn a 50% interest in the project. Reserves are estimated to be at least 300,000 tons grading 0.45 oz gold or better, notes Total Erickson.

Gold production during the quarter (for Total Erickson’s account) amounted to 15,000 oz. Cash flow was $3.4 million or 12 cents per share and net earnings were $1.1 million or 4 cents per share. Net income for 1986 was $2.5 million or 9 cents per share.