Amalgamation plan tabled by Queenston Gold, HSK

By combining their various exploration assets, mostly in the Kirkland Lake, Ont., region, Queenston and HSK say they will create a debt-free company with assets of $18 million. The new company, expected to be named Queenston Mining Inc., will also have $1.8 million in working capital.

As holder of four million (35.6%) of Queenston’s 11.2 million shares outstanding, HSK is the Queenston’s biggest shareholder. With 15.7 million shares outstanding, HSK is in turn controlled by Joutel Resources (TSE).

“Over the next three to five years, a bigger company will be of more benefit to shareholders than each company individually,” said Queenston Chairman Hugh Harbinson, who is hoping for a $30(US)-per-oz upswing in the price of gold.

At current prices, $370(US) per oz, the company is having to play wait-and-see with a number of exploration properties including the Anoki in Kirkland Lake and Pandora in Cadillac, Que. Until gold prices increase, the new company must depend on royalty income ($230,832 last year) from LAC Minerals’ (TSE) Macassa gold mine.

Under a proposed agreement, Queenston shareholders would receive one common share of the new company for each common share held while HSK shareholders receive 0.434 common shares of Queenston Mining for each of their own shares.

If four million Queenston shares held by HSK are cancelled, the new company would have 14.1 million shares outstanding.

While the proposed transaction has already been subjected to a fairness opinion by First Marathon Securities, shareholders are being invited to vote on the matter at a meeting Dec 21 in Toronto.

But news of the amalgamation, scheduled to take effect pending shareholder and regulatory approval Jan 1, failed to have much affect on the share prices of either company.

HSK shares are trading at 40 cents , well below their 52-week high of 90 cents . The Queenston issue is trading at 90-95 cents in a 52-week range of 80 cents -$2.40.

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