American Reserve, Assoc. Porcupine to amalgamate

American Reserve Mining Corp. (VSE) and Associated Porcupine Mines Ltd. (TSE) have announced a merger proposal which will see American Reserve take over a 100%-interest in Associated Porcupine for about $12 million.

American Reserve had announced previously it was contemplating a take-over bid for Associated Porcupine at $4.50 per share. Following that announcement, the price of Associated Porcupine’s shares jumped from $2.25 to $3.90 on the Toronto Stock Exchange.

The new merger proposal, announced recently, calls for shareholders of Associated Porcupine to receive, for each share of Associated Porcupine, the equivalent of $5 cash plus 3/4 of a common share of American Reserve.

The old Paymaster mine, a former producer and one of the deepest and oldest gold mines in the Porcupine Camp, is currently the focus of a 50/50 joint venture program by Associated Porcupine and American Reserve.

A joint venture agreement signed last year with Associated Porcupine gave American Reserve the right to earn a 50%-interest in the Paymaster property by spending $31 million on exploration.

The Paymaster mine, which operated between 1915 and 1966, produced $41.6 million worth of gold (1.2 million oz). The mine was also the site of a terrible tragedy in the 1930s when a cage plunged to the bottom of the main shaft killing 16 miners.

American Reserve has spent more than $3 million on deep drilling at the Paymaster property during the last year. The program, employing sophisticated directional drilling equipment, tested for gold mineralization located some 6,000 ft below surface.

The company is going after a 6,000-ft deep pocket of undeveloped reserves in the so-called “36 vein” near the No 6 winze (internal shaft). Total reserves existing in the No 6 winze area have been estimated at 794,423 tons grading 0.22 oz gold per ton. American Reserve’s plans call for dewatering of the mine workings (6,000 ft deep), rehabilitation of the main and internal shafts, and 10,000 ft of underground definition drilling.

The Paymaster’s main shaft has currently been dewatered to a depth of 250 ft, said C. A. Burns, president of Associated Porcupine at the company’s annual meeting in Toronto recently. When asked by shareholders about the recent take- over bid by American Reserve for Associated Porcupine, Burns had no comment, adding that trading in the company’s shares had been halted pending a news announcement.

Several hours following the shareholders meeting, the joint venture partners announced plans to merge Associated Porcupine with a wholly- owned subsidiary of American Reserve.

The proposed merger calls for shareholders of Associated Porcupine to receive one share of the newly-formed subsidiary plus 3/4 of a common share of American Reserve. Shares of the newly- formed subsidiary would be redeemed immediately following the merger at $5 per share, the companies said.

In addition, shareholders of Associated Porcupine would receive of a transferable 5-year warrant for each full American Reserve share received.

The joint venture agreement signed last year between the two companies gave American Reserve the right to earn a 50% interest in the Paymaster property by spending $31 million on exploration work over a period of two years.

The merger proposal announced this week would see American Reserve take over a 100% interest in all the issued shares of Associated Porcupine for a cash consideration totalling about $12.4 million.

Completion of the proposed merger will be subject to regulatory and shareholder approvals. The necessary shareholders’ meetings will be held in January.

Vancouver-based American Reserve also has current joint venture projects in British Columbia and northern Mexico. The company’s president, Carl Zuber, was also president of Inland Recovery Group (VSE) which was involved with the Equis project in Columbia, South America. Operations at that project were halted in 1986 due to financing problems.