Atlanta plans to issue shares to replenish working capital

Subject to regulatory approval, Atlanta Gold (TSE) will complete a private placement of 1.25 million shares at $1 per share to two European investors. The placement also includes 1.25 million non-transferrable warrants allowing the holders to subscribe for a further 1.25 million shares at $1.20 per share for a period of one year. The proceeds will be used to replenish the company’s depleted working capital position.

Olaf Tolpinrud, president of Atlanta, notes the company is continuing to seek joint venture partners for the development of its Atlanta Gold project in Elmore Cty., Idaho. He also says the company will consider selling the entire property although he declines to speculate on an acceptable figure.

The Atlanta project is estimated to contain over one million proven minable ounces of gold in two pits, dubbed the East and the West.

The project was the subject of a study by Behre Dolbear-Riverside Inc. and Bateman Engineers completed in mid-1989. The study concluded that the East pit, containing 8.27 million tons grading 0.087 oz. gold per ton, could be mined profitably at an average cost of about US$250 per oz. Total cost of the project was estimated at US$47.5 million.

The feasibility study incorporates bioleaching, a new technology which uses bacteria to oxidize sulphide ores prior to cyanidation. The technology has yet to be used successfully on a commercial scale, which may deter some companies from bidding on the deposit.

Tolpinrud indicates that several parties have expressed interest in the project and are studying the data, but that the company is not currently in serious discussions with anyone.

Atlanta announced its intention to seek a buyer or a partner last summer, but suitors may have been scared away by the proxy battle and subsequent court fights over control of the company.

U.S. Gold, a major shareholder, attempted to elect its own slate of directors to the company and failed. A court battle ensued, lasting about seven months and resulting in Atlanta’s original management keeping control.

Tolpinrud lamented that the only group to benefit from the fight were the lawyers, with both U.S. Gold and Atlanta the poorer for their efforts.