Atlantic, Jascan principals engage in control struggle

Jascan and Atlantic, both of Toronto, have interlocking shareholdings and are joint venture partners in a number of United States exploration projects.

In late 1988 the two companies had planned to amalgamate, but that fell through when control of Atlantic changed hands. Now Jascan has attempted to raise its stake in Altantic to 46.1% from 5.9% by offering to aquire 4.7 million Atlantic shares for 85 cents each.

Atlantic countered by announcing that it would allow its biggest shareholder, privately owned Kash Investments, to increase its interest in Atlantic through a private placement from 19.7% to 41.7%. It then followed that up by expanding its position in Jascan to 39.6% though the acquisition of just over three million Jascan common shares.

At stake in the battle are the proceeds from the sale of the huge Noxon silver-copper deposit in Montana and about a dozen exploration properties including the Dawson gold project in Colorado.

Since they sold their combined 45% stake in the Noxon silver deposit last September for $20 million in cash plus royalties, Jascan and Atlantic have been unable to agree on a future strategy.

To cut the cost of maintaining properties where they hold a shared interest, Jascan President Will Felderhof said it made sense to merge the two companies.

Jascan holds a 60% interest in the Dawson project, for example, where 465,000 tons of grade 0.24 oz gold per ton have been outlined, while Atlantic retains 40%.

But according to Atlantic President Bill Burton, corporate decisions taken by Jascan haven’t met with support on the Atlantic side and merger plans fell through recently when control of Atlantic passed to Ronald Goguen, a New Brunswick drilling contrator.

Through Kash Investments, Goguen’s private investment company, he purchased 2.3 million Atlantic shares at $1.10 each representing a 19.7% interest from Scotland-based Waverley Mining Finance and Burton. While Burton still holds about 9% of Atlantic’s 11.6 million outstanding shares, Toronto lawyer Vic Alboini was named chairman of the company.

When Atlantic raised its stake in Jascan to 23.5% three weeks later, it began to look as if a takeover attempt was imminent.

Jascan removed all doubts about its intentions when it offered to buy the 4.7 million Atlantic shares for $3.9 million. However, Jascan retained the right to withdraw the offer subject to Kash’s agreeing to purchase $4 million of 10.5% convertible debentures of Atlantic.

Convertible into 5.1 million common shares of Atlantic, the debentures would allow Kash to raise its stake in Atlantic to 41.7% on a fully diluted basis. “When Atlantic increased its stake in Jascan, all of a sudden we were faced with someone we didn’t know owning 23.5% of our company,” said Felderhof. “We don’t know what their intentions are and we feel that we have the wherewithal to make a comeback offer.

“For reasons of synergy between two companies with similar assets, we see the shares as an excellent investment for Jascan.” Felderhof is awaiting Toronto Stock Exchange approval for the bid. At that point, shareholders would have 21 days in which to tender their shares of Jascan which have been trading at around 48 cents on the Toronto Stock Exchange. Shares of Atlantic were trading at 75 cents on the COATS market.

Alboini, who was recently appointed to the 7-member Jascan board along with Goguen, was unavailable for comment.

In other news, Jascan says it has terminated its involvement in the Muyup gold project in Indonesia due to disppointing drill results. Under an agreement with two Australian companies, Jascan was earning a 25% interest.

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