Two companies with existing mines in North America have decided to join forces to create a growth-oriented company that would produce about 200,000 oz. gold by 1998.
Atlas (NYSE), a Nevada-based gold producer, and MSV Resources (TSE), a Quebec-based producer of gold and copper, plan to merge through a share exchange.
The companies sought the merger in the hope that the combined company would provide their respective assets with greater exposure. MSV Chairman Mario Caron says the merger will allow the company to realize the full potential of its Quebec operations, while Atlas Chairman David Birkenshaw describes it as “the first step towards creating a major gold-producing company.” Atlas will offer to acquire all the shares of MSV, and provide one share of a new Canadian company, to be called Atlas Canada, for every three MSV shares. These Canadian securities will be convertible into common shares of Atlas on a 1-for-1 basis.
MSV operates the Copper Rand and Portage copper-gold mines near Chibougamau, Que., as well as the nearby Eastmain gold mine. (Operations at Eastmain have been temporarily suspended because of high operating costs.) Total production for 1996 is expected to be 100,000 oz. gold and gold-equivalent (including copper credits).
MSV also owns the Corner Bay copper property in Quebec, where development is scheduled to accelerate in May. Reserves are reported at 1 million tonnes grading 5% copper.
MSV spokesman Eric Lasalle says the merger was negotiated on a friendly basis, in order to ensure the future prosperity of MSV’s Quebec operation.
“We have some interesting projects that need serious financing, and we are not a large enough company to go to stock markets for our requirements for the years to come,” Lasalle says. “We came to the conclusion that it would be best for shareholders to be part of a larger, geographically diverse company, as such as company would have an easier time raising capital.” He says MSV will be looking to raise about $25-30 million during the next three years. Part of this will be used to sink a shaft to a depth of 5,300 ft. at Copper Rand to gain access to new resources discovered during last year’s exploration program.
Exploration work is continuing at this find, which, at last report, hosted more than 4 million tons grading an average of 0.13 oz gold and 1.38% copper per ton. “This resource is an extension of the zones currently being mined at Copper Rand,” Lasalle explains.
A capital infusion at Copper Rand will also allow for a fully automated haulage system, instead of fighting gravity as is currently the case. “It will not only make mining easier, but reduce our operating costs as well,” says Lasalle.
If all goes as planned, MSV would first drive a ramp to develop its high-grade Corner Bay property to supply an additional source of feed to its Chibougamau operations.
“If we begin development as scheduled, in May, we could get this project going by the second half of this year, while we sink the shaft at Copper Rand.”
As for Eastmain, Lasalle regards it as a longer-term project, which will have to be re-visited to determine ways to improve its economics.
Atlas’s assets include exploration and development projects in Arizona and Nevada.
The company is resuming operations at the Gold Bar mine, near Eureka, Nev., where annual production is projected at 65,000 oz. The property is also the site of four joint-venture exploration programs, now under way.
Exploration is also in progress at the Doby George gold project in Nevada and at the Commonwealth gold project in Arizona. Atlas holds a 27.2% equity position in Granges (TSE), which produces 100,000 oz. gold annually at its Crofoot-Lewis mine in Nevada.
As part of the merger agreement, the board of directors of Atlas will make room for four nominees from MSV.
MSV must also raise at least US$20 million in equity through a special warrants issue. The funds will be used on the Copper Rand 5000 development project, where deep portions of ore are being made accessible, and on the Corner Bay project.
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