Aur keeps 55% of Louvicourt, Noranda to get smelter feed

The four participants in the Louvicourt Twp. base metal discovery emerged recently with a deal that removes all of the litigation surrounding the deposit, while guaranteeing Noranda’s (TSE) right to take virtually all the concentrates from any future mining operation. While the deal differs significantly to the one vetoed last month by Noranda, the agreement also satisfies the objectives of joint venture partners Aur Resources (TSE) and Societe Miniere Louvem (TSE) and Louvem’s parent company St. Genevieve Resources (TSE).

Assuming the deal closes Sept 24, Aur’s stake in the Val d’Or, Que., property where potential massive sulphide reserves stand at 36 million tons, grading 3.11% copper and 1.34% zinc per ton, will increase to 55% from 50%. Under the deal Louvem’s property interest drops to an undivided 45% from 50%.

Aur, which has said throughout the negotiations that its right to be operator was not a subject for bargaining, will remain as operator, even though operatorship was scheduled to be transferred to Louvem under the original joint venture agreement. In return, Aur has agreed to pay Louvem $1 million.

Meanwhile, Noranda, whose copper smelter is located just 90 km from the project site, will have the right of first refusal to purchase 50% to 60% of Aur’s share of copper and zinc concentrates during the first eight years of mine production.

Having acquired a 22.7% stake in Louvem, Noranda can also buy Louvem’s entire share of concentrates over the life of a mine which some analysts predict could be in production in three years.

According to Noranda treasurer Lance Tigert, his company will also manage Louvem’s interest in the property by nominating two representatives to a 4-person management committee.

The agreement, which has also been rubber stamped by Aur affiliates Teck (TSE) and Cominco (TSE), gives Noranda more time to size up the discovery before deciding whether or not to increase its interest in Val d’Or-based Louvem.

Rather than purchase 4.1 million Louvem shares from St. Genevieve at $8.10 per share under an offer that expired Sept. 11, Noranda now has the option to buy 1 million Louvem shares at any time between March 15 and April 15, 1991 at market price plus 15%.

If the option is exercised, Noranda’s stake in Louvem would increase to 28% while St. Genevieve’s drops to 44% from 51%.

As the option is permitted under a private agreement exemption relating to take-over bids under Ontario securities rules, Noranda wouldn’t be required to make a follow up offer to all shareholders.

“The information on the orebody that we have at the moment is not as good as we would like,” said Tigert who believes that rougly 15 million tons of the 36 million outlined so far will prove mineable.

Noranda will also solve St. Genevieve’s cash problems by agreeing to lend $19 million to the Montreal company at 6.5% interest annually for a 5-year term. St. Geneveive Chairman Pierre Gauthier says he will use the funds to pay off European holders of $23 million worth of company debentures. They are convertible into common shares of St. Genevieve at $2.27 per share.

Still subject to regulatory approval, the agreement was described as “imperfect” by all of the negotiators who have been trying to strike a deal since November. “Nobody got everything they wanted but all in all it’s fair to everyone,” said Aur secretary Peter McCarter.

“We can stop talking about legal matters and get on with our lives as businessmen,” added Gauthier, who appeared happy with the new found flexibility that the $19 million loan will give his company.

The litigation combined with an inhospitable market climate and recent results from the Louvicourt property have combined to put something off a damper on the share prices of Aur, Louvem and St. Genevieve.

Therefore, a number of brokers were perplexed when, after the agreement was announced and trading of the companies had resumed, shares of Louvem and St. Genevieve fell by 38 cents and 10 cents to close at $5.50 and $1.40 respectively while Aur gained only 5 cents before closing at $4.45.

However, investors are now awaiting for Aur to table results from infill drilling that McCarter said has continued on the property while negotiations occurred in Toronto and Montreal. Although Aur President Jim Gill wasn’t available for comment, the results are expected to be released later this month.