Barrick to sell four Lac properties

Conjecture over which properties American Barrick Resources (TSE) would sell following the closing of its $2.2-billion takeover of Lac Minerals has been laid to rest.

The major recently announced its intention to auction off four projects: the Macassa and Golden Patricia mines in Ontario; the Bullfrog mine in Nevada; and the Red Mountain gold-silver project in British Columbia. It is expected that Barrick will use proceeds from the sales to offset the $900 million in goodwill resulting from the takeover (goodwill being the difference between the purchase price and Lac’s net asset value). According to Alan Hill, Barrick’s vice-president of corporate development, “these are excellent assets that could be company makers for the right purchaser, but cents they] do not fit with Barrick’s long-term strategic plans.” Hill told The Northern Miner that all the properties were evaluated using a yardstick of potential return versus time and money invested. “It’s going to take money to explore and develop these projects, and it’s also going to take a lot of management time. We simply want to get the most (value) for our time and money.”

Hill added that several companies have been in contact with Barrick about potential purchases since plans for the sale were made public at a mining conference in Denver, Colo. “The speech I gave in Denver was the best advertisement that the projects were for sale.”

Interest has been so strong that Barrick has set up a separate office where companies can make enquiries about specific aspects of each of the four properties. The bidding process should start this week, and Hill expects all of the projects will be sold by year-end.

Many names have been bantered about as potential bidders for each or all of the projects. Companies such as Kinross Gold (TSE), TVX Gold (TSE) and Royal Oak Mines (TSE) — which either expressed interest in, or bid for, Lac during the takeover battle — are viewed as leading candidates. Robert Buchan, president of Kinross, said it’s too early to gauge the mining community’s interest in any of the projects. “Like most companies, we’ve received an information package. We will review it and see whether there is anything of interest and whether anything might have value to us.” Kinross, in the process of aggressively expanding its reserves, recently bought the Ridgeway mine in South Carolina. The company plans to be producing 500,000 oz. in the near future.

Recently, Royal Oak raised more than $100 million through an equity issue and indicated that savings might be achieved by taking on some of Lac’s assets. Numerous dark horses could figure in the bidding process, including companies either managed by former Lac executives or with operations near the properties for sale.

Regardless of which companies decide to enter the fray, each will evaluate the projects based on facts in the public domain. A checklist for each property follows:

Macassa

* Location — Kirkland Lake, Ont.

* Total production — More than 3 million oz. between 1933 and 1994. * 1993 production — 71,087 oz. at a cost of US$303 per oz.

* Reserves — Proven and probable reserves of 1 million tons at 0.53 oz. per ton and possible reserves of 93,000 tons at 0.52 oz. per ton in 1993. * Points of interest — Before the takeover, Lac planned to spend $14 million recommissioning the No. 2 Shaft and initiating longhole stoping mining. These moves would have increased annual production by 24,000 oz. and increased the recoverable ounces at Macassa by 242,000 oz. In November, 1993, rock bursts at the Macassa killed two miners and operations were suspended at the mine for six months. Operations resumed in May, 1994.

Bullfrog

Location — near Beatty, Nev.

* Total production — 1.1 million oz. gold and over 816,323 oz. silver between 1989 and 1993.

* 1993 production — 354,887 oz. gold at a cost at US$132 per oz. in 1993. * Reserves — Proven and probable reserves of 6,420,000 tons averaging 0.14 oz. gold per ton. Possible reserves of 579,000 at 0.18 oz. gold per ton. * Points of interest — In 1994, Lac was testing seven exploration areas around the mine. Lac completed 26,000 ft. of drilling and found three new areas hosting additional reserves. The southwestern downdip extension of the orebody contains an estimated 100,000-150,000 oz. of reserves; the North extension contains an estimated 60,000 oz. underground; and the Bonanza Mountain zone reportedly hosts an open-pit reserve of 100,000-150,000 oz. Red Mountain

* Location — near Stewart, B.C.

* Total production — none.

* 1993 production — none.

* Reserves — As of June, 1994, Lac estimated a proven, probable and possible reserve of 950,000 oz.

* Points of interest — Lac planned to develop and commission the Red Mountain project before the end of 1996. In addition to the reserves, Lac estimates that the deposit has a resource of more than 1 million oz. and that the area has the potential to host 5 million oz. Lac estimated that it will require US$100 million to develop a project capable of processing 2,000 tons of ore per day to yield 225,000 oz. gold per year at a cash cost of US$135-US$145 per oz.

Golden Patricia

* Location — near Pickle Lake, Ont.

* Total production — 406,607 oz. between 1988 and 1993.

* 1993 production — 74,712 oz. at cost of US$211 per oz.

* Reserves — Proven and probable reserves of 227,000 tons averaging 0.48 oz. per ton. Possible reserves of 234,000 tons averaging 0.47 oz. per ton.