Belmoral changes terms of Ketza River purchase

Belmoral Mines Chairman Kenneth Dalton said the new deal is worth about half ($8.5 million) of the originally estimated $16 million.

The Toronto-based gold producer said in December it had agreements to purchase the 50% interest of each of Canamax Resources (TSE), the operator, and Pacific Trans-Ocean Resources (TSE) in the Ketza River project which went into production in March, 1988.

Belmoral, having completed due diligence, says it will buy the 50% mine interest of each company and certain other assets of Pacific. The total consideration to be paid is $3 million in cash, 1.25 million common shares of Belmoral plus seven million Belmoral warrants. Each warrant would be exercisable over a 2-year period at $2.25 per Belmoral share. (Canamax is to receive the cash and two million warrants, Pacific the common shares and five million warrants.)

The original announcement had Belmoral paying $5.5 million for Canamax’s interest and acquiring all of the outstanding shares of Pacific in return for common shares and warrants of Belmoral.

Belmoral has agreed to assume Pacific’s indebtedness to its major creditors, Lloyds Bank and Central Capital Management; Belmoral says agreements-in-principle have been reached with both parties for the settlement of these debts. The transactions are subject to the signing of formal agreements, legal due diligence and regulatory and shareholder approval.

The Pacific assets which will fall to Belmoral are the Gordon Lake gold property north of Yellowknife, N.W.T., and some listed junior mining companies.

Belmoral says in Ketza it will gain a mine-mill complex which will turn out a projected 36,000 oz gold this year. Output last year between March and November totalled 19,960 oz. Current reserves

The company says total mineable oxide reserves reviewed by independent consultants stand at 250,000-275,000 tons grading 0.35- 0.38 oz gold per ton. Geological sulphide reserves are estimated to be 530,000 tons grading 0.31 oz.

Some $27 million was spent to develop the mine which has gone through a significant reserve miscalculation and dilution factor. Canamax’s feasibility study forecast oxide reserves of 460,000 tons averaging 0.45 oz.

Higher-than-anticipated development costs placed Pacific in grave financial difficulty. Pacific, with a debt load of $13 million, found itself unable to service a gold loan obtained from Lloyds and a convertible loan from Central Capital.

Dalton said his company is “acquiring a property where most of the break-in problems have been solved and paid for, and which will generate immediate cash flow.”

Belmoral, debt free and with cash in the bank, produces gold from two mining operations at Val d’Or, Que., and from a heap-leach operation in Arizona run by Roddy Resources (TSE), which is controlled by Belmoral. The company has interests in active exploration prospects in northwestern Quebec and northeastern Ontario.

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