Belmoral Mines would buy major interest in Louvem dw

The Quebec mining firm Louvem Inc. has attracted a second suitor. Toronto-based Belmoral Mines says it is prepared to spend $20 million to purchase a majority interest in the Val d’Or gold producer.

Belmoral’s offer would see almost 6.4 million shares, or about 58%, of Louvem, change hands, in a private placement, at $3.15 per share.

Louvem already has an offer, worth $10 million, on the table from the junior mining firm St. Genevieve Resources, which is seeking to purchase, in a private placement, about 3.7 million shares of Louvem at $2.70 per share.

A special shareholders’ meeting has been called by Louvem for Oct 20 to consider the St. Genevieve offer. Louvem has indicated it would use the $10 million to repay its debt to Soquem and to deepen the shaft at the Chimo mine and continue underground development there.

Belmoral says its offer is conditional on rejection by Louvem of the St. Genevieve proposal. Belmoral also says its offer is subject to the condition that, on or before completion of the deal, Louvem exercises a previously acquired option to purchase all common shares of Louvem held by Soquem. Approval by Louvem shareholders and regulatory authorities would be required.

Belmoral says its offer contains the outline of a plan to merge its Quebec-based assets and activities with those of Louvem in a newly formed Quebec company having three million tons of reserves and the potential of producing in excess of 100,000 oz gold per year. Belmoral, which was forecasting gold production in 1987 of 72,000 oz, has downsized that total to about 50,000 oz; Louvem has predicted gold production of 28,000 oz this year.

Under the merger plan, Belmoral would transfer its Quebec assets, and Louvem shareholders would transfer their Louvem stock, in exchange for shares in the new company, Belmoral says. Following the merger, it is proposed the new company make a public offering worth up to $100 million.

“The operations and assets of Louvem, together with our assets, provide an excellent base, a springboard, for our company’s growth in Quebec,” Belmoral’s new chairman, Kenneth Dalton, told The Northern Miner.

Belmoral currently has about $35 million in cash and cash assets on hand, which Mr Dalton said could be used to purchase the Louvem shares. Or, he said, his company could seek outside financing to complete the deal.

The private placement offering, Belmoral says, is not conditional on implementing the proposed merger with Louvem.