Belmoral taking over Yorbeau

Two Quebec-based companies that have had trouble living up to expectations during the past two years may have found a combination to benefit them both.

Belmoral Mines, a profitable gold mining company in need of mill feed, is paying top dollar to take a control position in Yorbeau Resources, a company whose main asset is a property where a production decision has been just slightly out of reach for the past year.

Belmoral, with more than $30 million in the till, is paying $5 million for 6,250,000 Yorbeau common shares and 10 million share purchase warrants. The shares alone will give Belmoral a 28.3% interest in Yorbeau. The warrants, each exercisable for one share at $1 over a 2-year period, will give Belmoral a 50.6% interest.

Belmoral will also spend $10 million on Yorbeau’s Astoria property just outside of Rouyn, Que., to earn a 50% in the property. The mix of property and equity interests will allow greater financing flexibility, Belmoral says, and is in part prompted by tax considerations.

The deal is subject to shareholder and regulatory approval.

Belmoral has two operating gold mines and a gold mill, all near Val d’Or, Que. But the two mines have not been able to supply the mill with enough ore to keep it running at its 2,000-ton-per-day capacity. Belmoral produced about 50,000 oz of gold in 1987 after projecting that it would turn out about 72,000 oz.

Belmoral has controlling interest in Vedron Ltd. which has a property at Timmins, Ont., it hopes to have in production this year. Belmoral also has a 22% interest in Wrightbar Mines which could be producing gold ore by the end of 1988 and a 50% interest in the Broulan property in Timmins which is not expected to produce for at least two years.

In the meantime, however, Belmoral is anxious to find more mill feed. In fact, the company was involved in somewhat of a bidding war for Societe Miniere Louvem, another Quebec junior with operations near Val d’Or. It lost out in that auction, but some industry observers questioned why Belmoral would want to buy Louvem, a company with limited ore reserves but another large gold mill.

The Yorbeau, Belmoral combination seems more suitable.

“We like the Astoria property which we believe will prove to be a long-term profitable producer,” says Belmoral chairman and chief executive officer K.S. Dalton.

“It’s a very sizeable land package with considerable potential in addition to the known gold-bearing zones. We also like Yorbeau’s inventory of exploration properties and its professional team. We see them spearheading an expanded program to identify and develop new opportunities in Quebec and elsewhere, with Belmoral’s assistance.”

Yorbeau has 1.4 million tons of probable and possible and proven reserves at Astoria grading an average 0.18 oz. It holds a 100% interest in the property, subject to a 20% net profits interest, and has been working on the large Astoria property for several years, but was unable to increase the tonnage or the grade enough to prompt a production decision.

Now, says Yorbeau President Karl Glackmeyer, Belmoral will have the financial wherewithal to get the property into production.

“It’s a good match,” says Glackmeyer. “Belmoral has the operating experience which we don’t. They have the mill and will take our ore at a very reasonable price. There are all the pieces to make Astoria a viable producer.”

Yorbeau, which had diluted its common equity dramatically since 1984 and finally consolidated its shares in 1986 on a 2-for-1 basis, has almost 16 million shares outstanding now and was finding it difficult to raise further equity. Glackmeyer says it would have had difficulty raising the money to put the Astoria property into production by itself.

Recent work, done during 1987, uncovered the A West zone on the property and that’s been the property’s “saving grace,” he says. Already there is 350,000 tons of sulphide bearing reserves indicated to the 1,500-ft level. Grade inproves with depth, too. At the 700-800-ft level, grade is 0.18 oz: at the 1,500-ft level it is 0.28 oz.

Glackmeyer says the 1,500-ft level is the logical place to start mining, but the cost of deepening the shaft from its present 500 ft requires funding that Yorbeau couldn’t provide. Yorbeau had previously estimated deepening the shaft would cost about 7.3 million. At that time it was considering a 250-ton-per-day operation at an average diluted grade of 0.22 oz.

The property includes 10 km of strike length that is virtually unexplored, so the Yorbeau exploration team will work on that while exploration and development of the known deposit takes place under Belmoral’s management.

Yorbeau also has several other properties including the Ellison property which adjoins Lac Minerals’ Bousquet gold mine to the east and Doyon gold mine to the west. The Ellison property, however, is the subject of a legal dispute.

Yorbeau’s other interests include an option to earn a 50% interst in a Casa Berardi property in northwestern Quebec from Fairfax Bay Resources and a 32,000-acre land position near Belmoral’s Bourlamaque Twp. property.

The $10 million Belmoral is spending for a 50% interest in the property will pay for shaft deepening and bulk sampling as part of an exploration program prior to putting the property into production. The $5 million spent on the shares and warrants will go toward Yorbeau’s working capital.

Montreal businessman Neal Raymond, who currently has a 16% interest in Yorbeau and has been an investor in the company since its beginning in 1984, will retain his interest although he will be diluted back. Raymond became a director in April, 1986, when Campbell Resources sold him its entire 20% interest in Yorbeau.