Boards OK merger of Repadre with Golden Knight

The terms of a proposed merger between Repadre Capital (RPD-T) and Golden Knight Resources (GKR-T) are fair to the minority shareholders of Golden Knight, according to study by investment banking firm Goepel McDermid.

The plan of arrangement would see one share of Golden Knight exchanged for 0.125 of a Repadre share and 33 cents in cash, or 0.2 of a share and 0.2 of a warrant. A whole warrant entitles the holder to buy an additional share at $4 for up to three years and receive 10 cents in cash.

The boards of both companies have given the nod to the amalgamation, which has yet to be approved by Golden Knight’s shareholders. A shareholders meeting is schedule for April 20.

Teck (TEK-T), which owns a 24.5% stake in Golden Knight, has already agreed to vote in favour of the deal.

Golden Knight’s major asset is a 17.5% equity position in Gold Fields Ghana Ltd. (GFGL), which owns the Tarkwa gold mine in southern Ghana. Tarkwa produced a total of 137,000 oz. in 1998 from both the new surface mine and the older, underground mine. The new open-pit, heap-leach operation started up in May 1998 and, for the year, produced 83,000 oz. at a cash operating cost of US$240 per oz. (excluding management fees and rehabilitation provisions).

South African-based Gold Fields (GLDFY-Q) is the operator at Tarkwa, with a 70% interest. The other shareholders of GFGL are the Ghanaian government, with 10%, and the Social Security & Natural Insurance Trust of Ghana, with 2.5%.

In October 1998, Gold Fields announced plans to recapitilize GFGL with an injection of US$60 million. The funds will significantly reduce GFGL’s debt and be used to finance a second phase of mine expansion that is designed to double the surface mine’s annual ore throughput capacity to 7.2 million tonnes. The expansion program is expected to be completed during the second half of 1999 and will increase annual production to 250,000 oz., while lowering cash costs to US$200 per oz.

Golden Knight is required to provide US$15 million as its pro rata share of the recapitalization. As part of the proposed merger, Repadre has agreed to lend Golden Knight the US$15 million so that it can maintain its 17.5% share in Tarkwa.

Ore reserves for the first 20 years total 129 million tonnes grading 1.26 grams gold per tonne at an overall stripping ratio of 2.25-to-1. The current mining plan targets portions of Pepe, Akontansi East and Akontansi Ridge, three of the project’s five deposits, which together host a measured resource of 286.6 million tonnes grading 1.39 grams gold per tonne, equivalent to 12.8 million contained ounces.

An extended base case plan calls for all five deposits to be mined over the initial 20 years of mine life. The study envisions the relocation of the Atuabo village and the construction of a carbon-in-pulp plant with an initial capacity of 3.6 million tonnes annually, beginning in 2004. Annual production would grow to more than 575,000 oz. per year at a life-of-mine cash cost averaging US$260 per oz.

Minable reserves in the base case plan are estimated at 244 million tonnes grading 1.25 grams at a stripping ratio of 2.37-to-1.