Cambior offers to purchase half of Louvem gold mine

Cambior Inc. (TSE) has entered into an agreement-in-principle to buy a 50% interest in the mine for $4 million. The Chimo mine has been undergoing a program of shaft sinking and underground development work.

Louvem itself was recently the object of a takeover bid by Aur Resources (TSE); the Aur offer, which has been terminated, would have seen the Toronto-based company pay about $8.3 million for about 65% of the common shares of Louvem.

Under the Cambior agreement, Louvem will retain a 2% net smelter return royalty interest over gold production from the first 17 levels of the mine attributable to Cambior in excess of 70,000 oz. (The mine would have to produce more than 140,000 per year for the royalty to apply.)

The mine will become a joint venture operation, with Cambior acting as manager. Cambior will custom mill Louvem’s share of all gold ore extracted from the mine at its Pascalis mill, which is under construction. Loans for Louvem

Cambior has agreed to lend Louvem $2.5 million to pay for the mine expansion work, with the loan to be repaid upon the closing of the purchase transaction.

Cambior will also provide Louvem with a gold loan to a maximum value of $6 million, to assist Louvem to fund its share of the mine development costs to Dec 31, 1989; the loan will be repaid from Louvem’s share of Chimo gold production.

In addition, if the companies undertake a major expansion of the mine, Cambior has agreed, subject to certain conditions, to finance a portion of these costs.

Louvem will grant extensive collateral security interests to Cambior to guarantee the repayment of the interim loan and the gold loan, including a first-ranking fixed charge over Louvem’s residual interest in the mine.

The deal is subject to regulatory approval and the approval of Cambior’s board of directors. Louvem directors have voted in favor. Ironically, Louvem and Cambior are creations of SOQUEM, the Quebec Crown mining corporation with interests in an assortment of exploration properties. Louvem went public in 1983, and Cambior in 1986.

Meanwhile, the major shareholder of Louvem, St. Genevieve Resources (TSE), recently threatened legal action if the Montreal Exchange did not lift a trading suspension on its shares and those of Louvem.

Trading in the shares of both companies was halted over test results received from a tailing recovery process being used on tailings at Louvem’s Manitou mill.

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