Shareholders of Australian-listed Red Back Mining and Vancouver-based Champion Resources (CHA-V) have give the go-ahead for the two companies proposed merger.
The deal calls for Champion, part of the Lundin group of exploration companies, to raise $3 million and consolidate its shares at a 3:1 ratio. Red Back shareholders will receive one of the consolidated shares for every three Red Back shares tendered. The surviving entity will retain the Red Back Mining name.
Under Australia law, Red Back must now have the decision of its shareholders ratified by the Court; a hear is slated for April 22, 2004. If ratified, the merger will close soon thereafter.
When the dust settles, existing Red Back shareholders would own about 87% of the new company. Red Back’s 53 million outstanding shares will trade on the TSX Venture Exchange.
Red Back’s principal asset is a 95% interest in the Chirano gold project in Ghana, about 15 km south of the Bibiani gold mine operated by Ashanti Goldfields (ASL-N). Chirano boasts a reserve of 16.1 million tonnes grading 2.1 grams gold per tonne, part of a resource in all categories of 30.4 million tonnes at 2.1 grams per tonne.
A feasibility study by Perth-based consultants Lycopodium Pty. indicated the deposit could be mined by open pit at an annual rate of 130,000 oz., with recovery by conventional milling. Optimization studies on the pits suggest a further 8 million tonnes of the resource could be brought into reserves at present gold prices.
The company is working to finalize equity and debt financing for Chirano, and hopes to begin the 15-month building phase in May; the first gold pour is expected in the second quarter of 2005
Champion’s key asset is the Farim phosphate deposit in Guinea Bissau, but the real prize for Red Back is a long-sought foothold in Canadian capital markets.
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