Details hammered out on new Golden Giant company

Absolutely delighted” is the consensus of the four major sharehol ders who have just spent the last week hammering out the details of the new public company being created to own the Golden Giant mine in the famed Hemlo gold camp.

The way the ownership of the new company breaks down sees Noranda Inc. emerging with a 62.4% stake. Golden Sceptre Resources and Goliath Gold Mines each will have a 14.2% interest. Hemglo Resources, a private company, will hold the balance of 9.2%. Under this plan the new company will have 87.26 million shares.

These percentages are calculated after giving effect to the exercise of Noranda of presently outstanding options to purchase shares of Golden Sceptre and Goliath Gold.

The Hemglo stake is further broken down 75/25 with 6.9% going to the orginial prospecting syndicate made up of prospectors John Larche and Donald McKinnon of Timmins, Ont. and Toronto lawyers Rocco Schiralli and associate Claude Bonhomme. Conwest Exploration, with a 25% interest in Hemglo, ends up with a 2.3% interest in the new company.

We’re very happy about it” John W. Ivany, Noranda vice-president and legal counsel of Noranda tells The Northern Miner. Mr Ivany will be the president and chief executive of the new gold mining company.

Everything has come together very nicely. We’ve very pleased,” says Dick Dillingsley, public relations for the Hughes-Lang Group, founders of Golden Sceptre and Goliath Gold. It certainly will resolve any complexity and confusion” that existed in the marketplace, he adds.

Delighted,” is the reaction of John Lamacraft, president of Conwest Exploration.

And investors will be able to share in the delight” of this yet-to- be-named company. The new company may do a primary issue to the public and thus increase the amount of shares in the new company. But, says Mr Ivany, the focus is on a secondary issue by Noranda whereby it expects to sell a portion of its 62.4% stake with the proceeds going to help ease its heavy debt load. At this point, he says we don’t know the exact portion we will be selling.” The decision hinges on market conditions, he explains, adding that the timing of the issue will probably be in late January.

The lowest, however, that Noranda would take its position down to is 49.9%, says Mr Ivany. He explains that if Noranda drops its interest below 50%, the Hemlo mine would not be consolidated on its books and therefore the Hemlo comp any’s debt would not, for accounting purposes, show up on the Noranda balance sheet. But there are also advantages to staying above the half-way mark. At 50% or above, we would consolidate the debt,” says Mr Ivany but

we would also consolidate the good things too.”

Based on current gold prices, the new company will have approximately $100 million(C) in revenues, estimates Mr Dillingsley with a debt of about $200 million, which represents the cost of putting the Golden Giant mine into production. It’s a debt load the new company can handle,” says Mr Ivany.

Mining analysts have been estimating the value of the new company to run between $1.4 billion to $2 billion. Noranda projects the value to be between $1.4 billion to $1.5 billion. Depending on market conditions at the time that the issue is sold, analysts estimate shares will be selling at the $17 or higher range. By selling 12.4% of its stake, Noranda at that price, could raise over $180 million.

The assets of the new company will be all the Hemlo assets of Golden Sceptre and Goliath Gold, including 156 mining claims adjoining the Golden Giant mine. The Golden Giant was the first mine in the Hemlo camp to produce gold, pouring its first bar in April 1985. The mine is expected to produce 260,000 oz of gold this year. When it reaches its peak in 1988, output is expected to exceed 350,000 oz.

Under the new agreement, each share of Golden Sceptre will be worth one share of the new company, while each share of Goliath will be worth 1.12 shares of the new company.

Two new public companies will be formed to hold the cash and other assets unrelated to the Golden Giant mine which are now held by Goliath and Golden Sceptre. The shares of these two new companies will be distributed to the current sharesholders of Goliath and Golden Sceptre, but Mr Dillingsley said at this time a conversion rate has not been established.

The cash treasuries of these new Golden Sceptre and Goliath companies will be $11 million and $9 million, respectively. Mr Dillingsley stresses these amounts will be in the treasuries after giving effect to the exercise to all outstanding options to purchase shares of Sceptre and Goliath.

Noranda notes that the new Golden Giant company will be managed as a largely autonomous corporation within the Noranda Group. The board of directors will include a majority of nominees of Noranda together with representatives of the shareholders of Goliath and Golden Sceptre.

Shareholders of the latter two companies will be asked to approve the transactions at meetings scheduled to be held late next month or early January. The transactions are also subject to regulatory approvals.