Details still under discussion of Dumagami, Agnico merger

Agnico-Eagle holds 43.3% of Dumagami and the two companies share senior management.

Questions of minority shareholders’ rights in the event of a merger have been raised by Invesfor, a Montreal-based company which says it owns 5.5% of Dumagami. Invesfor says any share exchange should be on the basis of at least two Agnico-Eagle shares for each Dumagami share. It argues that Agnico-Eagle has 16.4 million shares outstanding and will produce 75,000 ounces of gold next year while Dumagami has 9.4 million shares outstanding and will produce 85,000 ounces.

At the annual meeting, Dumagami predicted it would produce 70,000 oz in 1989 and 85,000 oz in 1990.

When pressed after the meeting as to whether the proposed merger would involve a rumored 1.5-for-1 share swap or the minimum 2-for-1 swap suggested by Invesfor, spokesman John Grant, a Dumagami director and the company’s lawyer, insisted that the question of share exchange had not yet been addressed. He said shareholders would be informed in due course should a deal be struck.

At the time of the meeting, shares of both companies traded in the $12 range on the Toronto and Montreal exchanges.

In cases where one shareholder owns a large block of shares, Ontario regulatory authorities require a majority of minority shareholders approve significant proposed transactions such as mergers.

During the meeting, Dumagami announced revised ore reserve figures for the Donald J. LaRonde mine at Cadillac, Que., of seven million tons grading 0.139 oz. gold per ton, up from last year’s figure of 5.4 million tons grading 0.134 oz. In addition, a new massive sulphide zone recently discovered to the north of the mine is presently estimated to contain 1.1 million tons at 0.63 oz silver per ton, 0.57% copper, 1.9% zinc and 0.08% lead and remains open at depth and to the east and west.

The mine, which started up in June, 1988, is presently running at 2,000 tons per day from open pit and underground operations. Production will shift completely to underground by mid-1990, in preparation for which the lower levels are now being developed and a new headframe and hoist will soon be installed.

Expansion of the underground mine will cost $12.6 million, most of which will be financed by increased production from the open pit.

Dumagami and Agnico-Eagle are also involved in litigation with Noranda Inc. regarding the mine.

Newly elected to Dumagami’s board of directors at Tuesday’s meeting was former Ontario attorney general John Clement.

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