Euro bows out of Golden Cycle deal — IRR too low to justify purchase price

Euro-Nevada Mining (EN-T) has decided against acquiring a 54% stake in Golden Cycle Gold (GCC-P), which owns a 33% interest in the Cresson gold mine near Colorado Springs, Colo.

After a thorough due diligence, Euro concluded that the internal rate of return on the proposed acquisition would not be satisfactory.

Euro had offered US$13.50 per share to acquire 1.1 million shares from non-executive shareholders, and intended to follow with a similar offer to the board of directors of Golden Cycle for the remaining shares. The total value of the deal would have been US$27.8 million.

Golden Cycle owns a 33% interest in the Cripple Creek & Victor joint venture, which operates the Cresson mine. Independence Mining, a wholly owned subsidiary of Anglogold (AU-N), owns the remainder of the joint venture and operates the mine.

Cresson contains 2.7 million oz. of recoverable gold within proven and probable reserves of 4.3 million oz. (126 million tons grading 0.034 oz. per ton). Golden Cycle expects the mine to crank out 243,000 oz. in 1999 at a cash cost of US$185 per oz.

Independence is evaluating the feasibility of doubling production to 450,000 oz. annually.

In the meantime, Golden Cycle is pursuing exploration opportunities in Korea and the Philippines.