Falco Gold to get African gold mines in asset swap

A proposed asset swap between Falconbridge Ltd. and its 51% owned subsidiary Falconbridge Gold (TSE) will see the latter company scoop up two African gold mines and 41 Canadian exploration prospects from its parent in exchange for $12 million in shares. The recently announced proposal calls for Falconbridge to sell all of its gold assets, including operating mines and exploration properties, to Falconbridge Gold for five million treasury shares valued at $2.40 per share.

The company’s shares have traded recently at $2.18 within a 52-week range of $1.90-3.15.

Assets being offered to the Falconbridge subsidiary are as follows: — all of the gold interests of Falconbridge in Zimbabwe including the Blanket mine and Golden Kopje mine which currently produce at a combined annual rate of 27,000 oz. — a 50% interest in the Signal Hill prospect in Botswana which is the subject of a feasibility study for a small, heap-leach mining operation. — all of Falconbridge’s interests in 41 Canadian exploration properties including prospects at Pelletier Lake near Rouyn, Que., Hammond Reef near Atikokan in northwestern Ontario and Garrison Creek near Matheson, Ont.

When the deal is complete, Falconbridge Gold will have 18.3 million shares outstanding, up from the current 13.3 million, with the parent’s ownership increasing to 64% from 51%. The parent will retain a semi-annual royalty interest, capped at $5 million, from any increased gold production at the Zimbabwe mines.

Brian Ferguson, president of Falconbridge Gold, said the transaction will establish his company as the exclusive vehicle for gold production within the Falconbridge group. “A key element of the asset swap is that it gives us an absolutely clear mandate to be the gold producing unit within the Falconbridge group,” he said.

The subsidiary was originally formed three years ago to hold the parent’s gold producing mines and exploration properties near Timmins, Ont. It went public on The Toronto Stock Exchange in January 1989, but the stock performance has been less than spectacular.

The company’s single operating mine is the Hoyle Pond underground operation near Timmins, Ont., which started production in 1985 and has sufficient reserves for another 4-5 years of production.

Total production from the Hoyle Pond mine together with the acquired Zimbabwe mines will total about 100,000 oz. of gold in 1990, said Ferguson.

“Falconbridge has a good exploration team in Zimbabwe and a good property position with promising potential for expansion,” he added. Production could possibly double within the next 3-5 years at the African mining operations, he said.

The sale is subject to regulatory and shareholder approvals as well as a favorable recommendation by a special committee of independent directors appointed by Falconbridge Gold.

On the exploration front, the company will be appointing a new vice-president of exploration soon to oversee an annual Canadian budget of about $3 million. The company is expected to focus its attention on the Canadian Shield greenstone belts as well as examine a number of other opportunities.