In order to secure more feed for its newly acquired Bogoso gold mine and mill in Ghana,
Birim’s chief asset in Ghana is the Dunkwa concession, situated immediately north of Bogoso along a 45-km section of the prolific Ashanti gold belt. Within the Dunkwa concession are several shallow oxide gold deposits, including Aboronye and Mampon, where Birim recently drilled several shallow high-grade gold intersections (T.N.M., June 21-27/99).
Under the proposal, Golden Star is offering half of a Golden Star share for each Birim share, valuing the latter company at about $8 million, or 38 cents per share. The deal is contingent on the tendering of at least two-thirds of Birim’s 21.2 million outstanding shares.
While the offer does not include provisions for taking on board any Birim directors or upper management, Golden Star has expressed an interest in retaining Birim’s technical team in Ghana.
Golden Star President James Askew has visited Birim’s Montreal headquarters, and the Birim board is now reviewing the bid before responding publicly.
Market reaction to the offer was muted, with Golden Star shares remaining unchanged at 75 cents and Birim shares rallying from 20 cents to 33 cents on low volumes.
“One of the things we want to do is solidify our position in Ghana with respect to the Bogoso mine,” explains Richard Winters, Golden Star’s vice-president of corporate development. “If the world stays at US$250-per-oz. gold, we have to have ore feed to the mill that makes sense. Birim’s Mampon deposit is attractive to us — it’s not that big but there are probably 100,000 oz. there, and the grades are very good, roughly twice the grade we’re putting through the mill now.”
Currently, the Bogoso mine is producing in excess of 100,000 oz. gold annually but has less than two years of remaining oxide reserves and resources.
Built by U.K.-based Billiton in the early 1990s at a cost of US$110 million, Bogoso was originally conceived as a roaster operation that would exploit five sulphide orebodies using open-pit mining methods.
However, due to Billiton’s poor understanding of the deposit’s metallurgy, the roaster failed to perform and was shut down in 1994. For each of the past five years, Billiton has been feeding 2 million tonnes of oxide material to the mill, producing about 120,000 oz. gold annually.
Says Winters: “If we can extend the life of the current oxide and transition operations at Bogoso to allow us to get into a better gold environment, then the sulphides that are there now [11.1 million tonnes grading 3.3 grams gold] start to become of great interest. Clearly, technology has come a long way with respect to sulphide ores since 1991 [when the roaster was first built].
“Putting Golden Star and Birim together, you wind up with a company that could look to the future in a low-gold-price environment with some real opportunity to make money. Then we can start to take advantage of a number of opportunities that exist within trucking distance to the Bogoso mill, which is the only major one in the southern part of the Ashanti trend.”
Birim’s vulnerability to a takeover is partly explained by its acute lack of funds — the company is down to its last $300,000 in cash and equivalents. While raising equity funding is proving difficult for Birim, the company has been examining the possibility of going into production on a joint-venture basis and receiving advance royalties that could then be directed towards further exploration.
David Jones, Birim’s manager of investor relations, cautions that Golden Star’s offer may not be the end of the story: “There could be other developments in the wings — we have been talking with various partners over the past few months. So we’re telling people to stay tuned.”
For its part, Golden Star has closed a US$7.6-million offering consisting of US$4.1 million of 7.5% convertible debentures and 200 share purchase warrants for each US$1,000 worth of debentures issued.
Excluding any exercised warrants, Golden Star expects to receive net proceeds of US$6.3 million, of which US$4.5 million will be used to buy a 70% interest in the Bogoso mine. The remaining interests are held by Australian-listed Anvil Mining (20%) and the Ghanaian government (10%).
“When all is said and done, Golden Star should have roughly C$3-4 million in the bank,” says Winters. “But what we’ll have is a mine that is producing gold, and Bogoso, if it operates as planned, will make us cash neutral. And then next year, when we get going full bore on Bogoso, we should begin to build up our bank account.
“If we can get the Birim transfer done and start adding that higher grade ore from Mampon into the mill feed, we’ll actually do quite well — we’ll have a company with earnings, cash flow and a building bank account.”
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