Hillsborough, Brinco discuss merger

Lead-zinc producer Hillsborough Resources (TSE) and coal producer Consolidated Brinco (TSE) are negotiating a corporate merger.

The two companies reported signing a letter of intent for the merger. They said one proposal calls for each Hillsborough shareholder to receive one common share in the merged company for each share currently owned, and each Brinco shareholder to receive one common share in the merged company for each one and one-half shares currently owned and a warrant.

Each warrant would acquire an additional share in the merged company for each three shares currently owned in Brinco at $3 per share. The warrants would carry a 1-year expiration date.

Due diligence, the companies said, should be completed within two months. The deal will require regulatory approval as well as the approval of the boards of directors and shareholders of both companies.

Hillsborough has a 20% interest in the Sa Dena Hes lead-zinc mine in the Yukon, where the operator is Curragh Resources. The mine entered production in July.

Hillsborough, with offices in Brampton, Ont., also owns Canadian Mine Development, an engineering and contract-mining company.

Calgary-based Brinco’s wholly owned subsidiary Brinco Coal owns the Quinsam mine on Vancouver Island which currently produces 325,000 tonnes coal per year for export to Pacific Rim markets. Mine reserves are estimated to be 41 million tonnes.

Brinco and Hillsborough said an expansion of the coal mine to one million tonnes per year is contemplated.