Homestake, Esso, agree on price for Canadian mineral properties

A Homestake subsidiary has agreed to pay an aggregate price of $29 million for the properties many of which are subject to rights of first refusal by Esso’s joint venture partners. That being the case, the final price could drop significantly and it’s still uncertain whether Homestake will end up with the holdings it wants.

A number of advanced stage projects are in the package including Esso’s 23.95% interest in the Musselwhite gold property in northwestern Ontario which is operated by Placer Dome (TSE) and includes partners Inco Ltd. (TSE) and Corona Corp. (TSE).

Robert Boyd, vice-president of Canadian explorations for Homestake, said Musselwhite was a key asset that his company had its “eyes focused on.” He estimated that 15-20 of the over-all properties in the package are subject to first refusal rights which “tend to focus on the key properties.”

Boyd noted that Homestake was already a joint venture partner with Esso on the Back River project, an iron formation-type gold project in the Northwest Territories.

“They also have the Hanson Lake project in northern Saskatchewan, which is subject to first refusal, plus interests in the Toodoggone and Stewart areas including Tenajon which has rights of first refusal again,” Boyd said.

Homestake assigned a value to the properties independently of Esso which he said was based on a business strategy of “what we would very much like to have. It tended to downgrade and put lower prices on projects that didn’t matter that much even if they did have rights of first refusal.”

He added that employment offers have been made to some of Esso’s staff, all of whom have received severance packages. Once Homestake knows exactly what properties it will get, Boyd confirmed there could be an expansion of the company’s exploration department to accommodate the extra work load.

“Because of rights of first refusal, we have taken a 2-tiered approach to personnel and we have hired a number of key personnel from Esso, people that look like they’ll be good candidates.”

He said existing rights of first refusal have, in some cases, about two months to go and a number of them extend a bit longer.

“We expect by mid-summer or so we should have a fairly good idea what we are going to end up with. We are to a certain degree rolling the dice here a bit. But whatever comes out of it, at least we will end up with a good exploration portfolio,” he emphasized.

Boyd noted that Homestake will be spending money on key properties this year and he didn’t rule out the possibility of farming several of them out to interested parties.

“We might be looking at this sooner than later,” he said.

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