HSK and Joutel to buy Queenston Gold shares

Working on an agenda of quiet growth over the past year, Toronto- listed HSK Minerals and Joutel Resources have taken a major step which consolidates their position in the famed Kirkland Lake mining camp of Ontario. But more importantly, it ensures them a springboard for further — and perhaps now, not so quiet — growth.

These two junior companies have entered into an agreement with the Canadian Imperial Bank of Commerce (cibc) to purchase four million common shares, or 41.5% of the equity of Toronto- listed Queenston Gold Mines, whose main assets include two royalty properties operated by Lac Minerals through the Macassa mine, a 35% interest in the McBean mill and direct and indirect interests in some 66,000 acres of prospective gold lands in Ontario and Quebec.

“Queenston represents potential opportunities that fit in with both HSK and Joutel,” says Hugh Harbinson, HSK president.

The agreement between HSK, Joutel and the cibc sees the two junior companies each purchasing two million shares from the bank at a price of $2 per share. Each company will pay $4 million dollars for total proceeds to the cibc of $8 million.

Joutel President John Arnold says discussions are now under way on the financial arrangements. The companies are talking to both overseas and domestic parties. Joutel recently raised $150,000 through a private placement with a Western Australian gold mining company called Balmoral Resources NL (N.M., April 6/87).

On the day before the agreement was announced, (April 13), Queenston shares closed at $2.15, while HSK and Joutel closed at 95 cents and 39 cents , respectively. At presstime — the day following the agreement — shares of each company had moved up. Queenston was trading at $2.26, while HSK was at $1.02 and Joutel was trading at 44 cents .

The cibc acquired 47% of Queenston shares in December 1984 after the restructuring of Challenger International Services and Turbo Resources. “It has always been our intention to sell these shares once someone made a suitable offer,” a cibc spokesperson told The Northern Miner, adding “someone has and we did.”

Queenston President Michael Gray agrees.”We’ve always understood that the bank would be selling these shares. We feel positive on the agreement,” he says, adding “it’s business as usual.” 006 Royalty properties

Part of that business is its royalty agreement with Lac on their jointly owned Gracie East and St Joseph properties. Operated by Lac through its Macassa mine on a royalty basis, the properties have provided Queenston with royalty payments of $3 million since 1977. Royalty payments are expected to be enhanced now that the 7,225 ft No 3 Macassa shaft has been completed and the accessing of high grade gold reserves, says Mr Gray.

Queenston also holds a 100% interest in the Kirkland Lake West property which encompasses the Kirkland Lake Main Break structure for a strike length of one mile extending west from the Macassa mine operations. Mining between the 5,000 and 6,450 ft levels on the adjacent Macassa properties has progressed to within 300 ft of the Kirkland Lake West boundary. Mr Gray says Lac has received a Queenston submission for underground exploration and development of this property.

Queenston also has 35% interest in the McBean mill with Inco Ltd holding the balance of 65%. The mill will operate with custom feed through much of this year. Inco joint venture

Queenston and Inco are also in joint venture with continuing active exploration of its 127-claim holding encompassing the McBean mine east of Kirkland Lake. Indeed, the two companies have agreed in principle to form a new company for exploration and possible development of properties east of Kirkland Lake, says Mr Gray. These properties include the McBean properties as well as some others located east of Kirkland Lake.

In Quebec, Queenston is operator of the 698-claim Detour Lake Joint venture that includes Falconbridge Ltd. and Bruneau Mining Corp.

Among other things, Queenston has an extremely healthy balance sheet. Working capital stands at $1.9 million at the end of 1986 up from $1.2 million at the end of 1985. Cash flow from operations amounts to $1.3 million, a substantial increase from $864,000 in 1985. Net income is $777,000 on revenues of $3.2 million, quite an improvement from the loss of $236,000 on revenues of $3 million in 1985. HSK in Kirkland Lake

Among HSK’s holdings in the Kirkland Lake area are its 100% owned Gull Lake property at the eastern end of the Kirkland Lake Main Break and its Vigrass Lake property, comprising 22 contiguous mineral claims situated south of the Kirkland Lake Break straddling the Larder Lake and Vigrass Lake fault systems. The company also recently acquired 100% interest in 35 unpatented claims in English and Beemer Twps. in the Larder Lake mining division.

Joutel has exploration programs under way on three of its 10 properties this year. They are its Montrose gold property near Steward B.C., its Pickle Lake property and its Norton Lake, Ont. property.

While HSK has 3.7 million common shares outstanding, Joutel has 20 million issued shares.

HSK and Joutel do not plan to make a follow-up offer to other Queenston shareholders. This purchase and sale agreement is subject to close on or before June 30 and is conditional upon receiving all regulatory approvals.