HSK plans aggressive program for Queenston acquisition

In investment circles there’s a well-known adage which states that a good deal helps to sell a deal.

In a bid to get the financing for its recent Queenston Gold Mine acquisition, Hugh Harbinson, president of Toronto-based HSK Minerals, adopted the old adage and used it to raise $4.5 million from a recent private placement.

In April, 1987, hsk, and Joutel Resources, agreed to buy four million common shares of Queenston Gold Mines (approximately 42% control) from the Canadian Imperial Bank of Commerce.

Under the agreement, which closed on May 27, hsk and Joutel bought two million shares each from cibc at $2 per share.

“To gain representation on the Queenston board of directors , we had to finance the deal before Queenston’s May 29 annual meeting,” said Mr Harbinson who was appointed chairman of Queenston at the meeting.

“That’s why we didn’t hire any lead agents or brokers,” he said.

hsk vice-president John Arnold and consulting geologist Charles Page were also appointed to the Queenston board along with Brian Ekstrom. Messrs Arnold and Page are also directors of Joutel.

Since the Queenston acquisition consolidates hsk’s position in the Kirkland Lake, Ont., mining camp, Mr Harbinson had little trouble selling the concept to investors.

“Once we identified the acquisition, we had discussions with friends and associates who encouraged us to proceed,” he said.

hsk successfully completed a $4.5-million private placement agreement just prior to the May 29 deadline. The hsk offering consisted of up to 3.7 million units consisting of one common share and one warrant. Two warrants and $1.50 enabled the holder to purchase one common share within one year. The units were priced at $1.20 each.

While he wouldn’t name any of the investors involved, Mr Harbinson said they are the “best blend of North American, British and European investors that a company like hsk could want.”

hsk’s Kirkland Lake holdings already included its 100% owned Gull Lake property at the eastern end of the Kirkland Lake Main Break and its Vigrass Lake property consisting of 28 contiguous mineral claims situated south of the Kirkland Lake Break straddling the Larder Lake and Vigrass Lake fault system.

In 1986, hsk carried out a program of surface stripping, trenching and channel sampling on the southern portion of the Vigrass property returning anomalously high gold values across a 70-ft width including a 5-ft section grading 0.363 oz gold per ton.

Queenston’s 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.

At hsk’s recent annual meeting, Mr Harbinson told The Northern Miner that approximately $2 million will be spent this year to explore the Upper Canada and Kirkland West properties. However, a funding program for Queenston exploration is being formalized and will be announced later this month.

The Kirkland West property 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 West boundary.

But priority is being given to the Upper Canada property which Mr Harbinson says has excellent potential for near-term development.

A former mine which produced more than one million oz of gold before closing in 1971, it is located near the McBean mill.

Production is expected to begin next year at the Sunbeam and Waverly gold deposits in the Westhawk Lake-Falcon Lake area of Manitoba. hsk holds a 3 3/4% net smelter royalty interest, including a $5,000-per-year advance royalty payment in the property.

Goldbeam Resources, which owns the property, estimate reserves of 500,000 tons grading 0.293 oz gold per ton. Goldbeam recently advised hsk that financing is being secured to begin production.

While Mr Harbinson maintains that his company has come a long way in 12 months, hsk still retains a healthy balance sheet with $287,000 in working capital on Dec 31, 1986. The recent private placement has boosted that figure to $650,000.

hsk shares were trading recently on the Toronto Stock Exchange at $1.55, below its 52-week high of $2.05 but well above its 55 cents low point.