Investors ponder implications of judge’s Aur/:Louvem decision

Dozens of brokers and mining investors were forced to play an unexpected waiting game recently while a Quebec judge considered a request by Noranda (TSE) for a temporary injunction to prevent St. Genevieve Resources (TSE) from selling part of its stake in the Louvicourt Twp. base metal project. Perhaps because his decision has so many implications for the all of the companies involved in the discovery, especially its joint owners, Aur Resources (TSE) and Societe Miniere Louvem (TSE), judge Jean Crepeau had failed to make a ruling by the time The Northern Miner went to press, Aug. 15.

For months now, Aur and Louvem have been trying to negotiate an out-of-court settlement that would allow St. Genevieve Chairman Pierre Gauthier to sell a large part of St. Genevieve’s stake in Louvem to either Noranda or a rival bidder.

Analysts are speculating that Noranda’s arch rivals, Teck (TSE) and Cominco (TSE), which together hold 21% of Aur, are waiting in the wings to bid for Louvem if Noranda elects not to go ahead.

The request for a temporary injunction was filed in a Montreal superior court to give Noranda more time to consider an offer that would force it into a $120-million takeover of Louvem and assume responsibility for Louvem’s share of the cost of fighting a legal battle over the Louvicourt Twp. massive sulphide discovery, east of Val d’Or, Que.

On Aug. 1, St. Genevieve offered Noranda, which owns 21.6% of Louvem, the right to buy 4.1 million shares of Louvem at $8 per share while retaining the right to repurchase the shares at $8.25 each for up to six months after they were sold.

Noranda already has the right of first refusal on all Louvem shares held by St. Genevieve and management of both St. Genevieve and Louvem. When the request was filed, St. Genevieve held 8.7 million of Louvem’s 17.7 million shares outstanding while Noranda owned 3.7 million.

The new proposal contained a clause that automatically triggers the legal settlement if Noranda and St. Genevieve’s combined stake in Louvem falls below 50%.

Under the settlement, Louvem agreed to transfer to Aur a 10% working interest in the Louvicourt property in return for an initial $5-million cash payment and a 2.5% net profits interest. That would give Aur a 60% project interest and the right to operate any future mining operation, while Louvem’s stake would drop to 40%.

If and when the project is brought into production at 10,000 tons per day, Aur would pay Louvem $7 million, in two separate installments.

However, Noranda Minerals officials have made no secret of the fact that they don’t like the proposal, and Treasurer Lance Tigert said he would walk away from the deal if the injunction request wasn’t granted. Noranda has already invested $27 million in Louvem, for an average price of $6.60 per share.

According to Tigert, the injunction request was based on Noranda’s belief that St. Genevieve has reached an agreement to sell the shares to Aur. “The sale of the shares takes Noranda and St. Genevieve below 50%,” said Tigert. “As a result, our veto rights (relating to the settlement) would expire and we couldn’t prevent consumption of the deal.”

However, despite accusations by Gauthier, Tigert said Noranda is not trying to prevent St. Genevieve from ever selling the shares. It simply wants more time to allow the companies to discuss possible alternatives to the proposal, he said.

Before the judge’s decision was scheduled to be announced, Tigert said his company hadn’t been given enough information on drilling results and other data from Louvicourt Twp. to fully evaluate the orebody. “In our view, the $8 price tag on the Louvem shares is high,” he said.

Aur President James Gill wasn’t available for comment. But Aur Vice-President Howard Stockford said Louvem has all the pertinent data relating to the deposit, estimated to contain 36 million tons of grade 3.11% copper and 1.34% zinc.

“It is a sad day for the mining industry if all the juniors are to disappear and everyone is to be dictated to by the major companies,” said Stockford.