Major ready to veto deal at Louvicourt

A senior official in Noranda Minerals group has told a Quebec business paper that Noranda (TSE) is opposed to an agreement designed to end the legal dispute over the massive sulphide discovery of Aur Resources (TSE) and Societe Miniere Louvem (TSE). While Noranda has until Aug. 14 to make a decision on the proposed deal, Michel Lefebvre, vice-president of Noranda Minerals’ eastern mining group, said his company will exercise its right of veto.

In Quebec’s Finance magazine, Lefebvre described Louvem’s decision to settle the lawsuit by selling to Aur a 10% stake in the Louvicourt Twp. massive sulphide discovery, east of Val d’Or, Que., as unrealistic.

“That would mean the (36- million-ton of 3.11% copper and 1.34% zinc) deposit is worth $50 million,” he said.

Under the a proposed agreement that would essentially end all of the litigation relating to the deposit, Aur would end up with a 60% interest in the project while Louvem retains 40%.

In return, Louvem would receive $5 million in cash plus a 2.5% net profits interest in the property plus a further $7 million once it is brought into production at the rate of 10,000 tons per day.

However, the deal would only come into effect pending Noranda’s approval and if the combined interest of Noranda and St. Genevieve Resources (TSE) in Louvem falls below 50%.

On Aug. 1, Noranda, which already holds 3.7 million of Louvem’s 17.7 million issued shares (representing a 21.6% interest), was offered an additional 4.1 million shares for $8 each by St. Genevieve.

As Noranda would lose control of the discovery to Aur and its affiliates Teck (TSE) and Cominco (TSE) if it rejects the offer, Noranda Minerals officials are facing some difficult decisions as they consider the options open to them.

“They would like to secure the concentrates as a source of feed for the hugh smelter in Rouyn-Noranda but they don’t want to overpay,” said Nutter, who considered the $8-a-share offer “a bit expensive.” Shares of Louvem traded recently at $6.25 on the Toronto exchange while Aur shares closed at $4.45.

However, if Noranda decides on Aug. 14 to proceed, it would be forced to make a similar offer to all Louvem shareholders while automatically assuming responsibility for all of the litigation surrounding the discovery.

It would also be forced to assume Louvem’s share of the estimated $200 million it would cost to develop the Louvicourt deposit to production. As Aur is suing to recover 8.7 million Louvem shares held by St. Genevieve, Noranda’s ownership of those shares would remain in doubt.

Neither Lefebvre nor any of the officials in Noranda Minerals’ Toronto office were available to comment on the offer or to estimate when a decision would be announced.

“We are all waiting on tenterhooks to see what happens,” said Aur Vice-President Howard Stockford.