MVP takeover proposal for troubled Camindex

In order to get its hands on gold production, MVP Capital Corp. (TSE), a mining finance company, has made an offer to acquire a minimum 90% interest in Camindex Mines (TSE). MVP is offering Camindex shareholders one MVP common share for each 6.66 Camindex shares held. Insiders of Camindex, who control 63% of the company, have agreed to accept the MVP offer.

More importantly, upon completion of the takeover, MVP will inject $14 million into Camindex via a $12 million term loan and a $2 million revolving line of credit. The cash is needed by Camindex in order to satisfy arrears totalling $11.5 million which were accumulated during the company’s participation in the Valdez Creek placer gold operation in Alaska.

Prior to April, 4, Camindex held a 51% interest in Valdez Creek. This interest was given to partners American Barrick Resources (TSE) and Cambior Inc. (TSE) who own the remaining interest in the property. Upon payment of $11.5 million, the 51% interest in Valdez Creek will revert back to Camindex.

Although a gold producer, the Valdez Creek placer operation has made little if any money for Camindex. 1986 was a particularly bad year, with gold revenues totalling $2.9 million and production expenses exceeding $7 million. The first half of 1987 was no better. During that period, revenues from gold sales were $2.7 million whereas mining costs exceeded $3.8 million — and that does not include interest charges of $800,000 or administrative costs of $373,000.

Despite the dismal performance, Camindex is predicting 1988 gold production of 56,000 oz (N.M., Mar 21/88). The company’s credit would total 28,500 oz of gold.

For MVP, which is not an operating mining company, the purchase will use up most of the proceeds from a 25 million Swiss franc convertible debenture which is being placed in Europe. Led by Bank IndoSuez, the issue is worth $20.6 million (C).