N ovaGold, Northumberland to merge

Two junior Nova Scotia gold explorers are planning a big Maritime wedding.Presidents Gerald McConnell, a Halifax lawyer, and geologist Dr William Young of Toronto, have agreed to amalgamate their two companies.

McConnell’s NovaGold Resources, which has brought the Fifteen Mile Stream property in Halifax Cty. to the pre-feasibility stage, and has acquired a major 10,000- acre position in the U.S. State of New Mexico in what geologist Dr Allan Juhas of Watts, Griffis and McOuat calls “the largest epithermal gold system outside of the Carlin trend,” has had its eye on Young’s Northumberland Mines for some time.

Northumberland has two underground exploration programs, one at the former-producing Goldenville mine, and one at Cochrane Hill, both in Nova Scotia and a “bankable” feasibility study for an open pit gold/silver mine on the Murray Brook deposit in New Brunswick.

But since the market crash of Oct 19 and the imminent death of earned depletion, Northumberland, which is run by the technically- trained Young, is not having an easy time finding the hard money it needs to get these properties into production.

NovaGold, on the other hand, has never had trouble raising money. It also has the largest property holding in Nova Scotia, totalling 102,000 acres, without the in-house technical expertise to pursue them. So last week, McConnell offered to merge the two companies. After a weekend of negotiations, NovaGold will, this week, offer one NovaGold share to every Northumberland shareholder for every 5.5 Northumberland shares held.

Young, who owns 729,549 shares, and Ian McIvity, president of mvp Capital Corp., a limited partnership which holds one million Northumberland shares, have agreed to accept the offer, saying “it makes sense.” The offer was based on the market prices of the two company’s shares. Trading of both of the companies shares was halted in Toronto this week pending the release of details on the agreement.

In order to retain Young with the company, NovaGold had to raise its offer, tagging on a 30% premium. Until now, NovaGold has relied on consulting geologists to make recommendations on its exploration programs.

“I am very enthusiastic about having Dr Young on board,” McConnell told The Northern Miner from Halifax, “now we will be able to build our own technical expertise in-house.”

Exploration work on the company’s properties will likely be accelerated once the deal is completed early next month subject to regulatory approval.

“It’s a good deal for Northumberland,” Young says. “It combines the financial expertise of NovaGold with our technical expertise. Apart, the market was yawning at Northumberland, but together we’re dynamite.”

“Together, the two companies have a lot more than Seabright did in the beginning,” David Scott, corporate finance mining officer for Levesque, Beaubien Inc. says. The brokerage firm was instrumental in the deal.

NovaGold is a relative new- comer to the Toronto Stock Exchange. It was listed in August, 1987. The company has about 4.25 million shares outstanding, trading recently at $4.80.

The company recently closed a private placement of shares and warrants to a select group of investors which should raise that number of shares outstanding. The offering was designed to raise $3 million for gold exploration in Nevada and New Mexico. But since the offering had to be closed early, it was not fully subscribed, according to Scott.

Shares were priced at $5.00 and the warrants, good for one share at $6 before Aug 31, 1989, cost 25.2 cents each.

Incorporated in 1974, Northumberland has had its shares listed in Toronto since 1981, trading as high as $2.33 in that year. The company now has 11,651,244 shares outstanding, trading recently at 82 cents .