Pamour buys 50.1% control of Giant Yellowknife, Cons CSA

Pamour Inc. is buying a 50.1% interest in Consolidated CSA Minerals giving it control over a 50% interest in the Bell Creek gold project being developed by Canamax Resources at Timmins, Ont.

Meanwhile, the boards of Pamour and Giant Yellowknife Mines have approved the leveraged buyout of Giant by Pamour. The merger will combine Pamour’s Timmins, Ont., mining operations with Giant’s operations at Yellowknife, N.W.T.

Pamour will sell to Giant substantially all of its Timmins mining operations and its 37% interest in Akaitcho Yellowknife Gold Mines. In return, Giant would pay to Pamour about $17.5 million in cash and issue to Pamour 2,683,567 shares from treasury. As a result of the share issue, Pamour would hold about 50.1% of the total issued shares of Giant. Pamour already holds a 19.16% interest in Giant which it bought from Falconbridge earlier this year.

In the Pamour-CSA deal, Pamour is buying 5,462,000 common shares of CSA Minerals from CSA Management at $1.70 per share or $9,285,400 million. Only $2 million of that is cash with the balance payable in 520,386 shares of Pamour valued at $14.

At the close of business Oct 15, the day the CSA deal was announced, CSA Minerals stock was quoted at $1.85 on the Vancouver Stock Exchange while Pamour stock was at $12.50 on the Toronto Stock Exchange. CSA Management, listed on the TSE, also gains the option to buy 250,000 shares of CSA Minerals at $1.70 for 18 months.

CSA Management had held almost 82% of CSA Mineral’s stock. It will retain a 30.1% interest and two seats on the board of directors. Pamour will take over management and says it does not intend to make a follow-up offer to other shareholders.

The Bell Creek property, operated by Canamax, is expected to be in a production mode in the first quarter of 1987. With reserves of 1.2 million tons grading an average 0.194 oz gold per ton, production rate is slated to reach 500 tons per day.

“The acquisition is viewed as a positive move in ensuring early development and profitability of the project,” says John Hansuld, president and CEO of Canamax which is operator, manager and 50% owner of the Bell Creek project.

“An experienced mining company in the Timmins district such as Pamour paying over $9 million in order to gain a 25% interest in the Bell Creek project says something about the quality of the property.”

A decision on where to mill the ore is, apparently, the only holdup to putting the property into production. A milling decision was expected earlier this summer. Pamour owns two large gold mills in Timmins and President Dennis MacLeod says Pamour could custom mill the Bell Creek ore at one of them. However, he says Pamour has “more than enough ore ourselves” and doing such custom milling is “against our philosophy.”

Canamax has planned to build a mill on the Bell Creek property, although that decision has not been made final, and Mr MacLeod says Pamour will give Canamax “every support we can.” Pamour will have no problem providing its share of funding for whatever decision is made regarding milling, he says.

Consolidated CSA’s other interests include a 50-50 joint venture with Newmont Mines on a 23,500- acre parcel of land in Ontario near the Casa Berardi area of northwestern Quebec. It has various interests in 19 other gold prospects in Canada.

Pamour says it will commit CSA Minerals to spend at least $2 million on exploration and development over the next 12 months.

In the Pamour-Giant deal, Pamour would not sell to Giant its cash on hand, exploration properties or its present and future tailings ponds which are the subject of a joint venture project with ERG Resources. Mr MacLeod, who is also president of ERG, says as a result of the deal Giant will double its average annual gold production and gain a broader base to “withstand the vagaries of the economic climate affecting today’s mineral industry.”

Pamour will, in effect, give up its claim to being a producer and become a holding and exploration company. It also plans to develop its tailings, with a feasibility study on that project expected out shortly.

In addition to Giant’s available working capital, Pamour will provide interim financing to Giant, if required, after completion of the deal.

The merger is subject to approval by regulatory bodies including those of the Toronto and American stock exchanges and Investment Canada. As well, the issue of shares by Giant will require the approval of its shareholders and the sale of assets by Pamour will require approval by a two-thirds majority of Pamour shareholders.

The deal is expected to close before the end of the year.

Pamour also announced its third quarter results showing net earnings for the period of $684,000. For the same period a year earlier the company reported net earnings of $6,139,000, but that included a $6.2-million gain on the sale of investments.

Operating profit in the third quarter was $617,000 compared to $369,000 in the second quarter and $49,000 in the first quarter. In the third quarter of 1985 the company had an operating loss of $110,000. For the first nine months of 1986 Pamour had operating income of $1,035,000 compared to $2,295,000 for the same period in 1985.

For the 9-month period, tons of ore mined and milled increased by about 21.8% while gold produced increased by 5.8%. Management of Pamour changed in February when Noranda sold its 49% interest. Australian-controlled Jimberlana Holdings (Canada) ended up with a 37.4% interest and control. The tonnage-gold ratio probably reflects new management’s attempts to improve results through economies of scale.

So far in 1986 the company has mined and treated 1,319,801 tons of ore compared to 1,083,944 tons for the same period in 1985. A total of 81,342 oz of gold has been recovered so far in 1986 to gain $41.6 million in revenue compared to 76,862 oz for revenue of $38.8 million in 1985s first nine months.

The company notes that its policy involves forward sales of a substantial portion of its gold output for 12 months into the future. Therefore, it says, current gold prices will not be substantially reflected in the company’s earnings until the latter part of 1987. Pamour also announced its third quarter results showing net earnings for the period of $684,000. For the same period a year earlier the company reported net earnings of $6,139,000, but that included a $6.2-million gain on the sale of investments.

Operating profit in the third quarter was $617,000 compared to $369,000 in the second quarter and $49,000 in the first quarter. In the third quarter of 1985 the company had an operating loss of $110,000. For the first nine months of 1986 Pamour had operating income of $1,035,000 compared to $2,295,000 for the same period in 1985.

For the 9-month period, tons of ore mined and milled increased by about 21.8% while gold produced increased by 5.8%. Management of Pamour changed in February when Noranda sold its 49% interest. Australian-controlled Jimberlana Holdings (Canada) ended up with a 37.4% interest and control. The tonnage-gold ratio probably reflects new management’s attempts to improve results through economies of scale.

So far in 1986 the company has mined and treated 1,319,801 tons of ore compared to 1,083,944 tons for the same period in 1985. A total of 81,342 oz of gold has been recovered so far in 1986 to gain $41.6 million in revenue compared to 76,862 oz for revenue of $38.8 million in 1985s first nine months.

The company notes that its policy involves forward sales of a substantial portion of its gold output for 12 months into the future. Therefore, it says, current gold prices will not be substantially reflected in the company’s earnings until the latter part of 1987.