Placer to sell Eskay interest

In concert with the planned combination of Stikine Resources and Prime Resources Group (TSE), Placer Dome (TSE) plans to sell its interest in British Columbia’s Eskay Creek project.

Placer, which holds 43.8% of Stikine’s outstanding shares, expects to receive 11.5 million shares of Prime under the proposed merger. Shareholders of Prime will vote on the arrangement on Dec. 14.

Assuming the merger is completed, Placer will sell its Prime shares to investment dealers Bunting Warburg and R.B.C. Dominion Securities for net proceeds of $8 per share, or about $92 million.

The two dealers have, in turn, pre-sold the shares to institutional investors in Canada and abroad for an undisclosed price.

The merger will increase to 100% Prime’s interest in the rich Eskay Creek deposit northwest of Stewart, B.C.; it currently holds half. Homestake Mining (NYSE) will hold about 54.2% of Prime on completion of the combination.

Hugh Leggatt, a spokesman for Placer, said the sale of the interest is part of the company’s ongoing “rationalization of non-core assets.” He noted the company prefers to be an active rather than passive shareholder and that the Prime share position represents a relatively small holding.

Placer originally bought the Stikine share position in 1990 under a takeover offer at $67.50 per share (or 3.5 common shares of Placer).

The company failed to get a majority shareholding, however, picking up only 1.5 million shares of the company (45% at the time).

In February, 1992, Placer decided to write off the $106 million carrying value to $56 million. As a result, it will record a gain on the planned sale. When in production, Eskay Creek is expected to produce about 240,000 oz. gold and 10.5 million oz. silver per year at a gold-equivalent cash cost of US$108 per oz.