Rayrock Resources fights takeover attempt by Quest

The board of Rayrock Resources (RAY-T) has appointed James Askew president and chief executive officer and retained an investment firm to help it fend off a takeover attempt by Quest Ventures.

The Vancouver-based investment company, which holds a 5% equity stake in Rayrock, has requisitioned a special meeting of shareholders to seek approval for the formation of a new board consisting of its own nominees (T.N.M., Aug. 31-Sept. 6/98). If successful, the new board would issue a special dividend to shareholders, using Rayrock’s current cash and marketable securities, estimated to be valued in the range of $5.50 per share. The board would then either sell the mining assets or negotiate a merger with another mining company.

Owned equally by Murray Sinclair and Brian Baley, Quest was a co-requisitioner of a special shareholders meeting of Inmet Mining (IMN-T), spearheaded by Zemex (ZMX-N), an industrial minerals company. Zemex recently called off its plans to solicit proxies for the meeting, after learning that Inmet shareholders holding more than 30% of the shares did not intend to vote in favor of its proposals.

In reponse to Quest’s proposal, Rayrock’s board retained NM Rothschild & Sons to help identify possible business transactions. Bruce Burton, chief financial officer, says the company has signed confidentiality agreements with 16 mining companies concerning possible transactions and is carrying out due diligence in relation to some of these.

“The dissident Quest proposal, which is essentially to liquidate the company at the low point in the commodity price cycle for oil and gas, copper and gold, appears to be premature,” Burton states.

Rayrock’s newly appointed president, James Askew, replaces David Crombie, who stepped down earlier this year. A mining engineer by profession, Askew is the former president of Golden Shamrock Mines and the founder of consulting firm Jakes Askew Associates. In a press release, he notes that Rayrock has undertaken “considerable rationalization” of its affairs this year.

While acknowledging that the company is trading “substantially below its net asset backing,” Askew says Rayrock’s base of assets and resources “provide real upside for shareholders.”

Rayrock currently produces about 90,000 oz. gold annually from mines in Nevada, namely the wholly owned Dee, the 66.6%-held Marigold, and the 35%-owned Daisy. Earlier this summer, it agreed to acquire the remaining 65% interest in Daisy from Inter-Rock Gold (IRO-T) for US$3.8 million plus a royalty.

Rayrock also owns 100% of the Ivan copper mine in Chile, acquired through a recent merger with an affiliate, Minera Rayrock. In 1998, the mine is expected to produce 22 million lbs. at an average cash cost of US61 cents per lb. Rayrock also holds various exploration projects, plus a 45.9% interest in Black Rock Ventures, an oil and gas company. Rayrock has indicated that the latter asset may be disposed of this year.