Royal Oak, dissidents agree on merger terms

Recent discussions between management of Royal Oak Resources (TSE) and a group of dissident shareholders of the Pamour group has resulted in an agreement for a proposed amalgamation between the companies.

Shareholders were to have voted on the amalgamation proposal at meetings June 24, but these were adjourned because of questions and concerns raised with the Ontario Securities Commission by dissenting shareholders.

Each of the amalgamating companies, including Royal Oak which acquired control of the Pamour group last fall, favor combining the operations of their respective companies into a single company to be known as Royal Oak Mines (T.N.M., Apr. 29/91). The Pamour group includes Pamour (TSE), Giant Yellowknife Mines (TSE), Pamorex Minerals (TSE) and Akaitcho Yellowknife Gold Mines (TSE).

As a result of the recent discussions, the exchange ratios for the proposed amalgamation of Royal Oak and the Pamour group have been adjusted as follows: six common shares of Royal Oak for five common shares of Royal Oak Mines, four Pamour shares for three shares of Royal Oak Mines, two Giant shares for 13 shares of Royal Oak Mines, five Pamorex shares for three shares of Royal Oak Mines, and five Akaitcho shares for three Royal Oak Mines shares.

The firm representing the dissident shareholders agreed to recommend the revised structure to its group and solicit proxies in favor of the amalgamation. A supplement will be sent to each shareholder outlining the revised structure, and in order to allow time for this development, management is proposing to postpone the amalgamation vote.

Shareholders’ meetings for Royal Oak and the Pamour group will be held June 27 as planned, to deal with business other than that related to the amalgamation vote.

Royal Oak President Margaret Witte told shareholders at the company’s June 24 annual meeting that the amalgamation would result in a diversified mining company that is financially stronger, and with a simplified, easily analyzed corporate structure. Witte currently owns about 17% of Royal Oak’s shares, with Teck (TSE) owning an approximate 18% interest.

The amalgamated company would have two gold mining operations turning out 200,000 oz. gold per year, as well as five development properties and 130 mineral properties.

Witte also said the amalgamation would reduce overhead and administrative expenses, broaden the shareholder base and improve liquidity, and better position Royal Oak Mines for future growth.

Since taking over the Pamour group, Royal Oak has reported success from its turnaround program aimed at reducing costs and rationalizing the group’s various operations (T.N.M., Jun. 3/91).

Royal Oak raised about $33 million last year to take over the Pamour group from an Australian mining company then in liquidation. About $16 million was equity financed, and the vendor take-back portion of the acquisition was provided by two foreign banks and consists of two secured notes in an amount totalling about $20 million.

If the amalgamation is successful, Royal Oak Mines would have a total of 53.6 million shares outstanding.

All companies, except Royal Oak, have decided that their inclusion in the amalgamation will require the approval of the majority of the votes cast at each shareholder meeting, excluding the votes attached to shares held by Royal Oak, its associates, affiliates and insiders.