Royal Oak Res. negotiates purchase of Pamour assets

The Australian owner of the Pamour group of companies has found a buyer for a large portion of its Canadian mining assets. Giant Resources of Sydney says it has entered into an agreement with Royal Oak Resources (TSE) of Vancouver for the sale of Giant’s interests in holding company Pamour (TSE) and producer Giant Yellowknife Mines (TSE), and about $15 million of debt owing from Pamour to the Australian parent secured by a pledge of Pamour’s investment portfolio.

The assets also include interests Pamour and Giant Yellowknife have in a number of junior mining companies. Not included in the sale are Pamour’s 62% interest in ERG Resources (TSE) and Giant Resource’s stake in lead-zinc producer Curragh Resources (TSE), which recently went public through a share offering.

Giant Resources, which has a 67.1% interest in Pamour, says the assets will be purchased for an aggregate price of $33 million and the closing of the deal is expected by Sept. 27. Royal Oak says the agreement is subject to, among other considerations, regulatory approval and financing.

Financial problems in Australia forced Giant Resources to place its Canadian mining assets up for sale. An international auction was organized by securities firm Deacon Morgan McEwen Easson to sell the assets.

The purchase would give Royal Oak annual gold production of about 200,000 oz. from mining camps in Timmins, Ont., and Yellowknife, N.W.T. Giant Yellowknife operates both the Giant mine and a tailings retreatment project at Yellowknife. At the Timmins camp, projects include the Pamour No. 1 underground operation and an open pit operation.

Giant Yellowknife has been fighting rising production costs. President Adrian Fleming told shareholders at this year’s annual meeting the company’s unit operating cost during the first half of 1989 was US$449 per oz. and US$389 during the second half.

The sale would give Royal Oak majority control of Giant Yellowknife: Pamour owns 41.7% of Giant Yellowknife and Giant Resources has 16.7% of the producer.

Also, Pamour and Giant Yellowknife together own 54.4% of Pamorex Minerals (TSE), an active exploration company, 44.5% of Akaitcho Yellowknife Gold Mines (TSE) and 38.6% of Mate Yellowknife Gold Mines (TSE).

Royal Oak would also gain interests in Arctic Precious Metals and Supercrest Mines.

The main asset of ERG is a tailings reclamation project at Timmins which has yet to live up to early expectations. The project is currently on a care-and-maintenance basis. In calculating its balance sheet for 1989, Giant Yellowknife wrote off amounts owed to it by ERG. Pamour wrote down its advances and investment in ERG to a nominal value of $1 for 1989.

Earlier this year, Royal Oak President Margaret Witte was unsuccessful in an attempt to purchase the assets of bankrupt LynnGold Resources. LynnGold ceased operations at its MacLellan gold mine at Lynn Lake, Man., late in 1989 because of falling prices. The bankruptcy trustee turned down the Royal Oak offer.

Witte is a former president of Neptune Resources, which was involved in the early development of the ambitious Colomac gold project in the Northwest Territories. Colomac was placed into production this year by Northwest Gold (Amex) (formerly ABM Gold), part of the Northgate group of companies.