SA Goldfields up as Friedland bids for control

Vancouver-based Ivanhoe Capital, the private management firm controlled by mine developer Robert Friedland, is set to take control of Toronto-based South American Goldfields (TSE) in a deal that will see $4 million injected into the junior whose projects are all in Guyana, South America. Subject to regulatory approval, Ivanhoe has agreed to subscribe for a $2-million debenture, convertible into 10 million shares of SA Goldfields at 20 cents per share, together with warrants to acquire another 10 million shares for $2 million. The Vancouver company will also purchase nearly two million shares of SA Goldfields held by insiders including President Alan Spence who owns about one million shares. SA Goldfields currently has about 5.5 million shares outstanding.

News of the planned financing agreement with Ivanhoe pushed the shares of little-known SA Goldfields to 48 cents, up 18 cents from the 30 cents level last week. The 12-month trading range is 20-65 cents.

Ivanhoe is controlled by well- known promotor Robert Friedland who recently stepped aside as president of Galactic Resources (TSE). Ivanhoe has worldwide exploration interests and also holds a 54.5% control block in Fairbanks Gold (VSE) which is developing the large Fort Knox gold deposit in Alaska.

Upon closing of the transaction with SA Goldfields, Ivanhoe will assign to the junior firm its right to earn a 65% interest in the Mazaruni diamond concessions in Guyana held by Golden Star Resources (TSE) of Edmonton.

The agreement calls for SA Goldfields to advance $1 million to Golden Star by a debenture convertible into Golden Star shares at $1 per share, and warrants to acquire another one million shares at $1 per share. South American will gain the right to earn a 65% direct interest in the Mazaruni joint venture by providing a further $2 million to the joint venture.

Golden Star will use its initial $1 million to advance an economic evaluation and feasibility study on the Mazaruni diamond deposits which were acquired last year.

The project is in the interior region of Guyana, about 250 km southwest of the capital Georgetown. The area is well known for alluvial diamond and gold deposits. The company says it has identified several targets with high volume and grade potential. The diamonds from the district are commonly of gem quality and average 7-15 stones per carat, according to Golden Star.

SA Goldfields will use the remaining $1 million to meet its obligations on seven other gold concessions in Guyana — joint ventures with Denison Mines (TSE) and Homestake International Minerals, a unit of Homestake Mining (NYSE).

The recent deal will see the board of directors of SA Goldfields increased to 10 members, eight of which will be Ivanhoe nominees. Spence and Tor Jensen, vice- president of SA Goldfields, will remain on the board and be active in senior management.

By presstime Aug. 29, shares of Golden Star had posted a gain of 30 cents to close at $1.30. That’s still near the low end of their 12-month trading range of 80 cents-$3.90.